ArcelorMittal Annual Report 2008

ArcelorMittal Annual Report 2008

Steel, as the most recyclable materialin the world, is naturally sustainable.But we want to go beyond this.We want to ensure that our business positionin the world creates sustainable benefitsfor all our stakeholders.Lakshmi N Mittal

ContentsManagement Report01 Our Philosophy02 Message from the Chairman and CEO06 Questions for the Group Management Board10 Monthly Highlights 2008Safe14 Health and Safety: The Number 1 Priority20 Board of Directors24 Senior ManagementSustainable28 Business Strategy30 Corporate Responsibility40 Global Presence46 Operational Review53 Customers and Innovation56 Market InformationSteel60 Corporate Governance67 Share Ownership68 Share Capital and Voting Rights69 Additional Information about ArcelorMittalLegal and Financial Information73 Directors’ Responsibility Statement2008 Consolidated Financial Statements74 Consolidated Balance Sheets75 Consolidated Statements of Income76 Consolidated Statements of Changes in Equity77 Consolidated Statements of Cash Flows78 Notes to the Consolidated Financial Statements146 Auditors’ Report on the Consolidated Financial Statements2008 Annual Accounts147 Balance Sheet148 Profit and Loss Account149 Notes to the Annual Accounts158 Auditors’ Report on the Annual Accounts159 Proposed Allocation of Results for 2008DisclaimerArcelorMittal has made, and will continue to make, forward-looking statementswith respect to, among other things, its financial position, business strategy,projected costs, projected savings, and the plans and objectives of ourmanagement. Such statements are identified by the use of forward-lookingwords or phrases such as ‘anticipates’, ‘intends’, ‘expects’, ‘plans’, ‘believes’,or ‘estimates’, or words or phrases with similar meaning. Our actual resultsmay differ materially from those implied by such forward-looking statementson account of known and unknown risks and uncertainties, including,without limitation, the risks described in this Annual Report.ArcelorMittal does not make any representation, warranty or predictionthat the results anticipated by such forward-looking statements will be achieved.Such forward-looking statements represent, in each case, only one of manypossible scenarios and should not be viewed as the most likely or standardscenario. ArcelorMittal undertakes no obligation to publicly update itsforward-looking statements, whether as a result of new information,future events or otherwise.

Key FiguresFinancial HighlightsSales (million US$)2008 124,9362007 105,216Shipments (million tonnes)2008 101.72007 109.7Operating Income ($ million)2008 12,2362007 14,830Net Income ($ million)2008 9,3992007 10,368Basic Earnings per Share ($)2008 6.802007 7.41+18.7%-7.3%-17.5%-9.3%-8.2%Number of employees 1 at December 31, 2008 according to segments567 123Segment Total %1 Flat Carbon Americas 30,848 102 Flat Carbon Europe 71,192 223 Long Carbon Americas and Europe 72,969 234 Asia, Africa and CIS (AACIS) 100,325 325 Stainless Steel 12,415 46 Steel Solutions and Services 18,871 67 Others 9,247 34Total 315,867 100Allocation of employees 1 at December 31, 2008 according to geographic location71%654321 EU15 2 242 Rest EU (EU27) 3 173 Other European Countries 164 North America 125 South America 96 Asia 167 Africa 6Total 1001Full Time Equivalent.2 EU15 includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom.3 EU27 includes the EU15 countries plus Bulgaria, Cyprus, Czech Republic, Estonia, Hungary,Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia.

Our PhilosophyOur PhilosophyArcelorMittal 1 is the world’s leading steelcompany, with approximately 316,000employees in more than 60 countries.ArcelorMittal has been built on a consistentmanagement strategy that values scale,vertical integration, product diversityand quality, continuous growth in highervalue products, strong employee well-beingand customer focus. The Company’sthree dimensional growth strategyof product diversity, geographical reachand vertical integration is its key tosustainability and growth.As a result of this strategy, the Companytoday is the leader in all major globalsteel markets, including automotive,construction, household appliancesand packaging, with leading Researchand Development (R&D) and technology,as well as sizeable captive suppliesof raw materials and outstandingdistribution networks. With an industrialpresence in over 20 countries spanningfour continents, the Company coversall of the key steel markets, from emergingto mature. It is the largest steel producerin the Americas, Africa and Europe,and the second largest producer in theCIS 2 region, with a growing presence inAsia, particularly China.With crude steel production of103.3 million tonnes, representing around10% of world steel output, ArcelorMittalgenerated revenues of $124.9 billionand an operating income of $12.2 billionin 2008. Approximately 36% of its steelis produced in the Americas; 49% isproduced in Europe; and 15% is producedin other countries, such as Kazakhstan,South Africa and Ukraine.Underpinning all our operationsis a philosophy to produce SafeSustainable Steel.Safety is the top priority forArcelorMittal. The Group is buildingon good practices to improve safetyperformance. The ‘Journey to Zero’ 3program will promote the achievementof world class standards by integratingHealth and Safety into the Group’sperformance management.ArcelorMittal’s leadership position is notonly about ‘what we do’ but also about‘how we do it’. Through its core valuesof Sustainability, Quality and Leadership,ArcelorMittal commits to operatingin a responsible way with respectto the health, safety and well-beingof its employees, contractors and thecommunities in which it operates.It is also committed to the sustainablemanagement of the environmentand of finite resources. ArcelorMittalrecognizes that it has a significantresponsibility to tackle the global climatechange challenge; it takes a leadingrole in the industry’s efforts to developbreakthrough steelmaking technologiesand is actively researching and developingsteel-based technologies and solutionsthat contribute to combatingclimate change.The Company’s Research andDevelopment team supports the businessunits in process and product improvementto produce the best quality steel atlow-cost and low environmental impact.With 14 major research centers,ArcelorMittal possesses an R&D capabilityunique in the steel industry. To improveits research efficiency and to achievea high level of scientific knowledge,ArcelorMittal maintains strong academicpartnerships with world-class scientificand technical universities.1Unless indicated otherwise, or the contextotherwise requires, references herein to ‘ArcelorMittal’,the ‘Group’ and the ‘Company’ or similar termsare to ArcelorMittal, having its registered officeat 19, avenue de la Liberté, L-2930 Luxembourg,Grand Duchy of Luxembourg, and, where thecontext requires, its consolidated subsidiaries.2Commonwealth of Independent States.3‘Journey to Zero’ is ArcelorMittal’s Healthand Safety improvement process, based onthe best practice principles containedwithin the Group-wide Health and Safety policy.ArcelorMittal Annual Report 20081

Message from the Chairman and CEODear Shareholders,A year ago I was able to report to youon the considerable success of theintegration of ArcelorMittal and therelated achievements of our Company.I said that despite an uncertain outlookfor the global economy I expected 2008to be a good year for ArcelorMittal.Clearly the global context has changeddramatically since then, entering a periodof instability the extent of which few hadpredicted or have experienced in theirworking lives. Nevertheless, 2008 wasin general a strong year for our Company.Benefiting from a strong demand forsteel in the first three quarters in all maingeographies, we reported an operatingincome of $12.2 billion and net incomeof $9.4 billion. This performance underlinesthe benefits of a global and diversifiedbusiness model and reflects the successof our three dimensional growth strategy.This generally excellent performancewas however overshadowed by thedramatic slowdown in the world economyin the fourth quarter. Since September2008 we have been facing a very differentoutlook. By the end of 2008, it waswidely accepted that, as a fall-out of thefinancial crisis, advanced economieswere on the edge of the worst recessionfor decades. The global economy is barelyexpected to exhibit positive growthin 2009, as declines in the developedeconomies are accompanied by slower,though still positive, growth in thedeveloping world.In response, we have seen some quiteunprecedented moves from governmentsacross the world in an effort to supportand stimulate their economies. The extentof the success these bail-out packagescan achieve will not be known for sometime. In the meantime, we must all adaptour business to the current climate.Structurally, the Company benefits todayfrom the size and scale it has built throughleading the process of consolidation.This does not mean that we will beunaffected. Rather, it means that todayour Company has a business model whichI believe will prove more resilient thanother business models have proved to bein previous downturns. Nevertheless,we have no choice but to respond to thischanged environment.One of ArcelorMittal’s key competitiveadvantages is our ability to remain flexibleand take fast decisions. We have madeit a priority to retain this ability evenas we have grown. Therefore, as soon asthe severity of the new economic realitybecame apparent, we moved quicklyto take the appropriate steps to positionourselves for the new environment.Most specifically, we made temporaryproduction cuts totaling up to 45%of global production capacity to accelerateinventory reduction. These cuts wereintroduced across the Group at all ourmain production facilities. These are thedeepest cuts the Group has implementedto date, but they were necessaryin response to the speed with whichthe market has turned, as many of ourcustomers started using up existinginventories rather than buying new stock.2

Whilst we must accept that real demandin 2009 will be significantly lower thanin 2008, we are confident that theseproduction cuts will begin to yieldresults as real demand is not expectedto fall anywhere near as much as 45%.It is too early yet to say exactly whenthis technical recovery will beginand therefore production cuts are beingmaintained at present, but we arecautiously optimistic that the secondhalf of the year should be stronger thanthe first.The current climate has also causedus to pause our growth plans for theimmediate future. As a result, capitalexpenditure in 2009 will be keptat a minimum, focusing on health,safety, environment and maintenance.Over the medium to long-term,we believe that developing countrieswill continue with their industrializationplans and therefore will have a demandfor steel to support infrastructure projects.Our growth projects will continueat the appropriate time to ensurewe are able to meet this demand whenit occurs.ArcelorMittal is a cost-consciousorganization and we have put a renewedemphasis on this aspect of themanagement of our business in recentmonths. In the autumn of 2008we announced a target of achieving$4 billion in management gains overfour years through additional selling,general and administrative savings.We later increased this target to $5 billionover the same period. We expect toachieve $2 billion of this amount bythe end of 2009.Regrettably this has included thecommencement of implementationof a Voluntary Separation Scheme acrossthe Group. This is never an easy decisionfor management to take but it wasa necessary response to today’sdeteriorated operating environment.As part of this emphasis on cost controlsand cash conservation, we have alsoannounced an intention to reduce ournet debt 1 by $10 billion by the endof 2009, from levels during the thirdquarter of 2008. Whilst we werecomfortable with our net debt/EBITDA 2ratio for 2008, it is only prudent in thecurrent instability in the credit marketsfor our Company to make net debtreduction a priority. I am pleased to beable to report that we have already beenmaking significant progress towardsthis target. By the end of 2008, net debthas already been reduced by $6 billion.Although this important net debtreduction in the last quarter of 2008was due in part to non-recurring factors,we believe that the measures we haveimplemented across the Group will allowus to reach the targeted net debt reductionby the end of 2009. Slightly improvedconditions in the worldwide steelmarkets which we expect to occur beforeyear-end should also help in achievingthis target. Along with debt reduction,the Board of Directors has recommendedreducing the base dividend for 2009to $0.75 per share.All of these measures have beenimplemented in close collaboration withour key stakeholders, including unionsand governments and, of course,our employees. We are very gratefulfor their support. They have recognizedthe difficulties that our Companyexperiences at present and have beenlargely working with us to ensure thesustainability of ArcelorMittal.It is important to emphasize also thatthese measures do not represent anyfundamental change in long-termstrategy for the Company. We stillbelieve in the benefits of an integrated,diversified and global business model.The systemic failure in the bankingsystem has caused deep and severerepercussions worldwide and acrossindustries, the extent of which arestill being worked out and which willprobably continue through 2010-2011.But over the long-term, we believethat steel will continue to be in demandas a fundamental material for buildingthe infrastructure of our world.And investment in infrastructure willcontinue – both in developed anddeveloping economies. It is highly unlikely,for example, that the industrializationof more than 1.5 billion people in thedeveloping markets will simply cometo a halt. This is a huge macro-trend,one that will remain relevant despitethe current slowing growth ratesin developing countries. And of courseArcelorMittal has great experience inand understanding of these developingmarkets. Few companies are better placedthan us to capture stronger growthwhen levels resume.Looking ahead.There can be no doubt that2009 will be very challengingfor our Company. Whilst I hopethat the various government stimuluspackages will start to bring some relief,we must recognize that we arein the midst of an exceptionallydifficult period for the global economyto which there is no easy or swiftsolution. Nevertheless, I am pleasedwith the way the Company hasadapted so far.Message from the Chairman and CEO ArcelorMittal Annual Report 20081Net debt stands for long-term debt net of current portion plus payables to banks and current portionof long-term debt, less cash and cash equivalents, restricted cash and short-term investments.2EBITDA is defined as operating income plus depreciation, impairment expenses and exceptional items.3

Message from the Chairman and CEO continuedThe current climate will also notcompromise the way we do businessor our core values of Sustainability, Qualityand Leadership. At our senior managementconvention last September in Delhi,I said that the priority of this Companyis to produce Safe Sustainable Steel.This is not dependent on the quantityof steel we produce, but is the basicoperating philosophy that we seek to applyto every tonne produced and it will notbe compromised by economic fluctuations.We have introduced several importantinitiatives that support this philosophyduring 2008.First of all safety. 2008 saw not onlya repeat of our successful annual Healthand Safety Day, but also the launch of ournew Health and Safety drive, ‘Journeyto Zero’. ‘Journey to Zero’ is all aboutreaching world class standards byintegrating Health and Safety into theperformance management system of theGroup. The driving philosophy is that,if some parts of the ArcelorMittal Groupcan deliver best practices, then all partscan do so. By learning together andsharing best practices across the entireorganization, we can achieve high impactHealth and Safety improvements thatprotect the Company’s greatest asset– our people. In order to leverage thispotential, we have identified 15 highpriority plants where the improvementplans will be monitored on a weeklybasis with the direct involvement of thecorporate Health and Safety team.We are making progress. The Lost TimeInjury Frequency Rate improved in 2008to 2.3, compared with 3.3 in 2007.But our ‘Journey to Zero’ continues.If we aspire to our steel beingaccident-free, we also aspire to it beingsustainable. Of course steel, as themost recyclable material in the world,is naturally sustainable. But we want togo beyond this. We want to ensure thatour business position in the worldcreates sustainable benefits for all ourstakeholders. This desire has translatedinto a new Corporate Responsibility(‘CR’) strategy focused on three keyareas: Investing in our People throughinnovative HR policies; Making SteelMore Sustainable through focusingon continuous improvement inenvironmental performance; and Enrichingour Communities through engagingmore transparently with communitiesand working in active partnership withlocal organizations. We see tremendousscope for results in these areas. As oneof the largest businesses in the world,we have the ability to have a far-reachingand positive influence in many differentareas. We hope our new CR strategywill help us deliver on this ability.And finally there is steel itself.We continue to produce on a daily basisone of the most useful, durable andnecessary materials in terms of buildingthe infrastructure of the modern world.The Shanghai World Financial Center,the Freedom Tower in New York andthe Federation Tower in Moscow– these are just some of the renownedglobal structures made from ArcelorMittalsteel. This is a big responsibility.Therefore, whatever the economic climate,we must ensure that the quality of oursteel is never compromised – that inevery country where customers buyour steel they will be guaranteed thehighest quality product. We are continuallyevaluating opportunities to improveour service to customers.This is why we invest in Researchand Development (R&D) and are expandingour network of R&D centers aroundthe Group. Our team of 1,500 researchersis working daily on new ways to makelighter, stronger, more environmentallyfriendly steel.Looking ahead, there can be no doubtthat 2009 will be very challengingfor our Company. Whilst I hope thatthe various government stimulus packageswill start to bring some relief, we mustrecognize that we are in the midst ofan exceptionally difficult period for theglobal economy to which there is noeasy or swift solution. Nevertheless,I am pleased with the way the Companyhas adapted so far. Our strategy has beenbuilt around designing a company of sucha scale and diversity that it has thestrength, flexibility and presence to adaptitself to fluctuations in the economic cycle.This current cycle is more extreme thanmost, but the fact that we have beenable to adapt swiftly and take decisiveand substantial measures will, I believe,assist in bringing a faster recoveryfor our Company than might have beenthe case otherwise.4

To this end, I must thank allour employees who haveadapted to the requiredchanges with understandingand support. I would alsolike to thank my colleagueson the Board of Directors,the Group ManagementBoard and the ManagementCommittee who continueto show strong leadership.And finally I would like toextend my thanks to all ourstakeholders for their continuedcommitment to this Company.Message from the Chairman and CEO continuedArcelorMittal Annual Report 2008Lakshmi N MittalChairman and CEO5

Questions for the Group Management BoardSince April 21, 2008,the Group Management Board(‘GMB’) has had sevenmembers: Lakshmi N Mittal,Aditya Mittal, Michel Wurth,Gonzalo Urquijo, ChristopheCornier, Sudhir Maheshwariand Davinder Chugh.Mine modernization program$1.2 bnWe are engagedin a $1.2 billion minemodernization programspanning over fiveyears to complete.Christophe Cornier,GMB.6

Given the prime importanceof Health and Safety, what progresswas made in this area in 2008?Aditya Mittal: Since our merger in 2006we have worked to ensure that Healthand Safety is our priority number oneand our frequency rate has gone downsignificantly. Building on ArcelorMittalDofasco’s initiative, in 2008 we launchedour new global Health and Safetyimprovement process: ‘Journey to Zero’.ArcelorMittal Dofasco was recognizedby the World Steel Association withthe 2008 Safety and Health ExcellenceRecognition Award, for its effortsto eliminate accidents and injuries.They also met the requirements of theOHSAS 18001:2007 Occupational Healthand Safety Assessment Series Standard,being the first of our North Americansites to do so. We must always rememberGonzalo Urquijo: There are twoaspects to consider. On the one hand,we suffered a number of fatalities,which is unacceptable. On the other,we reduced overall accident frequencyand severity rates. We are nowconcentrating on the areas of maximumvulnerability, such as falls from height,road and rail traffic, loading of materialsand unauthorized access to particular areas.We are involving everyone, from topto bottom, and we are working hardto share the lessons of every incidentin all our plants worldwide. Nothing ismore important than safety and we aredetermined to achieve the highestpossible standards.Christophe Cornier: In the steelmakingand iron ore operations, we are makingcontinuous, step-by-step progress.Safety ratios improved over the yearWe face a big challenge.As part of a valuechain that extends fromour suppliers at oneend to our customersat the other, steelconsumption is boundto be hit if, for instance,people are not buyingcars or ordering newbuildings. The answer isthat we must focuson the three ‘Cs’ – Cash,Customers, and Cost.Michel Wurth, GMB.Questions for the Group Management BoardArcelorMittal Annual Report 2008that, even if this performanceis encouraging, we need to continuebuilding a culture where everyonerealizes that safety must come first.Michel Wurth: Overall, we have madeprogress, as our accident frequencyand severity figures attest. But we stillexperienced fatalities, and it is herethat we will focus major efforts in theyear ahead – particularly in the areaof responsible behavior – as we workto implement the ‘Journey to Zero’ program.One other pressing issue is a relativelypoor safety performance amongcontractors. Clearly, there is greaterrotation of outside personnel but thatshould be no excuse. We are not wherewe want to be on this issue – andthere is much more work to be done.This is the absolute priority.and the extension of our ‘world-classmanufacturing’ initiative in 2009 will keepthe pressure up in areas such as goodhousekeeping. The coal mining operationsare another matter. We are engaged ina $1.2 billion mine modernization programspanning over five years to complete.While other areas of capital expenditure willbe trimmed in 2009, safety will be one of ourfocus areas – testimony to the overridingimportance we give to lifting safety standards.Sudhir Maheshwari: For me, the key eventwas the launch of the ‘Journey to Zero’initiative, aimed at making accidents a thingof the past. I am confident this programwill yield positive results in 2009 and beyond.Davinder Chugh: Health and Safetyof our colleagues and contractors workingin our plants is of utmost importanceto the management. Our supplier selectioncriteria now include a good safety trackrecord. Contractor training is enforced andwe have introduced stricter norms in ourcontracts for adherence to safety standards.There are consequences for safety lapsesand there is motivation for good safetyperformance by contractors.GMB members,from left to right:Lakshmi N MittalSudhir MaheshwariMichel WurthAditya MittalChristophe CornierGonzalo UrquijoDavinder Chugh7

Questions for the Group Management Board continuedHow would you sum up performancein your area in 2008?Aditya Mittal: From the financialperspective, in general 2008 wasa very strong year for the Company.Unfortunately, however, the achievementsof the first nine months have beenovershadowed by the sudden turnin market conditions in the last quarter.In the last quarter, our focus wason reducing costs, reducing net debt andgenerally adapting to the new environment.While the current economic situationis very challenging, I am pleasedwith the way the Company has adapted.In particular we have made pleasingprogress with debt reduction,reducing net debt by $6 billion in thefourth quarter. In Flat Carbon Americas,we recorded good results in 2008despite the slowdown in demandexperienced in the final quarter.Michel Wurth: Despite a fourth quarterimpacted by the economic crisis,the overall performance was excellent.For much of the year, the major challengewas the unprecedented explosion inthe cost of raw materials, followed by therapid downturn. We responded quicklyby implementing Total Cost of Ownership(‘TCO’) and by deciding actions in thefourth quarter, with the aim to decreasefixed cost parallel to the strong declinein demand, and by increasing our levelof contact with customers in order to findappropriate solutions. A re-engineered,more customer-focused R&D departmentalso contributed by delivering new steelsolutions and better value to customers.The reorganization of Flat Carbon Europedelivered major integration benefits.Gonzalo Urquijo: The first eight monthsof the year saw strong demand, with risingraw material costs matched by higherprices. There was then a downturn,with falling demand exacerbated byde-stocking as customers sought toincrease their liquidity. We responded bya reduction in production by approximately40% in the fourth quarter. Nonetheless,there were important landmarks duringthe year, such as the blast furnace start-upin Zenica, Bosnia, the opening of the newbar mill in Warsaw, Poland, and a numberof acquisitions. On the industrial front,our drive to lift the performance ofthe weaker plants to benchmark levelsis bearing fruit.Christophe Cornier: The businessesin Ukraine, Kazakhstan and South Africaall experienced a profitable year,especially during the first three quarters,while activities deteriorated during thefourth quarter. In our mining activities,we are on track to achieve our statedaim of becoming two-thirds self-sufficientin iron ore after 2012 and we havemade some progress with our programto modernize our Kazakh coal mines– a vital plan in our drive to raise safetystandards. We have also taken a majorstep forward in the transfer of expertisearound the Group with the creationof a new organization that will holda central technical database and helpstandardize procedures. This is animportant tool for capitalizing on theGroup’s knowledge base.Sudhir Maheshwari: In the first ninemonths of 2008, we were very successfulin pursuing our three dimensionalgrowth strategy of extending geographicreach, enhancing product diversity andincreasing vertical integration. We achieveda major expansion in our coal miningoperations, with transactions in Siberia,India, Australia, the USA and Mozambique.We completed four transactions in ironore mining and commenced work ona Saudi pipe mill project. We also receiveda positive response to our $3 billion bondissue in the USA, the largest of its kindby a steel producer.Davinder Chugh: Shared Services hasconsolidated the transversal functionsof the Group into a strategic advantageby leveraging the scale of operationsand at the same time providing agilityof response to market changes. We haveone face to all our suppliers whetherbig or small and have consolidatedrelationships and strategic partnershipswith our suppliers in 2008. Transversalfunctions have also been able toconsolidate, optimize and harmonizethe best practices from one part of theCompany to the rest of the Group,be it in IT, Purchasing, Energy, Real Estate,By-Products Sales, Legal or Shipping.A significant leap was that Total Costof Ownership is now entrenched asa thought model for all sourcing decisionswithin the Company and will go toa new level of maturity.8

What is the outlook for the year ahead?Aditya Mittal: We are living in exceptionaltimes for the global economy and I don’texpect there is going to be any quicksolution. ArcelorMittal cut productionby 45% in the fourth quarter of 2008and we are maintaining these cuts intothe first quarter of 2009. Real steeldemand has not fallen by this level,but cutting production in this way shouldaccelerate the required de-stocking periodas customers run down their inventories.De-stocking should complete in mostmarkets by the end of the first quarterand we should expect to see a technicalrecovery by the second half of the year.Michel Wurth: We face a big challenge.As part of a value chain that extends fromour suppliers at one end to our customersat the other, steel consumption is boundto be hit if, for instance, people are notbuying cars or ordering new buildings.The answer is that we must focus on thethree ‘Cs’ – Cash, Customers, and Cost.It means cutting fixed costs in line withthe fall in end-demand. It means limitingcapex spending to what is strictlynecessary, working with our supply chainto minimize inventories while ensuringshort lead times for our customers.It means listening to those customersand delivering better service. One thing iscertain: there will be no cut in the R&Dbudget. Innovation will play a major rolein keeping our customers competitive.Gonzalo Urquijo: Several factorscombined in the fourth quarter of 2008:customer de-stocking, a rush for cashand falling scrap prices. We believe thatde-stocking will have run its courseby the end of the first quarter while prices– from scrap to finished goods – maywell have hit bottom. This should givebuyers more confidence. With little stockin the supply chain and underlying demandnot substantially lower, there is thenevery chance of a pick-up in the market.In the meantime, we have importantcost reduction programs underwayand are utterly focused on staying closeto our customers.Christophe Cornier: The market backdropis clearly difficult, particularly forexport-based units such as thosein Ukraine and Kazakhstan, and we areexpecting lower demand in 2009.To counter these difficulties we areengaged in major cost-cutting effortsand we have increased our degreeof vertical integration by sourcing coal forUkraine from our recently acquired minesin Russia. We now face the future witha highly competitive cost base.Sudhir Maheshwari: We are in anera of unprecedented uncertainty.While the measures taken by governmentsaround the world will hopefully workthrough to a recovery in economic activityin 2009, there is a risk that this recoverywill be slow. We therefore need tobe prepared and our measures to maximizecash generation should be seen in thislight. For the present, our efforts willbe focused on reducing our debt by$10 billion before we engage in anyfurther mergers and acquisitions activity.Davinder Chugh: 2009 is expected tobe a tough year, though in a differentway to 2008. In the first half of 2008,we ensured the continuity of supply linesin scarce market conditions and deliveredcost reduction simultaneously. In the latterhalf, the focus was on cash conservationand significant cost reduction. Costs willcontinue to be of prime focus in 2009.We need to ensure supplies at competitiveprices while the volatility in the businessenvironment will challenge the supplychain with continuity risks in the industry.This will be an opportunity to strengthenour relationships with our suppliersand emerge as a stronger and moreefficient company.Questions for the Group Management Board continuedArcelorMittal Annual Report 20089

Monthly Highlights 2008JanuaryArcelorMittal signs a Memorandumof Understanding with Société NationaleIndustrielle et Minière in Mauritania.The agreement provides for thedevelopment of a large iron ore miningproject in Mauritania.ArcelorMittal acquires Unicon,the leading manufacturer of welded steelpipes in Venezuela. Unicon suppliesthe oil and gas and industrial andconstruction sectors both domesticallyand overseas. The transaction wascompleted in April 2008.ArcelorMittal inaugurates Arceo,its industrial prototype line for vacuumplasma steel coating in Liège, Belgium.With this process, steel can be a sensor,a reflector, a source of light, moreaesthetically pleasing or endowed withbetter anti-corrosive properties.ArcelorMittal Steel Service Centre Sverigeand BE Group create a 50/50 processedflat carbon steel joint venture in Sweden.This combination creates a new numberthree in the Swedish market, with a 20%market share.FebruaryArcelorMittal acquires the remaining50% interest in Laminadora Costarricenseand Trefileria Colima, the only majorlong carbon steel company in Costa Rica.ArcelorMittal and the federaland regional governments of Belgiumagree on carbon dioxide (‘CO 2’)emission allowances. As a consequence,the relaunch of ArcelorMittalLiège, Belgium, Blast FurnaceNumber 6 is initiated.AprilArcelorMittal enters the BrazilianSteel Service Centre market withthe acquisition of 50% of Gonvarri Brasil.The aim is to establish a strong presencein the Brazilian flat steel downstreamsegment, building on the product leadershipof ArcelorMittal’s Tubarão, Vitória,and Vega do Sul plants.ArcelorMittal acquires three coal minesand associated assets in Russia fora total consideration of $720 million.ArcelorMittal agrees to build a third linein its joint venture partnership withNippon Steel by building a new continuousgalvanizing line at the I/N Kote facilityin New Carlisle, Indiana, at a cost of$240 million. On December 4, 2008,Nippon Steel announced that the projectwould be delayed until demand in theUS automobile industry market strengthens.ArcelorMittal concludes a coal off-takeagreement with Coal of Africa Limited,the South African coal developmentcompany, relating to the Baobab andThuli coal mines.MayThe Court appointed trustee completesthe sale of ArcelorMittal’s SparrowsPoint steel mill to OAO Severstal for$810 million, net of debt.JuneArcelorMittal and its unions signa groundbreaking global agreementon occupational Health and Safety.It sets out minimum standardsin every site in order to achieveworld class performance.ArcelorMittal holds an inauguralglobal interactive individual shareholderevent with Second Life. Through thisvirtual reality website, individual shareholderscan meet and interact with Mr Mittal.ArcelorMittal signs an agreementto acquire Bayou Steel, a producerof structural steel with facilitiesin LaPlace, Louisiana, and Harriman,Tennessee, for $509 million. Thetransaction closed in July 2008.ArcelorMittal signs an agreementto acquire the Mid Vol Coal Group.This partnership will increase theCompany’s upstream self-sufficiencyin raw materials.ArcelorMittal, Hunan Valin Groupand Hunan Valin Steel Co. launch ValinArcelorMittal Automotive Steel, an industrialand commercial automotive joint venturethat will have an annual productioncapacity of 1.2 million tonnes of flat carbonsteel, mainly for automotive applications.ArcelorMittal enhances its distributionactivities in the United Arab Emirates.The Company intends to acquire 60%of Dubai Steel Trading Company LLC(‘DSTC LLC’), a newly incorporatedcompany located in the Dubai free zone.The acquisition is finalized in January 2009.ArcelorMittal increases its stake inMacarthur Coal of Australia, from 14.9%to 19.9%.10

JulyArcelorMittal and AREVA sign an industrialpartnership agreement for a €70 million($110 million) investment aimed at increasingproduction of steel products for the nuclearindustry at the Group’s Industeel plant.ArcelorMittal launches a new cleantechnology venture capital fund, with aninitial clean technology investment of$20 million in MiaSolé, and a new carbonfund, as part of its commitment to findingsolutions for environmental challenges,including climate change.ArcelorMittal’s Stainless Internationalsegment acquires the 35% stake in UginoxSanayi ve Ticaret Limited Sirketi (‘Uginox’)owned by Primex. Uginox operatesa coil processing and service centrein Turkey dedicated to servicing theautomotive and white goods markets.ArcelorMittal signs an agreementto acquire Concept Group (‘Concept’),located in southern West Virginia, USA.Concept’s proximity to Mid Vol’s operationswill allow the Group to draw on thecomplementary strengths of both companiesto increase their combined productioncapacity. The transaction is completedin August 2008.ArcelorMittal announces a €76 million($118 million) investment to expandelectrical steel production capacity at itsSaint Chély d’Apcher plant, France.ArcelorMittal reinforces its Steel ServiceCentre network in Brazil by acquiringa 70% share of Manchester Tubose Perfilados, the Brazilian steel processorand distributor located in Contagem,Minas Gerais.AugustArcelorMittal projects new investmentsof $1.6 billion in its carbon steel operationsin Brazil. The timing and scope of thisinvestment are currently under review.ArcelorMittal acquires the Koppers’Monessen coke plant for $170 million.The acquisition is an important steptowards increasing upstreamself-sufficiency in metallurgical cokeproduction. The transaction was completedin October 2008.Hunan Valin Iron & Steel Group Co.Ltd and ArcelorMittal sign a 50/50 jointventure agreement for the production andsale of electrical (silicon) steel, one moremilestone following the automotive sheetJV agreement signed in June. The new JV,named Valin ArcelorMittal Electrical Steel,will build cold rolling and processing facilitiesfor the production of electrical steels.ArcelorMittal acquires Brazilian iron oreminer London Mining South America Limitedand reaches an agreement with AdrianaResources Inc. for the development ofan iron ore port facility in the Stateof Rio de Janeiro, Brazil. Together withan investment in Mineração PirâmideParticipações Ltda, the acquisition furtherdiversifies ArcelorMittal’s iron ore basein the face of tighter raw material supply.SeptemberArcelorMittal and Kalagadi Manganeseagree a 50/50 joint venture to developKalagadi’s South African manganese deposits.Project implementation has not yet begunand its scope and timing are under review.ArcelorMittal Warsaw inaugurates a newbar rolling mill, one of the most advancedrolling lines in Europe, following an investmentof €80 million.ArcelorMittal announces a new‘Management Gains’ plan that will target$4 billion of cost savings over the next fiveyears. The plan focuses on increasingemployee productivity, reducing energyconsumption and reducing input coststo achieve a higher yield and improvedproduct quality.ArcelorMittal organizes its LeadershipConference in New Delhi, India. The 650most senior managers have the opportunityto present their strategies, discuss criticalissues and plan the future. Mr Mittal launchesthe new operating philosophy of SafeSustainable Steel.NovemberArcelorMittal meets with its EuropeanWorks Council to present voluntary separationprograms to be launched across the Group.This is to help achieve the Company’sstated aim of reducing SG&A expenditureby an additional $1 billion in response to thecurrent economic situation.ArcelorMittal announces measuresin response to the downturn in the globalsteel industry. These include: postponingtarget completion dates for the realizationof previously announced shipment growthobjectives entailing substantial capitalexpenditure, increasing targeted cost savingsunder the ‘Management Gains’ programover the next five years to $5 billion throughadditional savings in SG&A costs, increasingtemporary cuts in steel production to upto 35% (later increased to approximately40-45%) globally in order to acceleratesteel inventory reduction, and targeting a$10 billion reduction in net debt by the endof 2009. In addition, ArcelorMittal suspendsthe share buy-back program until thedebt reduction targets are achieved.DecemberArcelorMittal enters into bindingagreements to reduce its voting interestin Dillinger Hütte Saarstahl AG (‘DHS’)from 51.25% to 33.4% (correspondingto an economic interest of 30.08% sinceDHS holds 10% of its shares in treasury),in line with existing governance rights.ArcelorMittal plans to remain a key industrialpartner to DHS.RecentDevelopmentsArcelorMittal contributes its 76.9% stakein Saar Ferngas AG to Luxembourg-basedutility Soteg, in which it holds a minorityownership stake. Upon completionof all steps related to this transaction,ArcelorMittal’s stake in Soteg will ultimatelyincrease from 20% to 25.3%.In connection with its 2008 resultsannouncement on February 11, 2009,ArcelorMittal provides an update on itsinitiatives in response to the difficult marketenvironment. It will continue temporaryproduction cuts of up to 45% in the firstquarter of 2009 until the inventoryreduction process is complete, reduceits base dividend for 2009 to $0.75 per share,refocus its $5 billion ‘Management Gains’plan, target savings of $2 billion in 2009,reduce its planned capital expendituresto $3 billion in 2009, and target a reductionof working capital rotation days by15-25 days during 2009.Monthly Highlights 2008ArcelorMittal Annual Report 200811

Our vision in this regard is very“simple. We have to become the safeststeel company in the world.“Lakshmi N Mittal12

Health and Safety: The Number 1 PriorityEnsuring the highest standardsof Health and Safety continuesto be the overarching priorityfor ArcelorMittal. This willcontinue to be the case despitethe challenges of the globaleconomic environment sincethe end of 2008 and continuinginto 2009. ‘Journey to Zero’,launched in September 2008,is the Health and Safetyimprovement process thatis helping the Group realizeits commitment and its aim tobecome one of the safest steelcompanies in the world.14

Journey to ZeroAt ArcelorMittal, Health and Safetyis the top priority. As clear evidence,every meeting of both the GroupManagement Board and the ManagementCommittee begins with a Healthand Safety review.In March 2007, ArcelorMittal’sHealth and Safety policy was launched.Aimed at reducing the frequencyof accidents on a continuing basis,it underlines the commitment ArcelorMittalhas made to the well-being and safetyof all employees – both on and offthe job – and is a key componentof ‘transforming tomorrow’.In September 2008, ‘Journey to Zero’,ArcelorMittal’s Health and Safetyimprovement process, was launchedat the Leadership Conference in NewDelhi, India. The world class principlescontained within the Group-wide Healthand Safety policy form the foundationof ‘Journey to Zero’ – a widely heldand deeply felt initiative – with the goalof zero accidents.‘Journey to Zero’ represents thecommitted pursuit of an injury-free,illness-free and healthy workplace.As such, it is a common language usedto drive ArcelorMittal’s continual Healthand Safety improvement and to developcommon leadership actions to deliverperformance excellence. It leverageslearning and shared best practices acrossthe entire organization and engagespeople at all levels to identify highimpact improvement priorities.The process starts at the top and is ledby a senior site leader. In every site/location, a ‘talent’ has been selectedas project leader. Improvement initiativeswere rapidly developed since the launchand have already become part of localHealth and Safety business plans for 2009.The focus is on preventive operationalactivities, improving standards througheffective implementation of good andbest practices including hazardidentification and risk analysis, accident/incident investigation, critical taskanalysis, indicators follow-up, systemreview, communication process,layered evaluations/shop floor audits,colleague care and much more.This becomes part of a completeHealth and Safety Management System(‘HSMS’), underlying actions that areshop floor oriented and event analysisdriven. Each single Health and Safetybusiness plan on site can refer to theHSMS to devise key initiatives withreference to their own culture,their past results, their history andmotivational capabilities.Global Joint Health andSafety AgreementOn June 3, 2008, ArcelorMittal andthe European Metalworkers’ Federation,the United Steelworkers and theInternational Metalworkers’ Federation,signed a groundbreaking Global Agreementon Occupational Health and Safety.The agreement, the first of its kindin the steel industry, recognizes thevital role played by trade unions inimproving Health and Safety. It setsout minimum standards in every sitein which ArcelorMittal operates in orderto achieve world class performance.These standards include the commitmentto form joint management/unionHealth and Safety committees as wellas training and education programs inorder to make a meaningful impacton overall Health and Safety across theGroup. Also included in the agreementis the creation of a joint management/unionGlobal Health and Safety Committeethat will target plants in the Group in orderto help them to further improve theirHealth and Safety performance.Following the Global Health and SafetyCommittee meeting in East Chicago, USA,in June 2008, new Global Health and Safetystandards were refined and finalized.These included the new – and verycritical – global standards for contractors;vehicles and driving; cranes and lifting,as well as the Alert Procedure.From September 30 to October 1,2008, members of the Global JointHealth and Safety Committee metin Kazakhstan. Their primary purposewas to support implementation of thegroundbreaking Global Joint Healthand Safety Committee agreement.Continuing their work, union leadersand ArcelorMittal management metin Timóteo, Brazil from November 11-13,2008. Brazil has joint Health and Safetycommittees – CIPAs – which are a legalrequirement – composed of appointedmanagement and elected employees.At this second leg of the 2008 session,union members of the Joint Committeemet union representatives from acrossBrazil in Belo Horizonte.PerformanceDespite the current global economicuncertainties, the ArcelorMittal Groupplaces Health and Safety as its numberone priority. ArcelorMittal is ona ‘Journey to Zero’. The Group’sLost Time Injury Frequency Rateimproved in 2008 to 2.3 (comparedwith 3.3 in 2007, for steel and mining).The driving philosophy underlyingthe Health and Safety process is thatif some parts of the ArcelorMittalGroup can deliver best practice, all partscan. By learning together and sharingbest experience across the entireorganization, they achieve high impactHealth and Safety improvementthat protects the company’s greatestasset – the people.To leverage and improve the Healthand Safety performance around the Group,the Group Management Board identified15 high priority plants at end of year2008. The implementation of Healthand Safety improvement plans at thesesites will be closely monitored ona weekly basis with the direct involvementof the corporate Health and Safety team.Leading by exampleThere are many good examplesof ‘Journey to Zero’ progress in theGroup that show how the processcan be implemented.In 2008, ArcelorMittal Châtelet,Belgium, received the OHSAS 18001certification in January, followed by theService Centre based in Genk, Belgium,in April, ArcelorMittal Rodange,Luxembourg, in August, ArcelorMittalAncerville, France, in September andArcelorMittal Usti, Czech Republic,in October. More recently, ArcelorMittalTimóteo in Brazil, ArcelorMittal Genkin Belgium, ArcelorMittal Gueugnon,ArcelorMittal Isbergues, ArcelorMittalPont de Roide and Firminy in France,the Service Centre based in Poland andanother one based in Spain also obtainedtheir OHSAS 18001 certification.Health and Safety: The Number 1 PriorityArcelorMittal Annual Report 200815

Health and Safety: The Number 1 Priority continuedTen Actions of the Healthand Safety Corporatewith Global Health Committee• Analysis of health statusand main illness causes• Analysis of hygiene status• Definition of Group healthprograms contributingto ‘Journey to Zero’• Definition of an adequatereporting and metrics system,introducing leadingindicators and allowingperformance measurements• Definition of advancedenvironmental-healthand hygiene concepts• Definition of advanced diseaseprevention campaigns• Definition of main Grouphealth and hygiene standardsand recommendations• Definition of a best practicesportfolio – benchmarkingwith best of class companies• Definition of a health REX 1 system• Initiation and follow-upof pilot and masterplan projectsThus 18 units are now certifiedto OHSAS 18001 within the Stainlesssegment. All industrial sites are certified.These 18 sites cover around 9,000employees out of around 12,000 in totalwithin the Stainless segment. It meansthat three employees out of fourare now working on a site accreditedwith OHSAS 18001 Standard.On September 29 and 30, Health andSafety managers from Long Carbon Europe(‘LCE’) highlighted their ‘Journey to Zero’program. 2009 will concentrate on closingthe gap by aligning the least performingsites to LCE’s best in class. 2010 willfocus on eliminating losses due to failuresin processes and installations. In 2011,they will closely work on the definitionand the implementation of additionalimprovement tools. Finally, 2012 will morespecifically stress the health featuresof our action plans, for instance back painor occupational illnesses.In October 2008, the World SteelAssociation (worldsteel) recognizedArcelorMittal Dofasco with the 2008Safety and Health Excellence RecognitionAward. ArcelorMittal Dofasco wasrecognized for its excellence in the pursuitof an injury-free, illness-free and healthyworkplace. With this recognition, worldsteel(formerly the International Iron andSteel Institute) highlighted the ‘Journeyto Zero’ initiative as an example of howthe Company is engaging employeesin its efforts to improve Health andSafety performance.In the last month of 2008, StainlessBrazil reached an unprecedented result:a zero accident rate in all of its units,including service centers, the steel plantin Timóteo, the tubes manufacturing unitsand the charcoal production complexin Vale do Jequitinhonha, besidesthe administrative and commercialoffices. The result, which covers around5,500 employees and approximately2,500 subcontractors, proves thata zero accident rate is a possible target.Health and Safety DayAlready in March 2007 and 2008,ArcelorMittal held a Group-wide Healthand Safety Day that was observedin all of its worldwide operations.Now a regular annual event, Healthand Safety Day is an occasion to involveall staff in discussing safety improvements,new targets and associated safetyprograms at Group as well as plant level.1Return on Experience.16

50Mining activities%In 2008 ArcelorMittal continuedto make improvements to the equipmentand operating practices and continuesto implement an investment programaimed at modernizing the mines,ensuring a safe working environmentfor employees and improving productivity.The program will take four yearsto complete. It includes upgradingof the methane degassing and mineIn 2008, the iron oreventilation systems and installing electricaland gas detection telemetry systems. mining operationsof ArcelorMittal reducedIn 2008, the iron ore mining operationsof ArcelorMittal reduced its Lost its Lost Time InjuryTime Injury Frequency Rate by 50% and Frequency Rate by 50%the Bosnian operation at Prejidor achieved15 months without a lost time injury.The focus has been the implementation Unions and ArcelorMittal Healthof shop floor audits and Leading by Example and Safety management are working– the theme of Health and Safety Day together to create a dialogue in order2008. The rollout of ‘Journey to Zero’ to make a meaningful impact on Healthwill strengthen the focus in reducing and Safety across the Company,accidents and incidents in our operations. including mining. On October 1, 2008,the Global Joint Health and SafetyFollowing the Abayskaya Mine incidentCommittee met in Kazakhstan.in Kazakhstan in January 2008, whereTopics discussed included the need30 employees tragically lost their lives,for employees to be able to raise HealthArcelorMittal reviewed its investmentand Safety issues freely with localand modernization program andmanagement. Attendees also stressedsignificantly increased the capitalthe need to accelerate and install plannedexpenditure during 2008. A lengthyHealth and Safety capital improvementsinvestigation into the cause of thefor mining.accident was consequently conductedand an action plan was provided to the Health initiatives: Paying moremanagement to ensure the safetyattention to healthof all employees engaged in the Group’smining operations.ArcelorMittal views the health of itsworkforce as a key element in the successArcelorMittal continues to workof its operations. Maintaining good health iswith the Government improving and critical to the Company’s Health and Safetymodernizing the coal mines in Kazakhstan. record. A notable difference in 2008 is aPart of the investment program provides more unified approach towards Health andthe latest mine environmental monitoring Safety, placing greater emphasis on thesystem and is now installed at two of the health aspect; a health sub-committee ofmines, Kazakhstanskaya and Shaktinkskaya, the Global Health and Safety Committeeproviding real time monitoring of the has been formed, signifying no separationmine atmosphere.of Health and Safety in terms ofimportance, best practices and standards.A new technique designed to improvethe capture of the methane released Along with a focus on major injuries,during mining has recently beenthe Group is integrating a stronger campaign ofimplemented at Kuzembaev mine.preventative health measures and recognitionThe Group is also working with international of such problems as back pain, carpal tunnel,experts reviewing recognized ‘world fatigue syndrome, burns, cardiovascular risks,best’ techniques in degassing to develop noise at work, stress, etc.and apply the projects in our coal mines.A main area of focus in 2008 wasNew coal production equipment is being the development of the Health and Safetyinstalled at the Kostenko coal mine Committee’s integrated strategy andwhich will contribute to improving the action plan. A challenge at ArcelorMittalsafety of employees. ArcelorMittal is creating such plans for a companycontinues its Behavioral Safety program with a broad geographic reach; one which‘Each person’s safety is everyone’s safety’ encompasses both aspects of the Worldwith support from the internationally Economic Forum’s definition of ‘two’ worlds:renowned company DuPont. ArcelorMittal developed and developing. Within thisremains committed to the Health and context, the new Health CommitteeSafety investment program whichis implementing initiatives to respondis designed to eliminate these tragic specifically to the needs of these twoincidents in its coal mining operations. worlds, with an ultimate goal of Group-widecommon standards for all locations.For example, in places such as Brazil,Europe, the USA and Canada, where healthstandards may be higher, more emphasismight be placed on screening for illnesses.In such locations, the ArcelorMittalGroup can employ a ‘top down’ approach,with the global Committee creatinginitiatives, such as a global HealthStandards. In the developing world,a ‘bottom-up’ approach can prove morefruitful; developing localized solutionsto better suit the ground realities.For example, the need may be for basichealth care infrastructure, as is the casein Liberia, or the prevalent health careissue might be an illness such as Aids,as is the case in South Africa.Different locations require differentinvestments in the basics of occupationalhealth. This is why the Global Health andSafety Committee has continentalrepresentation (one person each forCanada, USA, Asia, Africa and Europe).The initiatives they develop servetherefore to meet the needs of specificregions with a final objective of improvinghealth care and establishing minimumacceptable levels of quality health careacross the geographies.Localized master plansOne task that Corporate Health andSafety has is the implementationof master plans for ‘Journey to Zero’,meaning zero occupational diseases,which involve a more ‘bottom up’ approach,meaning direct help for the operations.Over a period of approximately threeyears, analysis will be conducted, resultingin the creation of a localized action plan.This process can be quite complex,particularly in places such as Kazakhstanwhere there are mining and steeloperations. Assistance is provided bythe Joint Health and Safety Committees,who offer advice and help to createHealth and Safety action plans, providetraining and assist with the technicalaspects of knowledge transfer.The key is for the health team to buildup practical help and to be activein projects with concrete actions.One example where this call to actionis being applied is in Kazakhstan.At ArcelorMittal Temirtau, a new CEOwas appointed in 2008 who has takena very pragmatic approach to improvinghealth and hygiene. This resultedin a Directive, a Medical Coordinator,and a consulting group; all valuableelements in developing a local plan.Lessons learned in one countrycan be useful company-wide.Health and Safety: The Number 1 Priority continuedArcelorMittal Annual Report 200817

In 2008, ArcelorMittal andtrade unions across the globesigned a groundbreakingagreement to further improveHealth and Safety standardsthroughout the Company.The agreement sets outminimum standards in everysite that the Company operatesin, so as to achieve world-classperformance. These standardsinclude the commitmentto form joint management/unionHealth and Safety committeesas well as training andeducation programs in orderto make a meaningful impacton overall Health and Safetyacross the Company.A number of new Health andSafety initiatives were realizedin 2008. These include the new injurytracking and reporting database.Fatality prevention standards(such as protocols for workingat heights) and process standards(such as required protectiveequipment) have been developedand rolled-out across the Group.These are reinforced through a setof golden rules such as comingto work ‘in a fit and able condition’.The Group is placing significantemphasis on establishingstrict contractor standardsand implementing behavioral safetyprograms. In addition, a newoperations standard has beenrolled out involving frequentplant – or shop floor – audits,to augment safer waysof working.18

‘Leading by Example’ is an essentialconcept to promote Healthand Safety within the Group.19

Board of DirectorsArcelorMittal’s Boardof Directors is responsiblefor the overall supervisionof the Company. On May 13,2008, following the end ofMr Joseph Kinsch’s mandateas Chairman, Mr LakshmiN Mittal became Chairmanof the Board. Currently,the Board of Directors iscomprised of 16 directors,15 of whom are non-executivedirectors, one of whomis an executive director and 12of whom are independentdirectors. The Board istruly international in character.Lakshmi N Mittal, 58, is the Chairmanand CEO of ArcelorMittal. Mr Mittalfounded Mittal Steel Company(formerly the LNM Group) in 1976and guided its strategic development,culminating in the merger with Arcelor,agreed in 2006, to found the world’slargest steelmaker. Since the merger,Mr Mittal has led a successful integration,establishing ArcelorMittal as one ofthe world’s foremost industrial companies.He is widely recognized for the leadingrole he has played in restructuringthe steel industry towards a moreconsolidated and globalized model.Mr Mittal is an active philanthropistand a member of various trusts andboards, including Goldman Sachs’ Boardof Directors, EADS Board of Directorsand ICICI Bank Limited’s Board of Directors.He is also a member of the ForeignInvestment Council in Kazakhstan,the International Investment Councilin South Africa, the Investors’ Councilto the Cabinet of Ministers of Ukraine,the World Economic Forum’s InternationalBusiness Council, the World SteelAssociation’s Executive Committeeand the Presidential International AdvisoryBoard of Mozambique. He also sitson the Advisory Board of the KelloggSchool of Management in theUnited States.Mr Mittal began his career workingin the family’s steelmaking business in India,and has over 30 years of experienceworking in steel and related industries.In addition to forcing the pace of industryconsolidation, he has also championedthe development of integrated mini-millsand the use of DRI as a scrap substitutefor steelmaking. Following the transactioncombining Ispat International and LNMHoldings to form Mittal Steel in December2004, together with the simultaneousannouncement of the acquisition ofInternational Steel Group in the UnitedStates to form the world’s then-leadingsteel producer, Mr Mittal was awardedFortune magazine’s ‘European Businessmanof the Year 2004’.In 1996, Mr Mittal was awarded‘Steelmaker of the Year’ by New Steelin the United States and the ‘Willy KorfSteel Vision Award’ by World SteelDynamics in 1998 for outstanding vision,entrepreneurship, leadership and successin global steel development. Followingthe creation of ArcelorMittal, Mr Mittalwas awarded ‘Business Person of 2006’by the Sunday Times, ‘InternationalNewsmaker of the Year 2006’ by TimeMagazine and ‘Person of the Year 2006’by the Financial Times for his outstandingbusiness achievements. In January 2007,Mr Mittal was presented with a Fellowshipfrom King’s College London, the college’shighest award. He also received the 2007Dwight D Eisenhower Global LeadershipAward, the Grand Cross of Civil Merit fromSpain and was named AIST Steelmakerof the year. In January 2008, Mr Mittalwas awarded the Padma Vibhushan,India’s second highest civilian honor,by the President of India. In September2008, Mr Mittal was chosen for the third‘Forbes Lifetime Achievement Award’,which honors heroes of entrepreneurialcapitalism and free enterprise.Mr Mittal was born in Sadulpur inRajasthan, India on June 15, 1950.He graduated from St Xavier’sCollege in Kolkata where he receiveda Bachelor of Commerce degree.Mr Mittal is married to Usha Mittal,and has a son, Aditya Mittal anda daughter, Vanisha Mittal Bhatia.Lewis B Kaden, 66, is the LeadIndependent Director of ArcelorMittal.He has approximately 38 years ofexperience in corporate governance,financial services, dispute resolutionand economic policy. He is currently ViceChairman of Citigroup. Prior to that,he was a partner of the law firm DavisPolk & Wardwell, and served as Counselto the Governor of New Jersey,as a Professor of Law at ColumbiaUniversity and as director of ColumbiaUniversity’s Centre for Law and EconomicStudies. He has served as a directorof Bethlehem Steel Corporation for tenyears and is currently Chairman of theBoard of Directors of the MarkleFoundation. He is a member of the Councilon Foreign Relations and has been amoderator of the Business-Labor Dialogue.Mr Kaden is a magna cum laude graduateof Harvard College and of Harvard LawSchool. He was the John Harvard Scholarat Emmanuel College, CambridgeUniversity. Mr Kaden’s principal dutiesand responsibilities as Lead IndependentDirector are as follows:• Coordination of activities of theother Independent Directors;• Liaison between the Chairman andthe other Independent Directors;• Calling meetings of theIndependent Directors whennecessary and appropriate; and• Such other duties as are assignedfrom time to time by the Boardof Directors.20

First row (left to right)Lakshmi N MittalLewis B KadenVanisha Mittal BhatiaNarayanan VaghulSecond row (left to right)Wilbur L RossFrançois PinaultJosé Ramón Álvarez RenduelesSergio Silva de FreitasThird row (left to right)Georges SchmitMichel Angel MartiJean-Pierre HansenJohn O CastegnaroFourth row (left to right)Antoine SpillmannH.R.H. Prince Guillaume de LuxembourgIgnacio Fernández ToxoMalay MukherjeeBoard of DirectorsArcelorMittal Annual Report 2008

Board of Directors continuedVanisha Mittal Bhatia, 28, was appointedas a member of the LNM Holdings Boardof Directors in June 2004. Mrs VanishaMittal Bhatia was appointed to MittalSteel’s Board of Directors in December2004. She has a Bachelor of Arts degreein Business Administration from theEuropean Business School and hascompleted corporate internships at MittalShipping Ltd., Mittal Steel HamburgGmbH and an Internet-based venturecapital fund. She is the daughterof Mr Lakshmi N Mittal.Narayanan Vaghul, 72, has over 50 yearsof experience in the financial sectorand has been the Chairman of ICICI BankLimited since 2002. Previously, he servedas the Chairman of the Industrial Creditand Investment Corporation of India,a long-term credit development bankfor 17 years and, prior to that, servedas Chairman of the Bank of India andExecutive Director of the Central Bankof India. He was chosen as Businessmanof the Year in 1992 by Business Indiaand has served as a consultant to theWorld Bank, the International FinanceCorporation and the Asian DevelopmentBank. Mr Vaghul was also a visitingProfessor at the Stern Business Schoolat New York University. Mr Vaghulis Chairman of the Indian Institute ofFinance Management & Research andis also a Board member of various othercompanies, including Wipro, Mahindra& Mahindra, Nicholas Piramal India, ApolloHospitals and Himatsingka Seide.Wilbur L Ross, Jr, 71, has served asthe Chairman of the ISG Board of Directorssince ISG’s inception. Mr Ross is theChairman and Chief Executive Officerof WL Ross & Co. LLC, a merchant bankingfirm, a position that he has held sinceApril 2000. Mr Ross is also the Chairmanand Chief Executive Officer of WLRRecovery Fund L.P., WLR Recovery Fund IIL.P., Asia Recovery Fund, Asia RecoveryFund Co-Investment, Nippon InvestmentPartners and Absolute Recovery HedgeFund. Mr Ross is also Chairman of InvescoPrivate Capital, Ohizumi ManufacturingCompany in Japan, International TextileGroup, International Coal Group andof American Home Mortgage ServicingInc. Mr Ross is a Board member of theTurnaround Management Association,Nikko Electric in Japan, Clarent HospitalCorp. and International AutomotiveComponents. He also serves as a Directorto Compagnie Européenne de WagonsSARL, Luxembourg, Wagon PLC, UK,the Japan Society, the Whitney Museumof American Art and the Yale Schoolof Management. Previously, Mr Rossserved as the Executive Managing Directorat Rothschild, the investment banking firm,from October 1974 to March 2000and as Chairman of the SmithsonianInstitution National Board.François Pinault, 72, is the founderand former President of the Artemis Groupand PPR. The Artemis Group is a globalinvestment holding company including42% of the listed company PPR. PPRincludes retail brands such as FNAC,La Redoute, Conforama, and luxury brandssuch as Gucci Group, which includesGucci, Bottega Veneta, Yves Saint Laurent,Boucheron and Balenciaga. Artemisalso owns the Chateau Latour vineyardin France and Christie’s auction house.Mr Pinault also owns insurance and mediabusinesses and holds minority sharesin the French groups Bouygues and Vinci.Mr Pinault also serves on the Board ofDirectors of Financière Pinault and Artemis.José Ramón Álvarez Rendueles, 68,has extensive experience in the financial,economic and industrial sectors.He is a former Governor of the Bankof España and President of the BankZaragozano. He is President of the Boardof Directors of ArcelorMittal Españaand Peugeot España. He is also a retiredfull professor of public finance at theUniversidad Autónoma de Madrid anda Director of Gestevisión Telecinco S.A.,Generali España and Sanitas.22

Sergio Silva de Freitas, 65, has over40 years of experience in the financialsector. He is President of the Board ofDirectors of ArcelorMittal Brasil. From1975 to 1979, he was Secretary ofFinance of São Paulo and served as Directorof the Central Bank of Brasil in 1996.After several years spent in high-rankingpositions in important financial institutionsin São Paulo, London and Washington,he became Senior Vice President of BancoItaú and is currently a member of theInternational Advisory Board of BancoItaú, São Paulo, Brazil. He is also a memberof the Board of several Brazilian andforeign companies. He has a Bachelor’sdegree in Electrical Engineering fromEscola Nacional de Engenharia daUniversidade Brasil.Georges Schmit, 55, is Director Generalat the Ministry of the Economy andForeign Trade and Member of the Boardof Economic Development of theGrand-Duchy of Luxembourg. He is alsoVice Chairman of the Société Nationalede Crédit et d’Investissement (SNCI)and of the Entreprise des Postes etTélécommunications, Luxembourg,and a Director of SES, Banque et Caissed’Epargne de l’Etat and Paul Wurth.Mr Schmit graduated from the Universityof Louvain, Belgium and holds a Masterof Arts degree in Economics fromthe University of Michigan.Michel Angel Marti, 61, serves asa representative of the employeesof ArcelorMittal. He is a former Secretaryof the Conféderation FrançaiseDémocratique du Travail (CFDT) union,located in Broye, France.Jean-Pierre Hansen, 60, is Vice Chairmanof the Executive Committee andSenior Executive Vice President of Suez,in charge of Operations. He enteredthe electricity and gas sector in 1975.Since January 2005, Mr Hansen has beenVice Chairman and CEO of Electrabel,a role he had previously held from 1992to March 1999. Since March 1999,he has also held the position of Chairmanof the Executive Committee of Electrabel.He is also CEO of Suez-Tractebel,Chairman of Fabricom and Directorof Distrigas, Fluxys, AGBAR and ACEA,Vice Chairman of the Federation ofEnterprises in Belgium and associateprofessor of economics at the UCLand at the École Polytechnique, Paris.Mr Hansen holds a Master’s degreein Electrical Engineering, a degree inEconomics and a Doctorate in Engineering.John O Castegnaro, 64, serves asa representative of the employeesof ArcelorMittal. He is a memberof the Luxembourg Parliament andHonorary Chairman of the OnhofhängegeGewerkschaftsbond Lëtzebuerg(OGB-L) trade union.Antoine Spillmann, 45, worked for leadinginvestment banks in London from 1986to 2000. He is now an Asset Managerand executive partner at the firm BruellanWealth Management, an independent assetmanagement company based in Geneva.Mr Spillmann studied in Switzerland andLondon, receiving diplomas from theLondon Business School in InvestmentManagement and Corporate Finance.H.R.H. Prince Guillaume de Luxembourg,45, worked for six months at theInternational Monetary Fund in WashingtonD.C. and spent two years working forthe Commission of European Communitiesin Brussels. He studied at the Universityof Oxford in the United Kingdom,and Georgetown University in WashingtonD.C. from which he graduated.Ignacio Fernández Toxo, 56,has approximately 30 years of experiencein trade union matters. He is currentlya member of the Confederal ExecutiveCommittee of Comisiones Obreras(CC.OO.), serving as Secretary of AcciónSindical y Políticas Sectoriales.Malay Mukherjee, 60, has over 30 yearsof experience in a variety of technicaland commercial functions in the steelindustry, including iron ore mining, projectimplementation, materials managementand steel plant operations. He joinedthe LNM Group in 1993 after workingat the Steel Authority of India Limited(SAIL), where he last served as ExecutiveDirector (Works) at the Bhilai Steel Plant,the largest integrated steel plant inIndia, which has a production capacityof approximately four million tonnes.Mr Mukherjee has a Master’s degreein Mining from the U.S.S.R. StateCommission in Moscow and a Bachelorof Science degree from the Indian Instituteof Technology in Kharagpur, India.Mr Mukherjee also completed an advancedmanagement program conducted bythe Commonwealth Secretariat in jointassociation with the University of Ottawa,Canada, and the Indian Instituteof Management, Ahmedabad. MrMukherjee joined Ispat Karmet in 1996after serving as Managing Directorof Ispat Mexicana, joining Ispat Europeas President and CEO in June 1999.Formerly the President and Chief OperatingOfficer of Ispat International N.V.,Mr Mukherjee became the ChiefOperating Officer of Mittal Steel Companyin October 2004. He is a former Memberof ArcelorMittal’s Group ManagementBoard with responsibility for Asia,Africa, CIS, Mining, Stainless, Pipesand Tubes as well as Technology.Board of Directors continuedArcelorMittal Annual Report 200823

Senior Management - Group Management BoardThe strategic directionof the business is the responsibilityof the Group ManagementBoard (GMB). The GMB membersare elected by the Board ofDirectors and are headed byLakshmi N Mittal as Chief Executive.On April 21, 2008, the GMB wasexpanded, to reflect the increasingsize, scope and ambitions ofArcelorMittal. Sudhir Maheshwari,Christophe Cornier and DavinderChugh have joined the GMB.This ensures that the seniorexecutive team continues to enjoythe relevant talent and expertiseit needs to continue to deliverthe best possible performanceto all stakeholders.Aditya Mittal, CFO, Responsiblefor Flat Americas, Mergers and Acquisitions(M&A), Investor Relations, Strategyand CommunicationsAditya Mittal, 33, is Chief FinancialOfficer of ArcelorMittal with additionalresponsibility for M&A Businessand Project Development, Flat Americas,Strategy, Investors Relations andCommunications. Prior to the mergerto create ArcelorMittal, Aditya Mittalheld the position of President and CFOof Mittal Steel Company from October2004 to 2006. He joined Mittal Steelin January 1997 and has held variousfinance and management roles withinthe company. In 1999, he was appointedHead of Mergers and Acquisitionsfor Mittal Steel. In this role, he led thecompany’s acquisition strategy, resultingin Mittal Steel’s expansion into CentralEurope, Africa and the United States.Besides the Merger and Acquisitionresponsibilities, Aditya Mittal was involvedin post-integration, turnaround andimprovement strategies. As CFO of MittalSteel, he also initiated and led MittalSteel’s offer for Arcelor to create the first100 million tonne plus steel company.In 2008, Aditya Mittal was awarded‘European Business Leader of the Future’by CNBC Europe. He is a member of theWorld Economic Forum’s Young GlobalLeaders Forum, the Young President’sOrganization, a Board Member at theWharton School, a Board Member atBennett, Coleman & Co. and a member ofCitigroup’s International Advisory Board.Aditya Mittal holds a Bachelor’s degreeof Science in Economics withconcentrations in Strategic Managementand Corporate Finance from the WhartonSchool in Pennsylvania. Aditya Mittal is theson of Mr Lakshmi N Mittal.Gonzalo Urquijo, Responsiblefor Long Products, China, Stainless,Tubular Products, Corporate Responsibility,ArcelorMittal Foundation, InvestmentAllocation Committee (IAC) ChairmanGonzalo Urquijo, 47, previously SeniorExecutive Vice President and Chief FinancialOfficer of Arcelor, held the followingresponsibilities: Finance, Purchasing, IT,Legal Affairs, Investor Relations, ArcelorSteel Solutions and Services, and otheractivities. Gonzalo Urquijo also held severalother positions within Arcelor, includingDeputy Senior Executive Vice Presidentand Head of the functional directoratesof distribution. Until the creation of Arcelorin 2002, when he became Executive VicePresident of the Operational Unit Southof the Flat Carbon Steel sector, Mr Urquijowas CFO of Aceralia. Between 1984and 1992, he held a variety of positionsat Citibank and Crédit Agricole beforejoining Aristrain in 1992 as CFO and laterCo-CEO. Gonzalo Urquijo is a graduatein Economics and Political Science of YaleUniversity and holds an MBA fromthe Instituto de Empresa in Madrid.Michel Wurth, Responsible for Flat Europe,Steel Solutions and Services, ProductsDevelopment and R&D, Global CustomersMichel Wurth, 54, was previously VicePresident of the Group ManagementBoard of Arcelor and Deputy CEO,with responsibility for Flat Carbon SteelEurope and Auto, Flat Carbon SteelBrazil, Coordination Brazil, CoordinationHeavy Plate, R&D, NSC Alliance.The merger of Aceralia, Arbed andUsinor leading to the creation of Arcelorin 2002 led to Michel Wurth’sappointment as Senior Executive VicePresident and CFO of Arcelor, withresponsibility over Finance andManagement by Objectives. Michel Wurthjoined Arbed in 1979 and held a varietyof functions including Secretary of theBoard of Directors, head of the Arbedsubsidiary Novar and Corporate Secretary,before joining the Arbed GroupManagement Board and becoming itsChief Financial Officer in 1996. He wasnamed Executive Vice President in 1998.Michel Wurth holds a law degree fromthe University of Grenoble, a degreein Political Science from the Institutd’Études Politiques de Grenoble anda Master of Economics degree from theLondon School of Economics.Sudhir Maheshwari, Responsiblefor M&A, Business Development,Corporate Finance and TaxCommittee (reporting to CFO)Sudhir Maheshwari, 45, was previouslyMember of the Management Committeeof ArcelorMittal, Responsible for Financeand M&A. Prior to this, Mr Maheshwariwas Managing Director of BusinessDevelopment and Treasury at Mittal Steeland has over 20 years of experiencein steel and related industries. Prior to thishe was the Chief Financial Officer ofLNM Holdings N.V. from January 2002until its merger with Ispat Internationalin December 2004. He played an integralrole in all Mittal Steel acquisitions in recentyears, including turnaround and integrationactivities. He also played a key role invarious corporate finance and capitalmarket projects including the initial publicoffering in 1997. Over a 20-year careerwith Mittal Steel, Mr Maheshwari also heldthe positions of Chief Financial Officerat Mittal Steel Europe S.A., Mittal SteelGermany and Mittal Steel Point Lisas,and Director of Finance and Mergersand Acquisitions at Mittal Steel.Mr Maheshwari also served on the Boardof various subsidiaries of Mittal Steel.24

Senior ManagementFirst row (left to right)Lakshmi N MittalAditya MittalGonzalo UrquijoMichel WurthSecond row (left to right)Sudhir MaheshwariChristophe CornierDavinder ChughHe is the Alternate Chair of the StrategicFinance and Tax Committee. MrMaheshwari is an Honors Graduatein Accounting and Commerce from St.Xavier’s College, Calcutta and a Fellowof The Institute of Chartered Accountantsand The Institute of Company Secretariesin India.Christophe Cornier, Responsible for Asia,Africa, Technology and ProjectsChristophe Cornier, 56, was previouslya Member of the ManagementCommittee of ArcelorMittal, Responsiblefor Flat Carbon Western Europe. Prior tothat, Christophe Cornier was responsiblefor Arcelor’s flat products activitiesin Europe and for its worldwide automotivesector since December 2005, when hewas appointed a member of Arcelor’sManagement Committee. In June 2005,he was appointed head of Arcelor’s ClientValue Team. Upon the creation of Arcelorin 2002, he was named Executive VicePresident of FCS Commercial Auto.Before that, he was CEO of SollacMediterranée. In 1998, he was appointedCEO of La Magona, after joining SollacPackaging as Managing Director in 1993.In 1985 he joined Usinor, where he wasBusiness Development Director and ChiefController of Sollac. He began his careerwith the French Ministry of Industry, whichhe left as a Deputy Director. Mr Cornieris a graduate of the École Polytechniqueand the École des Mines in Paris.Davinder Chugh, Responsible for SharedServices (reporting to CEO), IAC MemberDavinder Chugh, 52, has over 30 yearsof experience in the steel industry ingeneral management, materials purchasing,marketing, logistics, warehousing andshipping. Davinder Chugh was previouslya Member of the Management Committeeof ArcelorMittal until 2007. Beforebecoming a Member of the ManagementCommittee, he served as the CEO of MittalSteel South Africa until 2006. Mr Chughalso worked in South Africa from 2002after the acquisition of Mittal Steel SouthAfrica (ISCOR) and was involved in theturnaround and consolidation of the SouthAfrican operations of ArcelorMittal.He also served as Director of Commercialand Marketing at Mittal Steel South Africa,among other positions. Mr Chugh wasVice President of Purchasing in Mittal SteelEurope until 2002, where he consolidatedprocurement and logistics across plantsin Europe. Prior to this, he held severalsenior positions at the Steel AuthorityIndia Limited in New Delhi, India.He holds degrees in science and law andhas a Master of Business Administration.Senior Management - Management CommitteeName Age 1 PositionBhikam Agarwal 56 Executive Vice President, Head of FinanceVijay Bhatnagar 61 Executive Vice President, CEO IndiaJosé Armando Campos 60 Executive Vice President, CEO Flat South AmericaPhilippe Darmayan 56 Executive Vice President, CEO Steel Solutionsand ServicesBernard Fontana 47 Executive Vice President, Head of Human ResourcesJean-Yves Gilet 52 Executive Vice President, CEO StainlessPierre Gugliermina 57 Executive Vice President, Chief Technology OfficerRobrecht Himpe 50 Executive Vice President, CEO Flat EuropePeter Kukielski 2 52 Senior Executive Vice President, Head of MiningCarlo Panunzi 59 Executive Vice President, CEO Long AmericasMichael Pfitzner 59 Executive Vice President, Head of Marketingand Commercial CoordinationArnaud Poupart-Lafarge 43 Executive Vice President, CEO Africa and CISGerhard Renz 61 Executive Vice President, CEO Long EuropeMichael Rippey 51 Executive Vice President, CEO USALou Schorsch 59 Executive Vice President, CEO Flat AmericasBill Scotting 50 Executive Vice President, Head of StrategyInvitee - John Macnamara 58 Vice President, Health and SafetyArcelorMittal Annual Report 20081Age as of December 31, 20082Effective at December 15, 200825

“When people hear the word sustainability,they often think first about the environment.But arguably the highest prize of all is tosustain your reputation because a reputationis a cumulative measure – it is the runningscorecard on all that we do.“Lakshmi N Mittal26

Business StrategyArcelorMittal has been built on a managementphilosophy that values scale, verticalintegration, product diversity and quality,continuous growth in higher value productsand a strong employee well-being andcustomer service focus. The Company hascontinued to enhance these characteristicsthrough its three dimensional strategy forsustainability and growth. As a result, theCompany enjoys unique geographical andproduct diversification, coupled with upstreamand downstream integration that reducesexposure to risk and cyclicality. This strategycan be broken down into three major elements:Geography: ArcelorMittal is the largestproducer of steel in Europe, North and SouthAmerica, Africa, the second largest steelproducer in the CIS region, and has a growingpresence in Asia, particularly in China.ArcelorMittal has steel-making operationsin 20 countries on four continents, including66 integrated, mini-mill and integratedmini-mill steel-making facilities which providea high degree of geographic diversification.Approximately 36% of its steel is produced inthe Americas, approximately 49% is producedin Europe and approximately 15% is producedin other countries, such as Kazakhstan,South Africa and Ukraine. ArcelorMittal is ableto improve management and spread its riskby operating in six segments (Flat CarbonAmericas, Flat Carbon Europe, Long CarbonAmericas and Europe, AACIS, Stainless Steel,and Steel Solutions and Services) reflectingits geographical and product diversity.Worldwide steel demand in recent years hasbeen driven by growth in developingeconomies, in particular the BRICET 1 countries.The Company’s expansion strategy over recentyears has given it a leading position in Africa,Central and Eastern Europe, South Americaand Asia. As these economies develop, localcustomers will require increasingly advancedsteel products as market needs change.Products: As a global steel producer,ArcelorMittal is able to meet the needsof diverse markets. Steel consumptionand product requirements are differentin mature economy markets and developingeconomy markets. Steel consumption in matureeconomies is weighted towards flat productsand a higher value-added mix, while developingmarkets utilize a higher proportion of longproducts and commodity grades. To meetthese diverse needs, ArcelorMittal maintainsa high degree of product diversification andseeks opportunities to increase the proportionof its product mix consisting of highervalue-added products. The Company producesa broad range of high-quality finished,semi-finished carbon steel products andstainless steel products.Value chain: Vertical integration is keyto ArcelorMittal. The Company has accessto high-quality and low-cost raw materialsthrough its captive sources and long-termcontracts. ArcelorMittal plans to continueto develop its upstream and downstreamintegration in the medium term, following areturn to a more favorable market environment.Accordingly, the Company intends in themedium-term to increase selectively its accessto and ownership of low-cost raw materialsupplies, particularly in locations adjacent to,or accessible from, its steel plant operations.Downstream integration is a key elementof ArcelorMittal’s strategy to build a globalcustomer franchise. In high-value products,downstream integration allows steel companiesto be closer to the customer and capturea greater share of value-added activities.As its key customers globalize, ArcelorMittalintends to invest in value-added downstreamoperations, such as steel service centersand building and construction support unitservices for the construction industry.In addition, the Company intends to continueto develop its distribution network in selectedgeographic regions. ArcelorMittal believes thatthese downstream and distribution activitiesshould allow it to benefit from better marketintelligence and to better manage inventoriesin the supply chain to reduce volatilityand improve working capital management.Furthermore ArcelorMittal will continue toexpand its production of value-added productsin developing markets, leveraging off itsexperience in developed markets.Organic growth: Notwithstanding the currentdownturn, ArcelorMittal’s managementbelieves there will be strong global steeldemand growth in the medium and long-term.Accordingly, the Company is maintaining itspreviously announced strategic growth planto increase shipments in the medium-termto 130 million tonnes, which represents a 20%increase over 2006 levels, primarily throughproduction improvements at existing facilities.Realization of this plan will nonetheless bedelayed due to the postponement of capitalexpenditure in light of current marketconditions and uncertainties.Mergers and acquisitions andGreenfield growth: Mergers and acquisitionshave historically been a key pillar ofArcelorMittal’s strategy to which it bringsunique experience, particularly in terms ofintegration. Instead of creating new capacity,mergers and acquisitions increase industryconsolidation and create synergies.ArcelorMittal has also placed strong emphasison growth in emerging economies throughGreenfield developments. In light of the currenteconomic and market conditions, ArcelorMittalhas temporarily curtailed merger and acquisitionand Greenfield investment activity until a returnto a more favorable market environment.Despite the unprecedented globaleconomic situation which has resulted insome postponements or temporaryadjustments of growth targets, the Company’sthree dimensional strategy remains its keyto sustainability and growth over thelong-term. However, given the currenteconomic challenges, the Company hastemporarily put its growth plans on pause,focusing instead on adapting the Companyto the current difficult environment.1Brazil, Russia, India, China, Eastern Europe and Turkey.28

ArcelorMittal is the largest producer of steel in Europe,North and South America, Africa, the second largest steelproducer in the CIS region, and has a growingpresence in Asia, particularly in China.Business Strategy ArcelorMittal Annual Report 200829

Corporate ResponsibilityArcelorMittal continues to supportthe Bone Marrow Registry project,started in France 20 years agoand is steadily expanding to new countriesaround the world. The internationalexpansion of the potential donor baseimproves the chances of findingcompatible donors, thus increasingnumber of people who could benefitfrom potentially life-saving bone marrowtransplants each year.December 2008.ArcelorMittal staged its first globalVolunteer Work Day that mobilizedmore than 10,000 employeesacross all regions of operationsto volunteer for good causes andto the benefit of the community.30

ArcelorMittal’s brand promiseis ‘transforming tomorrow’.The Group understands that itsleadership position in the steel industrybrings unique responsibilities.ArcelorMittal works towards buildingthe sustainability of its business as wellas the communities in which it operatesby investing in its people, making steelmore sustainable, enriching itscommunities, and running its operationsin an open and transparent way.It is ArcelorMittal’s conviction thatbusiness growth, sustainable communitiesand the creation of shareholder valuego hand-in-hand. Only by addressingthe global issues affecting its business,its people and its communities canArcelorMittal help establish mutuallybeneficial stakeholder relationships,attract and retain top talent and maintainits ‘license to operate’. While contributingto the Group’s stated aim of becomingone of the world’s most admiredcompanies and demonstrating clearevidence of its commitment tosustainability, an effective CorporateResponsibility (‘CR’) program shouldalso bring significant returns.ArcelorMittal aims to adhere to bestpractice environmental, social andgovernance disclosure guidelines in thisAnnual Report, as well as in its CR Reports.In 2008, the Group published its first fullCR report, providing an overview ofprogress made since the merger of Arcelorand Mittal Steel in addressing the keyeconomic, environmental and socialchallenges that confront it. The next reportwill be a comprehensive review ofArcelorMittal’s CR performance includinga more detailed account of significant andrelevant CR risks and opportunities.This report will be published during summerof 2009 on www.arcelormittal.comTo help manage risk and enhance valuecreation, ArcelorMittal has a clearly definedstrategy for Corporate Responsibility.ArcelorMittal believes that the CorporateResponsibility strategy will enhance growthof shareholder value, improve the Group’scapability to deal with local and globalissues affecting its operations and improveits stakeholder relations.Corporate Responsibility governanceDuring 2008 the CR governance structureat ArcelorMittal was reviewed. The aimwas to make the business quicker torespond and internalize the managementof issues that arise through stakeholderengagement, specifically in referenceto social, environmental and ethical risks.The new CR governance structureat Group level provides regular reportingto the Board of Directors and the GMBby the CR GMB representative. Boardreports that include performancemonitoring are prepared by the corporateCR team, with the support of the newCR Coordination Group to ensure thatthe management of the Company is givenadequate information for their decisionmaking.The CR Coordination Group isconstituted by a minimum of four corporaterepresentatives and invited guests fromthe corporation, operating units andexternal experts. Each subsidiary is askedto establish its own formal CR governancestructure, in adherence to the Group levelarrangement. The aim is to establisha participatory CR governance structurelocally that would support effectivecommunity relations and CR management.To ensure effective, efficient andstrategic execution of CR across theGroup, the governance structure issupported by roles and accountabilitydescriptions for CEOs/plant managersand CR Coordinators at all levels.To further improve the capacity of theorganization to deal with CR issues andto drive and evaluate performance in linewith our business objectives, a setof CR competencies have been developedspecifically for the appointed CRCoordinators, in collaboration withArcelorMittal University.The new CR governance principles arealso designed to aid the ongoingcommitment to improve transparencyin our operation and external reporting.Corporate Responsibility strategyIn 2008, the Group embarked on a studyto analyze the financial impact of CRon the business and to investigate waysof embedding CR into mainstreamdecision-making. The study highlightedthe potential significance of the CR agendato ArcelorMittal’s business and its rolein generating value by managing theupsides of risks, operating efficiently andsupporting the core business strategy.In support of this, ArcelorMittal hasa clearly defined strategy for CR.The CR strategy is aimed at enhancinggrowth of shareholder value, improvingthe Group’s capability to deal with localand global issues affecting its operationsand improving its stakeholder relations.ArcelorMittal’s CR strategycomprises four themes:Investing in our people. ArcelorMittal’speople are the key to its future. It is acore tenet of its policy that each and everyone is made to feel valued, is treatedwith dignity and respect, is provided witha safe and healthy environment in whichto work, and is given every opportunityfor personal development.Making steel more sustainable. The Group’sefforts are focused on achieving acontinuous improvement in environmentalperformance through increased efficiency,the development of pioneering newprocesses and acting with customersand others to help them achieve theirenvironmental goals.Enriching our communities. ArcelorMittalseeks to contribute to the developmentof strong and sustainable local communitieswherever it operates. It aims to achievethis by being sensitive to local needsand priorities, by engaging with localcommunities in an open and straightforwardway and by working in active partnershipwith local organizations.The strategy is supported bya commitment to transparent governance.ArcelorMittal will take steps to understandthe true impact of its business, predictfuture consequences and managerisks consistently across its operations.This is done through incorporatingenvironmental, social and governanceconsiderations into risk managementprocedures, as well as other existingsystems and processes. It will engagemeaningfully with key stakeholdersand respond in a transparent manner.To that end it will seek constantlyto improve the quality of disclosuresto investors and of CR reporting, treatall shareholders equally and communicatewith them proactively, implementgovernance policies and frameworksthough the business, and integrateCR principles into all business andmanagement practices.The progress made against theCR strategy is carefully monitoredthrough 14 Key Performance Indicatorsaddressing material CR issues.The indicators will be measuredlocally through existing procedures,where applicable, and monitored throughlocal CR committees.Corporate ResponsibilityArcelorMittal Annual Report 200831

Corporate Responsibility – Investing in our PeopleThe ArcelorMittalHuman Resources (HR)professionals supportCompany leadershipto attract, develop andretain tomorrow’s leaders,enable employees at alllevels to manage theirperformance, realize theirpotential and build andmaintain good relationsand social dialogue withemployees and theirrepresentatives. They supportthe Cost Leadershipprograms of the Company.A number of initiatives were introducedin 2008 to bring the business closerto employees and facilitate the cascadingof key information. These include amongother things: quarterly meetings with theHuman Resources Leadership Team,an internal newsletter, KnowledgeManagement Programs and proximitymeetings. In 2008, over 50 proximitymeetings were conducted in more than20 countries serving to align prioritiesand initiatives, narrow the gap betweenCorporate and local operations,shop floor workers, white collar workers,young talents and employee representatives,and to stimulate the exchangeof information.Human Resources achievements in 2008‘Speak Up’ surveyIn June 2008, Human Resources atArcelorMittal launched its first survey,called ‘Speak Up’, for ‘exempts’ 1 designedto assess how ArcelorMittal leaders combinecompetitiveness and HR management,two critical challenges for the Group toensure a successful execution of its strategies.In total, 22,750 exempts, in 76 countries,participated. The results of the survey helpedto enrich managers’ understanding at all levelsand to build local and Company-wide actionplans to help improve the way managementand leadership of the Company is practiced.More specifically, the results confirmed thatemployees perceived a significantimprovement in the leadership practicesof ArcelorMittal owing to the strong supportof HR initiatives and processes. A majorityof respondents declared that they wouldrecommend ArcelorMittal as a great placeto work.Dialogue with trade unions and employeesThe majority of ArcelorMittal employeesare represented by trade unions. The Groupis party to collective bargaining agreementswith many employee organizations as partof its commitment to open dialogue.On June 3, 2008, ArcelorMittal signeda landmark Global Joint Health and SafetyAgreement with all of its trade unions.A Joint Health and Safety Committeein every plant now meets at least oncea month. The process is monitored bya Joint Global Health and Safety Committeecomprising both management and tradeunion bodies.In 2008, as part of its commitmentto open dialogue at multiple managementlevels, ArcelorMittal introduced a newprocess based around monthly meetingsbetween management and employeerepresentatives. Implemented plantby plant over the second half of the year,the new process aims to put regular,constructive discussions at the heartof ArcelorMittal’s employee relations.For additional information aboutEmployee Benefits, see Note 23 of theConsolidated Financial Statements.Employee Share Purchase PlanIn 2008, ArcelorMittal launched its firstEmployee Share Purchase Plan (‘ESPP’)as part of a global employee engagementand participation policy. This plan wasaimed at rewarding employees throughownership, improving awareness ofeconomic and financial developments,and ultimately incentivizing them towardsshareholder value creation. The planwas offered to approximately 216,000employees in locations with more than250 employees. In total, employees acrossthe globe bought nearly one million shares.Shares were sold at the then prevailingmarket price, minus a discount of 15%for the first 100 shares per employeeand 10% for the second 100 shares.Any shares bought are subject toa three-year holding requirement.As it met with great interest fromemployees, the ESPP initiative will bere-conducted in 2009.32

International mobilityInternational mobility is a key factorfor the career development of employeesand to further develop the Company’scompetitive advantage. Some 390 mobilitycases were finalized in 2008, resultingin a total number of 847 expatriates.The updated mobility policy was introducedin 2008 and includes relocation andcultural support as well as successionplans for expatriates.Employer branding campaignAt the beginning of 2008, HumanResources underwent an EmployeeValue Proposition study to understandwhat ArcelorMittal represents. From thisstudy, ArcelorMittal can differentiate itselfas a world leader, known for its technologyand innovation, its entrepreneurshipand the Company is synonymous withboldness. The Employer Branding campaignwas rolled out in the press and onlinemedia in Mexico, South Africa, France,Czech Republic, Ukraine, Spain, Poland,Romania and India. The key messageto young graduates and experiencedprofessionals was that ArcelorMittal wouldafford them the rare opportunityto address some of the world’s mostimportant and complex challengesand make their own contributionto ‘transforming tomorrow’.Resourcing: The challenge of gettingthe right people for the right jobUp until September 2008, recruitment wasone of the biggest challenges forArcelorMittal’s HR department. In 2008,249 Group Engineers were recruited forinternational careers; there were 46recruitments to the redesigned BusinessLeaders Program (MBA); 300 internalcandidates were identified and 186 peopleenrolled in the Project Leaders Program.In addition, through the Group’se-recruitment tool for exempts,JobMarketOnline, 6,669 candidates(internal and external) applied for jobs.Of the 1,523 vacancies posted in 2008,approximately 1,000 jobs were filled.Induction: Introducing new employees tothe Company’s values and business strategyEffective induction not only helpsto promote the Group’s culture andreputation but is a clear investmentin ‘transforming tomorrow’. In 2008a comprehensive Group-wide globalInduction Program was designed and rolledout. The Induction Program facilitatesthe integration of newcomers into theArcelorMittal environment and enablesthem to maximize their contributionto the Group’s objectives. In addition,it accelerates their understandingof the ArcelorMittal philosophyand business strategy.Training and developmentThe 2008 budget for the ArcelorMittalUniversity (‘The University’) was$25 million. The ArcelorMittal Universityplays a central role in the area of trainingand development, delivering its coursesboth through local training centersand online. The program was expandedsignificantly in 2008 in areas such as Healthand Safety, intensive language training,core leadership and management skills,executive education and technical andfunctional skills. More than 30,000 peoplehave received training through theUniversity since its inception in 2007.Last year, over 10,000 peopleparticipated in ArcelorMittal UniversityCore Leadership and ManagementPrograms in 20 different countries.These programs are 1-2 day managementcourses, based on ArcelorMittal’s vision,mission and values. They are deliveredcountry by country in the local language,enabling the Company to deliverconsistent training across the Group.The University is supported by regionaland country-specific programs. In SouthAfrica, for instance, virtual classroomsat operating sites across the countryallow for simultaneous video conferencesand recorded presentations. This modelwill be applied to the transfer of knowledgefrom the Group’s best practice miningsites to its other operations in countriessuch as Senegal and Liberia.In August 2008, ArcelorMittal’s onlineEnglish training program was honoredwith an Optimas Award in the category‘Global Outlook’. The recognition confirmsthe University’s success in implementinga program that will help the Companyto thrive in the global market. Created in2006, this online tool gives ArcelorMittalemployees the opportunity to learn English,the Group’s official corporate language.In addition, e-Learning is proving to bethe most cost-efficient didactic tool forArcelorMittal during the current challengingeconomic period.A most ambitious project cameto completion at the end of the yearwith the inauguration of the newArcelorMittal University Campus locatedin Luxembourg.Group Engineers ProgramIn order for ArcelorMittal to attract thenecessary young, talented and mobileengineers to help the Group transformtomorrow, the Group Engineers Programwas developed. Its aim is to create a poolof internationally mobile engineers – withstrong potential for growth and the abilityto assume leading positions in the future.Business Leaders ProgramArcelorMittal has been running its BusinessLeaders Program since 2003. Each yearthis program targets external recruitmentof MBAs or other functional Mastersdegrees, who have proven managerialexperience. The objective of the programis to attract new ideas to continuouslyrefresh the organization and providea globally mobile pool of internationalmanagers who will develop into thefuture leaders of the Group’s business.The program also assists in addressingsome of the key skills gaps in organizationalsuccession plans including skills shortagesin emerging markets and demographicchallenges in developed markets.The exchange of knowledge also taps intothe latest thinking from the top businessschools worldwide.‘Steelworker for the Future’The Steelworker for the Future initiativeis part of the North America Footprintproject, to strengthen ArcelorMittal’shuman capital, Students in the programcomplete two years of course workand 24 weeks of onsite job training thatculminate in an associate’s degreein applied science and the prospect ofa steelworker’s job.Corporate Responsibility – Investing in our PeopleArcelorMittal Annual Report 20081 Exempts consist of employees with an education level of Master and above, with managerialresponsibility over a department or a large service, or designated as such by the CEO of the entity they work in.33

Corporate Responsibility – Making Steel more SustainableAs the world’slargest steel company,ArcelorMittal recognizesthat its environmentalfootprint is considerable.Steelmaking ishighly energy-intensive.While technical developments have reducedrelative CO 2 emissions in Western Europeancountries by nearly 50% in the last 30 years,on average every tonne of primary steelproduced in a blast furnace (the ‘integratedproduction route’) results in one-and-a-halfto two tonnes of direct CO 2 emissions.As a material, however, steel is almostendlessly recyclable, with scrap steel providingthe main feedstock for the alternativeproduction method – the electric arc furnace(‘EAF’) route – where CO 2 emissions aresignificantly lower than in the integratedroute. However, EAF production remainslimited by the availability of scrap and scrapsubstitutes. ArcelorMittal is the largest recyclerof scrap steel in the world and also thebiggest producer of direct reduced iron(‘DRI’) used in EAF plants.Steel is also at the forefront of the growing‘green’ building markets and is playinga major role in the automotive market helpingmake vehicles more energy-efficient.In the construction market, ArcelorMittal’s newHigh Strength Steels (‘HSS’), such as HISTAR®,contribute to a major reduction in greenhousegases by making it possible to use lighterstructures. Substituting HISTAR® for commonsteels reduces the weight of steel columnsby 32% and that of beams by 19%. In theautomotive market, the use of Advanced HighStrength Steels (‘AHSS’) and the stronger HSSsteels has the potential to reduce the weightof a vehicle by up to 25%. ArcelorMittalis a leading producer of both these steels.Confronting climate changeThe challenge of climate change is a globalissue and must be addressed through globalsolutions. ArcelorMittal has advocatedthe adoption of a sectoral approach in thesearch for solutions that are acceptableto developing, as well as developed countriesand avoid creating competitive distortions.The Group is working with the World SteelAssociation in taking this forward. The dialogueextends beyond European Union boundariesto include US and Canadian legislative bodies.Internally, ArcelorMittal is engaged ina multi-faceted approach that encompassesshort, medium and long-term goals throughtechnological support, the use of marketmechanisms and the promotion of innovation.Its Environmental Policy places responsibilityand environmental excellence at its core.ISO 14001, the internationally recognizedstandard for environmental managementsystems, is now mandatory for all productionfacilities. By the end of 2008, 91% ofproduction sites had attained certification,with all remaining facilities expected to becertified by the end of 2010.The search for quick wins in the areaof emissions reduction focuses on two primeareas. The first of these is process performancebenchmarking and target-setting. While manyof the Group’s European and US sites areclose to their technical limits for CO 2 reduction,others have further to go. ArcelorMittal hasnow developed an internal methodologythat monitors the CO 2 efficiency of steelproduction at each site – taking into accountall the multiple processes, differencesin plant structure, power generation andproducts involved.The methodology benchmarks each plantagainst the reference performance for theGroup and can be used to determine resourceallocation between sites and help share bestpractice. It provides the basis for modelingemissions scenarios and the setting of realisticbut challenging targets.The second area is energy saving.A new Group-wide energy policy was launchedin May 2008. It encompasses the procurementof energy-related commodities, the integrationof energy considerations into process andequipment design, technology selection andprocurement and individual employee behavior.An energy management system is beingimplemented throughout the Group.It includes the establishment and monitoringof corporate performance objectives,benchmarking and best practice operations,the generation of technology standardsand best operating practice guidelinesand investment and technology upgrades.At the same time, trials are under wayto establish the viability of recycling coke ovengas into the production of DRI. Indicationsare that this produces higher yields thanrecycling the same gas into a power plant.Using the resultant DRI in blast furnacesteelmaking has the potential to achievea significant reduction in energy consumptionand therefore CO 2 emissions.Breakthrough technologiesArcelorMittal’s longer-term responseto the emissions reduction challenge focuseson the development of breakthroughtechnologies. It is one of the leading companiesin the EU-sponsored Ultra Low CO 2Steelmaking (‘ULCOS’) project, which seeksto achieve a reduction of more than 50%in steel industry CO 2 emissions. Four potentialbreakthrough routes are to be evaluatedon an industrial scale.The first stage of the project, which is plannedto be in operation by 2015, envisages theremoval of CO 2 from the emitted gases,their reheating and recycling. The second stage,which is dependent on the identification andauthorization of an appropriate storage site,would include the further purification andstorage of the CO 2, thereby achieving areduction in carbon emissions of at least 50%.For more information, please see www.ulcos.org.34

Corporate Responsibility – Making Steel more SustainableArcelorMittal’s longer-term response to the emissionsreduction challenge focuses on the developmentof breakthrough technologies. It is one of the leadingcompanies in the EU-sponsored Ultra Low CO2Steelmaking (‘ULCOS’) project.ArcelorMittal Annual Report 200835

Corporate Responsibility – Enriching our CommunitiesArcelorMittal benefitsfrom maintaining goodrelationships with allof its stakeholders andparticularly with the localcommunities in which itoperates. These widerrelationships can havea direct impact on the Group’ssuccess in strengtheningits reputation as a trustedand responsible organization– one that works fora more sustainable future.In 2008, ArcelorMittal published itsCommunity Engagement Standard,supported by a practical manual.The standard defines minimum communityengagement requirements that all theGroup’s major operations must meet,both nationally and locally. It placesgreat emphasis on regular contact withstakeholders, the establishment ofcommunications channels through whichthey can raise any concerns and theneed to run at least one formal eventeach year.ArcelorMittal has stepped up its dialoguewith stakeholders at many of its operationsin the past year, demonstrating itscommitment to deal with issues raisedat a local level. For instance, in Ostrava,Czech Republic, that dialogue nowincludes regular meetings with politicaland community representatives.ArcelorMittal also launched a formalcollaboration with the Technical Universityof Ostrava to assess the impact of twomajor environment-related investmentprojects and a regular newsletter is nowbeing produced to keep all stakeholdersinformed of progress.ArcelorMittal Kazakhstan is now holdingquarterly reviews of its engagementplan involving local stakeholder groups.Some 70 representatives of localNon-Governmental Organizations (‘NGOs’),Mayors and union representatives attendedthe first in March 2008. A communityliaison system is now in place, supportedby a formal grievance procedure thatguarantees documented answers tocomplaints within ten days. A processof public disclosure with a focus on Healthand Safety and the environment allowspublic access to all information submittedto the Government.In Prijedor, Bosnia, where ArcelorMittalbegan mining operations in 2004,the Company is focusing its efforts ona variety of socio-economic projectsdesigned to help bring together localSerb, Muslim, Ukrainian, Macedonianand Croatian communities in this post-warregion. ArcelorMittal has developed ahealthcare centre and a maternity centre(the only one in the Republic of Srprska),sponsored schools for children with specialneeds, opened an office for the treatmentof diabetes and provided support for localschools, camps, sports teams and a folklorefestival. Increasing numbers of peoplewho fled Prijedor during the war arereturning and a concerted effort is beingmade to ensure hiring practices are fairand equitable.Greenfield projects pose particularengagement challenges where theyinvolve the need for resettlementand rehabilitation. While resettlementsare generally conducted by local andnational governments, ArcelorMittal makesit a priority to engage in the processand encourages reference to internationalstandards with regard to communityengagement and compensation.Where possible, the Group seeks toexceed minimum practice standardsby developing regional action plansand toolkits.In India, where the Group is planningto build two large steel plants in thestates of Orissa and Jharkhand, detailedcensus and socio-economic studiesof the affected populations have beenconducted as the basis of action planssubmitted to the state governments.Together with the government and localadministration, ArcelorMittal is identifyingavailable land suitable for resettlementand a land acquisition program willcommence shortly. A compensationframework for those subject toresettlement has been devised, discussedand shared with affected communitiesand villages, and a number of workshopshave been held with local NGOs.A variety of educational and vocationaltraining moves are underway. Importantly,the plan includes the whole communityand not just families affected by thetwo projects. Built on local consultationand participation, it is designed to protectthe social, cultural and economic fabricof the two regions.36

ArcelorMittal FoundationThe ArcelorMittal Foundation is anon-profit organization that focuseson providing support for the communitiesin which the Group operates. Workingwith the local business units, its priorityareas are education, Health and Safetyand social promotion. Its strategy is toset up projects to maximize the potentialof each community, respecting its specificneeds and empowering local resources.It favors projects that can becomeself-sustainable after initial support inorder to maximize the number of potentialbeneficiaries. In 2008, the ArcelorMittalFoundation supported projects in27 countries with a monetary valueof $57.1 million. In addition to supervisinglocal programs implemented byArcelorMittal units, it also invests inglobal programs to support humanitarianinitiatives aligned with its mission andprovides emergency aid.Educational projects supported in thepast year include the continued supportto the Science Centre in Sedibeng, SouthAfrica, catering for 1,800 students;a Youth Centre built in Nowa Huta, nearKraków in Poland; management andimprovement of the two schools in Yekepa,Liberia; and a new partnership withthe International Baccalaureate NGO,to develop their two-year diploma programin three colleges in Bosnia with the aimto gather students from all ethniccommunities and to promote reconciliation.In the area of Health and Safety,the ArcelorMittal Foundation hassupported, among other projects,investments in hospital equipment,refurbishment and transportationfor seven hospitals in Kryviy Rih,Ukraine; an AIDS care centre in SouthAfrica; a sexual education programin Brazil, mobile health clinics in thestate of Orissa, India; and the continuedrunning and upgrading of the twohospitals in Yekepa and Buchanan,Liberia. The Foundation’s activities in SocialPromotion include a wide varietyof social projects on four continents,with the aim to support the integrationof disadvantaged people into the society.In Algeria, funding has helped set upthe ‘Dar el Insania’ home for abusedwomen, which delivers shelter and support.In Spain, several projects with associationsaround the Asturias plants are working tosupport the social acceptance of disabledpeople. In Brazil, the Bem Bank micro-creditinitiative, set up in 2005 and supportedby ArcelorMittal Tubarão, has beenexpanded to include a brick factory andsmall-scale production of house-cleaningproducts. Bem Bank serves a populationof around 30,000 in the São Beneditoarea in Vitória.Emergency Aid initiatives includepartnerships with other associationsto help the people of Myanmar in thewake of the devastation caused by thecyclone of May 2008. A donation of€100,000 to Save the Children helpedthe charity reach over 500,000 people,distributing food, water, purificationtablets, canvas and other essential items.In the same period, the Sichuan provincein China was hit by an earthquake andthe ArcelorMittal Foundation sent anotheremergency donation of around €80,000to the Chinese Red Cross.The Foundation also supports a numberof global projects. One example is thepartnership with Habitat for Humanity,which provides low-cost housing forpeople in need, including victims ofcatastrophes such as the recent floodsin Romania. ArcelorMittal agreed to sponsorthe organization in April 2008 withan initial focus on building or renovatinghomes in Romania, Costa Rica andArgentina. The partnership agreementincludes ArcelorMittal’s expertise in steelconstruction – this resulted in the designof the ‘Casa Buna’ steel frame housingconcept, and the construction of thefirst prototype in October 2008 nearBucharest, Romania.Another global project is the continuedsupport to the Bone Marrow Registryproject, started in France 20 years agoand steadily expanding to new countriesaround the world. The internationalexpansion of the potential donor baseimproves the chances of finding compatibledonors, thus increasing number ofpeople who could benefit from potentiallylife-saving bone marrow transplantseach year.December 2008.ArcelorMittal staged its first globalVolunteer Work Day that mobilizedmore than 10,000 employeesacross all regions of operationsto volunteer for good causes andto the benefit of the community.Corporate Responsibility – Enriching our CommunitiesArcelorMittal Annual Report 200837

The Casa Buna prototype wasconstructed in the ArcelorMittalfacility in Pantelimon, Bucharest.It uses a steel frame superstructure,steel roof tile system, steel rainwaterextraction system and a steelcladding. The model has beentested for energy efficiencyand carefully assessed to ensurecomfort and adequate living space.As a result of its partnershipwith Habitat for Humanity,in 2009 ArcelorMittal is constructingthree ‘Casa Buna’ homes (housing12 families) in Romania. The Groupis also providing funding for criticallyneeded renovations to morethan 20 apartment block homesin the country. These renovationsalso include measures to improveenergy efficiency.The ArcelorMittal Foundation’sglobal partnership withHabitat for Humanity beganin April 2008. By the endof the year, results were alreadyremarkable: 89 families wereenjoying new or improvedhomes, and a joint teamof ArcelorMittal and Habitatexperts designed an innovativehome prototype called ‘CasaBuna’. Casa Buna, ‘Good House’in Romanian, is a steel-intensivefour-unit housing solutionover two floors that can beeasily constructed by volunteersand has a long life span.39

Global PresenceArcelorMittal is the largest producerof steel in Europe, North and SouthAmerica, Africa, the second largeststeel producer in the CIS region,and has a growing presence in Asia,particularly in China. ArcelorMittalhas steelmaking operationsin 20 countries on four continents,including 66 integrated, mini-milland integrated mini-mill steelmakingfacilities which provide a high degreeof geographic diversification.40

Las TruchasVintonGuanajuatoLázaro CárdenasGilbert; Hibbing; Minorca, MinnesotaBurns Harbor; East Chicago; Gary;Indiana Harbor, IndianaChicago, IllinoisGallatin, KentuckyPine Bluff, ArkansasJackson, MississippiMonterreyRiverdale, IllinoisHennepin, IllinoisMexico City; PeñaVeracruzNew Carlisle, IndianaCaldera; Escazit;Guapiles; TibasMarion; Shelby, OhioColumbus; Obetz, OhioWeirton, West VirginiaLaPlace,LouisianaFire Lake; Mont-Wright, QuébecContrecoeur (East & West);Coteau du Lac; Montreal, QuébecCleveland, OhioLondon; Woodstock, OntarioBrampton; Hamilton, OntarioLackawanna, New YorkWarren, OhioParsippany, New JerseyCoatesville; Steelton;Conshohocken, PennsylvaniaWashington, D.C.Monessen, PennsylvaniaGeorgetown, South CarolinaCaracasAmericasPoint LisasVenezuela (Unicon)Wabush, NewfoundlandPort-Cartier, QuébecGlobal Presence ArcelorMittal Annual Report 2008Feira de SantanaAndrade; João Monlevade; TimóteoBelo Horizonte; Contagem; Sabará; VespasianoItaúnaSerra; VitóriaPiracicabaSão PauloSão Francisco do SulJuiz de ForaRosarioVilla MercedesSan Nicolás; Villa ConstituciónMontevideoBuenos Aires; La Tablada41

EuropeTallinnBrussels; Charleroi; Châtelet; La PrayeGhentHautmontDunkerqueDesvresIsberguesMontataire; Paris; Rueil-Malmaison;Saint Denis; Vitry-sur-SeineBasse-IndreAsturias (Avilés & Gijón);LangreoBergara; Olaberría;ZumárragaBasauri; Etxebarri; SestaoSalvatierraSheffieldReimsChevillonImphyLe CreusotSaint-Chély d’ApcherLesaka; BerrioplanoZaragozaMouzonHamburgBremenDuisburg (Hochfeld & Ruhrort)Geel; GenkFlémalle; Liège; SeraingGueugnonFos-sur-MerLuxembourg; Belval; Differdange;Dudelange; SchifflangeFlorange; GandrangePont de RoidePiombinoRied im InnkreisFirminy; Saint-Chamond & ChâteauneufMilanEisenhüttenstadtSzengotthárdSycowOmarskaWarsawDąbrowa Górnicza; Katowice;Świętochłowice; SosnowiecKrakówFrýdek Místek; Karvina; OstravaBuvačHunedoaraZenicaSkopjeRomanIasiGalatiKryviy RihMadridNoblejasSaguntoAvellino42

LisakovskiAtansoreTemirtauKaragandaAtasuKentobeAktauBeijingJV Oriental (Hebei)RongchengShanghaiDubaiJV Valin Steel (Hunan)Asia44

Mergers and acquisitions havehistorically been a key pillarof ArcelorMittal’s strategy to whichit brings unique experience,particularly in terms of integration.Instead of creating new capacity,mergers and acquisitions increaseindustry consolidation and createsynergies. ArcelorMittal has alsoplaced strong emphasis on growthin emerging economies throughGreenfield developments.Message Global Presence from the continued President and CEOArcelorMittal Annual Report 200845

2008 $124.9 billion2007 $105.2 billionArcelorMittal salesOperational Review – Sales, steel shipments and average steel selling pricesSales in the Flat Carbon Europe segment were$38.3 billion for the year ended December 31, 2008,representing 30.7% of total consolidated salesfor 2008, an increase of 10% as compared to $34.9 billion,or 33.2% of the total consolidated sales, for the yearended December 31, 2007.46

The following table provides a summaryof ArcelorMittal’s sales by operating segmentfor the year ended December 31, 2008 ascompared to the year ended December 31, 2007:Operational ReviewSales for theChanges inSegment 2007 2008 SalesSteelShipmentsAverage SteelSelling Price(in $ millions) (in $ millions) (%) (%) (%)Flat Carbon Americas 21,839 27,031 24 (4) 31Flat Carbon Europe 34,924 38,300 10 (6) 23Long Carbon Americas and Europe 27,035 32,268 19 (4) 36AACIS 14,971 13,133 (12) (19) 37Stainless Steel 9,349 8,341 (11) 1 (11)Steel Solutions and Services 16,988 23,126 36 16 201Amounts are prior to inter-company eliminations and include non-steel sales.ArcelorMittal had sales of $124.9 billionfor the year ended December 31, 2008,representing an increase of 19% over salesof $105.2 billion for the year endedDecember 31, 2007. Sales were higheroverall primarily due to increases in averagesteel selling prices (except Stainless Steeldue to falling nickel prices), partiallyoffset by decreases in shipment volumes.Generally strong conditions in theCompany’s main markets during the firstnine months of the year were offsetby a sharp slowdown in the fourth quarterfollowing the severe downturn in theglobal economy.ArcelorMittal had steel shipmentsof 101.7 million tonnes for the yearended December 31, 2008, representinga 7% decrease from steel shipmentsof 109.7 million tonnes for the year endedDecember 31, 2007. Overall shipmentvolumes were lower due to the substantialdecline in the fourth quarter, in line withthe global economic slowdown andreduction in market demand.Average steel selling prices for the yearended December 31, 2008 increased27% as compared to the average steelselling prices for the year ended December31, 2007, reflecting strong steel demandand high raw material prices in the firstnine months of 2008, partially offsetby sharp price declines in the fourthquarter amid the global economic crisis.Average steel selling prices were higherwhen comparing the year ended December31, 2008 to December 31, 2007 in allsegments except for Stainless Steel whereprices decreased 11%, primarily as a resultof lower nickel prices.Flat Carbon AmericasSales in the Flat Carbon Americas segmentreached $27.0 billion for the year endedDecember 31, 2008, representing 21.6%of the total consolidated sales for 2008,an increase of 24% as compared to $21.8billion, or 20.8% of total consolidated sales,for the year ended December 31, 2007.Sales were higher mainly due to a higheraverage steel selling price, partially offsetby lower steel shipment volumes. As withthe rest of the Company, generally strongconditions during the first nine monthsof the year were partially offset by a sharpslowdown in the fourth quarter followingthe downturn in the global economy.Total steel shipments were 25.8 milliontonnes for the year ended December 31,2008, a decrease of 4% from shipmentsfor the year ended December 31, 2007.Shipment volumes decreased on accountof the sharp drop in demand in the fourthquarter (with shipments decreasing nearly43% compared to the third quarter)as a result of rapidly deterioratingeconomic conditions, inventory reductionby customers. In addition, total steelshipments decreased due to the saleon May 7, 2008 of ArcelorMittal’sSparrows Point steel mill to OAO Severstalpartially offset by the additional shipmentvolumes from ArcelorMittal Brasilfollowing the completion of its capacityexpansion project. Excluding the impactof Sparrows Point, total steel shipmentswere 25.0 million tonnes for the year endedDecember 31, 2008, as compared to25.2 million tonnes for the year endedDecember 31, 2007.Average steel selling prices for the yearended December 31, 2008 increased31% as compared to the average steelselling price for the year ended December31, 2007, due mainly to strong steeldemand in the first nine months of 2008,as well as the ability to pass on higher inputcosts to customers during this period.This was partially offset by sharp pricedeclines in the fourth quarter amid theglobal economic crisis, with averagesteel selling prices decreasing by 8.7%compared to the third quarter.Flat Carbon Americas implementedproduction cuts in excess of 50% in thefourth quarter due to a further declinein global economic conditions and thereduction in market demand. Productionin the fourth quarter was cut toapproximately 3.5 million tonnes, whichwas approximately 3.9 million tonnes lowerthan in the third quarter, and 4.2 milliontonnes (or more than 55%) lower thanin the second quarter of 2008.Flat Carbon EuropeSales in the Flat Carbon Europe segmentwere $38.3 billion for the year endedDecember 31, 2008, representing 30.7%of total consolidated sales for 2008, anincrease of 10% as compared to $34.9billion, or 33.2% of the total consolidatedsales, for the year ended December 31,2007. The increase was primarily due toa 23% increase in average steel sellingprices, partially offset by the 6% decreasein total steel shipments.Total steel shipments reached 33.5 milliontonnes for the year ended December 31,2008, a decline of 6% from steel shipmentsfor the year ended December 31, 2007.This decrease was primarily the result ofsharply lower demand in the fourth quarter(with shipments dropping 27% ascompared to the third quarter) as a resultof rapidly deteriorating economic conditionsand inventory reduction by customers.ArcelorMittal Annual Report 200847

The average steel selling price for the yearended December 31, 2008 increased 23%as compared to the average steel selling pricefor the year ended December 31, 2007,due mainly to strong steel demand, strengthof the euro to US dollar in the first ninemonths of 2008, and the ability to pass onhigher input costs to customers during thisperiod. This was partially offset by sharpprice declines in the fourth quarter as a resultof the global economic crisis, with averagesteel selling price decreasing by 15.0%compared to the third quarter.Flat Carbon Europe implemented productioncuts of approximately 46% for the fourthquarter in response to declining globaleconomic conditions and the reduction inmarket demand. Production in the fourthquarter was cut to approximately 5.1 milliontonnes, which was approximately 4.3 milliontonnes lower than for the third quarter, and4.9 million tonnes (or more than 49%)lower than for the second quarter.Long Carbon Americas and EuropeIn the Long Carbon Americas and Europesegment, sales reached $32.3 billionfor the year ended December 31, 2008,representing 25.8% of the total consolidatedsales for 2008, an increase of 19% oversales of $27.0 billion, or 25.7% of the totalconsolidated sales, for the year endedDecember 31, 2007. Sales were highermainly due to a 36% higher average steelselling price, which was partially offsetby a 4% decrease in steel shipment volumes.Total steel shipments were 27.1 milliontonnes for the year ended December 31,2008, a decrease of 4% from steelshipments for the year ended December 31,2007. This decrease was primarily a resultof sharply reduced demand in the fourthquarter due to rapidly deteriorating economicconditions and inventory reduction bycustomers. Steel shipments fell 32% forthe fourth quarter of 2008 as comparedto the third quarter of 2008.Average steel selling price increased 36%for the year ended December 31, 2008,as compared with average steel selling pricefor the year ended December 31, 2007,due mainly to strong steel demand in thefirst nine months of 2008 and the abilityto pass on higher input costs to customersduring this period. However, average steelselling price decreased by 20.7% for thefourth quarter compared to the third quarter.Long Carbon Americas and Europeimplemented production cuts ofapproximately 45% for the fourth quarterdue to the declining global economicconditions and the reduction in marketdemand. Production for the fourth quarterof 2008 was cut to approximately 3.7 milliontonnes, which was approximately 3.1 milliontonnes lower than for the third quarter,and 3.7 million tonnes (or approximately50%) lower than for the second quarter.AACISIn the AACIS segment, sales were$13.1 billion for the year ended December31, 2008, representing 10.5% of the totalconsolidated sales in 2008, a decreaseof 12% over sales of $15.0 billion,or 14.2% of total consolidated sales,for the year ended December 31, 2007.The main reason for the decrease wasa reduction in steel shipment volumescaused by the sharp decline in demandin the fourth quarter, particularly inoperations in Ukraine and Kazakhstan,which were partially offset by an increasein the average selling price.Total steel shipments reached 13.3 milliontonnes for the year ended December 31,2008, a decrease of 19% from steelshipments for the year ended December31, 2007. This decrease resulted primarilyfrom plummeting demand for productsat our Ukrainian and Kazakhstan operationsduring the fourth quarter of 2008,as the credit crisis had a particularly strongimpact on the CIS region; steel shipmentsfell 34% for the fourth quarter as comparedto the third quarter.Average steel selling price increased37% for the year ended December 31,2008, as compared to the average steelselling price for the year ended December31, 2007, primarily due to the abilityto pass on increased input costs tocustomers and the strong market demandduring the first nine months of the year.However, average steel selling pricedecreased by 40.4% for the fourth quartercompared to the third quarter.AACIS implemented production cutsin excess of 50% for the fourth quarterdue to declining global economic conditionsand the reduction in market demand.Production in the fourth quarter of 2008was cut to approximately 2.1 milliontonnes, which was approximately2.1 million tonnes lower than for thethird quarter, and 2.3 million tonnes(or more than 52%) lower than for thesecond quarter.Stainless SteelSales in the Stainless Steel segmentwere $8.3 billion for the year endedDecember 31, 2008, representing 6.7%of the total consolidated sales in 2008,a decrease of 11% over sales of $9.3 billion,or 8.9% of total consolidated sales, for theyear ended December 31, 2007. Thisdecrease was mainly due to a lower averageselling price caused by falling nickel prices.Total steel shipments were essentiallyflat (1% increase) at 2.0 million tonnesfor the year ended December 31, 2008.This outcome reflected strength in thefirst half of the year, particular in theaustenitic stainless market through inventoryreplenishment, and weakness in the secondhalf including a sharp downturn in thefourth quarter (shipments dropped 25%in the fourth quarter as compared withthe third quarter).Average steel selling price decreased11% for the year ended December 31,2008, as compared to the average steelselling price for the year ended December31, 2007, mainly due to lower nickel pricesin the second half of the year and the fallin customer demand in the fourth quarterdue to declining economic conditions.Average steel selling price decreasedby 17.7% for the fourth quarter comparedto the third quarter.Stainless Steel implemented productioncuts of approximately 26% due to thedeclining global economy and the reductionin customer demand. Production for thefourth quarter of 2008 was cut toapproximately 0.4 million tonnes, whichwas approximately 0.1 million tonnes lowerthan in the third quarter, and 0.3 milliontonnes (or more than 43%) lower thanin the second quarter.Steel Solutions and ServicesIn the Steel Solutions and Servicessegment, sales reached $23.1 billionfor the year ended December 31, 2008,representing 18.5% of the totalconsolidated sales for 2008, an increaseof 36% over sales of $17.0 billion,or 16.1% of the total consolidated sales,for the year ended December 31, 2007.The increase was driven by higher sellingprices and increased shipments primarilyduring the first nine months of 2008,which was partially offset by a slowdownin demand during the fourth quarterof 2008 following the downturn in theglobal economy.Total steel shipments were 19.1 milliontonnes for the year ended December 31,2008, an increase of 16% over steelshipments for the year ended December31, 2007 due to favorable demandfor the first three quarters of the year,as well as the inclusion of new entities,although shipments dropped 14% in thefourth quarter as a consequence of theeconomic downturn. The shipmentsof ArcelorMittal Steel Solutions andServices are not consolidated.Average steel selling price increased 20%for the year ended December 31, 2008,as compared to the average steel sellingprices for the year ended December 31,2007, primarily due to the ability to passon increased input costs to customersand the strong market demand during thefirst nine months of the year. However,average steel selling price decreased by18.7% for the fourth quarter comparedto the third quarter.48

Operational Review – Operating income2008 $4.2 billion2007 $4.1 billionLong Carbon Americas and Europesegment operating incomeIn the AACIS segment operating incomeamounted to $3.1 billion for the year ended December 31, 2008,representing an increase of 11% compared to operatingincome of $2.8 billion for the year ended December 31, 2007.Operational Review continued ArcelorMittal Annual Report 200849

The following table provides a summary of the operatingincome and operating margin of ArcelorMittal for theyear ended December 31, 2008, as compared withthe operating income and operating margin for the yearended December 31, 2007:Operating Incomeyear ended December 31OperatingMarginSegment 1 2007 2008 2007 2008(in $ millions) (in $ millions) (%) (%)Flat Carbon Americas 3,163 2,524 14 9Flat Carbon Europe 4,148 2,773 12 7Long Carbon Americas and Europe 4,083 4,154 15 13AACIS 2,843 3,145 19 24Stainless Steel 876 383 9 5Steel Solutions and Services 559 206 3 11Amounts are prior to inter-company eliminations and include non-steel sales.ArcelorMittal’s operating income amountedto $12.2 billion for the year endedDecember 31, 2008, representinga decrease of 17% compared to operatingincome of $14.8 billion for the yearended December 31, 2007. Contributingsubstantially to this decrease was$6.1 billion of pre-tax expenses thatArcelorMittal recorded in the second halfof the year. Of these pre-tax charges,approximately $4.1 billion resulted directlyfrom the rapidly deteriorating economicand market conditions in the fourth quarterof the year and consisted of write-downsof inventory (approximately $2.5 billion),provisions for onerous raw material supplycontracts (approximately $0.7 billion)and provisions for workforce reductions(including voluntary separation programsof approximately $0.9 billion). The otherexpenses consisted of a provision takenin connection with ArcelorMittal USA’s newfour-year labor contract with its unionemployees (approximately $1.6 billion)and provisions for litigation (approximately$0.4 billion). For 2008 as a whole,inventory write-downs and litigationprovisions amounted to approximately$2.7 billion and $0.6 billion, respectively.Further details of these expensesare set out below.• Write-downs of inventory. On each balancesheet date, inventories are measuredand valued at the lower of cost and netrealizable value. Due to the rapid and sharpdecline in demand for, and prices of,steel products and the expectation of lowerdemand and selling prices in the near-term,the net realizable value of certain inventoriesof finished steel products, works in processand raw materials (in particular iron oreand coking coal) after processing of theseraw materials / works in process into steelproducts at the Company’s facilities acrossits segments at year-end were lowerthan their cost, resulting in write-downs.• Provision for onerous raw materialsupply contracts. ArcelorMittal sourcesa portion of its raw materialsrequirements under contracts wherebyit has a firm commitment to purchasespecified quantities at a set price overa set period. Due to the sharp declinein steel selling prices in the second halfof 2008, the Company has recordeda provision with respect to raw materialssourced under these contracts becausethe net realizable value of such rawmaterials (assuming their processing intosteel products at year-end) was expectedto be lower than their cost and to resultin write-downs.• Provision for workforce reduction(including voluntary separationprograms). This provision relates to costs(including severance costs) expectedto be incurred in connection withthe voluntary separation plans thatArcelorMittal has communicatedto employee representatives and isin the process of implementing.These plans include the voluntaryseparation plan announced byArcelorMittal in November 2008 relatingin particular to employees inadministrative or other non-productionfunctions at numerous sites worldwide,as well as the extension of suchvoluntary separation plans to productionemployees at various sites worldwideon a site-by-site basis pursuantto consultations undertaken with localemployee representatives.• Provision for ArcelorMittal USAlabor contract. On August 30, 2008ArcelorMittal USA reached a laboragreement with the United Steelworkersof America (the ‘USW’) for mostof its steel plants and iron ore operationsin the US and recorded an expenseof $1.6 billion in this respect. For a fulldescription of the agreement and theaccounting treatment, see note23 to the ArcelorMittal ConsolidatedFinancial Statements. The most significantfeature of this agreement from a financialstatement perspective is the changein the funding principles of a ‘voluntaryemployee benefit association’ forretiree healthcare from a profit-sharingarrangement to providing defined benefits.The change in the contractual obligationled to the recognition of a liabilityand other post-employment expenseof $1.4 billion for those obligations thathad previously vested. The cash outflowrelated to these benefits is expected tobe approximately $25 million per quarterfor the first four years.50

Operating income for the year endedDecember 31, 2008 was furtherreduced by impairment expensesamounting to $1.1 billion, consistingof asset impairments of $499 million,goodwill impairment of $131 millionand reduction of goodwill of $429 million.The impairments included a $200 millionloss on the disposal of the SparrowsPoint plant in the United States andasset impairments of $74 million(various ArcelorMittal USA sites), $60 million(Gandrange, France) and $54 million(Zumarraga, Spain). In determining theseexpenses, the Company analyzed therecoverable amount of these facilitiesbased on their value in use and determinedthat the recoverable amount from thesefacilities was less than their carryingamount. The reduction of goodwill resultedprimarily from the recognition of deferredtax assets on acquired net operatinglosses not previously recognized inpurchase accounting which weresubsequently recognized (with the amountof the reduction also included withincost of sales in the statement of income).These goodwill reductions were (amongother factors) due to reorganizationsin the Flat Carbon Europe segment($117 million) and in the Long CarbonAmericas and Europe segment($291 million). For further informationregarding accounting for goodwill,see note 8 to the ArcelorMittalConsolidated Financial Statements.The impairment losses comparedto impairment losses for the twelvemonths ended December 31, 2007of $432 million, including impairmentsof $172 million (resulting primarily fromrestructurings of the Company’s facilitiesin Contrecoeur, Canada ($82 million)and Gandrange, France ($50 million))and the reduction of goodwill of$260 million.Conversely, operating income wasincreased in 2008 by the recognitionof a $349 million gain relating to theineffective portion of forward exchangeand options contracts initially executedin order to hedge currency exposure onexpected raw material supply purchasesthat were unwound during the year.Flat Carbon AmericasIn the Flat Carbon Americas segment,operating income amounted to $2.5 billionfor the year ended December 31, 2008,representing a decrease of 20% fromoperating income of $3.2 billion forthe year ended December 31, 2007.This decrease resulted from $2.1 billionin charges recorded in the third and fourthquarters. These included an approximately$1.5 billion expense relating to thenew labor agreement entered intoby ArcelorMittal USA, and expensesrelating to write-downs of inventory(approximately $0.4 billion) and provisionsfor onerous raw material supply contracts.Operating income was also affectedby impairment expenses of $291 millionrelated primarily to Sparrows Point($200 million) and the asset impairmentsat various ArcelorMittal USA facilities($74 million).Flat Carbon EuropeIn the Flat Carbon Europe segment,operating income amounted to $2.8 billionfor the year ended December 31, 2008,representing a decrease of 33% fromoperating income of $4.1 billion forthe year ended December 31, 2007.This decrease resulted from $1.8 billionin expenses recorded in the fourth quarter.These related to write-downs of inventory(approximately $1.0 billion), provisionsfor onerous raw material supply contracts,and provisions for workforce reductions(including voluntary separation programs).Operating income was also affectedby impairment expenses of $275 million,primarily related to goodwill impairmentof $246 million, which included a$116 million reduction in goodwill relatingto Noble International Ltd., as well asthe recognition of deferred tax assetson acquired net operating losses notpreviously recognized in purchaseaccounting in connection with thereorganization of certain legal entities.Long Carbon Americas and EuropeIn the Long Carbon Americas and Europesegment, operating income amountedto $4.2 billion for the year endedDecember 31, 2008, essentially flat(up 2%) from operating income of$4.1 billion for the year ended December31, 2007. Operating income for 2008included $0.8 billion in expenses recordedin the third and fourth quarters, includingapproximately $0.1 billion expense relatingto ArcelorMittal USA’s new four-yearagreement with its union employees,and expenses relating to write-downsof inventory (approximately $0.4 billion)and provisions for onerous raw materialsupply contracts, as well as provisions forworkforce reductions (including voluntaryseparation programs).Operating income was affected byimpairment expenses of $458 millionconsisting primarily of reduction ofgoodwill of $296 million (resulting fromthe recognition of deferred tax assetson acquired net operating losses notpreviously recognized in purchaseaccounting in connection with thereorganization of certain legal entitiesin Europe and asset impairments of$162 million, mainly from assetimpairments of $60 million (Gandrange,France) and $54 million (Zumarraga, Spain).AACISIn the AACIS segment operating incomeamounted to $3.1 billion for the yearended December 31, 2008, representingan increase of 11% compared to operatingincome of $2.8 billion for the year endedDecember 31, 2007. The result includedexpenses of $0.3 billion taken in thefourth quarter relating to write-downsof inventory (approximately $0.2 billion)and provisions for workforce reductions(including voluntary separation programs).Operational Review continuedArcelorMittal Annual Report 200851

Stainless SteelIn the Stainless Steel segment,operating income amounted to $0.4 billionfor the year ended December 31, 2008,representing a decrease of 56% comparedto operating income of $0.9 billionfor the year ended December 31, 2007(mainly due to sharp fall in nickel pricesdescribed above). The result includedexpenses of approximately $0.2 billionrecorded in the fourth quarter relatingto a write-down of inventory andprovisions for workforce reductions(including voluntary separation programs).Steel Solutions and ServicesIn the Steel Solutions and Servicessegment, operating income amountedto $0.2 billion for the year endedDecember 31, 2008, representinga decrease of 63% compared to operatingincome of $0.6 billion for the year endedDecember 31, 2007. The decline alsoreflected expenses of $0.7 billion recordedin the fourth quarter, relating primarilyto a provision for litigation ($0.4 billion),write-downs of inventory (approximately$0.2 billion), provisions for onerous rawmaterial supply contracts and provisionsfor workforce reductions (includingvoluntary separation programs).Income from investment in associates andjoint venturesArcelorMittal recorded incomeof $1.7 billion from investments accountedfor using the equity method for theyear ended December 31, 2008,as compared with income from equitymethod investments of $985 million forthe twelve months ended December 31,2007. The increase is primarily relatedto ArcelorMittal’s investments in DillingerHütte Saarstahl AG (‘DHS’) in Germany,China Oriental and Hunan Valin in China,MacArthur coal in Australia, KalagadiManganese in South Africa and EregliDemir Ve Celik Fab.T.AS (‘Erdemir’)in Turkey. On December 15, 2008,ArcelorMittal sold a 17.82% stake inDHS for €695 million (plus a dividendof €82 million to be received in 2009).Financing costsNet financing costs include net interestexpense, revaluation of financialinstruments, net foreign exchangeincome / expense (i.e., the net effectsof transactions in a foreign currencyother than the functional currencyof a subsidiary) and other financing costs.Net financing costs were 154% higherfor the year ended December 31, 2008,at $2,352 million, as compared with$927 million for the year ended December31, 2007.Interest expense, which includes bankfees, interest on loans and intereston pensions, increased to $2.5 billionfor the year ended December 31,2008 compared to $2.2 billion for theyear ended December 31, 2007, due toan increased average level of borrowing.As of December 31, 2008, ArcelorMittal’stotal debt was $34.1 billion (comparedto $30.6 billion as of December 31, 2007).Also contributing to the increase was higherinterest cost on pensions, particularlyin the United States.Interest income for the year endedDecember 31, 2008 was $0.5 billionas compared to $0.6 billion for theyear ended December 31, 2007,due a reduction in average interest rateson deposits.Losses related to the fair valueof derivative instruments for the yearended December 31, 2008 amountedto $177 million, as compared with$431 million of gains for the year endedDecember 31, 2007. The Companyrecorded a substantial loss on forwardcontracts on freight in 2008 (primarilyin the fourth quarter), whereas in 2007it had recorded a substantial gainon derivative instruments primarilyin connection with its purchase of a stakein a Turkish entity.Foreign exchange and other financingexpenses were $156 million forthe twelve months ended December 31,2008, compared to foreign exchangeand other financing income of$239 million for the twelve monthsended December 31, 2007.Income taxArcelorMittal recorded a consolidatedtax expense of $1,098 million for theyear ended December 31, 2008, comparedto income tax expense of $3,038 millionfor the year ended December 31, 2007.The effective tax rate (ETR) for thetwelve months ended December 31,2008 was lower at 9.5% (or 12.7% beforethe recognition of deferred tax assetson acquired net operating losses) ascompared with the effective tax rate forthe twelve months ended December 31,2007 of 20.4% on income before taxesof $11,537 million and $14,888 million,respectively. The lower ETR for the yearis primarily due to a change in thegeographical mix of ArcelorMittal’s sourcesof income and a decrease in the statutorytax rates in some countries.For additional information related toArcelorMittal’s income taxes, see note19 to the ArcelorMittal ConsolidatedFinancial Statements.Minority interestMinority interest was $1,040 millionfor the year ended December 31, 2008,as compared with $1,482 million forthe year ended December 31, 2007.The decrease resulted primarily from therepurchase of minority interests in Arcelor(via the second-step merger in 2007),ArcelorMittal Brasil, ArcelorMittal Inox Brasiland Acindar, partially offset by higherincome from ArcelorMittal South Africaand ArcelorMittal Ostrava.Net income attributable to equity holdersof the parentArcelorMittal’s net income attributableto equity holders of the parent for theyear ended December 31, 2008 decreasedto $9,399 million from $10,368 millionfor the year ended December 31, 2007,for the reasons discussed above.52

Customers and InnovationCustomers and InnovationMuch of the R&D team’s work extends beyondthe development of new steels to the design of totalengineering solutions to meet manufacturingand other challenges faced by customers.ArcelorMittal Annual Report 200853

Customers and Innovation continuedArcelorMittal’s 1,500strong R&D team worksin close collaborationwith customers, oftenin committed co-engineeringprograms, devisingnew steels and designsolutions that improvethe competitivenessof their products.ArcelorMittal seeks to develop high-valueand strategic niche products to increaseits market share, especially againstcompeting materials. Increasingly,it has a parallel goal – to meet the widerdemands of society for a lower carbondioxide world. It does this by constantlyreducing the CO 2 content both of itsown products – by minimizing the useof energy, the production of waste,and optimizing the use of raw materials– and those of its customers throughthe development of lighter, stronger,better designed steel solutions.Some 40 new products and numerousdesign solutions were commercializedin 2008 – a new record. They weredeveloped for a wide spectrum of customersegments. In addition to delivering newfunctionalities and meeting the specificneeds of a developing marketplace,many reflect the growing importanceof product life cycle analysis that takesaccount of the CO 2 emitted at everystage from production through usageto end of life.Total engineering solutionsMuch of the R&D team’s work extendsbeyond the development of new steelsto the design of total engineeringsolutions to meet manufacturing andother challenges faced by customers.Three examples in the area of constructionentered production in 2008:• The Arsolar solar roof, which wonthe Golden Innovation Medal at theBatimat trade fair in late 2007, is avisually attractive roofing or claddingsystem with an integrated photovoltaicsolution that reduces energyconsumption in buildings.• The Angelina® beam, which has wona number of awards, is a highly versatilebeam offering new architecturalpossibilities within an environmentallyfriendly approach.• The Firebreak Wall 4H, is a fireresistant wall for storage facilities thatneed four-hour fire resistance in eachof their compartments.Automotive developmentsThroughout the world, automotivemanufacturers face a similar challenge:to develop a new generation of vehicleswith improved fuel consumption and lowerCO 2 emissions while meeting ever morestringent safety requirements. ArcelorMittalworks closely with its customers fromthe design stage of new product launches,helping them develop vehicles that meetthe demands of a lower carbon world whilestill delivering the safety and design appealexpected by end-customers.ArcelorMittal also launched its‘S-in Motion’ project, which targetsa 20% weight reduction in vehicle bodystructures compared with currentlevels and is expected to be completedin 2010. The ‘S’ stands for steel, safety,stiffness, savings – all key issues fororiginal equipment manufacturers – andis a follow-up to the ArcelorMittal BodyConcept launched in 2005. Some of thenew steels developed in the ‘S for Motion’program are expected to be deployedby 2010.ConstructionIn the construction and civil engineeringmarkets, the Group develops newproducts and solutions to help customerscut construction costs, improve safetyor comfort, achieve specific architecturalrequirements, extend durabilityor reduce environmental impact.Besides earthquake-resistant structuresprojects, the Group has developeda modular building design to facilitatethe quick build of emergency housingfor victims of natural disasters.The Group’s advanced high-strengthsteels have played a major role ina number of the world’s high-profilecommercial developments:• The 492 meter-tall Shanghai WorldFinancial Center, which openedin August 2008, incorporates24,000 tonnes of high-quality,heavy plate from ArcelorMittalassociate Dillinger Hütte and12,000 tonnes of rolled sectionsfrom different Group plantsaround Europe.54

• In Russia, ArcelorMittal was involvedin two prestigious projects, the 300meter-high Moscow InternationalBusiness Center and the 360 meter-highFederation Tower. Together, the twoprojects incorporate 20,000 tonnesof ArcelorMittal sections.• In New York, ArcelorMittal delivered2,100 tonnes of very advanced jumbobeams for the 415 meter FreedomTower project. The jumbo beams weremade at ArcelorMittal’s Differdangeplant in Luxembourg, the only steelmakerin the world capable of producingbeams of this scale with a 460 MPatensile strength.• Since 2004, 100,000 tonnes of sheetpiles have been delivered for a foundationproject to protect the Lagoon of Venice,Italy, from the floods.By supplying innovative products andapplications and delivering high-qualitysteel solutions, ArcelorMittal aimsat making steel the material of choicein construction.Specialty plate developmentsIn 2008, the R&D team developed a rangeof quenched and tempered plates for usein the transportation industry, typicallyin the building of large wagons for thetransport of compressed natural gas.In addition, a new heavy plate product,1.6 inches thick, developed in the Group’slaboratories, went into production in theBurns Harbor heavy plate mill in Augustfor the pipe manufacturer and fabricator,Canadoil. A new Duplex grade, 2202,has also been developed. With itsoutstanding mechanical properties enablingweight reduction of the final applicationand lower alloying element content,Duplex 2202 leads to important costsavings at our customers. This gradeis already used in sea water desalinationplants as well as chemical and pulpand paper industries.Stainless SteelsAfter the successful promotion of theferritic stainless steels ‘Kara’ (nickel freegrades) in 2007, new grades have beendeveloped in 2008. The most popularone has a 20% chrome content andis a substitute to the usual 304 austeniticstainless steel used in various applicationssuch as appliances and construction items.ArceoIn January 2008, ArcelorMittal inauguratedArceo, a pilot line for a ground-breakingvacuum plasma steel coating processdeveloped by the Group’s R&D teamin partnership with the Walloon Regionof Belgium. The vacuum plasma processoffers a range of new surfacefunctionalities, allowing steel to becomea sensor, a reflector, a source of light,an anti-bacterial or self-cleaning surfaceor simply more aesthetically pleasing.It also offers better anti-corrosionproperties and is environmentally friendly.It does not use solvents or chemicalpreparations and does not generateeffluents or gases that require treatment.With a wide spectrum of potentialapplications in the appliance, automotive,lighting and metal processing sectors,commercial development is expectedto commence in 2009.Breakthrough projectsThe R&D team continues to work ona large number of breakthrough projects.Some are still at the exploratory stage.Others, such as titanium oxide-coatedsteel offering air purification qualitiesand with applications in air conditioning,are a year or two away fromcommercialization. A number of initiativesare on the verge of full-scale production.They include a new, ultra fine grain steelcalled High Fatigue Limit, which offersenhanced fatigue resistance. It is expectedto enter production in 2009 for usein automotive wheels.Large Hadron Collider.As a testimony to its strengthsin electrical steels, ArcelorMittal wasa major contributor to the Large HadronCollider particle accelerator projectdeveloped by the European Organizationfor Nuclear Research (CERN). The Group’sIndusteel unit in France was the onlysteel producer that could meet thespecification for 16-metre plates madeof a special type of fully non-magneticstainless steel required for the externalenvelope of the LHC ring. In all, Industeeldelivered 3,000 tonnes of platesand the Group’s flat carbon plant in Liègedelivered 70,000 tonnes of highpermeability low carbon ‘Magnetil’electrical steel for the magnet guidingof the particle flow.Customers and Innovation continuedArcelorMittal Annual Report 200855

Market InformationArcelorMittal is listed on thestock exchanges of New York,Amsterdam, Paris, Brusselsand Luxembourg (MT) and onthe Spanish stock exchanges ofBarcelona, Bilbao, Madrid andValencia (MTS).ArcelorMittal, with its diversified businessmodel, strong cash flow and cost leadershipposition, is well placed to weather thecurrent challenging economic environmentand has the ambition to develop andbalance its shareholder base on the majorlisted markets and to attract new investors.ArcelorMittal remains optimistic aboutthe industry’s medium-term growthprospects, but believes it is appropriateto take a pause in its growth strategy untilthe economic outlook is more settled.Share price performanceAs a result of the challenging economicenvironment and the strong de-stockingof steel taking place in the developed andemerging world, the ArcelorMittal sharehas decreased by 35% since the creationof the Group, or by 78% compared to thehighest share price of early June 2008.Industrial planArcelorMittal has taken rapidly significantinitiatives to face the economic downturn,such as large production cuts to adaptproduction to the de-stocking phase,refocusing the $5 billion management gainsprogram to target savings of $2 billionin 2009, targeting a reduction of workingcapital rotation by 15-25 days during2009, reducing CAPEX to $3 billionin 2009 and reducing the dividend to$0.75/share. ArcelorMittal is also targetinga $10 billion net debt reduction to ensurefinancial flexibility once markets recover.IndexesArcelorMittal is member of more than120 indices including the following leadingindices: DJ STOXX 50, DJ EURO STOXX 50,CAC40, AEX, FTSE Eurotop 100,MSCI Pan-Euro, DJ Stoxx 600, S&P Europe500, Bloomberg World Index andNYSE Composite Index. Recognizedfor its commitment to SustainableDevelopment, the Group is also a memberof the FTSE4Good index.DividendConsidering the exceptional globaleconomic conditions since mid-September2008, ArcelorMittal’s Board of Directorshas recommended reducing the quarterlydividend payment by half to $0.1875in 2009, resulting in an annual dividendper share of $0.75, subject to theapproval of the annual general meetingof shareholders on May 12, 2009.Once market conditions have normalized,the Board of Directors will reviewthe dividend policy.The dividend payments will occur ona quarterly basis for the full year 2009(see financial calendar). Dividends areannounced in US$ and paid in US$ forshares listed on the New York StockExchange and paid in euros for shareslisted on the European stock exchanges(Netherlands, France, Spain, Luxembourgand Belgium).Investor RelationsBy implementing high standardsof financial information disclosureand providing clear, regular, transparentand even-handed information to allits shareholders, ArcelorMittal aimsto be the first choice for investorsin the sector.To meet this objective and provideinformation to fit the needs of all parties,ArcelorMittal has decided to implementan active and broad communications policy:road shows with the financial community,conference calls, plant visits, meetingswith retail and private investors,a virtual meeting and conference centeron Second Life and a website featuringmanagement comments on quarterly,half-year and full-year results.Private InvestorsArcelorMittal’s senior managementintends to meet private investors andshareholder associations in road showsthroughout 2009. In order to improvethe communication and debate withits private investors, ArcelorMittal hasopened a virtual meeting and conferencecentre on Second Life. The ArcelorMittalvirtual meeting and conference centreenables investors to have access toGroup documentation, corporate videos,discuss in real time with companyrepresentatives or other shareholderspresent on the location or leavequestions in the dedicated question box.This is also the optimal location toarrange interactive Group presentationsand courses. A dedicated toll freenumber for private investors is availableat 00800 4792 4792. Requestsfor information or meetings onthe virtual meeting and conferencecentre may also be sent to:PrivateInvestors@arcelomittal.com56

Market InformationAnalysts and InvestorsAs the world’s leading steel companyand major investment vehicle in the steelsector, ArcelorMittal constantly seeksto develop relationships with financialanalysts and international investors.Depending on their geographical location,investors may use the following e-mails:InstitutionalsAmericas@arcelormittal.comInstitutionalsEurope@arcelormittal.comSocially Responsible InvestorsThe Investor Relations team is alsoa privileged source of information for thegrowing Socially Responsible Investmentcommunity. The team organizes specialevents on ArcelorMittal’s CorporateResponsibility strategy and answersall requests for information sentto the Group (SRI@arcelormittal.com).Credit and Fixed Income InvestorsCredit, Fixed Income Investors and ratingagency are followed by a dedicatedteam from Investor Relations(CreditFixedIncome@arcelormittal.com).ArcelorMittal share price performance since creationBase 100 at 1st August 2006 (US$)350300250200150100500Financial CalendarArcelorMittalHSBC Global Metals & Mining Index01/08/06 01/11/06 01/02/07 01/05/07 01/08/07 01/11/07 01/02/08 01/05/08 01/08/08 01/11/08 01/02/09Financial Results*April 29, 2009 Results for 1st quarter 2009July 29, 2009 Results for 2nd quarter 2009 and 6 months 2009October 28, 2009 Results for 3rd quarter 2009 and 9 months 2009* Earnings results are issued before the opening of the stock exchanges on which ArcelorMittal is listedArcelorMittal Annual Report 2008Dividend paymentMarch 16, 2009June 15, 2009September 14, 2009December 14, 2009** Subject to shareholder approval1st quarterly payment of base dividend(interim dividend)2nd quarterly payment of base dividend**3rd quarterly payment of base dividend**4th quarterly payment of base dividend**Shareholder and investor meetingsMarch 26 and 27, 2009Plant tour with analysts and institutional investorsMay 12, 2009Annual shareholder meeting in LuxembourgJune 17, 2009Individual investor eventSeptember 16, 2009Investor day with Group Management Board membersTo subscribe to ArcelorMittal releases and results, please visit the subscription form section under‘Investors & Shareholders – Contacts’ on www.arcelormittal.com57

“We need world-class Leadership to propelus forward. We must be visionary thinkers,creating opportunities every day. We must maintainthe entrepreneurial spirit that has brought usto the forefront of the steel industry. We must movebeyond what the world expects of steel.“Lakshmi N Mittal58

Corporate GovernanceOne of the elements in theCorporate Responsibility strategyis ‘transparent governance’,showing ArcelorMittal’scommitment to visiblegovernance based on anunderstanding of business reality.This section provides a summaryof the corporate governancepractices of ArcelorMittal,including in particular thepractices of its Board of Directors.Board of Directors, Group ManagementBoard and Management CommitteeArcelorMittal is governed by a Boardof Directors and a Group ManagementBoard. The Group Management Boardis assisted by a Management Committee.Board of DirectorsThe Board of Directors is in chargeof the overall management of ArcelorMittal.It is responsible for the performanceof all acts of administration necessaryor useful in furtherance of the corporatepurpose of ArcelorMittal, except formatters expressly reserved by Luxembourglaw or the Articles of Association tothe general meeting of shareholders.The Articles of Association provide thatthe Board of Directors is composed ofa minimum of three and a maximumof 18 members, all of whom, exceptthe Chief Executive Officer, must benon-executive directors, and none ofthe members of the Board of Directors,except for the Chief Executive Officer,may hold an executive position or executivemandate within ArcelorMittal or anyentity controlled by ArcelorMittal.At ArcelorMittal’s annual generalmeeting of shareholders on May 13,2008, Mr Joseph Kinsch stepped downas Chairman and Mr Lakshmi N Mittalbecame the new Chairman followinga unanimous nomination by the Boardof Directors. Mr Mittal also continues tohold his position as Chief Executive Officer.As of the date hereof, the Board ofDirectors is comprised of 15 non-executivedirectors, 12 of whom are independent,and one executive director. The ChiefExecutive Officer of ArcelorMittal is thesole executive director.The Articles of Association and theMemorandum of Understanding enteredinto among Mittal Steel NV, ArcelorSA and ArcelorMittal’s largest shareholderon June 25, 2006 (‘Memorandumof Understanding’ or ‘MoU’) bothprovide that at least half of the Boardof Directors must be composedof independent members. Currently,12 of the 16 members of the Boardof Directors are independent. A directoris considered to be ‘independent’ if(a) he or she is independent within themeaning of the Listed Company Manualof the New York Stock Exchange, Inc.,as it may be amended from time to time,or any successor provision, subject tothe exemptions available for foreign privateissuers, and (b) he or she is unaffiliatedwith any shareholder owning or controllingmore than two percent of the total issuedshare capital of ArcelorMittal. For thesepurposes, a person is deemed affiliatedto a shareholder if he or she is an executiveofficer, a director who also is an employee,a general partner, a managing memberor a controlling shareholder of suchshareholder. There is no requirement in theArticles of Association that directors beshareholders in the Company.The Memorandum of Understanding providesthat until August 1, 2009, subject to theSignificant shareholder 1 owning or controllingat least 15% of the outstanding sharecapital of ArcelorMittal, the Significantshareholder will be entitled to elect to theBoard of Directors a maximum of six directors,comprising three directors affiliated(directly or indirectly) with the Significantshareholder and three independent directors.The Articles of Association provide thatthe Significant shareholder will be entitledto a proportional right of representation onthe Board of Directors after August 1, 2009.As a general matter, the Articlesof Association provide that directorsare elected and removed by the generalmeeting of shareholders by a simplemajority of votes cast. Except as describedabove, no shareholder has any specificrights to nominate, elect or removedirectors. All directors are elected bythe general meeting of shareholders forthree-year terms, except in the eventof the replacement of a member of theBoard of Directors during his or her mandate.None of the members of the Boardof Directors, including the executivedirector, have entered into servicecontracts with ArcelorMittal or any ofits subsidiaries that provide for benefitsupon the termination of their mandate.Operation of the Board of DirectorsThe Board of Directors meets whenconvened by the Chairman of the Boardor two members of the Board of Directors.In order for a meeting of the Boardof Directors to be validly held, a majorityof the directors must be presentor represented, including at least theChairman and a majority of theindependent directors. The Chairmanmay decide not to participate in a Boardof Directors meeting, provided he hasgiven a proxy to one of the directorswho will be present at the meeting.The previously existing role of ‘President’of the Board of Directors was replacedby the role of ‘Lead Independent Director’as a result of changes approved inApril 2008 to the Memorandum ofUnderstanding. Please see ‘Memorandumof Understanding and Initial Term’ below.1‘Significant shareholder’ refers to Mr Lakshmi N Mittal and his wife, Mrs Usha Mittal, who togetherown approximately 45.63% of ArcelorMittal’s outstanding voting equity as at December 31, 2008.60

Each director has one vote and noneof the directors, including the Chairman,has a casting vote. Decisions of the Boardof Directors are made by a majorityof the directors present and representedat a quorate meeting.The agenda of the meeting of the Boardof Directors is agreed by the Chairmanof the Board of Directors and the LeadIndependent Director.Separate Meetingsof Independent DirectorsThe Lead Independent Director mayschedule meetings of the independentmembers of the Board of Directorsoutside the presence of managementand of the non-independent directors.There is no minimum number of suchmeetings that must be held per year,and no such meetings were held in 2008.Board of Directors CommitteesThe Board of Directors has twocommittees: the Audit Committeeand the Appointments, Remunerationand Corporate Governance Committee.Audit CommitteeThe Articles of Association providethat the Audit Committee is composedsolely of independent members of theBoard of Directors. The MoU furtherprovides that the Audit Committee mustbe composed of at least three membersand that the applicable standard ofindependence is that defined in Rule10A-3 of the U.S. Securities ExchangeAct of 1934. The members areappointed by the Board of Directors.The Audit Committee makes decisionsby a simple majority with no memberhaving a casting vote.The primary function of the AuditCommittee is to assist the Boardof Directors in fulfilling its oversightresponsibilities by reviewing:• the financial reports and other financialinformation provided by ArcelorMittalto any governmental body or the public;• ArcelorMittal’s system of internalcontrol regarding finance, accounting,legal compliance and ethics thatthe Board of Directors and membersof management have established; and• ArcelorMittal’s auditing, accounting andfinancial reporting processes generally.The Audit Committee’s primary dutiesand responsibilities are to:• be an independent and objectiveparty to monitor ArcelorMittal’sfinancial reporting process andinternal controls system;• review and appraise the audit effortsof ArcelorMittal’s independent auditorsand internal auditing department;• provide an open avenue ofcommunication among the independentauditors, senior management,the internal audit department andthe Board of Directors;• approve the appointment and feesof the independent auditors; and• monitor the independence of theindependent auditors.The three members of the AuditCommittee are Messrs Narayanan Vaghul,José Ramón Álvarez Rendueles andWilbur L Ross, each of whom is anindependent director under ArcelorMittal’sCorporate Governance guidelinesand the NYSE standards. The Chairmanof the Audit Committee is Mr Vaghul,who has significant experience andfinancial expertise. Mr Vaghul is theChairman of ICICI Bank Ltd., a companythat is listed on the NYSE and the MumbaiStock Exchange. Mr Álvarez Rendueles,a former Governor of the Banco de Españaand former President of the BancoZaragozano, also has significant experienceand financial expertise. Mr Ross has beenthe Chairman of International Steel Group(ISG) since its creation, he is the Chairmanof a number of international companiesand is the Chairman and Chief ExecutiveOfficer of private equity firm WL Ross & Co.LLC. As such, he has acquired significantexperience in the steel industry and inthe management of internationalcompanies in various economic sectors.According to its charter, the AuditCommittee is required to meet at leastfour times per year. During 2008,the Audit Committee met twelve times,seven of which were meetings heldin person and five of which were heldby teleconference.Appointments, Remuneration andCorporate Governance CommitteeThe Appointments, Remuneration andCorporate Governance Committeeis comprised of three directors, eachof whom is an independent directorunder ArcelorMittal’s CorporateGovernance guidelines and the NYSEstandards. The members areappointed by the Board of Directors.The Appointments, Remunerationand Corporate Governance Committeemakes decisions by a simple majoritywith no member having a casting vote.The Board of Directors has establishedthe Appointments, Remunerationand Corporate Governance Committee to:• determine, on its behalf andon behalf of the shareholderswithin agreed terms of reference,ArcelorMittal’s remunerationand compensation framework,including stock options for theChief Executive Officer, the ChiefFinancial Officer, the membersof the Group ManagementBoard and the members ofthe Management Committee;• consider any candidate forappointment or reappointmentto the Board of Directorsat the request of the Boardof Directors and provide adviceand recommendations toit regarding the same;• evaluate the functioning of theBoard of Directors and monitorthe Board of Directors’self-assessment process; and• develop, monitor and reviewcorporate governance principlesapplicable to ArcelorMittal.The Appointments, Remunerationand Corporate Governance Committee’sprincipal criteria in determiningthe compensation of executivesis to encourage and reward performancethat will lead to long-term enhancementof shareholder value.The three members of the Appointments,Remuneration and CorporateGovernance Committee are MessrsLewis Kaden, Sergio Silva de Freitasand Jean-Pierre Hansen, each of whomis ‘independent’ under ArcelorMittal’sCorporate Governance guidelinesand the NYSE standards. The Chairmanof the Appointments, Remunerationand Corporate Governance Committeeis Mr Kaden.The Appointments, Remunerationand Corporate Governance Committeeis required to meet at least twicea year. During 2008, this committeemet six times.Corporate GovernanceArcelorMittal Annual Report 200861

Corporate Governance continuedGroup Management BoardThe Group Management Boardis entrusted with the day-to-daymanagement of ArcelorMittal. Mr LakshmiN Mittal, the Chief Executive Officer,is the Chairman of the Group ManagementBoard. The members of the GroupManagement Board are appointed anddismissed by the Board of Directors.As the Group Management Board is nota corporate body created by Luxembourglaw or ArcelorMittal’s Articles ofAssociation, the Group Management Boardmay exercise only the authority grantedto it by the Board of Directors.In establishing ArcelorMittal’s strategicdirection and corporate policies,Mr Lakshmi N Mittal is supportedby members of ArcelorMittal’s seniormanagement, who have substantialprofessional and worldwide steel industryexperience. Some of the membersof ArcelorMittal’s senior managementteam are also members of the GroupManagement Board.Management CommitteeThe Group Management Board is assistedby a Management Committee comprisedof the members of the Group ManagementBoard, 16 other senior executive officers,and one invitee to the ManagementCommittee. The Management Committeediscusses and prepares Group decisionson matters of Group-wide importance,integrates the geographical dimensionof the Group, ensures in-depth discussionswith ArcelorMittal’s operational andresources leaders, and shares informationabout the situation of the Group andits markets.1As such term is defined in the introduction to the Board of Directorssection of this Corporate Governance section.Memorandum of Understandingand initial termOn June 25, 2006, Mittal Steel,the ‘Significant shareholder’ 1 and Arcelorsigned a binding Memorandum ofUnderstanding based on which Arcelor’sBoard of Directors recommended MittalSteel’s offer for Arcelor and the partiesagreed to certain corporate governancematters relating to the Arcelor-Mittalcombined Group. Certain provisionsof the MoU relating to corporategovernance were incorporated into theArticles of Association of ArcelorMittalat the extraordinary general meetingof shareholders on November 5, 2007.In April 2008, the Board of Directorscompleted a review of certainprovisions of the MoU to adaptit to the Company’s needs in thepost-merger and post-integration phase.In particular, the Board decided tocreate the role of Lead IndependentDirector. The Lead Independent Directorreplaces the ‘President’ of the Boardof Directors created by the MoU andhis/her function is to:• co-ordinate the activities ofthe independent directors;• liaise between the Chairmanof the Board of Directors and theindependent directors;• call meetings of the independentdirectors when necessary andappropriate; and• perform such other duties as maybe assigned to him or her by theBoard from time to time.Mr Lewis B Kaden was elected bythe Board of Directors as ArcelorMittal’sfirst Lead Independent Directorin April 2008.Furthermore, the Board of Directorsdecided to remove references in the MoUto the size of the Board of Directorsand the distinction between formerArcelor and Mittal directors. Finally,the Board of Directors decided that theAudit Committee and the Appointments,Remuneration and Corporate GovernanceCommittee will each be composed ofa minimum of three independent directors.In accordance with the Memorandumof Understanding, until August 1, 2009,with respect to Board of Directors’ decisionsthat require shareholders approval,the Significant shareholder will votein accordance with the position expressedby the Board of Directors, unless theSignificant shareholder opposes any suchposition, in which case the Significantshareholder can vote as it wishes subjectto the following requirements. Until August 1,2009, if Mr Lakshmi N Mittal opposesany decision of the Board of Directorson a matter that does not require shareholderapproval and that was not proposed byhim, he will have the right to requestthat such action first be approved bya shareholders’ meeting and the Significantshareholder will have the right to vote atsuch meeting as it sees fit. The Boardof Directors will not approve any actionrejected by the shareholders’ meeting.The Memorandum of Understandingfurther provides that until August 1, 2009,subject to the Significant shareholderowning or controlling at least 15% of theoutstanding share capital of ArcelorMittal,the Significant shareholder is entitledto elect to the Board of Directors a maximumof six directors comprised of threedirectors affiliated (directly or indirectly)with the Significant shareholder and threeindependent directors. Thereafter,the Significant shareholder will be entitledto representation on the Board ofDirectors in proportion to its shareholdingin ArcelorMittal.62

Upon expiration of a three-yeartransitional period (referred to as theInitial Term) on August 1, 2009,ArcelorMittal’s corporate governancerules described above will be revisedto reflect, subject to certain provisionsof the MoU incorporated into theArticles of Association, the best standardsof corporate governance for comparablecompanies and to conform with thecorporate governance aspects of theNYSE listing standards applicable tonon-U.S. companies and the LuxembourgStock Exchange code of governance.Other corporate governance practicesArcelorMittal is committed to adoptbest practice standards in termsof corporate governance in its dealingswith shareholders and aims to ensuregood corporate governance by applyingrules on transparency, quality of reportingand the balance of powers. ArcelorMittalcontinually monitors U.S., European Unionand Luxembourg legal requirementsand best practices in order to makeadjustments to its corporate governancecontrols and procedures when necessary.Ethics and Conflicts of InterestEthics and conflicts of interestare governed by ArcelorMittal’s Codeof Business Conduct, which establishesthe standards for ethical behavior thatare to be followed by all employeesand directors of ArcelorMittal in theexercise of their duties. They must alwaysact in the best interests of ArcelorMittaland must avoid any situation in whichtheir personal interests conflict, or couldconflict, with their obligations toArcelorMittal. As employees, they maynot acquire any financial or other interestin any business or participate in any activitythat could deprive ArcelorMittal of thetime or the attention needed to devoteto the performance of their duties.Any behavior that deviates from theCode of Business Conduct is to be reportedto the employee’s supervisor, a memberof management, the head of thelegal department or the head of the internalaudit/internal assurance department.Code of Business Conduct trainingis offered throughout ArcelorMittal.All new employees of ArcelorMittal mustacknowledge the Code of BusinessConduct in writing upon joining and areperiodically trained about the Codeof Business Conduct in each locationwhere ArcelorMittal has operations.The Code of Business Conduct is availablein the ‘Corporate Governance – Code ofBusiness Conduct’ section of ArcelorMittal’swebsite at www.arcelormittal.com.Process for Handling Complaintson Accounting MattersAs part of the procedures of the Boardof Directors for handling complaintsor concerns about accounting, internalcontrols and auditing issues, ArcelorMittal’sCode of Business Conduct encouragesall employees to bring such issuesto the Audit Committee’s attention ona confidential basis. In accordance withArcelorMittal’s Whistleblower Policy,concerns with regard to possibleirregularities in accounting, auditingor banking matters or bribery withinArcelorMittal or any of its subsidiariesor other controlled entities mayalso be communicated through the‘Corporate Governance – Whistleblower’section of the ArcelorMittal websiteat www.arcelormittal.com, whereArcelorMittal’s Whistleblower Policyis also available.During 2008, employees reported184 total complaints, of which 32 weredeemed significant complaints by theInternal Assurance team.Internal AssuranceArcelorMittal has an Internal Assurancefunction that, through its Headof Internal Assurance, reports to theAudit Committee. The function is staffedby full-time professional staff locatedwithin each of the principal operatingsubsidiaries and at the corporate level.Recommendations and matters relatingto internal control and processes are madeby the Internal Assurance functionand their implementation is regularlyreviewed by the Audit Committee.Independent AuditorsThe appointment and determinationof fees of the independent auditorsis the direct responsibility of the AuditCommittee. The Audit Committee is furtherresponsible for obtaining, at least onceeach year, a written statement fromthe independent auditors that theirindependence has not been impaired.The Audit Committee has also obtaineda confirmation from ArcelorMittal’s principalindependent auditors to the effectthat none of its former employees arein a position within ArcelorMittal that mayimpair the principal auditors’ independence.Measures to Prevent Insider Dealingand Market ManipulationThe Board of Directors of ArcelorMittalhas adopted Insider Dealing Regulations(‘IDR’), which are updated whennecessary and in relation to which trainingis conducted throughout the Group.The most recent version of the IDRis available on ArcelorMittal’s website,www.arcelormittal.com, under ‘Investors& Shareholders – Corporate Governance– Insider Dealing Regulations’.The IDR apply to the worldwideoperations of ArcelorMittal. The CompanySecretary of ArcelorMittal is the IDRcompliance officer and answers questionsthat members of senior management,the Board of Directors, or employees mayhave about the IDR’s interpretation.The IDR compliance officer may also assistsenior executives and directors withthe filing of notices required by Luxembourglaw to be filed with the Luxembourgfinancial regulator, the CSSF (Commissionde Surveillance du Secteur Financier).Furthermore, the IDR compliance officerhas the power to conduct investigationsin connection with the applicationand enforcement of the IDR, in whichany employee or member of seniormanagement or of the Board of Directorsis required to cooperate.Selected new employees of ArcelorMittalare required to participate in a trainingcourse about the IDR upon joiningArcelorMittal and every three yearsthereafter. The individuals who mustparticipate in the IDR training includethe members of senior management,employees who work in finance, legal,sales, mergers and acquisitions and otherareas that the Company may determinefrom time to time. In addition,ArcelorMittal’s Code of BusinessConduct contains a section on ‘Tradingin the Securities of the Company’that emphasizes the prohibition to tradeon the basis of inside information.Corporate Governance continuedArcelorMittal Annual Report 200863

Corporate Governance continuedCompensationCompensation informationThe total annual compensation of the members of ArcelorMittal’s Board of Directors paid in 2007 and 2008 was as follows:Year ended Year ended31 December 31 December2007 2008(Amounts in $ thousands except option information)Base salary and/or directors fees 4,334 5,569Short-term performance-related bonus 2,181 2,200Long-term incentives (number of options) 60,000 60,000The annual compensation paid to the members of ArcelorMittal’s Board of Directors for services in all capacitiesin 2007 and 2008 was as follows:2007 1 2008 2007 2008 2007 2008Short-term Short-term Long-term Long-termPerformance Performance Number NumberRelated Related of Options of Options(Amounts in $ thousands except option information)Lakshmi N Mittal 2,001 1,916 2,181 2,200 60,000 60,000Vanisha Mittal Bhatia — 199 — — — —Narayanan Vaghul — 240 — — — —Malay Mukherjee 2 — — — — — —Wilbur L Ross, Jr — 224 — — — —Lewis B Kaden — 221 — — — —François Pinault — 176 — — — —Joseph Kinsch 3 338 368 — — — —José Ramón Álvarez Rendueles 297 227 — — — —Sergio Silva de Freitas 181 206 — — — —Georges Schmit 197 196 — — — —Edmond Pachura 4 213 227 — — — —Michel Angel Marti 180 199 — — — —Manuel Fernández López 5 163 187 — — — —Jean-Pierre Hansen 200 199 — — — —John Castegnaro 180 199 — — — —Antoine Spillmann 6 163 196 — — — —HRH Prince Guillaume de Luxembourg 184 199 — — — —Romain Zaleski 7 37 190 — — — —Ignacio Fernández Toxo 8 — — — — — —Total 4,334 5,569 2,181 2,200 60,000 60,0001 The compensation that was paid in 2007 to the former Arcelor Board Members wasfor their services to Arcelor in 2006. No compensation was paid to the former MittalSteel Board Members on the ArcelorMittal Board in 2007. Compensation with respectto 2007 was paid after shareholder approval at the AGM held on May 13, 2008.Attendance fees for 2007 amounting to approximately $0.4 million were paid in February2008 and are included in the 2008 column above. Compensation with respectto 2008 will be paid after shareholder approval at the AGM held on May 12, 2009.Attendance fees for 2008 amounting to approximately $0.4 million were paidin January 2009 and are not included in the 2008 column above.2 Mr Mukherjee was elected to ArcelorMittal’s Board of Directors on May 13, 2008,prior to which he was a Member of the Group Management Board, responsible for Asia,Africa, Mining and CIS. Mr Mukherjee was compensated as a member of senior managementin 2007 and in 2008 until his appointment to the Board, and as a Director since then.The table above relates solely to compensation received by Mr Mukherjee while a Director.Compensation received by Mr Mukherjee in 2008 prior to becoming a Director is includedin the aggregate amount disclosed below for senior management.3 The mandate of Mr Kinsch ended on May 13, 2008.4 The mandate of Mr Pachura ended on May 13, 2008.5Mr Fernández López resigned on May 13, 2008.6 Mr Spillmann was elected to ArcelorMittal’s Board of Directors on May 13,2008, replacing Corporación JMAC. Mr Spillmann had been the representativeof Corporación JMAC on the Board before May 13, 2008. Compensationreceived by Mr Spillmann both as a representative of Corporación JMACand as a Director in his own right is included in this table.7 Mr Zaleski resigned on March 5, 2008.8 Mr Fernández Toxo was elected to ArcelorMittal’s Board of Directorson May 13, 2008.64

On February 10, 2009 the Boardof Directors decided that it would proposeto the next annual general meetingof shareholders to reduce the annualremuneration of board members(including the Chairman and ChiefExecutive Officer) by 15% as comparedto the previous year as an additionalmeasure to address the current situationin the steel industry and to show leadershipand solidarity with the Company’semployees affected by redundanciesand temporary lay-offs.As of December 31, 2007 and 2008,ArcelorMittal did not have outstandingany loans or advances to members ofits Board of Directors, and, as of December31, 2008, ArcelorMittal had not givenany guarantees for the benefit of anymember of its Board of Directors.The following table provides a summaryof the options outstanding and the exerciseof the options granted to ArcelorMittal’sBoard of Directors (in 2001, 2003and 2004, no options were grantedto members of ArcelorMittal’s Boardof Directors):Corporate Governance continuedGranted Granted Granted Granted Granted Granted Granted Total Weightedin 1999 in 2000 in 2002 in 2005 in 2006 in 2007 in 2008 AverageExercisePriceLakshmi N Mittal 80,000 80,000 80,000 100,000 100,000 60,000 60,000 560,000 $30.15Vanisha Mittal Bhatia — — — — — — — — —Narayanan Vaghul — — — — — — — — —Malay Mukherjee 1 — — — — — — — — —Wilbur L Ross — — — — — — — — —Lewis B Kaden — — — — — — — — —François Pinault — — — — — — — — —Joseph Kinsch 2 — — — — — — — — —José Ramón Álvarez Rendueles — — — — — — — — —Sergio Silva de Freitas — — — — — — — — —Georges Schmit — — — — — — — — —Edmond Pachura 3 — — — — — — — — —Michel Angel Marti — — — — — — — — —Manuel Fernández López 4 — — — — — — — — —Jean-Pierre Hansen — — — — — — — — —John Castegnaro — — — — — — — — —Antoine Spillmann 5 — — — — — — — — —HRH Prince Guillaume de Luxembourg — — — — — — — — —Romain Zaleski 6 — — — — — — — — —Ignacio Fernández Toxo 7 — — — — — — — — —Total 80,000 80,000 80,000 100,000 100,000 60,000 60,000 560,000 —Exercise price $11.94 $8.57 $2.26 $28.75 $33.755 $64.30 $82.57 — $30.15Term (in years) 10 10 10 10 10 10 10 — —Expiration date September 14, June 1, April 5, August 23, September 1, August 2, August 5, — —2009 2010 2012 2015 2016 2017 2018ArcelorMittal Annual Report 20081 Mr Mukherjee was elected to ArcelorMittal’s Board of Directors on May 13,2008, prior to which point he was a Member of the Group Management Board,responsible for Asia, Africa, Mining and CIS. Mr Mukherjee was compensatedas a member of senior management in 2007 and in 2008 until hisappointment to the Board on May 13, 2008, and as a Director since then.Options granted before this date are not included in this table but are includedin the table with respect to outstanding share options held by senior management.2The mandate of Mr Kinsch ended on May 13, 2008.3The mandate of Mr Pachura ended on May 13, 2008.4Mr Fernández López resigned on May 13, 2008.5 Mr Spillmann was elected to ArcelorMittal’s Board of Directors on May 13,2008, replacing Corporación JMAC. Mr Spillmann had been the representativeof Corporación JMAC on the Board before May 13, 2008.6Mr Zaleski resigned on March 5, 2008.7Mr Fernández Toxo was elected to ArcelorMittal’s Board of Directors on May 13, 2008.65

Corporate Governance continuedThe total compensation paid in 2008to members of ArcelorMittal’s seniormanagement was $20.5 million in basesalary (including various allowancespaid in cash) and $21 million in short-termperformance-related bonuses. As ofDecember 31, 2008, approximately$1.2 million was accrued by ArcelorMittalto provide pension benefits to itssenior management.In connection with the Board of Directors’decision in February 2009 to reduceits compensation in light of conditionsin the steel market, Group ManagementBoard members similarly voluntarily decidedto reduce their salary by 12%, and themembers of the Management Committeevoluntarily decided to reduce their salaryby 10%, as compared to the previous year.During 2008, no loans or advances toArcelorMittal’s senior management wereoutstanding. As of December 31, 2007,no loan was outstanding.Executive compensation policyPhilosophyThe ArcelorMittal CompensationPolicy for executives is based on thefollowing principles:• Provide a total compensation competitivewith executive compensation levelsof industrial companies of a similarsize and scope;• Promote internal equity andmarket median base pay levelsfor our executives, combined with‘pay for performance’;• Motivate managers towardsthe achievement of Group-wideand personal goals, includingefficiency and growth; and• Retain individuals who consistentlyperform at expected levelsand contribute to the successof the organization.Governance PrinciplesThe Appointments, Remunerationand Corporate Governance Committeeof ArcelorMittal reviews and recommendsproposals annually for the Boardof Directors on ArcelorMittal’s executivecompensation. The Committee alsoprepares proposals on the fees tobe paid annually to the members of theBoard of Directors. Such proposals relatingto executive compensation comprisethe following elements:• Fixed annual salary,• Short-term incentives, e.g.,performance-related bonus, and• Long-term incentives, e.g., stock options,and apply to the group of seniorexecutives, i.e.• the Chief Executive Officer,• the members of the GroupManagement Board, and• the members of the ManagementCommittee.Decisions on short and long-termincentive plans may apply to a largergroup of employees. The Appointments,Remuneration and Corporate GovernanceCommittee receives updates aboutthe application of these plans ona regular basis.Fixed Annual SalaryThe size of the fixed annual salaryis targeted to the median salary levelof the peer group of companies,i.e. industrial companies of a similar sizeand scope. The base salary levelsare reviewed annually to ensure thatArcelorMittal remains competitive.Short-term Incentives:Performance-related BonusA discretionary bonus plan is in placeat ArcelorMittal. The performanceof the ArcelorMittal Group as a whole,the performance of the relevantbusiness units, the achievementof specific objectives and the individual’soverall performance and potentialdetermine the outcome of the bonuscalculation. This bonus plan, calledthe Global Performance Bonus Plan,is applicable to more than 2,000executives and managers worldwide.The bonus is calculated as a percentageof the individual’s base salary. Differentpercentage ranges are used dependingon the hierarchical level of the individual.Performance-related bonuses are paidonly if certain minimum performancethresholds are exceeded by theArcelorMittal Group as a whole and/orthe relevant business segment.Long-term Incentives: Stock OptionsThe Chief Executive Officer,the Group Management Board membersand the Management Committeemembers benefit from the Global StockOption Plan. This plan also applies toa larger group of employees. The overallcap on options available for grants duringa year is approved by the shareholdersat the annual general meeting. The stockoption plan is detailed in Note 17of the Consolidated Financial Statements.Other BenefitsIn addition to the main compensationelements described above, otherbenefits may be provided to executives,such as company cars and contributionsto pension plans and insurance policies.66

Share OwnershipShare OwnershipAs of December 31, 2008, the aggregatebeneficial share ownership of ArcelorMittaldirectors and senior management(37 individuals) totaled 1,610,922ArcelorMittal shares (excluding sharesowned by ArcelorMittal’s Significantshareholder and including options to acquire596,453 ArcelorMittal common sharesthat are exercisable within 60 daysof December 31, 2008), representing0.11% of the total issued share capitalof ArcelorMittal. Excluding optionsto acquire ArcelorMittal common shares,these 37 individuals beneficially own1,014,469 ArcelorMittal common shares.Other than the Significant shareholder,each director and member of seniormanagement beneficially owns lessthan 1% of ArcelorMittal’s shares.The percentage of total common sharesin the possession of the Significantshareholder (including treasury stock)decreased from 44.79% prior to November13, 2007 to 43.05% after that dateas a result of the second step of the mergerof Mittal Steel and Arcelor. In 2006,the number of Mittal Steel options grantedto its directors and senior management(including the Significant shareholder)was 388,541 at an exercise priceof $33.755, and the number of Arceloroptions granted to its directors and seniormanagement was 312,146 at an exerciseprice of €34.43. In 2007, the numberof ArcelorMittal (or Mittal Steel)options granted to directors andthen-senior management (including theSignificant shareholder) was 695,001at an exercise price of $64.30.In 2008, the number of ArcelorMittaloptions granted to directors andthen-senior management (including theSignificant shareholder) was 740,500at an exercise price of $82.57.The Mittal Steel and ArcelorMittal optionsvest either ratably upon each of thefirst three anniversaries of the grantdate (or in total upon the death,disability or retirement of the grantee)and expire ten years after the grant date.The following table summarizesoutstanding share options, as of December31, 2008, granted to the membersof senior management of ArcelorMittal(or its predecessor company Mittal Steel,depending on the year):ArcelorMittal Annual Report 2008Year of Year of Year of Year of Year of Year of Year of Total** AverageGrant Grant Grant Grant Grant Grant Grant weighted1999* 2000* 2002* 2005* 2006* 2007* 2008* exerciseprice**Senior Managers*** (including 87,500 87,500 105,000 275,348 388,541 695,001 740,500 2,474,390 —the Significant shareholder)Exercise price $ 11.94 $ 8.57 $ 2.26 $ 28.75 $ 33.76 $ 64.30 $ 82.57 — $ 62.74Term (in years) 10 10 10 10 10 10 10 — —Expiration date September 14, June 1, April 5, August 23, September 1, August 2, August 5, — —2009 2010 2012 2015 2016 2017 2018* Options awarded under ArcelorMittalShares.** The options granted by Arcelor (noted above) have been included in the totalnumber of options and the average weighted exercise price(at a conversion rate of €1 = $1.3705).*** Includes options granted to Mr Mukherjee, all of which were received in his capacityas a member of senior management. Mr Mukherjee was elected to ArcelorMittal’sBoard of Directors on May 13, 2008, prior to which point he was a Memberof the Group Management Board, responsible for Asia, Africa, Mining and CIS.In 2001, 2003 and 2004, no optionswere granted to members of MittalSteel’s senior management.In accordance with the LuxembourgStock Exchange’s Ten Principlesof Corporate Governance, independentnon-executive membersof ArcelorMittal’s Board of Directorsdo not receive share options.67

Share Capital and Voting RightsArcelorMittalCommon Shares 1Number %Significant shareholder 2 623,751,667 43.05Treasury Stock 3 81,760,949 5.64Other Public Shareholders 743,317,731 51.31Total 1,448,826,347 100.00Directors and Senior Management 4 5 1,610,922 0.111For purposes of this table, a person or group of persons is deemed to have beneficial ownership of any ArcelorMittalcommon shares as of a given date on which such person or group of persons has the right to acquire such shares within60 days after December 31, 2008 upon exercise of vested portions of stock options. The first-third of the stockoptions granted on August 2, 2007 and the first- and second-thirds of the stock options granted on September1, 2006 vested on August 2, 2008, and September 1, 2008, respectively, and all stock options of the previous grantshave vested. None of the stock options granted on August 5, 2008 has vested; the first-third of such options,however, will vest on August 5, 2009.2Mr Lakshmi Mittal and his wife, Mrs Usha Mittal, have direct ownership of ArcelorMittal common shares and indirectownership of holding companies that own ArcelorMittal common shares. Ispat International Investments S.L. is the ownerof 98,250,000 ArcelorMittal common shares. Mittal Investments S.à r.l., a limited liability company organized underthe laws of Luxembourg, is the owner of 525,000,000 ArcelorMittal common shares. Mr Mittal is the direct ownerof 30,000 ArcelorMittal common shares and holds options to acquire an additional 560,000 ArcelorMittal common shares,of which 426,667 are, for the purposes of this table, deemed to be beneficially owned by Mr Mittal due to the fact thatthose options are exercisable within 60 days. Mrs Mittal is the direct owner of 5,000 ArcelorMittal common shares and holdsoptions to acquire an additional 40,000 ArcelorMittal common shares, of which all 40,000 options are, for the purposesof this table, deemed to be beneficially owned by Mrs Mittal due to the fact that those options are exercisable within 60 days.Mr Mittal and Mrs Mittal share equally beneficial ownership of 100% of Ispat International Investments S.L. and shareequally beneficial ownership of 100% of Mittal Investments S.à.r.l. Accordingly, Mr Mittal is the beneficial ownerof 623,706,667 ArcelorMittal common shares and Mrs Mittal is the beneficial owner of 623,295,000 common shares.Excluding options, Mr Lakshmi Mittal and Mrs Usha Mittal together, directly and indirectly through intermediate holdingcompanies, own 623,285,000 ArcelorMittal common shares.3Represents ArcelorMittal common shares repurchased by ArcelorMittal pursuant to share repurchase programs.Consisting of 27,375,557 ArcelorMittal common shares purchased between November 13, 2007 and December 31,2007; 56,523,212 ArcelorMittal common shares purchased between December 31, 2007 and December 31, 2008;and excluding (1) 119,856 options that were exercised during the November 13, 2007—December 31, 2007 periodand 954,844 options that were exercised during the December 31, 2007—December 31, 2008 period; (2) 596,453stock options that can be exercised by directors and senior management (other than the Significant shareholder);and (3) 466,667 stock options that can be exercised by the Significant shareholder, in each case within 60 days ofDecember 31, 2008. The ArcelorMittal common shares are, for the purposes of this table, deemed to be beneficiallyowned by the stock options holders due to the fact that those options are exercisable within 60 days.4Excludes shares beneficially owned by the Significant shareholder.5These 1,610,922 ArcelorMittal common shares are included in shares owned by the public shareholdersindicated above.As of December 31, 2008, the authorizedshare capital of ArcelorMittal consistedof 1,617,000,000 common shares withoutnominal value. At December 31, 2008and 2007, 1,448,826,347 commonshares were issued and at December 31,2008, 1,366,002,278 commonshares, compared to 1,421,570,646common shares at December 31, 2007,were outstanding, the difference consistingin common shares held in treasuryby ArcelorMittal.The preceding table sets forth informationas of December 31, 2008 with respectto the beneficial ownership of ArcelorMittalcommon shares by each person who isknown to be the beneficial owner of morethan 5% of the shares and all directorsand senior management as a group.The ArcelorMittal common shares maybe held in registered form only. Registeredshares may consist of (i) shares tradedon the NYSE, or New York Shares, which areregistered in a register kept by or on behalfof ArcelorMittal by its New York transferagent, or (ii) shares traded on EuronextAmsterdam by NYSE Euronext, EuronextBrussels by NYSE Euronext, Euronext Parisby NYSE Euronext, the regulated marketof the Luxembourg Stock Exchange and theSpanish Stock Exchanges (Madrid, Bilbao,Valencia and Barcelona), which areregistered in ArcelorMittal’s shareholders’register, or ArcelorMittal European RegisterShares, which are registered in a localshareholder register kept by or on behalfof ArcelorMittal by Royal Bank of Scotland,or directly on ArcelorMittal’s Luxembourgshareholder register without being heldon ArcelorMittal’s local Dutch shareholderregister. Under Luxembourg law, theownership of registered shares is evidencedby the inscription of the name of theshareholder, the number of shares heldby such shareholder and the amount paidup on each share in the shareholder registerof ArcelorMittal.68

At December 31, 2008, there were3,028 shareholders other than the Significantshareholder holding an aggregate of53,550,631 ArcelorMittal common sharesregistered in ArcelorMittal’s shareholder register,representing approximately 3% of the commonshares issued (including treasury shares).At December 31, 2008, there were133 U.S. shareholders holding an aggregateof 46,060,462 New York Shares, representingapproximately 3.17% of the common sharesissued (including treasury shares). ArcelorMittal’sknowledge of the number of New York Sharesheld by U.S. holders is based solely on therecords of its New York transfer agent regardingregistered ArcelorMittal common shares.At December 31, 2008, there were723,506,498 ArcelorMittal common sharesbeing held through the Euroclear/Iberclearclearing system in The Netherlands, France,Luxembourg and Spain.As of December 31, 2008, ArcelorMittal’sSignificant shareholder owned directlyand indirectly through holding companies623,285,000 ArcelorMittal common shares,representing approximately 45.67% of thecombined voting interest in ArcelorMittal.In the merger between ArcelorMittal and Arcelor,31,619,094 ArcelorMittal shares were issuedon November 13, 2007. After closing of thethird offer period for Arcelor shares onNovember 17, 2006, a total of 679,416,607shares had been issued to the shareholdersof Arcelor since July 31, 2006, as partialpayment for Arcelor (the other part was paidin cash). Prior to closing of the third offer periodfor Arcelor shares on November 17, 2006,Mittal Steel’s Significant shareholder owneddirectly and indirectly through holding companies165,794,790 Mittal Steel class A commonshares (approximately 67% of the issued andoutstanding class (except for class A commonshares held in treasury)) and 457,490,210Mittal Steel class B common shares (100% ofthe issued and outstanding class), representingapproximately 98% of the combined votinginterest in Mittal Steel. Upon completionof the merger with ISG on April 15, 2005,60,891,883 shares were issued to the formershareholders of ISG as partial paymentfor ISG (the other part was paid in cash).Prior to the merger with ISG, Mittal Steel’sSignificant shareholder owned directly andindirectly through holding companies165,794,790 Mittal Steel class A commonshares (approximately 89.5% of the issuedand outstanding class (except for class Acommon shares held in treasury)) and457,490,210 Mittal Steel class B commonshares (100% of the issued and outstandingclass), representing approximately 99.6%of the combined voting interest in Mittal Steel.On completion of the acquisition of LNMHoldings on December 17, 2004, 139,659,790Mittal Steel class A common shares and385,340,210 Mittal Steel class B commonshares were issued to an intermediate holdingcompany owned by the Significant shareholder.Prior to the completion of the acquisitionof LNM Holdings, the Significant shareholderowned 26,135,000 Mittal Steel class Acommon shares (approximately 57.5% of thethen issued and outstanding class(save for class A common shares held intreasury)) and 72,150,000 Mittal Steel class Bcommon shares (100% of the then issuedand outstanding class), representingapproximately 97.5% of the combined votinginterest in Mittal Steel.Share buy-back programIn 2008, ArcelorMittal implemented twotypes of share buy-backs: Dividend policyshare buy-backs and specific supplementaryshare buy-backs.ArcelorMittal’s general meeting of shareholdersheld on May 13, 2008 authorized sharebuy-backs for a period of 18 months.The maximum number of shares that may beacquired is the maximum allowed by theLuxembourg law on commercial companies(the ‘Law’) in such a manner that the accountingpar value of the Company’s shares held by theCompany (or other Group companies) doesnot exceed 10% of its subscribed share capital.Dividend Policy Share Buy-backsThe policy of ArcelorMittal aims to return30% of ArcelorMittal’s prior year’s annual netincome to shareholders every year through anannual base dividend supplemented by sharebuy-backs. ArcelorMittal confirmed on February22, 2008 that, with the acquisition of 25 millionshares from Carlo Tassara International S.A.announced on February 20, 2008, it completedits $1 billion share buy-back program announcedin November 2007 and on February 13, 2008,which was part of its policy to return 30%of the previous year’s net income toshareholders, together with the Company’s2008 base cash dividend of $1.50. Out of the25 million shares purchased at a price of€46.6 ($68.70) per share, 14.6 million havebeen purchased under the $1 billion sharebuy-back program and 10.4 million under the44 million shares buy-back program whichstarted on December 18, 2007 and is to becompleted over two years.On March 17, 2008, June 16, 2008,September 15, 2008 and December 15,2008, an interim dividend of $0.375 centsper share was paid.Considering the exceptional global economicconditions since September 2008, sharebuy-backs were suspended after September 5,2008 and on February 10, 2009, ArcelorMittal’sBoard of Directors recommended reducing theannual dividend in 2009 to $0.75 per share(with quarterly dividend payments of $0.1875),subject to the approval of the annual generalmeeting of shareholders on May 12, 2009.The new quarterly dividend payments wouldtake place on March 16, 2009 (an interimdividend), June 15, 2009, September 14, 2009and December 14, 2009. The Company hassuspended its previously announced policyto return 30% of net income to shareholdersthrough an annual base dividend supplementedby share buy-backs. Once market conditionshave normalized, the Board intends to reviewthe Company’s policy.Supplementary Share Buy-backsOn December 12 and 18, 2007, ArcelorMittalannounced a share buy-back program for upto a maximum of 44 million shares. This sharebuy-back program is aimed at offsettingthe issuance of 44 million ArcelorMittal sharesthat took place in connection with theArcelorMittal merger on November 13, 2007.This program started on December 18, 2007and is to be realized in a 2-year time frame.The shareholders’ meeting on May 13, 2008authorized the use of the repurchased sharesfor any purpose permitted by Luxembourg law,including future corporate opportunities,allocation to employees, or cancellation.Under this program, ArcelorMittal had,as of the close of business on January 31,2009, repurchased a total of 43.9 millionshares, leaving 100,000 shares for repurchasingunder this program.ArcelorMittal held, indirectly and directly,approximately 82.8 million shares in treasuryas at December 31, 2008. This is equivalentto approximately 5.72% of the total issuednumber of ArcelorMittal shares at that date.Additional Informationabout ArcelorMittalArcelorMittal, incorporated under thelaws of Luxembourg, is the parent companyof the ArcelorMittal Group and is expectedto continue this role over the comingyears. The Company has no branchoffices. ArcelorMittal generated a profitof $19,094 million in 2008, primarilyfrom revenues from its holdings includinga gain of $18,525 million followinga legal restructuring of its investmentsin affiliated undertakings mainlyin Luxembourg and Belgium.On January 8, 2008, the Companyreceived a writ of summons on behalfof four of its hedge fund shareholdersto appear before the civil court ofLuxembourg. The summons was alsoserved on all natural persons sitting onthe Board of Directors of the Companyat the time of the merger and on theSignificant shareholder. The claimantsrequest, among other things (1)the cancellation and the amendmentof the corporate decisions relating tothe second-step merger in order to reflectan exchange ratio of 11 ArcelorMittal(the entity resulting from the first stepmerger) shares for seven Arcelor shares(ignoring the impact of the share capitalrestructuring of Arcelor) accompaniedby the allocation by the Significantshareholder or the Company of additionalshares to the claimants to reflectthis revised ratio, and alternatively,(2) the payment of damages by thedefendants (jointly and severallyor severally, at the court’s discretion),in an amount of EUR 180 million.ArcelorMittal submitted its brief in responseon October 16, 2008, challenging thevalidity, the admissibility and the meritsof the claims. Hearing and judgmentin the first instance are not expectedbefore the end of 2009 or early 2010.Share Capital and Voting RightsArcelorMittal Annual Report 200869

By 2012, Spain is expectedto have the largest highspeed rail network in theworld, with over 2,200 km.By 2020, its length will reach10,000 km, which means that90% of the Spanish populationwill live within a distanceof 50 km of a high speed trainstation. ArcelorMittal Asturiasis supplying the rails for theproject, meeting the stringentquality controls that enablethese trains to travel safelyat 350 km/h.The first high-speed rail line in Spain,linking Madrid and Seville, wascommissioned in 1992. Since then,the proven quality of the rails producedby ArcelorMittal has led to thembeing chosen for all high speed railtracks currently in service in Spain.The production of these rails requiresvery stringent controls; they haveto meet exacting requirements in termsof durability, cost, minimum acousticimpact, passenger comfort and safety.The Rail Mill operated by ArcelorMittalAsturias has an annual productioncapacity of 250,000 tonnes and canroll rails in lengths of up to 90 meters.It has supplied over 500,000 tonnesof high-speed rails which have also beeninstalled in France, Germany and Turkey,amongst other countries.70

By2012 over 2200kmof rail track in Spain.71

Underpinning all our operations is a philosophy to produce72

Directors’ Responsibility StatementDirectors’ Responsibility StatementWe confirm to the best of our knowledge:1. the consolidated financial statements of ArcelorMittal presented in this Annual Reportand established in conformity with International Financial Reporting Standards as adoptedin the European Union give a true and fair view of the assets, liabilities, financial positionand profit of ArcelorMittal and the undertakings included within the consolidationtaken as a whole; and2. the management report includes a fair review of the development and performanceof the business and position of ArcelorMittal and the undertakings included withinthe consolidation taken as a whole, together with a description of the principal risksand uncertainties they face.By order of the Board of DirectorsArcelorMittal Annual Report 2008Chief Executive OfficerMr Lakshmi N MittalFebruary 26, 2009Chief Financial OfficerMr Aditya MittalFebruary 26, 200973

Consolidated Balance SheetsArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)December 31, December 31,Assets 2007 2008Current assets:Cash and cash equivalents 7,860 7,576Restricted cash 245 11Assets held for sale (note 4) 1,296 910Trade accounts receivable and other (note 5) 9,533 6,737Inventories (note 6) 21,750 24,741Prepaid expenses and other current assets (note 7) 4,644 4,439Total current assets 45,328 44,414Non-current assets:Goodwill and intangible assets (note 8) 15,031 16,119Property, plant and equipment (note 9) 61,994 60,755Investments in associates and joint ventures (note 10) 5,887 8,512Other investments (note 11) 2,159 437Deferred tax assets (note 19) 1,629 751Other assets (note 12) 1,597 2,100Total non-current assets 88,297 88,674Total assets 133,625 133,088December 31, December 31,Liabilities and equity 2007 2008Current liabilities:Short-term debt and current portion of long-term debt (note 14) 8,542 8,409Trade accounts payable and other 13,991 10,501Short-term provisions (note 20) 1,144 3,292Liabilities held for sale (note 4) 266 370Accrued expenses and other liabilities (note 21) 7,275 7,413Income tax liabilities (note 19) 991 775Total current liabilities 32,209 30,760Non-current liabilities:Long-term debt, net of current portion (note 15) 22,085 25,667Deferred tax liabilities (note 19) 7,927 6,395Deferred employee benefits (note 23) 6,244 7,111Long-term provisions (note 20) 2,456 2,343Other long-term obligations 1,169 1,582Total non-current liabilities 39,881 43,098Total liabilities 72,090 73,858Commitments and contingencies (note 22 and note 24)Equity (note 17):Common shares 9,269 9,269(no par value, 1,470,000,000 and 1,617,000,000 shares authorized, 1,448,826,347 and 1,448,826,347shares issued, 1,421,570,646 and 1,366,002,278 shares outstanding at December 31, 2007 and 2008, respectively)Treasury stock (27,255,701 and 82,824,069 common shares at December 31, 2007 and 2008, respectively, at cost) (1,552) (5,800)Additional paid-in capital 20,309 20,575Retained earnings 23,552 30,403Reserves 5,107 751Equity attributable to the equity holders of the parent 56,685 55,198Minority interest 4,850 4,032Total equity 61,535 59,230Total liabilities and equity 133,625 133,088The accompanying notes are an integral part of these consolidated financial statements.74

Consolidated Statements of IncomeArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)2008 Consolidated Financial StatementsYear endedYear endedDecember 31, December 31,2007 2008Sales 105,216 124,936(Including 4,767 and 6,411 of sales to related parties for 2007 and 2008, respectively)Cost of sales 84,953 106,110(Including 4,570 and 6,100 of depreciation and impairment and 2,408 and 2,391 of purchasesfrom related parties for 2007 and 2008, respectively)Gross margin 20,263 18,826Selling, general and administrative 5,433 6,590Operating income 14,830 12,236Other income - net — —Income from investments in associates and joint ventures 985 1,653Financing costs - net (note 18) (927) (2,352)Income before taxes 14,888 11,537Income tax expense (note 19) 3,038 1,098Net income (including minority interest) 11,850 10,439Net income attributable to:Equity holders of the parent 10,368 9,399Minority interest 1,482 1,040Net income (including minority interest) 11,850 10,439ArcelorMittal Annual Report 2008Year endedYear endedDecember 31, December 31,2007 2008Earnings per common share (in U.S. dollars)Basic: Common shares 7.41 6.80Diluted: Common shares 7.40 6.78Weighted average common shares outstanding (in millions) (note 17)Basic: Common shares 1,399 1,383Total 1,399 1,383Diluted: Common shares * 1,401 1,386Total 1,401 1,386* Diluted common shares relate to the effect of stock options (see note 17).The accompanying notes are an integral part of these consolidated financial statements.75

Consolidated Statements of Changes in EquityArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)ReservesUnrealized Unrealized EquityGains Gains attributableForeign (Losses) On (Losses) On to theAdditional Currency Derivative Available equityShares 1 Share Treasury Paid-in Retained Translation Financial for Sale holders of Minority TotalCapital Stock Capital Earnings Adjustments Instruments Securities the parent Interest EquityBalance at December 31, 2006 1,385 17 (84) 25,566 14,995 1,436 (20) 238 42,148 8,080 50,228Items recognized directly in equity — — — — 3,220 (336) 569 3,453 1,046 4,499Net income — — — 10,368 — — — 10,368 1,482 11,850Recognized income and expenses — — — 10,368 3,220 (336) 569 13,821 2,528 16,349Recognition of share-based payments 2 — 111 52 — — — — 163 2 165Treasury Stock (note 17) (36) — (2,553) — — — — — (2,553) — (2,553)Dividend (1.30 per share) — — — (1,826) — — — (1,826) (443) (2,269)Issuance of shares in connection withthe acquisition of ArcelorMittalBrasil minority interest 27 — — 1,713 — — — — 1,713 (2,760) (1,047)Issuance of shares in connectionwith the acquisition of Arcelor SAminority interest 44 2 9,252 974 (7,022) — — — — 3,204 (2,592) 612Other movements — — — 15 — — — 15 35 50Balance at December 31, 2007 1,422 9,269 (1,552) 20,309 23,552 4,656 (356) 807 56,685 4,850 61,535Items recognized directly in equity — — — — (6,122) 1,844 (78) (4,356) (627) (4,983)Net income — — — 9,399 — — — 9,399 1,040 10,439Recognized income and expenses — — — 9,399 (6,122) 1,844 (78) 5,043 413 5,456Recognition of share-based payments 2 — 62 337 — — — — 399 — 399Treasury Stock (note 17) (58) — (4,310) (71) — — — — (4,381) — (4,381)Dividend (1.50 per share) — — — (2,068) — — — (2,068) (508) (2,576)Acquisition of minority interest (note 3) — — — — — — — — (1,297) (1,297)Dilution of interest in consolidatedsubsidiary and others — — — (480) — — — (480) 574 94Balance at December 31, 2008 1,366 9,269 (5,800) 20,575 30,403 (1,466) 1,488 729 55,198 4,032 59,2301Excludes treasury shares .2Includes 12 million treasury shares .The accompanying notes are an integral part of these consolidated financial statements.76

Consolidated Statements of Cash FlowsArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)2008 Consolidated Financial StatementsYear endedYear endedDecember 31, December 31,2007 2008Operating activities:Net income 11,850 10,439Adjustments to reconcile net income to net cash provided by operations and payments:Depreciation and impairment 4,570 6,100Interest expense 1,839 2,044Income tax expense 3,038 1,098Net realizable value and onerous supply contract 45 3,451Labor agreement and separation plans — 2,577Litigation provisions 135 595Unrealized foreign exchange effects, provisions and other non-cash operating expenses (net) (1,681) (478)Changes in operating assets and liabilities, net of effects from acquisitions:Trade accounts receivable 548 2,139Inventories (690) (7,724)Trade accounts payable 565 (2,485)Other working capital movements 370 (946)Interest paid and received (1,494) (1,943)Taxes paid (2,563) (2,724)Cash received from settlement of hedges not recognized in the statement of income — 2,509Net cash provided by operating activities 16,532 14,652Investing activities:Purchase of property, plant and equipment (5,448) (5,531)Acquisition of net assets of subsidiaries and minorities, net of cash acquired of 24 and 103 respectively (6,052) (6,201)Investments in associates and joint ventures accounted for under equity method (1,196) (3,114)Disposals of financial fixed assets 979 2,226Other investing activities (net) (192) 192Net cash used in investing activities (11,909) (12,428)Financing activities:Proceeds from short-term debt 5,848 7,121Proceeds from long-term debt, net of debt issuance costs 3,034 14,599Payments of short-term debt (1,126) (11,720)Payments of long-term debt (6,321) (5,127)Purchase of treasury stock (2,553) (4,440)Sale of treasury stock for stock option exercises 55 68Dividends paid (includes 443 and 508 of dividends paid to minority shareholders in 2007 and 2008, respectively) (2,269) (2,576)Other financing activities (net) (85) (57)Net cash provided by (used in) financing activities (3,417) (2,132)Effect of exchange rate changes on cash 634 (376)Net increase (decrease) in cash and cash equivalents 1,840 (284)Cash and cash equivalents:At the beginning of the year 6,020 7,860At the end of the year 7,860 7,576ArcelorMittal Annual Report 2008The accompanying notes are an integral part of these consolidated financial statements.77

Notes to the Consolidated Financial StatementsArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 1: Nature of Business,Basis of Presentation and ConsolidationNature of businessArcelorMittal (“ArcelorMittal”, or “MittalSteel”, or the “Company”), together withits subsidiaries, is a manufacturer of steeland steel related products. ArcelorMittalowns and operates manufacturing facilitiesin Europe, North and South America, Asiaand Africa. These manufacturing facilities,each of which includes its respectivesubsidiaries, are referred to in theseconsolidated financial statements asthe “Operating Subsidiaries”.Basis of presentationThe consolidated financial statements havebeen prepared on a historical cost basis,except for available-for-sale financialassets and derivative financial instruments,which are measured at fair value,and inventories which are measured atthe lower of net realizable value or cost.The consolidated financial statementshave been prepared in accordance withInternational Financial Reporting Standards(“IFRS”) as adopted in the EuropeanUnion and as issued by the InternationalAccounting Standards Board (“IASB”).They are presented in U.S. dollars with allamounts rounded to the nearest million,except for share and per share data.Adoption of new IFRS standards andinterpretations applicable in 2008The following new standards, amendmentsto standards or interpretations wereadopted by the Company on January 1,2008:• IFRIC 11 “IFRS 2 – Group and TreasuryShares Transactions”• IFRIC 12 “Service ConcessionArrangements”• IFRIC 14 “IAS 19 – the Limit on a DefinedBenefit Asset, Minimum FundingRequirements and their interaction”The effects from the adoption of thesestandards for the year ended December 31,2008 were not material to the consolidatedfinancial statements. IFRIC 12 has notyet been endorsed by the European Union(“the EU”).New IFRS standards and interpretationsapplicable from 2009 onwardIFRS 1 (revised) - First Time Adoption ofInternational Financial Reporting Standardsand IAS 27 (revised) - Consolidated andSeparate Financial StatementsIn May 2008, the IASB issued revisionsto IFRS 1, “First Time Adoption ofInternational Financial ReportingStandards”, and International AccountingStandard (“IAS”) 27, “Consolidated andSeparate Financial Statements”.The revisions allow first-time adoptersto use a deemed cost of either fair valueor the carrying amount under a previousaccounting practice to measure the initialcost of investments in subsidiaries,jointly controlled entities and associatesin the separate financial statements.The amendments also remove the definitionof the cost method from IAS 27 andreplace it with a requirement to presentdividends as income in the separatefinancial statements of the investor.The revisions of IFRS 1 are effectivefor annual periods beginning on or afterJuly 1, 2009 and the revisions of IAS 27are effective for annual periods beginningon or after July 1, 2009. The Companydoes not expect that the revisions to thestandards will have a significant impacton its financial statements.IFRS 2 - Share-based PaymentIn January 2008, the IASB issued revisionsto IFRS 2, “Share-based Payment”.The amended standard clarified the terms“vesting conditions” and “cancellations”.It clarifies that vesting conditions areservice conditions and performanceconditions only. Other features of ashare-based payment are not vestingconditions. These features would needto be included in the grant date fair valuefor transactions with employees and othersproviding similar services; they would notimpact the number of awards expectedto vest or valuation thereof subsequentto grant date. All cancellations, either bythe entity or by other parties, shouldreceive the same accounting treatment.The amendment is effective for annualperiods beginning on or after January 1,2009, with earlier application permitted.As the Company was already applying IFRS 2as amended, it believes that adoption willnot impact its financial statements.78

2008 Consolidated Financial StatementsIFRS 3 (revised) - Business Combinationsand IAS 27 (revised) - Consolidated andSeparate Financial StatementsIn January 2008, the IASB issuedrevisions to IFRS 3, “BusinessCombinations” and IAS 27, “Consolidatedand Separate Financial Statements”which are effective for any transactionswith acquisition dates that are on or afterthe beginning of the first annual reportingperiod beginning on or after July 1, 2009.Among other changes, the revisions willrequire the acquirer to expense directacquisition costs as incurred; to revalue tofair value any pre-existing ownership in anacquired company at the date on which theCompany takes control, and record theresulting gain or loss in net income;to record in net income adjustments tocontingent consideration which occur aftercompletion of the purchase price allocation;to record directly in equity the effectof transactions after taking control of theacquiree which increase or decrease theCompany’s interest but do not affectcontrol; to revalue upon divesting controlany retained shareholding in the divestedcompany at fair value and record theresulting gain or loss in net income;and to attribute to non-controllingshareholders their share of any deficit inthe equity of a non wholly-ownedsubsidiary. Earlier application is permitted.The Company is in the process of assessingwhether there will be any material changesto its financial statements upon theiradoption. These revisions have not yet beenendorsed by the EU.IFRS 8 - Operating SegmentsIn November 2006, the IASB issued IFRS 8,“Operating Segments”, which specifies howan entity should report information aboutits operating segments in annual financialstatements, and amends IAS 34, “InterimFinancial Reporting”, to require an entityto report selected information about itsoperating segments in interim financialreports. This statement defines operatingsegments as components of an entityabout which separate financial informationis available and is evaluated regularly by thechief operating decision-maker in decidinghow to allocate resources and assessingperformance. This statement also outlinesthe requirements for related disclosuresabout products and services, geographicalareas, and major customers and is effectivefor annual periods beginning on or afterJanuary 1, 2009. The Company believesthat the adoption of IFRS 8 will not havea significant impact on its financialstatements disclosures.IAS 1 (revised) - Presentationof Financial StatementsIn September 2007, the IASB issueda revised IAS 1 “Presentation of FinancialStatements”. The revised standard willprohibit the presentation of items ofincome and expenses (that is, ‘non-ownerchanges in equity’) in the statement ofchanges in equity, requiring non-ownerchanges in equity to be presentedseparately from owner changes in equity.All non-owner changes in equity will berequired to be shown in a performancestatement, but entities can choosewhether to present one performancestatement (the statement ofcomprehensive income) or twostatements (the statement of incomeand statement of comprehensive income).Where entities restate or reclassifycomparative information, they will berequired to present a restated balancesheet as of the beginning comparativeperiod in addition to the currentrequirement to present balance sheetsat the end of the current period andcomparative period. The Company willapply the revised standard on its effectivedate which is for annual periods beginningon or after January 1, 2009.IAS 23 - Borrowing CostsIn March 2007, the IASB issued a numberof amendments to IAS 23 “BorrowingCosts”. The amendments require thatborrowing costs relating to the acquisition,construction or production of a qualifyingasset be capitalized as part of the cost ofthe asset. All other borrowing costs shouldbe expensed as incurred. The revisedstandard is effective for annual periodsbeginning on or after January 1, 2009, withearly application permitted. Retrospectiveapplication is not required. As the Companyis already in compliance with the revisedstandard, it believes that its adoption willhave no impact on its financial statements.The definition of borrowing costs has alsobeen amended during the IASB’s annualimprovements project published in May2008. The amended definition states thatinterest expense must be calculated usingthe effective interest method defined inIAS 39, “Financial Instruments: Recognitionand Measurement”. This eliminates theinconsistency of terms between IAS 39and IAS 23. The Company will apply theamended IAS 23 prospectively to thecapitalization of borrowing costs onqualifying assets from January 1, 2009.ArcelorMittal Annual Report 200879

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)IAS 27 (revised) - Consolidated andSeparate Financial StatementsIn January 2008, the IASB issued revisionsto IAS 27, “Consolidated and SeparateFinancial Statements”. The revised standardrequires the effects of all transactions withnon-controlling interests to be recordedin equity if there is no change in controland these transactions will no longerresult in goodwill or gains and losses.The standard also specifies the accountingwhen control is lost. Any remaining interestin the entity is remeasured to fair value, anda gain or loss is recognized in profit or loss.The revised standard is effective for annualperiods beginning on or after July 1, 2009and should not be applied before that dateunless it also applies IFRS 3 (revised) asdiscussed previously. The Company is inthe process of assessing whether there willbe any significant changes to its financialstatements upon the adoption of therevised standard. This revised standardhas not yet been endorsed by the EU.IAS 32 (revised) - Financial Instruments:Presentation and IAS 1 (revised)Presentation of Financial StatementsIn February 2008, the IASB issuedamendments to IAS 32, “FinancialInstruments: Presentation” and IAS 1,“Presentation of Financial Statements”.The amendments are relevant to entitiesthat have issued financial instrumentsthat are (i) puttable financial instruments,or (ii) instruments, or components ofinstruments, which impose on the entityan obligation to deliver to another partya pro rata share of the net assets of theentity only upon liquidation.Under the revised IAS 32, subject tospecified criteria being met, theseinstruments will be classified as equitywhereas, prior to these amendments, theinstruments would have been classified asfinancial liabilities. The amendments areeffective for annual periods beginning on orafter January 1, 2009. The Companybelieves that the adoption of theseamendments will not have a significantimpact on its financial statements.IAS 39 (revised) - Financial Instruments:Recognition and MeasurementOn July 30, 2008, the IASB publishedamendments to IAS 39, “FinancialInstruments: Recognition andMeasurement”, to clarify two hedgeaccounting issues:Inflation in a financial hedged item -Inflation may only be hedged if changesin inflation are a contractually specifiedportion of cash flows of a recognizedfinancial instrument. However, theamendment clarifies that an entity maynot designate an inflation component ofissued or acquired fixed rate debt in a fairvalue hedge because such a componentis not separately identifiable and reliablymeasurable. The amendments also clarifythat a risk-free or benchmark interestrate portion of the fair value of a fixedrate financial instrument will normallybe separately identifiable and reliablymeasurable and, therefore, may be hedged.A one-sided risk in a hedged item - IAS 39permits an entity to designate purchasedoptions as a hedging instrument in a hedgeof a financial or non-financial item.The amendments make clear that theintrinsic value, not the time value, of anoption reflects a one-sided risk and,therefore, an option designated in itsentirety cannot be perfectly effective.The time value of a purchased optionis not a component of the forecasttransaction that impacts profit or loss.Therefore, if an entity designates an optionin its entirety as a hedge of a one-sidedrisk arising from a forecast transaction,hedge ineffectiveness will arise.Alternatively, an entity may chooseto exclude time value as permitted byIAS 39 to improve hedge effectiveness.This amendment to IAS 39 is effective forannual periods beginning on or after July 1,2009, with earlier application permitted,and must be applied retrospectively.IAS 39 has also been amended duringthe IASB’s annual improvements projectpublished in May 2008. This amendmentclarifies that it is possible for there to bemovements into and out of the fair valuethrough net income when a derivativefinancial instrument commences or ceasesto qualify as a hedging instrument in cashflow or a net investment hedge.The definition of financial asset or financialliability at fair value through profit or lossas it relates to items that are held fortrading was also amended. This clarifiesthat a financial asset or liability that is partof a portfolio of financial instrumentsmanaged together with evidence of anactual recent pattern of short-term profittaking, is included in such a portfolio oninitial recognition.80

2008 Consolidated Financial Statements continuedThe current guidance on designating anddocumenting hedges states that a hedginginstrument must involve a party externalto the reporting entity and cites a segmentas an example of a reporting entity.This means that in order for hedgeaccounting to be applied at segment level,the requirements for hedge accountingare currently required to be met by theapplicable segment. The amendmentremoves the example of a segment so thatthe guidance is consistent with IFRS 8,“Operating Segments”, which requiresdisclosure for segments to be basedon information reported to the chiefoperating decision-maker. After theamendment is effective, the hedge willcontinue to be reflected in the segmentto which the hedged items relate(and information provided to the chiefoperating decision-maker), but theCompany will not formally documentand test this relationship.When remeasuring the carrying amountof a debt instrument on cessation of fairvalue hedge accounting, the amendmentclarifies that a revised effective interestrate (calculated at the date fair value hedgeaccounting ceases) should be used.These amendments to IAS 39 are effectivefor annual periods beginning on or afterJanuary 1, 2009. The Company does notexpect that the revised standard will havea significant impact on its financialstatements. This revised standard hasnot yet been endorsed by the EU.Amendments to IFRS standards andinterpretations as a result of the IASB’sannual improvement project applicablefrom 2009 onwardThe following amendments are part ofthe IASB’s annual improvements projectpublished in May 2008. Unless otherwiseindicated below, the Company is still in theprocess of assessing whether there willbe any significant changes to its financialstatements upon adoption of theseamendments.IFRS 5 (revised) - Non-current Assets Heldfor Sale and Discontinued OperationsThe amendment clarifies that all ofa subsidiary’s assets and liabilities areclassified as held for sale if a partialdisposal sale plan results in loss of control.Relevant disclosure should be made for thissubsidiary if the definition of a discontinuedoperation is met. A consequentialamendment to IFRS 1 states that theseamendments are applied prospectivelyfrom the date of transition to IFRSs.The revised standard is effective for annualperiods beginning on or after July 1, 2009.IAS 16 (revised) - Property, Plant andEquipment and IAS 7 (revised) - Statementof Cash FlowsThe amendment requires entities whoseordinary activities comprise renting andsubsequently selling assets to presentproceeds from the sale of those assetsas revenue and to transfer the carryingamount of the asset to inventorieswhen the asset becomes held for sale.A consequential amendment to IAS 7 statesthat cash flows arising from purchase,rental and sale of those assets are to beclassified as cash flows from operatingactivities. The amendment is effectivefor annual periods beginning on or afterJanuary 1, 2009. The Company does notexpect that the revised standard will havea significant impact on its financialstatements.IAS 19 (revised) - Employee BenefitsThe amendment clarifies that a planamendment that reduces benefits affectedby future salary increases isa curtailment, while an amendment thatchanges benefits attributable to pastservice results in negative past service costif it results in a reduction in the presentvalue of the defined benefit obligation.The definition of return on plan assetswas amended to state that planadministration costs are deducted inthe calculation of return on plan assetsonly to the extent that such costs havebeen excluded from measurement of thedefined benefit obligation.The revised standard is effective forannual periods beginning on or afterJanuary 1, 2009. The Company will applythe IAS 19 amendments prospectivelyfrom January 1, 2009.IAS 20 (revised) - Accounting forGovernment Grants and Disclosureof Government AssistanceThe benefit of a below market rategovernment loan is measured as thedifference between the carryingamount in accordance with IAS 39,“Financial Instruments: Recognitionand Measurement”, and the proceedsreceived with the benefit accounted forin accordance with IAS 20. The amendmentis effective for annual periods beginningon or after January 1, 2009. The Companydoes not expect that the revised standardwill have a significant impact on itsfinancial statements.ArcelorMittal Annual Report 200881

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)IAS 28 (revised) - Investmentsin AssociatesThe amendment states that an investmentin associate is treated as a single assetfor the purposes of impairment testing.Any impairment loss should not be allocatedto specific assets included within theinvestment, for example, goodwill.Reversals of impairment are recordedas an adjustment to the investmentbalance to the extent that the recoverableamount of the associate increases.Where an investment in associate isaccounted for in accordance with IAS 39,“Financial Instruments: Recognition andMeasurement”, only certain disclosurerequirements of IAS 28 need to be madein addition to disclosures required byIAS 32, “Financial Instruments:Presentation” and IFRS 7, “FinancialInstruments: Disclosures”. The amendmentis effective for annual periods beginningon or after January 1, 2009. The Companydoes not expect that the revised standardwill have a significant impact on itsfinancial statements.IAS 31 (revised) - Interests in JointVentures, IAS 32 (revised) - FinancialInstruments: Presentation andIFRS 7(revised) - Financial Instruments:DisclosuresWhere an investment in a joint ventureis accounted for in accordance with IAS 39,“Financial Instruments: Recognition andMeasurement”, only certain disclosurerequirements of IAS 31 need to be madein addition to disclosures required byIAS 32, “Financial instruments:Presentation”, and IFRS 7, “FinancialInstruments: Disclosures”. The amendmentis effective for annual periods beginningon or after January 1, 2009. The Companydoes not expect that the revised standardwill have a significant impact on itsfinancial statements.IAS 36 (revised) - Impairment of AssetsThe amendment states that where fairvalue less costs to sell is calculated on thebasis of discounted cash flows, disclosuresequivalent to those for value in usecalculation should be made. The revisedstandard is effective for annual periodsbeginning on or after January 1, 2009.The Company does not expect that therevised standard will have a significantimpact on its financial statements.IAS 38 (revised) - Intangible AssetsThe amendment states that a prepaymentmay only be recognized in the event thatpayment has been made in advance ofobtaining right of access to goods orreceipt of services. The amendment alsodeletes the wording that states that thereis ‘rarely, if ever’ support for use of amethod that results in a lower rate ofamortization than the straight-line method.The revised standard is effective for annualperiods beginning on or after January 1,2009. The Company does not expect thatthe revised standard will have a significantimpact on its financial statements.IAS 40 (revised) - Investment Propertyand IAS 16 (revised) - Property,Plant and EquipmentProperty that is under construction ordevelopment for future use as investmentproperty is within the scope of IAS 40,“Investment Property”. Where the fairvalue model is applied, such property is,therefore, measured at fair value.However, where fair value of investmentproperty under construction is notreliably measurable, the propertyis measured at cost until the earlier ofthe date construction is completed andthe date at which fair value becomesreliably measurable. The amendment iseffective for annual periods beginning onor after January 1, 2009. The Companydoes not expect that the revised standardswill have a significant impact on itsfinancial statements.IFRIC 15 - Agreements for the Constructionof Real EstateOn July 3, 2008, the International FinancialReporting Interpretations Committee,(the “IFRIC”) issued IFRIC 15, “Agreementsfor the Construction of Real Estate”.The interpretation addresses theaccounting for revenue and associatedexpenses by units that undertake theconstruction of real estate directly orthrough subcontractors. The Companydoes not expect that this interpretationwill have a significant impact on its financialstatements. IFRIC 15 is effective for annualperiods beginning on or after January 1,2009. This interpretation has not yetbeen endorsed by the EU.IFRIC 16 - Hedges of a Net Investmentin a Foreign OperationOn July 3, 2008, the IFRIC issued IFRIC 16,“Hedges of a Net Investment in a ForeignOperation”. The interpretation providesguidance on net investment hedging,including which foreign currency risksqualify for hedge accounting and whatamount can be designated, where withinthe group the hedging instrument canbe held and what amount should bereclassified to net income when thehedged foreign operation is disposed.IFRIC 16 is effective for annual periodsbeginning on or after October 1, 2008.The Company does not expect that therevised standard will have a significantimpact on its financial statements.This interpretation has not yet beenendorsed by the EU.82

2008 Consolidated Financial Statements continuedIFRIC 17 - Distributions of Non-cashAssets to OwnersIn November 2008, the IFRIC issuedIFRIC 17, “Distributions of Non-cash Assetsto Owners”, that clarifies that a dividendpayable should be recognized when thedividend is appropriately authorized andis no longer at the discretion of the entity.The dividend payable should be measuredat the fair value of the net assets to bedistributed. The entity should recognizethe difference between the dividend paidand the carrying amount of the net assetsdistributed in profit or loss and the entityneeds to provide additional disclosuresif the net assets that are being heldfor distribution to owners meet thedefinition of a discontinued operation.This interpretation applies prospectivelyto pro rata distributions of non-cashassets except for common controltransactions and is effective for annualperiods beginning on or after July 1, 2009.Earlier application is permitted.The Company is in the process of assessingwhether there will be any material changesto its financial statements upon theadoption of IFRIC 17. This interpretationhas not yet been endorsed by the EU.IFRIC 18 - Transfers of Assetsfrom CustomersIn January 2009, the IFRIC issued IFRIC 18,“Transfers of Assets from Customers”,that provides guidance on the accountingfor transfers of cash or items of property,plant and equipment by entities thatreceive such transfers from theircustomers. Agreements within the scopeof this interpretation are agreementsin which an entity receives from a customeran item of property, plant and equipmentthat the entity must then use either toconnect the customer to a network orto provide the customer with ongoingaccess to a supply of goods or services,or to do both.If the transferred item of property, plantand equipment meets the definition of anasset, the entity shall measure the cost ofthe asset received on initial recognition atits fair value and consequently the entityshall recognize revenue in accordance withIAS 18, “Revenue”. This interpretationapplies prospectively to transfers of assetsor cash from customers received onor after July 1, 2009. Earlier applicationis permitted provided the valuations andother information needed to apply theInterpretation to past transfers wereobtained at the time those transfersoccurred. The Company is in the processof assessing whether there will be anymaterial changes to its financial statementsupon the adoption of IFRIC 18.This interpretation has not yet beenendorsed by the EU.Basis of consolidationThe consolidated financial statementsinclude the accounts of the Company,its Operating Subsidiaries, and itsrespective interest in associated companiesand jointly controlled entities. Subsidiariesare consolidated from the date ofacquisition which is considered to bethe date the Company obtains control untilthe date control ceases. Control is definedas the power to govern the financial andoperating policies of an entity, so as toobtain benefits derived from its activities.Control is presumed to exist whenthe Company holds more than halfof the voting rights.Associated companies are those companiesover which the Company has the abilityto exercise significant influence on thefinancial and operating policy decisionswhich are not Operating Subsidiaries.Generally, significant influence is presumedto exist when the Company holds morethan 20% of the voting rights.In addition, jointly controlled entitiesare companies over whose activitiesthe Company has joint control undera contractual agreement. The consolidatedfinancial statements include the Company’sshare of the total recognized gains andlosses of associates and jointly controlledentities on an equity accounted basis fromthe date that significant influencecommences until the date significantinfluence ceases, adjusted for anyimpairment loss. Adjustments to thecarrying amount may also be necessary forchanges in the Company’s proportionateinterest in the investee arising fromchanges in the investee’s equity that havenot been recognized in the investee’s profitor loss. The Company’s share of thosechanges is recognized directly in equity.Other investments are classified asavailable-for-sale and are stated at fairvalue when their fair value can be reliablymeasured. When fair value cannot bemeasured reliably, the investments arecarried at cost less impairment.Intra-company balances and transactions,including income, expenses and dividends,are eliminated in the preparation of theconsolidated financial statements.Gains and losses resulting fromintra-company transactions that arerecognized in assets are eliminated in full.Minority interests represent the portionof profit or loss and net assets not heldby the Company and are presentedseparately in the statement of incomeand within equity in the consolidatedbalance sheet.ArcelorMittal Annual Report 200883

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 2: Summary of SignificantAccounting PoliciesTranslation of financial statementsdenominated in foreign currencyThe functional currency of each of themajor Operating Subsidiaries is the localcurrency, except for ArcelorMittal SA,OJSC ArcelorMittal Kryviy Rih,ArcelorMittal Lázaro Cárdenas S.A.de C.V., ArcelorMittal Brasil, ArcelorMittalGalati S.A., and ArcelorMittal Temirtau,whose functional currency is the U.S. dollar.Following the merger of the flat and longoperations in Brazil, the Company reviewedvarious indicators and concluded thatthe U.S. dollar represents most faithfullythe economic effects of the mergedentity operations.Transactions in currencies other thanthe functional currency of a subsidiaryare recorded at the rates of exchangeprevailing at the date of the transaction.Monetary assets and liabilities in currenciesother than the functional currency areremeasured at the rates of exchangeprevailing at the balance sheet dateand the related transaction gains andlosses are reported in the consolidatedstatement of income.Upon consolidation, the results ofoperations of ArcelorMittal’s subsidiariesand associates whose functional currencyis other than the U.S. dollar are translatedinto U.S. dollars at the monthly averageexchange rates and assets and liabilities aretranslated at the year-end exchange rates.Translation adjustments are recognizeddirectly in equity and are included in netearnings only upon sale or liquidation of theunderlying foreign subsidiary or associate.Business combinationsAcquisitions of subsidiaries and businessesare accounted for using the purchaseaccounting method. The cost of theacquisition is measured at the aggregateof the fair values (at the date of exchange)of assets given, liabilities incurred orassumed, and equity instruments issuedby ArcelorMittal in exchange for controlof the acquiree, plus any costs directlyattributable to the business combination.The acquiree’s identifiable assets (includingpreviously unrecognized intangible assets),liabilities and contingent liabilities arerecognized at their fair values at theacquisition date. The interest of minorityshareholders in the acquiree is initiallymeasured at the minority’s proportion ofthe net fair value of the assets, liabilitiesand contingent liabilities recognized.When an acquisition is completed bya series of successive transactions,each significant transaction is consideredindividually for the purpose of thedetermination of the fair value of theidentifiable assets, liabilities and contingentliabilities acquired and hence for thegoodwill associated with the acquisition.The fair values of the identifiable assetsand liabilities acquired can vary at the dateof each transaction. Interests previouslyheld in that entity are revalued on the basisof the fair values of the identifiable assetsand liabilities at the date control is obtained.The excess of the cost over the fair valueof the net assets acquired is recorded asgoodwill or as a gain in the statementof income when the fair value of the assetacquired exceeds the cost.Subsequent purchases, after the Companyhas obtained control, are treated as theacquisitions of shares from minorityshareholders: the identifiable assets andliabilities of the entity are not subject to afurther revaluation and the positive ornegative difference between the cost ofsuch subsequent acquisitions and the netvalue of the additional proportion of thecompany acquired is recorded as goodwillor immediately as a gain in the statementof income when the difference is negative.Cash and cash equivalentsCash and cash equivalents consist of cashand short-term highly liquid investmentsthat are readily convertible to cash withoriginal maturities of three months or lessat the time of purchase and are carriedat cost plus accrued interest, whichapproximates fair value.Restricted cashRestricted cash represents cash and cashequivalents not readily available to theCompany, mainly related to insurancedeposits, various other deposits or requiredbalance obligations related to letters ofcredit and credit arrangements, and escrowaccounts created as a result of acquisitions.Trade accounts receivableTrade accounts receivable are initiallyrecorded at their fair value and do not carryany interest. ArcelorMittal maintains anallowance for doubtful accounts at anamount that it considers to be a sufficientestimate of losses resulting from theinability of its customers to make requiredpayments. An allowance is recorded andcharged to expense when an account isdeemed to be uncollectible. In judging theadequacy of the allowance for doubtfulaccounts, ArcelorMittal considers multiplefactors including historical bad debtexperience, the current economicenvironment and the aging of thereceivables. Recoveries of trade receivablespreviously reserved in the allowance fordoubtful accounts are recorded as gainsin the statement of income.84

2008 Consolidated Financial Statements continuedArcelorMittal has provided for allreceivables over 180 days becausehistorical experience is such thatreceivables that are past due beyond180 days are generally not recoverable.Trade receivables between 60 days and180 days are provided for based onestimated irrecoverable amounts from thesale of goods and/or services, determinedby reference to past default experience.InventoriesInventories are carried at the lower ofcost and net realizable value. Cost isdetermined using the first-in, first-out(“FIFO”) method or average cost method,which approximates FIFO. Costs ofproduction in process and finished goodsinclude the purchase costs of raw materialsand conversion costs such as direct laborand an allocation of fixed and variableproduction overheads. Raw materials andspare parts are valued at cost inclusiveof freight and shipping and handling costs.Net realizable value represents theestimated selling price at which theinventories can be realized in the normalcourse of business after allowing for thecost of conversion from their existing stateto a finished condition and for the costof marketing, selling, and distribution.Goodwill and negative goodwillGoodwill arising on an acquisitionis recognized as an asset and initiallymeasured at cost, being the excess ofthe cost of the business combinationover ArcelorMittal’s interest in the net fairvalue of the identifiable assets, liabilitiesand contingent liabilities recognized.Goodwill is allocated to thecash-generating units expected tobenefit from the synergies of thecombination for the purpose of impairmenttesting. The allocation is made to thosecash-generating units or groups ofcash-generating units that are expectedto benefit from the business combinationin which the goodwill arose.Goodwill is reviewed at thecash-generating unit level forimpairment annually or wheneverchanges in circumstances indicate that thecarrying amount may not be recoverable.The recoverable amounts of thecash-generating units are determinedfrom the higher of fair value less costto sell or value in use calculations,as described in the impairment of tangibleand intangible assets. The key assumptionsfor the value in use calculations are thoseregarding the discount rates, growth ratesand expected changes to selling pricesand direct costs during the period.Management estimates discount ratesusing pre-tax rates that reflect currentmarket rates for investments of similar risk.The growth rates are based on theCompany’s growth forecasts which arein line with industry trends. Changes inselling prices and direct costs are basedon historical experience and expectationsof future changes in the market.Cash flow forecasts are derived from themost recent financial forecasts for thenext five years. Beyond the specificallyforecasted period, the Companyextrapolates cash flows for the remainingyears based on an estimated growth rate.This rate does not exceed the averagelong-term growth rate for the relevantmarkets. Once recognized, impairmentlosses recognized for goodwill are notreversed. On disposal of a subsidiary,any residual amount of goodwill is includedin the determination of the profit or losson disposal.ArcelorMittal has historically purchasedcertain steel assets involved in variousprivatization programs in formergovernment controlled economies.Businesses with these characteristicstypically have been purchased foran amount that does not exceed net assetfair value, thus producing negative goodwillfor accounting purposes.In a business combination in whichthe fair value of the identifiable netassets acquired exceeds the cost of theacquired business, the Company reassessesthe fair value of the assets acquired.If, after reassessment, ArcelorMittal’sinterest in the net fair value of theacquiree’s identifiable assets, liabilitiesand contingent liabilities exceeds thecost of the business combination,the excess (negative goodwill) isrecognized immediately in thestatement of income.Intangible assetsIntangible assets are recognized onlywhen it is probable that the expectedfuture economic benefits attributableto the assets will accrue to the Companyand the cost can be reliably measured.Intangible assets acquired separatelyby ArcelorMittal are initially recordedat cost and those acquired in a businesscombination are recorded at fair value.These primarily include the cost oftechnology and licenses purchasedfrom third parties. Intangible assets areamortized on a straight-line basis overtheir estimated economic useful liveswhich typically are not to exceed five years.Costs incurred on internally developedproducts are recognized as intangibleassets from the date that all of thefollowing conditions are met: (i) completionof the development is consideredtechnically feasible and commercially viable;(ii) it is the intention and ability of theCompany to complete the intangible assetand use or sell it; (iii) it is probable that theintangible asset will generate futureeconomic benefits; (iv) adequate technical,financial, and other resources to completethe development and to use or sell theintangible asset are available; and (v) it ispossible to reliably measure the expenditureattributable to the intangible asset duringits development.ArcelorMittal Annual Report 200885

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The intangible asset capitalized includesthe cost of materials, direct labor costsand an appropriate proportion of overheadsincurred during its development.Capitalized development expendituresare stated at cost less accumulatedamortization and impairment losses.Other development expendituresthat do not meet the conditions forrecognition as an asset are recognizedas an expense as part of operating incomein the statement of income in the periodin which it is incurred.Property, plant and equipmentProperty, plant and equipment is recordedat cost less accumulated depreciationand impairment. Cost includes professionalfees and, for assets constructed by theCompany, any related works to the extentthat these are directly attributable to theacquisition or construction of the asset.Property, plant and equipment except landare depreciated using the straight-linemethod over the useful lives of therelated assets which are presented inthe table below.Asset CategoryLandBuildingsSteel plant equipmentAuxiliary facilitiesOther facilitiesUseful Life RangeNot depreciated10 to 50 years15 to 30 years15 to 30 years5 to 20 yearsMajor improvements, which add toproductive capacity or extend the lifeof an asset, are capitalized, while repairsand maintenance are charged to expenseas incurred. Where a tangible fixed assetcomprises major components havingdifferent useful lives, these componentsare accounted for as separate items.Property, plant and equipment usedin mining activities is depreciated over itsuseful life or over the remaining life of themine if shorter and if there is no alternativeuse possible. For the majority of assets usedin mining activities, the economic benefitsfrom the asset are consumed in a patternwhich is linked to the production level andaccordingly, assets used in mining activitiesare depreciated on a unit of production basis.Property, plant and equipment underconstruction are recorded as constructionin progress until they are ready for theirintended use; thereafter they aretransferred to the related category ofproperty, plant and equipment anddepreciated over their estimated usefullives. Interest incurred during constructionis capitalized. Gains and losses onretirement or disposal of assets arereflected in the statement of income.Property, plant and equipment acquiredby way of finance leases are stated at anamount equal to the lower of the fair valueand the present value of the minimum leasepayments at the inception of the lease.Each lease payment is allocated betweenthe finance charges and a reduction of thelease liability. The interest element of thefinance cost is charged to the statementof income over the lease period so asto achieve a constant rate of intereston the remaining balance of the liability.Investment in associates, joint venturesand other entitiesInvestments in associates and jointventures, in which ArcelorMittal has theability to exercise significant influence,are accounted for under the equity method.The investment is carried at the cost atthe date of acquisition, adjusted forArcelorMittal’s equity in undistributedearnings or losses since acquisition,less dividends received and impairment.Any excess of the cost of the acquisitionover the Company’s share of the net fairvalue of the identifiable assets, liabilities,and contingent liabilities of the associateor joint venture recognized at the dateof acquisition is recognized as goodwill.The goodwill is included in the carryingamount of the investment and is evaluatedfor impairment as part of the investment.ArcelorMittal reviews all of its investmentsin associates and joint ventures at eachreporting date to determine whether thereis any evidence that the investment maybe impaired. If objective evidence indicatesthat the investment is impaired,ArcelorMittal calculates the amountof the impairment as being the differencebetween the value in use of the investmentand its carrying value. The amount ofany write-down is included in the overallincome from investments in associatedcompanies in the statement of income.Investments in other entities, over whichthe Company and/or its OperatingSubsidiaries do not have the abilityto exercise significant influence andhave a readily determinable fair value,are accounted for at fair value with anyresulting gain or loss included in equity.To the extent that these investmentsdo not have a readily determinable fairvalue, they are accounted for under thecost method.86

2008 Consolidated Financial Statements continuedAssets held for saleNon-current assets, and disposal groups,are classified as held for sale and aremeasured at the lower of carryingamount and fair value less costs to sell.Assets and disposal groups are classifiedas held for sale if their carrying amountwill be recovered through a sale transactionrather than through continuing use.This condition is regarded as met onlywhen the sale is highly probable and theasset, or disposal group, is available forimmediate sale in its present conditionand is marketed for sale at a price thatis reasonable in relation to its current fairvalue. Assets held for sale are presentedseparately on the balance sheet and arenot depreciated.Deferred employee benefitsDefined contribution plans are thoseplans where ArcelorMittal pays fixedcontributions to an external life insuranceor pension fund for certain categories ofemployees. Contributions are paid in returnfor services rendered by the employeesduring the period. They are expensed asthey are incurred in line with the treatmentof wages and salaries. No provisionsare established in respect of definedcontribution plans, as they do not generatefuture commitments for ArcelorMittal.Defined benefit plans are those plans thatprovide guaranteed benefits to certaincategories of employees, either by wayof contractual obligations or througha collective agreement. For defined benefitplans, the cost of providing benefits isdetermined using the Projected Unit CreditMethod, with actuarial valuations beingcarried out at each balance sheet date.Actuarial gains and losses that exceed10% of the greater of the present valueof the Company’s defined benefit obligationand the fair value of plan assets at theend of the prior year are amortized overthe expected average remaining workinglives of the participating employees.Past service cost is recognized immediatelyto the extent that the benefits are alreadyvested, and otherwise is amortized ona straight-line basis over the averageperiod until the benefits become vested.The retirement benefit obligationrecognized in the balance sheet representsthe present value of the defined benefitobligation as adjusted for unrecognizedactuarial gains and losses and unrecognizedpast service cost, and as reduced bythe fair value of plan assets. Any assetresulting from this calculation is limitedto unrecognized actuarial losses and pastservice cost, plus the present valueof available refunds and reductions infuture contributions to the plan.Voluntary retirement plans primarilycorrespond to the practical implementationof social plans or are linked to collectiveagreements signed with certain categoriesof employees. Early retirement plans arethose plans that primarily correspondto terminating an employee’s contractbefore the normal retirement date.Early retirement plans are consideredeffective when the affected employeeshave formally been informed and whenliabilities have been determined usingan appropriate actuarial calculation.Liabilities relating to the early retirementplans are calculated annually on the basisof the effective number of employees likelyto take early retirement and are discountedusing an interest rate which correspondsto that of highly-rated bonds that havematurity dates similar to the terms of theCompany’s early retirement obligations.Termination benefits are provided inconnection with voluntary separation plans.The Company recognizes a liability andexpense when it has a detailed formalplan which is without realistic possibilityof withdrawal and the plan has beencommunicated to employees or theirrepresentatives.Other long-term employee benefits includevarious plans that depend on the lengthof service, such as long service andsabbatical awards, disability benefits andlong-term compensated absences suchas sick leave. The amount recognizedas a liability is the present value of benefitobligations at the balance sheet date,and all changes in the provision (includingactuarial gains and losses or past servicecosts) are recognized in the statementof income.Provisions and accrualsArcelorMittal recognizes provisions forliabilities and probable losses that havebeen incurred when it has a present legalor constructive obligation as a result ofpast events and it is probable that theCompany will be required to settle theobligation and a reliable estimate of theamount of the obligation can be made.If the effect of the time value of moneyis material, provisions are discountedusing a current pre-tax rate that reflects,where appropriate, the risks specific tothe liability. Where discounting is used,the increase in the provision due to thepassage of time is recognized asa financing cost.ArcelorMittal Annual Report 200887

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Provisions for restructuring relate to theestimated costs of initiated reorganizationsthat have been approved by the GroupManagement Board, and which involvethe realignment of certain parts of theindustrial and commercial organization.When such reorganizations requirediscontinuance and/or closure of linesor activities, the anticipated costs ofclosure or discontinuance are includedin restructuring provisions. A liabilityis recognized for those costs only whenthe Company has a detailed formal planfor the restructuring and has raised a validexpectation with those affected that it willcarry out the restructuring by startingto implement that plan or announcingits main features to those affected by it.Environmental costsEnvironmental costs that relate to currentoperations are expensed or capitalizedas appropriate. Environmental costs thatrelate to an existing condition caused bypast operations, and which do notcontribute to current or future revenuegeneration or cost reduction, are expensed.Liabilities are recorded when environmentalassessments and or remedial efforts areprobable and the cost can be reasonablyestimated based on ongoing engineeringstudies, discussions with the environmentalauthorities and other assumptions relevantto the nature and extent of the remediationthat may be required. The ultimate costto ArcelorMittal is dependent upon factorsbeyond its control such as the scope andmethodology of the remedial actionrequirements to be established byenvironmental and public health authorities,new laws or government regulations,rapidly changing technology and theoutcome of any potential related litigation.Environmental liabilities are discountedif the aggregate amount of the obligationand the amount and timing of the cashpayments are fixed or reliably determinable.Asset retirement obligationsArcelorMittal records asset retirementobligations (“ARO”) initially at the fairvalue of the legal liability in the periodin which it is incurred and capitalizesthe ARO by increasing the carryingamount of the related non-current asset.The fair value of the obligation isdetermined as the discounted valueof the expected future cash flows.The liability is accreted to its presentvalue each period and the capitalizedcost is depreciated in accordance withthe Company’s depreciation policies forproperty, plant and equipment.Income taxesThe tax currently payable is based ontaxable profit for the year. Taxable profitdiffers from profit as reported in theconsolidated statement of income becauseit excludes items of income or expensethat are taxable or deductible in otheryears and it further excludes items thatare never taxable or deductible.The Company’s liability for current taxis calculated using tax rates that havebeen enacted or substantively enactedby the balance sheet date.Deferred tax is recognized on differencesbetween the carrying amounts of assetsand liabilities in the financial statementsand the corresponding tax basis usedin the computation of taxable profit,and is accounted for using the balancesheet liability method. Deferred taxliabilities are generally recognized forall taxable temporary differences,and deferred tax assets are generallyrecognized for all deductible temporarydifferences to the extent that it is probablethat taxable profits will be available againstwhich those deductible temporarydifferences can be utilized.Such assets and liabilities are notrecognized if the taxable temporarydifference arises from the initial recognitionof goodwill or if the differences arise fromthe initial recognition (other than in abusiness combination) of other assets andliabilities in a transaction that affectsneither the taxable profit nor theaccounting profit.Deferred tax liabilities are recognized fortaxable temporary differences associatedwith investments in subsidiaries andassociates, and interests in joint ventures,except where the Company is able tocontrol the reversal of the temporarydifference and it is probable that thetemporary difference will not reversein the foreseeable future. Deferred taxassets arising from deductible temporarydifferences associated with suchinvestments and interests are onlyrecognized to the extent that it isprobable that there will be sufficienttaxable profits against which to utilizethe benefits of the temporary differencesand they are expected to reverse in theforeseeable future.Deferred tax assets and liabilitiesare measured at the tax rates that areexpected to apply in the period in whichthe liability is settled or the asset realized,based on tax rates (and tax laws) that havebeen enacted or substantively enacted bythe balance sheet date. The measurementof deferred tax liabilities and assets reflectsthe tax consequences that would followfrom the manner in which the Companyexpects, at the reporting date, to recoveror settle the carrying amount of its assetsand liabilities. The carrying amount ofdeferred tax assets is reviewed at eachbalance sheet date and reduced to theextent that it is no longer probable thatsufficient taxable profits will be availableto allow all or part of the asset to berecovered.88

2008 Consolidated Financial Statements continuedDeferred tax assets and liabilities areoffset when there is a legally enforceableright to set off current tax assets againstcurrent tax liabilities and when they relateto income taxes levied by the same taxationauthority and the Company intends tosettle its current tax assets and liabilitieson a net basis.Financial instrumentsDerivative financial instrumentsThe Company enters into derivativefinancial instruments principally to manageits exposure to fluctuation in interest rates,exchange rates, prices of raw materials,energy and emission rights allowances.Derivative financial instruments areclassified as current assets or liabilitiesbased on their maturity dates and areaccounted for at trade date. Embeddedderivatives are separated from the hostcontract and accounted for separately ifrequired by IAS 39, “Financial Instruments:Recognition and Measurement”.The Company measures all derivativefinancial instruments based on fair valuesderived from market prices of theinstruments or from option pricing models,as appropriate. Gains or losses arising fromchanges in fair value of derivatives arerecognized in the statement of income,except for derivatives that are highlyeffective and qualify for cash flow ornet investment hedge accounting.Changes in the fair value of a derivativethat is highly effective and that isdesignated and qualifies as a fair valuehedge, along with the gain or loss on thehedged asset, liability, or unrecognizedfirm commitment of the hedged itemthat is attributable to the hedged risk,are recorded in the statement of income.Changes in the fair value of a derivativethat is highly effective and thatis designated and qualifies as a cashflow hedge are recorded in equity.Amounts deferred in equity are recordedin the statement of income in the periodswhen the hedged item is recognizedin the statement of income and withinthe same line item.The Company formally assesses, both atthe hedge’s inception and on an ongoingbasis, whether the derivatives that are usedin hedging transactions are highly effectivein offsetting changes in fair values or cashflows of hedged items. When a hedginginstrument is sold, terminated, expires oris exercised, the cumulated unrealized gainor loss on the hedging instrument ismaintained in equity until the forecastedtransaction occurs. If the hedgedtransaction is no longer probable, thecumulative unrealized gain or loss, whichhad been recognized in equity, is reportedimmediately in the statement of income.Foreign currency differences arisingon the retranslation of a financial liabilitydesignated as a hedge of a net investmentin a foreign operation are recognizeddirectly as a separate component of equity,to the extent that the hedge is effective.To the extent that the hedge is ineffective,such differences are recognized in thestatement of income.Non-derivative financial instrumentsNon-derivative financial instrumentsinclude cash and cash equivalents,trade and other receivables, investmentsin equity securities, trade and otherpayables and debt and other liabilities.These instruments are recognized initiallyat fair value when the Company becomesa party to the contractual provisions of theinstrument. They are derecognized if theCompany’s contractual rights to the cashflows from the financial instruments expireor if the Company transfers the financialinstruments to another party withoutretaining control or substantially all risksand rewards of the instruments.The Company classifies its investmentsin equity securities that have readilydeterminable fair values asavailable-for-sale which are recordedat fair value. Unrealized holding gainsand losses, net of the related tax effect,on available-for-sale equity securities arereported as a separate component ofequity until realized. Realized gains andlosses from the sale of available-for-salesecurities are determined on a first-in,first-out basis.Investments in privately held companiesthat are not considered equity methodinvestments are carried at cost.Debt and liabilities, other than provisions,are stated at amortized cost. However,loans that are hedged under a fair valuehedge are remeasured for the changesin the fair value that are attributableto the risk that is being hedged.Impairment of financial assetsA financial asset is considered to beimpaired if objective evidence indicatesthat one or more events have hada negative effect on the estimated futurecash flows of that asset. Estimated futurecash flows are determined using variousassumptions and techniques, includingcomparisons to published prices in anactive market and discounted cash flowprojections using projected growth rates,weighted average cost of capital,and inflation rates. In the case ofavailable-for-sale securities, a significantor prolonged decline in the fair value of thesecurity below its cost is considered anindicator that the securities are impaired.If any such evidence exists foravailable-for-sale financial assets,the cumulative loss - measured as thedifference between the acquisition costand the current fair value, less anyimpairment loss on that financial assetpreviously recognized in the statementof income - is removed from equityand recognized in the statement of income.ArcelorMittal Annual Report 200889

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)If objective evidence indicates that costmethod investments need to be testedfor impairment, calculations are basedon information derived from businessplans and other information availablefor estimating their value in use.Any impairment loss is charged to thestatement of income.An impairment loss related to financialassets is reversed if and to the extent therehas been a change in the estimates usedto determine the recoverable amount.The loss is reversed only to the extent thatthe asset’s carrying amount does notexceed the carrying amount that wouldhave been determined, if no impairmentloss had been recognized. Reversals ofimpairment are recognized in net incomeexcept for reversals of impairment ofavailable-for-sale equity securities,which are recognized in equity.Emission rightsArcelorMittal’s industrial sites which areregulated by the European Directive2003/87/EC of October 13, 2003 oncarbon dioxide (“CO 2 ”) emission rights,effective as of January 1, 2005 andamended by European Directive2004/101/EC of October 27, 2004,are located primarily in Germany, Belgium,Spain, France, Poland, Romania, CzechRepublic and Luxembourg. The emissionrights allocated to the Company on ano-charge basis pursuant to the annualnational allocation plan are recorded on thebalance sheet at nil value and purchasedemission rights are recorded at cost.Gains and losses from the sale of excessallowances are recognized in the statementof income. If at the balance sheet datethe Company is short of emission rights,it will record a provision through thestatement of income.Revenue recognitionRevenue is measured at the fair valueof the consideration received or receivable.Revenue is reduced for estimated customerreturns and other similar allowances.Revenue from the sale of goods isrecognized when the Company hastransferred to the buyer the significant risksand rewards of ownership of the goods, nolonger retains control over the goods sold,the amount of revenue can be measuredreliably, it is probable that the customerhas accepted the ownership and risk andrewards of ownership of the goods, and thecosts incurred or to be incurred in respectof the transaction can be measured reliably.Shipping and handling costsArcelorMittal records amounts billedto a customer in a sale transaction forshipping and handling costs as sales andthe related shipping and handling costsincurred as cost of sales.Financing costsFinancing costs include interest incomeand expense, amortization of discountsor premiums on borrowings, amortizationof costs incurred in connection with thearrangement of borrowings and net gainor loss from foreign exchange on translationof long-term debt, net of unrealized gainsand losses on foreign exchange contracts.Earnings per common shareBasic earnings per common share iscomputed by dividing net income by theweighted average number of commonshares outstanding. Diluted earnings pershare is computed by dividing incomeavailable to shareholders and assumedconversion by the weighted averagenumber of common shares and potentialcommon shares from outstanding stockoptions. Potential common shares arecalculated using the treasury stockmethod and represent incrementalshares issuable upon exercise of theCompany’s outstanding stock options.Stock option plan/share-basedpaymentsArcelorMittal issues equity-settledshare-based payments to certainemployees. Equity-settled share-basedpayments are measured at fair value(excluding the effect of non market-basedvesting conditions) at the date of grant.The fair value determined at the grantdate of the equity-settled share-basedpayments is expensed on a graded vestingbasis over the vesting period, based onthe Company’s estimate of the sharesthat will eventually vest and adjusted forthe effect of non market-based vestingconditions. Fair value is measured using theBlack-Scholes pricing model. The expectedlife used in the model has been adjusted,based on management’s best estimate, forthe effects of non-transferability, exerciserestrictions and behavioral considerations.Segment reportingArcelorMittal reports its operations insix operating segments: Flat CarbonAmericas, Flat Carbon Europe, Long CarbonAmericas and Europe, Africa, Asia andCommonwealth of Independent States(“AACIS”), Stainless Steel and ArcelorMittalSteel Solutions and Services.These business segments are used as theprimary format for segmental reporting.They include attributable goodwill,intangible assets, property, plant andequipment, and equity methodinvestments. They do not include cashand short-term deposits, short-terminvestments, tax assets, and other currentfinancial assets. Segment liabilities are alsothose resulting from the normal activitiesof the segment, excluding tax liabilities andindebtedness but including post retirementobligations where directly attributable tothe segment. Financing items are managedcentrally for the Company as a whole andso are not directly attributable to individualbusiness segments.90

2008 Consolidated Financial Statements continuedGeographical sectors are used as thesecondary format for segmental reporting.Those areas separately disclosed representArcelorMittal’s most significant regionalmarkets. Segment assets are operationalassets employed in each region and includeitems such as tax and pension balancesthat are specific to a country. They do notinclude goodwill, deferred tax assets,other investments or receivables andother non-current financial assets.Segment liabilities are those arisingwithin each region, excluding indebtedness.Financing items are managed centrally forthe Company as a whole and so are notdirectly attributable to individualgeographical segments.Critical accounting judgmentsThe critical accounting judgmentsand significant assumptions made bymanagement in the preparation of thesefinancial statements are provided below.Purchase accountingAccounting for acquisitions requiresArcelorMittal to allocate the cost of theenterprise to the specific assets acquiredand liabilities assumed based on theirestimated fair values at the date of theacquisition. In connection with each ofits acquisitions, the Company undertakesa process to identify all assets and liabilitiesacquired, including acquired intangibleassets. The judgments made in identifyingall acquired assets, determining theestimated fair value assigned to each classof assets acquired and liabilities assumed,as well as asset lives, can materially impactresults of operations. Estimated fair valuesare based on information available near theacquisition date and on expectations andassumptions that have been deemedreasonable by management.There are several methods that canbe used to determine the fair value ofassets acquired and liabilities assumed.For intangible assets, the Company typicallyuses the “income method”. This methodis based on the forecast of the expectedfuture cash flows adjusted to present valueby applying an appropriate discount ratethat reflects the risk factors associatedwith the cash flow streams. Some of themore significant estimates and assumptionsinherent in the income method or othermethods include: the amount and timingof projected future cash flows; the discountrate selected to measure the risks inherentin the future cash flows (weighted averagecost of capital); the assessment of theasset’s life cycle and the competitive trendsimpacting the asset, including considerationof any technical, legal, regulatory,or economic barriers to entry.The most common purchase accountingadjustments relate to the following assetsand liabilities:• The fair value of identifiable intangibleassets (generally patents, customerrelationships and favorable andunfavorable contracts) is estimatedas described above.• Property, plant and equipment is recordedat depreciated replacement cost.• The fair value of pension and otherpost-employment benefits is determinedseparately for each plan using actuarialassumptions valid as of the acquisitiondate relating to the populationof employees involved and the fairvalue of plan assets.• Inventories are estimated basedon expected selling prices at the dateof acquisition reduced by an estimateof selling expenses and a normalprofit margin.Determining the estimated useful livesof tangible and intangible assets acquiredrequires judgment, as different typesof assets will have different useful livesand certain intangible assets may beconsidered to have indefinite useful lives.If the fair value of the net assets acquiredexceeds their acquisition cost, the excessis recognized immediately as a gainin the statement of income.Deferred tax assetsArcelorMittal records deferred tax assetsand liabilities based on the differencesbetween the carrying amount of assetsand liabilities in the financial statements andthe corresponding tax bases. Deferred taxassets are also recognized for the estimatedfuture effects of tax losses carried forward.ArcelorMittal reviews the deferred taxassets in the different jurisdictions in whichit operates periodically to assess thepossibility of realizing such assets basedon projected taxable profit, the expectedtiming of the reversals of existingtemporary differences, the carry forwardperiod of temporary differences andtax losses carried forward and theimplementation of tax-planning strategies.Note 19 describes the total deferredtax assets recognized in the consolidatedbalance sheets and the estimated futuretaxable income required to utilize therecognized deferred tax assets.ArcelorMittal Annual Report 2008• Adjustments to deferred tax assetsand liabilities of the acquiree are recordedto reflect purchase price adjustments,other than goodwill.91

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Provisions for pensions and otherpost-employment benefitsArcelorMittal’s Operating Subsidiarieshave employee benefits such as pensionplans and post-employment benefit plans(primarily post-employment health care).The expense associated with these pensionplans and post-employment benefits,as well as the carrying amount of therelated liability/asset on the balance sheetis based on a number of assumptions andfactors such as discount rates, expectedrate of compensation increase, expectedreturn on plan assets, health care cost trendrates, mortality rates, and retirement rates.• Discount rates. The discount rate is basedon several high-quality corporate bondindexes in the appropriate jurisdictions(rated AA or higher by a recognized ratingagency). Nominal interest rates varyworldwide due to exchange ratesand local inflation rates.• Rate of compensation increase. The rateof compensation increase reflects actualexperience and the Company’s long-termoutlook, including contractually agreedupon wage rate increases for representedhourly employees.• Expected return on plan assets.The expected return on plan assets isderived from detailed periodic studies,which include a review of asset allocationstrategies, anticipated long-termperformance of individual asset classes,risks (standard deviations), andcorrelations of returns among theasset classes that comprise the plans’asset mix.• Healthcare cost trend rate. The healthcarecost trend rate is based on historicalretiree cost data, near-term health careoutlook, including appropriate costcontrol measures implemented by theCompany, and industry benchmarksand surveys.• Mortality and retirement rates. Mortalityand retirement rates are based on actualand projected plan experience.In accordance with IFRS, actuarial gainsor losses resulting from experience andchanges in assumptions are recognized inArcelorMittal’s statement of income onlyif the net cumulative unrecognized actuarialgains and losses at the end of the previousreporting period exceeded the greater of10% of the present value of the definedbenefit obligation at that date and 10% ofthe fair value of any plan asset at that date.The fraction exceeding 10% is thenrecognized over the expected averageremaining working lives of the employeesparticipating in the plans.Note 23 details the net liabilities of pensionplans and other post-employment benefitsincluding a sensitivity analysis illustratingthe effects of changes in assumptions.Environmental and other contingenciesArcelorMittal is subject to changingand increasingly stringent environmentallaws and regulations concerning airemissions, water discharges and wastedisposal, as well as certain remediationactivities that involve the clean-up of soiland groundwater. ArcelorMittal is currentlyengaged in the investigation andremediation of environmentalcontamination at a number of its facilities.Most of these are legacy obligations arisingfrom acquisitions. ArcelorMittal recognizesa liability for environmental remediationwhen it is more likely than not that suchremediation will be required and theamount can be estimated.The estimates of loss contingenciesfor environmental matters and othercontingencies are based on variousjudgments and assumptions includingthe likelihood, nature, magnitude andtiming of assessment, remediation and/ormonitoring activities and the probable costof these activities. In some cases,judgments and assumptions are maderelating to the obligation or willingnessand ability of third parties to beara proportionate or allocated share of costof these activities, including third partieswho sold assets to ArcelorMittalor purchased assets from it subject toenvironmental liabilities. ArcelorMittal alsoconsiders, among other things, the activityto date at particular sites, informationobtained through consultation withapplicable regulatory authorities and thirdparty consultants and contractors and itshistorical experience with othercircumstances judged to be comparable.Due to the numerous variables associatedwith these judgments and assumptions,and the effects of changes in governmentalregulation and environmental technologies,both the precision and reliability of theresulting estimates of the relatedcontingencies are subject to substantialuncertainties. As estimated costs toremediate change, the Company will reduceor increase the recorded liabilities throughcredits or charges in the statement ofincome. ArcelorMittal does not expectthese environmental issues to affect theutilization of its plants, now or in the future.92

2008 Consolidated Financial Statements continuedImpairment of tangible and intangibleassets including goodwillAt each reporting date, ArcelorMittalreviews the carrying amounts of its tangibleand intangible assets (excluding goodwill)to determine whether there is anyindication that the carrying amountof those assets may not be recoverablethrough continuing use. If any suchindication exists, the recoverable amountof the asset is reviewed in order todetermine the amount of the impairment,if any. The recoverable amount is the higherof its net selling price (fair value reducedby selling costs) and its value in use.In assessing its value in use, the estimatedfuture cash flows are discounted to theirpresent value using a pre-tax discount ratethat reflects current market assessmentsof the time value of money and the risksspecific to the asset. For an asset that doesnot generate cash inflows largelyindependent of those from other assets,the recoverable amount is determinedfor the cash-generating unit to which theasset belongs. The cash-generating unitis the smallest identifiable group of assetscorresponding to operating units thatgenerate cash inflows. If the recoverableamount of an asset (or cash-generatingunit) is estimated to be less thanits carrying amount, an impairment lossis recognized. An impairment loss isrecognized as an expense immediatelyas part of operating income in thestatement of income.An impairment loss recognized in prioryears is reversed if, and only if, therehas been a change in the estimatesused to determine the asset’s recoverableamount since the last impairment losswas recognized. However, the increasedcarrying amount of an asset due toa reversal of an impairment loss willnot exceed the carrying amount thatwould have been determined (net ofamortization or depreciation) had noimpairment loss been recognized for theasset in prior years. A reversal of animpairment loss is recognized immediatelyas part of operating income in thestatement of income.Goodwill is reviewed at thecash-generating unit level for impairmentannually or whenever changes incircumstances indicate that the carryingamount may not be recoverable.The recoverable amounts of the cashgenerating units are determined from thehigher of its net selling price (fair valuereduced by selling costs) or its valuein use calculations, as described above.The key assumptions for the value in usecalculations are those regarding thediscount rates, growth rates and expectedchanges to selling prices and direct costsduring the period. Management estimatesdiscount rates using pre-tax rates thatreflect current market rates forinvestments of similar risk. The growthrates are based on industry growthforecasts. Changes in selling pricesand direct costs are based on historicalexperience and expectations of futurechanges in the market.Cash flow forecasts are derived from themost recent financial budgets for the nextfive years. Beyond the specificallyforecasted period, the Companyextrapolates cash flows for the remainingyears based on an estimated growth rate.This rate does not exceed the averagelong-term growth rate for the relevantmarkets. Once recognized, impairmentlosses recognized for goodwill arenot reversed.Use of estimatesThe preparation of financial statementsin conformity with IFRS recognition andmeasurement principles and, in particular,making the aforementioned criticalaccounting judgments require the useof estimates and assumptions that affectthe reported amounts of assets, liabilities,revenues and expenses. Managementreviews its estimates on an ongoing basisusing currently available information.Changes in facts and circumstances mayresult in revised estimates, and actualresults could differ from those estimates.ArcelorMittal Annual Report 200893

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 3: AcquisitionsAcquisitions have been accounted for usingthe purchase method of accounting and,accordingly, the assets acquired andliabilities assumed have been recordedat their estimated fair values as of thedate of acquisition.Significant acquisitions made duringthe years ended December 31, 2007and 2008 include:SicartsaOn April 20, 2007, ArcelorMittal acquired100% of the outstanding common sharesof Siderúrgica Lázaro Cárdenas Las Truchas,S.A. de C.V. (“Sicartsa”) from GrupoVillacero. Sicartsa is a Mexican fullyintegrated producer of long steel.The acquisition also includes Metave,a mini-mill, Sibasa and Camsa, tworolling-mills located in Mexico, as wellas Border Steel, a mini-mill in the US.Finally, through the acquisition of Sicartsa,Sersiinsa, a 50% joint-venture betweenSicartsa and ArcelorMittal Lázaro CárdenasS.A. de C.V., is fully consolidated.Sicartsa was acquired for a total cashconsideration of 1,436 (1,427 net of9 of cash acquired) consisting of 526 forits shares and 910 related to a debtassumption. The allocation of the totalpurchase price was preliminary atDecember 31, 2007. Iron ore mines wererevalued by 138 and property, plant andequipment was stepped down by 138.Following the finalization of the allocationof the purchase price of Sicartsa andSersiinsa in 2008, total goodwill decreasedfrom 274 to 153. Regarding Sicartsa,consideration paid was reduced by 75and net assets acquired increased by 56.With respect to Sersiinsa, the acquisitionof the 50% held by ArcelorMittal LázaroCárdenas S.A. de C.V. in Sersiinsa ledto the recognition of goodwill of 10 andan increase of 72 in retained earningscorresponding to the revaluation ofpreviously held interests. The acquisitionof Sicartsa and Sersiinsa resulted in theconsolidation of total assets of 2,086 andtotal liabilities of 1,630.UniconOn April 4, 2008, the Company completedthe acquisition of Unicon, Venezuela’sleading manufacturer of welded steel pipesfor a total consideration of 350 (336 netof 14 of cash acquired). The allocationof the total purchase price is preliminaryat December 31, 2008. Intangible assetswere recognized for a total amount of130 with respect to the valuation oftrade mark and customer relationships.The acquisition of Unicon resulted in theconsolidation of total assets of 591 andtotal liabilities of 413. The preliminarygoodwill amounts to 158. The net resultconsolidated since acquisition dateamounts to 16.Russian coal minesOn April 10, 2008, the Companycompleted the acquisition from Severstalof three coal mines (Berezovskaya,Pervomayskaya and Anzherskoye) andassociated assets located in the Kemerovoregion in Russia for a total considerationof 720 (715 net of 5 of cash acquired)consisting of 272 for the shares and448 related to a debt assumption.The allocation of the total purchase priceis preliminary at December 31, 2008.The fair value of the mining reserveswas stated at 365. The preliminarygoodwill amounts to 143. The net resultconsolidated since acquisition dateamounts to (14).Bayou SteelOn July 31, 2008, ArcelorMittal completedthe acquisition of Bayou Steel, LLC,a producer of structural steel products withfacilities in LaPlace, Louisiana and Harriman,Tennessee (USA) for a total considerationof 509 (504 net of 5 of cash acquired).The allocation of the total purchase priceis preliminary at December 31, 2008.The net result consolidated since acquisitiondate amounts to (14).Mid Vol and ConceptOn June 30, 2008, the Company completedthe acquisition of Mid Vol Coal Group fora total consideration of 491 (453 net of38 of cash acquired). On August 18, 2008,ArcelorMittal finalized the acquisition ofConcept Group for a total considerationof 166 (152 net of 14 of cash acquired).These acquisitions operate coal mines in thestates of West Virginia and Virginia (USA).The allocation of the total purchase priceis preliminary at December 31, 2008.The acquisition of Mid Vol and Conceptresulted in the consolidation of total assetsof 1,217 and total liabilities of 718.The fair value of the mining reserves was638 for Mid Vol and 185 for Concept.The acquired liabilities include 617 assignedto unfavorable selling contracts that arebeing amortized over the term of theassociated contracts ranging from fourmonths to two years. The preliminarygoodwill is 54 for Mid Vol and 52 forConcept. The net result consolidatedsince acquisition date amounts to 41.London MiningOn August 20, 2008, the Companyacquired London Mining South AmericaLimited, an iron ore mine located in theSerra Azul region in Brazil for a totalconsideration of 818 (813 net of 5 of cashacquired) consisting of 772 for the sharesand 46 related to a debt assumption.The allocation of the total purchase priceis preliminary at December 31, 2008.The net result consolidated since acquisitiondate amounts to (9).94

2008 Consolidated Financial Statements continuedKoppers’ MonessenOn October 1, 2008, the Companycompleted the acquisition of the Koppers’Monessen Coke Plant, located in Monessen,Pennsylvania (USA) and owned by KoppersInc., for a total consideration of 170 (169net of 1 of cash acquired). The allocationof the total purchase price is preliminaryat December 31, 2008. The net resultconsolidated since acquisition dateamounts to (16).Acquisitions of minority interestsThe Company acquired significant minorityinterests in 2007 and 2008.Arcelor Brasil S.A.As a result of the acquisition of Arcelor,the Company made a mandatory tenderoffer to acquire all of the outstanding sharesin Arcelor Brasil S.A. (“Arcelor Brasil”),subsequently renamed ArcelorMittal Brasil,not previously owned by Arcelor or anyother affiliate of ArcelorMittal.On June 5, 2007, the Company publiclyannounced the results of its mandatorytender offer for the shares it did not holdin Arcelor Brasil. In the aggregate,the Company acquired 29.5% of the totalshare capital and 89.7% of the free floatof Arcelor Brasil as of June 5, 2007,thereby increasing its current 67.1%shareholding in Arcelor Brasil to 96.6%.The Company paid for the shares with3,694 in cash and approximately 27 millionMittal Steel Class A common shares,representing a total consideration of 5,407.Following the auction and after a generalArcelor Brasil shareholders’ meeting heldon August 8, 2007 approving theredemption of the remaining shares,the Company acquired the remaining3.4% for a total cash consideration of 497.On September 12, 2007, the Companyannounced that it held 100% of ArcelorBrasil. Total consideration for the transactionwas 5,879, of which 4,191 paid in cash.The goodwill related to this acquisitionamounts to 3,119 and the reduction inminority interests to 2,760.ArcelorOn November 13, 2007, as a resultof the legal merger between the formerArcelorMittal and Arcelor, the 5.76%remaining minority interests in Arcelor werecancelled. The transaction was recordedas if ArcelorMittal had been the acquirer.Total consideration was 3,204 (44 million,including 12 million treasury shares, withshares of the former ArcelorMittal valuedat $72.65 per share) and resulting goodwillwas 612.ArcelorMittal PolandOn July 20, 2007, ArcelorMittalannounced that it had reached an agreementwith the Polish government to acquirean additional 25.2% of the outstandingshares in ArcelorMittal Poland, which werepreviously held by the Polish state andtreasury ministry. The additionalconsideration was 181. These shares wereaccounted for as an acquisition in 2004in conjunction with the acquisition ofa controlling interest in ArcelorMittal Polandas there was an irrevocable commitment totransfer operational and economic controlof these remaining shares to the Company.ArcelorMittal Kryviy RihThe Company’s ownership in ArcelorMittalKryviy Rih increased from 93.77% in 2006to 94.66% in 2007 and 95.02% in 2008.In 2008, the reduction in minority interestis 18 and the resulting goodwill amountsto 38. In 2007, the reduction in minorityinterest was 49 and the resulting goodwillamounted to 5.ArcelorMittal Inox BrasilOn April 4, 2008, the Companycompleted the delisting offer to acquireall of the remaining outstanding sharesof ArcelorMittal Inox Brasil. Following thesqueeze out, the Company’s stake increasedfrom 57.4% to 100% for a totalconsideration of 1,757. The transactionresulted in a reduction in minority interestof 863 and goodwill of 894.AcindarOn November 20, 2008, the Companycompleted the delisting offer to acquire allof the remaining outstanding shares ofAcindar Industria Argentina de Aceros S.A.Following the squeeze out, the Companyacquired a 35% stake for a totalconsideration of 564. The transactionresulted in a reduction in minority interestof 321 and goodwill of 243.ArcelorMittal Annual Report 200895

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Summary of significant acquisitionsThe table below summarizes the estimated fair value of the assets acquired and liabilities assumed for significant acquisitions and theacquisition of minority interests:2007Acquisition ofSicartsa 2 minority interests Others 1,3Current assets 558 — 612Property, plant and equipment 1,411 — 134Other assets 117 — 2Total assets acquired 2,086 — 748Current liabilities 914 — 561Long-term loan 548 — 37Other long-term liabilities 20 — 8Deferred tax liabilities 148 — 6Minority interest — 2,809 —Total liabilities assumed 1,630 2,809 612Total net assets 456 2,809 136Minority interest — 2,591 20Net assets acquired 456 5,400 116Fair value of shares issued — 4,917 —Cash paid, net 1,352 4,401 224Debt repayment (910) — —Equity investment 95 — —Purchase price, net 537 9,318 224Revaluation of interests previously held 72 — —Goodwill 153 3,918 1082008AcquisitionRussian Mid Vol & London Koppers‘ Bayou of minoritycoal mines 3 Concept 3 Unicon 3 Mining 3 Monessen 3 Steel 3 interests Others 3Current assets 145 44 280 27 25 202 — 287Property, plant and equipment 716 908 181 818 109 211 — 240Other assets 26 265 130 — 47 84 — 47Total assets acquired 887 1,217 591 845 181 497 — 574Current liabilities 179 349 255 54 8 45 — 184Long-term loan 449 — 78 15 — 2 — 138Other long-term liabilities 91 312 6 2 4 10 — 8Deferred tax liabilities 44 57 68 7 — 93 — 1Minority interest — — 6 — — — 1,365 —Total liabilities assumed 763 718 413 78 12 150 1,365 331Total net assets 124 499 178 767 169 347 1,365 243Minority interest — — — — — — — 38Net assets acquired 124 499 178 767 169 347 1,365 205Fair value of shares issued — — — — — — — —Cash paid, net 715 605 336 813 169 504 2,648 411Debt repayment (448) — — (46) — — — (117)Debt outstanding on acquisition — — — — — — — 105Purchase price, net 267 605 336 767 169 504 2,648 399Goodwill 143 106 158 — — 157 1,283 4 1941Historical IFRS information as of the date of acquisition was not available for the acquired entities.2During 2008, the Company finalized the purchase price allocation for Sicartsa.3Based on a preliminary purchase price allocation, which is subject to change.4Includes negative goodwill of 17.96

2008 Consolidated Financial Statements continuedThe total purchase price for the significant acquisitions consists of the following:2007 2008Russian Mid Vol & London Koppers’ BayouSicartsa coal mines Concept Unicon Mining Monessen SteelCash paid to stockholders, gross 1,359 719 655 349 814 170 509Transaction related fees 2 1 2 1 4 — —Shares issued — — — — — — —Total purchase price 1,361 720 657 350 818 170 509Debt assumed (910) (448) — — (46) — —Cash acquired (9) (5) (52) (14) (5) (1) (5)Equity investments acquired 95 — — — — — —Total purchase price, net 537 267 605 336 767 169 504The preliminary fair value adjustments for acquisitions made in 2008 are as follows:Historical Preliminary PreliminaryIFRS fair value allocation ofinformation adjustments purchase priceCurrent assets 996 14 1,010Property, plant and equipment 988 2,195 3,183Other assets 68 531 599Total assets acquired 2,052 2,740 4,792Current liabilities 809 265 1,074Long-term loan 712 (30) 682Other long-term liabilities 34 399 433Deferred tax liabilities 43 227 270Minority interest 6 — 6Total liabilities assumed 1,604 861 2,465Total net assets 448 1,879 2,327ArcelorMittal Annual Report 2008Pro forma resultsThe following pro forma financial information presents the results of operations of ArcelorMittal for 2008 as if all acquisitions hadoccurred as of the beginning of the periods presented. The 2007 pro forma information includes the results of operations of Sicartsa onthe same basis. The pro forma financial information is not necessarily indicative of what consolidated results of operations would havebeen had the acquisitions been completed at the dates indicated. In addition, the pro forma financial information does not purport toproject the future results of operations of the combined company.Unaudited pro forma Unaudited pro formafor the year ended for the year endedDecember 31, 2007 December 31, 2008Sales 105,456 125,614Net income 10,372 9,500Per share amounts:Basic earnings per common share 7.14 6.87Diluted earnings per common share 7.13 6.8597

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 4: Assets and Liabilities Held for SaleOn February 20, 2007, the U.S. Department of Justice (“the DOJ”) informed the Company that the DOJ had selected the SparrowsPoint (Flat Carbon Americas) steel mill located near Baltimore, Maryland for divestiture under a consent decree filed by the DOJ inAugust 2006. As a consequence, the assets and liabilities of Sparrows Point were classified as held for sale as of December 31, 2007.The DOJ appointed a trustee to handle the sale process. On March 26, 2008, ArcelorMittal confirmed that the Court-appointeddivestiture trustee had entered into an agreement to sell Sparrows Point to OAO Severstal for total consideration of 810. The disposalwas completed during the second quarter of 2008 and resulted in a loss of 207 (of which 200 was recorded as impairment loss).On August 30, 2007 the Company acquired a 76.9% stake in the German gas distribution company Saar Ferngas AG for totalconsideration of 542. As the result of a business combination in January 2009 under which the Company lost control of Saar FerngasAG, the assets of this subsidiary were classified as held for sale.December 31, December 31,2007 2008Assets classified as held for sale:Property, plant and equipment 670 417Trade and other receivables 127 201Inventories 470 —Other assets 29 292Total 1,296 910December 31, December 31,2007 2008Liabilities classified as held for sale:Trade and other payables 173 271Other liabilities 93 99Total 266 370Note 5: Trade Accounts Receivable and OtherTotal trade receivables (net of allowances) held by ArcelorMittal amounted to 9,533 and 6,737 at December 31, 2007and 2008, respectively.Before accepting any new customer, ArcelorMittal uses an internally developed credit scoring system to assess the potentialcustomer’s credit quality and to define credit limits. For all significant customers the credit terms must be approved by the creditcommittees of each individual segment. Limits and scoring attributed to customers are reviewed periodically. There are no customerswho represent more than 5% of the total balance of trade receivables.Included in ArcelorMittal’s trade receivable balance are debtors with a carrying amount of 6,866 and 5,125 as of December 31,2007 and 2008, respectively, which were not past due at the reporting date.The trade receivables balances are as follows as of December 31, 2007 and 2008:2007 2008Gross amount 9,950 7,108Allowance for doubtful accounts (417) (371)Total 9,533 6,73798

2008 Consolidated Financial Statements continuedExposure to credit risk by business segmentThe maximum exposure to credit risk for trade receivables at the reporting date by segment is:Exposure to credit risk by geographyThe maximum exposure to credit risk for trade receivables at the reporting date by geographical area is:2007 2008Flat Carbon Americas 1,018 543Flat Carbon Europe 1,866 1,330Long Carbon Americas and Europe 2,210 1,777ArcelorMittal Steel Solutions and Services 2,378 1,914AACIS and Stainless Steel 964 959Others activities 1,097 214Total 9,533 6,7372007 2008Europe 5,876 4,280North America 1,562 909South America 1,151 884Africa, Asia and CIS 563 542Middle East 381 122Total 9,533 6,737ArcelorMittal Annual Report 2008Aging of trade receivablesThe aging of trade receivables is as follows:2007 2008Gross Allowance Gross AllowanceNot past due 6,866 (98) 5,125 (50)Past due 0-30 days 1,995 (55) 1,159 (50)Past due 31-120 days 695 (37) 552 (181)More than 120 days 394 (227) 272 (90)Total 9,950 (417) 7,108 (371)The movement in the allowance for doubtful accounts in respect of trade receivables during the year is as follows:Balance at Deductions/ Balance atDecember 31, 2006 Additions Releases Others December 31, 2007428 14 (75) 50 417Balance at Deductions/ Balance atDecember 31, 2007 Additions Releases Others December 31, 2008417 68 (81) (33) 37199

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 6: InventoriesInventory, net of allowance for slow-moving, excess of cost over net realizable value or obsolete inventory, of 799 and 3,519 as ofDecember 31, 2007 and 2008, respectively, is comprised of the following:December 31, December 31,2007 2008Finished products 8,108 7,788Production in process 4,582 4,501Raw materials 6,739 9,771Manufacturing supplies, spare parts and other 2,321 2,681Total 21,750 24,741The amount of inventory pledged as collateral was 217 and 352 as of December 31, 2007 and 2008 respectively.The movement in the allowance for slow-moving, excess of cost over net realizable value or obsolete inventory is as follows:Balance at Deductions/ Balance atDecember 31, 2006 Additions Releases Others December 31, 2007602 483 (407) 121 799Balance at Deductions/ Balance atDecember 31, 2007 Additions Releases Others December 31, 2008799 3,049 (303) (26) 3,519The cost of inventories recognized as an expense during the period was 43,455 and 42,433 in 2007 and 2008, respectively.The amount of write-down of inventories to net realizable value recognized as an expense within cost of sales in the statementof income is 483 and 3,049 in 2007 and 2008, respectively, and has been reduced by 407 and 303 for the reversal of suchwrite-downs in 2007 and 2008, respectively.Note 7: Prepaid Expenses and Other Current AssetsThe other current assets consist of advance payments to taxing and other public authorities (including value-added tax (“VAT”)),positive fair values of derivative financial instruments, advances to employees, prepayments, accrued interest, dividends receivableand other miscellaneous receivables.December 31, December 31,2007 2008VAT recoverable short-term 1,312 1,758Income tax receivable 504 837Other 2,828 1,844Total 4,644 4,439100

2008 Consolidated Financial Statements continuedNote 8: Goodwill and Intangible AssetsGoodwill and intangible assets are summarized as follows:Concessions,Goodwill on patents Favorableacquisition and licenses contracts Other TotalCost:At December 31, 2006 7,574 488 983 2,508 11,553Acquisitions 4,300 26 — 17 4,343Disposals — (23) — (1) (24)Foreign exchange differences 1,092 51 44 174 1,361Transfers and other movements — 127 (4) (815) (692)At December 31, 2007 12,966 669 1,023 1,883 16,541Acquisitions 2,058 147 76 17 2,298Disposals — (66) — (270) (336)Adjustment on allocation of purchase price (194) — — 65 (129)Foreign exchange differences (482) (85) (35) (143) (745)Transfers and other movements 118 289 64 267 738At December 31, 2008 14,466 954 1,128 1,819 18,367Accumulated amortization and impairment losses:At December 31, 2006 — 120 280 113 513Disposals — (17) — — (17)Impairment and reduction of goodwill 303 — — — 303Amortization charge — 82 332 184 598Foreign exchange differences — 35 22 56 113At December 31, 2007 303 220 634 353 1,510Disposals — (63) — (268) (331)Impairment and reduction of goodwill 560 — — — 560Amortization charge — 100 260 223 583Foreign exchange differences (26) (62) (30) (27) (145)Transfers and other movements — 33 44 (6) 71At December 31, 2008 837 228 908 275 2,248Carrying amount:At December 31, 2007 12,663 449 389 1,530 15,031At December 31, 2008 13,629 726 220 1,544 16,119ArcelorMittal Annual Report 2008Goodwill acquired in business combinations and acquisitions of minority interests are as follows:Acquisitions Exchange rateNet value (including differences Impairment Adjustment on Net valueDecember 31, minority and other and other allocation of December 31,2006 interests) movements reductions purchase price 2007Flat Carbon Europe 2,240 400 319 (34) — 2,925Flat Carbon Americas 1,048 2,372 336 (220) — 3,536Long Carbon Europe 1,030 102 120 — — 1,252Long Carbon Americas 426 1,163 128 (43) — 1,674AACIS 1,384 10 6 — — 1,400Stainless 1 740 92 96 (2) — 926Steel Solutions and Services 694 161 82 (4) — 933Others 12 — 5 — — 17Total 7,574 4,300 1,092 (303) — 12,663101

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Acquisitions Exchange rateNet value (including differences Impairment Adjustment on Net valueDecember 31, minority and other and other allocation of December 31,2007 interests) movements reductions purchase price 2008Flat Carbon Europe 2 2,925 70 (51) (248) — 2,696Flat Carbon Americas 2 3,536 122 189 (17) — 3,830Long Carbon Europe 1,252 — (13) (2) — 1,237Long Carbon Americas 2 1,674 417 78 (292) (131) 1,746Pipes & Tubes 2 — 158 — — — 158AACIS 2 1,400 181 (90) — — 1,491Stainless 1 926 902 (280) — (63) 1,485Steel Solutions and Services 2 933 205 (151) (1) — 986Others 17 3 (20) — — —Total 12,663 2,058 (338) (560) (194) 13,6291Includes Acesita, with a net value of 257 as of December 31, 2007 and December 31, 2008.2Subject to change upon finalization of purchase price allocation.The allocation by segment and operating unit has been aligned with the cash-generating unit (“CGU”) defined for impairmenttesting purposes.Goodwill is reviewed at the cash-generating unit level for impairment annually or whenever changes in circumstances indicate thatthe carrying amount may not be recoverable. The recoverable amounts of the cash-generating units are determined from the higherof fair value less cost to sell or value in use calculations. The key assumptions for the value in use calculations are those regarding thediscount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discountrates using pre-tax rates that reflect current market rates for investments of similar risk. The growth rates are based on industry growthforecasts. Changes in selling prices and direct costs are based on historical experience and expectations of future changes in the market.Cash flow forecasts are derived from the most recent financial plans approved by management for the next five years. Beyond thespecifically forecasted period, the Company extrapolates cash flows for the remaining years based on an estimated growth rate.This rate does not exceed the average long-term growth rate for the relevant markets. Once recognized, impairment losses recognizedfor goodwill are not reversed.During 2007 and 2008, the Company recorded an impairment of goodwill of 43 and 131 and reduction of goodwill of 260 and 429,respectively. The reduction of goodwill is due to the recognition of deferred tax assets on acquired net operating losses not previouslyrecognized in purchase accounting because they did not satisfy the criteria for separate recognition when the business combinationwas initially accounted for. These amounts have been included within cost of sales in the statement of income.The Company’s weighted average discount rate used for the valuation of the main cash-generating units (“CGU”) was 14.1% and15.0% for the years ended December 31, 2007 and 2008, respectively.As a part of its annual impairment test procedures, the Company did not record an impairment expense for the CGUs above.In addition, the Company assessed the sensitivity of the estimated recoverable amounts to an independent change of one pointin either the discount rate or the perpetual growth rate as of December 31, 2008. An increase in one percentage point in discountrate as well as a decrease in one percentage point in the perpetual growth assumption would have not resulted in any materialadditional goodwill impairment.Research and development costs are expensed and included in selling, general and administrative expenses within the statementof income. These costs amounted to 214 and 295 for the years ended December 31, 2007 and 2008, respectively.102

2008 Consolidated Financial Statements continuedNote 9: Property, Plant and EquipmentProperty, plant and equipment are summarized as follows:Land, buildings Machinery Constructionand improvements and equipment in progress TotalCost:At December 31, 2006 14,344 44,169 4,460 62,973Additions 440 1,964 3,044 5,448Acquisitions through business combinations 499 896 88 1,483Foreign exchange differences 2,403 7,096 245 9,744Disposals (174) (1,030) (22) (1,226)Other movements 1,658 2,005 (4,036) (373)At December 31, 2007 19,170 55,100 3,779 78,049Additions 350 1,771 3,410 5,531Acquisitions through business combinations 2,385 719 79 3,183Foreign exchange differences (2,451) (6,381) (321) (9,153)Disposals (150) (873) (39) (1,062)Other movements 412 3,158 (2,875) 695At December 31, 2008 19,716 53,494 4,033 77,243Accumulated depreciation and impairment:At December 31, 2006 1,878 6,514 8 8,400Depreciation charge for the year 567 3,235 5 3,807Impairment 3 178 12 193Disposals (42) (819) — (861)Foreign exchange differences 884 3,919 43 4,846Other movements (38) (272) (20) (330)At December 31, 2007 3,252 12,755 48 16,055Depreciation charge for the year 702 4,015 3 4,720Impairment 101 387 11 499Disposals (73) (773) — (846)Foreign exchange differences (854) (3,598) (12) (4,464)Other movements 46 484 (6) 524At December 31, 2008 3,174 13,270 44 16,488Carrying amount:At December 31, 2007 15,918 42,345 3,731 61,994At December 31, 2008 16,542 40,224 3,989 60,755ArcelorMittal Annual Report 2008Other movements represent mostly transfers between the categories.During the period, the Company analyzed the recoverable amount of its manufacturing property, plant and equipment.The recoverable amount of the relevant assets was determined on the basis of their value in use. As a result, the Companydetermined that the recoverable amount for certain of its property, plant and equipment was less than its carrying amount.Accordingly, impairment loss of 193 and 499 for the year ended December 31, 2007 and 2008, respectively, was recognizedimmediately as an expense as part of operating income in the statement of income.The Company has pledged 671 and 580 in land and buildings as of December 31, 2007 and 2008, respectively, to secure bankingfacilities granted to the Company. These facilities are further disclosed in note 15.103

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 10: Investments in Associates and Joint VenturesThe Company had the following investments in associates and joint ventures:Net assetNet assetvalue attributable value attributableOwnership % at to the Company at to the Company atInvestee Location December 31, 2008 December 31, 2007 December 31, 2008DHS Group 1 Germany 33.43% 1,598 1,262China Oriental Group Company Ltd 2 China 47.03% 644 1,187Gestamp Spain 35% 361 404Gonvarri Industrial Consolidated Spain 35% 423 376Eregli Demir Ve Celik Fab.T.AS 3 Turkey 24.99% — 1,633Macarthur Coal 4 Australia 19.9% — 515Hunan Valin 5 China 33.02% 442 780Kalagadi Manganese (Propriety) Limited 6 South Africa 50% — 360Other 2,419 1,995Total 5,887 8,5121 On December 15, 2008, the Company reduced its voting interest from 51.25% to 33.43%, corresponding to an economic interest of 30.08% for total consideration of 936 throughthe sale of shares to Struktur-Holding-Stahl GmbH & Co. (“SHS”) and Dillinger Hütte Saarstahl AG (“DHS”).2 On November 8, 2007, ArcelorMittal purchased approximately 820,000,000 China Oriental shares for a total consideration of 644 (HK$ 5.02 billion), or a 28.02% equity interest.On December 13, 2007, the Company entered into a shareholder’s agreement which enabled it to become the majority shareholder of China Oriental and to raise eventuallyits equity stake in China Oriental to 73.13%. At the time of the close of its tender offer on February 4, 2008, ArcelorMittal had reached a 47% shareholding in China Oriental.Given the 45.4% shareholding by the founding shareholders, this left a free float of 7.6% against a minimum Hong Kong Stock Exchange (“HKSE”) listing requirement of 25%.The measures to restore the minimum free float have been achieved by means of sale of 17.4% stake to ING Bank and Deutsche Bank together with put option agreements.The Company has not derecognized the 17.4% stake as it retained the significant risks and rewards. As of December 31, 2008, the investment had a market value of 228.3 On June 13, 2008, ArcelorMittal acquired 11.31% of Eregli Demir Ve Celik Fab.T.AS (“Erdemir”) shares for a total consideration of 869, increasing its stake to 24.99%.As of December 31, 2008, the investment had a market value of 766. In 2007 and the first five months of 2008, this investment had been classified as available-for-sale.4On May 21, 2008, ArcelorMittal acquired a 14.9% stake in Macarthur Coal Limited. On July 10, 2008, the Company increased its stake from 14.9% to 19.9%, following the acquisitionof 10,607,830 shares from Talbot Group Holdings. The total acquisition price for Macarthur Coal is 812. As of December 31, 2008, the investment had a market value of 87.5Following additional purchases of shares in January 2008, the stake of the Company increased to 33.02%. As of December 31, 2008, the investment had a market valueof 604 (1,058 in 2007).6On August 19, 2008, ArcelorMittal set up a joint venture partnership with Kalagadi Manganese and acquired a 50% stake for 432.Summarized financial information, in the aggregate, for the associates and joint ventures is as follows:December 31, December 31,2007 2008Condensed statement of income data:Gross revenue 28,696 45,101Net income 1,806 3,319Condensed balance sheet data:Total assets 27,518 40,671Total liabilities 14,551 21,181The Company assessed the recoverability of its investments accounted for using the equity method. In determining the valuein use of its investments, the Company estimated its share in the present value of the projected future cash flows expectedto be generated by operations of associates. Based on this analysis, the Company concluded that no impairment was required.104

2008 Consolidated Financial Statements continuedNote 11: Other InvestmentsThe Company holds the following other investments:December 31, December 31,2007 2008Available-for-sale securities (at fair value) 1,839 56Erdemir 1,019 —Others 820 56Investments accounted for at cost 320 381Total 2,159 437The change in fair value of available-for-sale securities for the period was recorded directly in equity as an unrealized resultof 569 and (78) for the years ended December 31, 2007 and 2008, respectively, net of income tax and minority interests.No impairment loss for available-for-sale securities was recognized in 2007. An impairment expense of 109 was recognizedin 2008 because the Company determined that the market value decline for certain of its available-for-sale securities was eithersignificant or prolonged.The decrease in available-for-sale securities is mainly related to the reclassification of Erdemir shares to investments in associateson July 1, 2008 and to the disposal of certain of these available-for-sale securities.ArcelorMittal Annual Report 2008Note 12: Other AssetsOther long-term receivables consist mainly of assets related to derivative financial instruments, value-added tax (“VAT”) receivable,loans, cash guarantees and deposits.On April 30, 2008, in order to restore the public float of China Oriental on the HKSE, the Company entered into a sale and purchaseagreement with ING Bank N.V. and Deutsche Bank Aktiengesellschaft for the sale of 509,780,740 shares representing approximately17.40% of the issued share capital of China Oriental. The transaction also includes put option agreements entered into with both banks.The consideration for the disposal of the shares has been paid to Deutsche Bank and ING as collateral to secure the obligations of theCompany under the put agreements.December 31, December 31,2007 2008Revaluation of derivative financial instruments 105 240Assets in pension funds 419 491Long-term VAT receivables 298 215Collateral related to the put agreements on China Oriental — 381Other financial assets 775 773Total 1,597 2,100105

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 13: Balances and Transactions with Related PartiesTransactions with related parties, all of which are associates or joint ventures of the Company, were as follows:SalesTrade receivablesYear ended Year ended Year ended Year endedTransactions December 31, 2007 December 31, 2008 December 31, 2007 December 31, 2008Macsteel Int’l Holding & Subsidiaries 941 729 45 25I/N Kote 408 347 6 —Polski Koks 445 632 81 31Coils Lamiere Nastri (“CLN”) SPA 645 797 107 51Gonvarri Industrial SA 275 553 1 25WDI 175 106 3 —Zaklad Przetworstwa 169 240 21 5Stalprofil S.A. 111 111 13 9Lamines Marchands Europeens SA 168 165 37 5Borcelik Celik Sanayii Ticaret AS 214 315 39 —Florin Centrum 47 64 7 6Gouvauto SA 145 239 12 22GTC — 167 — 34Berg Steel Pipe Corp 110 113 — —ArcelorMittal Gonvarri SSC Slovakia 92 121 12 1Gestamp Servicios 71 70 7 3Gonvarri Productos Siderurgicos SA 67 82 11 3Bamesa Celik Servis Sanayii Ticaret AS 66 92 19 9Hierras Aplanaciones SA 65 93 9 11Gonvarri Brasil SA 62 314 22 13Noury SA 50 62 5 3Alcat SP 36 71 12 6Consolidated Wire Industries Limited 36 52 4 1Condesa Favril Sa — 136 — 4Noble 1 — 113 — 21Westfälische Drahtindustrie — 94 — 1Arcelor SSC Sverige AB — 63 — 6Glacier Trading Centre FZE — 55 — 13Other 369 415 94 65Total 4,767 6,411 567 3731During 2008, the Company granted a long-term loan to Noble International Ltd. (“Noble”) of 85. The outstanding balance payable by Noble as of December 31, 2008 is 86,for the principal and accrued interest.106

2008 Consolidated Financial Statements continuedPurchases of raw materials & othersTrade payablesYear ended Year ended Year ended Year endedTransactions December 31, 2007 December 31, 2008 December 31, 2007 December 31, 2008Polski Koks 623 490 72 21E.I.M.P 282 274 — —Forges et Acieries de Dillingen 330 129 56 41I/N Tek (Tolling charges) 136 57 31 —Peña Colorada 70 85 41 39PCI Associates (Tolling Fees) 45 — — —Eko Recycling GmbH — 50 — 1Borcelik Celik Sanyaii Ticaret AS 198 188 40 20ArcelorMittal Gonvarri SSC Slovakia 64 1 8 4ATIC Services 164 79 22 2Dillinger Hütte Saarstahl AG 103 8 24 1Cia Hispano Brasileira de Pelotizaçao SA 60 98 12 18Macarthur Coal LTD — 132 — 30SOTEG — 107 — 24Noble — 78 — 17SOMEF — 59 — 9ArcelorMittal Insurance Consultants SA — 51 — 9Other 333 505 140 106Total 2,408 2,391 446 342ArcelorMittal Annual Report 2008Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminatedin consolidation and are not disclosed in this note. Refer to note 26 for disclosure of transactions with key management personnel.107

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The principal subsidiaries of the Company in 2008 were as follows:Name of Subsidiary Abbreviation CountryFlat Carbon AmericasArcelorMittal Dofasco Inc. Dofasco CanadaArcelorMittal Lázaro Cárdenas S.A. de C.V. ArcelorMittal Lázaro Cárdenas MexicoArcelorMittal USA Inc. ArcelorMittal USA USAArcelorMittal Mines Canada Inc ArcelorMittal Mines Canada CanadaFlat Carbon EuropeArcelorMittal Atlantique et Lorraine SAS ArcelorMittal Atlantique et Lorraine FranceArcelorMittal Belgium N.V. Arcelor Steel Belgium BelgiumArcelorMittal España S.A. ArcelorMittal España SpainArcelorMittal Flat Carbon Europe SA AMFCE LuxembourgArcelorMittal Galati S.A. ArcelorMittal Galati RomaniaIndusteel Belgium S.A. Industeel Belgium BelgiumIndusteel France S.A. Industeel France FranceLong Carbon Americas and EuropeAcindar Industria Argentina de Aceros S.A. Acindar ArgentinaArcelorMittal Belval & Differdange SA ArcelorMittal Belval & Differdange LuxembourgArcelorMittal Brasil S.A. ArcelorMittal Brasil BrazilArcelorMittal Hamburg GmbH ArcelorMittal Hamburg GermanyArcelorMittal Hochfeld GmbH ArcelorMittal Hochfeld GermanyArcelorMittal las Truchas, S.A. de C.V. Sicartsa MexicoArcelorMittal Madrid S.L. ArcelorMittal Madrid SpainArcelorMittal Montreal Inc ArcelorMittal Montreal CanadaArcelorMittal Olaberría S.L. ArcelorMittal Olaberría SpainArcelorMittal Ostrava a.s. ArcelorMittal Ostrava Czech RepublicArcelorMittal Point Lisas Ltd. ArcelorMittal Point Lisas Trinidad and TobagoArcelorMittal Poland S.A. ArcelorMittal Poland PolandArcelorMittal Ruhrort GmbH ArcelorMittal Ruhrort GermanySociété Nationale de Sidérurgie S.A. Sonasid MoroccoAACISArcelorMittal South Africa Ltd. ArcelorMittal South Africa South AfricaJSC ArcelorMittal Temirtau ArcelorMittal Temirtau KazakhstanOJSC ArcelorMittal Kryviy Rih ArcelorMittal Kryviy Rih UkraineStainless SteelArcelorMittal Inox Brasil S.A. Acesita or ArcelorMittal Inox Brasil BrazilArcelorMittal Stainless Belgium AMSB BelgiumSteel Solutions and ServicesArcelorMittal International Luxembourg SA ArcelorMittal Luxembourg Luxembourg108

2008 Consolidated Financial Statements continuedNote 14: Short-Term DebtShort-term debt, including the current portion of long-term debt, consisted of the following:December 31, December 31,2007 2008Short-term bank loans and other credit facilities 3,653 4,564Current portion of long-term debt (note 15) 4,832 3,777Revaluation of interest rate hedge instruments (note 16) — 3Current portion of lease obligations (note 15) 57 65Total 8,542 8,409Short-term debt includes short-term loans, overdrafts and commercial paper.Commercial paperThe Company has a commercial paper program that was increased by €1 billion on March 26, 2008, enabling borrowingsof up to €3 billion (4,175).Note 15: Long-Term DebtLong-term debt is comprised of the following as of December 31:Year of maturity Type of interest Interest rate 1 2007 2008Corporate$3.2 billion Credit Facility 2010 Floating 2.5%-3.2% 2,700 3,181€17 billion Credit Facility 2011 – 2012 Floating 2.5%-5.7% 16,357 16,289EBRD loans 2009 – 2015 Floating 3.3%-4.7% 216 304Debenture loans 2009 – 2018 Fixed 3.4%-6.1% 2,917 4,809Other loans 2009 – 2035 Floating 1%-5.5% 1,583 1,385Other loans 2009 – 2015 Fixed 3.7%-6.4% 372 724Total Corporate 24,145 26,692AmericasSenior secured notes 2014 Fixed 9.75% 420 420Senior unsecured notes 2014 Fixed 6.5% 500 500Asset acquisition loans 2009 – 2018 Fixed/Floating 4.5%-11.4% 813 836Other loans 2009 – 2014 Fixed 5.75%-10% 101 376Other loans 2009 – 2018 Floating 2%-21% 380 249Total Americas 2,214 2,381Europe, Asia & AfricaOther loans 2009 – 2010 Fixed 3.2%-16% 259 67Other loans 2009 – 2010 Floating 3%-23% 16 88Total Europe, Asia & Africa 275 155Total 26,634 29,228Less current portion of long-term debt 4,832 3,777Total long-term debt (excluding lease obligations) 21,802 25,451Revaluation of interest rate hedge instruments (note 16) 18 —Lease obligations 2 265 216Total long-term debt, net of current portion 22,085 25,667ArcelorMittal Annual Report 20081Rates applicable to balances outstanding at December 31, 2008. The effective rate of the €17 billion Credit Facility amounts to 4.60% in 2008.2Net of current portion of 57 in 2007 and 65 in 2008.109

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Corporate€17 billion credit facilityOn January 30, 2006, the Companyentered into a €5 billion credit agreementwith a group of lenders to finance thecash portion of the offer for Arceloralong with related transaction costs(the “Initial Acquisition Facility”) anda €3.0 billion credit agreement to refinancethe previous credit facility entered intoduring 2005 (the “Refinancing Facility”).On May 23, 2006, the Company enteredinto a €2.8 billion agreement with a groupof lenders to finance the cash portion ofthe increased offer for Arcelor along withrelated transaction costs (the “RevisedAcquisition Facility”).On November 30, 2006, the Companyentered into a €17 billion credit agreement,which is comprised of a €12 billion termloan facility and a €5 billion revolving creditfacility, with a group of lenders to refinancethe Company’s Refinancing Facility andInitial and Revised Acquisition Facilitiesand Arcelor’s €4.0 billion term loan facilityand €3.0 billion revolving credit facility.All of these refinanced facilities wererepaid and cancelled in December 2006.On October 30, 2007, the maturityof the €5 billion revolving credit facilitywas extended for one additional year, toNovember 30, 2012. On December 10,2007, ArcelorMittal transferred the totalcredit facility to ArcelorMittal Finance.ArcelorMittal provided an unconditionalguarantee securing the debt. On October31, 2008, the total outstanding amountunder this credit facility was transferredto ArcelorMittal.$3.2 billion credit facilityOn April 7, 2005, the Company and certainsubsidiaries signed a five-year $3.2 billioncredit facility, which is comprised of a$1.7 billion term loan and a $1.5 billionrevolving credit facility, with a consortiumof banks.On February 6, 2007, an amendment deedwas signed to align the agreement withthe €17 billion credit facility agreementdiscussed above. On December 10, 2007,this credit facility was transferred toArcelorMittal Finance and on September 5,2008 the total outstanding amountunder this credit facility was transferredto ArcelorMittal.European Bank for Reconstructionand Development (“EBRD”) LoansThe Company has entered into threeseparate agreements with the EBRD foron-lending to its subsidiaries as follows:On November 18, 2002, as part ofthe acquisition of ArcelorMittal Galati,the Company entered into an agreementwith the EBRD for capital expendituresand working capital requirements. The loanis guaranteed by the Company and certainof its subsidiaries. The outstanding amountas of December 31, 2007 and 2008 was33 and 15, respectively.On April 4, 2006, the Company signeda 200 loan agreement with the EBRD foron-lending to ArcelorMittal Kryviy Rih.The outstanding amount of the loan was183 and 150 as of December 31, 2007and 2008, respectively.On June 15, 2007, the Company signeda 100 loan agreement with the EBRD foron-lending to ArcelorMittal Temirtau inorder to finance the overall modernizationof the coal mines operated by ArcelorMittalTemirtau in the region of Karagandawith the aim to bring them in line withinternational best practice in terms ofproductivity and health and safety.The outstanding amount under thisagreement at December 31, 2007 and2008 was nil and 100, respectively.Debenture loansDuring 2001, the former Usinor (renamedArcelorMittal France) issued €600 millionof loans in two tranches of €500 millionon April 10 and €100 million on July 31.The loans are unsecured andunsubordinated and bear interest at6.125% per annum due April 10, 2008.On April 10, 2008 the bond was repaid.During 2003, ArcelorMittal Finance issued€600 million of loans in two tranchesof €500 million on September 24 and€100 million on December 4. The loansare unsecured and unsubordinated and bearinterest at 5.125% per annum dueSeptember 24, 2010.On July 15, 2004, ArcelorMittal Financeissued €100 million principal amount ofunsecured and unsubordinated fixed ratednotes bearing interest at 5.50% per annum(issued at 101.97%) due July 15, 2014.On November 7, 2004, ArcelorMittalFinance issued €500 million principalamount of unsecured and unsubordinatedfixed rated bonds bearing interest at4.625% per annum (issued at 99.195%)due November 7, 2014.On December 10, 2004, ArcelorMittalFinance issued €100 million principalamount of unsecured and unsubordinatedfixed rated bonds bearing interest at3.395% per annum (issued at 100.00%)due December 10, 2009.On May 27, 2008, the Company issued3,000 principal amount of unsecured andunsubordinated fixed rated bonds in twotranches. The first tranche of 1,500 bearsinterest at 5.375% (issued at 99.722%)due June 2013 and the second tranche of1,500 bears interest at 6.125% (issued at99.571%) due June 2018.Debenture loans denominated in eurorepresent a total amount of €1,300 million.Other debenture loans are denominatedin U.S. dollars.110

2008 Consolidated Financial Statements continuedOther facilitiesOn July 24, 2007, ArcelorMittalFinance, together with a subsidiary,signed a five-year €500 million bilateralfacility due 2012.In 2007 and 2008, ArcelorMittal Financeentered into bilateral credit facilitiestotaling €950 million. Their proceeds maybe used for general corporate purposes.During 2008, all these credit facilitieswere transferred to ArcelorMittal. All creditfacilities remained unutilized at December31, 2008.On May 13, 2008, ArcelorMittal Financeentered into a liquidity facility througha loan that was pre-marketed to a groupof relationship lenders totaling 4,000.This credit facility has remained unutilizedand is fully available to ArcelorMittal.Their proceeds may be used for generalcorporate purposes.On February 11, 2009, ArcelorMittalannounced that it had securedcommitments from banks for twoforward start facilities totaling 4,800(the “Forward Start Facilities”), subject tocertain conditions. A 3,250 revolving creditfacility in respect of these commitmentswas entered into on February 13, 2009.A forward start facility provides a borrowerwith a committed facility to refinancean existing facility (which is not amendedand continues in force), and thereforecertainty as to the availability of fundsfor that refinancing. If drawn, the ForwardStart Facilities would effectively extend thematurities of the 4,800 principal amountof indebtedness to 2012 (from originalmaturity dates in 2009-2011).AmericasSenior Secured NotesOn March 25, 2004, Ispat Inland ULCissued Senior Secured Notes with anaggregate principal amount of 800 ofwhich 150 were floating rate notes bearinginterest at LIBOR plus 6.75% due April 1,2010 and 650 were fixed rate notesbearing interest at 9.75% (issued at99.212% to yield 9.875%) due April 1,2014 (the “Senior Secured Notes”).The Senior Secured Notes are secured byFirst Mortgage Bonds (relating to certainassets of the former Ispat Inland Inc.)originally totaling 800 and by a secondposition lien on the inventory of MittalSteel USA (renamed ArcelorMittal USA).As further credit enhancement, the SeniorSecured Notes are fully and unconditionallyguaranteed by ArcelorMittal USA, certainof its subsidiaries as well as by ArcelorMittaland certain other subsidiaries. The termsof the Senior Secured Notes place certainlimitations on the ability of ArcelorMittalUSA and its subsidiaries to incur additionalindebtedness, pay dividends or make otherdistributions and various other activities.The indenture also contains limitedcovenants that are applicable toArcelorMittal. These limitations aresubject to a number of exceptions andqualifications. The Senior Secured Notesbecame investment grade rated as ofJanuary 19, 2006. As a result, manyof the above limitations were suspended,including restrictions on paying dividends ormaking other distributions to shareholders.Senior Unsecured NotesOn April 14, 2004, ArcelorMittal USAissued 600 of senior, unsecured debtsecurities due in 2014 (the “SeniorUnsecured Notes”). The debt securitiesbear interest at a rate of 6.5% per annumand were issued at a discount of 5, which isamortized as interest expense over the lifeof the Senior Unsecured Notes. On July 22,2005, ArcelorMittal USA repurchased100 of unsecured notes leaving anoutstanding balance of 500. These bondsare fully and unconditionally guaranteedby certain wholly-owned subsidiariesof ArcelorMittal USA and, as of March 9,2007, by ArcelorMittal.Asset Acquisition LoansIn May 2005, ArcelorMittal USA acquireda coke oven battery at one of its steelplants that was previously leased undera capital lease. The related loan amountedto 118 and 101 as of December 31,2007 and 2008, respectively. CertainOperating Subsidiaries in Brazil enteredinto loans mainly with Banco Nacional deDesenvolvimento and Banco Bradesco S.A.for a total amount of 695 in orderto finance expansion of capacity.Together the outstanding loan amountwas 813 and 836 including accruedinterest as of December 31, 2007 and2008, respectively.Other loansThe other loans relate mainly to loanscontracted by ArcelorMittal Inox Brasil SA,ArcelorMittal Brasil and Vega do Sul withdifferent counterparties. On April 24,2008, ArcelorMittal Brasil entered intoa BRL 600 million loan agreement due2010 and bearing a floating interest rate.In 2008, the acquisition of IndustriasUnicon included the assumption ofa 232 principal amount of loan maturingbetween 2009 and 2012 of which17% bearing fixed rates and 83% bearingfloating interest rates.Europe, Asia & AfricaArcelorMittal Annaba had a 150 ten-yearterm loan agreement with the governmentof Algeria. The loan is guaranteed byArcelorMittal and was repaid in full duringthe first quarter of 2007.In 2007, the acquisition of Rongchengincluded the assumption of 66 principalamount of borrowings maturing between2008 and 2010 of which 40% bearsfixed interest rates and 60% bears variableinterest at rates based on 6 months LIBOR.In 2007, the acquisition of Rozak includedthe assumption of 267 principal amountof borrowings maturing between 2008and 2010 and bears interest at fixedinterest rates.ArcelorMittal Annual Report 2008111

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)OtherCertain debt agreements of the Company or its subsidiaries contain certain restrictive covenants. Among other things,these covenants limit encumbrances on the assets of ArcelorMittal and its subsidiaries, the ability of ArcelorMittal’s subsidiariesto incur debt and ArcelorMittal’s ability to dispose of assets in certain circumstances. Certain of these agreements also requirecompliance with financial maintenance tests, including financial ratios and minimum levels of net worth. The Company is in compliancewith the financial covenants contained within the (amended) agreements related to all of its borrowings.Scheduled maturities of long-term debt including lease obligations at December 31, 2008 are as follows (without takinginto consideration the Forward Start Facilities announced on February 11, 2009):2009 3,8422010 8,1192011 3,9282012 7,7122013 1,871Subsequent years 4,037Total 29,509The following table presents the structure of the Company’s short-term debt, long-term debt and cash in original currencies:In original currency as of December 31, 2008Total USD EUR USD BRL CAD Other (in $)Short-term debt and current portion of long-term debt 8,409 4,311 1,666 315 44 572Long-term debt 25,667 9,332 11,673 1,428 66 360Cash 7,587 3,173 1,546 460 6 1,424As a part of the Company’s overall risk and cash management strategies, several loan agreements have been swapped fromtheir original currencies to other currencies.At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments is:December 31, 2007 December 31, 2008Carrying amount Fair value Carrying amount Fair valueInstruments payable bearing interest at fixed rates 4,596 4,683 6,914 5,150Instruments payable bearing interest at variable rates 22,360 22,315 22,595 17,709112

2008 Consolidated Financial Statements continuedNote 16: Financial Instruments and Credit RiskThe Company enters into derivative financial instruments to manage its exposure to fluctuations in interest rates, exchange ratesand the price of raw materials, energy and emission rights allowances arising from operating, financing and investment activities.Fair values versus carrying amountsThe estimated fair values of certain financial instruments have been determined using available market information or other valuationmethodologies that require considerable judgment in interpreting market data and developing estimates.Cash and cash equivalents, restricted cash, short-term investments and trade receivables are included in the “Loans and receivables”category, which is measured at amortized cost. Other current assets include derivative instruments of 303 and 560 as of December31, 2007 and 2008, respectively, which are classified as “Financial assets at fair value through profit or loss”. Other investmentsare classified as “Available-for-sale” with gains or losses arising from changes in fair value recognized in equity. Other assets areclassified as “Financial assets at fair value through profit or loss”.Except for derivative financial instruments, amounting to 674 and 1,473 as of December 31, 2007 and 2008, respectively,which are classified as “Financial liabilities at fair value through profit or loss”, financial liabilities are classified as “Financial liabilitiesmeasured at amortized cost”.The Company’s short and long-term debt consists of debt instruments which bear interest at fixed rates and variable rates tiedto market indicators. The fair value of fixed rate debt is based on estimated future cash flows, which are discounted using currentmarket rates for debt with similar remaining maturities and credit spreads.Portfolio of derivativesThe Company manages the counter-party risk associated with its instruments by centralizing its commitments and by applyingprocedures which specify, for each type of transaction and underlying, risk limits and/or the characteristics of the counter-party.The Company does not generally grant to or require from its counter-parties guarantees over the risks incurred.Allowing for exceptions, the Company’s counter-parties are part of its financial partners and the related market transactionsare governed by framework agreements (mainly of the International Swaps and Derivatives Association agreements whichallow netting in case of counter-party default).The portfolio associated with derivative financial instruments as of December 31, 2007 is as follows:AssetsLiabilitiesNotional amount Fair value Average rate* Notional amount Fair value Average rate*Interest rate swaps - fixed rate borrowings / loans 1,311 4 4.31% 1,108 (16) 3.83%Interest rate swaps - fixed rate variable / variable — — 143 (2)Total interest rate instruments 4 (18)Exchange rate instruments:Forward purchase of contracts 304 32 9,672 (218)Forward sale of contracts 3,246 45 1,409 (16)Exchange option purchases 8,720 111 — —Exchange options sales — — 5,682 (258)Total exchange rate instruments 188 (492)Raw materials (base metal), freight, energy,emission rights:Term contracts sales 199 20 82 (4)Term contracts purchases 554 89 1,229 (151)Options sale / purchase 69 2 121 (9)Total raw materials (base metal), freight, energy,emission rights 111 (164)Total 303 (674)ArcelorMittal Annual Report 2008* The average rate is determined for fixed rate instruments on the basis of the U.S. dollar and foreign currency rates and for the variable rate instruments generallyon the basis of Euribor or Libor.113

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The portfolio associated with derivative financial instruments as of December 31, 2008 is as follows:AssetsLiabilitiesNotional amount Fair value Average rate* Notional amount Fair value Average rate*Interest rate swaps - fixed rate borrowings / loans 1,320 42 4.11% 264 (3) 5.37%Other interest rate instrument 135 — — —Total interest rate instruments 42 (3)Exchange rate instruments:Forward purchase of contracts 954 95 649 (131)Forward sale of contracts 6 1 1,168 (106)Currency swap purchases 2,888 36 7,468 (399)Currency swap sales 6,672 243 6,239 (80)Exchange option purchases 1,818 37 — —Exchange options sales — — 1,941 (33)Total exchange rate instruments 412 (749)Raw materials (base metal), freight, energy,emission rights:Term contracts sales 81 9 174 (79)Term contracts purchases 197 50 1,342 (540)Swaps using raw materials pricing index 10 — 35 (15)Options sale / purchase 144 47 282 (87)Total raw materials (base metal), freight, energy,emission rights 106 (721)Total 560 (1,473)* The average rate is determined for fixed rate instruments on the basis of the U.S. dollar and foreign currency rates and for the variable rate instruments generallyon the basis of Euribor or Libor.Interest rate riskThe Company utilizes certain instruments to manage interest rate risks in order to optimize its financial results. Interest rate instrumentsallow the Company to borrow long-term at fixed or variable rates, and to swap the rate of this debt either from the start or duringthe period of the loan. The Company and its counter party exchange, at predefined intervals, the difference between the agreed fixedrate and the variable rate, calculated on the basis of the notional amount of the swap. Similarly, swaps may be used for the exchangeof variable rates against other variable rates.Interest rate derivatives used by the Company to manage changes in the value of fixed rate loans qualify as fair value hedges.Exchange rate riskThe Company is mainly exposed to changes in values arising from foreign exchange rate fluctuations of raw materials,energy and freight. Normally, the Company invoices its customers in the functional currency of its Operating Subsidiaries.The Company uses forward purchases and sales of foreign currency, “plain vanilla” options, and foreign currency swaps to hedgeforeign currency transactions at the majority of its subsidiaries. The Company also uses these instruments at the corporate levelto hedge debt recorded in foreign currency other than the functional currency or the balance sheet risk incurred on certain monetaryassets denominated in a foreign currency other than the functional currency.The general policy of the Company is to hedge its exposure to exchange rate risk transactions. However, as an exceptionto this general policy, for certain currencies and for risks and amounts that are clearly identified and authorized by management,the Company may either hedge in anticipation of future transactions or not hedge transactional risks. To hedge the above exposureto exchange rate risk, the Company had 2.5 billion of short positions in forward contracts and option arrangements against othercurrencies as of December 31, 2008.114

2008 Consolidated Financial Statements continuedLiquidity riskThe following are the contractual maturities of financial liabilities, including estimated interest payments and excludingthe impact of netting agreements:December 31, 2007Carrying Contractualamount cash flows Less than 1 year 1-2 years 2-5 years More than 5 yearsNon-derivative financial liabilitiesBonds / notes over 100 (3,839) (4,875) (1,111) (169) (1,299) (2,296)Loans over 100 (20,216) (22,476) (6,454) (4,158) (11,864) —Trade and other payables (13,991) (13,991) (13,991) — — —Other non-derivative financial liabilities (7,903) (9,074) (2,890) (923) (3,923) (1,338)Total (45,949) (50,416) (24,446) (5,250) (17,086) (3,634)Derivative financial liabilitiesInterest rate instruments (18) (18) (5) (5) (8) —Foreign exchange contracts (492) (492) (426) (35) (31) —Other commodities contracts (164) (164) (156) (6) (2) —Total (674) (674) (587) (46) (41) —December 31, 2008Carrying Contractualamount cash flows Less than 1 year 1-2 years 2-5 years More than 5 yearsNon-derivative financial liabilitiesBonds / notes over 100 (5,730) (7,722) (477) (1,458) (3,966) (1,821)Loans over 100 (25,011) (29,391) (9,675) (11,318) (8,060) (338)Trade and other payables (10,501) (10,501) (10,501) — — —Other non-derivative financial liabilities (3,335) (3,582) (1,866) (876) (651) (189)Total (44,577) (51,196) (22,519) (13,652) (12,677) (2,348)Derivative financial liabilitiesInterest rate instruments (3) (3) (3) — — —Foreign exchange contracts (750) (750) (461) (97) (192) —Other commodities contracts (720) (720) (653) (36) (31) —Total (1,473) (1,473) (1,117) (133) (223) —ArcelorMittal Annual Report 2008Cash flow hedgesThe following table presents the periods in which cash flows hedges are expected to mature:December 31, 2007(liabilities) (outflows)/inflows (outflows)/inflows (outflows)/inflows (outflows)/inflowsCarrying amount 3 months and less 3-6 months 6-12 months 1-2 YearsForward exchange contracts (420) (305) (53) (27) (35)Commodities and emission rights (86) (50) (21) (16) 1Total (506) (355) (74) (43) (34)December 31, 2008(liabilities) (outflows)/inflows (outflows)/inflows (outflows)/inflows (outflows)/inflows (outflows)/inflowsCarrying amount 3 months and less 3-6 months 6-12 months 1-2 Years More than 2 yearsForward exchange contracts 16 15 — 1 — —Commodities (310) (156) (24) (83) (47) —Emission rights (127) (33) (1) (20) (20) (53)Total (421) (174) (25) (102) (67) (53)115

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The following table presents the periods in which cash flows hedges are expected to impact the statement of income:December 31, 2007(liabilities) (expenses)/income (expenses)/income (expenses)/income (expenses)/incomeCarrying amount 3 months and less 3-6 months 6-12 months 1-2 YearsForward exchange contracts (420) (102) (79) (74) (165)Commodities and emission rights (86) (38) (30) (21) 3Total (506) (140) (109) (95) (162)December 31, 2008(liabilities) (expenses)/income (expenses)/income (expenses)/income (expenses)/income (expenses)/incomeCarrying amount 3 months and less 3-6 months 6-12 months 1-2 Years More than 2 yearsForward exchange contracts 16 14 1 1 — —Commodities (310) (15) (160) (113) (22) —Emission rights (127) (33) (1) (20) (20) (53)Total (421) (34) (160) (132) (42) (53)Several forward exchange and options contracts have been unwound during 2008. The effective portion recorded in equityand amounting to 2,678 (at the year-end balance sheet rate) is expected to be recycled in the statement of income alongwith the recording of the hedged items as follows:Year2009 7782010 7162011 6472012 537Total 2,678AmountThe ineffective portion amounted to 349 and has been recorded as operating income.Raw materials, freight, energy risks and emission rightsThe Company uses financial instruments such as forward purchases, options and swaps for certain commodities in order to managethe volatility of prices of certain raw materials and energy. The Company is exposed to risks in fluctuations in prices of raw materials(including base metals such as zinc, nickel, aluminum, pewter and copper) and energy, both through the purchase of raw materialsand through sales contracts.Fair values of raw material instruments are as follows:December 31, December 31,2007 2008Base metals, freight (79) (216)Energy (oil, gas, electricity), emission rights 12 (399)(67) (615)Assets associated with raw materials, energy, freight and emission rights 91 106Liabilities associated with raw materials, energy, freight and emission rights (158) (721)Total (67) (615)Emission rightsPursuant to the application of the European Directive 2003/87/EC of October 13, 2003, establishing a scheme for emission allowancetrading, the Company enters into certain types of derivatives (cash purchase and sale, forward transactions and options) in order toimplement its management policy for associated risks. As of December 31, 2007 and 2008, the Company had a net notional positionof 29 with a net fair value of 14 and a net notional position of 171 with a net fair value of (32), respectively.116

2008 Consolidated Financial Statements continuedCounterparty riskThe Company’s treasury department monitors various market data regarding the credit standings and overall reliability of the financialinstitutions for all countries where the Company’s subsidiaries operate. The choice of the financial institution for the cash poolingtransaction must be approved by the treasury department. Counterparty risk related to customers, customer credit terms andreceivables is discussed in note 5.Sensitivity analysisForeign currency sensitivityThe following table details the Company’s sensitivity as it relates to derivative financial instruments to a 10% strengthening anda 10% weakening in the U.S. dollar against the other currencies to which the Company is exposed. The sensitivity analysis doesnot include non-derivative foreign currency-denominated monetary items. A positive number indicates an increase in profitor loss and other equity where a negative number indicates a decrease in profit or loss and other equity.December 31, 2007 December 31, 2008Income Other equity Income Other equity10% strengthening in U.S. dollar 129 933 288 (120)10% weakening in U.S. dollar (40) (995) (288) 120Cash flow sensitivity analysis for variable rate instrumentsA change of 100 basis points (“bp”) in interest rates during the period would have increased (decreased) profit or loss by the amountsshown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.December 31, 2007Interest rateVariable rate swaps/Forward Cash flowinstrument rate agreements sensitivity (net)100 bp increase (179) 1 (178)100 bp decrease 179 (1) 178ArcelorMittal Annual Report 2008December 31, 2008Interest rateVariable rate swaps/Forward Cash flowinstrument rate agreements sensitivity (net)100 bp increase (153) (19) (172)100 bp decrease 153 20 173Base metals, energy, freight, emissions rightsThe following table details the Company’s sensitivity to a 10% increase and decrease in the price of the relevant base metals,energy, freight, and emissions rights. The sensitivity analysis includes only outstanding, un-matured base metal derivativeinstruments both held for trading as fair value through statement of income and those designated in hedge accounting relationships.December 31, 2007 December 31, 2008Other equity cashOther equity cashflow hedgingflow hedgingIncome reserves Income reserves+10% in prices 41 112 31 42-10% in prices (41) (112) (31) (42)117

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 17: EquityOn August 28, 2007, at the extraordinarygeneral meeting of Mittal Steel theshareholders approved the merger ofMittal Steel into the former ArcelorMittal,a wholly-owned subsidiary of Mittal Steel.This merger was effective on September 3,2007 and was the first step in thetwo-step merger process between MittalSteel and Arcelor. Holders of Mittal Steelshares automatically received one newlyissued share of the former ArcelorMittalfor every one Mittal Steel share on thebasis of their respective holdings.The Mittal Steel Class A common sharesand the Mittal Steel Class B commonshares have disappeared in this merger.On November 5, 2007, at theextraordinary general meeting ofArcelorMittal and Arcelor shareholdersapproved the merger of formerArcelorMittal into Arcelor effectiveon November 13, 2007. In this secondstep in the two-step merger process,a holder of the former ArcelorMittal sharesreceived one newly issued Arcelor sharefor every one former ArcelorMittal share(the “Exchange Ratio”). This Exchange Ratiofollowed the completion of a share capitalrestructuring of Arcelor pursuant to whicheach seven pre-capital restructuring sharesof Arcelor were exchanged for eightpost-capital restructuring shares of Arcelor.After the second step merger Arcelorwas renamed ArcelorMittal.In addition, new share capital wasapproved of €6.4 billion represented by1,470 million shares without nominal valuefor a period ending on November 5, 2012.At the extraordinary general meeting heldon May 13, 2008, the shareholdersapproved an increase of the authorizedshare capital of ArcelorMittal by€644 million represented by 147 millionshares, or approximately 10% ofArcelorMittal’s outstanding capital.The new total authorized share capital is€7.1 billion represented by 1,617 millionshares without nominal value.The issued corporate share capital is€6.3 billion (9,269) represented byapproximately 1,449 million shares withoutnominal value of which approximately1,422 million and 1,366 million shareswere outstanding as of December 31,2007 and 2008, respectively.Employee Share Purchase PlanIn May 2008, the Company adopted anEmployee Share Purchase Plan (“ESPP”)as part of a global employee engagementand participation policy. The plan aimsto strengthen the link between theCompany and its employees and to alignthe interests of the Company employeesand shareholders. The main features ofthe plan, which was approved by the annualgeneral shareholders’ meeting held onMay 13, 2008, are the following:• The plan was offered to 216,311employees in 22 jurisdictions.The Company offered a maximum totalnumber of 2,500,000 treasury shares(0.2% of issued shares). A total of955,820 shares were subscribed, whichare held in treasury for the employees.The implementation of the plan was splitinto two tranches (in September andNovember 2008). The subscription pricefor the first tranche was $57.05 and$21.71 for the second tranche,before discounts;• Pursuant to the plan, eligible employeescould apply to purchase a number ofshares not exceeding that number ofwhole shares equal to the lower of (1)200 shares and (2) the number of wholeshares that may be purchased for fifteenthousand U.S. dollars (rounded downto eliminate fractional shares).The purchase price is equal to the averageof the opening and the closing prices of theCompany shares trading on the New YorkStock Exchange on the exchange dayimmediately preceding the opening ofthe relevant subscription period, whichis referred to as the “reference price,”less a discount equal to:a) 15% of the reference price for apurchase order not exceeding the lowerof (1) 100 shares, and (2) theimmediately lower whole number ofshares corresponding to an investmentof seven thousand five hundred U.S.dollars; and thereafter;b) 10% of the reference price for anyadditional acquisition of shares up toa number of shares (including those inthe first cap) not exceeding the lowerof (x) 200 shares, and (y) theimmediately lower whole number ofshares corresponding to an investmentof fifteen thousand U.S. dollars.Shares purchased under the plan aresubject to a three-year lock-up period,except for the following exceptions:permanent disability of the employee,termination of the employee’s employmentwith the Company or death of theemployee. At the end of this lock-upperiod, the employees will have a choiceeither to sell their shares (subject tocompliance with the Company’s insiderdealing regulations) or keep their sharesand have them delivered to their personalsecurities account or make no election,in which case shares will be automaticallysold. Shares may be sold or released withinthe lock-up period in the case of early exitevents. During this period, and subjectto the early exit events, dividends paid onshares are held for the employee’s accountand accrue interest. Employee shareholdersare entitled to any dividends paid by theCompany after the settlement date andthey are entitled to vote their shares.118

2008 Consolidated Financial Statements continuedDividendsCalculations to determine the amountsavailable for dividends are based onArcelorMittal’s Luxembourg statutoryaccounts, which are different from itsconsolidated accounts. ArcelorMittal hasno significant manufacturing operationsof its own. Accordingly, it can only paydividends or distributions to the extentit is entitled to receive cash dividenddistributions from its subsidiaries’recognized gains, from the sale of itsassets or records share premium fromthe issuance of (new) common shares.Dividends are declared in U.S. dollars andare payable in either U.S. dollars or in euros.On September 27, 2006, Mittal Steelannounced that its Board of Directorshad agreed upon, and the shareholderssubsequently approved, a new dividendand cash distribution policy. The new policyaimed to return 30% of Mittal Steel’s prioryear annual net income to shareholdersannually through an annual base dividend,supplemented by share buy-backs. Theannual base dividend was $1.30 per share.The dividend for 2007 amounted to 1,826($1.30 per share) and was paid quarterly($0.325 cents per share) on March 15,2007, June 15, 2007, September 17,2007 and December 17, 2007.On November 14, 2007, ArcelorMittalannounced its Board of Directors hadrecommended increasing the Company’sbase dividend by 20 cents from $1.30 to$1.50 per share. The policy reconfirmsa mechanism that will allow ArcelorMittalto honor its commitment of returning30% of net income to shareholdersthrough an annual base dividend,supplemented by additional sharebuy-backs. Based on the annual net incomeattributable to equity holders of the parentfor the year ended December 31, 2007of 10,368, ArcelorMittal would returna total of 3,068 to shareholders bypaying a cash dividend of 2,068 andimplementing a 1,000 share buy-back.This distribution policy was implementedas of January 1, 2008.The dividend for 2008 amounted to 2,068($1.50 per share) and was paid quarterly($0.375 cents per share) on March 17,2008, June 16, 2008, September 15,2008 and December 15, 2008.On February 10, 2009, ArcelorMittal’sBoard of Directors recommended reducingthe quarterly dividend payment to$0.1875 in 2009. The new quarterlydividend payments will take place on March16, 2009, June 15, 2009, September 14,2009 and December 14, 2009.Treasury stockOn April 2, 2007, ArcelorMittal announcedthe start of a share buy-back programdesigned to achieve the 30% distributionpay-out commitment described above.This share buy-back program wascompleted on September 4, 2007 as the590 was reached. ArcelorMittal purchasedan aggregate of 9,513,960 Mittal SteelClass A common shares and ArcelorMittalshares under the program.On June 12, 2007, ArcelorMittalannounced the start of a share buy-backprogram for up to 27 million shares,for cancellation in due course. This sharebuy-back program was designed to offsetthe issuance of 27 million shares inconnection with ArcelorMittal’s mandatoryoffer for ArcelorMittal Brasil. This sharebuy-back program was completed onDecember 13, 2007. The shares wererepurchased at an average price of€50.15 ($72.39) per share and fora total amount of €1.4 billion (1,955).On November 5, 2007, ArcelorMittalannounced the start of a 1.0 billion sharebuy-back program valid for a period of18 months or until the date of its renewalby a resolution of the general meeting ofshareholders if such renewal date is priorto such period.This program was completed onFebruary 19, 2008 with the acquisitionof 14.6 million shares from Carlo TassaraInternational S.A. (“Carlo Tassara”) ata price of €46.60 ($68.70) per share fora total amount of €680 million (1,003).Carlo Tassara is controlled by theZygmunt Lubicz-Zaleski Foundation.Mr Romain Zaleski was a member ofthe ArcelorMittal Board of Directorsat the time of this transaction.On December 12, 2007, ArcelorMittalannounced the start of a share buy-backprogram for up to 44 million shares.This program has a two-year term, andshares bought under this program maybe used in potential future corporateopportunities or for cancellation.The Company acquired approximately130,000 shares under this programthrough December 31, 2007, for a totalamount of 9 at an average price of$70.38 per share.During the year 2008, ArcelorMittalacquired approximately 43.8 million sharesunder the 44 million shares program fora total amount of 3,440 at an average priceof $78.58 per share. Of this amount,10.4 million shares were acquired onFebruary 19, 2008 from Carlo Tassaraat a price of €46.40 ($68.70) per share.In total, 25 million shares were acquiredfrom Carlo Tassara.As of December 31, 2008, ArcelorMittalhad acquired approximately 43.9 millionshares under the 44 million share buy-backprogram for a total amount of 3,449at an average price of $78.56 per share.As of December 31, 2008, ArcelorMittalowned 82,824,069 treasury shares.ArcelorMittal Annual Report 2008119

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Share Retention AgreementsArcelorMittal Temirtau has entered intoshare retention agreements with theEBRD and the International FinanceCorporation (“IFC”). Until the date onwhich the EBRD and IFC loans have beenrepaid in full, ArcelorMittal Temirtau’sholding company or its nominee shall not,unless EBRD and IFC otherwise agree inwriting, transfer, assign, pledge, disposeor encumber 67% of its share holding inArcelorMittal Temirtau.The Company has pledged 40% of theoutstanding shares of ArcelorMittal Galatito AVAS (the governmental body inRomania responsible for privatization) inrelation to the Company’s ten-year capitalexpenditure commitment at ArcelorMittalGalati which commenced November 2001.The Company has entered into a sharepledge agreement with AVAS for 100%of its shareholding in ArcelorMittal TubularProducts Roman’s share capital with respectto its investment commitment from 2003to February 1, 2014.The Company has entered into a sharepledge agreement with APAPS for 1.4%of its share holding in ArcelorMittalHunedoara’s share capital with respectto its commitment to pay the purchaseprice for ArcelorMittal Hunedoara.The Company has also entered intoa share pledge agreement with APAPS for58% of its share holding in ArcelorMittalHunedoara’s share capital towards its capitalexpenditure commitments for five yearscommencing April 2004.The Company is required to establisha registered pledge in favor of the StateTreasury of Poland for the number of theCompany’s shares of ArcelorMittal Poland,which is 100% owned by ArcelorMittalHoldings AG, which is in turn 100% ownedby the Company, equal to the differencebetween: (i) the number of sharesof ArcelorMittal Poland held by theCompany and (ii) 50% of the sharesof ArcelorMittal Poland plus one share.As a result, the number of the sharespledged equals to 124,828,159 shares,which constitutes about 46.8% of theshares of ArcelorMittal Poland.Stock Option PlanIn 1999, the Company established theArcelorMittal Global Stock Option Plan(“ArcelorMittalShares”). Under the termsof ArcelorMittalShares, ArcelorMittal maygrant options to purchase common stockto senior management of ArcelorMittal andits associates for up to 20,000,000 sharesof common stock (increased from6,000,000 shares to 10,000,000 sharesof common stock after shareholderapproval in 2003 and increased from10,000,000 shares to 20,000,000 sharesof common stock after shareholderapproval in 2006). The exercise priceof each option equals not less than thefair market value of ArcelorMittal stockon the grant date, with a maximum termof 10 years. Options are granted at thediscretion of the ArcelorMittal’sAppointments, Remuneration andCorporate Governance Committee or itsdelegate. The options vest either ratablyupon each of the first three anniversaries ofthe grant date, or, in total, upon the death,disability or retirement of the participant.On September 1, 2006, ArcelorMittalgranted 3,999,223 options to a groupof key employees at an exercise priceof $33.755. The options expire onSeptember 1, 2016.On August 2 and December 11, 2007,ArcelorMittal granted 5,965,200 and13,000 options, respectively, to a groupof key employees at an exercise priceof $64.30 and $74.535, respectively.The options expire on August 2, 2017,and on December 11, 2017, respectively.On August 5, November 10 and December15, 2008, ArcelorMittal granted7,255,950, 20,585 and 48,000 options,respectively, to a group of key employeesat an exercise price of $82.57, $22.245and $23.745, respectively. The optionsexpire on August 5, November 10and December 15, 2018, respectively.In addition, Arcelor had stock option plans(grants for 2003, 2004, 2005, 2006)with 1,346,160 options outstanding priorto step-two of the two-step merger.In connection with the merger of Arcelorand Mittal Steel, each Arcelor stock optionwas provided the right to purchase orsubscribe, as applicable, a number of sharesequal to seven pre-capital restructuringoptions to purchase underlying sharesin exchange for eight post-capitalrestructuring options to purchaseunderlying shares. No other modificationsto the initial Arcelor stock option grantswere made. This resulted in the issuanceof 1,538,469 options to purchase commonstock of ArcelorMittal, with an exerciseprice ranging from €8.46 ($11.78) to€30.13 ($41.93) per option.The Company determines the fair valueof the options at the date of grant usingthe Black-Scholes model. The fair valuesfor options and other share-basedcompensation is recorded as an expensein the consolidated statement of incomeover the relevant vesting or serviceperiods, adjusted to reflect actual andexpected levels of vesting.120

2008 Consolidated Financial Statements continuedThe fair value of each option grant to purchase ArcelorMittal common shares is estimated on the date of grant usingthe Black-Scholes option pricing model with the following weighted average assumptions (based on year of grant):Year of grant - 2007 Year of grant - 2008Exercise price per share $64.30 – 74.535 $82.57 – 22.245 – 23.745Dividend yield 2.03% 1.82% – 6.74% – 6.32%Expected annualized volatility 142% 111% – 131% – 139%Discount rate – bond equivalent yield 4.91% 4.02% – 3.76% – 2.52%Weighted average share price $64.30 – 74.535 $82.57 – 22.245 – 23.745Expected life in years 6 6Fair value of options (per share) $52 $62 – 13 – 15The expected life of the options is estimated by observing general option holder behavior and actual historical lives of ArcelorMittalstock option plans. In addition, the expected annualized volatility has been set by reference to the implied volatility of optionsavailable on ArcelorMittal shares in the open market, as well as, historical patterns of volatility.The compensation expense recognized for stock option plans was 108 and 362 for each of the years ended December 31, 2007and 2008, respectively.Option activity with respect to ArcelorMittalShares is summarized below as of and for each of the years ended December 31, 2007and 2008:Range of Weighted averageexercise prices Exercise priceNumber of options (per options) (per option)Outstanding, December 31, 2006 8,450,968 2.26 – 33.76 28.27Granted 5,978,200 64.30 – 74.535 64.32Exercised (2,129,255) 2.26 – 33.76 25.94Cancelled (222,566) 28.75 – 33.76 32.20Forfeitures (36,378) 11.94 – 33.76 30.61Effect of legal merger 1,538,469 12.46 – 44.35 43.28Outstanding, December 31, 2007 13,579,438 2.26 – 74.535 46.15Granted 7,324,535 22.245 – 82.57 82.01Exercised (954,844) 2.26 – 64.30 31.88Cancelled (347,034) 2.26 – 82.57 51.28Forfeitures (43,629) 28.75 – 64.30 43.35Outstanding, December 31, 2008 19,558,466 2.26 – 82.57 60.01Exercisable, December 31, 2008 6,011,214 2.26 – 82.57 39.75Exercisable, December 31, 2007 2,595,164 2.26 – 64.30 24.49ArcelorMittal Annual Report 2008121

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The following table summarizes information about total stock options of the Company outstanding as of December 31, 2008:Options OutstandingWeighted averageOptions exercisableExercise prices (per option) Number of options contractual life (in years) (number of options)82.57 7,201,250 9.59 13,50074.535 13,000 8.95 4,33364.30 5,729,402 8.59 1,960,91341.93 1,445,757 4.50 —33.76 2,739,507 7.68 1,671,50328.75 1,737,997 6.65 1,737,99723.745 48,000 9.96 —22.245 20,585 9.87 —19.69 11,429 3.50 11,42915.96 29,373 2.50 29,37311.78 17,622 1.50 17,62211.94 186,099 0.71 186,0998.57 165,100 1.42 165,1002.26 213,345 3.27 213,345$2.26 – 82.57 19,558,466 8.15 6,011,214For the purpose of calculating earnings per share, diluted weighted average common shares outstanding excludes 5 millionand 9 million potential common shares from stock options outstanding for the years ended December 31, 2007 and 2008,respectively, because such stock options are anti-dilutive.Note 18: Financial Income and ExpenseFinancial income and expense recognized in the years ended December 31, 2007 and 2008 is as follows:2007 2008Recognized in profit and lossInterest expense (2,174) (2,516)Interest income 577 497Net gain (loss) on derivative instruments 431 (177)Net foreign exchange result and others 239 (156)Total (927) (2,352)Recognized in equity (Company share)Net change in fair value of available-for-sale financial assets 569 (78)Effective portion of changes in fair value of cash flow hedge (336) 1,844Foreign currency translation differences for foreign operations 3,220 (6,122)Total 3,453 (4,356)Interest expense includes interest on borrowings, interest cost on defined benefit obligations and bank fees.Interest on borrowings amounted to 1,839 and 2,044 for the year ended December 31, 2007 and 2008, respectively.122

2008 Consolidated Financial Statements continuedNote 19: Income TaxIncome tax expenseThe breakdown of the income tax expense (benefit) for each of the years ended December 31, 2007 and 2008,respectively, is summarized as follows:Total current income tax expense 2,544 2,494Total deferred tax expense (benefit) 494 (1,396)Total income tax expense 3,038 1,098The following table reconciles the income tax expense (benefit) to the statutory tax expense as calculated:Year endedYear endedDecember 31, December 31,2007 2008Year endedYear endedDecember 31, December 31,2007 2008Net income: 10,368 9,399Minority interest 1,482 1,040Income from investments in associates and joint ventures (985) (1,653)Income tax expense 3,038 1,098Income before tax and income from investments in associates and joint ventures 13,903 9,884Tax at the domestic rates applicable to profits in the countries 3,926 1,392Permanent items (318) (540)Benefit arising from interest in partnership (51) (21)Rate changes (209) (151)Net change in measurement of deferred tax assets 103 (410)Re-characterization of capital loss to ordinary loss — —Benefit of tax holiday (27) (7)Effects of foreign currency translation (297) 728Tax deduction (105) —Tax credits (14) (95)Other taxes 67 177Others (37) 25Income tax expense 3,038 1,098ArcelorMittal Annual Report 2008The 2008 permanent items of (540) result from deemed deductions on taxable income of (979), tax expense relating to interestrecaptures of 184, tax expense of 177 relating to non-deductible provisions and tax expense of 78 relating to other permanent items.The 2007 permanent items of (318) result from deemed deductions on taxable income of (347), income tax expense of98 on inter-company dividends and share transfers, and other taxable income of (69) relating to other permanent items.The 2008 tax benefit from rate changes of (151) mainly results from the decrease of corporate income tax rates in Kazakhstan,Luxembourg, South Africa and Russia. The 2007 tax benefit from rate changes of (209) results from the decrease of corporateincome tax rates in Canada, Czech Republic, Germany and Morocco.The 2008 net change in measurement of deferred tax assets of (410) primarily consists of a net tax benefit of 295 for recognitionof acquired deferred tax assets and other net tax benefit of 115, mainly relating to recognized deferred tax assets for not acquireddeferred tax assets, partly offset by non-recognition of deferred tax assets for losses of the year.The 2007 net change in measurement of deferred tax assets of 103 primarily consists of a tax benefit of 260 for acquired deferredtax assets, a tax expense of 192 for unrecognized net operating losses relating to the legal merger of Arcelor and Mittal Steeland other net tax expense of 171, mainly relating to deferred tax assets not recognized for losses of the year.123

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The effects of foreign currency translation of 297 and 728 at December 31, 2007 and 2008, respectively, pertain to certainentities with the U.S. dollar as functional currency and the local currency for tax purposes.The tax deduction of 105 in 2007 relates to federal governmental incentives granted to CST in Brazil as part of a programto promote the development of the Brazilian northeast region.The 2008 tax credits of 95 are mainly attributable to our Operating Subsidiaries in Spain. They relate to credits claimed on researchand development, credits on investment and to tax sparing credits.Other taxes include withholding taxes on dividends including Secondary Taxation on Companies (“STC”), which is a tax leviedon dividends declared by South African companies. STC is not included in the computation of current or deferred tax as theseamounts are calculated at the statutory company tax rate on undistributed earnings. On declaration of a dividend, the South AfricanOperating Subsidiary includes the STC tax in its computation of the income tax expense. If the South African Operating Subsidiarydistributed all of its undistributed retained earnings of 2,978 million and 3,015 million in 2008 and 2007, respectively, it wouldbe subject to additional taxes of 271 million and 274 million, respectively. STC on dividends declared in 2008 and 2007 were31 million and 67 million, respectively.Others of (37) in 2007 consists of a tax expense of 110, due to a change in Mexican tax law, a tax expense of 92 for deferredtax liabilities recorded on investments, a tax benefit of 193 due to a release of tax liabilities following the finalization of tax audits,and other tax benefits of 46.Tax agreementsCertain agreements relating to acquisitions and capital investments undertaken by the Company, provides reduced tax rates,or, in some cases exemption from income tax. Such arrangements expire over various fiscal years through 2014.The net deferred tax benefit (expense) recorded directly to equity was 286 and (789) as of December 31, 2007 and 2008,respectively. The net current tax benefit (expense) recorded directly to equity was 119 and (67) as of December 31, 2007and 2008, respectively.The origin of deferred tax assets and liabilities is as follows:Assets Liabilities Net2007 2008 2007 2008 2007 2008Intangible assets 45 175 (665) (1,211) (620) (1,036)Property, plant and equipment 493 237 (10,027) (9,775) (9,534) (9,538)Inventories 287 554 (364) (470) (77) 84Available-for-sale financial assets — — (52) (14) (52) (14)Financial instruments 222 77 (62) (67) 160 10Other assets 172 98 (151) (1,530) 21 (1,432)Provisions 1,828 2,748 (446) (574) 1,382 2,174Other liabilities 651 884 (60) (323) 591 561Tax losses carried forward 1,659 3,164 — — 1,659 3,164Tax credits 214 424 — — 214 424Untaxed reserves — — (42) (41) (42) (41)Deferred tax assets / (liabilities) 5,571 8,361 (11,869) (14,005) (6,298) (5,644)Deferred tax assets 1,629 751Deferred tax liabilities (7,927) (6,395)Deferred tax assets not recognized by the Company as of December 31, 2007 were as follows:Recognized UnrecognizedTotal deferred deferred deferredGross amount tax assets tax assets tax assetsTax losses carried forward 7,179 2,373 1,659 714Tax credits 292 292 214 78Other temporary differences 12,853 4,022 3,698 324Total 6,687 5,571 1,116124

2008 Consolidated Financial Statements continuedDeferred tax assets not recognized by the Company as of December 31, 2008 were as follows:Recognized UnrecognizedTotal deferred deferred deferredGross amount tax assets tax assets tax assetsTax losses carried forward 11,370 3,557 3,164 393Tax credits 719 719 424 295Other temporary differences 15,915 5,018 4,773 245Total 9,294 8,361 933ArcelorMittal had unrecognized deferred tax assets relating to tax loss carry forwards and other temporary differences, amountingto 933 as of December 31, 2008 (1,116 as of December 31, 2007). As of December 31, 2008, most of these temporary differencesrelate to tax loss carry forwards attributable to our Operating Subsidiaries in Belgium, Brazil, Luxembourg, Mexico and the United States.The majority of unrecognized tax losses have no expiration date. The utilization of tax loss carry forwards is, however, restricted to thetaxable income of the subsidiary or tax consolidated group to which it belongs.At December 31, 2008, based upon the level of historical taxable income and projections for future taxable income over the periodsin which the deductible temporary differences are anticipated to reverse, management believes it is probable that ArcelorMittalwill realize the benefits of the total deferred tax assets of 751 recognized. The amount of future taxable income required to begenerated by ArcelorMittal’s Operating Subsidiaries to utilize the total deferred tax assets is approximately 2,540. For each of theyears ended December 31, 2007 and 2008, these Operating Subsidiaries generated approximately 29% and 62%, respectively,of the Company’s income before tax of 14,888 and 11,537, respectively. Historically, the Company has been able to generate taxableincome in sufficient amounts to permit it to utilize tax benefits associated with net operating loss carry forwards and other deferredtax assets that have been recognized in its consolidated financial statements. However, the amount of the deferred tax asset consideredrealizable could be adjusted in the future if estimates of taxable income are revised.In 2007, ArcelorMittal has recorded approximately 35 of deferred income tax liabilities on the undistributed earnings of its foreignsubsidiaries for income taxes due if these earnings would be distributed. There was no material change to these liabilities as ofDecember 31, 2008. Investments in our subsidiaries are not expected to reverse in the foreseeable future and therefore capital gainsare not anticipated. The aggregate amount of deferred tax liabilities relating to investments in subsidiaries, branches and associatesand investments that is not recognized is approximately 892.Tax loss carry forwardAt December 31, 2008, the Company had total estimated net tax loss carry forwards of 11,370.Such amount includes net operating losses of 2,527 primarily related to Operating Subsidiaries in Canada, Mexico, Romania, Spain andthe United States, which expire as follows:Year expiringAmount2009 172010 402011 852012 352013 17Thereafter 2,333Total 2,527ArcelorMittal Annual Report 2008The remaining tax loss carry forwards of 8,843 are indefinite and primarily attributable to the Company’s operations in Belgium,Brazil, France, Luxembourg and Trinidad and Tobago.Tax loss carry forwards are denominated in the currency of the countries in which the respective subsidiaries are located and operate.Fluctuations in currency exchange rates could reduce the U.S. dollar equivalent value of these tax loss carry forwards in future years.125

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 20: ProvisionsThe movements by provision were as follows:Effects of foreignBalance at Deductions exchange and Balance atDecember 31, 2006 Additions / Releases Acquisitions other movements December 31, 2007Environmental (see note 24) 827 134 (62) 4 (14) 889Asset retirement obligations 169 19 (26) 6 8 176Restructuring 209 394 (123) 80 5 565Litigation (see note 24) 711 317 (182) — 177 1,023Commercial agreements and onerous contracts 56 96 (36) — 18 134Other 1 637 450 (328) 28 26 8132,609 1,410 (757) 118 220 3,600Short-term provisions 569 1,144Long-term provisions 2,040 2,4562,609 3,600Effects of foreignBalance at Deductions exchange and Balance atDecember 31, 2007 Additions / Releases Acquisitions other movements December 31, 2008Environmental (see note 24) 889 125 (146) — (99) 769Asset retirement obligations 176 22 (3) 71 12 278Restructuring 565 215 (117) 8 (105) 566Voluntary separation plans — 945 — — (10) 935Litigation (see note 24) 1,023 847 (252) 66 (83) 1,601Commercial agreements and onerous contracts 134 743 (29) 12 (5) 855Other 1 813 317 (519) 16 4 6313,600 3,214 (1,066) 173 (286) 5,635Short-term provisions 1,144 3,292Long-term provisions 2,456 2,3433,600 5,6351Other includes provisions for technical warranties, guarantees as well as other disputes and staff related provisions.The provisions will be used in a period of one to four years except for the environmental provisions which will be used for up to 20 years.Note 21: Accrued Expenses and Other LiabilitiesAccrued expenses were comprised of the following at December 31:December 31, December 31,2007 2008Accrued payroll and employee related expenses 2,008 1,949Other payables 1,703 1,942Other creditors 1,535 1,320Revaluation of derivative instruments 549 1,094Other amounts due to public authorities 909 791Unearned revenue and accrued payables 571 317Total 7,275 7,413Accrued expenses and other liabilities as at December 31, 2008 were higher than as at December 31, 2007 on accountof the increase in mark-to-market of the derivative instruments held by the company.126

2008 Consolidated Financial Statements continuedNote 22: CommitmentsThe Company’s commitments consist of three main categories:• non-cancellable operating leases,• various purchase and capital expenditure commitments,• pledges, guarantees and other collateral instruments given to secure financial debt and credit lines.Operating leasesThe Company leases various facilities, land and equipment under non-cancellable lease arrangements. Future minimum leasepayments required under operating leases that have initial or remaining non-cancellable terms are presented according to maturityperiods as follows:Less than 1 year 861-3 years 1434-5 years 105More than 5 years 155Total 489Commitments givenDecember 31, December 31,2007 2008Purchase commitments 31,539 29,724Capital expenditure commitments 414 2,233Guarantees, pledges and other collateral 6,413 4,796Other commitments 3,358 5,759Total 41,724 42,512ArcelorMittal Annual Report 2008Purchase commitmentsPurchase commitments consist of the major agreements for procuring iron ore, coking coal, coke and hot metal.The Company also entered into a number of agreements for electricity, industrial and natural gas, as well as freight contracts.Guarantees, property and other collateralProperty pledges and guarantees mainly relate to mortgages entered into by the Company’s Operating Subsidiaries and guaranteesissued in respect of external debt financing.Guarantees consist of guarantees of financial loans and credit lines granted to non-consolidated subsidiaries and investmentsaccounted for under the equity method, first demand and documentary guarantees, as well as guarantees provided to stateauthorities such as customs.Other collateral and guarantees include documentary credits, letters of credit and sureties.Other commitments givenOther commitments given comprise commitments incurred for the long-term use of goods belonging to a third party, commitmentsincurred under operating leases and credit lines confirmed to customers but not drawn, and commitments relating to grants.Commitments receivedDecember 31, December 31,2007 2008Endorsements and guarantees received from non-consolidated companies 1,218 921Other commitments received 10,674 7,037Total 11,892 7,958Other commitments receivedOther commitments received include commitments deriving from bills, sureties and guarantees provided by third parties.127

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 23: Deferred Employee BenefitsArcelorMittal’s Operating Subsidiarieshave different types of pension plansfor their employees. Also, some ofthe Operating Subsidiaries offer otherpost-employment benefits, principallyhealth care. The expense associated withthese pension plans and employee benefits,as well as the carrying amount of therelated liability/asset on the balance sheetsare based on a number of assumptionsand factors such as the discount rate,expected compensation increases,expected return on plan assets, futurehealth care cost trends and market valueof the underlying assets. Actual resultsthat differ from these assumptions areaccumulated and amortized over futureperiods and, therefore, will affect thestatement of income and the recordedobligation in future periods. The totalaccumulated unrecognized actuarial lossamounted to 1,969 for pensions and454 for other post retirement benefitsas of December 31, 2008.On August 30, 2008 ArcelorMittal USAreached a labor agreement with the UnitedSteelworkers of America (the “USW”)for most of our steel plants and iron oreoperations in the US. The USW ratifiedthis agreement on October 21, 2008.The agreement increased wages, provideda signing bonus of six thousand dollars peremployee, increased the pension multiplierfor certain employees, increased paymentsinto Steelworkers pension trust, providedfor a lump sum payment upon retirementfor certain employees, and reduced thepremium retirees must pay for healthcare.The most significant change to thisagreement is the change in the fundingprinciples of a Voluntary Employee BenefitAssociation (“VEBA”) for retiree healthcare.Previously this fund was accounted foras a profit-sharing arrangement.The change in the contractual obligationled to the recognition of a liability andother post-employment expense of1,424 for those obligations that hadpreviously vested.The cash outflow related to these benefitsis a requirement to fund 25 per quarterinto the VEBA for the first four years plusan initial cash payment of 90 upon thesigning of the contract. The impact ofthose changes is discussed further inthe post-employment benefits sectionof this note.The Company agreed to transfer toArcelorMittal USA a number of shares heldin treasury equal to 130, subject to certainadjustments, in several tranches until theend of 2009 to provide a means forArcelorMittal USA to meet its cash fundingrequirements to the ArcelorMittal USAPension Trust. The first tranche, consistingof 1,121,995 treasury shares, wastransferred on December 29, 2008 forconsideration of $23.72 per share, theNYSE opening price on December 23, 2008.A summary of the significant definedbenefit pension plans is as follows:AmericasU.S.ArcelorMittal USA’s Pension Plan andPension Trust is a non-contributory definedbenefit plan covering approximately24% of its employees. Benefits for mostnon-represented employees who receivepension benefits are determined undera “Cash Balance” formula as an accountbalance which grows as a result of interestcredits and of allocations based ona percentage of pay. Benefits for othernon-represented salaried employees whoreceive pension benefits are determinedas a monthly benefit at retirementdepending on final pay and service.Benefits for wage and salaried employeesrepresented by a union are determinedas a monthly benefit at retirement basedon fixed rate and service.CanadaThe primary pension plans are those ofArcelorMittal Dofasco and ArcelorMittalMining Canada. The ArcelorMittalDofasco (Hamilton) pension plan isa hybrid plan providing the benefitsof both a defined benefit and definedcontribution pension plan.The defined contribution componentis financed by both employer and employeecontributions. The employer alsocontributes a percentage of profits in thedefined contribution plan. The ArcelorMittalMining Canada (QCM) defined benefitplan provides salary related benefit fornon-union employees and a flat dollarpension depending on employee lengthof service.BrazilThe primary defined benefit plans, financedthrough trust funds, have been closed tonew entrants. Brazilian entities have allestablished defined contribution plans thatare financed by employer and employeecontributions.EuropeCertain European Operating Subsidiariesmaintain primarily unfunded defined benefitpension plans for a certain number ofemployees. Benefits are based on suchemployees’ length of service and applicablepension table under the terms of individualagreements. Some of these unfunded planshave been closed to new entrants andreplaced by defined contributions pensionplans for active members financed byemployer and employee contributions.South AfricaThere are two primary defined benefitpension plans. These plans are closed tonew entrants. The assets are held inpension funds under the control of thetrustees and both funds are wholly fundedfor qualifying employees. South Africanentities have also implemented definedcontributions pension plans that arefinanced by employers’ and employees’contributions.OtherA limited number of funded definedbenefit plans are in place in countrieswhere funding of multi-employer pensionplans is mandatory.128

2008 Consolidated Financial Statements continuedPlan assetsThe weighted-average asset allocations for the funded defined benefit pension plans by asset category were as follows:December 31, 2007U.S. CANADA BRAZIL EUROPE SOUTH AFRICA OTHERSEquity Securities 63% 54% 10% 17% 34% 45%Fixed Income (including cash) 23% 38% 88% 64% 52% 48%Real Estate 5% — — — — —Other 9% 8% 2% 19% 14% 7%Total 100% 100% 100% 100% 100% 100%December 31, 2008U.S. CANADA BRAZIL EUROPE SOUTH AFRICA OTHERSEquity Securities 45% 55% 7% 13% 34% 39%Fixed Income (including cash) 35% 40% 91% 69% 52% 56%Real Estate 7% — — — — —Other 13% 5% 2% 18% 14% 5%Total 100% 100% 100% 100% 100% 100%ArcelorMittal Annual Report 2008These assets do not include any direct investment in ArcelorMittal or in property or other assets occupied or usedby ArcelorMittal except for the transaction explained previously. This does not exclude ArcelorMittal shares being includedin mutual fund investments. The invested assets produced an actual return of 379 and (1,128) in 2007 and 2008, respectively.The respective Finance and Retirement Committees of the Board of Directors have general supervisory authority over the respectivetrust funds. These committees have established the following asset allocation targets. These targets are considered benchmarksand are not mandatory.December 31, 2008U.S. CANADA BRAZIL EUROPE SOUTH AFRICA OTHERSEquity Securities 50% 59% 17% 18% 35% 50%Fixed Income (including cash) 23% 41% 80% 74% 53% 50%Real Estate 7% — — 2% — —Other 20% — 3% 6% 12% —Total 100% 100% 100% 100% 100% 100%129

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The following tables detail the reconciliation of defined benefit obligation, plan assets and balance sheet liability.December 31, 2007TOTAL U.S. CANADA BRAZIL EUROPE SOUTH AFRICA OTHERSChange in benefit obligationBenefit obligation at beginning of the period 9,609 3,075 2,730 481 2,228 1,017 78Service cost 176 39 73 10 45 — 9Interest cost 574 167 152 60 107 73 15Plan amendments 13 — 3 — 10 — —Plan participants’ contribution 5 — 1 2 1 — 1Curtailments and settlements 96 — 48 — — — 48Actuarial (gain) loss (501) (201) (311) 10 (62) 51 12Benefits paid (560) (2) (141) (34) (209) (105) (69)Foreign currency exchange rate differencesand other movements 1,100 — 479 110 366 33 112Benefit obligation at end of the period 10,512 3,078 3,034 639 2,486 1,069 206Change in plan assetsFair value of plan assets at beginning of the period 6,985 2,335 2,193 551 551 1,256 99Expected return on plan assets 580 221 176 76 24 73 10Actuarial gain (loss) (201) (184) (54) — 5 28 4Employer contribution 419 257 106 13 42 — 1Plan participants’ contribution 5 — 1 2 1 — 1Benefits paid (347) (2) (141) (34) (63) (105) (2)Foreign currency exchange rate differencesand other movements 650 — 426 123 63 38 —Fair value of plan assets at end of the period 8,091 2,627 2,707 731 623 1,290 113(Unfunded) funded status of the plans (2,421) (451) (327) 92 (1,863) 221 (93)Unrecognized net actuarial loss (gain) 578 808 (195) 9 (45) (19) 20Unrecognized past service cost (2) — (1) — — — (1)Prepaid due to unrecoverable surpluses (305) — — (103) — (202) —Net amount recognized (2,150) 357 (523) (2) (1,908) — (74)Net assets related to funded obligations 419 357 29 4 3 — 26Balance sheet liabilities (2,569) — (552) (6) (1,911) — (100)130

2008 Consolidated Financial Statements continuedDecember 31, 2008TOTAL U.S. CANADA BRAZIL EUROPE SOUTH AFRICA OTHERSChange in benefit obligationBenefit obligation at beginning of the period 10,512 3,078 3,034 639 2,486 1,069 206Service cost 163 42 61 11 38 — 11Interest cost 625 181 161 69 127 69 18Plan amendments 180 155 11 — 10 — 4Plan participants’ contribution 6 — 1 3 1 — 1Acquisition 20 — — — — — 20Curtailments and settlements 12 — (1) (1) (12) — 26Actuarial (gain) loss (141) 50 (248) 37 42 (15) (7)Benefits paid (760) (225) (167) (37) (194) (92) (45)Foreign currency exchange rate differencesand other movements (1,258) — (577) (171) (182) (288) (40)Benefit obligation at end of the period 9,359 3,281 2,275 550 2,316 743 194Change in plan assetsFair value of plan assets at beginning of the period 8,091 2,627 2,707 731 623 1,290 113Expected return on plan assets 584 215 182 82 25 69 11Actuarial gain (loss) (1,712) (915) (631) (24) (24) (103) (15)Employer contribution 458 213 170 18 56 — 1Plan participants’ contribution 6 — 1 3 1 — 1Settlements (11) — — — (11) — —Benefits paid (589) (224) (166) (37) (64) (92) (6)Foreign currency exchange rate differencesand other movements (1,039) — (477) (184) (40) (338) —Fair value of plan assets at end of the period 5,788 1,916 1,786 589 566 826 105(Unfunded) funded status of the plans (3,571) (1,365) (489) 39 (1,750) 83 (89)Unrecognized net actuarial loss (gain) 1,969 1,700 179 44 22 — 24Unrecognized past service cost 29 28 — — 1 — —Prepaid due to unrecoverable surpluses (155) — — (69) (3) (83) —Net amount recognized (1,728) 363 (310) 14 (1,730) — (65)Net assets related to funded obligations 491 406 49 17 — — 19Balance sheet liabilities (2,219) (43) (359) (3) (1,730) — (84)ArcelorMittal Annual Report 2008Asset ceilingThe amount not recognized in the fair value of plan assets due to the asset ceiling was 305 and 155 at December 31, 2007and 2008, respectively.131

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The following tables detail the components of net periodic pension cost:December 31, 2007TOTAL U.S. CANADA BRAZIL EUROPE SOUTH AFRICA OTHERSNet periodic cost (benefit)Service cost 176 39 73 10 45 — 9Interest cost 574 167 152 60 107 73 15Expected return on plan assets (580) (221) (176) (76) (24) (73) (10)Charges due to unrecoverable surpluses 16 — — 16 — — —Curtailments and settlements 118 — 72 — (2) — 48Amortization of unrecognized past service cost 13 — 3 — 10 — —Amortization of unrecognized actuarial (gain) loss 71 68 4 — (1) — —Total 388 53 128 10 135 — 62December 31, 2008TOTAL U.S. CANADA BRAZIL EUROPE SOUTH AFRICA OTHERSNet periodic cost (benefit)Service cost 163 42 61 11 38 — 11Interest cost 625 181 161 69 127 69 18Expected return on plan assets (584) (215) (182) (82) (25) (69) (11)Charges due to unrecoverable surpluses (8) — — (11) 3 — —Curtailments and settlements 25 — (1) — — — 26Amortization of unrecognized past service cost 152 127 11 — 10 — 4Amortization of unrecognized actuarial (gain) loss 78 69 (6) 12 2 — 1Total 451 204 44 (1) 155 — 49Other post-employment benefitsArcelorMittal’s principal Operating Subsidiaries in the U.S., Canada and Europe, among certain others, provide post-employmentbenefits, including medical benefits and life insurance benefits, to retirees. Substantially all union-represented ArcelorMittal USAemployees are covered under post-employment life insurance and medical benefit plans that require deductible and co-insurancepayments from retirees. The post-employment life insurance benefit formula used in the determination of post-employment benefitcost is primarily based on applicable annual earnings at retirement for salaried employees and specific amounts for hourly employees.ArcelorMittal USA does not pre-fund most of these post-employment benefits.In connection with the new labor agreement between ArcelorMittal USA and the USW, the Company agreed to changes to an existingVoluntary Employee Benefit Association (“VEBA”). The VEBA provided limited healthcare benefits to the retirees of certain companieswhose assets were acquired (referred to as Legacy Retirees). Contributions into the trust were calculated based on quarterly operatingincome and on certain overtime hours worked. Benefits paid were based on the availability of funds in the VEBA.Under the new agreement the Company agreed to contribute a fixed amount of 25 per quarter and to develop a programof benefits for the Legacy Retirees. Agreements with the USW capped the Company’s share of healthcare costs for ArcelorMittalretirees at 2008 levels for years 2010 and beyond. The VEBA will be responsible for reimbursing the Company for any costsin excess of the cap for retirees of ArcelorMittal USA. Because the current labor agreement specifies the level of benefitsto be provided and ArcelorMittal is the only source of funding, the obligation meets the definition of a defined benefit plan.Accordingly, the Company recognized a liability of 571 for the actuarial determined amount of benefits expected to be paidto the Legacy Retirees net of the existing assets in the VEBA trust. Since these individuals have all retired, the expense was recognizedimmediately. The Company also determined that removing the cap on future healthcare costs increased the defined benefit obligationby 1,061 of which 853 was vested and recognized immediately. The remaining balance will be recognized evenly over the averageperiod of estimated future service life until the benefits become vested.132

2008 Consolidated Financial Statements continuedSummary of changes in the other post employment benefit obligation and the change in plan assets:December 31, 2007TOTAL U.S. CANADA BRAZIL EUROPE OTHERSChange in post-employment benefit obligationBenefit obligation at beginning of period 2,614 1,169 935 6 474 30Service cost 62 9 19 — 16 18Interest cost 139 64 52 1 22 —Plan amendment 47 44 — — 3 —Actuarial loss (gain) (181) (12) (158) (1) (10) —Benefits paid (195) (70) (34) (1) (51) (39)Curtailments and settlements 18 11 10 — (3) —Acquisition (divestitures) 15 — — — (4) 19Foreign currency exchange rate changesand other movements 286 — 159 1 75 51Benefits obligation at end of period 2,805 1,215 983 6 522 79Fair value of assets 49 34 — — 15 —Funded (unfunded) status of the plans (2,756) (1,181) (983) (6) (507) (79)Unrecognized net actuarial loss (gain) 165 322 (144) — (13) —Unrecognized past service cost (benefit) 8 13 (2) — (3) —Net amount recognized (2,583) (846) (1,129) (6) (523) (79)ArcelorMittal Annual Report 2008December 31, 2008TOTAL U.S. CANADA BRAZIL EUROPE OTHERSChange in post-employment benefit obligationBenefit obligation at beginning of period 2,805 1,215 983 6 522 79Service cost 54 12 14 — 23 5Interest cost 212 121 48 1 34 8Plan amendment 1,695 1,642 2 — 8 43Actuarial loss (gain) 224 379 (155) — (18) 18Benefits paid (250) (135) (36) (1) (78) —Curtailments and settlements 4 4 — — — —Acquisition (divestitures) (47) (47) — — — —Foreign currency exchange rate changesand other movements 557 670 1 (189) (1) 112 (35)Benefits obligation at end of period 5,254 3,861 667 5 603 118Fair value of assets 635 623 — — 12 —Funded (unfunded) status of the plans (4,619) (3,238) (667) (5) (591) (118)Unrecognized net actuarial loss (gain) 454 695 (223) — (35) 17Unrecognized past service cost (benefit) 199 197 (1) — 3 —Net amount recognized (3,966) (2,346) (891) (5) (623) (101)1This amount includes the existing asset VEBA trust.133

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The following tables detail the components of net periodic other post-employment cost:December 31, 2007TOTAL U.S. CANADA BRAZIL EUROPE OTHERSComponents of net periodic cost (benefit)Service cost 62 9 19 — 16 18Interest cost 139 64 52 1 22 —Expected return on plan assets (3) (2) — — (1) —Curtailments and settlements 20 11 13 — (4) —Amortization of unrecognized past service cost 4 — — — 4 —Amortization of unrecognized actuarial (gain) loss 23 27 — (1) (3) —Total 245 109 84 — 34 18December 31, 2008TOTAL U.S. CANADA BRAZIL EUROPE OTHERSComponents of net periodic cost (benefit)Service cost 54 12 14 — 23 5Interest cost 212 121 48 1 34 8Expected return on plan assets (16) (15) — — (1) —Curtailments and settlements 6 6 — — — —Amortization of unrecognized past service cost 1,504 1,458 1 — 2 43Amortization of unrecognized actuarial (gain) loss 6 12 (15) — 9 —Total 1,766 1,594 48 1 67 56Weighted-average assumptions used to determine benefit obligations at December 31,Pension PlansOther Post-employment Benefits2007 2008 2007 2008Discount rate 5.17% – 10.77% 5.42% – 10.77% 2.94% – 10.77% 4.25% – 10.77%Rate of compensation increase 2% – 8% 2.50% – 9.2% 1% – 8% 1.5% – 7.12%Expected long-term rate of return on plan assets 3.54% – 11.25% 3.47% – 11.72% 4.5% – 5% 4.5% – 6.11%Health care cost trendDecember 31, December 31,2007 2008Health care cost trend rate assumed 2.5% – 6.31% 3% – 5.71%Cash flowsIn 2009, the Company expects its cash contributions to amount to 543 for pension plans, 289 for other post employmentbenefits plans (including 100 related to USW agreement in USA) and 134 for the defined contribution plans. Cash contributionsto the defined contribution plans, sponsored by the company, amounted to 115 in 2008.Balance sheetAt December 31, At December 31,2007 2008Pension plan benefit 2,569 2,219Other post-employment benefit 2,583 3,966Early retirement benefit 780 669Other long-term employee benefits 312 257Total 6,244 7,111134

2008 Consolidated Financial Statements continuedSensitivity analysisThe following information illustrates the sensitivity to a change in certain assumptions for ArcelorMittal’s pension plans(as of December 31, 2008, the defined benefit obligation (“DBO”) for pension plans was 9,359):Effect on 2009 Pre-Tax Pension Expense Effect of December 31,Change in assumption (sum of service cost and interest cost) 2008 DBO100 basis point decrease in discount rate 1 973100 basis point increase in discount rate (3) (818)100 basis point decrease in rate of compensation (31) (240)100 basis point increase in rate of compensation 36 264100 basis point decrease in expected return on plan assets 56 —100 basis point increase in expected return on plan assets (56) —The following table illustrates the sensitivity to a change in the discount rate assumption related to ArcelorMittal’s OPEB plans(as of December 31, 2008 the DBO for post-employment benefit plans was 5,254):Effect on 2009 Pre-Tax OPEB Expense Effect of December 31,Change in assumption (sum of service cost and interest cost) 2008 DBO100 basis point decrease in discount rate (7) 580100 basis point increase in discount rate 6 (464)100 basis point decrease in healthcare cost trend (36) (441)100 basis point increase in healthcare cost trend 40 498ArcelorMittal Annual Report 2008The above sensitivities reflect the effect of changing one assumption at a time. Actual economic factors and conditionsoften affect multiple assumptions simultaneously, and the effects of changes in key assumptions are not necessarily linear.Experience adjustmentsThe two-year history of the present value of the defined benefit obligations, the fair value of the plan assets and the surplusor the deficit in the pension plans is as follows:At December 31, At December 31,(in millions of U.S. dollars) 2007 2008Present value of the defined benefit obligations (10,512) (9,359)Fair value of the plan assets 8,091 5,788Deficit (2,421) (3,571)Experience adjustments: (increase)/decrease plan liabilities (195) (122)Experience adjustments: increase/(decrease) plan assets (201) (1,712)This table illustrates the present value of the defined benefit obligations, the fair value of the plan assets and the surplusor the deficit for the OPEB plans is as follows:At December 31, At December 31,(in millions of U.S. dollars) 2007 2008Present value of the defined benefit obligations (2,805) (5,254)Fair value of the plan assets 49 635Deficit (2,756) (4,619)Experience adjustments: (increase)/decrease plan liabilities (33) (142)Experience adjustments: increase/(decrease) plan assets — (19)135

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 24: ContingenciesArcelorMittal may be involved in litigation,arbitration or other legal proceedings.Provisions related to legal and arbitralproceedings are recorded in accordancewith the principles described in note 2.Most of these claims involve highlycomplex issues, actual damages and othermatters. Often these issues are subjectto substantial uncertainties and, therefore,the probability of loss and an estimationof damages are difficult to ascertain.Consequently, for a large number of theseclaims, we are unable to make a reasonableestimate of the expected financial effectthat will result from ultimate resolutionof the proceeding. In those cases, we havedisclosed information with respect to thenature of the contingency. We have notaccrued a reserve for the potentialoutcome of these cases.In the cases in which quantifiable finesand penalties have been assessed, we haveindicated the amount of such fine orpenalty or the amount of provision accruedthat is the estimate of the probable loss.In a limited number of ongoing cases,we are able to make a reasonable estimateof the expected loss or range of possibleloss and have accrued a provision for suchloss, but believe that publication of thisinformation on a case-by-case basiswould seriously prejudice the Company’sposition in the ongoing legal proceedingsor in any related settlement discussions.Accordingly, in these cases, we havedisclosed information with respect tothe nature of the contingency, but havenot disclosed our estimate of the rangeof potential loss.These assessments can involve a seriesof complex judgments about future eventsand can rely heavily on estimates andassumptions. Our assessments are basedon estimates and assumptions that havebeen deemed reasonable by management.We believe that the aggregate provisionsrecorded for the above matters areadequate based upon currently availableinformation.However, given the inherent uncertaintiesrelated to these cases and in estimatingcontingent liabilities, we could, in thefuture, incur judgments that could havea material adverse effect on our resultsof operations in any particular period.Environmental liabilitiesArcelorMittal’s operations are subject to abroad range of laws and regulations relatingto the protection of human health and theenvironment at its multiple locations andOperating Subsidiaries. As of December 31,2008, ArcelorMittal had establishedreserves of 769 for environmental remedialactivities and liabilities, including 385in provisions relating to Europe, 222 inprovisions relating to the United States,143 in provisions relating to South Africaand 7 in provisions relating to Canada.Previous owners of ArcelorMittal’s facilitiesexpended in the past, and ArcelorMittalexpects to expend in the future, substantialamounts to achieve or maintain ongoingcompliance with applicable environmentallaws and regulations.United StatesArcelorMittal USA’s environmentalprovisions of 222 are mainly relatedto investigation, monitoring andremediation of soil and groundwaterinvestigation at its current and formerfacilities and to removal and disposal ofPCBs and asbestos-containing material.The environmental provisions include4 to address ArcelorMittal USA’s potentialliability at two Superfund sites.ArcelorMittal USA’s largest environmentalprovisions relate to investigation andremediation at Indiana Harbor (East),Lackawanna, and its closed miningoperations in southwestern Pennsylvania.In 1990, ArcelorMittal USA’s Indiana Harbor(East) facility was party to a lawsuit filedby the U.S. Environmental ProtectionAgency (the “EPA”) under the U.S. ResourceConservation and Recovery Act (“RCRA”).In 1993, ArcelorMittal Indiana Harbor(East) entered into a Consent Decree,which, among other things, requiresfacility-wide RCRA Corrective Action andsediment assessment and remediation inthe adjacent Indiana Harbor Ship Canal.ArcelorMittal USA’s provisions forenvironmental liabilities includeapproximately 12 for RCRA CorrectiveAction, and 25 for sediment assessmentand remediation at this site. Remediationultimately may be necessary for othercontamination that may be present atIndiana Harbor (East), but the potentialcosts of any such remediation cannotyet be reasonably estimated.ArcelorMittal USA’s properties inLackawanna, New York are subject to anAdministrative Order on Consent with theEPA requiring facility-wide RCRA CorrectiveAction. The Administrative Order, enteredinto in 1990 by the former owner,Bethlehem Steel, requires the Company toperform a Remedial Facilities Investigation(“RFI”) and a Corrective Measures Study,to implement appropriate interim and finalremedial measures, and to perform requiredpost-remedial closure activities. In 2006,the New York State Department ofEnvironmental Conservation and theEPA conditionally approved the RFI.ArcelorMittal USA has executed Orderson Consent to perform certain interimcorrective measures while advancing theCorrective Measures Study. These includeinstallation and operation of ground watertreatments system and dredging of a localwaterway known as Smokes Creek.The Company expects to executea Corrective Measure Order on Consentin 2009 for other site remediationactivities. ArcelorMittal USA’s provisionsfor environmental liabilities includeapproximately 47 for anticipatedremediation and post remediation activities.The reserved amount is based on theextent of soil and groundwatercontamination identified by the RFI and theremedial measures likely to be required,including excavation and consolidationof containments in an on-site landfilland continuation of groundwater pumpand treat systems.ArcelorMittal USA is required to preventacid mine drainage from dischargingto surface waters at closed miningoperations in southwestern Pennsylvania.136

2008 Consolidated Financial Statements continuedIn 2003, ArcelorMittal USA entered intoa Consent Order and Agreement with thePennsylvania Department of EnvironmentalProtection (the “PaDEP”) requiringsubmission of an operational improvementplan to improve treatment facilityoperations and lower long-termwastewater treatment costs. The ConsentOrder and Agreement also requiredArcelorMittal USA to propose a long-termfinancial assurance mechanism. In 2004,ArcelorMittal USA entered into a revisedConsent Order and Agreement outlininga schedule for implementation of capitalimprovements and requiring theestablishment of a treatment trust thatthe PaDEP has estimated to be the netpresent value of all future treatment cost.ArcelorMittal USA has been funding thetreatment trust and has a period of up toten years to reach the current target valueof approximately 20. After the treatmenttrust is fully funded, the treatment trustwill then be used to fund the continuingcost of treatment of acid mine drainage.Although remote, ArcelorMittal USAcould be required to make up any deficiencyin the treatment trust in the future.ArcelorMittal USA’s provisions forenvironmental liabilities includeapproximately 29 for this matter.On August 8, 2006, the U.S. EPA RegionV issued ArcelorMittal USA’s Burns Harbor,Indiana facility a Notice of Violation (“NOV”)alleging that in early 1994 the facility (thenowned by Bethlehem Steel, from whom theassets were acquired out of bankruptcy)commenced a major modification of its#2 Coke Battery without obtaininga Prevention of Significant Deterioration(“PSD”) permit and has continuedto operate without the appropriate PSDpermit. ArcelorMittal USA has discussed theallegations with the EPA, but to date therehave been no further formal proceedings.The U.S. EPA Region V also has conducteda series of inspections and submittedinformation request under the U.S. CleanAir Act relating to the Burns Harbor facilityand several other ArcelorMittal facilitieslocated in Indiana and Ohio. ArcelorMittalhas held discussions with the EPA andstate environmental agencies regardingtheir concerns.During such discussions, in addition to thematters raised in the NOV, EPA alleged thatArcelorMittal’s Burns Harbor, Indiana Harborand Cleveland facilities were non-compliantwith certain requirements of the U.S. CleanAir Act. Some of EPA’s allegations relateto recent compliance performance andsome relate to acts by former facilityowners that occurred 15-25 years ago.Preliminary analysis by counsel indicatesthat the allegations related to the acts offormer owners appear to be unsound andthat the current operations at the BurnsHarbor, Indiana Harbor and Clevelandfacilities achieve high rates of compliancewith existing or, where applicable,anticipated permits and regulations underthe U.S. Clean Air Act. Further discussionswith EPA and affected state environmentalagencies are planned with regard to EPA’sexpressed concerns.EuropeProvisions total 385 and are mainlyrelated to investigation and remediation ofenvironmental contamination at currentand former operating sites in France (169),Luxembourg (105) and Belgium (85).This remediation work relates to variouselements such as decontamination of waterdischarges, waste disposal, cleaning waterponds as well as certain remediationactivities that involve the clean-up of soiland groundwater. These reserves are alsorelated to human health protectionmeasures such as fire prevention andadditional contamination preventionmeasures to comply with local health andsafety regulations.In Belgium, Cockerill Sambre SA has anenvironmental provision of 50, of whichthe most significant elements are legalobligations linked to the dismantlingof steelmaking installations and soiltreatment of sites.In France, ArcelorMittal France hasenvironmental provisions of 74, principallyrelating to the remediation of former cokeplant sites and the capping and monitoringof landfills or basins previously used forresidues and secondary materials.ArcelorMittal Atlantique et Lorraine hasan environmental provision that principallyrelates to the remediation and theimprovement of storage of secondarymaterials and disposal of waste at differentponds and landfills and an action plan forremoving asbestos from the installations.In Luxembourg, the provisions areessentially associated with post-closuremonitoring and remediation of formerlandfill and mining sites.Additionally, ArcelorMittal Belval andDifferdange has a provision of 12 to cleanpond water in Differdange in order to meetthe requirements of the LuxembourgEnvironment Administration (Administrationde l’Environnement) regarding dischargein the Chiers River and maintain sufficientcold water reserves to permit theproduction of degassed steel in warmermonths. The cleaning started in 2006 andis expected to continue for five years.South AfricaArcelorMittal South Africa hasenvironmental provisions of 143, mainlyrelating to environmental remediationobligations that represent the present valueof the costs of remedial action to clean andsecure a site. These actions are primarilyattributable to historical, or legacy, wastedisposal activities. With subsequentchanges in national environmentallegislation, the unit has a legal obligationto remediate these facilities.Asset Retirement Obligations (“AROs”)AROs arise from legal requirements andrepresent management’s best estimateof the present value of the costs that willbe required to retire plant and equipment.As of December 31, 2008, ArcelorMittalhad established reserves for assetretirement obligations of 29 in provisionsrelating to Canada and 26 in provisionsrelating to South Africa. Most of theAROs relate to ancillary plants andequipment that will be retired as partof the closure of the facilities subjectto remediation obligations.ArcelorMittal Annual Report 2008137

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Environmental Remediation Obligations(“EROs”)EROs arise from legal requirements andrepresent management’s best estimateof the present value of the costs that willbe required to restore a site at the end ofits useful life. As of December 31, 2008,ArcelorMittal had established reservesfor environmental remediation obligationsof 120 in provisions relating to Ukraineand 61 in provisions relating to Russia.Legal claimsArcelorMittal is a party to various legalactions. The principal legal actions aredisclosed below.Environmental claimsArcelorMittal is a party to various legacyenvironmental claims. As of December 31,2008, ArcelorMittal had not establishedreserves for the claims disclosed below.United StatesIn July 2004, the Illinois EnvironmentalProtection Agency (the “IEPA”) notifiedIndiana Harbor (East) that it had identifiedthat facility as a potentially responsibleparty in connection with allegedcontamination relating to Hillside MiningCo. (“Hillside”), a company that IndianaHarbor (East) acquired in 1943, operateduntil the late 1940s and whose assetsit sold in the early 1950s, in conjunctionwith the corporate dissolution of thatcompany. The IEPA is requesting thatArcelorMittal USA and other potentiallyresponsible parties conduct an investigationof certain areas of potential contamination.ArcelorMittal USA intends to defend itselffully in this matter. As of December 31,2008, ArcelorMittal is not able toreasonably estimate the amount ofliabilities relating to this matter, if any.EuropeOn December 16, 2008, the EuropeanCourt of Justice ruled that certain EuropeanUnion air pollution legislation does notdiscriminate against ArcelorMittal andother steelmakers by exempting fromits requirements other industries withsimilar levels of carbon dioxide emissions.ArcelorMittal had argued that the EuropeanUnion had breached the principle of equaltreatment by excluding the aluminum andchemical industries from legislation thatimposed caps on carbon dioxide emissions.Tax claimsArcelorMittal is a party to various taxclaims. As of December 31, 2008,ArcelorMittal has established reservesin the aggregate of approximately128 for the claims disclosed below.BrazilThe Brazilian Federal Revenue Servicehas claimed that ArcelorMittal Brasil owes100 for IPI (Manufactured Goods Tax)concerning its use of tax credits on thepurchase of raw materials that werenon-taxable, exempt from tax or subjectto a 0% tax rate and the disallowance ofIPI credits recorded five to ten years afterthe relevant acquisition. Recent BrazilianSupreme Court jurisprudence would tendto support the Brazilian Federal RevenueService’s position.In 2003, the Brazilian Federal RevenueService granted ArcelorMittal Brasil(through its predecessor company,then known as CST) a tax benefit forcertain investments. ArcelorMittal Brasilhad received certificates from SUDENE,the former Agency for the Developmentof the Northeast Region of Brazil,confirming ArcelorMittal Brasil’s entitlementto this benefit. In September 2004,ArcelorMittal Brasil was notified of theannulment of these certificates.ArcelorMittal Brasil has pursued its rightto this tax benefit through the courtsagainst both ADENE, the successor toSUDENE, and against the Brazilian FederalRevenue Service. The Brazilian FederalRevenue Service issued a tax assessmentin this regard for 451 in December 2007.In December 2008, the administrativetribunal of first instance upheld the amountof the assessment. ArcelorMittal Brasilis appealing to the administrative tribunalof second instance.In May 2007, the Brazilian Federal RevenueService issued a 614 tax assessmentto ArcelorMittal Brasil to recover taxesprimarily related to credit settlementsin the context of the 2003 financialreorganization and acquisition of MendesJúnior Siderurgia S.A. In September 2007,ArcelorMittal Brasil received anadministrative decision on the taxassessment pursuant to which it wasdetermined that the amount of tax payableunder the assessment should be 12.In December 2008, the administrativecourt held that ArcelorMittal Brasil wasnot liable to pay any tax. The decisionis subject to further appeal by the FederalRevenue Service.The Brazilian Social Security Administrationhas claimed that ArcelorMittal Brasil owescertain amounts for social contributions inrespect of amounts paid by ArcelorMittalBrasil to employees under its profit sharingscheme for the 1998-2005 period.In December 2007, it issued a further11 tax assessments to ArcelorMittal Brasilin respect of the same subject matter,bringing the total amount claimed to 79.The various claims are at different stagesin the administrative and judicialprocedures. ArcelorMittal Brasil is unablereasonably to estimate when any or all ofthe cases may reach a definitive conclusion.SpainSpanish tax authorities have claimedthat amortization recorded by theformer Siderúrgica del Mediterraneo, S.A.(currently ArcelorMittal Segunto S.L.)in 1995, 1996 and 1997 is non-deductiblefor corporation tax purposes. Spanish taxauthorities seek payment of 55, includingthe amount of tax, interest and penalties.The case is pending before the court(the Audiencia Nacional), administrativeprocedures having been exhausted.KazakhstanIn May and June 2007, the Tax Committeeof the Kazakh Ministry of Finance issuedtwo tax assessments against ArcelorMittalTemirtau for (1) adjustment of salesincome for related and non-related partysales under transfer pricing law in thesum of 1,042 and (2) the inclusion of138

2008 Consolidated Financial Statements continuedincome of a subsidiary company domiciledin the United Arab Emirates tax-free zonein the sum of 840, in both cases plusadministrative charges. ArcelorMittalTemirtau appealed both tax assessmentsto the courts. In November 2007,the Astana Court held that the assessmentlevied by the Tax Committee for 1,042 wasnot justified and cancelled it, along withrelated administrative charges of 363.This decision was upheld on appeal to theKazakh Supreme Court in January 2008.The time for the Tax Committee to appealthis decision (one year) has expired.In respect of the tax demand for 840,in February 2008, the Karaganda Courtfound in favor of the Tax Committee,quantifying the amount due as 840 plusadministrative charges of 261. In April2008, the Karaganda Regional Courtreversed this decision, and this reversalupheld by its highest body. The TaxCommittee has one year to appeal thisdecision, but has not done so to date.The Company believes that it has no liabilityin respect of either tax assessment, sinceits obligation to pay income tax is cappedunder the share purchase agreement andrelated agreements pursuant to whichit acquired ArcelorMittal Temirtau from thegovernment of Kazakhstan. ArcelorMittalTemirtau has paid its income tax inaccordance with these agreements.Competition/Antitrust claimsArcelorMittal is a party to variouscompetition/antitrust claims. As ofDecember 31, 2008, ArcelorMittal hasestablished reserves of approximately595 in the aggregate for the claimsdisclosed below:United StatesOn September 12, 2008, Standard IronWorks filed a purported class actioncomplaint in U.S. District Court in theNorthern District of Illinois againstArcelorMittal, ArcelorMittal USA Inc.,and other steel manufacturers, allegingthat the defendants had conspired since2005 to restrict the output of steelproducts in order to fix, raise, stabilizeand maintain prices at artificially highlevels in violation of U.S. antitrust law.Since the filing of the Standard Iron Workslawsuit, other similar lawsuits have beenfiled in the same court and have beenconsolidated with Standard Iron Works.In January 2009, ArcelorMittal and theother defendants filed a motion to dismissthe claims. It is too early in the proceedingsfor ArcelorMittal to determine the amountof its potential liability, if any. ArcelorMittalconsiders the allegations in the complaintto be entirely unfounded.BrazilIn September 2000, two constructioncompanies filed a complaint with theBrazilian Economic Law Department againstthree long steel producers, includingArcelorMittal Brasil. The complaint allegedthat these producers colluded to raiseprices in the Brazilian rebar market,thereby violating applicable antitrust laws.In September 2005, the Brazilian AntitrustCouncil (CADE) issued a decision againstArcelorMittal Brasil that resulted inArcelorMittal Brasil’s having to paya penalty of 42. ArcelorMittal Brasilhas appealed the decision to the BrazilianFederal Court. In September 2006,ArcelorMittal Brasil offered a letterguarantee and obtained an injunctionto suspend enforcement of this decisionpending the court’s judgment.There is also a related class actioncommenced by the Federal PublicProsecutor of the state of Minas Geraisagainst ArcelorMittal Brasil for damagesbased on the alleged violations investigatedby CADE.EuropeIn late 2002, three subsidiariesof ArcelorMittal (Tréfileurope, TréfileuropeItalia S.r.l. and Fontainunion S.A.) –now known as ArcelorMittal Wire France,ArcelorMittal Verderio and ArcelorMittalFontaine – and two former subsidiariesof ArcelorMittal España (Emesa andGalycas), along with other Europeanmanufacturers of pre-stressed wireand strands steel products, receivednotice that the European Commissionwas conducting an investigation intopossible anti-competitive practices bythese companies.In 2004, Emesa and Galycas were sold.ArcelorMittal and its subsidiaries arecooperating fully with the EuropeanCommission in this investigation.On October 2, 2008, the EuropeanCommission sent a Statement ofObjections to (1) ArcelorMittal Wire France,ArcelorMittal Verderio and ArcelorMittalFontaine for their involvement in thealleged practices under investigation;and (2) ArcelorMittal France (as successorof Usinor), ArcelorMittal España andArcelorMittal (as legal successor to MittalSteel) in their capacity as former or currentparent companies of the current andformer subsidiaries involved in theinvestigation. The Statement of Objectionsdoes not indicate the amount of the finethat the European Commission intendsto impose on any of the companies.A response to the Statement of Objectionswas submitted in December 2008.The European Commission can imposefines for breaches of EU competition lawof up to a maximum of 10% of theworldwide annual revenues of the relevantentity in the business year preceding theCommission’s decision. The amount of thefine is influenced by, inter alia, the relevantentity’s direct or indirect involvement.ArcelorMittal is currently unable to assessthe amount of any fines that will result.ArcelorMittal is contractually requiredto indemnify the present owner ofEmesa and Galycas if a fine is imposedon it relating to any matters that occurredwhile these entities were owned by Arcelor.On April 23, 2007, ArcelorMittal receiveda decision of the Financial Directoratein Ostrava, Czech Republic, which orderedArcelorMittal Ostrava to pay approximately106 for allegedly abusing its economicposition and, as a result, acquiringunjustified profits in respect of pricesof blast furnace coke produced byArcelorMittal Ostrava and deliveredin 2004. The Financial Directoratesubsequently ordered ArcelorMittalOstrava to pay an additional fine of 25 forthe period from January to March 2005.ArcelorMittal Annual Report 2008139

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)After its previous decision in October 2006was cancelled by the Czech Ministryof Finance, the matter was returnedto the Financial Directorate in Ostravafor reexamination. ArcelorMittal Ostravareceived notice on June 14, 2007 thatthe Ministry of Finance had upheld theFinancial Directorate of Ostrava’s decision.ArcelorMittal Ostrava filed a petition againstthe decision with the Municipal Court ofPrague on June 29, 2007. Filing thepetition had the effect of suspendingpayment of the fines.In 2004, the French competitionauthorities (La Direction Générale de laConsommation et de la Repression desFraudes) commenced an investigation intoalleged anti-competitive practices in thesteel distribution sector in France, includingArcelor Négoce Distribution, a subsidiaryof Arcelor. The case was then referredto the French Competition Council(Conseil de la Concurrence), whichconducted an investigation. On March 5,2008, a Statement of Objections wasissued to three subsidiaries of ArcelorMittal(PUM Service d’Acier, Arcelor Profil andAMD Sud/Ouest). On December 16, 2008,the French Competition Council imposedfines of €575 million, of which €302 millionwas apportioned to subsidiaries ofArcelorMittal. In its decision, the FrenchCompetition Council concluded that thesecompanies had agreed to fix prices andallocate markets and customers from theperiod of 1999 to 2004 through regularmeetings and exchanges of information.On January 19, 2009, ArcelorMittalappealed the amount of the fine.South AfricaArcelorMittal South Africa is involvedin a dispute with Harmony Gold MiningCompany Limited and Durban RoodeportDeep Limited in which the latter companiesallege that ArcelorMittal South Africais in violation of the Competition Act.On March 27, 2007, the CompetitionTribunal decided that ArcelorMittal SouthAfrica had contravened Section 8(a) of theCompetition Act by charging an excessiveprice. On September 6, 2007, theCompetition Tribunal imposed a penaltyon ArcelorMittal South Africa ofapproximately 97, other behavioral remediesdesigned to prevent ArcelorMittal SouthAfrica imposing or agreeing with customersany conditions on the resale of flat steelproducts and ordered that ArcelorMittalSouth Africa pay the costs of the case.ArcelorMittal South Africa has appealed thedecision of the Competition Tribunal on themerits and its decision on the remedies.In November 2007, the Competition AppealCourt ordered the suspension of theTribunal’s decision on the remedies pendingthe appeal. On October 23 and 24, 2008,the hearing before the Competition AppealCourt took place. ArcelorMittal is unableat present to determine the outcome ofthe appeal. A decision is expected duringthe first quarter of 2009.In February 2007, the complaint previouslyfiled with the South African CompetitionCommission by Barnes Fencing, a SouthAfrican producer of galvanized wire, allegingthat ArcelorMittal South Africa, as a“dominant firm”, discriminated in pricing itslow carbon wire rod, was referred to theCompetition Tribunal. The claimant seeks,among other sanctions, a penalty of10% of ArcelorMittal South Africa’s salesfor 2006 in respect of low carbon wirerod and an order that ArcelorMittal SouthAfrica cease its pricing discrimination.The complaint is under review by theCompetition Tribunal. In March 2008,the Competition Tribunal accepted theclaimants’ application for leave to intervene,prohibiting, however, the claimant fromseeking as relief the imposition of anadministrative penalty. ArcelorMittal isunable to assess the outcome of thisproceeding or the amount of ArcelorMittalSouth Africa’s potential liability, if any.Other legal claimsArcelorMittal is a party to various otherlegal claims. As of December 31, 2008,ArcelorMittal has established reservesof approximately 54 in the aggregate forthe claims disclosed below.CanadaIn 2008, two complaints were filed byCanadian Natural Resources Limited(“CNRL”) in Calgary, Alberta againstArcelorMittal, ArcelorMittal USA Inc.,Mittal Steel North America Inc. andArcelorMittal Tubular Products Roman S.A.CNRL alleges negligence in both complaints,seeking damages of 50 and 22, respectively.The plaintiff alleges that it purchaseda defective pipe manufactured byArcelorMittal Tubular Products Romanand sold by ArcelorMittal Tubular ProductsRoman and Mittal Steel North America Inc.ArcelorMittal is unable to reasonablyestimate the amount of ArcelorMittal’s,ArcelorMittal USA Inc.’s, Mittal Steel NorthAmerica Inc.’s and ArcelorMittal TubularProducts Roman’s liabilities relating tothis matter, if any.MexicoSicartsa is involved in a dispute with EjidoSanta Maria of the Municipality of La UnionGuerrero over the payment of materialsand related damages under a joint ventureagreement between the parties. In October2006, the Agrarian Unity Tribunal entereda judgment ordering Sicartsa to pay theplaintiff damages of 54. In April 2007,upon appeal by Sicartsa, a higher courtset aside the judgment and ordered furtherexpert evidence relating to the mattersin dispute. The accounting expert appointedby the Agrarian Unity Tribunal filed itsreport on September 5, 2008 stating thatthe amount to be paid to Ejido Santa Mariais approximately seven thousand fivehundred dollars. However, the reportis still subject to dispute by the claimant.FranceIn May 2008, the liquidator of SAFETbrought an action in the CommercialCourt of Nanterre against the Directorsof SAFET, including ArcelorMittal Packaging,alleging that the Directors are liable forall of SAFET’s debts amounting to 52 dueto their default in the management ofSAFET’s business. ArcelorMittal and theother directors are vigorously defendingthe action. It is too early in the proceedingsfor ArcelorMittal to determine the amountof its liability, if any. However, ArcelorMittalconsiders the allegations against it to beentirely unfounded.140

2008 Consolidated Financial Statements continuedVarious retired or present employees of certain French subsidiaries of the former Arcelor have initiated lawsuits to obtain compensationfor asbestos exposure in excess of the amounts paid by French social security (“Social Security”). Asbestos claims in France initially aremade by way of a declaration of a work-related illness by the claimant to the Social Security authorities resulting in an investigation anda level of compensation paid by Social Security. Once the Social Security authorities recognize the work-related illness, the claimant,depending on the circumstances, can also file an action for inexcusable negligence (faute inexcusable) to obtain additional compensationfrom the company before a special tribunal. Where procedural errors are made by Social Security, the company is requiredto assume full payment of damages awarded to the claimants. This has generally been the case to date.The number of claims outstanding for asbestos exposure at December 31, 2008 was 431, as compared to 449 at December 31, 2007.The range of amounts claimed for the year ended December 31, 2008 was €7,500 to €865,000 (approximately ten thousand dollarsto one million one hundred fifty thousand dollars). The aggregate costs and settlements for the year ended December 31, 2008 were€383,825 (approximately five hundred ten thousand dollars) and zero respectively. The aggregate costs and settlements for the yearended December 31, 2007 were €350,141 (approximately five hundred fifteen thousand dollars) and zero respectively.In number of cases2007 2008Claims unresolved at beginning of period 421 449Claims filed 191 63Claims settled, dismissed or otherwise resolved (163) 1 (81)Claims unresolved at December 31, 449 431ArcelorMittal Annual Report 20081After purchase of a new company, sale of a subsidiary and further verification.Minority shareholder claims regarding the exchange ratio in the second-step merger of ArcelorMittal into ArcelorSeveral former minority shareholders of Arcelor or their representatives have brought legal proceedings relating to the exchangeratio in the second-step merger between ArcelorMittal and Arcelor. In proceedings that remain ongoing following the completionof the merger process that are summarized below, the claimants make the following principal allegations:• The exchange ratio in the second-step merger should have been the same as that of the secondary exchange offer componentof Mittal Steel’s June 2006 tender offer for Arcelor (i.e., 11 Mittal Steel shares for seven Arcelor shares), and investors hada legitimate expectation that this would be the case based on Mittal Steel’s and Arcelor’s disclosure and public statements;• The exchange ratio applied in the second step merger was unfair to minority shareholders of Arcelor, particularly in lightof developments between the June 2006 tender offer and the merger of Mittal Steel into Arcelor;• Mittal Steel’s disclosure regarding the merger of Mittal Steel into Arcelor and specifically the exchange ratio (in the second-stepmerger) was late, insufficient and misleading;• The two-step process was detrimental to interests of Arcelor minority shareholders; and• The second step merger did not comply with certain provisions of Luxembourg company law.ArcelorMittal believes that the allegations made and claims brought by the minority shareholders regarding the exchange ratio appliedin the second step merger and the merger process as a whole are without merit and that such exchange ratio and process compliedwith the requirements of applicable law, were consistent with previous guidance on the principles that would be used to determinethe exchange ratio in the second step merger and that the merger exchange ratio was relevant and reasonable to shareholdersof both merged entities.The following summarizes the current status of proceedings brought by minority shareholders in this regard;In June and July 2007, two hedge funds that were shareholders of Arcelor wrote to the Netherlands Authority for the Financial Markets(the Stichting Autoriteit Financiële Markten, or the “AFM”), the Dutch securities regulator, requesting it to take various measures againstMittal Steel relating in particular to disclosure regarding the proposed exchange ratio, and making in substance the allegationssummarized above. On August 17, 2007 the AFM rejected the claimants’ demands.141

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)On September 20, 2007, the claimantsfiled formal objections with the AFMagainst the decision of August 17, 2007,asking the AFM to overturn its decision onthe same grounds as those presented insupport of their initial request. On February4, 2008, the AFM confirmed its decision ofAugust 17, 2007. On March 13, 2008, theclaimants lodged an appeal against theAFM’s decision with the RotterdamAdministrative Court. By judgment datedDecember 10, 2008, the Court nullified theAFM’s decision of February 4, 2008, on thegrounds that the AFM’s limitedinvestigation was an insufficient basis for itsdecision, and requiring it to conduct afurther investigation and issue a newdecision. AFM and ArcelorMittal are bothappealing the court’s ruling.On October 18, 2007 and November 19,2007, ArcelorMittal (the entity resultingfrom the first step merger) and Arcelorwere notified of an appeal by three formerhedge fund shareholders of Arcelor beforethe administrative court of Luxembourgagainst the March 2, 2007 decision of theCSSF exempting the Significant shareholderfrom the obligation (under the Luxembourglaw implementing the European TakeoverDirective) under specified circumstancesto launch a tender offer for all Arcelorshares outstanding after the merger.The CSSF had based its grant of anexemption on the fact that the mergerwould not result either in an acquisitionof shares or in a change of the ultimatecontrol of the company. The hearing tookplace on July 7, 2008.On January 8, 2008, ArcelorMittal receiveda writ of summons on behalf of four hedgefund shareholders of Arcelor to appearbefore the civil court of Luxembourg.The summons was also served on all naturalpersons sitting on the Board of Directorsof ArcelorMittal at the time of the mergerand on the significant shareholder.The claimants’ request, among other things(1) the cancellation and the amendmentof the corporate decisions relating to thesecond-step merger in order to reflectan exchange ratio of 11 ArcelorMittal(the entity resulting from the first stepmerger) shares for seven Arcelor shares(ignoring the impact of the share capitalrestructuring of Arcelor) accompanied bythe allocation by the Significant shareholderor the company of additional shares tothe claimants to reflect this revised ratio,and alternatively, (2) the payment ofdamages by the defendants (jointly andseverally or severally, at the court’sdiscretion), in an amount of €180 million.ArcelorMittal submitted its brief inresponse on October 16, 2008, challengingthe validity, the admissibility and the meritsof the claims. Hearing and judgment in thefirst instance are not expected before theend of 2009 or early 2010.Note 25: Segment and GeographicInformationArcelorMittal has a high degree ofgeographic diversification relative toother steel companies. During 2008,ArcelorMittal shipped its products tocustomers in approximately 180 countries,with its largest markets in the Flat CarbonEurope, Flat Carbon Americas and LongCarbon America and Europe segments.ArcelorMittal conducts its business throughits Operating Subsidiaries. Many of theseoperations are strategically located withaccess to on-site deep water port facilities,which allow for cost-efficient import of rawmaterials and export of steel products.As of December 31, 2008, ArcelorMittalemployed approximately 316,000 persons.A segment is a distinguishable componentof the Company that is engaged eitherin providing particular products or services(business segment), or in providing productsor services within a particular economicenvironment (geographical segment), whichis subject to risks and rewards that aredifferent from those of other segments.The Company’s primary segment is definedas the “business segment”, while itssecondary segment is the “geographicalsegment”.Business segmentationArcelorMittal reports its operations insix operating segments: Flat CarbonAmericas, Flat Carbon Europe, Long CarbonAmericas and Europe, Asia, Africa andCommonwealth of Independent States(“AACIS”), Stainless Steel and SteelSolutions and Services.• Flat Carbon Americas represents the flatfacilities of the Company located in theAmerican Continent (Canada, Brazil,Mexico, United States). Flat CarbonAmericas produces slabs, hot rolled coil,cold rolled coil, coated steel and plate.These products are sold primarily tocustomers in the following industries:distribution and processing, automotive,pipe and tubes, construction, packaging,and appliances;• Flat Carbon Europe is the largest flatsteel producer in Europe, with operationsthat range from West (Spain) to East(Romania), and covering the flat carbonsteel product portfolio in all majorcountries and markets. Flat CarbonEurope produces hot rolled coil, coldrolled coil, coated products, tinplate,plate and slab. These products are soldprimarily to customers in the automotive,general industry and packaging industries;• Long Carbon Americas and Europeoperates in Europe and America.Production consists of sections, wire rod,rebar, billets, blooms and wire drawing;• AACIS produces a combination of flatand long products and pipes and tubes.Its facilities are located in Asia, Africaand Commonwealth of IndependentStates (“CIS”);• Stainless Steel produces flat and longstainless steel and alloy products from itsplants in Europe and South America; and• ArcelorMittal Steel Solutions andServices is primarily an in-house tradingand distribution arm of ArcelorMittal.It also provides value-added andcustomized steel solutions throughfurther steel processing to meet specificcustomer requirements.142

2008 Consolidated Financial Statements continuedThe following table summarizes certain financial data relating to our operations in different reportable business segments.The December 31, 2007 information has been adjusted retrospectively following the redefinition of operating responsibilitiesof all members of the Board of Management announced on April 21, 2008 and made effective January 1, 2008 in light of thenew Group Management Board (“GMB”) structure also announced on April 21, 2008.Long CarbonFlat Carbon Flat Carbon Americas Asia & Stainless Steel Solutions Others/Americas Europe and Europe Africa CIS Steel and Services elimination* TotalYear ended December 31, 2007Sales 21,839 34,924 27,035 14,971 9,349 16,988 (19,890) 105,216Operating income 3,163 4,148 4,083 2,843 876 559 (842) 14,830Depreciation and impairment 940 1,415 993 489 275 154 304 4,570Capital expenditures 1,272 1,752 1,077 764 263 243 77 5,448Total assets 19,192 32,932 24,992 10,275 5,564 6,188 34,482 133,625Total liabilities 6,248 12,392 9,192 4,104 2,278 4,278 33,598 72,090Year ended December 31, 2008Sales 27,031 38,300 32,268 13,133 8,341 23,126 (17,263) 124,936Operating income 2,524 2,773 4,154 3,145 383 206 (949) 12,236Depreciation and impairment 1,228 1,924 1,725 549 343 201 130 6,100Capital expenditures 1,082 1,443 1,195 891 262 280 378 5,531Total assets 22,507 35,083 19,830 8,512 7,447 6,524 33,185 133,088Total liabilities 7,438 11,853 6,571 2,195 1,738 3,825 40,238 73,858ArcelorMittal Annual Report 2008* Others / Elimination includes all other operations than mentioned above, together with inter-segment elimination, and/or non-operational items which are not segmented.Geographical segmentationSales (by destination)Year endedYear endedDecember 31, 2007 December 31, 2008AmericasUnited States 19,560 20,200Canada 4,139 4,505Brazil 6,628 9,759Argentina 1,101 1,485Others 3,241 4,989Total Americas 34,669 40,938EuropeFrance 8,989 9,578Spain 7,843 8,441Germany 11,629 14,185Romania 1,330 1,347Poland 4,355 5,113Belgium 2,181 2,574Italy 5,584 5,782United Kingdom 2,731 2,605Turkey 2,057 3,001Czech Republic 1,953 2,492Others 9,973 12,247Total Europe 58,625 67,365Asia & AfricaSouth Africa 4,396 5,163Others 7,526 11,470Total Asia & Africa 11,922 16,633Total 105,216 124,936143

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Capital expenditures and segment assets* per significant countryCapital expendituresSegment assetsFor the year ended For the year ended As of As ofDecember 31, 2007 December 31, 2008 December 31, 2007 December 31, 2008AmericasBrazil 775 621 12,782 12,609United States 461 530 10,333 11,197Canada 298 267 7,915 5,598Mexico 154 195 3,019 2,561Others 150 66 1,942 2,412Total Americas 1,838 1,679 35,991 34,377EuropeFrance 744 680 15,508 17,506Luxembourg 192 212 6,899 4,822Belgium 315 345 8,858 8,700Spain 285 219 7,423 6,874Ukraine 295 309 5,427 5,446Poland 603 265 5,974 4,801Germany 237 282 5,744 6,685Czech Republic 119 227 2,963 2,518Romania 155 148 1,961 1,940Italy 42 36 1,298 1,192Others 107 164 2,543 3,675Total Europe 3,094 2,887 64,598 64,159Asia & AfricaSouth Africa 275 203 3,931 3,753Kazakhstan 159 305 1,945 2,493Liberia 13 275 15 299Others 69 182 3,217 2,578Total Africa & Asia 516 965 9,108 9,123Unallocated — — 23,928 25,429Total 5,448 5,531 133,625 133,088* Segment assets are operational assets, which include intangible assets and property, plant and equipment, as well as current assets used in the operating activities.They do not include goodwill, deferred tax assets, other investments or receivables and other non-current financial assets. Such assets are shown under the caption“Unallocated assets”.144

2008 Consolidated Financial Statements continuedNote 26: Employees and Key Management PersonnelThe total annual compensation of ArcelorMittal’s employees paid in 2007 and 2008 was as follows:The total annual compensation of ArcelorMittal’s key management personnel, including its Board of Directors,paid in 2007 and 2008 was as follows:Year endedYear endedDecember 31, 2007 December 31, 2008Employee InformationWages and salaries 11,221 12,593Pension cost 611 2,080Total 11,832 14,673Year endedYear endedDecember 31, 2007 December 31, 2008Base salary and/or directors fees 20 24Short-term performance-related bonus 24 21Post-employment benefits 2 1Share based compensation 21 30ArcelorMittal Annual Report 2008The fair value of the stock options granted to ArcelorMittal’s key management personnel is recorded as an expense in theconsolidated statement of income over the relevant vesting periods. The Company determines the fair value of the optionsat the date of the grant using the Black-Scholes model.As of December 31, 2007 and 2008, ArcelorMittal did not have outstanding any loans or advances to members of its Boardof Directors or key management personnel, and, as of December 31, 2007 and 2008, ArcelorMittal had not given any guaranteesfor the benefit of any member of its Board of Directors or key management personnel.Note 27: Subsequent EventsOn January 23, 2009, the Company contributed its 76.9% stake in Saar Ferngas AG to an associated company, Soteg.Following this transaction, ArcelorMittal’s stake in Soteg increased from 20% to 26.15%.On January 31, 2009, ArcelorMittal completed the acquisition of 60% of DSTC FZCO, a newly incorporated companylocated in the Dubai free zone which will acquire the main business of Dubai Steel Trading Company LLC, a steel distributorin the United Arab Emirates.145

Auditors’ Report on the Consolidated Financial StatementsReport of the Réviseur d’EntreprisesTo the shareholders ofArcelorMittal, Société Anonyme19, avenue de la LibertéL-2930 LuxembourgReport on the consolidated financial statementsFollowing our appointment by the General Meeting of the Shareholders dated May 13, 2008, we have audited the accompanyingconsolidated financial statements of ArcelorMittal, which comprise the consolidated balance sheet as at December 31, 2008,and the consolidated statement of income, consolidated statement of cash flows, and consolidated statement of changesin equity for the year then ended, and a summary of significant accounting policies and other explanatory notes.Board of directors’ responsibility for the consolidated financial statementsThe board of directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordancewith International Financial Reporting Standards as adopted in the European Union. This responsibility includes: designing, implementingand maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free frommaterial misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accountingestimates that are reasonable in the circumstances.Responsibility of the réviseur d’entreprisesOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit inaccordance with International Standards on Auditing as adopted by the Institut des réviseurs d’entreprises. Those standards require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financialstatements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financialstatements. The procedures selected depend on the judgment of the réviseur d’entreprises, including the assessment of the risksof material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,the réviseur d’entreprises considers internal control relevant to the entity’s preparation and fair presentation of the consolidatedfinancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the entity’s internal control.An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates madeby the board of directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of ArcelorMittalas of December 31, 2008, and of its consolidated financial performance and its consolidated cash flows for the year then endedin accordance with International Financial Reporting Standards as adopted in the European Union.Report on other legal and regulatory requirementsThe management report, which is the responsibility of the board of directors, is consistent with the consolidated financial statements.Deloitte S.A.Réviseur d’entreprisesEric van de KerkhovePartnerFebruary 26, 2009560, rue de NeudorfL-2220 Luxembourg146

Balance SheetArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars)December 31, 2008 December 31, 2007AssetsC. Fixed assets 72,347 68,168I. Intangible assets Note 3 63 22. Concessions, patents, licenses, trademarks and similar rights and assets 63 2II. Tangible assets Note 4 43 111. Land and buildings 23 53. Other fixtures and fittings, tools and equipment 5 54. Payment on account and tangible assets in course of construction 15 1III. Financial assets Note 5 72,241 68,1551. Shares in affiliated undertakings 68,645 51,4542. Loans to affiliated undertakings 2,528 16,1123. Participating interests 1,015 5355. Securities held as fixed assets 47 476. Other loans 6 7D. Current assets 10,954 3,168II. Debtors becoming due in one year or less 9,641 2,0551. Trade debtors 5 72. Amounts owed by affiliated undertakings Note 6 9,626 2,0214. Other debtors 10 27III. Transferable securities Note 7 1,298 9022. Own shares (54,290,240 shares with an accounting par value of USD 6.40 per share) 1,298 902IV. Cash at bank, cash in postal check accounts, checks and cash in hand 15 211E. Prepayments and accrued income 49 5Total assets 83,350 71,3412008 Consolidated Financial Statements and Annual AccountsArcelorMittal Annual Report 2008LiabilitiesA. Capital and reserves Note 8 56,939 39,960I. Subscribed capital 9,269 9,269II. Share premium account 17,811 17,811IV. Reserves 2,120 1,3431. Legal reserve 822 4412. Reserve for own shares 1,298 902V. Profit brought forward 8,645 3,926VI. Profit for the financial year 19,094 7,611B. Provisions for liabilities and charges 39 211. Provisions for pensions and similar obligations 6 23. Other provisions Note 9 33 19C. Creditors Note 10 26,372 31,3601b. Non convertible debenture loans becoming due in more than one year Note 11 3,089 892. Amounts owed to credit institutions Note 12 20,944 239Becoming due in one year or less 6,144 50Becoming due in more than one year 14,800 1894. Trade creditors becoming due in one year or less 54 —6. Amounts owed to affiliated undertakings 2,087 30,923Becoming due in one year or less 2,057 11,538Becoming due in more than one year 30 19,3858. Tax and social security debts becoming due in one year or less 124 479. Other creditors becoming due in one year or less 74 62Total liabilities 83,350 71,341The accompanying notes are an integral part of these annual accounts.December 31, 2008 December 31, 2007147

Profit and Loss AccountArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars)Year endedYear endedDecember 31, 2008 December 31, 2007A. Charges3. Staff costs 137 92a) Wages and salaries 86 72b) Social security costs attributable to wages and salaries 8 9c) Supplementary pensions 14 8d) Other social security costs 29 34. a) Value adjustments in respect of formation expenses and tangible and intangible fixed assets 4 45. Other operating charges 284 3186. Value adjustments in respect of financial assets and of transferable securities held as current assets Note 5, 7 2,655 —7. Interest payable and similar charges Note 13 1,078 2,188a) In respect of affiliated undertakings 653 432b) Other interest payable and charges 425 1,75613. Profit for the financial year 19,094 7,611Total charges 23,252 10,213Year endedYear endedDecember 31, 2008 December 31, 2007B. Income4. Other operating income 437 4615. Income from participating interests Note 14 18,701 9,043a) Derived from affiliated undertakings 18,701 9,0436. Income from other transferable securities and from loans forming part of fixed assets 662 586a) Derived from affiliated undertakings 662 5867. Other interest receivable and similar income Note 13 3,452 123a) Derived from affiliated undertakings 76 121b) Other interest receivable and similar income 3,376 2Total income 23,252 10,213The accompanying notes are an integral part of these annual accounts.148

Notes to the Annual AccountsArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars, unless otherwise stated)2008 Annual AccountsNote 1: GeneralArcelorMittal (“the Company”) wasincorporated as a “Société Anonyme”under Luxembourg law on June 8, 2001for an unlimited period.The registered office of the Companyis established in Luxembourg City and theCompany is registered at the Registerof Trade and Commerce of Luxembourgunder the number B82.454.The financial year of the Company startson January 1 and ends on December 31each year.The Company’s corporate goal is themanufacturing, processing and marketingof steel products and all other metallurgicalproducts; and any other activity directlyor indirectly related thereto. The companyrealizes its corporate goal either directlyor through the creation of companiesor the acquisition and holding of interestsin companies, partnership, associations,consortia and joint-ventures.In conformity with the requirements ofLuxembourg laws and regulations; theCompany publishes consolidated financialstatements in accordance with InternationalFinancial Reporting Standards as adoptedin the European Union.Note 2: Summary of SignificantAccounting PrinciplesGeneral principlesThese annual accounts have been preparedin accordance with generally acceptedaccounting principles and in accordancewith the laws and regulations in force in theGrand-Duchy of Luxembourg.Main valuation rulesTranslation of currenciesThe Company maintains its accountingrecords in United States Dollars (“USD”)and the annual accounts are preparedin this currency. Unless otherwise stated,all amounts in the annual accounts arestated in millions of USD.The following principles are applied toitems denominated in a currency otherthan the USD:• Fixed assets, creditors due after morethan one year and off-balance sheetcommitments are translated at historicalexchange rates. Differences in theexchange rates leading to an unrealizedloss are recorded in the profit and lossfor the year.• Other balance sheet items are translatedat the year-end exchange rate andrelated exchange differences are recordedin the profit and loss for the year.Loans to affiliated undertakings and otherloans are recorded in the balance sheetat their nominal value. At the end of eachaccounting period value adjustments arerecorded on loans which appear to be partlyor wholly irrecoverable.DebtorsDebtors are recorded in the balance sheetat their nominal value. At the end of eachaccounting period value adjustments arerecorded on debtors, which appear to bepartly or wholly irrecoverable.Transferable securitiesTransferable securities are valued at thelower of cost or market value. A valueadjustment is recorded when the marketprice is lower than the acquisition price.A reversal of the value adjustment isrecorded to the extent the factors,which caused its initial recording,have ceased to exist.Provisions for liabilities and chargesProvisions for liabilities and charges arerecorded to cover all foreseeable liabilitiesand charges for which there is a legalor constructive obligation as a result ofpast events as of the balance sheet date.Provisions relating to previous periodsare regularly reviewed and released if thereasons for which the provisions wererecorded have ceased to apply.CreditorsCreditors are recorded in the balance sheetat their nominal value.ArcelorMittal Annual Report 2008• Profit and loss items are translated atthe exchange rate prevailing attransaction date.Financial assetsShares in affiliated undertakings arerecorded at acquisition cost includingrelated acquisition costs. At the end ofeach accounting period, shares in affiliatedundertakings are subject to an impairmentreview. Where a permanent diminutionin value is identified, this diminution isrecorded in the profit and loss accountas a value adjustment. A reversal of thevalue adjustment is recorded to the extentthe factors, which caused its initialrecording, have ceased to exist.149

Notes to the Annual Accounts continuedArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars, unless otherwise stated)Note 3: Intangible AssetsConcessions, patents, licenses,trademarks and similar rights and assetsAcquisition costOpening balance 2Additions 62Closing balance 64Value adjustmentOpening balance —Charge for the year (1)Closing balance (1)Net book valueOpening balance 2Closing balance 63Note 4: Tangible AssetsOther fixtures, Payment on accountfittings tools and tangible assetsLand and buildings and equipment under construction TotalAcquisition costOpening balance 9 13 1 23Additions 20 1 14 35Closing balance 29 14 15 58Value adjustmentOpening balance (4) (8) — (12)Charge for the year (2) (1) — (3)Closing balance (6) (9) — (15)Net book valueOpening balance 5 5 1 11Closing balance 23 5 15 43Note 5: Financial AssetsShares in affiliated Loans to affiliated Participating Securities heldundertakings undertakings interests as fixed assets Other loans TotalAcquisition costOpening balance 51,811 16,112 535 47 7 68,512Additions 50,289 967 674 — — 51,930Disposals (33,455) (14,551) — — (1) (48,007)Closing balance 68,645 2,528 1,209 47 6 72,435Value adjustmentsOpening balance (357) — — — — (357)Reversals 357 — — — — 357Charge for the year — — (194) — — (194)Closing balance — — (194) — — (194)Net book valueOpening balance 51,454 16,112 535 47 7 68,155Closing balance 68,645 2,528 1,015 47 6 72,241150

2008 Annual Accounts continuedDescription of main movementsUpon completion of the legal merger process of the Company and Mittal Steel Company N.V. in 2007, the Company embarkedon a significant reorganization with a view to optimize ArcelorMittal Group (“the Group”) legal and organizational structure.This reorganization resulted in the alignment of the key ArcelorMittal functions within the Group’s corporate structure througha series of contributions in kind and sales within the Group.In accordance with the prudence principle and Luxembourg Company law, the Company has not recognized any profits on contributionsin kind within the Group. Profits on the sale of holdings by the Company to other Group entities and dividends received in kind fromother Group entities are recognized in the profit and loss account (see note 14). The decrease in loans receivable, and the increasein shares in affiliated undertakings are consequences of the contribution-in-kind of loans receivable to other Group entities and othertransactions carried out within the Group in the context of the reorganization.Upon completion of the reorganization in 2008, the Company has reclassified a non certificate evidenced investment in a subsidiaryof 1,955; that was previously carried as a discrete investment in that subsidiary; to the Company’s investment in the subsidiary’slegal shareholder. This reclassification has no impact on the Company’s capital and reserves or profit for the year.The main holdings at December 31, 2008 are listed below:Capital and reservesPercentage of(including resultName and registered office Carrying amount Capital held % Result for 2008* for 2008)*AMO Holding Switzerland A.G.Zug (Switzerland) 26,387 100.00 — 54,325ArcelorMittal Cyprus Holding LimitedNicosia (Cyprus) 18,332 100.00 — 16,388AM Global Holding S.à r.l.Luxembourg (Luxembourg) 6,705 100.00 966 5,900ArcelorMittal Investment S.A.Luxembourg (Luxembourg) 3,057 100.00 (783) 9,626ArcelorMittal Finance and Services Belgium S.A.Brussels (Belgium) 12,024 26.74 2,156 46,5994313267 Canada Inc,Montréal / Québec (Canada)900 Depositary receipts 2,054 10.89 701 2,248ArcelorMittal Annual Report 2008* In accordance with unaudited IFRS reporting packages.151

Notes to the Annual Accounts continuedArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars, unless otherwise stated)Note 6: Amounts Owed by Affiliated UndertakingsAmounts owed by affiliated undertakings have increased by 7,605 over the year under review. This movement is primarilya consequence of the inclusion of the following elements within this amount:i) The cash-pooling accounts held with ArcelorMittal Treasury SNC which have increased over the year as a consequenceof the new external financing (notes 11 & 12).ii) The amounts receivable from other Group companies as a consequence of the tax consolidation (notes 13 & 15).Note 7: Transferable SecuritiesOwn sharesAcquisition costOpening balance 902Additions 3,102Disposals (245)Closing balance 3,759Value adjustmentsOpening balance —Charge for the year (2,461)Closing balance (2,461)Net book valueOpening balance 902Closing balance 1,298As of December 31, 2008, the Company holds 54,290,240 (2007: 17,173,201) of its own shares. The value adjustmentsof 2,461 represent the difference between the aggregate cost of the own shares and the market value determined on the basisof the Euronext market price as of December 31, 2008.Additions for the year relate to own shares acquired in connection with the share buy-back program announced by the Companyon December 12, 2007.Disposals for the year comprise the transfer of shares to Corea S.A. (part of the Group) and the sale of shares to ArcelorMittal USA Inc(“AMUSA” – part of the Group) as described below.On December 15, 2008, the Company entered into an agreement in virtue of which a total of 833,143 own shares witha carrying value of 20 have been transferred to Corea S.A. for a period that ends on December 31, 2009. The agreement maybe tacitly extended for successive periods of one year unless terminated by either party. At the end of the agreement, Corea S.A.shall reimburse the Company with either the same number and type of ArcelorMittal shares or the equivalent in cash subjectto the Company’s prior approval.On December 19, 2008, the Company entered into an agreement with AMUSA in virtue of which it agrees to sell to AMUSA;on specific dates in the period ranging from December 19, 2008 to September 30, 2009 a number of own shares for an aggregatemarket value of 130. This agreement has been concluded in order to fund AMUSA’s pension trust. Pursuant to this agreement,1,121,995 shares have been sold to AMUSA on December 19, 2008 for 27.152

2008 Annual Accounts continuedNote 8: Capital and ReservesBalance as at January 1, 2008 1,448,826,347 9,269 17,811 441 902 3,926 7,611 39,960Allocation of net result — — — 381 — 7,230 (7,611) —Profit for the year — — — — — — 19,094 19,094Directors’ fees — — — — — (3) — (3)Dividends paid * — — — — — (2,112) — (2,112)Reserve for own shares — — — — 396 (396) — —Balance as at December 31, 2008 1,448,826,347 9,269 17,811 822 1,298 8,645 19,094 56,939* Equivalent to the 2007 dividend of 2,173; net of dividends on own shares.Number Subscribed Share premium Reserve for Profit brought Profit forof shares capital amount Legal reserve own shares forward the year Total8.1: Share capital and share premium accountAt December 31, 2008 and 2007 the subscribed capital comprises 1,448,826,347 ordinary shares, fully paid up and amountingto EUR 6,345,859,400 (9,269). During an extraordinary general meeting of the shareholders held on May 13, 2008, it was resolvedto increase the authorized share capital from EUR 6,438,600,000 (represented by 1,470,000,000 shares without nominal value)to EUR 7,082,460,000 (represented by 1,617,000,000 shares without nominal value).To the knowledge of the Board, the shareholding may be specified as follows:December 31, 2008Mittal Investments S.à r.l. 36.24%Ispat International Investment S.L. 6.78%Other shareholders * 56.98%Total 100.00%ArcelorMittal Annual Report 2008* Including own shares and shares held by affiliated undertakings.8.2: Legal reserveIn accordance with Luxembourg Company law, the Company is required to transfer a minimum of 5% of its net profits foreach financial year to a legal reserve. This requirement ceases to be necessary once the balance of the legal reserve reaches10% of the issued share capital. The legal reserve is not available for distribution to the shareholders.8.3: Reserve for own sharesThe Board of Directors shall request the upcoming General Meeting of Shareholders to approve the allocation of 396 fromthe profit brought forward in order to establish a non distributable reserve equivalent to the carrying value (note 7) of its ownshares in accordance with Luxembourg Company Law.153

Notes to the Annual Accounts continuedArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars, unless otherwise stated)Note 9: Other ProvisionsThe Company is jointly and severally liable for the following entities:• ArcelorMittal Finance S.C.A. (Luxembourg)• ArcelorMittal Treasury S.N.C. (France)The Company has recognized a provision equivalent to 22 in connection with ArcelorMittal Finance S.C.A.Note 10: Maturity of CreditorsDecember 31, 2008 December 31, 2007From 1 5 years From 1 5 yearsUp to 1 year to 5 years or more Total Up to 1 year to 5 years or more TotalNon convertible debenture loans — 1,500 1,589 3,089 — — 89 89Amounts owed to credit institutions 6,144 14,800 — 20,944 50 189 — 239Trade creditors 54 — — 54 — — — —Amounts owed to affiliatedundertakings 2,057 30 — 2,087 11,538 19,385 — 30,923Tax and social security debts 124 — — 124 47 — — 47a) Tax 121 — — 121 45 — — 45b) Social security 3 — — 3 2 — — 2Other creditors 74 — — 74 62 — — 62Total 8,453 16,330 1,589 26,372 11,697 19,574 89 31,360Note 11: Non Convertible Debenture LoansOn May 27, 2008, ArcelorMittal issued secured, redeemable and non convertible debentures in the form of 5 year and10 year bonds, with an aggregate principal amount of USD 3 billion split equally between the 5 year and the 10 year issue.The bonds will bear interest at a rate of 5.375% for the 5 year issue and 6.125% for the 10 year issue and will matureon June 1, 2013 and June 1, 2018, respectively.154

2008 Annual Accounts continuedNote 12: Amounts Owed to Credit InstitutionsOn April 7, 2005, Mittal Steel (predecessor to the Company) and certain subsidiaries signed a five-year USD 3.2 billion credit facilitywith a consortium of banks. This facility bears interest at a variable rate. On September 5, 2008, the total outstanding amount underthis credit facility was transferred from ArcelorMittal Finance to the Company. The balance outstanding under this facility as ofDecember 31, 2008 amounts to USD 1.5 billion.On November 30, 2006, the Company and ArcelorMittal Finance S.C.A. entered into a EUR 17 billion credit agreement (comprisinga EUR 12 billion term loan facility and a EUR 5 billion revolving credit facility) with a group of lenders. On October 30, 2007,the maturity of the EUR 5 billion revolving credit facility was extended in agreement with the lenders for one additional year,to November 30, 2012. These facilities bear interest at a variable rate. On October 31, 2008, the total outstanding amount underthis credit facility was transferred from ArcelorMittal Finance to the Company. The balance outstanding under this facility as ofDecember 31, 2008 amounts to USD 16.3 billion.The Company runs a commercial paper program enabling borrowing of up to EUR 3 billion. The balance outstanding under thisprogram as of December 31, 2008 amounts to USD 2.4 billion.Note 13: Net Interest and Similar Income/(Charges)Year endedYear endedDecember 31, 2008 December 31, 2007Net interest * (1,004) (1,363)Effects of changes foreign exchange rates 1,469 (704)Amounts received in connection with the Group tax consolidation 1,772 46Others 137 (44)Total 2,374 (2,065)* Net interest includes:receivable from affiliates 76 121payable to affiliates (653) (432)payable to credit institutions (427) (1,052)Total (1,004) (1,363)ArcelorMittal Annual Report 2008Note 14: Income from Participating InterestsYear endedYear endedDecember 31, 2008 December 31, 2007Dividends received 1 3,639 2,650Profit on disposal of financial assets 2 15,062 6,382Others — 11Total 18,701 9,0431This amount includes a dividend-in-kind of 3,563 received from ArcelorMittal Investment S.A. in connection with the legal reorganization described in note 5.2 This amount includes profits of 14,692 (2007: 6,382) recognized further to the disposal of the Company’s investment in ArcelorMittal Belgium Holdings S.A. in connectionwith the legal reorganization described in note 5.155

Notes to the Annual Accounts continuedArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars, unless otherwise stated)Note 15: Income TaxThe Company is the head of a tax consolidation and is fully liable for the overall tax liability. Each of the entities includedin the tax consolidation is charged with the amount of tax that relates to its individual taxable profit.As a consequence of the net tax losses within the tax consolidation, no income tax is payable in respect of 2008 (2007: nil).The amount charged to affiliated undertakings amounts to 1,772 (2007: 46).Note 16: Commitments and ContingenciesCommitments givenYear endedYear endedDecember 31, 2008 December 31, 2007Guarantees on debts 1 939 19,800Other commitments 2 1,134 —Foreign exchange derivative instruments 3 4,989 —Total 7,062 19,8001The decrease in the guarantees on Group debts is a consequence of the transfer of debt from ArcelorMittal Finance S.C.A. (note 12)2Other commitments comprise amounts committed with regard to credit lines and guarantees given on behalf of Group companies.3Foreign exchange derivative instruments mainly consist of EUR/USD currency swaps that have matured on January 2, 2009. As of December 31, 2008,a loss amounting to 87 has been recognized on these instruments.Available lines of creditThe Company has available lines of credit for an aggregate amount of 5,829 as of December 31, 2008 (2007: nil).ContingenciesOn January 8, 2008, the Company received a writ of summons on behalf of four of its hedge fund shareholders to appear beforethe civil court of Luxembourg. The summons was also served on all natural persons sitting on the Board of Directors of the Companyat the time of the merger and on the significant shareholder. The claimants request, among other things (1) the cancellation and theamendment of the corporate decisions relating to the second-step merger in order to reflect an exchange ratio of eleven ArcelorMittal(the entity resulting from the first step merger) shares for seven Arcelor shares (ignoring the impact of the share capital restructuringof Arcelor), accompanied by the allocation by the Significant shareholder or the company of additional shares to the claimants to reflectthis revised ratio, and alternatively, (2) the payment of damages by the defendants (jointly and severally or severally, at the court’sdiscretion), in an amount of EUR 180 million. ArcelorMittal submitted its brief in response on October 16, 2008, challenging the validity,the admissibility and the merits of the claims. Hearing and judgment in the first instance are not expected before the end of 2009or early 2010.Note 17: StaffAverage number of staffYear endedYear endedDecember 31, 2008 December 31, 2007Employees 411 318Workers 28 31Total 439 349156

2008 Annual Accounts continuedNote 18: Directors’ RemunerationMembers of the Board of Directors are entitled to a total remuneration of 7.8 for the year 2008 (2007: 6.5)Note 19: Stock Option PlanOn August 5, November 10 and December 15, 2008 ArcelorMittal granted respectively 7,255,950, 20,585 and 48,000 optionsto a group of key employees at an exercise price of USD 82.57, USD 22.25 and USD 23.75, respectively. The options expireon August 5, November 10 and December 15, 2018, respectively.Allocated share options at December 31, 2008 are as follows:Number of shares Exercise price MaturityPlan 1999 (legacy Mittal Steel) 186,099 11.94 September 14, 2009Plan 2000 (legacy Mittal Steel) 165,100 8.57 June 1, 2010Plan 2002 (legacy Mittal Steel) 213,345 2.26 April 5, 2012Plan 2003 17,622 11.78 June 30, 2010Plan 2004 29,373 15.96 June 30, 2011Plan 2005 (legacy Mittal Steel) 1,737,997 28.75 August 23, 2015Plan 2005 11,429 19.69 June 30, 2012Plan 2006 (legacy Mittal Steel) 2,739,507 33.76 September 1, 2016Plan 2006 1,445,757 41.93 June 30, 2013Plan August 2007 5,729,402 64.30 August 2, 2017Plan December 2007 13,000 74.53 December 11, 2017Plan August 2008 7,201,250 82.57 August 5, 2018Plan November 2008 20,585 22.25 November 10, 2018Plan December 2008 48,000 23.75 December 15, 2018ArcelorMittal Annual Report 2008The movements in the number of outstanding share options during the year are as follows:Number of shares options 2008 2007Options outstanding at the beginning of the year 13,579,438 1,447,793Effect of legal merger — 8,541,644Options granted during the year 7,324,535 5,978,200Options forfeited during the year (43,629) (36,378)Options exercised during the year (954,844) (2,129,255)Options expired during the year (347,034) (222,566)Options outstanding at the end of the year 19,558,466 13,579,438Note 20: Subsequent EventsOn February 11, 2009 ArcelorMittal announced that it had secured commitments from banks for two Forward Start facilitiestotaling 4,800 (“the Forward Start facilities”), subject to certain conditions. A 3,250 revolving credit facility in respect of thesecommitments was entered into on February 13, 2009. A Forward Start facility provides a committed facility to refinance an existingfacility (which is not amended and continues in force), and therefore certainty as to the availability of funds for that refinancing.If drawn, the Forward Start facilities would effectively extend the maturities of 4,800 principal amount of indebtedness to 2012(from original maturity dates in 2009-2011).157

Auditors’ Report on the Annual AccountsReport of the Réviseur d’EntreprisesTo the shareholders ofArcelorMittal, Société Anonyme19, avenue de la LibertéL-2930 LuxembourgReport on the annual accountsFollowing our appointment by the General Meeting of the Shareholders dated May 13, 2008, we have audited the accompanyingannual accounts of ArcelorMittal, which comprise the balance sheet as at December 31, 2008 and the profit and loss accountfor the year then ended, and a summary of significant accounting policies and other explanatory notes.Board of directors’ responsibility for the annual accountsThe board of directors is responsible for the preparation and fair presentation of these annual accounts in accordance with theLuxembourg legal and regulatory requirements relating to the preparation of the annual accounts. This responsibility includes:designing, implementing and maintaining internal control relevant to the preparation and fair presentation of annual accountsthat are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;and making accounting estimates that are reasonable in the circumstances.Responsibility of the réviseur d’entreprisesOur responsibility is to express an opinion on these annual accounts based on our audit. We conducted our audit in accordancewith International Standards on Auditing as adopted by the Institut des réviseurs d’entreprises. Those standards require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual accountsare free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts.The procedures selected depend on the judgment of the réviseur d’entreprises, including the assessment of the risks of materialmisstatement of the annual accounts, whether due to fraud or error. In making those risk assessments, the réviseur d’entreprisesconsiders internal control relevant to the entity’s preparation and fair presentation of the annual accounts in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonablenessof accounting estimates made by the board of directors, as well as evaluating the overall presentation of the annual accounts.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the annual accounts give a true and fair view of the financial position of ArcelorMittal as of December 31, 2008and of the results of its operations for the year then ended in accordance with the Luxembourg legal and regulatory requirementsrelating to the preparation of the annual accounts.Report on other legal and regulatory requirementsThe management report, which is the responsibility of the board of directors, is consistent with the annual accounts.Deloitte S.A.Réviseur d’entreprisesEric van de KerkhovePartnerFebruary 26, 2009560, rue de NeudorfL-2220 Luxembourg158

Proposed Allocation of Results for 2008Proposed Allocation of Results and Determination of DividendProfit for the year 19,093,961,939Profit brought forward (Report à nouveau) 9,040,282,780Results to be allocated and distributed 28,134,244,719Transfer to the reserve for own shares 395,657,429Allocation to the legal reserve 105,278,200Directors’ fees, compensation and attendance fees 2,870,634Dividend of $0.75 (gross) per share for the 2008 financial year * 1,086,619,760Profit carried forward 26,543,818,696* On the basis of 1,448,826,347 shares in issue at December 31, 2008. Dividends are paid quarterly, resulting in a total annualized cash dividend per share of $0.75.In U.S. dollars2008 Annual Accounts and Proposed Allocation of Results for 2008ArcelorMittal Annual Report 2008159

Notes160

NotesArcelorMittal Annual Report 2008161

Notes162

Published in April 2009.To receive a copy of the Annual Report,please contact:ArcelorMittalLuxembourg:19, Avenue de la LibertéL-2930 LuxembourgGrand-Duchy of LuxembourgT: +352 4792 1London:7th Floor, Berkeley Square HouseBerkeley SquareLondon W1J 6DAUnited KingdomT: +44 20 7629 7988www.arcelormittal.com

Photography: ArcelorMittal Photo Library; Wolfgang von Brauchitsch; Daniel Delguste;Carlos Gutiérrez; istockphoto; A. Kradisch; Himanshu Pahad; Thoburns; wide.lu.Designed and produced by www.thoburns.com (United Kingdom).Printed by Royle Print, London.Copyright 2009 ArcelorMittal.