One Enduring Truth... Cover Photo: Neil Mcburney of Dofasco’S Steelmaking Department with His Son, Ryan

DOFASCO INC. ANNUAL REPORT 2001 one enduring truth... Cover photo: Neil McBurney of Dofasco’s Steelmaking department with his son, Ryan. Contents 2 2001 Performance 49 Consolidated Financial Statements 3 2001 Highlights 52 Notes to Consolidated 4 Message to Shareholders Financial Statements 10 Our Strength is People 59 Auditors’ Report 18 Environment and Energy 59 Management’s Responsibility 30 Social Well-being for Financial Reporting 40 Management’s 60 Eleven Year Summary Discussion and Analysis 62 Corporate Governance 63 Directors and Officers 64 Ownership Interests and Stock Market Information ... our strength is people In meeting the many challenges of 2001, it was clear that putting people first keeps Dofasco first. In everything we do, we strive to satisfy the needs and aspirations of people. This philosophy has set Dofasco apart in the past and will be the key to our future growth. PROFILE Dofasco is Canada’s most successful de Mexico, Dofasco’s wholly-owned • operational excellence, which results steel producer, serving customers subsidiary, produces tubular products in maximum operating performance, throughout North America with in Monterrey, Mexico. Powerlasers, reflecting our focus on improving high quality flat rolled and tubular also wholly-owned, manufactures what is important to our customers; steels and laser-welded blanks. laser-welded automotive blanks and • a knowledgeable, resourceful and related components in Concord, dedicated workforce that flourishes Dofasco’s advanced facilities in Ontario and Pioneer, Ohio. in an environment rooted in Hamilton, Ontario, produce hot Dofasco values and that rewards rolled, cold rolled, galvanized, Dofasco’s strategy provides the performance and innovation; and ExtragalTM, GalvalumeTM, tinplate, foundation for sustainable growth • financial strength, which enables chromium-coated and prepainted flat and increased value for all our us to invest and grow with rolled steels, as well as tubular prod- stakeholders by differentiating the our customers. ucts. Gallatin Steel, the company’s company in the marketplace. That joint venture minimill in Kentucky, strategy has four main elements: produces hot rolled steels. Dofasco • Solutions in Steel TM, which builds strong customer relationships by employing new and unique technologies to produce value- added products; Spanning generations: Dofasco retiree Joseph Long (left) with his son Dave, a current Dofasco employee, and granddaughter Shannon, who participated in Dofasco’s summer student employment program. 2001 PERFORMANCE Rigoberto Salazar Ostos is one of 120 new employees at Dofasco de Mexico. Throughout our 2000 annual report, we identified many challenges that Dofasco must address to remain successful. In order to be accountable to our shareholders, the following summarizes our performance in 2001 related to those challenges. setting industry standards achieving goals OBJECTIVES PERFORMANCE Short-term Challenges • Work towards a goal of an accident-free workplace. • Continued to implement health and safety improvement initiatives and maintained focus on improving performance. • Respond to deteriorating market conditions by • Market response plan generated savings of more than $100 million reducing costs and conserving cash. and deferred $30 million in capital expenditures. • Bring Dofasco de Mexico on stream. • Dofasco de Mexico began commercial production in December 2001, ahead of schedule. • Complete ISO 14001 registration of all Dofasco • Registration to the ISO 14001 Environmental Management Hamilton operations by end of 2001. System standard was completed. • Continue to seek fairness in international steel trade. • Filed unfair trade cases in Canada and the U.S. and participating in process to address problem of excess, uneconomic global capacity. Long-term Strategic Initiatives • Capitalize on sustainable financial strength • Dofasco was one of only a few profitable steelmakers in and overall strategy to remain financially strong, North America in 2001. despite occasional industry downturns. • Proceed with strategic investments that will • Completed hot mill, tin mill and GalvalumeTM upgrade programs continue to differentiate Dofasco from competitors. and installed ZyplexTM manufacturing facility. • Lead North American steel industry in • Met or surpassed all legislated environmental performance environmental performance. requirements, as well as voluntary commitments. • In future annual reports, report progress in a way • Integrated approach (financial, environmental, social well-being) to that reflects commitment to sustainability. annual report provides more complete disclosure to all stakeholders. 2 | Dofasco Inc. Dofasco’s Donna Hebb and her dog, Valrhona, volunteer at the St. John Ambulance Therapy Dog program in Hamilton. 2001 HIGHLIGHTS • Named one of the world’s most • Maintained an excellent customer • Maintained our commitment to the sustainable companies by the Dow service record, ranking second well-being of our communities by Jones Sustainability World Index among 27 major North American supporting, through contributions for the third consecutive year. For steel suppliers in an industry- of time, expertise and money, all the second year in a row, named recognized survey on overall facets of the community – economic the leader of the Basic Resources customer satisfaction, addressing development, education, arts and sector of the index. such categories as service, on-time culture, health and athletics. delivery, quality and price. • Earned net income of $26.7 million, the only integrated and one of only • Achieved ISO 14001 registration a few of all North American steel- at Dofasco’s Hamilton operations. makers to earn a profit in 2001. • Continued to implement health and safety programs across the company, maintaining our commitment to an accident-free workplace. 2001 2000 Raw steel production and purchased semi-finished steel processed (thousands of net tons) 4,955 5,009 Steel shipments (thousands of net tons) 4,375 4,416 Sales* $ 2,962.5 $ 3,201.1 Net income* 26.7 188.7 Net income attributable to common shares*† 26.1 188.1 Earnings per common share† – basic 0.35 2.47 – diluted** 0.35 2.46 Dividends declared per common share 1.08 1.06 Capital expenditures* $ 203.9 $ 216.0 Working capital* $ 878.8 $ 842.9 Shareholders’ equity* 1,817.6 1,852.5 * in millions † after preferred dividends ** Restated – see note 2 to the consolidated financial statements 3 | Dofasco Inc. MESSAGE TO SHAREHOLDERS 2001 was a year of extraordinary challenges for the North American steel industry. It was the year we had been preparing for. Dofasco people remained focused and executed our strategies with excellence. Our results reaffirm one enduring truth – Our strength is people. investing in our future setting ourselv It has been said that it takes a and to differentiate Dofasco among United States, and for the first time, lifetime of hard work to become customers. This past year, it differ- in Mexico. We worked with our an overnight success. That’s how we entiated Dofasco within the North suppliers to ensure they remain an felt when observers were surprised American steel industry. active part of our value chain. And by Dofasco’s performance in 2001. we continued to contribute to the We made a profit in 2001. And while social and environmental well- While it was a year of extraordinary our financial results did not meet being of Hamilton and the other challenges for the steel industry, at our ongoing expectations nor the communities where we operate. Dofasco it was an example of what needs of our shareholders, it was an can be accomplished when an entire excellent performance in a year In the end, we relied on one company has a thorough understand- when the steel industry was at its enduring truth – Our strength is ing of what is happening around it, lowest ebb in more than a decade. people – to get us through the year yet remains focused and acts on In fact, Dofasco was the only inte- successfully. It should come as no those things that it can control. grated steelmaker, and one of only surprise that the same people who a few of all North American steel- put Dofasco at the top of the North 2001 was the culmination of makers, to report a profit. American steel industry, kept us several years of change and focus there during a very tough year. And, at Dofasco. It was the year we We continued to improve rela- it is fair to say that we emerged had been preparing for when we tionships with our customers. We from the year smarter and stronger launched our strategy that was continued to invest in our future than when 2001 started. designed to generate profitability and in meeting our customers’ future at all points in the business cycle needs. We continued to offer chal- lenging and rewarding employment to more than 7,800 people at our operations in Canada and the 4 | Dofasco Inc. A Strong Comparative More than two dozen North need for decisive action, our market Performance American steel producers have filed response plan came together in a The facts and statistics tell the for bankruptcy protection in the past matter of weeks. Our employees’ story of our strong comparative three years. Almost all steelmakers experience working in multi- performance in 2001. lost money in 2001. Dofasco disciplined teams and flexibility in recorded a profit. adapting to change, allowed us to Steel demand was soft and prices quickly re-assign people and work to continued to fall from their already The North American steel industry meet the

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