Mittal Steel

MITTAL STEEL COMPANY N.V. AND SUBSIDIARIES

Background for Currency Fluctuations and Foreign Exchange

Mittal Steel's operations span 16 countries across four continents. Its geographic diversity is mirrored by its product diversity.

Currency Fluctuations

Mittal Steel operates and sells products in a number of countries, and as a result, its financial condition and results of operations could be adversely affected by fluctuations in exchange rates. Major changes in rates, particularly changes in the U.S. dollar against the currencies of countries in which Mittal Steel operates, could have adverse effect on its financial condition and results of operations.

The imposition of exchange controls or other similar restrictions on currency convertibility in the countries in which Mittal Steel operates could also adversely affect its financial condition and results of operations.

Net Gain or Loss from Foreign Exchange

Mittal Steel uses the U.S. dollar as its reporting currency. Movements in the exchange rates of the currencies of the countries in which Mittal Steel has operations versus the U.S. dollar have an impact on the earnings of Mittal Steel.

Adjustments for currency exchange rate changes are excluded from net income for those fluctuations that do not impact cash flows and are included for those that do. The requirements reflect these general conclusions:

* The economic effects of an exchange rate change on an operation that is relatively self-contained and integrated within a foreign country relate to the net investment in that operation. Translation adjustments that arise from consolidating that foreign operation do not impact cash flows and are not included in net income.

* The economic effects of an exchange rate change on a foreign operation that is an extension of the parent's domestic operations relate to individual assets and liabilities and impact the parent's cash flows directly. Accordingly, the exchange gains and losses in such an operation are included in net income.

For Mittal Steel, such exchange rate movements affect both revenues and costs.

Net gain from foreign exchange for the year ended December 31, 2005, was $40 million as compared with an exchange loss of $20 million for the year ended December 31, 2004.

Foreign Currency translation and translation of financial statements

An entity's functional currency is the currency of the primary economic environment in which that entity operates. The functional currency can be the dollar or a foreign currency depending on the facts. Normally, it will be the currency of the economic environment in which cash is generated and expended by the entity. An entity can be any form of operation, including a subsidiary, division, branch, or joint venture.

The functional currency of each of the operating subsidiaries is the U.S. Dollar, except for Mittal Canada, Mittal Steel Ostrava, Mittal Steel