Dofasco Inc. Annual Report 2000 It Looks Like Dofasco

What does a growth company look like?

Dofasco Inc. Annual Report 2000 It looks like Dofasco...

... a company that offers its customers products that few others in the world can, enabling them to do their jobs better; a company that has developed technology that is state of anybody’s art and that continually improves its industry- leading productivity; a company that believes the well-being of its employees and community is essential to sustain long-term growth; a company that competes effectively and internationally, that is at the leading edge of e-commerce and that employs a highly-skilled, educated and motivated workforce with a mandate to innovate.

Dofasco finds inspiration in the needs of its customers, uses imagination to find new ways to meet those needs, and applies determination inspiration to turn ideas into action. imagination determination 1 | Dofasco Inc. hot rolled steels. Powerlasers, Dofasco’s wholly-owned subsidiary, manufactures laser-welded automotive blanks and related components in Concord, Ontario and Pioneer, Ohio, and has an Advanced Profile Technology Centre in Kitchener, Ontario. For nearly a decade, Dofasco has pursued a Dofasco is Canada’s most successful steel strategy that provides the foundation for producer, serving customers throughout sustainable growth and increased value for North America with high quality flat rolled all our stakeholders by differentiating the and tubular steels and laser-welded blanks. company in the marketplace. That strategy

Dofasco’s advanced facilities in Hamilton, has four main elements: Ontario, produce hot rolled, cold rolled, • Solutions in SteelTM, which builds strong galvanized, ExtragalTM, GalvalumeTM, tin- customer relationships by employing plate, chromium-coated and pre-painted new and unique technologies to produce flat rolled steels, as well as tubular prod- value-added products, ucts. Gallatin Steel, the company’s joint • operational excellence, which results venture minimill in Kentucky, produces in maximum operating performance reflecting our focus on improving what is important to our customers,

Dofasco is Canada’s most successful steel producer.

• a knowledgeable, resourceful and ded- icated workforce, that flourishes in an environment rooted in Dofasco values and that rewards performance and innovation, and • financial strength, which enables us to invest and grow with our customers.

Contents

4 2000 Highlights

6 Sustainability 38 Management’s Discussion and Analysis 8 Message to Shareholders 47 Consolidated 14 Inspiration Financial Statements 16 Imagination 50 Notes to Consolidated 18 Determination Financial Statements

20 Environment and Energy 57 Auditors’ Report

32 Social Well-being 57 Management’s Responsibility for Financial Reporting

58 Eleven Year Summary

TM TM 60 Corporate Governance Extragal is a registered Canadian trademark of Sollac, France. 62 Directors and Officers TM GalvalumeTM is a registered trademark of Dofasco 64 Ownership Interests and Inc. in Canada, and a registered trademark of Stock Market Information BIEC International Inc. in the United States.

TM Solutions in SteelTM is a trademark of Dofasco Inc.

| Dofasco Inc. TM ZyplexTM is a trademark of Dofasco Inc. 2 2000 Performance

Throughout our 1999 Annual and Environment & Energy Reports, we identified many challenges that Dofasco must address to remain successful. In order to be account- able to our shareholders, the following summarizes our performance in 2000 related to those challenges.

Objectives Performance

Short-term challenges

• Ensure the well being of today’s employees through • Further development of the Health and Safety Program and business plans contributed leadership and progressive health and safety practices. to reduced injury frequency and fewer lost-time injuries.

• Earn our cost of capital and where appropriate return • Generated 9.2% consolidated return on capital and returned more than $175 million money to our shareholders. to shareholders through dividends and share repurchases.

• Build on Gallatin Steel’s dramatic 1999 turnaround. • Gallatin received quality and safety awards in 2000 and generated its first-ever profitable year.

• Improve profitability at Quebec Cartier Mining Company. • Higher operating costs, particularly energy, and reduced worldwide demand for iron ore contributed to lower QCM profitability.

• Focus on making products our customers will want to • Rated first overall in North American industry-wide customer service survey. Enhancing buy and on delivering superior customer service. product line with upgrades in Hot Rolling, GalvalumeTM, and Tinplate facilities.

• Minimize the environmental impact of our operations • In full compliance with all environmental laws and regulations. by meeting or surpassing legislative and regulatory requirements.

• Take an active role in building a healthy, prosperous • Dofasco and Dofasco people contributed more than $3 million to charitable place to live and work. causes. Dofasco employees volunteered thousands of hours to local organizations. Co-sponsored the “Culture of Opportunity” summit addressing the sustainability of Canada’s standard of living. Founding sponsor of the Sustainable Enterprise Academy at York University in Toronto.

Long-term strategic initiatives

• Be recognized as one of the world’s best • Named the global leader in the Basic Materials sector of the Dow Jones steel companies. Sustainability Group Index.

• Target significant and sustained health and safety • Remain committed to achieving an accident-free workplace through continuous performance improvement. development of wellness and health & safety improvement programs.

• Focus on earning our cost of capital across • Earned greater than our cost of capital in Hamilton in 2000 for the third the business cycle. consecutive year.

• Lead the North American steel industry in • Continuous improvement in overall environmental performance. On or ahead environmental performance. of schedule to meet all commitments under voluntary Environmental Management Agreement.

• Grow globally to support our customers, making selective • Constructing No. 3 tube mill for hydroforming applications in Mexico. Participating investments based on a superior understanding of their (20% ownership) in a new steel processing facility to be built in Brazil. future requirements and capitalizing on our knowledge.

• Develop the intellectual capital that resides in • Commercializing ZyplexTM, an internally developed composite product. Marketing Dofasco’s employees into a competitive advantage. maintenance software products worldwide through Ivara Corporation. | Dofasco Inc. 3 2000 Highlights

A year of achievements.

2000 1999

Raw steel production and purchased semi-finished

steel processed (thousands of net tons) 5,009 4,833 Steel shipments (thousands of net tons) 4,416 4,449

Sales* $ 3,201.1 $ 3,142.3 Net income* 188.7 260.8 Net income attributable to common shares *† 188.1 260.2 Earnings per common share † – basic 2.47 3.16 – fully diluted 2.42 3.11 Dividends declared per common share 1.06 1.00

Capital expenditures* $ 216.0 $ 186.0

Working capital* $ 842.9 $ 776.5 Shareholders’ equity* 1,852.5 1,812.5

* in millions † after preferred dividends | Dofasco Inc. 4 • • • • • • • • • quency andthenumberoflost-time injuries. accident-free workplace.Reducedinjuryfre- progress towards theultimate goalofan Health andSafetyprograms contributingto Developed andimplementedlocal-area Hot RollingandFinishing. nance projects inIronmaking, Steelmaking, and Galvalume upgrade programs inHotRolling,Tinplate Projects includedmajorcapacityandquality a world-classsteelmanufacturingfacility. Invested tomaintainHamiltonoperations as share repurchases. holders through dividendsandcommon Returned more than $175 milliontoshare- Increased thecommonshare dividendby8%. year, for$94.5million. shares outstandingatthebeginningof the openmarket,representing 4.7%ofthe Repurchased 3.7millioncommonshares on from operations forthefifthconsecutiveyear. Generated more than$400millionincashflow (before interest andtaxes)pershippedton. ers inNorthAmerica,onthebasisofearnings Remained oneofthemostprofitable steelmak- highest EPSperformancesince1989. common share –thecompany’s second shares of$188.1million,or$2.47per Earned netincomeattributabletocommon and managementapproaches. cial, socialandenvironmental performance Sustainability Group Index,basedonfinan- Materials sectoroftheDowJones Named thegloballeaderinBasic TM facilities, andmajormainte- • • • • • • • • • • itable year. Recorded GallatinSteel’s first-ever prof- duction capabilityto450,000tonsper year. Mexico, whichwillbringDofasco’s tubepro- and steelprocessing facilityinMonterrey, Constructing ahydroformed tubemaking ing inSouthAmerica. growing globalautomotiveindustryoperat- facility tobebuiltinBrazil toservetherapidly ship interest inajointventure steelfinishing Announced planstoacquire a20%owner- leading-edge laser-weldingtechnology. Centre researches, developsandmanufactures components. Powerlasers’ AdvancedTechnology laser-welded automotiveblanksandrelated Acquired Powerlasers, amanufacturer of $2.6 billion,electronically. business transactions, valuedatmore than applications, completingmore than60% of Continued developmentofe-commerce their suppliers. automotive andtruckmanufacturers and Group thatrepresents more than1,600 industry, bytheAutomotiveIndustryAction tributions totheNorthAmericanautomotive Achievement Award forleadership andcon- Awarded theOutstandingCorporate satisfaction survey. recognized Jacobson&Associatescustomer American steelsuppliers intheindustry- Ranked first overall among23North duced byDSG. dipped exposedgalvanizedproduct pro- Focused Technology” forExtragal Recognition ofAchievementfor“Consumer delivery andcost.Alsoawarded Ford’s Excellence Award” forexcellinginquality, Awarded Ford MotorCompany’s “GoldWorld electrical safetyintheworkplace. recognizing Dofasco’s effortstopromote the OntarioElectricalSafetyAuthority, Received theElectricalSafetyAward from Recreation Park. users ofin-plantfitnesscentre andnearby classes. Continuedgrowth inthenumberof And Stretch” programs and“BackPower” noon-hour fitnessprograms, pre-shift “Walk tion programs, stress managementprograms, smoking cessationprograms, weightreduc- Group, includingtheHealthandSafetyFair, grams through Dofasco’s LifestyleResource Continued extensiveemployeewellnesspro- TM , thehot • • • • • • • • • • • • York University. Academy attheSchulichSchoolofBusiness at Founding SponsoroftheSustainableEnterprise Canada’s future inaglobaleconomy. and thevoluntarysectortogethertodiscuss from business, government,education,health a conference thatbrought Canadianleaders Choices: Creating aCulture ofOpportunity, Co-sponsored andorganized tive placestoliveandwork. helping makeourcommunitiesmore attrac- of volunteerhours to localorganizations, Contributed byDofascopeople,thousands cultural organizations –nationallyandlocally. education, health,environmental, artsand more than$3milliontopost-secondary Contributed bythecompanyandourpeople, Award from theRecyclingCouncilofOntario. Received theGoldEnvironmentally Sustainable Industrial Environmental Association. environmental groups, includingHamilton number ofindustry-community-government Maintained active,leadingparticipationina provincial environment ministries. Management Agreement withfederal and ments underthevoluntaryEnvironmental On oraheadofscheduletomeetallcommit- emissions by80%from 1993levels. Surpassed commitmenttoreduce benzene end of2001. all ofDofasco’s Hamiltonoperations bythe for DoSolGalva.Plansare inplacetoregister Environmental ManagementSystemStandard Received registration totheISO14001 30% ofIvara. Dofasco. Dofascoownsapproximately derived from technologiesdevelopedat Maintenance Managementsystems, products computerized AssetManagementand Energy, Ivara Corporation’s leading-edge Distributing worldwide,through Siemens automakers asaproduct qualitystandard. tion atGallatin,created byNorthAmerican Achieved theprestigious QS9000accredita- at Gallatin. Occupational SafetyandHealthAward Awarded Kentucky’s 1999-2000Governor’s Canada’s Key

5 | Dofasco Inc. Sustainability

Dofasco’s foundation for growth.

The widely accepted definition of sustainability is “... the ability to meet the needs of the present without compro- mising the ability of future generations to meet their own needs.” This definition underscores the integrated and mutually dependent nature of the three pillars of sustainability – environmental responsibility, social well-being and financial performance.

Everyone who has a stake in Dofasco’s long-term prosperity recog- nizes that our future rests on success in all three areas. We do not increase our success, or our chances of success, in one by diminishing our efforts in another. Rather, they are the three interdependent pillars that together support our future. We can only achieve one with the support of the others. | Dofasco Inc. 6 Sherman forged auniquepartnership with company’s history, whenfounder Frank to sustainabilitywere sownearlyinthe For Dofasco,theseedsofourcommitment and acommunity. factors indefiningthesuccessofacompany between financial,environmental andsocial seen first-hand thelong-termcorrelation the nextgeneration. AtDofasco,wehave cations forthebroader communityandfor action, westrivetobemindfuloftheimpli- When Dofascomakesadecisionortakesan the average return onequity(ROE) for benchmarks. Infact,inthefirst halfof2000, companies generally excelagainstall these It’s nocoincidencethatthemostsuccessful approach toenvironmental stewardship. nities hasledtoanincreasingly proactive our mutualdependencewithcommu- the pastquartercentury, thisrecognition of core operations forthelastninedecades. In Hamilton, Ontario,thehomeofDofasco’s communities where weoperate, especially naturally toadeepinterrelationship withthe ship, knownas“TheDofascoWay”, extended Over time,thismutuallybeneficialpartner- vidual respect andshared success. employees andtheirfamilies, basedonindi- other stakeholders. complete disclosure toshareholders and grated approach thatwillprovide more believes nowisthetimetoadoptaninte- three areas continuetoevolve,Dofasco While measurement andreporting inall to sustainabilityandthetriplebottomline. in awaythatbetterreflects ourcommitment Starting thisyear, wewillreport ourprogress Dow JonesGroup Index. the average ROEforcompaniesonthebroader secutive year–wasnearly77%higherthan which includesDofascoforthesecondcon- the DowJonesSustainabilityGroup Index– companies thathaveachievedinclusionin

7 | Dofasco Inc. Message to Shareholders

For Dofasco, the year 2000 provided further evidence that:

• One steel company can clearly distinguish itself from others, and in so doing provide real value to its customers, shareholders, employees and other stakeholders;

• A steel company can be as imaginative and future oriented as any company in any sector;

• A steel company can clearly demonstrate the interdependence and real meaning of sustainability through its financial strength, environmental responsibility and commitment to social well- being; and

• A steel company with astute business strategies, and the people able to execute those strategies with excellence, can support continued profitability and growth potential, even while steel markets endure industry- wide setbacks.

John Mayberry, President and CEO [ left ]

Chuck Hantho, Chair of the Board | Dofasco Inc. 8 to invest in the technologies and the people laser-welded automotive blanks and related required to fulfill its commitment to strong components, but markets its proprietary laser and mutually beneficial customer relationships. technology around the world. All three Powerlasers locations have achieved QS 9000 With initiatives such as DoSol Galva and two registration, the highest quality system tube mills, all based in Hamilton, we have In short, 2000 provided further evidence standard for suppliers to North America’s proven that we have the ability to deliver on that a steel company – Dofasco – can be a automobile manufacturers. Their manufac- this commitment. We have also said in the successful growth company. turing facilities have also earned ISO 14001 past that we are ready to produce the kind certification for their environmental man- Global growth – of value-added steel products that our agement systems. based on differentiation customers need, wherever they need them. The reality of the global steel industry is that The Powerlasers acquisition is consistent with Our Solutions in SteelTM strategy has laid the there is significant overcapacity, even at our commitment to produce value-added groundwork for long-term growth that will record levels of consumption. With no products where they are needed. Over the meet the needs of all our stakeholders. While apparent or obvious catalysts to increase next five years, the North American market we continued to invest in our customers’ consumption and balance supply and for automotive welded blanks is expected value chains by expanding our operations demand, the question is, “How will winning to triple with more than 85 per cent of the into new and growing markets both at home steel companies, like Dofasco, continue to demand in Powerlasers’ commercial backyard and internationally, we also invested in our grow and deliver value?” in Ontario, Michigan and Ohio. people – our most significant competitive

The answer is in innovative new products advantage – who turn our strategy into While Powerlasers gives Dofasco an that solve our customers’ needs by delivering sustainable results. immediate leadership position in an auto unique advantages and that increase manufacturing process of the future, it also In recent years, Dofasco has focused on Dofasco’s market share and margins. In the opens the door to further potential in a wide adopting and commercializing three specific steel industry, the next wave of growth will range of non-automotive applications, new technologies, all driven by consumer not come from increased global consump- including laser-welding for medical appli- demand for lighter, more fuel-efficient cars. tion, but from the ability to generate new ances, plastics and other materials. In short, These innovations – large diameter tubing for and better ideas. Equally important is opera- Powerlasers is an ideal fit with Dofasco’s hydroforming, advanced galvanized steel and tional excellence – the ability to flawlessly focus on value creation through innovation. laser-welded blanks – have transformed execute whatever is required to efficiently Solutions in SteelTM theory into reality and Dofasco de Mexico transform these new ideas into success generated growth through new business and Dofasco’s first mill capable of producing tube stories for our customers and for Dofasco. market share. for high pressure hydroformed applications –

Dofasco has both these abilities. and the first of its kind in the world – opened Powerlasers in Hamilton in 1997. It was followed by a In the years since Dofasco adopted the main In May, Dofasco acquired Powerlasers, a second in mid-2000. Today Dofasco provides elements of its current strategy, the company laser-welding pioneer based in Concord, has continuously demonstrated its willingness Ontario. Powerlasers, which also has production facilities in Ohio and an Advanced Technology Centre in Kitchener, not only sells | Dofasco Inc. 9 10 | Dofasco Inc. dents from theMonterrey Technical Institute corporate culture andanotherfiveMBAstu- York University inToronto tostudyDofasco’s we haveengagedfiveMBAstudentsfrom corporate citizenandemployerintheregion, To ensure thatDofascodeMexicoisaleading start-up team. ence andexpertiseintraining theMexican will beabletoleverage ourHamiltonexperi- interchangeable production capabilities, we Monterrey andHamiltonfacilitieswillhave people, themajorityhired locally. Sincethe Dofasco deMexicowillemployabout130 the nexttwoyears. try, withanotherUS$8billionexpectedover excess ofUS$5billioninMexico’s autoindus- ufacturers andsuppliers haveinvestedin In justthepastthree years, automotiveman- Canada’s andcontinuingtogrow rapidly. which isalready nearlytwo-thirds thesizeof growth intheMexicanautomotivemarket, This investmentwillprovide aplatformfor approximately 450,000tonsperyear. Dofasco’s totaltubeproduction capabilityto operational, theMonterrey facilitywillbring facility inMonterrey, Mexico.Whenitisfully tube manufacturingandsteelprocessing road andannouncedplansforahydroformed In October, wetookourtechnologyonthe motive manufacturers inNorthAmerica. tubing forhydroforming tofourmajorauto- produce Extragal year, expandableto1.2milliontonnes. Itwill will haveacapacityof800,000tonnesper When commissionedin2003,Vega do Sul 10% respectively. operator. Theywillown45%,25%and tional steelservicecentre andstamping Corporación GestampofSpain,aninterna- Tubarao, amajorBrazilian steelcompany, and in Hamilton),CompanhiaSiderúrgica de (our partnerinourDoSolGalvafacility automotive steelsupplierUsinorofFrance Our partners inBrazil are leadingglobal ing sophisticatedgalvanizedsteel. solidify ourestablishedleadership insupply- worldwide manufacturingplatformsandwill our products locallytocustomers with delivers onourcommitmenttoprovide production intheworld.Thisinvestment of thefastestgrowing centres ofautomotive steel finishingfacilitytobebuiltinBrazil, one 20% ownership interest inajointventure In June,weannouncedplanstoacquire a Vega doSul introduced toourMexicanoperations. underlying Dofasco’s culture are effectively mend waystoensure thatthevalues in Mexico.Theteamswillmeetandrecom- to examinebestpractices amongemployers Galva. OurinvestmentinBrazil means that exclusively inNorthAmerica by DoSol Extragal American automotiveindustry. doors, hoodsandbodypanelsfortheSouth in exposedautomotiveapplicationssuchas dipped galvanizedsteeltobeusedprimarily TM is thesameproduct produced TM , acorrosion-resistant hot relatively unchangedfrom 1999. steel shipmentsof4.42million tons were 1999. Salesin2000of$3.2billion andtotal $260.2 million,or$3.16percommonshare in or $2.47percommonshare, compared to common shares in2000was$188.1million, Consolidated netincomeattributableto necessary toachieveourstrategic goals. continue tomakethecapitalinvestments to maintainitsbalancesheetstrength andto generate strong cashflowwillallowDofasco America. Inaddition,ourcontinuingabilityto most profitable steelcompaniesinNorth 2000 and,fortheyearasawhole,oneof we remained profitable in each quarterof Dofasco isimpactedbytheseforces. However, Like allsteelcompaniesonthecontinent, declining pricesandescalatingenergy costs. record levelsofimports, reduced demand, nal forces suchasglobalsteelovercapacity, market adjustmentbrought aboutbyexter- In late2000andearly2001 there wasarapid affect theindustryasawhole. despite thedownturnsthatoccasionally financially strong yearinandout, strategy isdesignedtoensure thatweremain all otherelementsandinitiatives. Ouroverall element ofourstrategy, itisakeyenablerof Sustainable financialstrength isnotonlyan Financial performance Usinor respectively. and Europe, through DSG,Vega doSuland product inNorthAmerica,SouthAmerica from theabilitytosource thisinnovative global automotivecustomers willbenefit quarter, Gallatinlostmoneyasshipments cost pertonperformance.Inthefourth ment levelsandanimproved operating and first three quarters of2000onstrong ship- profit. Gallatinpostedprofits ineachofthe results in2000,earningitsfirst-ever pre-tax Gallatin Steelpostedsignificantlyimproved by higherpetroleum prices. due tohigheroperating costscausedinpart the first quarteroftheyear, earningsdeclined Despite increased sellingpricesannouncedin income before incometaxesdeclinedin2000. Dofasco’s share ofQuebecCartierMining’s that arose lateintheyear. earnings ofthedifficultmarketconditions ucts helpedoffsetsomeoftheimpacton higher valuedgalvanizedandtubularprod- which includedagreater proportion of operating performanceandaproduct mix Operations segmentin2000.Anexcellent resulted inverygoodresults forourSteel people toexecuteourplanswithexcellence contributor toearnings. Theabilityofour nerstone ofourbusinessandthelargest Our Hamiltonoperations remain thecor- posted profitable results in2000. and QuebecCartierMiningCompany– segments –SteelOperations, GallatinSteel, All three ofDofasco’s reporting business more than25%from 1999andaccounting violation ofWTO rules, were substantial,upby steel intoCanada,oftenunfairlytraded in However, low-pricedimportsofflatrolled to beunfairlytraded. duction oritshomemarketpriceisdeemed foreign marketseitherbelowitscostofpro- Under theserules, steelthatissoldinto rules agreed tobyallsteel-trading countries. complies withWorld Trade Organization world, aslongthecompetitionisfairand ready tocompetewithanysteelmakerinthe Dofasco hasclearlystateditiswillingand Steel trade of electricalpower. by uncertainavailabilityandescalatingcosts rolled markets. Profitability wasalsoaffected high leveloflow-pricedimportsinU.S.hot and sellingpricesdeclinedasaresult ofthe 1.00 1.50 2.00 2.50 3.00 0 .50 Otheritems Normaloperations dollars percommon share Earnings pershare 600 96 79 99 98 97 0 150 200 0 100 50 1 2 3 4 5 on $100 investment Cumulative totalreturn TSESteelIndex TSE300Index DofascoInc. % asatDecember31 Dividend yield TSESteelIndex TSE300Index DofascoInc. dollars 59 99 98 95 600 96 600 96 79 99 98 97 97

11 | Dofasco Inc. for 30% of flat rolled steel consumption emissions by 80% from 1993 levels. In fact, care, education, arts and culture, social ser- in Canada. Spot pricing levels in North we have either met, or are on target to meet vices and civic and community organizations, American steel markets dropped to near within the established timelines, all the objec- largely in Hamilton. their lowest level in the past two decades. tives set out in this voluntary agreement. On the national level, last year Dofasco co-

North American steelmakers have filed unfair In order to maintain our leadership position sponsored and organized a major national trade actions in both Canada and the United in environmental stewardship, we remain conference called Canada’s Key Choices: States and Dofasco will initiate further action actively engaged with all our stakeholders – Creating a Culture of Opportunity, which exam- if warranted. Dofasco supports the concern federal and provincial regulators, non- ined the national framework required to sustain expressed by the three steel industry asso- governmental organizations, industry and and improve Canadians’ standard of living. ciations in Canada, the United States and our local community. Don Pether named Mexico over the role played by various inter- Social well-being Chief Operating Officer national governments in perpetuating and Dofasco’s activities in a number of areas In December, Don Pether was named Chief exacerbating the problem of world steel underscore our concern and support for the Operating Officer of Dofasco. While Don has overcapacity by providing export financing well-being of our employees, their families served in the primary role of Executive Vice aid to help build unnecessary capacity. and our local and national communities. President, Dofasco Inc. and General Manager,

Environmental performance Dofasco Hamilton, in reality his responsibili- Nothing is more important than the health and Dofasco is committed to leading the North ties have been much broader, particularly safety of our people. Dofasco remains commit- American steel industry in environmental his involvement in helping to establish and ted to the goal of an accident-free workplace performance. In 2000, we maintained this implement the company’s strategic direction. and recorded continuing steady improvement commitment in key areas relating to energy This new appointment reflects the integral in health and safety performance in 2000. consumption, air and water emissions and leadership role that Don will continue to play The company also expanded the health and the management of secondary materials. in generating profitable and sustainable wellness programs available to employees growth for Dofasco. Significantly, DoSol Galva achieved ISO 14001, through Dofasco’s Lifestyle Program.

the accepted international environmental Dofasco’s response to Our direct impact on local, regional and management standard and plans are in place current market conditions national economic development is signifi- for the complete registration of Dofasco While our financial strength puts us in the cant. In 2000, Dofasco injected more than Hamilton operations by the end of 2001. enviable position of not having to make $1 billion into the Hamilton-area economy short-term decisions that would detract We reported progress in measurements under through wages and purchases and another from our long-term growth strategy, we have our Environmental Management Agreement $1 billion into the larger Canadian economy acted decisively to deal with the rapid market with Environment Canada and Ontario’s through raw material and energy purchases. adjustment that emerged in late 2000 and Ministry of the Environment, such as sur- We also play an active role in building a has carried forward into 2001. passing our commitment to reduce benzene healthy community in which to live and work. During the year, Dofasco and our employees gave more than $3 million and countless hours of volunteer time to health | Dofasco Inc. 12 We have implemented plans in Hamilton and We will continue to create value by investing in at all our joint ventures and subsidiaries to opportunities that provide sustainable growth, reduce costs and conserve cash. We will also that allow us to develop and adopt innovative reduce capital spending, deferring capital technologies and products that enhance the projects that can reasonably be deferred. At communities where we live and work. the same time, however, we will proceed with At Dofasco, we have lots of room for imagi- the strategic investments that will continue nation. Our role is to imagine and implement to differentiate us from our competitors. solutions for the next decade, and for the one

What does a growth after that, and to challenge steel’s traditional company look like? boundaries and mindset in a way that is Dofasco remains focused on growth. We nothing short of revolutionary. expect to remain an industry leader, despite what is anticipated to be a very difficult first half of 2001. Because of initiatives we have taken over the past decade, we have a Chuck Hantho uniquely sound financial foundation and Chair of the Board strong customer relationships. These strengths position us better than most steel companies to address the current challenges and to continue to imagine what the future might hold.

Dofasco people continue to use their capa- John Mayberry bilities to outperform the competition. Our President and Chief Executive Officer employees have the inspiration, imagination March 30, 2001 and determination to see the company through this period.

The progress we made in 2000 is evidence of our commitment to the strong customer bonds that are the foundation of our

Solutions in SteelTM strategy. This strategy has made Dofasco one of the most successful steelmakers in the world. | Dofasco Inc. 13 14 | Dofasco Inc. inspiration into atangibleidea time whenunderstanding transforms itself us asenseofpurpose.Itisthatmomentin plans forthefuture. We mustprove tothem close enoughthattheytrustus with their we mustfirst earntheirtrust.We mustbe we canaddress theneedsofourcustomers, opportunities andconstraints. Butbefore standing ofourcustomers Inspiration requires knowledgeandunder- unique capabilities. marrying theneedsofacustomertoour possibility ofcreating somethingnewby Inspiration – whenweperceive the is whatgives ’ business better than anyoneelse efforts andthatourbestare best our alw they that again and again standards, allinpursuit ofSolutionsinSteel the highestmanufacturingandperformance for thenewestandbesttechnologies ally, toearnthattrust.We search theworld We gotogreat lengths, figuratively andliter- Ford MotorCompanypresented ustheir recognized customer satisfactionsurvey. American steelsuppliers inanindustry- we ranked first overall among23North companies inNorthAmericaandlastyear We remain oneofthemostprofitable steel nificant competitiveadvantageforDofasco. insight intoourcustomers Have webeensuccessful?Absolutely. Our for ourcustomers. ’ s. ’ thinkingisasig- ays receive TM Gold World Excellence Award for excelling in quality, delivery and cost and their Recognition of Achievement for Consumer Focused Technology for ExtragalTM, our hot dipped exposed galvanized steel.

But there is one thing that is certain about the steel industry. It will change. While inspiration tells the story of the past decade for Dofasco – half the products we make today didn’t exist ten years ago – inspiration will continue to be part of our success story in the future. Ten years from now, the steel industry, its products and even its customers, won’t look the same as they do now.

And our success will be driven by our ability to stay close to our customers, to be in a position to ask “What’s next?”

Dofasco has successfully embraced the technologies set out in the Ultra Light Steel Auto Body (ULSAB) initiative | Dofasco Inc. and is uniquely positioned to supply the full complement

of leading-edge ULSAB-related automotive steels. 15 16 | Dofasco Inc. imagination insulated, energy efficient,decorator-friendly stronger, lighter, lessexpensive,better- consumption. Thesteelofthefuture creates the driverinasafetycocoon,andhalvesfuel weighs one-third oftoday bricks. Thesteelofthefuture incarframes recyclable andlessexpensivethanwoodor can withstandstorms, isfireproof, 100% In homeconstruction,thesteeloffuture Today, Dofascoisimagining will fulfillthoseneeds. new andbetterproducts andprocesses that imagination It fulfill thechangingneedsofyourcustomers. ’ s quiteanothertohavetheorganizational It to findwaysdevelopthe ’ s onethingtobeinspired to ’ s standard, wraps “ what ’ s next. ” producing Extragal hydroformed automotiveapplications. Like of producing steeltubeforhigh-pressure facility. Suchasbuildingthree millscapable traditional steelmakingtechnologyintoone bility byintegrating electricarc furnaceand Such asenhancingourmanufacturingflexi- tions fortoday Not verylongago,wewere imaginingsolu- products thatourcustomers need. others are stillstudyingthem,toprovide new successfully adoptednewtechnologieswhen in NorthAmerica,ifnottheworld,thathas are probably oneofonlyafewsteelcompanies Dofasco projects programmed imagesacross abuilding. of thefuture changescolourunderstress and household appliances. Inskyscrapers, thesteel technology toproduce laser-weldedblanks, and SouthAmerica.Suchasowningthe hot dippedgalvanizedsteel,inbothNorth ’ s abilitytoimagineiswellproven. We ’ s needs. TM , thecorrosion-resistant increasingly in demand for automotive and other applications. Such as being at the leading edge of e-commerce, conducting almost 60% of our business online. Such as competing successfully for the best and brightest technology graduates, challenging them with the most advanced technology in the world and allowing them to share in their company’s success. By giving our people the freedom to search the world for new products, processes and technologies, and as a result enabling the development of products like ZyplexTM, a versatile, ultra-strong, ultra-light and unique steel laminate poised for a variety of lucrative potential applications.

At Dofasco, we imagine all kinds of possibilities.

Dofasco’s acquisition of Powerlasers provides a jump start in the growth market for laser-welded | Dofasco Inc. blanks and is an ideal fit with Dofasco’s focus on

value creation through innovation. 17 determination

while linking the success of the employee directly with the success of the company.

We established cross-functional teams focused on achieving aggressive objectives. This allows employees with a variety of technical expertise and business accountabilities to align in pursuit of a common purpose.

What does it takes to turn This team approach thrives in a culture of inspiration into imagination and imagination excellence. “Do it right the first time, on time, into reality? It takes great people with the and with no injuries” is an often-heard credo determination to be the best. at Dofasco. This determination has helped Dofasco eliminate bottlenecks, maximize Inspiration and imagination are all about quality, improve delivery and achieve a level being innovative. But innovation is not only of operational excellence that is among the about new technologies. A truly innovative world’s best-in-class in every key measure. company also changes its business processes. For Dofasco to change the way we did business, our people had to become more involved and acquire a sense of ownership in our growth. We had to maintain our traditional values of respect, loyalty and concern, | Dofasco Inc. 18 A couple of examples: In Hamilton in April of 2000, teams at our KOBM steelmaking operations set a record by producing more than twice the number of batches of steel attained with the same equipment five years earlier. In 2000, Gallatin earned an impressive triple crown, recording its first-ever profitable year, achieving the prestigious QS 9000 quality accreditation, and being awarded the Kentucky Governor’s Occupational Safety and Health Award.

Throughout Dofasco, our employees are our most valuable asset and one of our greatest competitive advantages. We have the results to prove it. For more than five years, Dofasco has been one of North America’s most profitable steelmakers and in 2000, we were named the global Basic Materials sector leader in the Dow Jones Sustainability Group Index.

At Dofasco, we have the determination to succeed.

DoSol Galva shows how Dofasco has utilized strategic alliances to be able to supply ExtragalTM, the product of | Dofasco Inc. choice for exposed automotive applications, benefiting

our customers and our shareholders. 19 Environment and Energy

Our vision is clear.

Pollution Prevention. We will minimize our environmental impact through innovative design and practices to improve our processes Policy on Environment and our products. Product Stewardship. We will work with our At Dofasco, the conservation and customers and suppliers to maximize the protection of our natural environment is inherent advantages of steel’s strength, recy- a fundamental consideration in our deci- clability and cost-effectiveness across the steel product life cycle. sion making. Environmental quality and Continual Improvement. We will use our the well-being of our community are environmental management system, which primary goals for all Dofasco people. includes setting objectives, assigning responsibilities, communication, training, auditing, We are committed to: and assessing risks, to achieve this.

Sustainable Development. We will take an Exceeding Expectations. We will meet integrated approach to improve our environ- standards set by legislation and go beyond mental performance, improve the quality of compliance where appropriate through life of our employees and the community, voluntary commitments to stakeholders. and achieve our financial goals.

Managing Resources. We will optimize the use of resources by reducing, reusing, recov- ering and recycling energy, raw materials, water and by-products. | Dofasco Inc. 20 responsibly andsafely. use theseresources efficiently, productively, sustainability, itisDofasco’s responsibility to energy. Consistentwithourcommitmentto of raw materials, recycled materialsand The manufacturingofsteelrequires theuse from 1990levelsby1998. and EliminationofToxics (ARET)parameters Reduce by50%aggregate Accelerated Reduction Destroy 100% ofstored, drummed PCBsbyendof2000. Increase useof recyclables. Plan (HHRAP). Participation inHamiltonHarbourRemedialAction (MISA) targets. Meet Municipal-IndustryStrategy forAbatement greenbelting by endof1999. Enhance 5,000square metres ofproperty through of 1%between1990and2000. Reduce SpecificEnergy Consumptionbyannualaverage by endof1997and80%2000. Reduce benzeneemissionsfrom 1993levelsby50% by 30%theendof2000and50%2005. Reduce Polycyclic Aromatic Hydrocarbons from 1993levels We are on–orahead of–scheduletomeettheremainder. Highlightsinclude: government andreported thatDofascohasalready metmanyoftheagreement’s specificcommitments. federal andprovincial governmentsin1997.In2000,weparticipatedoursecondannualprogress meetingwith Dofasco wasthefirst companyinCanadatosignavoluntaryEnvironmental ManagementAgreement withthe Environmental ManagementAgreement omtetStatus Commitment Hamilton-based 80%jointventure with standard. DoSolGalva,thecompany’s ISO 14001 environmental managementsystem (EMS) withtheinternationally-recognized existing Environmental ManagementSystem Importantly, Dofascobeganaligningits These effortsare anongoingcommitment. mance showedsteadyprogress. Pollutants ReleaseInventory(NPRI)perfor- Management Agreement (EMA)andNational materials. Additionally, ourEnvironmental and water, andthemanagementofsecondary sures intheareas ofenergy use,emissionstoair our performanceaccording toourkeymea- We continuedoureffortsin2000toimprove achieved a61% reduction todate. Accomplished by1998.Exceededexpectations and destroyed 46,500kgofliquidPCBsin2000. safely removed 33PCBtransformers from serviceand Accomplished infirst quarterof1999.Inaddition,Dofasco Used 1.6milliontonnesofscrap in2000,up6%from 1999. based organizations committedtoharbourremediation. Dofasco continuesinvolvementinthisandothercommunity- checks resulting in99.9%compliancerate. Meeting allloadinglimits. In2000weexceededtwopHlimit More than34,000 square metres greenbelted since1995. 5,000 square metres enhancedbygreenbelting byendof1998. in SpecificEnergy Consumptionsince1990. Exceeded expectationsbyaveraging a2.0%annualreduction by 83%andexceededexpectations. $9.4 millionbenzenereduction project hasreduced emissions Well aheadof2005commitment. Achieved reduction of65%bytheend2000. elements surveyed. have best-in-classpractices forseveral ofthe and implementedEMSwasfoundto recognized aspossessingawell-designed North Americanheavyindustry, Dofascowas In anA.D.Littlebenchmarkingsurveyof environmental andsocialreporting in2001. acquired subsidiarieswillbeincludedinour of Dofasco,isalsoISO14001 certified.Newly by theendof2001. Powerlasers, asubsidiary operations isontrack toachieveregistration 2000. Theremainder ofDofasco’s Hamilton Usinor, received ISO14001 registration in

21 | Dofasco Inc. energy Energy

Steelmaking is an energy-intensive business. Dofasco is committed to continuously improve energy efficiency, for both environ- As part of a Canadian steel industry commit- mental and financial reasons. In particular, ment, Dofasco agreed to reduce SEC by 10% we are committed to addressing Specific between 1990-2000. Dofasco surpassed this Energy Consumption (SEC) and emissions of commitment, achieving a reduction of 19.5%. We have renewed our commitment for carbon dioxide (CO2). Scientific research indi- the period of 2000-2010. Dofasco supports cates that greenhouse gases such as CO2 are contributing factors to climate change. voluntary energy efficiency improvements as our principal response to climate change and is engaged with government and industry peers in this effort. | Dofasco Inc. 22 [ left to right ] Dofasco has reduced This power station The increased use of Electric Arc Furnace Specific Energy supplies energy to steelmaking, which is less energy intensive Consumption by an Dofasco’s Primary than traditional steelmaking, contributed to average of 2% a year Manufacturing improved energy consumption in 2000. since 1990. operations.

2000

1500

1000

500 20

15 0 90* 96 97 98 99 00

10 Carbon dioxide emissions to air 5 kg/tonne shipped * base year

0 90* 96 97 98 99 00

Energy rate (SEC)

gigajoules/tonne shipped * base year

SEC improved 0.5% from 1999 to 2000. Less energy required to make our integrated KOBM slabs, coupled with an overall shift to the less these areas have received greater focus for substantially the weight of a vehicle’s body energy-intensive production of EAF slabs, energy reduction initiatives. However, each structure and at the same time, ensure were major contributors. In addition, natural business unit has been provided the tools safety, fuel efficiency and lower emissions. gas, which is less carbon intensive, accounted that allow them to: define and track energy for a greater percentage of our energy mix. Dofasco provides funding to the Centre performance, identify areas of potential As a result, both total CO2 emissions and CO2 For Advanced Gas Combustion Technology improvement, set specific goals and resource per tonne shipped improved in 2000. (CAGCT) for research into high-efficiency, and implement projects. low nitrogen oxide (NOx) combustion, and As part of our efforts to reduce energy costs, Dofasco provides leadership through involve- to the BIOCAP Canada Foundation for improve competitiveness and minimize envi- ment with industry and stakeholder groups. research into strategies that reduce green- ronmental impacts, Dofasco is examining the A Dofasco employee represents the Canadian house gas emissions by increasing the attractiveness of a co-generation facility. This steel industry and also acts as Vice-Chair of amount of carbon stored in soil, crops and effort will continue in 2001. the Canadian Industry Program for Energy trees. The CAGCT and BIOCAP are both based Dofasco’s Primary Manufacturing and Utilities Conservation (CIPEC). The company is also at Queen’s University. operations account for roughly 85% of the engaged in the Ultra Light Steel Auto company’s energy consumption. As a result, Consortium Projects: ULSAB (Body), ULSAC (Closures) and ULSAS (Suspensions). These projects are all part of a multi-phased study to demonstrate steel’s capability to reduce | Dofasco Inc. 23 24 | Dofasco Inc. 0.05 0.15 0.20 0.25 0.10 0 * baseyear kg/tonne shipped Benzene emissionstoair 93 * 69 89 00 99 98 97 96 1.00 2.00 3.00 4.00 0 * baseyear kg/tonne shipped emissions toair Sulphur dioxide 90 * 69 89 00 99 98 97 96 air stances, suchasdioxins andfurans. Working Canada-Wide Standards forpriority sub- Environment launchedaninitiativeto develop The CanadianCouncilofMinisters ofthe targets tobeachievedwithvoluntary action. which allowforthecreation ofindustry-wide tives anduniformmeasurement standards, Codes ofPractice create asetofshared objec- Polycyclic Aromatic Hydrocarbons (PAHs). Codes ofPractice foremissionstoairof Dofasco participatedinthedevelopmentof concerns related toairquality. Forinstance, other stakeholders inaddressing anumberof provincial government,industrymembers and In 2000,Dofascoparticipatedwithfederal and Benzene emissionswere reduced by83%. by 80%theendof2000from 1993levels. commitment toreduce emissionsofbenzene This year, Dofascosurpasseditsvoluntary Air and dust control. Dofasco isalsoa member project forbothaesthetic considerations greenbelting were animportantpart ofthis used forcoilstorage. Berming,fencingand completed in2000andthespace isbeing wind-blown dust. greenbelting, toreduce abatement activities, suchas invested in2000ondust More than$2.3millionwas [ lefttoright] The demolitionofDofasco road-sweeping program wasalsoundertaken. – were enhancedthisyearthrough greenbelting Also, 2,560square metres ofDofascoproperty recycled Dofasco steel slagintheasphalt. were newlypaved,using7,200tonnesof More than70,400 square metres ofroads suspended particulates, suchasroad dust. $2.3 millionin2000toreduce theamountof our neighbours. Dofascoinvestedmore than Wind-blown dustisaconcerntoDofascoand assists inprioritizingsubstances. project. Thisproject measures emissionsand Selected Targets forAirCompliance(STAC) unteered toparticipateintheprovince Contaminant Discharge regulation andvol- government indevelopinganAirborne Dofasco alsoworkedwiththeprovincial well belowthelevelsproposed. tested ourplantfortheseemissionsandwere with Environment Canada,wevoluntarily theplantingoftrees andgrasses. Anextensive 0.30 0.60 0.90 1.20 1.50 ’ s No.1HotMillwas 0 sions andmaintenancecosts. low-emission engines, reducing bothairemis- heavy machinery, suchastransporters, with Dofasco hasanongoingprogram toretrofit our * baseyear kg/tonne shipped emissions toair Nitrogen oxides 90 * 69 89 00 99 98 97 96 ’ s sulphur dioxide(SO of NOx,volatileorganic compounds(VOC), Action Plan,whichaimstoreduce emissions ducers, isaparticipantin the Anti-Smog Dofasco, alongwithotherOntariosteelpro- This effortwillcontinuein2001. $100,000 togreenbelting for1999and2000. an area offocus. Inresponse, HIEAbudgeted on airqualityandsuggestedgreenbelting as Advisory Panel (CAP).CAPputahighpriority Association, whichincludesaCommunity of theHamiltonIndustrialEnvironmental to review pipeinspection programs. a reoccurrence andataskforce wascreated for piperepairs havebeenrevised toprevent visible emissionswere reported. Procedures However, whilerepairs were beingmade, The fire was containedandextinguished. being conductedonacokeovengaspipe. On August11, afire occurred whileworkwas finalized in2001. gressed in2000andare expectedtobe Ontario MinistryoftheEnvironment pro- commitments betweenindustryandthe particulates). Discussionstodefineplansand 0.03 0.04 0.02 0.01 0 2 ), PM * baseyear kg/tonne shipped PAHs emissionstoair 93 10 * and PM 69 89 00 99 98 97 96 2.5 (fine 0.20 0.30 0.10 0 particulate emissions Inventory of * baseyear kg/tonne shipped to airfrom pointsources Particulate emissions 90 * Roads 69 89 00 99 98 97 96 Erosion Wind Sources Point Fugitives Process

25 | Dofasco Inc. 26 | Dofasco Inc. 1200 1000 200 400 600 800 0 * baseyear g/tonne shipped to HamiltonHarbour Total process effluent 90 * 69 89 00 99 98 97 96 water Dofasco loadings asaresult ofstormwaterdrainage. ter pondin2000toreduce potential effluent construction ofa2,200square metre stormwa- ment. Forinstance,Dofascocompleted We are exploringadditionalareas ofimprove- state-of-the-art technologyandprocesses. than 99%since1990.Thissystememploys Hamilton Harbourhavebeenreduced bymore result ofthissystem, particulateloadingsto water from HamiltonHarbourannually. Asa approximately 58millioncubicmetres of the needtodraw andultimatelydischarge formed wellin2000.Thesystemeliminates all process waterinPrimaryOperations, per- which allowsfortherecirculation ofvirtually ’ s “ closed loop ” recirculation system, Implementation Team. Restoration Counciland theBayArea Harbour RemedialActionPlan,the BayArea Hamilton Harbour, includingtheHamilton nizations dedicatedtotheremediation of support andactiveparticipation,with orga- Dofasco remains involved,through financial treatment technologiesandprocesses. established toassesspotentialnewwater cokemaking operations. Pilotplantswere management studyforwastewaterfrom Also in2000,Dofascoinitiatedawater structing asecondstormwaterpond. We are investigatingthepossibility ofcon- and bulrushes, willtreat therun-offwater. variety ofplantlifeinthepond,suchascattails been redirected tothepond.Infiltration anda A numberofdrainage areas andsewers have Water of theMISA. quality andtooutperformingrequirements Dofasco iscommittedtoimproving water adjusted toprevent areoccurrence. system atthefiltration planthasbeen no environmental impact.Theneutralization the Environment wasnotifiedandthere was allowable range of6.0to9.5.TheMinistry plant dropped to5.91 and5.95,belowthe 26 and27,pHlevelsofwaterleavingthe Abatement (MISA)waterregulation. OnJune with theMunicipal-IndustrialStrategy for filtration plantresulted innon-compliance Two minorincidentsattheNo.1HotMill water testseachyear. than 7,000analytical Dofasco conductsmore [ lefttoright] 20 30 40 50 10 0 * baseyear g/tonne shipped Hamilton Harbour Ammonia to 90 * 69 89 00 99 98 97 96 plant lifeinthepond which istreated byfiltration and to capture stormwaterrun-off, This pondwasconstructedin2000 ic1. .19% 10% 3% 18% 1.11 0.04 1% 0.18 27.44 11% 11.7 0.364 0.19 6.08 152 71.33 Phenolics 19.8 Zinc (kg/day) Lead 646 Ammonia (kg/day) Cyanide Suspended Solids Substance 120 150 0.5 1.0 1.5 2.0 30 60 90 0 0 * baseyear g/tonne shipped Zinc toHamiltonHarbour * baseyear g/tonne shipped to HamiltonHarbour Dissolved organic carbon 90 90 * * 69 89 00 99 98 97 96 69 89 00 99 98 97 96 IALmtDofasco Performance MISA Limit 200 400 600 800 0.3 0.6 0.9 1.2 1.5 0 0 * baseyear g/tonne shipped Hamilton Harbour Phenol to * baseyear g/tonne shipped to HamiltonHarbour Suspended solids 90 90 * * 69 89 00 99 98 97 96 69 89 00 99 98 97 96 % ofLimit

27 | Dofasco Inc. 28 | Dofasco Inc. secondary Secondary Materials Hatch tolaunchtheproject in 2001. Champion ofthiseffortandisworking with and environmental benefits. DofascoisProject another. Thiswouldprovide botheconomic materials ofonecompanyasafeedstockat to identifyopportunitiesusethesecondary posing secondarymaterials, willworktogether Golden Horseshoe area which,insteadofdis- project willseektoengagecompaniesinthe Horseshoe By-Product Synergy Project. The Associates tolaythefoundationforGolden In 2000,DofascoworkedwithHatch rich iniron, thestudy isexploringthepossibil- manufacturing. Since drop-out boxmaterialis another secondarymaterialof EAFsteel to recycle EAFdrop-out boxmaterial, Dofasco alsoundertookafeasibility study shipped forthispurposein2000. Approximately 7,800tonnesofEAFdustwas consumer goods, suchascosmeticsandtires. recovered andusedinthemanufacture of where valuablemetalssuchaszincare Electric Arc Furnace(EAF)dusttoafacility pendently. In2000,webeganshipping Dofasco alsopursues theseinitiativesinde- materials base wouldpreviously have beensentto re-paving aroad, oldasphaltandgranular from on-siteexcavation.Forexample, when valuable slagandothergranular materials Additionally, Dofascobeganrecovering limestone intheslag-coatingofsteelvessels. Steel slagsare alsobeingusedtoreplace slags foruseinhighqualityroad aggregate. 2000 thecompanysold28,600tonnesofsteel Steel slagsare anotherarea ofopportunity. In making process intoafeedstockforanother. could turnasecondarymaterialofonesteel- Basic OxygenFurnace.Ifsuccessful,this ity ofusingthematerialtocharge Dofasco applications, suchasroad aggregate. recovered andusedinavarietyof year. Thissecondarymaterialis 230,000 tonnesofsteelslagseach Dofasco produces approximately [ lefttoright] ’ s containing PCBs will continuein2001. shells. Thephase-outofelectricalequipment approximately 195,000kgoftransformer destruction facilityandsafelydisposed of 46,500 kgofliquidPCBstoan approved with non-PCBunits, shippedapproximately In 2000,wereplaced 33PCBtransformers of electricalequipmentcontainingPCBs. Dofasco advanceditsphase-outprogram was recovered inthismanner2000. rial. Approximately 26,700 tonnesofmaterial landfill andtheneedtopurchase newmate- are recovered andre-used, reducing wasteto screening facility, where slagandoldasphalt landfill. Itisnowsenttoacrushingand 100 20 40 60 80 0 PCB phase-outprogram. non-PCB unitsaspartofa formers were replaced with Thirty-three PCBtrans- * baseyear kg/tonne shipped Solid wastedisposal 90 * 69 89 00 99 98 97 96 increase economicbenefits. materials inorder toreduce waste and tunities inthemanagementofsecondary Dofasco continuestopursue newoppor- PCB phase-outprogram. this eventunderscored theimportanceof release ofPCBsto theenvironment. However, The PCBswere containedandthere wasno electrical transformer inNovember1999. pleted ofPCBsthatwere released from an In June2000,successfulclean-upwascom- 1500 2000 2500 3000 1000 500 0 collected forrecycling Blue boxmaterials tonnes 69 89 00 99 98 97 96

29 | Dofasco Inc. 30 | Dofasco Inc. moi 91 ContinueCokeBatteryleakreduction program 15 19 Ammonia yee5429Optimizeemissioncontrols atCokePlantBy-Product areas KOBMSecondaryEmissionsControl System Optimizeemissioncontrols atCokePlantBy-Product areas Optimizeemissioncontrols atCokePlantBy-Product areas 2.9 13 15 5.4 13 0.6 39 *TEQ: Toxic Equivalentsas2,3,7, 8 Work withotherindustrialsectors todeveloppollution The datainthistablewillbesubmittedtoEnvironment Canada aspartofourNationalPollutant ReleaseInventoryreporting re Optimizeemissioncontrols at CokePlantBy-Product areas Note: Airrelease inventoriesofmetalandvolatileorganic compounds(e.g.benzeneandtoluene)were updatedin 1999 toreflec KOBMSecondaryEmissionsControl System 1.1 Zinc anditscompounds Xylene KOBMSecondaryEmissionsControl System 0.088 Process andmaintenanceimprovements atPickle Lines KOBMSecondaryEmissionsControl System Toluene 41 0.13 ContinueCokeBatteryleakreduction program 0.080 Styrene 0.13 70 Investigatecontrol optionsthrough theCanada-Wide emissioncontrols Optimize atCokePlantBy-Product areas Polycyclic Aromatic Hydrocarbons 3.1 0.49 43 Nickel anditscompounds 24 0.48 3.1 45 Mercury 33 Manganese anditscompounds 0.00017 0.67 Optimizeemissioncontrols atCokePlantBy-Product areas Lead anditscompounds 0.00015 KOBMSecondaryEmissionsControl System Investigatecontrol optionsthrough theCanada-Wide 1.4 Hydrochloric Acid KOBMSecondaryEmissionsControl System Hexachlorobenzene 122 Ethylene 0.14 0.00000054 0.00000049 390 Ethylbenzene 0.23 0.14 Dioxins &Furans (TEQ*) 0.23 Copper anditscompounds Chromium anditscompounds Benzene National Pollutant ReleaseInventoryReporttoEnvironment Canada Substance Name – TCDD usingInternationalToxic EquivalencyFactors. to theEnvironment 9920 i Water Air 2000 1999 Direct Release onsYa PrimaryRelease Tonnes/Year Action PlantoReduceEmissions and continueCokeBatteryleakreduction program Standards settingprocess and continueCokeBatteryleakreduction program and engineernewammoniastillsatBy-Product Plant and continueCokeBatteryleakreduction program and continueCokeBatteryleakreduction program and continueCokeBatteryleakreduction program and continueCokeBatteryleakreduction program prevention opportunities and AcidRegeneration Plants Standards settingprocess quirements. t newinformationandestimationtechniques. Sustainability Volatile Organic Compounds(VOCs) Total Suspended Solids(TSS) Sulphur Dioxide(SO Specific Energy Consumption Phenol pH Particulates Nitrogen Oxides(NOx) Greenhouse gas Greenbelting Gigajoule EAF dust Climate change Carbon Dioxide Benzene BOF Oxides Ammonia (NH Glossary ofEnvironmental Terms Total Process Effluent Slags Secondary Material Primary ManufacturingFacilities Polycyclic Aromatic Hydrocarbons (PAHs) EAF drop-out boxmaterial Dioxins andFurans Coke ovengas 3 ) 2 ) A conceptthathasemerged inrecent years, basedonthepremise thatdevelopmentmustmeettheneedsof For example,benzene isaVOC. Any hydrocarbon, exceptmethaneandethane, withavapourpressure equaltoorgreater than0.1mmHg. Solids thateitherfloatonthesurface orremain suspendedinliquids. The netconsumptionofenergy inaprocess orgroup ofprocesses perunitofproduct output. A classofaromatic compoundsinwhichoneormore hydroxyl groups are attacheddirectly tothebenzene pH isavaluewhichrepresents theacidityoralkalinityofasolution.Pure waterhasapHof7. Finely dividedsolidorliquidparticlesintheairanemission.Particulates includedust,smokeandfumes. A product ofcombustionwhichcontributestotheformationsmogandacidrain. Any oneofseveral heattrapping gases(e.g.watervapour, carbondioxide,methane) thatabsorbheatemitted Planting oftrees, shrubsandgrass toreduce wind-blowndustfrom openareas. A measure ofenergy. Agigajouleequals1,000,000,000joules. A100-watt lightbulbturnedonforonesecond An iron andzincrichby-product recovered from theElectricArc Furnacegascleaningsystem. A changeintheaverage weather. Thismightencompasschangesintemperature, precipitation andwind An odourless, colourlessgas. Aproduct ofcombustionafuelcontainingcarbon. A flammable,colourlesstolightyellowvolatilearomatic hydrocarbon. Benzeneisaby-product ofcokemaking. An iron richby-product recovered from theBasicOxygenFurnacegascleaningsystem. A colourless, pungentgasformedbythecombustionoffossilfuels A colourlessgaswithasharpirritatingodour. Easilysolubleinwater. Ammoniaisaby-product ofcokemaking. phenolics andcyanide. The totaldischarge ofammonia,phosphorus, suspendedsolids, oilandgrease, dissolved organic carbon, the present generation withoutcompromising theabilityoffuture generations tomeet theirownneeds. and usedinanumberofdifferent applications. Fused agglomerate thatseparates inmetalsmeltingandfloatsonthesurfaceof moltenmetal.Slagsare sold steelmaking process. ExamplesofsecondarymaterialsincludeBOFoxides, coaltarandEAFdust. Broadly definedasfeedstocks, co-products andresiduals thatare generated asaconsequenceofthe facilities, raw materialsare madeintosteel andthenrolled intocoilsforfurtherprocessing. Includes Cokemaking,Ironmaking, SteelmakingandHotRollingprocesses. AtthePrimarymanufacturing Most are removed from thecokeovengasstream andsoldinby-products suchascoaltar. organic substancesmadeupofcarbonandhydrogen. PAHs are released from cokemakingoperations. PAHs isatermusedtocollectivelydescribemore than100 different compounds. Allofthesecompoundsare ring. Phenolisaby-product ofcokemaking. by theearth,thereby retarding thelossofheattospace.Excessgreenhouse gasesmaycauseclimatechange. consumes 100 joules. Anothermeasure ofenergy isBritishThermalUnits, orBTUs. OneBTU equals1054.8 joules. the gascleaningsystem. The heavierfraction ofslag-likematerialfrom theElectricArc Furnacethatiscollectedinthefront endof of Ministers oftheEnvironment Policy fortheManagementofToxic Substances. combustion process. Dioxinsandfurans are substancesthatrequire managementundertheCanadianCouncil Dioxins andfurans are twocloselyrelated familiesofchlorinatedchemicalsformedasaby-product ofthe Coke ovengasisdistributedthroughout theplantandusedasafueltooffsetpurchases ofnatural gasandoil. A gaseousfuelthatisgenerated whenvolatilematerialsare drivenoutofcoalduringthecokingprocess. patterns. Onaglobalscale,itrefers tochangesintheclimateofearthasawhole. Benzene isrecovered from cokeovengasandsold. Ammonia isremoved from cokeovengasandsold. – hasbeenidentifiedasonecauseofacidrain.

31 | Dofasco Inc. Social Well-being

A superior quality of life translates into essential services for employees, such as health care and education. It’s good for our employ- At Dofasco, our employees are ees and their families and makes it easier for a key competitive advantage. Respect and us to hire and retain the best and brightest. It attracts regional economic development, concern for employees is a core company which means world-class suppliers and value. This has been manifested in many trading partners and a thriving economy. ways throughout our history. The company In this Annual Report, Dofasco is advancing has a strong tradition of helping employees its commitment to communicate with our and their families achieve their aspira- stakeholders. Last year, we published an insert in the Hamilton Spectator entitled Dofasco tions and enjoy a better quality of life. Report to the Community. That was the first Examples of this commitment include step. This is the next step in our journey. Dofasco’s 100-acre recreation park for We are reporting our progress in contributing employees, the 22,000-person Christmas to social well-being, one pillar of sustainabil- party and a compensation structure that ity. For Dofasco, this assessment focuses on contribution in respect to our employees and shares the rewards of superior performance. various communities.

As a natural extension of this core value, we We recognize that this assessment is largely have historically supported the communities qualitative, and we will work on further in which our employees live. This support developing quantitative metrics in future extends to all facets of the community – reports. In the meantime, we will do our best economic development, education, arts and to provide a clear and accurate picture of our culture, health, athletics and civic causes. commitment to social well-being.

We have a vested interest in a vibrant local economy and a strong social fabric and understand that the quality of life in our community is a critical competitive factor. | Dofasco Inc. 32 nally oncross-functional commodityteams manage ourcosts. Theyare represented inter- ers are importantalliesinassistingusto alone (5,000throughout Canada).Oursuppli- than 2,000suppliers intheHamiltonregion with suppliers. Dofascohasanetworkofmore This beginsthrough ourdirect interaction our overall competitiveness. maintaining aviabletaxbaseandenhancing retain employees, ensuringfuture markets, future byincreasing ourabilitytoattract and economic development,wesupportourown regional andnationalscale.Insupporting economic developmentactivitiesonalocal, It isapriorityforDofascotoengagein Economic Development Canadians framework forsustainingandimproving ground uponwhichtobuildanational in whichparticipantscouldexplore common Rotman SchoolofManagement,wasaforum and theUniversity ofToronto summit, alsosponsored byIndustryCanada care, academiaandthevoluntarysector. The ipants from business, government,health that brought togethermore than230partic- Creating aCulture ofOpportunity, and leadorganizer of Significantly in2000,Dofascowasasponsor in ournationaleconomicdevelopment. On abroader level,Dofascoisaparticipant alternative supplyorproduct substitution. ing, utilizationandinventoryingpractices, either through lowerprices, improved order- opportunities toimprove ourcoststructure our purchasing dollars. Theseteamslookfor that worktomaximizethevaluederivedfrom ’ standard ofliving. Creating aCulture ofOpportunity Canada’s Key Choices: Canada’s Key Choices: • • • • • • • Worked with2,000commmunity-basedsuppliers Invested $216 millionincapitalexpenditures Paid $27.5million inmunicipaltaxesHamilton Paid approximately $550millioninraw materialsand energy Paid approximately $500millionindirect localpurchases Paid approximately $500millionindirect wagestoemployees purchases from across Canada Paid approximately $620millioninraw materialsand energy purchases inOntarioandQuebec In 2000,Dofasco: ’ s JosephL. a summit Hamilton DowntownPartnership, and Economic DevelopmentCorporation, the Chamber ofCommerce, TheBurlington Hamilton ChamberofCommerce, Canadian development organizations, suchasthe Dofasco workswithanumberofeconomic in themedia. members ofthepublicandwaswidelyreported The summitwasalsowebcasttointerested distributed toparticipantsandpolicymakers. A ReportofProceedings wasprepared and Ventures, aninvestmentprogram tobring Halton, andNiagara regions. together intheHamilton-Wentworth, venture capitalandgrowth businesses

33 | Dofasco Inc. In 2000, Dofasco and its employees donated more than $3.3 million to more than 160 Community Investment charitable organizations, the majority of these Hamilton-based. This level of donations The City of Hamilton and surrounding com- represents approximately $460 donated per munities is home to thousands of Dofasco Dofasco employee. Dofasco is recognized as people, their families, friends and neighbours. a Caring Company by the Imagine program Dofasco and its employees engage at every of the Canadian Centre for Philanthropy. The level in the community, through donations, company encourages community support voluntarism and civic leadership. and engagement among its joint ventures throughout North America.

4 Dofasco employees log thousands of hours of volunteer time at dozens of local organiza-

3 1.4 tions. Employee voluntarism has not yet been tracked, but it is our intention to explore 1.2 methods to capture and report this indicator 2 1.0 in future reports. Education Health 0.8 In the community at large, Dofasco has five Social Services 1 general areas of priority: health care, educa- 0.6 tion, arts and culture, social services, and

0.4 activities that enhance the community at 0 96 97 98 99 00 Civic

0.2 Culture

Total company and 0 employee donations

millions of dollars 2000 donations by sector

millions of dollars Total Local community | Dofasco Inc. 34 We are working with the United Way to expand their funding pool to ensure a sustainable source of funds for this essential community organization. large. Dofasco supported all five of these Also in 2000, Dofasco and its employees areas in 2000. Additionally, Dofasco supports contributed more than $170,000 to five local the Canadian democratic process through a food banks and Greater Hamilton Food Share. political contribution policy, with an annual An average of 15,000 people per month, 40% contributions budget established by the Arts and Culture of whom are children, turn to the emergency Board of Directors. In 2000 Dofasco continued its sponsorship of food banks for assistance in the Hamilton area. the “Families First” program at the Art Gallery Some particular achievements of Hamilton. Held the first Sunday every in 2000 include: month, Families First generates interaction between caregivers and their children. Activities are planned that relate to current exhibitions and under the guidance of local artists, everyone discovers how much fun art can be. More than 1,200 children and adults participated in this interactive family program.

Education Dofasco continues to support a number of local Dofasco is a Founding Sponsor of the and regional theatres, including the Stratford Health Care Sustainable Enterprise Academy (SEA) at the Festival, which the company has supported The region’s third MRI (magnetic reso- Schulich School of Business at York University. continuously since its debut in 1953. nance imaging) unit was delivered to the The SEA’s mission is to provide senior execu- General Division of Hamilton Health Sciences tives with the vision, education, tools and Corporation in November. Dofasco and support to champion sustainable develop- Dofasco employees contributed $1.1 million ment in their organizations. Dofasco President toward the purchase of the unit. Hundreds and CEO John Mayberry, as well as other senior of individuals throughout the community executives, completed the program in 2000. followed with personal contributions to raise We work with the Hamilton Industry Education the $2.5 million required. Council and with several local school boards, colleges and universities to provide a variety Community Activities of programs. In addition to participating in Dofasco was a sponsor of the 2000 the “Take Our Kids To Work Day” in Ontario, International Children’s Games, held in the company offers co-op student programs, Hamilton in July. The city was home to 2,000 week-long science and technology study young athletes representing 26 countries modules for Grade 8 students and opportu- from around the world. The Games were nities for MBA students to get involved in established to promote development of real-life projects. The company works with youth through sport and the Olympic ideal. local colleges to train apprentices and skilled Social Services trades people. Dofasco remained the largest supporter of * Note: Dofasco is committed to transparent communication with stakeholders, which includes a clear description of the Hamilton-Wentworth United Way, pro- the types of organization the company supports financially. Please refer to Dofasco’s website (www.dofasco.ca) viding approximately $780,000 in employee for the company’s Guidelines for Investment. and company donations. Our leadership position in this area is an ongoing commitment. | Dofasco Inc. 35 Dofasco is ranked among the best companies to work for in Canada.

[ left ] Employees learn to [ above] The F. H. Sherman solve all types of problems Recreation and Learning Centre is creatively at Dofasco’s a venue for dozens of employee Play To Win sessions. sports and recreation activities.

Employees also received compensation from our Variable Compensation Plan, which provides a percentage of earnings as a variable bonus, based on meeting clearly communi- Here, they learn to approach problems Our Strength is People cated performance objectives. creatively and cooperatively, and to further For decades, Dofasco has been among the develop their individual commitment to per- Dofasco conducts quarterly surveys in which most successful steel companies in the world. sonal and professional growth. Every Dofasco employee perception trends are tracked for The reason is simple: Dofasco people are a employee has the opportunity and is encour- key issues affecting satisfaction. Since we powerful competitive advantage. They give aged to attend these sessions. began measuring employee perceptions in Dofasco its unique identity. And its strength. 1998, there has been a steady improvement Dofasco invested $16 million in employee overall, as well as in the individual areas of Our commitment to people is demonstrated in training and development in 2000. These measurement. In 2000, more than 80% of a wide variety of ways: through professional activities included technical training courses employees who responded to the survey development and education opportunities, and seminars, leadership development, man- indicated they were either satisfied or very progressive human resources policies, com- agement training, computer training and satisfied working at Dofasco. pensation philosophies and health and safety on-the-job skills development. programs and the support of after-work Also in 2000, Dofasco received recognition Our compensation philosophy is simple: when activities, such as sports and recreation at from Michael Jantzi Research Associates, who our shareholder wins, we all win. In addition to Dofasco’s 100-acre recreation park. indicated that “Dofasco’s initiatives to encour- hourly and salaried wages, compensation is age employee participation and involvement” In 2000, 285 new employees attended Play linked directly to company performance. In constitute one of the company’s strengths. To Win sessions, held at a resort in Beaver 2000, Dofasco distributed $38.8 million in Report On Business Magazine’s annual survey Valley’s UNESCO World Biosphere Reserve. profit sharing – 14% of the company’s pre-tax of Canada’s “35 Best Companies To Work For” profits from Hamilton steel operations – to ranked Dofasco 27th. employees, or $5,690 per employee. Half this amount is deposited in each employee’s retirement account. The remainder can also be deferred to this account, or withdrawn at the employee’s discretion. | Dofasco Inc. 36 Individual business units are active in improving health and safety performance and celebrating success.

Lost Time Injuries and All-reported Injury [ above] Employees participate Frequency improved in 2000, continuing in a pre-shift Walk and Stretch Health and Safety a trend of steady improvement. program, part of Dofasco’s Lifestyle Program. Dofasco’s commitment to health and safety reflects the value the company places in ensuring an excellent quality of life for its employees. internalizing the Accident Free Workplace Nothing is more important than health and concept. Most importantly, employee actions safety. Our goal is to achieve an accident- are better aligned with this objective. • More than 2,200 people are involved in free workplace. Anything less is unacceptable. Dofasco is capable of continuing to make Back Power sessions Dofasco continued a strong trend of steady significant improvements,” reported DuPont • Participation in our Walk and Stretch pro- improvement in health and safety perfor- after the Oct. 6, 2000 evaluation. grams has quadrupled since 1998 mance in 2000. Lost Time Injuries were • 227 people joined Weight Watchers at The company also continues to increase its reduced by 25% from 1999 and have been Work. Since starting the program in 1997, efforts to offer health and wellness programs reduced by 55% over the past six years. All- employees have lost a combined total of to employees through Dofasco’s Lifestyle reported Injury Frequency was reduced by 9% nearly 15,000 pounds Program. The program is embraced by from 1999 and has shown a positive reduction • More than 3,000 people attended the employees and in large part driven by their six years in a row. Additionally, business units annual Health and Safety Fair, a two-day engagement. Successes in 2000 include: within the company are increasingly active in event organized by employees improving “local” health and safety programs • More than 460 employees participated in and hosting health and safety days. Business fitness appraisals 40 units are also tracking the duration of periods • Approximately 180 people participated in without accidents or lost-time injuries. noon-hour aerobics classes

30 These improvements are the result of strong visible commitment by leadership and the 4 engagement of employees across the company. 20 A comprehensive Health and Safety Program, 3 which is integrated into the company’s annual business planning process, has supported the 10 achievement of our improvement objectives. 2

Annual plans and progress are shared with 0 Dofasco’s Board of Directors. 96 97 98 99 00 1

DuPont Safety Resources provides a third All-reported party evaluation of Dofasco’s health and injury frequency 0 safety management system and progress. 96 97 98 99 00 injuries per 100 employee-years “Dofasco has made significant strides in Lost time injuries

injuries per 100 employee-years | Dofasco Inc. 37 Management’s Discussion and Analysis

Company of Canada (IOCC), resulting in an after-tax gain of $28.0 million ($0.34 per share). Excluding this gain provides a more appropriate comparison of year- Results of Operation over-year financial performance. Without the Dofasco Inc. posted very good earnings in effect of the IOCC sale, 1999 earnings were 2000, despite a North American steel market- $232.2 million, or $2.82 per common share. place significantly impacted by record levels 250 Gross Income of low-priced, often unfairly traded, imports. Dofasco’s consolidated gross income was 200 Excellent operating performances at the $560.5 million in 2000, down 15.5% from company’s Hamilton operations and at $663.0 million in 1999. 150 Gallatin Steel, Dofasco’s joint venture Segmented analysis of gross income is minimill facility in Kentucky, and continued provided for: 100 profitable operations at Quebec Cartier Mining, the company’s joint venture iron ore • Steel Operations (which includes the

50 mining facility in Quebec, contributed to company’s Hamilton operations, Dofasco Dofasco’s 2000 consolidated net income of USA, Powerlasers, DoSol Galva, Dofasco de

0 $188.7 million. After deducting preferred Mexico and Dofasco’s share of Baycoat, DNN 9697 98 99 00 share dividends, consolidated net income Galvanizing, Sorevco and Wabush Mines); attributable to common shares for 2000 was • Gallatin Steel Company; and Consolidated net income $188.1 million, or $2.47 per common share. • Quebec Cartier Mining Company (QCM). This represents Dofasco’s second highest millions of dollars Note 19 to the Consolidated Financial earnings per share since 1989. Normal operations Statements provides further segmented Other items In 1999, Dofasco posted its best results of the information for each of these three report- past decade, with consolidated net income ing segments. attributable to common shares of $260.2 million, or $3.16 per common share. In 1999, Dofasco sold its investment in the Iron Ore 5

0 9697 98 99 00 1

Steel shipments 0 9697 98 99 00 millions of net tons Hamilton Steel production Gallatin

millions of net tons Hamilton production Gallatin production Purchased

| Dofasco Inc. semi-finished steel 38 high valuedtubularproducts destinedfor to comprisemore than42%ofthetotaland mix improved asgalvanizedshipments grew 3,806,000 tonsin1999.However, theproduct unchanged from thenear-record levelof of 3,795,000tonsin2000were relatively Flat rolled andtubularproduct shipments 1999 salesrevenue of$2,760.0million. were $2,805.0million,aslightincrease from Total salesforthe yearforSteelOperations 2000, withsomeweakeninglateintheyear. steel products wasstrong through mostof Demand forDofasco Sales through thelasthalfofyear. costs andarapid declineinsellingprices mitigate theimpactofhighermanufacturing mance andanimproved product mixhelped where anexcellentplantoperating perfor- the largest componentofSteelOperations, ings atDofasco Most ofthedeclineresulted from lowerearn- million or18%from $594.3millionin1999. was $487.2million,adeclineof$107.1 In 2000,gross incomefrom SteelOperations Steel Operations 70 75 80 85 90 percentage Hamilton operations Shipped yield 600 96 ’ 79 99 98 97 s Hamiltonoperations, ’ s flatrolled andtubular • • • • • products increased, reflecting: per shippedtonofflatrolled andtubular million in1999.Theaverage production cost $2,317.8 million,7%higherthan$2,165.7 Total costofsalesfor2000increased to Cost ofsales of flatrolled steelproducts intoCanada. result oftherecord levelsoflow-pricedimports steadily inthelasthalfofyear, primarilya higher thanin1999,althoughitdiddecline realized pertonofsteelshippedin2000was to almost4%ofthemix.Theaverage revenue hydroforming intoautomotivepartsincreased higher pensionandpost-employment higher employmentcosts asaresult of higher energy prices, primarilynatural gas higher maintenanceexpenditures, mostly higher costsassociatedwiththe improvements. benefit expensesprimarilyreflecting plan rates andhigherhealthcare benefitcosts;and increased employmentlevels, higherwage and oil; during theyear; related toplannedprojects completed value-added product mix; 200 400 600 800 0 (righthandscale) Gross income Cost Revenue dollars pernetton Hamilton operations cost andgross income Average revenue, 600 96 79 99 98 97 0 50 100 150 200 Dofasco profitability despiteadeclineinshipments. minimill inKentucky achieveditsfirst yearof improved results in2000,asthejointventure Gallatin Steeldelivered significantly Gallatin Steel negatively impactedGallatin the year. Highlevelsoflow-pricedimports market forhotrolled steelinthefirst halfof operating performanceandbyastrong U.S. tons in1999. total was621,000 tonscompared to649,000 Despite this, Gallatin caused asignificantdrop insellingprices. consumption inthelatterpartofyear However, risingimportsanddecliningsteel in highersellingpricesearlytheyear. particularly inthefirst halfof2000,resulted tinued highlevelsofsteelconsumption, 1999. SuccessfulU.S.trade actionsandcon- $17.9 million,or7%from $248.2millionin revenue was$266.1million,anincrease of Dofasco Sales supply/demand situation. rolled marketreturns to a more balanced to return toprofitability whentheU.S.hot customer service,Gallatiniswellpositioned in operating performance,qualityand Having madesignificantimprovements trade lawsare upheld. trade actionstoensure thatinternational and otherU.S.steelmakers initiatedunfair results inthesecondhalfofyear. Gallatin Gallatin million in1999. 2000 was$36.1million,compared to$15.4 share ofGallatin in thesecondquarterofyear. Dofasco a record shipmentquarterof348,000tons from 1999 Gallatin ton shippedincreased 12%over1999. ’ ’ ’ s shipmentsdeclinedby4.3%in2000 s results were drivenbyanexcellent s share ofGallatin ’ s share ofGallatin ’ s record levels, despiteachieving ’ s shipmentsfortheyearin ’ s average revenue per ’ s gross incomein ’ s 2000sales ’ s financial ’ s

39 | Dofasco Inc. 40 | Dofasco Inc. facility (compared withonlysevenmonths in in 1999.Afullyear 2000 to$254.1millionfrom $256.0million Depreciation expensedecreased slightlyin Depreciation andamortization Consolidated Results Dofasco Inc. Company Dofasco Cost ofsales Dofasco steel production. ing decliningNorthAmericanandEuropean declined inthelatterpartofyear, reflect- were verystrong inthefirst halfof2000,but Market conditionsintheiron ore industry Sales million, downfrom $48.7millionin1999. Dofasco Quebec CartierMining and electricitycosts. virtually offsetbyhigherscrap, maintenance costs associatedwithlowervolumeswere 2000 from $232.8millionin1999.Lower sales dropped slightlyto$230.0millionin Dofasco higher worldiron ore prices. impact ofaweakerCanadiandollarand decline. Thesewere partiallyoffsetbythe less favourable product mixcausedthe million in1999.Lowervolumesandaslightly was $269.6million,downfrom $278.7 cantly higherpetroleum andpensioncosts. expensive product mixwasoffsetbysignifi- The impactoflowersalesvolumesandaless million compared to$230.0millionin1999. relatively unchangedin2000,at$229.8 Dofasco Cost ofsales million tonnesin1999. year was7.2milliontonnes, compared to7.6 ’ ’ s 50%share ofQuebecCartierMining ’ ’ ’ s share ofQCM s share ofQCM s share ofQCM s share ofGallatin ’ s gross incomein2000was$39.8 ’ s depreciation oftheDSG ’ s shipmentsforthe ’ ’ s costofsaleswas s revenue in2000 ’ s 2000costof resulting inapre-tax gainof$31.8 million. proceeds of$36.9million(U.S.$25.0million), the Iron Ore CompanyofCanadaforcash 1999, Dofascosolditsequityinvestment in There were nounusualitemsin2000.In Unusual items Life Assurance CompanyofCanada. gain realized onthedemutualizationofSun $10.2 millionin1999reflects the$5.1million 2000 was$15.9million.Theincrease from Interest andotherinvestmentincomein Interest andotherincome Dofasco, QCM,DNNandSorevco. offset byscheduleddebtrepayments at and newfinancingatDSGwaspartially of 7.5%MediumTerm NotesissuedinJune interest expenseincurred onthe$175million $61.7 millionfrom $60.8millionin1999.The Interest expenseincreased slightlyin2000to Interest onlong-termdebt fully depreciated in1999. at QCMresulting from assetsthatbecame offset bylowerdepreciation inHamiltonand Powerlasers (acquired onMay8,2000)was 1999) anddepreciation onfixedassetsat -50 150 100 50 0 Otherintegrated mills Minimills Dofasco(Hamilton) dollars pernetton EBIT pershippedton 600 96 79 99 98 97 • • primarily to: The reduction intheeffectivetaxrate isdue million, foraneffectivetaxrate of34.3%. $133.3 milliononpre-tax incomeof$388.2 30.0%. In1999,incometaxexpensewas of $260.6million,aneffectivetaxrate of expense was$78.2milliononpre-tax income Dofasco Income taxes compared to$463.2millionin1999. million, reaching $419.7 millionin2000 in operating workingcapitalexceeded$400 cash derivedfrom operations before changes mance in2000.Forthefifthconsecutiveyear, Dofasco continueditsstrong cashflowperfor- Cash derivedfrom operations Cash Flow recognition ofaportionthebenefit net reduction intheconsolidatedfuture recorded onDofasco Steel inprevious years andnotpreviously of U.S.taxlossesgenerated byGallatin during theyear;and Canadian taxrate reductions announced income taxliabilityfollowingOntarioand 0 200 300 400 500 100 ’ s 2000consolidatedincometax millions ofdollars in workingcapital) (before changes from operations Cash derived 600 96 79 99 98 97 ’ s books. taxes receivable. Thedeclineinprofitability includes $14.6millioninincomeandother Gallatin Steel limit theincrease iniron ore inventories. December 2000andearlyJanuary2001 to adjusted itsproduction scheduleinlate volumes inthelatterpartof2000.QCM from 1999,duetoadeclineintheirsales Dofasco Income andothertaxesreceivable scrap totakeadvantageoflowprices. ing significantfourthquarterdeliveriesof inventory alsoincreased significantly, reflect- in advanceoftheshipmentdate.Scrap ily asaresult ofproducing materialfororders higher attheendof2000than1999,primar- QCM inventories increased tomore normallevels. Other work-in-process andfinishedgoods because ofthehighercostpurchased slabs. unchanged from 1999,theirvaluewashigher finished slabsininventorywasrelatively million. Althoughthenumberoftonssemi- Hamilton inventoriesincreased by$58 from $772.7millionattheendof1999. at theendof2000,anincrease of$80.8million Consolidated inventorieswere $853.5million Changes ininventories same periodin1999. fourth quarterof2000compared withthe 1999, reflecting lowersalesrevenue inthe million from $382.3millionatDecember31, end 2000were $355.6million,downby$26.7 Consolidated accountsreceivable atyear- Reduced accounts receivable compared to$568.6millionin1999. operations was$249.8millionin2000, ing workingcapital,cashderivedfrom After changesinthecomponentsofoperat- ’ s inventoryincreased by$12million ’ s 2000consolidatedbalancesheet ’ s inventorywas$11 million band improvement program, $26million in Hamiltonincluded$59millionforthehot 2000 totaled$216.0 million.Majorspending success. Cashusedforcapitalexpenditures in existing facilitiesin2000toensure itsfuture Dofasco continuedtoinvestinnewand Capital expenditures rates duringthefourthquarterofyear. plies were reduced duetoloweroperating decreased aspurchases ofmaterialsandsup- Dofasco Variable Compensation.Accountspayableat amounts payableforProfit Sharingand No. 3BlastFurnaceinHamiltonandlower nificant reductions related torepairs on $392.1 millionayearearlier. Themostsig- $52.3 millionin2000to$339.8from Consolidated accountspayabledeclinedby Reduced accounts payable ily duetoincreased bankborrowings atQCM. from $17.5millionattheendof1999,primar- ventures increased to$43.6millionin2000 Dofasco Bank borrowings ofjointventures during 2001. 2000, whichare expectedtoberefunded installments ofincometaxesfortheyear November andDecember, resulted inover- during thefourthquarter, mostnotablyin 150 200 250 300 350 100 ’ ’ 50 s share ofbankborrowings atitsjoint s jointventures, primarilyGallatin, 0 millions ofdollars Capital expenditures 600 96 79 99 98 97 the company the No.2Tube Milland$14milliontoupgrade company for automationcontrol upgrades atthe Common share dividendspaidin2000were million ofthistotalinboth2000and1999. Preferred share dividendsaccountedfor$0.6 2000, downfrom $84.4millionin1999. Dofasco paid$80.6millionindividends Dividends normal course issuerbids. common shares for$164.5millionunder During 1999,Dofascorepurchased 6.6million that program. Dofasco hadnotpurchased anyshares under the openmarket.AsatDecember31, 2000, repurchase afurther3.8million shares on November 21, 2000,Dofascoisentitledto course issuerbidthatbecameeffectiveon September 13,2000.Underanewnormal normal course issuerbidthatexpired on common shares for$94.5millionundera Dofasco purchased andcancelled3.7million enhancing shareholder value.During2000, shares forcancellationasameansof Dofasco continuedtorepurchase itscommon Common shares repurchased ments atDofasco,QCM,DNNandSorevco. partially offsetbyscheduleddebtrepay- million inMediumTerm NotesissuedinJune, 2000, reflecting theproceeds ofthe$175 Long-term debtincreased by$83.5millionin Increased long-termdebt related components, for$44.8million. manufacturer oflaser-weldedblanksand In May, Dofascoacquired Powerlasers, a Acquisition construction ofthenewtubemillinMexico. $10 millionatGallatinand$9forthe spending included$14millionatQCM, ’ s tinplatefacilities, $15millionfor ’ s Galvalume TM line. Othercapital

41 | Dofasco Inc. 42 | Dofasco Inc. Dofasco Cash andcash equivalents $0.25 pershare forallfourquarters. quarters of2000.In1999,thedividendwas 2000, and$0.27pershare forthelastthree was $0.25pershare inthefirst quarterof The quarterlycommonshare dividenddeclared share dividendrate. programs, partiallyoffsetbyahighercommon as aresult ofthecommonshare repurchase lower numberofcommonshares outstanding 1999. Thedeclinewasprimarilyduetothe $80.0 millioncompared to$83.8millionin Dofasco Debt ratio $197.1 millionatthebeginningofyear. to $127.1millionattheendof2000from ing cashequivalents, declinedby$70.0 million compared to25.9%atDecember31, 1999. debt tototalplusequitywas28.8%, tage. AtDecember31, 2000theratio oftotal to provide asignificantcompetitiveadvan- 0 15 20 25 30 10 ’ ’ s consolidatedcashposition,includ- 5 s balancesheetstrength continues Total debt Netdebt % asatDecember31 plus equityratio Debt todebt 600 96 79 99 98 97 are represented bylabourunions. QCM Mining Company, Sorevco andWabush Mines unionized, someemployeesatQuebec Cartier sidiary andjointventure operations are not operations andmostofthecompany respect. While employeesatDofasco history oftreating peoplefairlyandwith with itsentire workforce, basedonalong Dofasco continuestoenjoypositiverelations Details ofDofasco trading orforspeculativepurposes. or issuederivativefinancialinstrumentsfor ments isnegligible.Dofascodoesnothold and marketrisksforthesefinancialinstru- Dofasco believesthatitsexposure tocredit exchange rates andcommodityprices. associated withfluctuationsinforeign financial instrumentstomanagetherisk Dofasco andsomeofitsjointventures utilize rate andcommoditypricerisk Managing foreign exchange program anytimeuptoMay25,2002. $125 millionundertheMediumTerm Notes Dofasco hasbeenapproved toissueafurther amount remained available. revolving linehadbeenusedandtheentire 2001. AtDecember31, 2000,noneofthis ing bankcredit, availableuntilOctober21, Dofasco hasinplace$200millionrevolv- Available credit at Dofasco,DNN,Sorevco andQCM. 2000, offsetbyscheduleddebtrepayments and cashequivalentsbalanceattheendof issued duringtheyearandlowercash to the$175millionofMediumTerm Notes The increase indebtratios isattributable 19.4% ayearearlier. was 25.2%attheendof2000,compared to Dofasco After deductingcashreserves, theratio of to theConsolidatedFinancialStatements. at December31, 2000are setoutinnote17 Labour Relations ’ s netdebttoplusequity ’ s foreign exchangehedges ’ s Hamilton ’ s sub- ’ s col- automotive industryhasbeenforced to make slowing oftheU.S.economyinlate 2000.The has certainlyworsened basedontherapid The near-termoutlookforeconomicgrowth U.S. economy, were moderately lower. Canada to grow strongly inthefourthquarter, consumer andbusinessspendingcontinued an estimated3%inthefourth.Although a 4.8%annualrate inthethird quarterand the secondhalfof2000,withreal growth at The Canadianeconomyfared muchbetterin and equipmentalsocontracted inthequarter. on residential constructionandmachinery such ascars andappliances. Businessspending quarter andinfactdeclinedondurable goods spending slowedappreciably inthefourth fourth quarter. Growth inoverall consumer U.S. economyonlygrew ata1.4%rate inthe in thelasthalfofyear. Asaresult, the to arapid declineinconsumerconfidence tightened financialmarketconditionslead lower andmore volatileequityvaluesand However, asharpincrease inenergy costs, rate inthesecondhalfofyear. would realize amore sustainable3%growth year, expectationswere thatbotheconomies a 5%annualrate inbothcountries. Atmid- The yearstartedstrongly withreal growth at and Canadianeconomies. 2000 wasatransition yearforboththeU.S. Canadian andU.S.economies share inthecompany and variablecompensationplansthereby in variousformsofprofit sharing,gainsharing including allHamiltonemployees, participate Many ofthepeoplethroughout Dofasco, tions foranewagreement are proceeding. expired onFebruary28,2001, andnegotia- lective agreement withitshourlyemployees Market Outlook ’ s exports, tiedheavilytotheslowing ’ s financialsuccess. remained high,resulting inasteepdecline weakened laterintheyear, importlevels the marketplace.Evenasoverall demand surge thatresulted inthelarge inventoryin products during2000fuelledthesupply The large increase inimportedflatrolled steel year compared tothefirst. declined by10% inthesecondhalfof the inventories. Overall, flatrolled steeldemand bought lessastheyworkeddownsurplus steel declinedandconsumingindustries half oftheyear, consumptionofflatrolled American economiesslowedinthesecond respectively, compared to1999.AstheNorth 16% higherinCanadaandtheUnitedStates, the first halfoftheyear, being19%and Demand wasexceptionallystrong through increased byapproximately 2.3%in2000. Flat rolled steeldemandinNorthAmerica Flat rolled steel in 2001. the U.S.economyand2.5%to3%inCanada Overall, weexpect2%real growth rate in than lastyear. grow atagoodpace,thoughmore moderate 2001. Businessinvestmentisexpectedto impact oflowerexportsinthefirst halfof Canada andshouldmoderate thenegative support goodlevelsofconsumerspendingin tax cutsenactedatthestartofyearwill form theU.S.economyin2001. Significant We expecttheCanadianeconomytooutper- rates inthesecondhalfof2001. U.S. economywillreturn tohighergrowth surplus, alsocontributetotheviewthat U.S., madepossiblebytheirfederal budget fuelling inflation.Potential taxcutsinthe help supporteconomicexpansionwithout interest rates intheU.S.are expectedto sales expectations. However, lowershort-term bring inventoriesbackinlinewithlower swift corrections toproduction levelsto significantly to1.9million. vehicles, production inMexicoincreased the UnitedStatesdeclinedto15.4 million in 2000.Whileproduction in Canadaand North Americanproduction increased slightly high fuelpricesandinterest rates. truck salesdeclinedby11%, impactedby imports rose by15%.Mediumandheavy tively unchangedfrom 1999,butsalesof Domestically madevehiclesaleswere rela- 19.6 millionvehicles, 3%aheadof1999. with salesoflightvehiclesapproximately experienced anotherrecord yearin2000, The NorthAmericanautomotiveindustry Automotive be workedoutofthesystem. the year, assurplusinventoriescontinueto Demand willbeweakestinthefirst halfof steel demandinboththeU.S.andCanada. to result ina5%to7%declineflatrolled In 2001, slowereconomicgrowth isexpected American flatrolled steeltransaction prices. levels andanaccelerated declineinNorth reductions todomesticsteelmilloperating new orders atdomesticsteelmills, dramatic 0 100 20 40 60 80 * estimated millions ofnettons rolled steeldemand North Americanflat 600 96 79 99 98 97 * the housingmarketinWestern Canada. energy sectorgrowth willbegintostrengthen Canada, stronger commoditypricesand While mostoftheactivitywillbeinCentral starts are expectedtogrow by3%in2001. by 1%in2000over1999.Canadianhousing residential construction startsinCanadagrew posable incomeandlowmortgagerates, Backed byemploymentgrowth, risingdis- Residential relatively unchangedfrom 2000 levels. a goodmarketforsteelproducts in2001, mentally soundandwillcontinuetoprovide construction activity, thissectorisfunda- expected slowinginoverall NorthAmerican tion customers increased by2%.Despitethe Canadian steelmillstoconstruc- flat rolled steelshippeddirectly from non-residential constructionactivityin2000, Due tothehealthylevelofresidential and Construction after 2000and1999. would stillregister asthethird strongest ever, These expectedsaleslevels, whileweaker, and secondquarters. much ofthereduction happeninginthefirst is expectedtofallinthe9-12%range, with more sustainablelevel,domesticproduction In order toreturn vehicleinventoriestoa to 9%declineintotalvehiclesales2001. demand are expectedtocontributea6% oil pricesandthesatiationofpent-upvehicle consumer confidenceandnetwealth,higher expected tocontinuethrough 2001. Lower The economicslowdownoflate2000is into thefirst quarterof2001. assembly plantsinDecember, carryingover makers scheduledshutdownsatanumberof inventory levelsandslowingsales, vehicle above the1999level.Inresponse tohigh the year, endingtheyearapproximately 9% Vehicle inventorieswere higherthroughout

43 | Dofasco Inc. Non-residential construction activity in the related tubing, both line pipe and oil country United States continued to perform at a near tubular goods. Tube shipments by this capacity level in 2000. With a softening U.S. segment surpassed 1999 levels by 10%. economy expected in 2001, non-residential Mechanical tubing exhibited the greatest building starts are expected to decline 4%. Pipe & Tube growth in 2000, up 15% over 1999. Production Manufacturing Manufacturing increased due to continued strong demand Automotive Canadian non-automotive manufactur- within the automotive and construction ing activity was up about 12% in 2000. markets, combined with conversion programs Steel-related groups in this diverse sector to automotive tubing from stamped parts. experienced mixed results after enjoying Pipe and tube production in Canada is strong growth during the last few years. expected to grow by 5% in 2001. Demand The Canadian appliance market generally from the energy sector is expected to remain reflects market trends in the United States. strong with high oil and gas prices expected During 2000, favourable consumer confidence, to continue to support energy activity. Packaging active Canadian residential construction and Mechanical tubing production will increase Offshore Construction growing export opportunities were positive as more tons are channeled into the automo- Distribution factors influencing appliance sales in Canada. tive industry. Conversions from automotive Despite the changing economic climate and stampings to newer technology, hydro- 2000 market mix reduced consumer confidence that resulted formed tubular parts have been completed Hamilton operations in weaker appliance sales in the last quarter for several new models in 2001, which will of 2000, Canadian shipments of flat rolled offset expected reduced vehicle builds on steel products to Canadian appliance manu- existing tubing-intensive platforms in 2001. The U.S. residential construction market facturers grew by 5% for the year in total. Consumer packaging declined in 2000, with housing starts A further easing of consumer confidence in The North American processed food, aerosol approximately 5% below strong 1999 levels. 2001 will likely result in 3% to 5% lower and other consumer product packaging Although a further decline of 7% is forecast appliance sales compared to the robust markets such as paint and chemicals contin- for 2001, this will still leave total housing year of 2000. ued to provide stable demand for tinplate starts at a historically strong level. Canadian steel shipments to the electrical steel in 2000. Shipments of steel cans in the In Canada and the United States, residential machinery sector started strong in the first United States were down slightly in 2000, steel framing and roofing offer a huge and as half of 2000, declining in the second half to about 1% off 1999 levels. yet largely unrealized potential for flat rolled finish the year about 6% higher than 1999. For Tinplate shipments in Canada were down steel to replace lumber. The North American 2001, a decline of about 4% is anticipated for about 8% in 2000 from 1999, due to a steel industry is actively promoting the ben- this sector, reflecting the slowing in manufac- reduced food-packaging season caused by efits of steel in residential construction. turing activity and reduced economic growth. unfavourable weather conditions and from Non-residential In other manufacturing sectors, Canadian process disruptions due to equipment In 2000, non-residential building starts in steel mill shipments declined by 7% in 2000, upgrades at Dofasco’s tin mill facilities. mainly from reduced activity in the railway Canada declined by only 1% from good 1999 Overall, North American tinplate demand is and shipbuilding sectors. levels. The prediction for 2001 is for a further expected to hold steady in 2001. 2% decline. Pipe and tube Dofasco is Canada’s only manufacturer of Tube shipments by Canadian producers tinplate steel. Equipment upgrades are now remained strong throughout 2000, with overall complete and are beginning to demonstrate shipments surpassing 1999 levels by 10%.

Higher fuel prices led to increased drilling activity and heightened demand for energy | Dofasco Inc. 44 in theautomotiveindustry. goods marketandbyforecasted reductions impacted byreductions intheconsumer level. Canadianservicecentres are negatively centres are expectedtodrop belowthe2000 In 2001, shipmentsfrom Canadianservice of importedflatrolled products. centre industrywassupportedbypurchases shipment growth withintheCanadianservice remained unchangedfrom 1999 levels. The steel producers the gaininservicecentre activity, asCanadian Canadian steelproducers didnotbenefitfrom shipments easingbackinlate2000. 2000 wasthestrongest partoftheyearwith steel in2000than1999.Theearlypartof Canadian servicecentres shipped6%more in theNorthAmericaneconomy. Overall, the overall strength insteelconsumption Strong servicecentre activityin2000reflected Service centres is expectedtodeclinebyasmuch10%. the NorthAmericanindustrialpackagingsector products in2001. Flatrolled steeldemandin reduced demandforindustrialpackaging easing ofoverall manufacturingwillresult in Declining automotiveactivityandageneral were downabout4%from 1999. Canadian steelmillshipmentstothesector support growth inmanufacturing.However, increased needforsteeldrumsandpailsto approximately 4%in2000,reflecting the industrial packagingmarketsincreased Steel millshipmentstoNorthAmerican Industrial packaging improved on-timedeliveryperformance. equipment reliability, reduced cycle-timeand improved capabilities, includingincreased ’ shipmentstothissegment Dofasco industry, are workingwithfederal govern- and GallatinSteel,aspartofthe U.S.steel Dofasco, aspartoftheCanadiansteel industry, price intheproducer either thecostofproduction ortheselling product inaforeign marketatapricebelow tional trade ruleswhichprohibit sellinga imports were traded inviolation ofinterna- record highin2000.Inmanycases, these Imports offlatrolled steelintoCanadahita steel pricesgenerally decline. into theNorthAmericanmarket,asin2000, imports. Whenthere isahighlevelofimports industry capacityandthelevelofoverseas impact onpriceisaffectedbothbyglobal The supplyofsteelinNorthAmericaandits Steel trade general andinthesteelindustryparticular. activity andstabilitybothintheeconomy number offactors thatrelate tothelevelof Risks andUncertainties 15 20 25 30 35 10 ’ s performancemaybeaffectedbya 0 5 * estimated UnitedStates Canada % ofdemand Flat rolled steelimports 600 96 79 99 98 97 ’ s homemarket. * April 23,2001. publish preliminary dumpingmargins on Department ofCommerce isexpectedto a preliminary rulingofinjury, andthe International Trade Commissionhasgiven Africa, Taiwan, ThailandandUkraine. The Kazakhstan, Netherlands, Romania,South against Argentina, China,India,Indonesia, U.S. steelmakers havefiledahotrolled case traded hotrolled andcoldrolled products. dumping margins toapplyagainstunfairly announcement bytheCCRAofpreliminary Korea andTaiwan. Theindustryawaitsan Macedonia, Malaysia,SouthAfrica, from Brazil, China,Italy, Luxembourg, rolled casehasbeenfiledagainstimports Thailand, Ukraine andYugoslavia. Acold Arabia, SouthAfrica,Korea, Taiwan, China, India,Macedonia,NewZealand,Saudi addressing importsfrom Brazil, Bulgaria, A hotrolled caseisalsoinprocess inCanada, Revenue Agency(CCRA)inearlyMarch. announced bytheCanadaCustomsand steel importedfrom thesecountrieswere dumping margins toapplyongalvanized Russia, SouthAfricaandTaiwan. Preliminary (galvanized) steelfrom China,India,Malaysia, unfairly traded importsofcorrosion-resistant In Canada,acomplainthasbeenfiledagainst U.S. marketsfrom around theworld. flat rolled products enteringCanadianand unfair trade complaintscoveringanumberof and otherNorthAmericansteelproducers filed During 2000andearly2001, Dofasco,Gallatin national trade lawstoaddress theproblem. Dofasco willcontinuetoaggressively useinter- international resolution tothissituation, steelmaking overcapacity. Untilthere isan unfairly traded steel,causedprimarilybyglobal long-term solutiontothehighlevelsof ments inbothcountriestotryfinda

45 | Dofasco Inc. 46 | Dofasco Inc. Dofasco strong level. through 2001, itremains atahistorically expected tobebelowthestrong levelof2000 significantly inthelasthalfof2000andis North Americanautomotiveactivitydeclined enues from theautomotiveindustry. While derives asignificantproportion ifitsrev- Like manyothersteelcompanies, Dofasco industrial sectors Reliance onspecific of thesecycles. surement systemaimstomitigatetheimpact overall corporate strategy andfinancialmea- of capitaloverafullbusinesscycle,Dofasco relationships andafocusonearningthecost added steelproducts, closecustomer With anincreasing proportion ofvalue- panies hastypicallysuffered. performance ofNorthAmericansteelcom- In thevalleysofthesecycles, thefinancial packaging, consumergoodsandoilgas. tries suchasautomotive,construction, manufacturing activityinseveral keyindus- economic environment andtothelevelof and demandthatrelate tothegeneral ically beencharacterized bycyclesinsupply The NorthAmericansteelindustryhashistor- Economic cycles quantities ofiron ore andsteelscrap inthe Dofasco Raw materials the worldwideautomotiveindustry. enhancing Dof processing facilityinBrazil Mexico andan a tubemillandsteelprocessing facilityin investments announcedin2000 American automotiveindustry. Thestrategic remains asupplierofchoicetotheNorth is designedtoensure thatthecompany ’ s Hamiltonoperations consumelarge ’ s customerrelationship strategy asco ownership interest inasteel ’ s positionasasupplierto – are aimedat – Powerlasers, ’ s operating ataloss. Several U.S.companies many NorthAmericasteelcompanies are tinued through theearlymonthsof 2001, that beganattheendof2000andhascon- As aresult oftherapid marketadjustment Industry competition that needtobepurchased. to reduce the amountofoutsidefuelgases (such ascokeovengasandblastfurnacegas) its useofrecycled by-product fuelgases prices where possible.Dofascoalsomaximizes tioning itselftotakeadvantageofdeclining impact ofthesepriceincreases, whileposi- long-term supplyagreements tomitigatethe Dofasco utilizesacombinationofshort-and many oftheseincreased significantly. oil andnatural gas. In2000,thepriceof prices ofotherenergy sources, suchascoal, fluctuations thatcanoccurinthemarket All Dofascooperations are susceptibletothe to theimpactofhighelectricityprices. of 2000.Gallatincontinuestobesusceptible situation atGallatinSteelduringthelasthalf result inproduction disruptions, aswasthe lack ofreasonably pricedelectricpowercould to developitselectricitysourcing strategy. A higher electricitycosts. Dofascoiscontinuing extremely volatileelectricitymarketand that, ifimplemented,couldleadtoan to establishacompetitiveelectricitymarket Ontario governmenthasinitiatedaprocess consumers ofelectricityinOntario.The operation isoneofthelargest singlepoint mately $100 million,Dofasco With anannualelectricitycostofapproxi- Energy approach ismore economicallyadvantageous. material requirements, dependingonwhich short-term supplyagreements fortheirraw and Gallatinutilizeacombinationoflong and ongeneral economicconditions. Dofasco fluctuations dependingontheiravailability steel scrap. Thesematerialsare subjecttoprice production ofsteel.GallatinSteelrelies on ’ s Hamilton Dofasco operate overtheshorttermandtherefore on within whichDofascoandGallatinSteel cant impactonthecompetitiveenvironment has hadandwillcontinuetohaveasignifi- egy isnotsustainableoverthelongterm,it return oncapitalemployed.Whilethisstrat- a needtogenerate aprofit orareasonable on thebasisofaneedforcashrather than borrow orraise cashandare nowoperating constraints ontheirabilitytogenerate, pension liabilitiesandhighcostshaveserious Chapter 11. Manycompanieswithlarge debts, have filedforbankruptcyprotection under results maydiffer from expectedresults. a result, readers are cautionedthatactual ment’s bestestimatesoffuture events.As assumptions, uncertaintiesandmanage- about future performancethatare basedon Analysis includesstatementsandexpectations Dofasco’s Management’s Discussionand ronmental authorities. company maintainsclosecontactwithenvi- requirements ofcurrent legislationandthe Agreement thatgenerally exceedsthe a voluntaryEnvironmental Management are subjecttochange,Dofascohasinplace facilities. Whiletheselawsandregulations discharges from thecompany including thosethatgovernemissionsand and regulations relating totheenvironment, Dofasco isinfullcompliancewithalllaws Environment ’ s consolidatedfinancialresults. ’ s operating Consolidated Statements of Income and Retained Earnings

For the years ended December 31 (in millions except per share amounts) 2000 1999 Income Sales $ 3,201.1 $ 3,142.3 Cost of sales (before the following item) 2,601.8 2,426.0 Employees’ profit sharing (note 15) 38.8 53.3 2,640.6 2,479.3 Gross income 560.5 663.0 Depreciation and amortization 254.1 256.0 Operating income 306.4 407.0 Interest on long-term debt 61.7 60.8 Interest and other income (15.9) (10.2) 260.6 356.4 Unusual item: Gain on sale of investment (note 6) — 31.8 Income before income taxes 260.6 388.2 Income tax expense (note 13) 78.2 133.3 182.4 254.9 Minority interest (6.3) (5.9) Net income $ 188.7 $ 260.8 Earnings per Common Share Basic $2.47 $3.16 Fully diluted $2.42 $3.11 Dividends Declared per Common Share $1.06 $1.00 Retained Earnings Balance at beginning of year $ 968.7 $ 885.4 Net income 188.7 260.8 1,157.4 1,146.2 Dividends declared: Preferred shares .6 .6 Common shares 80.6 82.2 Premium paid on repurchase of common shares 55.4 94.7 136.6 177.5 Balance at end of year $ 1,020.8 $ 968.7

See accompanying notes to consolidated financial statements. | Dofasco Inc. 47 Consolidated Balance Sheets

December 31 (in millions) 2000 1999 Current Assets Cash and cash equivalents $ 127.1 $ 197.1 Accounts receivable 355.6 382.3 Inventories (note 4) 853.5 772.7 Income and other taxes receivable 14.6 — Future income tax assets (note 13) 4.2 10.1 1,355.0 1,362.2 Fixed and Other Assets Fixed assets (note 5) 2,003.6 1,986.8 Future income tax assets (note 13) 43.0 41.4 Other assets (note 6) 122.0 92.4 2,168.6 2,120.6 Total assets $ 3,523.6 $ 3,482.8 Current Liabilities Bank borrowings of joint ventures $ 43.6 $ 17.5 Accounts payable and accrued charges 339.8 392.1 Income and other taxes payable — 56.7 Dividends payable 20.4 19.8 Current requirements on long-term debt (note 8) 108.3 99.6 512.1 585.7 Long-term Liabilities Long-term debt (note 8) 597.9 516.5 Employee non-pension benefits 326.1 311.3 Provision for relining blast furnaces and other 44.3 26.3 968.3 854.1

Future Income Tax Liabilities (note 13) 170.3 208.9 Minority Interest 20.4 21.6 Shareholders’ Equity Preferred shares (note 9) 12.1 12.4 Common shares (note 10) 792.7 831.4 Retained earnings 1,020.8 968.7 Currency translation adjustment (note 18) 26.9 — 1,852.5 1,812.5 Total liabilities and shareholders’ equity $ 3,523.6 $ 3,482.8

See accompanying notes to consolidated financial statements.

On behalf of the Board:

J. T. Mayberry, C. H. Hantho, Director Director | Dofasco Inc. (Incorporated under the laws of Canada) | Dofasco Inc. (Incorporated 48 Consolidated Statements of Cash Flows

For the years ended December 31 (in millions) 2000 1999 Cash Provided from (Used for) Operating Activities (note 14) $ 249.8 $ 568.6 Investment Activities: New facilities (216.0) (186.0) Acquisition (note 3) (44.8) — Other investments (.3) 30.3 (261.1) (155.7) Financing Activities: Increase in bank borrowings 26.0 7.3 Issue of long-term debt 175.0 — Repayment of long-term debt (91.5) (74.3) Equity contribution by minority interest 5.2 4.8 Redemption of preferred shares (.3) (.3) Common shares issued .4 2.3 Common shares repurchased (94.5) (164.5) Dividends paid (80.6) (84.4) (60.3) (309.1) Effect of Exchange Rate Changes on Cash and Cash Equivalents 1.6 — Cash and Cash Equivalents Increase (decrease) for year (70.0) 103.8 Balance at beginning of year 197.1 93.3 Balance at end of year $ 127.1 $ 197.1

See accompanying notes to consolidated financial statements. | Dofasco Inc. 49 50 | Dofasco Inc. effect atthebalancesheetdate.All otherassetsandliabilitiesare con- have beenconvertedtoCanadian dollars usingtheexchangerate in foreign operations. Consequently, theirmonetary assetsandliabilities Dofasco deMexicoand USAare classified asintegrated translated ataverage exchangerates prevailing duringtheyear. exchange rates whileforeign currency revenues andexpensesare assets andliabilitiesofdomesticoperations are translated atyearend Translation offoreign currencies – the differences are expectedtoreverse. the substantiallyenactedtaxrates andlawsthatwillbeineffectwhen reporting andtax basesofassetsandliabilitiesare measured using ities are determined basedondifferences betweenthefinancial income taxallocation.Underthismethod,future taxassetsandliabil- Income taxes– furnaces whichisaccruedbetweenrelines. are expensedasincurred exceptfortheestimatedcostofrelining blast Repair andmaintenancecosts – shipment tocustomers. 2.5to5% products isrecognized whentitlepasses, whichgenerally occurs upon Revenue recognition – earnings intheyearsuchdeterminationismade. productive lifeoftheproperty, theunrecoverable portionischarged to 5to25% that aninvestmentindeferred strippingisnotrecoverable overthe deferred andamortizedovertheextendedminelife.Ifitisdetermined Stripping expenditures thatare incurred toextendminelifeare the miningsector. basis overaperiodrelating totheindividualeconomicresidual lifeof sectors intoproduction are deferred andamortizedonastraight-line Pre-production anddevelopmentexpenditures tobringmining Pre-production, developmentandstrippingexpenditures – Equipment andmachinery Buildings estimated usefullives, asfollows: applied tothecostofassetsinserviceatannualrates basedontheir Depreciation iscomputedgenerally bythestraight-line method Fixed assets – and netrealizable value. Inventories – than three monthsatacquisition. cash ondepositandtermdepositswithremaining maturitiesofless Cash andcash equivalents – carried atcost. joint venture activities. Theremaining long-terminvestmentsare portionate share oftheassets, liabilitiesandresults ofoperations ofits include theaccountsofCorporation, itssubsidiariesandthepro- Basis ofconsolidation – accounting policiessummarizedbelow: generally acceptedinCanadaandare withintheframework ofthe prepared bytheCorporation inaccordance withaccountingprinciples The consolidatedfinancialstatementsfor2000and1999havebeen 1. Accountingpolicies Notes toConsolidatedFinancialStatements Inventories are valuedatthelowerofaverage cost Fixed assetsare recorded attheirhistoricalcost. The Corporation followstheliabilitymethodof Revenue from thesaleofmanufactured The consolidatedfinancialstatements Cash andcashequivalentsincludes Repair andmaintenancecosts Foreign currency monetary in theseparate componentofshareholders The appropriate amountsofexchangegainsorlossesaccumulated tions are deferred asaseparate componentofshareholders losses ontranslation oftheCorporation translated attheaverage rates duringtheperiod.Exchangegainsor dollars usingtheperiod-endexchangerates. Revenuesandexpensesare Consequently, theirassetsandliabilitiesare translated toCanadian Dofasco translated atthehistoricalrate applicabletotherelated asset. average exchangerates fortheyearexceptdepreciation, whichis verted athistoricalrates. Revenuesandexpensesare translated atthe the options. that wouldhavebeenearnedonfunds received duetotheexercise of shares are increased bytheamountofinterest, netofapplicabletaxes, or dateofissuance,iflater. Theearningsapplicable tothecommon cised orconvertedintocommonshares atthebeginningofyear, the yearhadalldilutivecommon share stockoptionsbeenexer- average numberofshares thatwouldhavebeenoutstandingduring Fully dilutedearningspershare are calculatedontheweighted shares outstandingduringtheyear. dends, dividedbythemonthlyweightedaverage numberofcommon calculated onthebasisofnetincomeforyear, lesspreferred divi- Earnings percommonshare – employees ontheexercise ofstockoptionsiscredited toshare capital. settlement ofstockappreciation rights. Anyconsideration paidby ognized intheaccountsonlyrespect ofamountspaidonthe executive officers andotheremployees. Compensationexpenseisrec- stock options, withattachedstockappreciation rights, are granted to stock basedcompensationplanspursuant towhichcommonshare Stock basedcompensation plans – remaining serviceperiodofactiveemployees. ations andthefairvalueofplanassetsisamortizedoveraverage net actuarialgain(loss)over10% ofthegreater ofthebenefitoblig- remaining average service lifeofactiveemployees. Theexcessofthe service costsresulting from planamendmentsare amortizedoverthe purposes ofcalculatingtheexpectedreturn onplanassets. Past tion andotherfactors. Pension planassetsare valuedatfairvaluefor and certaincompensatedabsences)related toemployees ment benefits(includingmedicalbenefits, dentalcare, lifeinsurance Employee benefitplans – to beeffective. vided there isreasonable assurance thatthehedgeisandwillcontinue revenues, are deferred andmatchedtothefuture revenue stream, pro- tified asahedgeagainstexposure onfuture foreign currency Gains andlossesonforeign currency liabilitieswhichhavebeeniden- (for 1999andprioryears, Gallatin was considered integrated). exchange translation purposes, Gallatinisconsidered self-sustaining its ownoperations. Accordingly, effectiveJanuary1,2000,forforeign profitability, Gallatin isabletofinanceitsday-to-dayactivitiesfrom sification ofGallatinanddeterminedthatasaresult ofsustained At thebeginningofcurrent year, managementreviewed theclas- in theoperations thatgaverisetosuchexchangegainsandlosses. income whenthere isareduction intheCorporation and management actuarial basisusingtheprojected benefitmethodprorated onservice service ischarged toincomeannually. Thecostiscomputedonan ’ s otherforeign operations are classifiedasself-sustaining. ’ s bestestimatesofinvestmentyields, salaryescala- The costofpensionandpost-employ- Earnings percommonshare is ’ s netinvestmentintheopera- The Corporation maintains ’ equityare reflected in ’ s netinvestment ’ equity. ’ current Raw materialsandotherinventories 5. Fixedassets expenditures willbe incurred overthenext twoyears. jects is$210 millionatDecember31, 2000.Themajorityofthese The estimatedamountrequired tocomplete authorizedcapitalpro- Net bookvalue Land (1.9) (in millions) Semi-finished andfinishedsteelproducts 44.8 $ (in millions) 4. Inventories Total consideration and netassetsacquired Long-term debt used wasbasedonmanagement accounting foremployeefuture benefits. Previously, thediscountrate Effective January1,2000theCorporation changedthemethodof 2. Accountingchanges Equipment and Buildings odil7.6 30.0 3.9 5.2 $ Future incometaxasset(net) Goodwill Fixed assets Non-cash workingcapital as follows: estimated fairvalueoftheassetsacquired lessliabilitiesassumed The purchase pricewasallocatedintheaccountsbasedon acquisition hasbeenaccountedforusingthepurchase method. and related components, forcashconsideration of$44.8million.The Cosma Powerlasers Corporation, manufacturers oflaser-weldedblanks outstanding commonshares ofCosmaPowerlasers Limitedand Effective May8,2000theCorporation acquired alloftheissuedand 3. Acquisitions did nothaveamaterialimpactontheresults forthecurrent year. ees expectedtoreceive benefitsunderthebenefitplan.Thechange line basisovertheaverage remaining serviceperiodofactiveemploy- The transitional assetof$231.7 millionwillbeamortizedonastraight change hasbeenappliedonaprospective basis. amortized overtheemployeeaverage remaining servicelife.This and experiencegainslosses(actuariallosses)were Construction in progress machinery ,8. $3,181.1 5,184.7 $ — $ 43.7 $ ,8. 2,793.1 4,286.5 3. 388.0 738.1 1. — 116.4 otDepreciation Cost $ 2,003.6 Accumulated ’ s bestestimateoflong-termyields 2000 329.6 $ 853.5 $ ,4. 2,960.3 $ 4,947.1 $ $ 40.9 $ ,1. 2,596.6 4,111.2 523.9 2000 2. 363.7 723.1 71.9 otDepreciation Cost $ 1,986.8 Accumulated 324.1 $ 772.7 $ Millions 448.6 1999 1999 — — Investments Deferred pensioncost Pre-production, development Fixed andotherassets Working capital Balance Sheets The Corporation Wabush Mines Sorevco andCompany, Limited Quebec CartierMiningCompany Gallatin SteelCompany DNN GalvanizingLimitedPartnership Baycoat in thefollowingjointventures: The Corporation hasa50%interest (exceptWabush Mines 7. Jointventures value oftheinvestmentattimesale. A pre-tax gainof$31.8 millionwasrecorded basedonthecarrying in Iron Ore CompanyofCanadaforcashproceeds of$36.9million. In December1999,theCorporation solditscommonshare investment 6. Otherassets Long-term liabilities Other (in millions) Financing activities Investment activities Operations Cash derivedfrom (usedfor): Statements ofCashFlows Net income Expenses Revenues Statements ofIncome Net investment Future incometaxliabilities Future incometaxassets (in millions) joint ventures are summarizedbelow(before eliminations): and strippingexpenditures – asteelcoilcoatingoperation – ’ s proportionate share ofthemajorcomponentsits aniron ore miningoperation – aminimillthinslabcastingfacility – agalvanizingoperation – aniron ore miningoperation – agalvanizingoperation 46.9 $ 24.1 $ 122.0 $ 59.6 $ 28.4 $ 686.0 $ 492.2 $ 605.9 180.7 672.9 133.2 657.6 2000 2000 (31.1) 12.4 47.5 42.9 41.7 21.0 2.5 $31.5 33.9 $ 92.4 $ 54.1 $ 13.6 $ $681.5 463.7 $ – 605.0 679.6 667.9 215.9 161.0 24%) 1999 1999 (25.1) 35.4 12.4 13.1 54.9 40.7 (7.5)

51 | Dofasco Inc. 52 | Dofasco Inc. DNN QCM Joint ventures (proportionate share) Notes Medium termnotes Dofasco DoSol Galva Total long-termdebtatDecember31 years are asfollows: Requirements forrepayment oflong-termdebtwithinthenextfive eral fortheirrespective loans, allofwhich are non-recourse toDofasco. Certain assetsofsomeourjointventures have beenpledgedascollat- (iii) Jointventures – shareholder andisnon-recourse toDofasco. 218.5The long-termdebtofDoSolGalvaisguaranteed byitsminority 53.0 $ (ii) DoSolGalva– $ 100.0 amount oftherevolving credit isavailable. $ 126.1 2001 intheamountof$200million. AtDecember31, 2000theentire $ 108.3The Corporation hasrevolving bankcredit availableuntilOctober21, $ rates ofanyadditional noteswillbedeterminedatthetimeofissue. the periodfrom May25,2000to2002. Thetermsandinterest ble toissueamaximumof$300millionMediumTerm Notesduring Pursuant tothetermsoftrustindenture, theCorporation iseligi- June 1,2005. issued $175millionof7.5%unsecured, non-callablenotesmaturing of aShortFormShelfProspectus onMay25,2000,Dofascohas Under itsMediumTerm Noteprogram establishedthrough thefiling (i) Dofasco– 2005 2004 2003 2002 2001 (in millions) Less current requirements Other Notes (in millions) 8. Long-termdebt – – – – – – 6.4%maturing2008 variablerates, currently variablerates maturing2004 9.95%maturing2003 7.5%maturing2005 9.81% maturing2007 denominated inU.S.funds averaging 7.2%,maturing2002, 175.0 $ 597.9 $ 245.0 149.6 108.3 531.6 706.2 111.6 2000 64.6 25.0 14.2 70.8 $ 516.5 $ 143.5 423.5 280.0 167.6 616.1 1999 72.6 78.9 25.0 99.6 16.1 — Class Apreferred shares Class Bpreferred shares Class Apreferred shares Authorized –preferred shares issuable inseries: 9. Preferred shares be writtenoff. debt wouldbeclassifiedascurrent andrelated deferred costswould In theeventthatagreement isnotsatisfactorilyrenegotiated, the report date,therenegotiations hadnotbeencompleted. cial covenantsincludedinitscurrent agreement. Asattheauditors necessary forQCMtoavoidnon-compliancein2001 ofcertainfinan- ating itslong-termdebtagreement. Arenegotiated agreement is Quebec CartierMining(QCM)iscurrently intheprocess ofrenegoti- hrsrprhsd(,0)(69.8) (6,608) Outstanding atDecember31, 2000 Shares repurchased 898.9 Shares issuedforcashunderthe $ Outstanding atDecember31, 1999 85,087 Shares repurchased Shares issuedforcashunderthe Outstanding atDecember31, 1998 Issued lessredeemed atDecember31: Class Cpreferred shares two years are summarizedbelow: Changes intheoutstandingcommonshares duringeachofthepast Authorized –unlimited 10. Commonshares dividends are inarrears. chase requirement andredemption rightsare suspendedwhen $101 pershare plusaccruedandunpaiddividends. Theannualpur- shares are redeemable attheoptionofCorporation atapriceof cellation for$.3million(1999 costs ofpurchase. During2000,2,500shares were purchased forcan- extent availableinthatyearatpricesuptotheissuepriceof$100 plus shares outstandinginthatyearforthepurchase ofsuchshares tothe an accountequalto2%oftheamountpaiduponallseriesApreferred Under theshare provisions, theCorporation istoestablishineachyear Class Apreferred shares – redeemable preferred 4 3/4%cumulative shares, seriesA mlyesokoto ln 1 2.3 118 employee stockoptionplans employee stockoptionplans – – – unlimited unlimited 500,000 2000 – 2,600for$.3million).Thepreferred 121 i huad)(inmillions) (in thousands) Shares 1999 i huad)(inmillions) (in thousands) 124 490$792.7 $ 74,920 831.4 78,597 370 (39.1) (3,700) Shares $ 12.1 3.4 23 2000 $ 12.4 1999 ’ year are asfollows: A summaryofthestatusCorporation ag fOttniga otata AeaeEecsbea Average Exercisable at Average Contractual Outstandingat Range of in 2001, ifnotterminatedearlier. payable byashareholder uponissuanceoftheRights. TheNewPlanwillterminateattheclose oftheannualgeneral meetingof common share andoneRightwillbeissuedinrespect ofeachcommon share issuedpriortotheexpiryofNewPlan.Noconsid originally adoptedbytheBoard ofDirectors onNovember24,1989.Oneright(a On May1,1998,theshareholders oftheCorporation approved anewshareholder rightsplan(the 12. Shareholder rights plan Amounts charged toincomeascompensationexpenseineachof1999 and2000were notmaterial. 2.5-$59 ,9,0 .52.7781024.02 20.48 $ 748,100 603,109 24.17 20.48 19.38 24.75 $ 23.05 Exercise Price 8.05 4.31 December31, 2000 Exercise Price 1,692,500 LifeinYears 603,109 (164,900) (3,600) December31, 2000 466,500 22.14 $ $23.85 -$25.95 $14.75 -$21.45 Exercise Prices 1,543,809 The followingtablesummarizesinformationonstockoptionsoutstandingatDecember31, 2000: Balance outstandingatDecember31, 2000 Forfeited/expired Exercised Authorized Balance outstandingatDecember31, 1999 Forfeited/expired Exercised Authorized Balance outstandingatDecember31, 1998 rights, butnotboth,maybeexercised attheemployees equally onthefirst, secondandthird anniversary dateofthegrant andhaveatermnottoexceedtenyears. Eitheroptionsor employees. Theexercise priceoftheoptionsmaynotbelessthanmarketvaluecommonshares onthedateofgran The Corporation isauthorizedtogrant commonshare stockoptions, withattachedstockappreciation rights, tocertainexecutiv 11. Stockbasedcompensation plans Under othernormalcourse issuerbids, theCorporation acquired 11,200,000 commonshares betweenSeptember14,1998andSeptemb particular transaction. During2000,Dofascodidnotrepurchase commonshares underthisprogram. shares betweenNovember21, 2000andNovember20,2001. Thepurchases are madeontheopenmarketatpriceti In November, 2000theCorporation filedanormalcourse issuerbidwhichentitlestheCorporation toacquire upto3,800,000of ’ s stockbasedcompensationplansasofDecember31, 1999and2000changesduringthe ,9,0 .7$2.013129$22.44 $ 1,351,209 23.20 $ 7.07 2,295,609 ’ option. pin usadn OptionsExercisable Options Outstanding eann egtd Weighted Remaining Weighted Weighted Average “ Right ” ) wasissuedundertheNewPlanforeachoutstanding ,9,0 23.20 $ 2,295,609 ,4,0 22.61 $ 1,841,809 0,0 24.95 506,100 5,0)19.31 (52,300) hrsExercise Price Shares —— “ New Plan ” ) whichreplaced asimilarplan stockappreciation t. Optionsvest e officers and shareholders itscommon er 13,2000. me ofany Weighted eration is Average

53 | Dofasco Inc. 54 | Dofasco Inc. The incometaxexpenseiscomprisedof: 13. Incometaxes a redemption priceof$0.001 perRight. may, incertaincircumstances, redeem thethenoutstandingRightsat to purchase commonshares ata50%discount.TheBoard ofDirectors able automaticallyallowingholders (otherthantheAcquiringPerson) above (subjecttocertainexceptions),theRightswillbecomeexercis- Corporation Current Add (deduct): before incometaxes, asfollows: ing Canadianincometaxrates (Federal andProvincial) toincome The incometaxexpensediffers from theamountcalculatedbyapply- Income taxexpense Income taxexpensecomputed Income before incometaxes (in millions) Future (in millions) (an Rights are notexercisable untilcertaineventsoccur. Ifanyone bidders andexplore otherwaysofmaximizingshareholder value. evaluate thebid,negotiatewithbidder, seekoutalternative strategies andthattheBoard ofDirectors willhavesufficienttimeto for theirshares andwillnotbesubjecttoabusiveorcoercive take-over control oftheCorporation, shareholders willreceive fullandfairvalue The NewPlanisintendedtoensure that,intheeventofabidfor or more oftheCorporation then outstandingvotingshares. IftheAcquiringPerson acquires 20% accepted byindependentshareholders holdingmore than50%ofthe which mustcontainprovisions specifiedintheNewPlanandbe ers or, alternatively(ii)withoutBoard approval, makea of Directors oftheCorporation approve asbeingfairtoallsharehold- Other using statutoryincometaxrates Effect ofdifferent rates Resource allowance Manufacturing andprocessing credit Net future incometaxbenefit Non-taxable portionofgain Benefit ofpreviously unrecognized Minimum taxes Mining duties “ in foreign jurisdictions in taxrates resulting from reduction on saleofinvestment losses ofU.S.subsidiaries Acquiring Person ’ s votingshares, itmay(i)negotiatetermswhichtheBoard ” ) wishestoacquire 20%ormore ofthe ’ s votingshares otherthanasdescribed $107.4 114.4 $ 78.2 $ 78.2 $ 260.6 $ (36.2) (29.2) 2000 2000 (21.5) (4.5) (2.2) (1.7) (3.5) (6.8) 2.8 1.2 — “ permitted bid 158.5 $ $171.7 133.3 $ 133.3 $ 388.2 $ 1999 1999 (38.4) (25.2) (31.4) (4.5) (5.6) 1.9 — — — .3 .9 ” Current Assets Canada Items notinvolvingcash Net incomeforyear as follows: Components offuture incometaxesbyjurisdictionare summarized tributions madeby members, totheDofascoEmployees before incometaxesoraminimumpayment ofthree timesthecon- The Corporation allocates14% ofitsHamiltonsteelmakingprofits 15. Employees’profit sharing on Cash paidforincometaxes Cash paidforinterest Supplemental disclosure ofcashflowinformation Assets Foreign Future incometaxliabilities Liabilities Future incometaxassets (in millions) Changes inoperating workingcapital (in millions) 14. Cash derivedfrom operations varying amountsupto2019. accounts. Theselossescanbeappliedagainstfuture taxableincomein million) forwhichnofuture taxbenefithasbeenrecognized inthe tax purposesofapproximately U.S.$40.2million(1999-$45.5 At December31, 2000,U.S.subsidiarieshaveaccumulatedlossesfor Future incometaxassets Other Employee future benefits Future incometaxes Depreciation andamortization Accounting provisions notcurrently Gain onsaleofinvestment Other Inventory ofproduction rolls Other Tax depreciation inexcess U.S. netoperating losscarryforward Accounting provisions notcurrently Tax depreciation inexcess deductible fortaxpurposes of bookdepreciation deductible fortaxpurposes of bookdepreciation Hamilton steelmaking operations – – – – 12.9 $ 188.7 $ 182.9 $ 65.9 $ 249.8 $ 100.1 $ $170.3 $4.2 290.3 $ 43.0 $ (169.9) (116.5) 254.1 (29.2) (53.7) 2000 2000 (2.3) (3.5) (8.7) (3.4) – 8.4

— ’ Savingsand 19.5 $ 260.8 $ 118.7 64.0 $ $ 568.6 $ 89.4 $ 208.9 $ $10.1 316.5 $ $41.4 (110.6) 256.0 105.4 1999 1999 (25.2) (44.2) (31.8) (2.5) (9.4) (3.8) 5.9 3.0 Unamortized pastservicecosts Unamortized transitional asset Employer contributionsafter average assumptions asofDecember31): Transfer todefinedcontributionplan Benefits paid Employer contributions Actual return onplanassets Market valueofplanassets Change inplanassets aggregate, isasfollows: The informationabouttheCorporation 31 amountto$821.9 million. $23.2 million.Total assetsandobligationsfortheseplansatDecember The totalexpensefortheCorporation Dofasco Employees benefits tosubstantiallyalloftheemployees. Suchplansincludethe tion plansproviding pension,otherretirement andpost-employment The Corporation hasanumberofdefinedbenefitandcontribu- 16. Employeebenefits Dofasco SupplementaryRetirement IncomePlan. creation ofadefinedcontributionpensioncomponentwithinthe A portionoftheannualprofit sharingallocationisfundedthrough the Sharing Plan,tobeshared amongHamiltonsteelmakingemployees. Benefits paid Plan amendments Interest cost Current servicecost(employer) Funded status Reconciliation offundedstatus Corporation The significantactuarialassumptions adoptedinmeasuringthe ity isincludedincurrent liabilities. Of theotherbenefitplans, $15.5 millionoftheaccruedbenefitliabil- Accrued benefitasset(liability) Unamortized netactuarialloss Market valueofplanassets Actual planexpenses Benefit obligation Actuarial loss Profit SharingFundsandtheDofascoEmployees Benefit obligation Change inbenefitobligation measurement date – – beginningofyear endofyear ’ s accruedbenefitobligationsare as follows (weighted- – surplus(deficit) – – ’ SavingsandProfit SharingFunds(note15). endofyear beginningofyear ’ s definedcontributionplanwas ’ s definedbenefitplans, in 2. $ (383.6) 222.8 $ 8. .8 $ 982.3 $ 384.4 $ 785.8 $ 2. 329.2 $ 720.6 $ ,0. .8 $ 1,008.6 $ 17$ (341.6) 41.7 $ esosBenefitPlans Pensions 280 — (218.0) 2.)— (12.0) (20.2) (43.7) 4.)(12.1) (43.7) 002000 2000 65— 86.5 9022.4 6.7 49.0 17.1 5738.2 25.7 37.3 35.5 05.9 10.5 . 12.0 4.0 . .9 7.3 .)— (.3) ’ 72.9 .7 Deferred Profit Other the U.S.dollarduring theyear. primarily asaresult oftheweakening Canadian dollaragainst unrealized translation gainincreased to$26.9 millionatDecember31 currency translation gainonJanuary1,2000of $13.7million.The to self-sustainingasdescribedin note1resulted inanunrealized sustaining foreign operations. Thechangein classificationofGallatin to Canadiandollars ofassetsandliabilities of thecompany Unrealized currency translation adjustmentsariseonthetranslation 18. Currency translation adjustment speculative purposes. It doesnotholdorissuederivativefinancialinstrumentsfortrading or exposure tocredit andmarketrisksfortheseinstrumentsisnegligible. instruments asatDecember31, 2000. TheCorporation believesthatits There wasnosignificantunrealized gainorlossonthesefinancial $7.2 million)expiringatvariousdatesthrough toJune30,2002. amount ofallcontracts outstandingwasU.S.$8.6million(1999 raw materials. AsatDecember 31, 2000,theaggregate notional Commodity priceswapcontracts are usedtohedgethecostofcertain and Cdn.$1.5467. December 31, 2001 atexchangerates varyingbetweenCdn.$1.4270 (1999 aggregate amountofU.S.$82.1millionasatDecember31, 2000 The Corporation hasentered intoforeign exchangecontracts withan commodities. in interest andCanadian/U.S.exchangerates andthepriceofcertain ity prices. Thesecontracts limittheexposure tounfavourable changes associated withfluctuationsinforeign exchangerates andcommod- The Corporation utilizesfinancialinstrumentstomanagetherisk 17. Financialinstruments Net expense(income) Amortization ofnetactuarialloss Amortization oftransitional asset Expected return onplanassets Interest cost Current servicecost Components ofdefined The Corporation 4 percent for2005andremain atthatlevelthereafter. assumed for2000.Therate wasassumedtodecrease gradually to in thepercapitacostofcovered healthcare anddentalbenefitswas For measurement purposes, a4to7.6percent annualrate ofincrease Rate ofcompensationincrease Expected long-termrate of Discount rate return onplanassets benefit planexpense – U.S.$73.7million).Thesecontracts mature atthelateston ’ s netbenefitplanexpenseisasfollows: 2.)$29.5 $ (26.5) $ 71$6.7 $ 17.1 $ esosBenefitPlans Pensions BenefitPlans Pensions .0 — — 3.50% 8.00% 6.75% 6.75% 1.)— (.1) (13.7) (78.9) 002000 2000 2000 2000 9022.4 49.0 —.5 ’ s self- Other Other – U.S.

55 | Dofasco Inc. 56 | Dofasco Inc. Geographic information– emn ses2802360373(07 3,482.8 388.2 (10.7) 4.6 347.3 14.3 326.0 9.9 2.4 2,820.2 (4.7) 169.3 378.4 Expenditures forfixedassets Segment assets Income (loss)before incometaxes neeto ogtr et5. 55.7 .5 31.8 (9.4) 54.6 Gain onsaleofinvestment Interest andotherincome Interest onlong-termdebt Powerlasers, DoSolGalva,DofascodeMexicoand ae oetra utmr ,6. 9. 8. $ 184.6 $ 197.7 $ 2,760.0 $ Sales toexternalcustomers rs noe5431. 8746663.0 3,142.3 4.6 (144.6) 48.7 There are nocustomers whichaccountfor10% ormore ofconsolidatedrevenue in2000or1999. 278.7 Customer segments – Total 33.9 Other countries 15.4 United States 248.2 Canada 19.6 (in millions) 594.3 2,760.0 202.5 Depreciation andamortization Gross income Total sales Inter-segment sales (in millions) Expenditures forfixedassets Segment assets Income (loss)before incometaxes Interest andotherincome Interest onlong-termdebt Depreciation andamortization Gross income(loss) Total sales Inter-segment sales Sales toexternalcustomers (in millions) flat rolled steelproduction andsales Baycoat, DNN,Sorevco andWabush whichare primarilyengagedin Steel operations The Corporation hasthree reportable segmentsasfollows: 19. Segmentedinformation – includesHamiltonoperations, DofascoUSA, ,0. 3. 5. 3,201.1 $ — $ 158.5 $ 237.6 $ 2,805.0 $ prtosGlai C lmnto Total Elimination QCM Gallatin Operations ,0. 6. 6. 196 3,201.1 (139.6) 269.6 266.1 2,805.0 ,3. 3. 6. 74 3,523.6 (7.4) 362.6 337.2 2,831.2 9. . 36—216.0 260.6 — (2.6) 560.5 13.6 5.5 (2.6) 9.6 14.1 39.8 192.8 243.6 36.1 487.2 0. 163. 254.1 — 30.0 21.6 202.5 1.)—(9 (15.9) — (.9) — (15.0) 61. . 61.7 — 5.2 .4 56.1 te necmayConsol. Intercompany Steel 85111(3.)— (139.6) 111.1 28.5 — — ’ s share of ,0. 2,003.6 $ 3,201.1 $ 1,736.9 $ 2,439.8 $ 9. 8.7 199.6 6. 258.0 561.7 Quebec CartierMining(QCM) hot rolled steel Gallatin ae Fixed Assets Sales 059. (144.6) 94.1 50.5 ——— — – jointventure minimillintheU.S.whichproduces andsells 2000 1999 2000 (.8) – iron ore production andsales ,4. 1,986.8 $ 1,759.4 3,142.3 $ $ 2,443.4 $ 2. 227.4 523.8 175.1 ae FixedAssets Sales — — — — — 3,142.3 $ 186.0 256.0 1999 (10.2) 60.8 31.8 — — Auditors’ Report

To the Shareholders of Dofasco Inc.

We have audited the consolidated balance sheets of Dofasco Inc. as at accounting principles used and significant estimates made by manage- December 31, 2000 and 1999 and the consolidated statements of ment, as well as evaluating the overall financial statement presentation. income, retained earnings and cash flows for the years then ended. In our opinion, these consolidated financial statements present fairly, These financial statements are the responsibility of the Corporation’s in all material respects, the financial position of Dofasco Inc. as at management. Our responsibility is to express an opinion on these December 31, 2000 and 1999 and the results of its operations and its financial statements based on our audits. cash flows for the years then ended in accordance with accounting We conducted our audits in accordance with auditing standards gener- principles generally accepted in Canada. ally accepted in Canada. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes exam- Hamilton, Canada Ernst & Young LLP ining, on a test basis, evidence supporting the amounts and disclosures January 31, 2001 Chartered Accountants in the financial statements. An audit also includes assessing the

Management’s Responsibility for Financial Reporting

The accompanying financial statements of Dofasco Inc. and all the The Board carries out this responsibility principally through its information in this annual report are the responsibility of manage- Audit Committee. ment and have been approved by the Board of Directors. The Audit Committee is appointed by the Board, and all of its members The financial statements have been prepared by management in accor- are outside directors. The Committee meets periodically with manage- dance with accounting principles generally accepted in Canada. Where ment, as well as with internal and external auditors, to discuss internal alternative accounting methods exist, management has chosen those controls over the financial reporting process, auditing matters and methods deemed most appropriate in the circumstances. Financial financial reporting issues. The Committee has reported its findings to statements are not precise since they include certain amounts based on the Board which has approved the financial statements for issuance estimates and judgments. Management has determined such amounts to the shareholders. The Committee also considers, for review by the on a reasonable basis in order to ensure that the financial statements Board and approval by the shareholders, the engagement or re- are presented fairly, in all material respects. Management has ensured appointment of the external auditors. that the financial information presented throughout the annual report The consolidated financial statements have been audited on behalf is consistent with the financial statements. of the shareholders by the external auditors, Ernst & Young, in Dofasco Inc. maintains systems of internal accounting and adminis- accordance with auditing standards generally accepted in Canada. trative controls which are of high quality, consistent with reasonable Ernst & Young has full and free access to the Audit Committee. cost. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Corporation’s assets are appropriately accounted for and ade- quately safeguarded. B. P. Solski, J. T. Mayberry, The Board of Directors is responsible for ensuring that management Executive Vice President – Finance President and Chief Executive Officer fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. January 31, 2001 | Dofasco Inc. 57 58 | Dofasco Inc. Statement ofincomedata* Statistical data Financial position data* Eleven Year Summary †† † Restated toreflect changesinaccountingrelated toincome taxes *** capital=shareholders in millions ** * Net income(loss)fortheyear Income (loss)from equityinvestments Minority interest Income taxexpense(recovery) Unusual items Income (loss)before unusualitemsandincometaxes Minority interest Future incometaxliabilities Long-term liabilities Current liabilities Other assets Interest andotherincome Interest onlong-termdebt Operating income Depreciation andamortization Gross income Total dividendsdeclared* Capital expenditures* Cost ofsales(before thefollowingitem) Fixed assets Earnings reinvested in(withdrawn from) thebusiness* Net income Net incomeafteraddingbackinterest onlong-termdebt Average numberofcommonshares outstanding (thousands) Shareholders Net income(loss)attributabletocommonshares Sales Earnings (loss)percommonshare Steel shipments(thousandsofnettons) Raw steelproduction andpurchased Current assets Dividends declared Net bookvaluepercommonshare Net income restated toincludeAlgoma ontheequitybasis after preferred dividends and post-employment benefits. Employees (after taxes) semi-finished steelprocessed (thousandsofnettons) – – – – ’ equity percent ofaverage commonshareholders percent ofsales accumulateddepreciation land,buildingsandequipment,atcost ’ profit sharingplan – percent ofaverage capital** ’ equitypluslong-termdebt(includingcurrent portion) – – – perClassC,$2.60preferred share perClassApreferred share percommonshare – – common preferred † † † ’ equity † 188.7 $ (6.3) $— 78.2 $ $ 260.6 $— $ 20.4 $ 968.3 $170.3 512.1 $ 165.0 $ $ (15.9) $ 3,181.1 $ 306.4 $61.7 254.1 $ 560.5 $ $ 216.0 $ $0.6 2,601.8 $ 38.8 $ 5,184.7 $ 52.1 $ 80.6 $ 1,852.5 $ 188.1 $ 3,201.1 $ 1,355.0 $ 24.56 $ $— $4.75$1.06 using theproportionate consolidationmethod. its 50%interest intheQuebecCartierMiningCompany For 1994andsubsequentyears, Dofascohasreported $2.47 76,293 10.3% 5,009 4,416 9.2% 5.9% 2000 ,6. 2,731.8 2,960.3 ,2. 2,359.6 2,426.0 ,4. 4,786.0 4,947.1 ,4. 2,982.2 3,142.3 ,6. 1,246.3 1,362.2 ,1. 1,797.0 1,812.5 22685,748 82,296 22 8.7% 12.2% 45 9.8% 14.5% 6. 174.2 260.8 3. 112.5 286.4 133.3 356.4 0. 227.8 911.8 459.4 118.2 208.9 854.1 585.7 133.8 5. 248.3 584.5 256.0 663.0 8. 265.7 186.0 6. 173.6 260.2 ,4 4,056 4,449 ,3 4,794 4,833 29 20.97 22.90 0. 336.2 407.0 991998 1999 .%5.8% 8.3% 1.)(20.0) (10.2) 0869.8 60.8 3338.1 53.3 3380.7 83.3 2285.7 82.2 .54.75 1.00 4.75 1.00 .62.02 3.16 31.8 1622.7 21.6 59 (0.3) (5.9) . 0.6 0.6 —— —— — *** ,3. ,1. ,4. ,3. ,7. ,3. ,4. 1,905.7 1,842.4 1,737.0 1,778.2 1,936.2 2,047.1 2,317.0 2,439.9 ,5. ,7. ,7. ,6. ,8. ,6. ,0. 1,502.4 1,607.2 1,369.0 1,482.6 1,764.4 1,874.4 1,970.2 1,755.3 ,3. ,8. ,1. ,2. ,6. ,6. ,5. 1,526.5 3,647.6 1,082.3 1,654.7 3,861.6 1,038.7 1,867.1 3,870.9 1,111.2 1,768.5 3,685.2 1,158.1 2,029.0 4,139.1 1,533.0 2,218.1 4,352.5 1,599.7 2,387.8 4,585.4 1,511.5 2,534.3 4,568.5 1,372.1 ,7. ,4. ,3. ,2. ,0. ,5. ,5. 2,349.3 2,055.8 1,952.9 2,102.9 2,424.8 2,635.9 2,942.0 3,070.4 5798,1 5558,3 9347,8 05466,323 70,554 79,084 79,394 83,433 85,525 85,615 85,799 07 14 14 51 03 / / N/A N/A N/A 10.3% 15.1% 11.4% 11.4% 10.7% 9. 0. 8. 9. 59(82 3.)200.0 (38.2) (38.2) 65.9 194.2 289.4 303.5 293.7 9. 0. 9. 2. 3. 271 2.)(679.2) (25.0) (207.1) 138.6 220.9 195.8 207.3 193.2 02 91 80 68 43 29 61 17.34 16.18 12.98 14.39 16.80 18.00 19.16 20.27 4. 5. 3. 5. 3. 084. 258.2 156.0 414.2 46.0 157.0 203.0 40.8 166.8 207.6 137.8 179.8 317.6 253.9 211.1 465.0 335.3 207.8 543.1 356.0 228.2 584.2 343.6 252.7 596.3 5. 7. 4. 1. 9. 8. 9. 383.1 883.9 295.4 970.6 381.6 1,110.2 295.3 1,062.0 411.9 1,136.7 1,025.6 546.1 1,013.9 474.4 849.7 554.1 0. 629. 03(.)(6.)(48 70.7 (54.8) (165.5) (2.7) 40.3 93.6 96.2 100.5 ,3 ,8 ,8 ,7 ,5 ,1 ,7 3,717 4,526 3,375 4,094 3,419 4,089 3,350 3,884 3,076 3,507 3,181 3,746 3,985 4,274 4,131 4,621 8. 8. 6. 9. 1. 238 5.)(705.9) (51.7) (233.8) 111.9 194.2 169.4 181.2 181.7 1. 1. 5. 9. 6. 9. 3. 568.8 539.3 393.8 367.2 399.4 353.9 316.0 316.8 1. 9. 3. 9. 98169205325.9 250.5 106.9 89.8 192.8 230.1 293.7 119.6 9719 9519 9319 911990 1991 1992 1993 1994 1995 1996 1997 .%94 .%1.%84 / .%N/A N/A 1.3% N/A N/A N/A 8.4% 5.3% 10.8% 8.0% 9.3% 6.4% 9.4% 6.2% 9.0% 5.9% 2.)(68 4.)(83 1.)(18 84 (13.8) (8.4) (11.8) (17.3) (28.3) (40.1) (26.8) (25.9) .547 .547 .547 .54.75 (790.8) (108.1) 4.75 (245.6) 4.75 111.9 25.4 4.75 168.8 68.4 4.75 0.30 97.9 72.7 4.75 0.80 95.7 85.8 4.75 0.85 95.9 4.75 1.00 587. 608. 929. 2672.0 29.4 92.6 10.4 90.8 8.3 89.2 7.1 88.0 86.0 23.6 79.3 45.7 75.8 40.8 34.2 .221 .823 .1(.6 07)(10.64) (0.73) (2.96) 1.41 2.33 1.98 2.12 2.12 966. 596. 3. 3. 6. 134.8 166.9 139.6 132.3 69.3 65.9 65.4 69.6 152. 642. 672. 6726.7 2.60 26.7 2.60 26.7 2.60 26.7 2.60 26.7 2.60 26.4 2.60 26.1 2.60 11.5 1.11 ——— ———— ———— ———— —————— ———— 707. 339 5.)(713.0) (52.8) (323.9) 74.8 67.0 48 1.)1. (95.5) 11.2 (10.5) (4.8) — — .508 1.28 0.80 0.15 185. 84.9 56.4 11.8 ††

59 | Dofasco Inc. Corporate Governance

Dofasco’s Philosophy

The objective of Dofasco’s Board of Directors is to maximize share- and guidelines are regularly reviewed, evaluated and modified to meet holder value by governing the company’s activities in a manner that is the changing needs of the company and its shareholders. Dofasco consistent with good corporate citizenship, including fair treatment of publishes a handbook setting out these policies. Copies of “Dofasco employees, customers, suppliers and the community. Board Guidelines on Corporate Governance Issues” are available to shareholders upon request. Dofasco has a comprehensive set of corporate governance policies and guidelines which are designed to permit the Board of Directors to In 2000, there were seven meetings of the Board. Average attendance represent the interests of the company’s shareholders and to assist at Board meetings by directors was 96%. management in setting and attaining goals which create value and During the year, there were twelve meetings of Board committees. contribute to the communities where Dofasco operates. These policies The average attendance at committee meetings by directors was 91%.

Board Committees

Audit Committee Nominating and Corporate Governance Committee

Mandate Mandate • Review financial reporting issues, audit plans and results, and • Review and make recommendations concerning the composition internal control systems and procedures with management and of the Board of Directors, nominees for election to the Board at the the auditors. Annual Shareholders’ Meeting or to fill vacancies between annual • Review audited financial statements prior to approval by the Board meetings, the composition and chairs of Board committees, corpo- and make recommendations concerning the appointment and rate governance policies, evaluation of the Board’s performance compensation of auditors. and succession planning for the Chair of the Board.

Members Members • Doe, Dowsett, Hantho, Horváth, Logan, Maurice (Chair) • Doe (Chair), Dowsett, George, Hantho, Logan, Maurice

Meetings in 2000 – Three Meetings in 2000 – Two

Human Resources Committee Environment, Health and Safety Committee

Mandate Mandate • Monitor, review and make recommendations concerning human • Monitor, review and make recommendations concerning Dofasco’s resources policies and practices, organizational structure, (and subsidiary and joint venture) environment and health and safety appointments, compensation and succession planning for senior policies, goals, management and reporting systems and performance. management and the Chief Executive Officer’s performance • Monitor relevant legal and regulatory changes and Dofasco’s and compensation. compliance.

Members Members • Akitt, Chrominska, Clitheroe, George, Hantho, McCamus (Chair) • Akitt (Chair), Clitheroe, Coyne, Hantho, Horváth, MacNeill, McCamus

Meetings in 2000 – Five Meetings in 2000 – Two | Dofasco Inc. 60 TSE Guidelines

Like most major Canadian corporations, Dofasco uses the corporate nance in relation to each of the TSE guidelines. A more detailed dis- governance guidelines advocated by The Toronto Stock Exchange as a cussion of Dofasco’s compliance with the TSE corporate governance compliance template. Set out below are the corporate governance guidelines in 2000 is included in the company’s 2001 Management guidelines of the TSE and a summary of Dofasco’s approach to gover- Proxy Circular.

The Board of Directors should: Dofasco’s approach:

• be responsible for corporate stewardship, including the strategic planning • Board’s formal mandate includes all these responsibilities and outlines the process, identification and management of risks, succession planning, elements of stewardship required to fulfil them. corporate communications policy and the integrity of internal control and • Board approval is required for significant acquisitions, divestitures and management information systems. capital expenditures.

• be constituted with a majority of unrelated directors. • Board is comprised of 13 unrelated directors and 1 related director. • report annually on the proportion of unrelated directors. • reported annually in the Management Proxy Circular.

• apply the definition of “unrelated director” to the circumstances of each • Board has determined that the President and CEO is the only related director. individual director and disclose on an annual basis whether the Board has a • disclosed annually in the Management Proxy Circular. majority of unrelated directors and the analysis of the application of the principles supporting that conclusion.

• appoint a committee of outside directors to propose new Board nominees • responsibility of the Nominating and Corporate Governance Committee, and to assess existing directors. composed exclusively of outside directors. All directors are encouraged to identify potential candidates.

• have a process for assessing the effectiveness of the Board as a whole, • Dofasco has a formal, annual evaluation process that includes question- its committees and individual directors. naires completed by directors and committee members, self-evaluation questionnaires completed by directors, input from senior management, discussions between the Chair and individual directors and an evaluation of the Chair’s performance by other directors.

• have an orientation and education program for new directors. • Dofasco’s comprehensive program includes a variety of written information, tours of operations and the opportunity to attend governance seminars.

• ensure that the number of directors is appropriate for effective decision- • Board reviews its size and composition annually, to maintain an appropriate making. mix of expertise and experience, combined with efficient operation and decision-making.

• ensure that directors’ compensation realistically reflects their responsi- • Nominating and Corporate Governance Committee annually reviews direc- bilities and associated risk. tors’ compensation and compares it with other Canadian public companies, noting the time commitment expected of Dofasco directors. • Dofasco encourages ownership of the company’s shares by directors and requires that all non-employee directors allocate at least 25% of their annual Board retainer to the purchase of Dofasco shares.

• ensure that Board committees are made up, generally, of outside directors, • Dofasco Board committees are composed of outside, unrelated directors. with a majority of unrelated directors.

• be responsible for developing the company’s approach to governance and • responsibility of the Nominating and Corporate Governance Committee. for implementing TSE governance guidelines.

• with the CEO, develop position descriptions for Board and CEO and • Board has position descriptions for the CEO, Chair of the Board and directors. corporate objectives for CEO. • Board approves an annual business plan that includes the CEO’s corporate objectives, priorities and performance targets.

• have a non-management Chair, or “lead director.” • Chair of the Board is an outside and unrelated director. • meet regularly without management. • a portion of each Board meeting is reserved for discussion among directors only. Outside directors also normally meet twice a year, followed by a discussion with the CEO.

• have an Audit Committee composed entirely of outside directors that has • Dofasco’s Audit Committee meets all these guidelines. specific responsibilities, direct access to internal and external auditors and oversees management reporting on internal control.

• have a system to enable individual directors to engage an outside advisor • Dofasco directors are expected to review such matters with the Chair at the company’s expense in appropriate circumstances, subject to the of the Board. approval of an appropriate Board committee. | Dofasco Inc. 61 Directors and Officers

Directors

John E. Akitt Roger G. Doe Frank H. Logan Mr. Akitt is a Corporate Director and Consultant. Mr. Doe is a retired senior partner of the law firm Mr. Logan joined Dofasco’s Board in 1976 and is He joined Dofasco’s Board in 1994 and is a member of Fasken Martineau DuMoulin LLP in Toronto, currently a member of the Audit and Nominating of the Human Resources Committee and Chair of Ontario. He has served on Dofasco’s Board since & Corporate Governance Committees. Mr. Logan the Environment, Health & Safety Committee. 1975 and is currently Chair of the Nominating is Director and Managing Director of Hatch & Corporate Governance Committee and a group of Mississauga, Ontario. Sylvia D. Chrominska member of the Audit Committee. Ms. Chrominska, Executive Vice-President, Human Brian F. MacNeill Resources of the Bank of Nova Scotia of Toronto, Robert C. Dowsett Mr. MacNeill is Chairman of Petro-Canada Ontario, joined Dofasco’s Board in 2000. She sits Mr. Dowsett is President of Robert Dowsett of Calgary, Alberta. He joined Dofasco’s Board on the Human Resources Committee. Consulting of Toronto, Ontario. He joined Dofasco’s in 2000 and sits on the Environment, Board in 1975 and is a member of the Audit and Health & Safety Committee. Eleanor R. Clitheroe Nominating & Corporate Governance Committees. Ms. Clitheroe is President & Chief Executive Peter C. Maurice Officer of Hydro One Inc. of Toronto, Ontario. Richard L. George Mr. Maurice, a director of a number of Canadian Elected to the Dofasco Board in 1996, she is Mr. George, President and Chief Executive Officer companies, was elected to Dofasco’s Board in a member of the Human Resources and of Suncor Energy Inc. of Calgary, Alberta, joined 1993. He is Chair of the Audit Committee and Environment, Health & Safety Committees. Dofasco’s Board in 1995. Mr. George is a member a member of the Nominating & Corporate of the Human Resources and Nominating & Governance Committee. William E. Coyne Corporate Governance Committees. Dr. Coyne recently retired as Senior Vice President, John T. Mayberry Research and Development of 3M of St. Paul, Charles H. Hantho Mr. Mayberry is President and Chief Executive Minnesota. He has been a Dofasco Director since Mr. Hantho is Chair of the Board of Dofasco. Officer of Dofasco and joined the Board in 1993. 1997 and is a member of the Environment, He joined Dofasco’s Board of Directors in 1989 Health & Safety Committee. and was elected Chair in 1995. He is a member David R. McCamus of the Audit, Human Resources, Nominating Mr. McCamus, a Dofasco Board member since & Corporate Governance and Environment, 1993, is a director of a number of major Canadian Health & Safety Committees. corporations. He is Chair of the Human Resources Committee and a member of the Environment, Dezsö J. Horváth Health & Safety Committee. Dr. Horváth is Dean & Tanna H. Schulich Chair in Strategic Management at the Schulich School of Business at York University in Toronto, Ontario. Elected to the Dofasco Board in 1995, he sits on the Audit and Environment, Health & Safety Committees.

[ left to right] John Mayberry, John Akitt, Frank Logan, Rob Dowsett, Brian MacNeill, Roger Doe, Eleanor Clitheroe, Chuck Hantho, Sylvia Chrominska, Dezsö Horváth, Rick George, Peter Maurice David McCamus, Bill Coyne, | Dofasco Inc. 62 in 2000.HebeganhisDofascocareer in1970. Mr. Pether wasappointedtohiscurrent position Chief Operating Officer Donald A.Pether named President andCEOin1993. Mr. MayberryjoinedDofascoin1967and was President andChiefExecutiveOfficer John T. Mayberry in 1989andwaselectedChair1995. Mr. HanthojoinedDofasco Chair oftheBoard Charles H.Hantho Officers ’ s Board ofDirectors Dofasco in1973. position in1993,havingbegunhiscareer at Mr. Lockingtonwasnamedtohiscurrent Vice President –Technology J. NormanLockington named General Counselin2000. Corporate Administration in1997 andwas Mrs. Weppler joinedDofascoasVicePresident Administration andGeneral Counsel Vice President –Corporate Joan M.H.Weppler in 1997. in 1970 andwasnamedtohiscurrent position Mr. SolskijoinedDofasco Executive VicePresident –Finance Bill P. Solski ’ s FinanceDepartment Joan Weppler, BillSolski Dave Borsellino, JohnMayberry, DonPether, lefttoright] [ – le ot omLockington, Allen Root,Norm in 1994. was appointedVicePresident Mr. Borsellino joinedDofascoin1971 and Vice President –Manufacturing David S.Borsellino Comptroller Brian R.Wilson Secretary Urmas Soomet Treasurer Raymond P. d’Andrade the FinanceDepartment. 1997. HejoinedDofascoin1973asamemberof Mr. Rootwasnamedtohiscurrent positionin Vice President –Commercial L. AllenRoot – Manufacturing

63 | Dofasco Inc. Ownership Interests and Products

Subsidiaries

Dofasco USA Inc., Southfield, Michigan 100 % Storage and processing of steel and by-products. Dofasco de Mexico S.A. de C.V., Monterrey, Mexico 100 % Tube mill and steel processing facility. (Under construction) Powerlasers, Kitchener and Concord, Ontario; Pioneer, Ohio 100 % Laser-welded automotive blanks and related components.

Mining and related ventures

Quebec Cartier Mining Company, Fermont and Port Cartier, Quebec 50 % Iron ore pellets and concentrates. Wabush Mines, Wabush, Nfld.; Pointe Noire, Quebec 24.3 % Iron ore pellets.

Joint ventures

Baycoat, Hamilton, Ontario 50 % Prepainted flat rolled steels. DNN Galvanizing Limited Partnership, Windsor, Ontario 50 % Hot dip galvanized flat rolled steels. DoSol Galva Limited Partnership, Hamilton, Ontario 50 % Hot dip galvanized flat rolled steels. Gallatin Steel Company, Gallatin County, Kentucky 50 % Hot rolled steels. Sorevco and Company Limited, Coteau-du-Lac, Quebec 50 % Hot dip galvanized flat rolled steels.

Stock Market Information

Common shares Stock exchange listings

Year High† Low† Shares Traded Common shares 2000 $ 30.60 $ 19.05 64,471,944 Stock Symbol: DFS; CUSIP No. 256900-70-5 Listed: The Toronto Stock Exchange 1999 $ 29.50 $ 17.75 67,927,146 1998 $ 26.65 $ 15.25 63,561,777 Preferred shares 4 3/4% Cumulative Redeemable Preferred Shares, Series A 1997 $ 31.80 $ 20 85,174,286 Stock Symbol: DFS.PR.A; CUSIP No. 256900-30-9 1996 $ 26.55 $ 17 1/8 56,077,341 Listed: The Toronto Stock Exchange † based on board lots traded.

Valuation day prices

December 22, 1971: Common – $25.00 (after giving effect to the 3:1 stock split in 1984, $8.33) 4 3/4% Class A Preferred – $74.00

Closing price on February 22, 1994: Common – $24.125 4 3/4% Class A Preferred – $64.00 | Dofasco Inc. 64 Corporate Information

When contacting Dofasco, Stock transfer agents please direct inquiries to: and registrars

The Corporate Secretary CIBC Mellon Trust Company Dofasco Inc. Toronto, Montreal, Vancouver, Calgary P.O. Box 2460 The Bank of Nova Scotia Trust Company Hamilton, Ontario of New York, New York (Common Shares L8N 3J5 and 4 3/4 % Cumulative Redeemable (905) 544-3761 or Preferred Shares, Series A) 1-800-DOFASCO (363-2726) E-mail address: [email protected] For more information concerning Internet address: www.dofasco.ca share ownership or dividends, please contact our transfer agent: The Annual and Special General Meeting of Shareholders will be held CIBC Mellon Trust Company on Friday, May 4, 2001. The meeting will 320 Bay Street take place at the du Maurier Ltd. Centre, P.O. Box 1 190 King William Street, Hamilton, Toronto, Ontario Ontario, at 12:00 noon. M5H 4A6 Answerline: (416) 643-5500 On pourra se procurer le texte Toll Free Number: 1-800-387-0825 français de ce rapport annuel en E-mail address: [email protected] s’adressant au secrétaire de la Société, Dofasco Inc., P.O. Box 2460, Hamilton, Ontario L8N 3J5.

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