As filed with the Securities and Exchange Commission on March 22, 2004

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the financial year ended: January 3, 2004
Commission file number: 1-10120

CORUS GROUP plc

(Exact name of Registrant as Specified in its Charter)

England and Wales
(Jurisdiction of Incorporation or Organisation)

30 Millbank, London SW1P 4WY, England
(Address of Principal Executive Offices)

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None

SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION
PURSUANT TO SECTION 15(d) OF THE ACT:

None

4,434,759,050 Ordinary shares of 10p each

Yes    X               No

Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17              Item 18   X

* Not for trading, but only in connection with the registration of American Depositary Shares.

TABLE OF CONTENTS 

Page

Definitions

iii

Presentation of Information

v

Certain Forward Looking Statements

v

PART I

Item 1

Identity of Directors, Senior Management and Advisers

1

Item 2

Offer Statistics and Expected Timetable

1

Item 3

Key Information

1

    Selected financial data

1

    Exchange rates

1

    Risk factors

1

Item 4

Information on the Company

7

    Introduction

7

    History and development of the company

8

    Avesta Sheffield AB and AvestaPolarit Oyj Abp

8

    Aluminium businesses

9

    Restoring Success

9

    Bank facility

11

    Placing and open offer

11

    Capital expenditure

11

    Business overview

12

    Organisational structure

25

    Property, plants and equipment

26

    The environment

27

    Insurance

28

Item 5

Operating and Financial Review and Prospects

28

    Critical accounting policies

28

    Operating results

28

    Liquidity and capital resources

28

    Research and development, patents and licenses, etc

29

    Trend information

29

    Off balance sheet arrangements

29

    Aggregate contractual arrangements

30

Item 6

Directors, Senior Management and Employees

30

    Directors and senior management

30

    Compensation

30

    Board practices

30

    The organisation of the Group

31

    Employees

32

    Share ownership

32

Item 7

Major Shareholders and Related Party Transactions

32

    Major shareholders

32

    Related party transactions

33

Item 8

Financial Information

33

    Consolidated statements and other financial information

33

    Significant changes

36

Item 9

The Offer and Listing

36

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Item 10

Additional Information

37

    Memorandum and articles of association

37

    Material contracts

39

    Exchange controls

40

    Taxation of US Holders

41

    Documents on display

46

Item 11

Quantitative and Qualitative Disclosures About Market Risk

46

Item 12

Description of Securities Other than Equity Securities

47

PART II

Item 13

Defaults, Dividend Arrearages and Delinquencies

47

Item 14

Material Modifications to the Rights of Security Holders and Use of Proceeds

47

Item 15

Controls and Procedures

47

    Disclosure controls and procedures

47

    Internal control over financial reporting

47

Item 16A

Audit committee financial expert

47

Item 16B

Code of ethics

47

Item 16C

Accountants' fees and services

47

Item 16D

Exemptions from the listing standards for audit

48

PART III

Item 17

Financial Statements

48

Item 18

Financial Statements

49

Item 19

Exhibits

50

SIGNATURES

51

EXHIBIT INDEX

52

CERTIFICATIONS

53

ii    Form 20–F 2003

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The following terms have the meanings set out alongside unless the context indicates otherwise:

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iv    Form 20–F 2003

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  PRESENTATION OF INFORMATION

     Corus is the successor registrant to British Steel.

     Certain of the responses to the requirements of Form 20-F are incorporated by reference to the Corus Report on Form 6-K dated March 22, 2004, which contains the Report & Accounts 2003, and is attached as an exhibit to the Form 20-F.

     Corus has prepared its consolidated financial statements in accordance with accounting principles generally accepted in the United Kingdom (“UK GAAP”), which differ in certain significant respects from accounting principles generally accepted in the United States (“US GAAP”). The principal differences between UK GAAP and US GAAP are summarised in Note 37 ‘Supplementary information for North American investors’ on pages 107 to 112 in the Report & Accounts 2003 incorporated herein by reference.

     Prior to the merger between British Steel and KH, British Steel prepared its financial statements on the basis of a financial year consisting of the 52 week or 53 week period ending on the Saturday closest to March 31 of each year. A change of year end from March to September was introduced as a preparatory step to the merger and in connection with this change British Steel produced accounts for the six month period from April 4, 1999 to October 2, 1999. Following the merger, Corus further changed its year end to the Saturday closest to December 31 of each year. Unless otherwise indicated, financial and operating statistics are stated on the basis of such financial years. References to 1998 are to the relevant calendar year. References to 1999 are to the six month period from April 4, 1999 to October 2, 1999 and references to 1999/2000 are to the fifteen month period to December 30, 2000 unless otherwise indicated. References to 2001, 2002 and 2003 are to the financial years ended December 29, 2001, December 28, 2002 and January 3, 2004 respectively or the calendar year as the context requires.

  CERTAIN FORWARD LOOKING STATEMENTS

     The Form 20-F includes or incorporates by reference “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain statements in the Form 20-F and in the pages incorporated by reference from ‘Review of the period’ and ‘Financial review’ of the Report & Accounts 2003 under Item 5 ‘Operating and Financial Review and Prospects’ including, without limitation, those concerning (i) the economic outlook for steel and aluminium demand for calendar year 2004, (ii) expectations regarding steel and aluminium prices and (iii) the liquidity and capital resources of Corus, contain certain forward looking statements regarding the steel and aluminium industries and the operations, economic performance and financial condition of Corus. Item 11 ‘Quantitative and Qualitative Disclosures About Market Risk’ with regard to risk management, foreign exchange risk, commodity risk and interest rate risk are also forward looking in their nature. Although Corus believes that the expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward looking statements. Factors that could cause such differences include, but are not limited to, (i) the economic climate in the UK and mainland Europe, (ii) the value of the pound sterling particularly in relation to the euro, the value of the pound sterling and the euro in relation to the US dollar, and changes in the global market for steel and aluminium, (iii) market developments, (iv) the availability and effective management of employees, supplies (including raw materials) and technology, (v) changes in environmental and other regulatory requirements and (vi) business risk management.

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 PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not applicable.

ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3.  KEY INFORMATION

  Selected financial data
     Certain of the information required by this Item is incorporated herein by reference from page 113 ‘Five year financial summary’ of the Report & Accounts 2003, contained in the Corus Report on Form 6-K dated March 22, 2004. A reconciliation of the financial figures stated under UK GAAP to those restated under US GAAP is presented in Note 37 on pages 107 to 112 of the Report & Accounts 2003 and is incorporated herein by reference.

 Exchange rates
     The consolidated financial statements of Corus incorporated herein by reference from the Report & Accounts 2003 are presented in pounds sterling. In this document, references to ‘US$’, ‘US dollars’ or ‘$’ are to United States dollars, references to ‘pounds sterling’, ‘sterling’, ‘£’, ‘pence’ or ‘p’ are to UK currency and references to ‘euro’ or ‘EUR’ are to the single currency of the member states of the EU that have adopted such currency in accordance with legislation relating to European Economic and Monetary Union. On March 16, 2004 the noon buying rate in New York City for cable transfers in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) was $1.8105 to £1.00.

     The following table sets forth, for periods and dates indicated, certain information concerning the Noon Buying Rate, expressed in US dollars per £1.00:

High

 Risk factors
     Corus is subject to various changing competitive and economic conditions that affect the market for steel and aluminium. The following is a description of factors that may affect Corus’ business, results of operations and share price:

Risks relating to the Group’s business
Corus has incurred and may continue to incur operating losses.
     For the year ended January 3, 2004, Corus had an operating loss of £208 million. While the Group has  

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made progress in reducing its losses through initiatives taken in recent years to reduce capacity and improve competitiveness, the Group’s losses continue to emanate principally from the UK. This is largely related to the progressive decline in UK manufacturing, the increased penetration of steel imports, and the impact of exchange rates on the Group’s operating results, which have offset the benefits of these measures. Furthermore, Corus is subject to the effects of weaknesses in the global business environment and financial markets. As part of Corus’ “Restoring Success” initiatives (see pages 9 to 11 under Item 4), Corus has launched a series of measures to improve performance across all its businesses to close the performance gap between Corus and its European competitors. There can be no assurance that Corus’ efforts will be successful and that Corus will realise positive operating income or cash flows from operations in the future. In addition, in connection with the UK restructuring and other planned initiatives, Corus’ capital expenditure in future years will be significantly higher than in previous years.

Corus’ “Restoring Success” initiatives may not achieve their goals and may cost more than anticipated, which could have a material adverse effect on Corus’ financial condition.
     In response to the declining steel demand from Corus’ UK customer base, resulting from the long-term erosion of the UK manufacturing industry, and coupled with the lack of competitiveness in export markets, related in part to the strength of sterling in 2001, Corus initiated a restructuring programme in 2001. In April 2003 Corus’ Board announced additional restructuring programmes to concentrate its steelmaking in the UK at three sites. The main objectives of the restructuring are to size the business to the available market while eradicating losses and creating an internationally competitive cost base for Corus UK operations. The details of the Restoring Success initiatives and their objectives are provided on pages 9 to 11 under Item 4. There can be no assurance that the total capital expenditure and restructuring costs will not exceed present expectations. Additionally, Corus’ restructuring plans are subject to operational risks, and benefits of the plan will depend in part on the strength of sterling against the euro. Thus, there can be no guarantee that Corus’ restructuring plans will achieve their intended goals.

     Whilst Corus believes the Restoring Success initiatives are necessary in order to combat the Group’s operating losses and to improve the Group’s financial performance, these significant changes are subject to risks and uncertainties and the scope of change currently envisioned by Corus may prove difficult to realise. In addition, management has made several key assumptions in relation to its Restoring Success programme, including specific assumptions tied to each aspect of the initiatives and general assumptions relating to exchange rates and market prices for steel and raw materials. Corus has also assumed that it will be able to dedicate significant management resources from both senior management and at business units, whilst mitigating disruption to existing plant performance as this programme continues. If these assumptions are not realised, Corus may be unable to achieve the benefits of its Restoring Success initiatives.

Corus’ operating results are strongly affected by movements in exchange rates, particularly between sterling and the euro and between sterling and the US dollar.
     Corus derives most of its turnover and incurs most of its costs in the EU. Within the EU, Corus has substantial assets and sales in the UK, which is not a member of the eurozone. Whereas the majority of the costs of Corus in the UK are not affected by the sterling to euro exchange rate, steel prices in Europe, including the UK, in the medium and long term are largely set in euros. Therefore, fluctuations in the sterling to euro exchange rate impact heavily on Corus’ revenue in the UK. In 2003, £6.3 billion or 79% of the Group’s total turnover was derived from Europe, the most important market for the Group. Turnover in other export markets and Corus’ major supplies purchases, including iron ore and coal, are mainly denominated in US dollars. Corus’ aluminium sales, which are based on London Metal Exchange (LME) prices, are also quoted in US dollars. As a result, Corus’ revenues are also impacted by fluctuations in the US dollar to sterling and the euro. Exchange rate volatility affects the Group’s results from operations in a number of ways. It impacts the Group’s revenues from export markets, affects the strength of Corus’ competitors and their ability to penetrate the UK steel market, and exposes Corus’ UK customers to similar pressures, which may result in a reduction in demand for steel in the UK. 

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Certain business decisions concerning Corus’ business require approval by the Corus Nederland Supervisory Board, a body whose composition is outside the control of Corus, and that has previously withheld its approval of a key strategy decision of Corus Group.
     Corus Nederland is subject to the mitigated structure regime under the provisions of the Dutch Civil Code. Under this regime, Corus Nederland is required to have a Supervisory Board which plays a significant role in the governance of Corus Nederland. Although Corus indirectly owns all the issued shares in Corus Nederland, it cannot appoint or dismiss members of the Supervisory Board, as they are appointed and dismissed by the Supervisory Board itself. Corus is able to appoint and dismiss the members of the Management Board of Corus Nederland, which runs its day to day affairs. The Supervisory Board owes duties to constituencies beyond Corus Group plc and its shareholders, which includes employees, bondholders and trade creditors of Corus Nederland and its subsidiaries.

     Under mandatory Dutch law, a number of important decisions taken by the Management Board are subject to the approval of the Supervisory Board. In March 2003, the Corus Nederland Supervisory Board withheld its approval from the proposed sale of the Group’s aluminium rolled products and extrusions operations to Pechiney.

     If Corus is not able to obtain the approval of the Supervisory Board for the decisions affecting the businesses held by Corus Nederland or the co-operation of the Supervisory Board on other matters, this could preclude Corus Group from realising its strategy, developing its business, realising the payment of dividends and the making of intra-group loans by Corus Nederland and utilising cash resources for the benefit of the Corus Group.

Corus has a substantial amount of indebtedness and other obligations, which could limit its operating flexibility and otherwise adversely affect its financial condition.
     As of January 3, 2004, Corus had total borrowings of £1,393 million. Corus may incur other obligations for the refinancing of a portion of this indebtedness or for other purposes. This indebtedness and related covenants could limit Corus’ operating flexibility and could otherwise adversely affect its financial condition.

• it may become difficult for Corus to obtain additional financing for working capital, capital expenditure, debt service requirements, acquisitions or general corporate or other purposes in the future;

• a substantial portion of Corus’ cash flow from operations must be dedicated to the payment of principal and interest on its indebtedness, thereby reducing the funds available to Corus for other purposes;

• it may limit, along with the financial and other restrictive covenants applicable to Corus debt, its ability to borrow additional funds even when necessary to maintain adequate liquidity;

• some of Corus’ borrowings are and are expected to be at variable rates of interest (including borrowings under its main banking facility), which will expose Corus to the risk of increased interest rates;

• Corus’ flexibility to adjust to changing economic or market conditions may be constrained and its ability to withstand competitive pressures may be reduced, making Corus more vulnerable to a downturn in general economic conditions; and

• it may place Corus at a competitive disadvantage compared to its competitors, if they have lower levels of debt and, as a consequence, have greater operating and financial flexibility than Corus.

     Corus’ interest costs for its indebtedness are linked to its credit rating. Should Corus’ credit rating be further downgraded, Corus’ interest costs may increase. Additionally, such an event may make it more difficult for Corus to obtain additional financing. The addition of further debt to its current levels could exacerbate the leverage-related risks described above.

     Moreover, Corus’ main bank facility has a final maturity date of June 30, 2006. A significant portion of Corus’ outstanding indebtedness, including its convertible bonds, will reach maturity between 2006 and 2008, which may have a significant effect on Corus’ financial position and results of operations. 

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     If Corus’ cash flow and capital resources are insufficient to fund its debt service requirements and its other obligations, Corus may be forced to reduce or delay scheduled expansion and capital expenditure (particularly with regard to the Restoring Success initiatives), sell material assets or operations, obtain additional capital or restructure or refinance all or a portion of its debt.

Corus ability to comply with the covenants under its senior credit facility will depend on achieving planned financial results.
On July 31, 2003, Corus entered into a secured senior credit facility with an initial principal amount of €1.2 billion. Under this facility, Corus must comply with certain financial covenants. Several of these required measures become more stringent over time. Corus is in compliance with these covenants and expects to remain in compliance. However, compliance with these covenants can be adversely affected if Corus is unable to achieve its planned financial results which, in turn, can be affected by unforeseen events, and by events and circumstances outside of Corus’ control. Corus’ sensitivity to these covenants will diminish as the results of its Restoring Success initiatives begin to take effect. In the event that Corus breaches one of these covenants and is unable to obtain a waiver from the lenders, it will be in default under the main banking facility and, consequently, other indebtedness. Upon a default, the lenders could elect to declare all amounts borrowed under the facility, together with accrued interest, due and payable and/or enforce on the collateral securing the facility.

Corus’ operations may be adversely affected by business interruptions and property damage.
     Corus’ operations may be adversely affected by abnormal unplanned events such as explosions, fires and other industrial accidents, transportation interruptions and inclement weather. On November 8, 2001, an explosion occurred at no. 5 blast furnace at Port Talbot works. Corus’ operating costs for 2002 were affected by the consequences of the explosion and included the cost of buying-in slab, the additional costs of processing bought-in rather than manufactured slab, and the additional costs of increasing throughput at the remaining furnace at Port Talbot. In addition, Corus is liable for the civil claims and other proceedings resulting from the incident. The rebuild and the consequential losses associated with the furnace being out of operation have been largely recovered from insurers. On September 29, 2003, a fire at Scunthorpe works ceased steelmaking there temporarily. The cost of the damage resulting from the fire and other related operating costs and lost contribution, which were not covered by third party insurance, was approximately £20 million.

     As part of its risk management, Corus maintains insurance cover through a combination of self funding and policies purchased from third party insurers. To the extent one or more events occur that are not covered by insurance, Corus’ operating results and cash flows may be materially adversely affected.

Corus’ future pension expenses, based on actuarial assumptions, may prove more costly than currently anticipated and the market value of Corus’ pension assets could decline.
     Corus provides retirement benefits for substantially all of its employees under several benefit and contribution plans. Corus contributes to the defined benefit plans the amount that is required by governing legislation in the countries in which it operates. Pension contributions are calculated by independent actuaries. The actuarial assumptions used may differ from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may impact Corus’ recorded net pension expense and liability, as well as future funding requirements. As at January 3, 2004, under FRS 17, the market value of Corus’ pension assets was £11.3 billion and its pension liabilities were assessed at £11.2 billion. If there is a significant adverse change in the market value of Corus’ pension assets, Corus may need to increase its pension contributions, which could have an adverse impact on Corus’ financial results.

Risks relating to the steel and aluminium industries
Corus’ results of operations could be adversely affected by the cyclical nature of the steel industry and the industries Corus serves.
     The steel and aluminium industries are highly cyclical, sensitive to general economic conditions and dependent on the condition of certain other industries. Corus’ steel business supports cyclical industries 

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such as the automotive, appliance, construction, packaging and energy industries. As a result, the prices of steel and steel products may fluctuate significantly due to many factors beyond Corus’ control. The demand for steel products is generally affected by macroeconomic fluctuations in Europe and the global markets in which steel companies sell their products. Aluminium end use markets, including the transport (especially automotive and aerospace), construction and packaging sectors, are also cyclical. When downturns occur in these sectors, Corus may experience decreased demand for its products, which may have a material adverse effect on its financial results.

     The volatility and the length and nature of business cycles affecting the steel industry have become increasingly unpredictable, and the recurrence of another major downturn in the industry before the cycle recovers adequately and long enough to allow Corus’ financial condition to improve may have a material adverse impact on Corus.

A change in the demand for steel in China could have a significant impact on the global steel market.
     China is presently increasing steel producing capacity by millions of tonnes every year and importing large volumes of finished steel and raw materials. China’s imports of raw materials are driving up prices globally, particularly for iron ore and scrap. In addition, Chinese demand for freight to import raw materials and export finished products is increasing ocean freight rates to unprecedented levels. Corus has already experienced the impact of higher raw material prices and freight costs, which may further increase. Although China’s demand for steel may continue to grow in the near future, this growth may subside, as the Chinese supply of steel is brought into balance with the demand. A reduction in demand for steel in China may result in reduced raw material prices and freight cost for Corus. However, also as a result, countries presently exporting large volumes to China will be searching for alternative markets. Imports from these other countries could impact the markets that Corus sells into, resulting in Corus losing sales volume, or having to reduce steel prices, which may have a material adverse impact on Corus.

Corus’ profitability may be affected by changes in the cost and availability of raw materials and freight. Corus may not be able to recover increased raw material costs in higher selling prices.
     The prices of many of the raw materials Corus uses depend on supply and demand relationships at a worldwide level, and are therefore subject to fluctuation. The principal raw materials used by Corus are iron ore and coal, purchased on international markets, and scrap.

     Corus enters into long term supply contracts with certain of its raw material vendors. These contracts, however, do not assist in protecting Corus against significant price increases as prices for these contracts are determined on an annual basis. There is a potential time lag between changes in prices under Corus’ purchase contracts and the point when Corus can implement a corresponding change under its sales contracts with its customers.

     Prices for the raw materials that Corus requires may continue to increase and, if they do, Corus may not be able to pass on the entire cost of the increases to its customers or to offset fully the effects of higher raw material costs through productivity improvements, which may cause its profitability to decline. When demand for raw materials is strong, the terms of the purchase contracts may be disadvantageous to Corus. Thus, shortages of, or price increases for, supplies could have a material adverse effect on Corus’ ability to sell certain of its products in a cost-effective manner.

Corus’ business is greatly affected by price volatility, which is largely the result of high fixed costs characteristic of the steel industry.
     The production of steel is capital intensive, with a high proportion of fixed to total costs. Consequently, steel producers seek to maintain high capacity utilisation. If capacity exceeds demand, there is a tendency for prices to fall sharply as supply is largely maintained. Conversely, expansion of capacity requires long lead times so that, if demand grows strongly, prices increase rapidly, as unutilised capacity cannot be brought on line as quickly. The result is substantial price volatility. While Corus has taken steps to reduce operating costs, including reducing steel production capacity, Corus may continue to be affected by significant price volatility and incur operating losses as a result.  

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Strong competition may continue to exert downward pressure on Corus pricing.
     Corus experiences intense competition within the steel and aluminium industries at both a regional and global level. International trade is a substantial component of its business with the result that changes in market conditions in one region are rapidly transmitted to other regions. The competitive arena encompasses quality, customer service, delivery performance, product development and price. Although as a technologically advanced materials producer, Corus attempts to differentiate its products by emphasising non-price competitive advantages, Corus is still subject to the effect of strong price competition from commodity producers (see section ‘Competition - steel’ on page 20 under Item 4).

High energy costs adversely impact Corus’ results of operations.
     Both steel and aluminium production processes are energy intensive. Corus’ operations consume large amounts of energy, in particular natural gas and electricity. A significant increase in energy prices could have an adverse impact on Corus’ financial results. In addition, Corus’ aluminium smelters generally require an uninterrupted supply of intense electrical energy, and any significant interruption may have a technical, commercial and financial impact on the facility concerned.

     The UK, Dutch and German governments have imposed general energy taxes on industry. Corus has endeavoured to minimise the cost impact of these taxes through a series of negotiated agreements. From April 2001, the UK Government has imposed a tax on the business use of energy. A negotiated agreement was signed with the UK Government to allow Corus to take an 80% reduction in the amount of such tax up to the end of 2002. As Corus has met certain energy efficiency targets in 2002, it will receive the 80% reduction for the 2003 and 2004 periods. In order to receive this reduction for 2005 and 2006, Corus will have to meet the energy efficient targets for 2004. The reduction is worth approximately £28 million per annum. In the event Corus fails to meet agreed energy efficiency targets, costs in the form of increased taxation could be significant.

Health, safety and environmental matters, including compliance with environmental laws and remediation of contamination, could result in substantially increased capital requirements and operating costs.
     Corus’ businesses are subject to numerous laws and regulations relating to health, safety and the environment in the countries in which Corus operates. These laws and regulations concern air emissions, wastewater discharges, solid and hazardous waste material handling and disposal, worker health and safety, and the investigation and remediation of contamination. The risks of substantial costs and liabilities related to these laws and regulations are an inherent part of the Group’s business, and future conditions and contamination may develop, arise or be discovered that create substantial environmental compliance or remediation liabilities and costs. Although Corus believes that its operations are in substantial compliance with currently applicable environmental, health and safety regulations, violations of such laws or regulations can lead to fines and penalties. In addition, risks of substantial costs and liabilities, including for the investigation and remediation of past or present contamination, at facilities currently or formerly owned or operated by Corus, or at which wastes have been disposed, are inherent in Corus’ operations, and there can be no assurance that substantial costs and liabilities will not be incurred in the future.

     Other developments, such as increased requirements of environmental, health and safety laws and regulations, increasingly strict enforcement thereof by governmental authorities, and claims for damages to property or injury to persons resulting from the environmental, health or safety impacts of Corus’ operations or past contamination, could prevent or restrict some of Corus’ operations, require the expenditure of significant funds to bring Corus into compliance, involve the imposition of clean up requirements and give rise to civil or criminal liability. There can be no assurance that any such legislation, regulation, enforcement or private claim will not have a material adverse effect on Corus’ business, financial condition or results of operations.

     Corus is currently addressing contamination at its closed facilities, and may be required to initiate environmental investigation and remediation projects at both former and current operating locations. In addition to potential clean up liability, Corus may become subject to monetary fines and penalties for violation of applicable laws, regulations or administrative orders.

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Corus may be subject to liability related to the use of hazardous substances in production.
     Corus uses a variety of hazardous materials, gases and chemicals in its manufacturing activities. The management, use and disposal of these substances are regulated by laws and regulations that have not, to date, resulted in material costs to Corus. There can be no assurance that more onerous laws will not be adopted in the future, resulting in material costs or liabilities to Corus. In the event that any of these substances, proves to be toxic or accidents involving these substances occur, Corus may be liable for increased costs for health-related claims or removal or treatment of such substances.

Actions taken by governments of other major steel importing countries can result in disruption to Corus’ business and affect steel prices globally as trade flows adjust.
     The large trade flows and, in particular, large swings in trade, which can result from changing market conditions, can lead to trade remedy actions to protect domestic industries. Exports by Corus to the United States were recently subject to such trade remedies, including “Safeguard” measures imposed by the US under Section 201 of the US Trade Act of 1974 on imports of a number of steel products such as flat rolled steel, plates, and wire rod. Although these “Safeguard” measures have been removed, there can be no assurance, that future similar trade remedy measures instituted by the US or other governments will not have a significant impact on Corus’ export sales in the future or that Corus will be able to mitigate the impact of such measures.

ITEM 4.   INFORMATION ON THE COMPANY

  Introduction
     Corus was formed in October 1999 by the merger of British Steel and KH. Corus produced 19 million tonnes of crude steel in 2003 and estimates that on the date hereof it is the seventh largest steel producer in the world. Its European steelworks accounted for approximately 11% of the EU’s steel production in 2003. The majority of Corus steel is rolled in its own mills although it supplies semi-finished steel products to other steelmakers for rolling into finished products. Europe, principally the EU including the UK, is the most important market for Corus, accounting for 80% of total carbon steel turnover in 2003, with North America accounting for 9% and other areas for 11%.

     The aluminium businesses of Corus manufacture and supply primary products, rolled products and extrusions. Corus was, in 2003, the fifth largest producer of rolled aluminium products in the world and the fifth largest producer of rolled and extruded aluminium products combined. Europe, principally the EU including the UK, is the most important market for Corus, accounting for 75% of total aluminium turnover in 2003, with North America accounting for 17% and other areas for 8%.

     Corus produces carbon steel by the basic oxygen steelmaking method at three integrated steelworks in the UK located at Port Talbot, Scunthorpe and Teesside and at one in the Netherlands at IJmuiden. Engineering steels are produced using the electric arc furnace method, currently in two other UK steelworks (Rotherham and Stocksbridge). Carbon steel is also produced by the electric arc furnace method at Tuscaloosa in the United States. Capacity and output figures of these steelworks for the twelve month period from January 2003 to December 2003 are set out on page 26 ‘Property, plants and equipment’.

     The steelworks of Corus supply steel not only to external customers but also to other Corus operating sites. A number of the Corus rolling mills and process lines are located on the same sites as the steelworks, but the substantial majority of operating sites do not have steelmaking facilities. These include the sites set out on page 27 ‘Property, plants and equipment’.

     Corus produces primary aluminium in two smelters located in Delfzijl in the Netherlands and Voerde in Germany. Following the disposal of the Group’s interest in Aluminerie Alouette in 2002, this primary aluminium represents approximately 40% of the metal needs of the rolling mills and extrusion works of Corus. The European rolling mills are located at Koblenz in Germany and Duffel in Belgium. In Canada a 60% owned mill is located in Cap-de-la-Madeleine. Corus has extrusion operations at three locations in Germany, one in Belgium and one in China (61% owned).

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     In the EU, Corus has an extensive network of sales offices, processing and service centre locations for the distribution and, in some cases, the further processing of its products. Outside the EU, Corus has sales offices in over twenty countries which are supported by a worldwide trading network and a number of processing and service centres. This network is supported by agency agreements and joint venture or associate arrangements in a number of markets.

  History and development of the Company
     Since 1945, the UK steel industry has undergone fundamental changes of structure and ownership. It was nationalised in 1949, substantially denationalised from 1953 onwards and then largely renationalised in 1967, when BSC was formed from 14 of the major UK steel producing companies. On December 5, 1988, HM Government disposed of substantially all of the equity of British Steel in an offering made in the UK, the United States, Canada, Europe and Japan. British Steel’s Ordinary shares were traded on the London Stock Exchange and, in the form of American Depositary Shares (“ADSs”), evidenced by American Depositary Receipts (“ADRs”), on the New York Stock Exchange up to and including October 5, 1999.

     On October 6, 1999, British Steel merged with KH to form a new group whose parent company is Corus Group plc. On that date British Steel became a wholly-owned subsidiary of Corus Group plc. On October 8, 1999, British Steel was re-registered as a private company.

     The merger was implemented by the acquisition of British Steel by Corus Group plc, the new UK holding company, pursuant to a Scheme of Arrangement of British Steel under section 425 of the Companies Act 1985 and a public offer by Corus for the Hoogovens Ordinary shares.

     Under the terms of the merger, on October 6, 1999, British Steel shareholders received one Ordinary share in Corus in exchange for each British Steel Ordinary share held and either 35 pence in cash or 35 pence in nominal amount of Corus Floating Rate Unsecured Loan Notes 2006 (“Loan Notes”) per existing British Steel share (approximately £694 million in total). Holders of British Steel ADSs received Corus ADSs representing ten Ordinary shares in Corus and $5.8205 cash for each ADS held. Hoogovens ordinary shareholders received 29.18 Corus Ordinary shares in exchange for each Hoogovens Ordinary share. Upon completion of the merger, the former British Steel shareholders held approximately 65% and the former Hoogovens ordinary shareholders held approximately 35% of the issued Ordinary share capital of Corus. Hoogovens Convertible Bonds, which were convertible into Hoogovens Ordinary shares, became exchangeable for Corus Ordinary shares upon completion of the merger.

     Corus was incorporated in the name of BSKH plc in England and Wales on July 16, 1999 and was established for the purpose of the merger. The name was subsequently changed to Corus Group plc on September 28, 1999, prior to the merger. The corporate headquarters are in London. The address and telephone number of Corus and its agent in the USA are shown on page 118 of the Report & Accounts 2003, contained in the Corus Report on Form 6-K dated March 22, 2004, which is incorporated herein by reference and attached as an exhibit hereto.

     From October 6, 1999, Corus Ordinary shares were traded on the London Stock Exchange. They were also traded, in the form of ADSs, evidenced by ADRs, on the New York Stock Exchange.

     In connection with a placing and open offer on November 12, 2003, the existing Ordinary shares of Corus Group plc were subdivided and converted from one existing Ordinary share of 50p into one Ordinary share of 10p and one Deferred share of 40p. For more information see Item 4, ‘Placing and open offer’ on page 11.

     Prior to October 2003, Corus Group consisted of 20 main business units, focused on specific markets, products and processes. From October 2003, these business units have been structured into four main divisions and a speciality portfolio: Strip Products, Long Products, Aluminium, Distribution and Building Systems, and Speciality Portfolio. The Group will report on this basis from 2004.

 Avesta Sheffield AB and AvestaPolarit Oyj Abp
     In September 2000, a proposed merger between Outokumpu Steel Oyj and Avesta Sheffield was announced. This merger was completed on January 22, 2001, creating AvestaPolarit Oyj Abp, one of the

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world’s largest stainless steel producers. Until July 1, 2002, Corus had a 23% holding in AvestaPolarit Oyj Abp. Corus had a holding in Avesta Sheffield prior to the merger of 51%.

On July 1, 2002, Corus announced the sale of its stake in AvestaPolarit Oyj Abp to Outokumpu Oyj for

€6.55 per share in cash, plus €25 million in cash as consideration for the termination of the shareholders’ agreement between Corus and Outokumpu Oyj entered into in connection with the formation of AvestaPolarit Ojy Abp in January 2001. The total proceeds amounted to approximately €555 million (approximately £356 million).

 Aluminium businesses
     In March 2002 Corus announced that, following a reappraisal of its position in the global aluminium industry, it was to offer its aluminium businesses for sale. On August 16, 2002 Corus announced that it had agreed to sell a 20% interest it had in the Aluminerie Alouette smelter in Canada to Alcan for US$165 million (approximately £107 million) in cash, with a consideration for working capital on completion. This sale took place in September 2002.

     On October 23, 2002 Corus announced that it had agreed in principle to the sale of its aluminium rolled products and extrusions businesses to Pechiney S.A. for €861 million (approximately £543 million). It was intended that a definitive sale and purchase agreement would be entered into following completion of internal consultation, advice and approval processes. However, the Supervisory Board of Corus Nederland BV decided on March 10, 2003 to reject the recommendation to proceed with the sale. On March 11, 2003 Corus Group plc announced it would commence proceedings before the Enterprise Chamber of the Amsterdam Court of Appeal to seek redress in respect of this decision. However, this request was unsuccessful and, as no appeal procedure was available to resolve the issue in time for the sale to proceed, Corus accepted the Court’s decision as final. Pechiney was informed that Corus would not now proceed with the sale and, as a result, a break fee of €20 million was paid to Pechiney in 2003. The exclusivity period granted to Pechiney under the commitment agreement has now come to an end.

     On February 5, 2004 Corus announced it was entering the early stages of a process to actively consider the options for its aluminium businesses, which may lead to discussions with third parties.

 Restoring Success
     Following his appointment as Chief Executive of Corus with effect from May 1, 2003, Philippe Varin carried out an intensive and detailed review of the Group’s activities. As a result a number of key initiatives were launched, known as the “Restoring Success” initiatives, focusing on introducing new leadership and instilling a new corporate culture across the Group, aligning the financial resources available to the Group with its future strategic needs, and returning all parts of the Group to acceptable levels of profitability, by building on existing cost reduction programmes, implementing restructuring proposals for the UK asset base and initiating further Group-wide efficiency measures, described below.

     The Group’s aim is to close the competitive gap that currently exists between Corus and its European peer group. Corus estimates that this gap in 2003 was some 6% at the EBITDA margin level (i.e. EBITDA to turnover) when measured against the average of its European competitors. Full implementation of the Restoring Success initiatives described below is designed to close the current competitive gap by the end of 2006.

Existing ongoing initiatives
     A number of cost reduction and efficiency programmes are still ongoing, the benefits of which are planned to
     be realised over the next few years. These include:

• the final stages of previously announced headcount reduction programmes.

• the ‘World Class IJmuiden’ programme, aimed at achieving significant performance improvement across the Dutch flat carbon steel business through increased output and productivity improvements, as well as improved sales mix.

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• the ‘High Performance Strip UK’ programme, aimed at achieving significant performance improvement in the UK flat products business through improved purchasing, lower manufacturing costs, and improved customer service and delivery performance.

UK restructuring
     In April 2003 Corus outlined the results of a review of the Group’s UK asset base, recognising the need to reverse the significant losses that had been incurred as a result of the progressive decline of UK manufacturing, high sterling exchange rates and increased market penetration from steel imports. The main objectives of the review were to size the business to the available market whilst eradicating the losses and creating an internationally competitive cost base for the UK businesses, which would be cash positive even at the bottom of the cycle. The key finding was that steelmaking in the UK should be concentrated on three sites that should be developed to meet their continuing requirements of providing feedstock for the Group’s UK mills and downstream businesses. Steelmaking for strip products should be concentrated at Port Talbot in South Wales, steelmaking for long products at Scunthorpe in North Lincolnshire and steelmaking for engineering steels at Rotherham in South Yorkshire.

     Once UK restructuring has been completed, Teesside steelmaking capacity will be surplus to the Group’s internal requirements and therefore, to avoid closure, the potential for refocusing the site as a cash generative slab exporter is being assessed. Options including joint ventures and equity partnerships are currently being explored.

     With steelmaking for strip products in the UK concentrated at Port Talbot, the mills and coating line at Llanwern will be supplied from there.

     With steel production and primary rolling for engineering steels concentrated at Rotherham, the closure of steelmaking and hot rolling at Stocksbridge in South Yorkshire should take place in 2005. The aerospace steels and all finishing of engineering billets/rounds will remain at the Stocksbridge site. At Rotherham, the Thrybergh bar mill will be enhanced to roll coiled bar and the Roundwood coiled bar mill will be closed. The finishing facilities at Tipton in the West Midlands will also be relocated to Rotherham.

     In the light of the above the Group’s UK steelmaking requirements for the core strip products, long products and engineering steels businesses (i.e. not including Teesside) would reduce to become 10.5 million tonnes a year largely focussed on satisfying UK market demand. Approximately 1,150 jobs would be directly affected by these closures and rationalisation measures.

     The Board anticipates that the capital expenditure and restructuring cash costs associated with these proposals should not exceed £250 million (including the cost of the closure of Teesside should this prove unavoidable). These funds are to be provided from the disposal of non-core activities and the placing and open offer completed in December 2003, which is discussed further below, supported if appropriate by Export Credit Agency backed finance.

Further initiatives
     The Restoring Success project includes, in addition to the existing ongoing cost reduction programs and UK restructuring, a series of initiatives designed to improve Group performance to be in line with its European peer group. During the second half of 2003 a detailed review process took place aimed at identifying and quantifying areas in which significant further savings could be achieved.

     In total, target cost savings and profit improvement opportunities of up to £350 million per annum have been identified, to be achieved by the end of 2006, as follows:

• up to £200 million cost savings per annum through manufacturing excellence, purchasing savings and supply chain optimisation;

• up to £70 million cost savings per annum through rationalising support functions across the Group. Functions which have already been benchmarked against industry best practice include finance, information technology and human resources; and

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• up to £80 million profit improvement per annum through rebalancing the Group’s product - customer mix towards premium end-markets.

     The Group’s capital expenditure plans going forward allow for a significant increase from the current levels of capital expenditure to support these initiatives, including UK restructuring.

 Bank facility
     On July 31, 2003 the Company signed a new €1,200 million banking facility to replace the facility that was due to expire at the end of January 2004. The new amortising syndicated facility has a final maturity date of June 30, 2006, and provides committed bank financing for Corus’ working capital requirements. The scheduled reductions under the facility reduce the commitment at the end of January 2004 to €1,000 million until the end of June 2005; then to €800 million until the end of December 2005; and then to €600 million until the end of June 2006. On December 11, 2003, following the receipt of proceeds from the placing and open offer, the commitment under the facility was reduced by voluntary cancellation to €1,000 million.

  Placing and open offer
     On November 12, 2003 the Company announced a placing and open offer of 5 New Ordinary shares for 12 Old Ordinary shares to raise approximately £307 million before expenses (£291 million after expenses). 1,304 million New Ordinary shares were offered at a price of 23.5p per share. This share issue was approved at an Extraordinary General Meeting on December 5, 2003, and proceeds were received on December 11, 2003.

     Prior to the issue of the New Ordinary shares, the nominal value of 50p of each Old Ordinary share exceeded the proposed issue price of 23.5p per New Ordinary share. As a matter of company law, it was not possible for the Company to issue shares at less than their nominal value and, therefore, in order to effect the placing and open offer the existing issued Ordinary shares were subdivided and converted from one Old Ordinary share of 50p into one New Ordinary share of 10p and one Deferred share of 40p, and each existing but unissued Ordinary share was converted into five New Ordinary shares of 10p. This resulted in 9,478,827,378 New Ordinary shares and 3,130,418,153 Deferred shares being created under a share capital reorganisation.

 Capital expenditure
The capital expenditure over the last three financial periods is set out below.

     The major focus of capital expenditure in the period from December 30, 2000 to December 28, 2002 was on the completion of the steel plant capacity increase at IJmuiden, linked to the Direct Sheet Plant scheme, the commencement of rebuilding of Port Talbot no. 5 blast furnace, the relining of IJmuiden no. 6 blast furnace, preparations for the reline of IJmuiden no. 7 blast furnace and the continuous annealing line for aluminium at Duffel (Belgium). Other notable schemes completed in the period were the reconfiguration of an electrolytic tinning line at Trostre (South Wales) following the closure of Ebbw Vale works and the transfer of a double reduction rolling mill to IJmuiden, the enhancement of a bloom caster at Scunthorpe and a new 90MN press to replace a large press at the Bonn extrusions plant.

     A description of the principal capital expenditures and divestitures since December 28, 2002, including those currently in progress, is incorporated herein by reference from pages 12 and 13 ‘Summary’, pages 18 and 19 ‘Carbon steel – Investment’, and pages 21 and 22 ‘Aluminium – Investment’ of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004.

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     The principal acquisitions and dispositions of businesses during the period from December 30, 2000 to December 28, 2002 are noted below. With the exception of the Avesta Sheffield merger and the disposal of AvestaPolarit Oyj Abp, none of these are material to Corus.

January 22, 2001

Avesta Sheffield AB ceased to be a subsidiary of Corus and, from the same date, AvestaPolarit Oyj Abp became an associated undertaking.

March 27, 2001

Trico Steel LLC, the Group’s 25% owned US joint venture, filed for Chapter 11 protection from creditors.

June 28, 2001

The trade and assets of PSW Industries were sold to Tempel Steel for £13 million.

November 9, 2001

The trade and assets of Trico Steel LLC, the Group’s 25% US joint venture, was sold to Nucor Corporation.

March 28, 2002

The Group’s stake in Galtec, a joint venture company, was sold to Sidmar for proceeds of £12 million.

July 1, 2002

AvestaPolarit Oyj Abp, the Group’s 23.2% associated undertaking, was sold to Outokumpu Oyj for £356 million.

August 21, 2002

Acquisition of Erik Olsson and Söner of Sweden for £9 million.

September 17, 2002

The Group’s 20% interest in the Aluminerie Alouette smelter was sold to Alcan for £107 million.

December 27, 2002

Acquisition of Precoat International plc for £7 million.

     A description of the acquisitions and dispositions since December 28, 2002, is incorporated herein by reference from pages 27 and 28 ‘Acquisitions and disposals’ of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004.

 Business overview
Products and their markets – carbon steel
     Corus sells its carbon steel products direct to end users and through stockholders. The stockholding sector, including the stockholding business of Corus, plays a major role in the distribution of most finished products.

     The table below sets out Corus carbon steel sales in 2003 by major product grouping and by geographical market:

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     (a) Deliveries by Corus mills, including transfers to Corus stockholders, service centres and similar activities.

     (b) “Distribution and further processing” includes the sales value of products sourced by Corus stockholders, service centres and similar activities from outside Corus and the value added to products sourced from within Corus.

     (c) The information contained in Note 1 to the accounts of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004, is incorporated herein by reference.

     In 2003 about 60% of Corus crude steel production (excluding Tuscaloosa) was rolled into hot rolled coil. Most of the remainder was further processed into sections, plates, engineering steels or wire rod, or sold in semi-finished form. Some 35% of hot rolled coil was sold without further processing, approximately 50% was further processed in cold rolling mills and the remainder was transferred to Corus tube mills for the manufacture of welded tubes.

     Corus has recently reorganised into a structure that comprises four main operating divisions and a speciality portfolio. The bulk of Corus’ carbon steel products are manufactured by businesses within its Strip Products and Long Products divisions, although a number of products are also produced by businesses within the Speciality Portfolio. The Corus major carbon steel groupings comprise strip products, long products, engineering steels and other carbon steel products. The main products included within these groupings and their main markets are described below.

Strip products
     Corus’ main strip products production facilities are in the Netherlands at IJmuiden, and at Port Talbot and Llanwern, in the UK. The strip products grouping comprises uncoated and coated strip, and welded tubes.

     Uncoated strip products comprise hot rolled, cold reduced and electrical steels, which are sold both in coil form and, cut to length, in sheet form. Hot rolled coil is manufactured in a wide range of widths and thicknesses as the feedstock for cold reduced coil and welded tubes, and for many different industrial applications. Cold reduced coil and sheet are sold for use in the automotive industry (for example, in car body panels) and in the domestic appliance, engineering and metal goods industries, including the manufacture of drums and radiators. Cold reduced coil is also the basic material for coated strip products.

     Electrical steels are manufactured by a 75% owned subsidiary of Corus. Hot and cold rolled coil are processed to produce a range of strip steels with precise magnetic properties, used by manufacturers of electrical equipment for transformers, motors, generators and alternators.

     Corus’ coated strip products comprise metallic coated products (e.g. zinc and alloy-coated), non-metallic coated products (e.g. painted and plastic coated steels) and tinplate. Steels coated with zinc, special alloys, paint or plastic provide a corrosion resistance and decorative finish, which are used by the construction industry and by manufacturers of motor vehicles and consumer durables. These steels are used for such applications as roofing, the side cladding and decking of buildings, body panels in motor vehicles and the casing of domestic appliances. Tinplate is used for packaging in the food and beverage industries and for other domestic and industrial applications.

     Corus is one of the global market leaders in the manufacture of coated strip products and in steel for packaging production.

     Corus produces steel tubes for a variety of industrial uses, including for lighting columns, transmission poles for electrical services, ships’ masts and derricks, oil, gas, water and air mains, and scaffolding tubes. Structural hollow sections, both circular and rectangular, are used in the construction, mechanical handling, agricultural and general engineering fields.

Long products
     Corus’ main long products production facilities are at Scunthorpe, the Group’s largest steelmaking site in the UK, and at Teesside. The long products grouping comprises sections and plates, and wire rods.

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     Sections and plates are manufactured in primary and finishing mills where the steel is formed by rolling reheated concast (continuously casting) slabs and blooms or ingots to produce particular product shapes. Sections (including beams, columns, bearing piles, sheet piling, joists and channels, rails and sleepers) are used in the construction, engineering, mining and railway industries. Special sections are used in automotive components, earth-moving equipment, fork lift trucks and the mining industry. Plates are used in connection with offshore oil and gas production, power generation, mining, earth-moving and mechanical handling equipment, shipbuilding, boiler and pressure vessels, and structural steelwork. Corus’ plates and piling products are also being used for the renewable energy industry in onshore and offshore wind farms in Europe. Wire rod is used for drawing into a variety of wire products.

Engineering steels
     Corus’ wide range of engineering steels products includes free cutting, improved machining, spring, forging and general steels for the automotive and related markets together with specialist steels for the aerospace, power generation, oil and gas exploration and engineering industries. Engineering steels are produced by the electric arc method from scrap as opposed to the basic oxygen steelmaking method. Corus’ engineering steels are currently produced in the UK at Rotherham and Stocksbridge. Corus is one of the largest manufacturers of engineering steels in Europe.

Other carbon steel products
     Corus supplies a range of semi-finished carbon steel products in the form of billets, blooms and slabs for rerolling and subsequent processing to Corus’ service centres and to third party service centres.

Product and market strategies
     Corus product and marketing strategies are:

• to provide customers with a broad range of steel products and innovative metal solutions to meet their requirements;

• to differentiate its products from those of other producers by brand marketing and product quality;

• to increase sales of those finished products that contribute higher margins;

• to maintain and improve the relative position of steel against competing materials, for example by developing new products with higher corrosion resistance and strength-to-weight ratios; and

• to continue to improve all aspects of customer service and its distribution network for finished products.

UK market
     The table below sets out carbon steel sales in the UK over the financial periods indicated. Figures up to October 2, 1999 are in respect of British Steel and, thereafter, Corus.

Market share. The estimated total UK market for carbon steel products in 2003 amounted to 12.8 million tonnes. The main Corus product range covers approximately 84% of the total UK market for finished products. Products outside the main Corus range include reinforcing rods and bars, and other light bars and sections.

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     Corus deliveries to the UK market in 2003 totalled 6.1 million tonnes, of which 5.5 million tonnes were in its main carbon steel products, and its market share for the products within its range amounted to 51% in 2003. Other UK steel companies had a 5% market share, while imports had a 44% market share, of which approximately 75% were from other EU countries in 2003.

     The following table shows UK consumption of carbon steel products over the financial periods indicated.

     (a) Excluding deliveries of semi-finished products to other UK steel companies.

     (b) Prior to October 3, 1999 figures relate to the British Steel range.

     (c) Main carbon steel products exclude stainless steel products.

Non-UK sales
     The table below sets out Corus carbon steel sales outside the UK by geographical market over the financial periods indicated. Figures up to October 2, 1999 are in respect of British Steel and, thereafter, Corus.

     Export sales from the UK and overseas sales of £4,887 million represented 70% of Corus’ total carbon steel sales in 2003. Corus’ carbon steel exports from the UK totalled £1,566 million in 2003. The major combined market outside the UK for Corus is the rest of the EU, which accounted for 45% of its carbon steel sales in 2003. Steel demand in the EU (excluding the UK) was approximately 126 million product tonnes in 2003, of which the Corus market share was approximately 7%.

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     Domestic selling prices of major steel producers are generally higher than their export prices for a number of reasons. These include the ability of producers to provide additional services to domestic customers, competitive advantages associated with proximity to customers and differences in market sectors and types of customer. Thus the return to Corus on sales in its domestic markets, principally the UK and the other EU countries, is generally higher than its return on other sales. Prices for export sales can fluctuate considerably over time in different markets, depending on local market conditions, exchange rates and other economic factors.

     North America and Asia are also important markets, both accounting for 13% of exports and overseas sales in 2003. This compared with 17% and 9% respectively in 2002, with North American sales affected by Section 201 import restrictions and Asian sales benefiting from strong demand in China and other Asian export markets.

Distribution
     Corus sells its carbon steel products direct to end users and through its own and other stockholding and service centre businesses. Stockholders purchase steel from high-volume producers for subsequent resale and service centres purchase steel stocks for further processing prior to selling to customers. The majority of stockholder and service centre activity in the EU is accounted for by companies owned by steel producers. As part of its strategy of developing distribution activities, Corus has, in prior years, acquired a number of independent stockholders and service centres in various EU countries. The stockholding and service centre sector plays a major role in the distribution of most finished products in the EU steel market. In addition to offering rapid off-the-shelf service to low volume customers, major stockholders and service centres, including Corus’ businesses, increasingly offer further processing facilities to the automotive, construction and earth-moving equipment industries, among others. Typically, the large volume purchasers buy directly from Corus’ business units, whereas lower volume customers buy from stockholders and service centres, including those owned by Corus.

     Approximately 50% of Corus’ total UK deliveries of carbon steel products in 2003 went directly to end-users. The balance was distributed through Corus’ UK stockholders and service centres or third party service centres. It is estimated that stockholders and service centres handled approximately 60% of all steel imports into the UK.

Products and their markets – aluminium
     Corus is focused on customer specific aluminium products and has a low level of standardised high volume products. In March 2002, Corus announced that it was to offer its aluminium businesses for sale (see Item 4, page 9, ‘Aluminium businesses’).

     The table below sets out Corus’ aluminium sales in 2003 by major product grouping and by geographical market:

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     (a) The information contained in Note 1 to the accounts of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004, is incorporated herein by reference.

     In 2003 the production of primary metal covered approximately 40% of the needs of the Corus rolled and extruded product businesses. Almost all rolled products are hot rolled, further cold rolled and finished. The major aluminium product groupings and their main markets are described below.

Rolled products
     Rolled products, including aluminium plate, sheet and coil for the aerospace sector, heat exchangers and construction and automotive products, accounted for 67% of Corus’ aluminium business turnover during 2003.

     Corus produces five main varieties of rolled products: aircraft plate and sheet, commercial plate, heat exchange materials, automotive body sheet and speciality coil and sheet. The major markets for these rolled products are in Europe, North America and the Far East. Coil and sheet products are sold mainly to the European market. Corus is one of the major suppliers of aircraft plate in the world, supplying major aircraft manufacturers and their respective subcontractors.

     Corus is ranked number two in Europe in terms of volume of commercial plate, which is used predominately in the transport and engineering sectors, supplied in 2003. Corus is one of the world’s leading producers of clad sheet and fins for the heat exchanger market, which is used predominantly in the automotive industry and related component suppliers.

     Corus does not concentrate on supplying the packaging sector, which is the major application area for aluminium products, but concentrates on customer specific products in the transport, engineering, construction and household application sectors.

Extrusions
     Extrusion products are divided into four product combinations: industrial extrusions, building systems, hard alloys, and projects. Corus’ main customers for these products are the building and construction, transport, electrical and mechanical engineering industries. Corus is one of the leading European suppliers of specialty rods and hard alloy extrusions, of which the major consumer is the automotive sector.

Primary metal
     Corus primary aluminium smelters produce approximately 250,000 tonnes of rolling ingots and billets of which some 200,000 tonnes are made from alumina (processed bauxite) using an electrolysis process. Approximately 70% of this output is dedicated to its downstream operations with the remainder sold to external customers under tolling or direct sales contracts.

Product and market strategies
     Corus focuses its product mix on technically demanding, service related products made to customer specifications and sold directly to end users, which it believes distinguishes it from large volume producers and low cost standard producers. For this reason it is not active in producing can stock, foil and standard distributor sheet.

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Market
    Corus has only been active in the aluminium segment following the merger with KH. The table below sets out Corus’ aluminium sales over the financial periods indicated.

     The transport sector (especially aerospace and automotive) is the largest market for downstream aluminium business, accounting for approximately 35% of Corus’ rolled products sales and approximately 29% of its extrusions sales. The construction industry is also a key market for both the rolled products and the extrusions business, accounting for approximately 18% and 35% of turnover, respectively.

Distribution
     Corus sells 90% of its finished products direct to end users, sales to distributors and service centres, including the distribution businesses of Corus, counting for less than 10% of total sales.

Products and their markets – stainless steel
Stainless steel products
     AvestaPolarit Oyj Abp was formed on January 22, 2001 by the merger between Outokumpu Steel Oyj and Avesta Sheffield. The Corus holding in Avesta Sheffield prior to the merger was 51%. The Corus holding in AvestaPolarit following the merger was 23%. Corus has since sold its stake in AvestaPolarit to Outokumpu. This sale was announced on July 1, 2002. Total proceeds of the sale received by Corus were approximately € 555 million (approximately £356 million).

     Prior to Corus’ sale of its holding in AvestaPolarit, AvestaPolarit had an annual stainless steel melting capacity of about 2 million tonnes. It produced a range of grades of stainless steel, typically each with different properties, by varying the levels of chromium, nickel and molybdenum. Molten steel was typically cast into either slabs or billets. These slabs were then generally rolled into coil or into heavy plate. The coil processing systems in Tornio, Avesta, Nyby, Kloster and Sheffield were the core business of AvestaPolarit. Hot rolled coil was subject to further processing for use in both household and industrial applications, including the food, petrochemical and construction industries. Cold rolled coil was also used as the feedstock for the manufacture of welded pipe and tube, fittings and precision strip. Tubes and fittings were used primarily for the transport of corrosive gases in the process industry and precision strip was used for cutting edge applications, heat exchangers and a wide range of other end uses. Billets were typically rolled into bar or rod which could be drawn into smaller diameter bar or wire. The heavy plate was commonly used in the pulp and paper industry, oil and gas, power plants and chemical tankers.

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Market
     The table below sets out Corus’ stainless steel sales over the financial periods indicated.

     This table only includes sales for the twenty two days of 2001 for which Avesta Sheffield was a subsidiary of Corus. The net sales for AvestaPolarit for that year were €2,851 million.

Distribution
     AvestaPolarit had sales and distribution channels in fifty two countries, including company owned sales units and a number of independent outlets.

The international market environment
Supply and demand – steel
     World crude steel production in 2003 was 964 million tonnes, 61 million tonnes higher than in 2002. The table below shows a breakdown of world crude steel production in 2003.

     Source: International Iron and Steel Institute

     The global picture in steel demand and production is heavily influenced by China. Chinese production was reported to have increased in 2003 by 38 million tonnes (21%) from the 2002 level, with demand increasing at a similar rate. These figures may include an element of double counting and accumulation of inventories, and hence overstate the real strength of the market. Consequently the following analysis excludes Chinese production, capacity and demand. Additionally, estimates of effective steelmaking capacity are inevitably imprecise and subject to change as later information becomes available. Consequently, the current view of 2002 and 2003 capacities may differ in small detail from that reported in last year’s Form 20-F.

     On the basis of Corus’ latest estimates, excluding China, effective world steel capacity fell by 6 million tonnes in 2003, to 836 million tonnes. Crude steel production rose by 23 million tonnes to 744 million tonnes, so utilisation of effective capacity improved from 86% to 89%. Corus estimates that there is an excess of

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around 100 million tonnes of effective capacity, the lowest level since the 1980’s, of which about one quarter is in the former USSR countries and Central Europe, where further restructuring is underway. Surplus effective capacity in the EU is around 18 million tonnes, unchanged from the latest view of the position in 2002.

     This improvement in the supply/demand situation provided a moderately positive climate for pricing of steel products. However, through the year events such as the SARS epidemic, the Iraq war and the development of the US market as imports and domestic supply responded to the high prices seen in 2002, meant that regional prices continued to exhibit some volatility. Overall, however, prices did move upwards through the year. Towards the end of the year prices began to recover more strongly as China’s effect on the world steel market became more pronounced. The rapid demand growth in China forced up freight rates and the price of key raw materials, and steel prices were pushed up as companies sought to protect profit margins. By the end of the year and into the first quarter of 2004, prices in all regions were increasing strongly in response to rising demand, production constraints and raw material costs.

     World trade in steel products continued to grow in 2003 as trade restrictions introduced in 2001 and 2002 were eased. Strong demand from China resulted in a high level of imports, principally from Japan, Korea, Taiwan and the CIS countries. EU trade remained broadly in balance, with increases both in imports and exports. Excluding trade within the EU, imports and exports each amounted to around 30 million tonnes, or some 20% of demand and production. Trade with the Accession Countries (the ten countries due to join the EU in May 2004) increased, with imports rising to some 7 million tonnes and exports to 5 million tonnes. The main EU export destinations were the USA and China.

Competition – steel
     The main international competitors for Corus are other EU steel producers, however Corus faces significant additional competition from other steel producers worldwide e.g. in Japan, the United States, South Korea, Taiwan, Brazil, South Africa, Turkey, Poland, Russia, Ukraine and many other countries with developing steel industries.

     Corus competes on the basis of the range and quality of its products, price, delivery performance and overall customer service.

     Corus crude steel production in 2003 was some 19 million tonnes. Corus estimates that this placed it seventh in the world and meant that it was the second largest producer in Europe.

     The market for steel is very competitive, with high levels of international trade. Because steel is a capital intensive industry, changes in demand in one region can often lead to significant changes in steel prices in that region. These in turn cause rapid shifts in geographical sales patterns as producers attempt to maintain high capacity utilisation rates while seeking out the best priced markets. As a consequence, world steel prices are strongly cyclical. Having fallen to a low point in 2001, world steel prices expressed in US dollars staged a gradual recovery through 2002 and 2003, supported by a combination of production restraint as several key producers attempted to restore profitability and growing demand in Asia. The momentum of price increases accelerated towards the end of 2003 as raw material prices surged in response to strong demand in China. However, prices in the EU measured in euros were held back by the combination of relatively weak market conditions and the strengthening of the euro against the US dollar. Going into 2004, EU prices are recovering more strongly as increases in steel production are being restricted by inadequate supplies of some key raw materials.

Aluminium
     Corus is currently the fifth largest producer of downstream aluminium rolled and extrusion products globally. Aluminium business accounted for around 12% of Corus sales in the year ended January 3, 2004, having reduced slightly from around 13% in the year ended December 28, 2002.

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     Primary aluminium production covers about 40% of the downstream needs of Corus. The main focus of Corus is on downstream activities; selling rolled and extruded products to high value-added markets. Corus is not involved in the high volume packaging and foil elements of the aluminium industry.

     (a) Alcan and Pechiney have now merged, although the combined tonnages may reduce substantially as a result of divestments required from obtaining regulatory clearance.

     Source: Industry estimates based on annual and quarterly reports, and analyst reports

     Corus has rolling and extrusion plants in Germany and Belgium and, early in 2000, acquired 60% of Reycan (now named Corus LP) in Canada, which produces heat exchanger products at its mill in Cap-de-la-Madeleine. Since the beginning of 2000, there has also been a venture for large extrusions in China.

     The leading five players of rolled products in Europe account for more than 80% of that market. The extrusions market is considerably more fragmented primarily due to its less capital-intensive nature and for reasons of closeness to customers.

     (a) Alcan and Pechiney have now merged, although the combined tonnages may reduce substantially as a result of divestments required from obtaining regulatory clearance.

     Source: Industry estimates based on annual and quarterly reports, and analyst reports

EC regulatory regime
     Since the expiry of the Treaty of Paris in July 2002, all steel products have been subject to the Treaty of Rome, which is of indefinite duration. The European Commission is responsible for implementing the objectives of EC Treaties.

State aid. With the expiry of the Treaty of Paris in July 2002, the EU has become subject to a single state aid regime under the Treaty of Rome. Specific policies are in place in relation to aid for research and development, environmental improvement, training, regional investment, and rescue and restructuring. The steel industry, however, continues to be subject to more rigorous controls, with a prohibition on regional investment aid, and rescue and restructuring aid, with the exception of limited help with plant closures. The

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European Commission has a duty to enforce these rules by investigating notifications of financial injections by governments of EU member states and pursuing allegations of direct and indirect subsidies made against such governments.

Pricing. Following the expiry of the Treaty of Paris in July 2002, there are no longer any regulations specific to the pricing of steel products.

Competition. The Treaty of Rome and the EEA Agreement contain provisions prohibiting anti-competitive practices and agreements which relate to the fixing or determination of prices, the restriction or control of production or the sharing of markets subject, in certain cases, to specified exemptions. In addition, both the Treaty of Rome and the EEA Agreement contain provisions prohibiting the abuse of a dominant position. The European Commission has indicated its opposition to any establishment by all EU industries of arrangements contrary to the EC rules on competition. Under the UK Enterprise Act 2002, individuals can be criminally liable for being involved in certain types of cartels.

Sanctions. The European Commission and ESA have powers to control anti-competitive practices, agreements and concentrations by imposing fines and making orders to stop illegal practices or requiring offenders to make appropriate disposals. While the maximum level of fines can be related to worldwide sales, fines are usually related to the volume of EC or EFTA trade in the products involved. The European Commission and ESA may act or be compelled to act on the basis of complaints by third parties. In addition to the measures that can be taken by the European Commission under the Treaty of Rome and the ESA under the EEA Agreement, third parties may, in certain circumstances, bring proceedings in national courts to obtain injunctions to restrain Treaty or EEA Agreement infringements or to obtain damages to compensate them for losses caused by Treaty or EEA Agreement infringements.

Trade associations and other voluntary arrangements
     Within the EU there has historically been close co-operation between the steel industry, the European Commission and governments.

     Eurofer is the trade association to which all major European steel producers including Corus belong, either directly or through national trade associations. Eurofer, through its main committees, supplies and coordinates advice and information to its members and in turn represents them to, amongst others, the European Commission. These representations cover a wide range of issues where there is a need for a common industry voice, and include international trade policies (see following section), social and environmental control issues, research and development matters, market conditions and various aspects of the sale and marketing of steel products. They relate to most major steel products.

     Corus is also a member of other trade associations and other industry groups in respect of its other products and activities, for example, the European Aluminium Association.

     Following investigations by officials of the European Commission in respect of alleged anti-competitive behaviour since 1984 with regard to beams supplied to the construction industry, proceedings were initiated in May 1992 and, in February 1994, the European Commission imposed fines totalling €104.4 million (£79 million) on fourteen European steelmakers, including British Steel. Provision in the sum of €32 million (£24 million) was made in the 1993/94 financial statements for the full amount of British Steel’s fine. The amount was lodged with the European Commission in June 1994. The appeal to the Court of First Instance of the European Communities against the European Commission’s decision was heard in March 1998 and a decision was given in March 1999. The fine was reduced by €12 million (£8 million) and this amount was taken into account in the 1999 financial statements. A further (and final) substantive appeal was initiated to the European Court of Justice in May 1999 but was not successful for Corus.

     In July 1999 British Steel initiated proceedings in the Court of First Instance against the European Commission for payment of interest on the fine reduction, and a hearing took place in November 2000. The Court held in British Steel’s favour and British Steel (Corus) has now received the interest payment.

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     In December 1994 the European Commission inspected various tube and pipe producers including British Steel. British Steel, together with certain other tube manufacturers, received Statements of Objections in January 1999 from the European Commission concerning alleged anti-competitive behaviour with regard to the supply of some seamless and large diameter pipes, to which British Steel replied in April 1999. An oral hearing took place in June 1999. The European Commission intimated that it did not propose proceeding with the allegations concerning large diameter pipes after that hearing. In December 1999 fines were imposed on various of the producers, including a fine of €12.6 million (£8 million) on Corus, which was taken into account in the 1999 financial statements. Corus appealed the European Commission’s decision in March 2000 together with other tube manufacturers and a hearing took place in March 2003, the outcome of which is awaited.

International trade restrictions
     Steel is an internationally traded material. Such trade is governed by the rules of the World Trade Organisation (WTO) that allow for trade remedies such as anti-dumping and countervailing actions to be taken against unfairly traded imports. Since 1992, a number of such actions have been initiated in Canada, the US and other countries against certain steel products from a number of producers including Corus. Where material, details of legal proceedings involving Corus relating to these actions are given under Item 8 ‘Financial Information – Legal proceedings’. Such actions are much less prevalent in aluminium; Corus has no involvement in any such actions relating to its aluminium activities.

     Trade restrictions remain in place and additional duties are payable on Corus’ sales into the US of certain carbon steel plates and certain stainless steel bars from the UK, and on sales into Canada of stainless round bar from the UK. In addition, in the US, restrictions remain in place on imports into the US of certain wire rod and on certain line pipe products. However, these actions and restrictions have had no material effect on total Corus sales or results.

     An anti-dumping investigation by the US authorities into certain imports of hot rolled coil, launched in November 2000, resulted in additional duties being applied on Corus sales into the US of hot rolled steel from the Netherlands. The US Department of Commerce (DOC) determined a final dumping margin of 2.59% in the investigation and cash deposits at this rate are now payable on all Corus sales of hot rolled steel from the Netherlands into the US. Corus lodged a number of appeals against the rulings in this case with the US Court of International Trade (CIT). Certain of these appeals are continuing.

     In the first annual Administrative Review of this case to determine the actual duty liability on subject sales made during the period under review (May 2001 to October 2002), and the new duty deposit rate on US sales going forward, the DOC has now issued a preliminary decision of 5.34%. The DOC’s final decision in this case will be issued in June 2004.

     In March 2002, following a Section 201 Safeguards investigation by the US International Trade Commission (ITC), President Bush took action to impose tariffs of between 8% and 30% on US imports of a number of steel products and a system of quotas and tariffs on slab products. Imports from most developing countries, as well as Canada and Mexico, were exempted from the measures. These measures were due to remain in force until March 2005, being progressively reduced each year.

     The US authorities implemented an exclusions process to enable suppliers and their US customers to obtain exclusions from the Section 201 measures for material that they were unable to source adequately from domestic US sources. In total, exclusions covering approximately one third of Corus’ US sales originally subject to the Section 201 measures were secured. While sales to the US of certain of Corus’ products, most notably flat rolled steel, were affected by the measures, the exclusions secured, the sales of products outside the scope of the Section 201 measures, and the sharp price rises that were experienced in some product areas, helped to mitigate temporarily the impact of the Section 201 measures.

     To ensure that the European steel market did not suffer from material displaced due to the US restrictions, a system of quotas and tariffs was introduced on EU imports of a limited number of steel products. This action ensured that the EU market remained open, but helped to prevent any import surge. A number of other countries, including China, took similar action.

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     In November 2003, following a complaint by the European Commission and others, the WTO appellate body ruled the US measures to be inconsistent with WTO rules. The EU had notified the WTO of its intention to take immediate retaliatory action in the form of punitive duties on imports into the EU of certain US products (including textiles and food products), unless the US complied with the WTO’s ruling and terminated the Section 201 measures.

     On December 4, 2003, President Bush issued a statement ending the US Section 201 measures with effect from December 5, 2003. From this date, all imports into the US, including Corus sales, have been free from any additional Section 201 duties or restrictions. Immediately following the termination of the US measures, the European Commission withdrew its WTO retaliatory action and also terminated its own safeguard measures. China has now also terminated the measures it initiated in response to the US action.

     Underlying such steel trade disputes has been the need to tackle the key issues of excess inefficient capacity and subsidies. An initiative launched through the OECD to tackle such problems was a positive development that received both industry and government support, but progress in such discussions has remained very disappointing.

Seasonality
     Seasonal effects have only a relatively limited impact on Corus. However, some slowing in demand is evident during the summer months when many customers, especially those in southern European markets, are closed for an extended period, and similarly over the Christmas and New Year holidays. Many of the Group’s plants have planned shutdowns to coincide with these periods, when essential maintenance can be undertaken. Sales of some products are also subject to some sector-specific seasonal factors, for example the slowdown in construction activity over the winter months, and the seasonal variations in automotive build programmes to fit with new vehicle registration dates.

Raw materials
     The principal raw materials in the carbon and engineering steelmaking process are iron ore and coal, purchased on international markets, and steel scrap. During 2003, approximately 25 million tonnes of iron ore and 11 million tonnes of coal were imported at or near Corus’ integrated steelworks. Iron ore is imported predominantly from Australia, South America, Canada and South Africa. Corus imports coal, for conversion into coke and direct injection into blast furnaces, predominantly from Australia, Canada and the United States. Corus UK’s external scrap requirement of some 1.3 million tonnes in 2003 was purchased in the UK, and some 0.6 million tonnes for its Dutch integrated plant was purchased predominantly from mainland Europe.

     The purchase price for these materials is subject to market forces largely beyond Corus’ control and is impacted by demand from other steel producers, supply capacity and freight costs, among others. Steel scrap prices are generally based on spot market prices.

     Corus enters into supply contracts lasting typically between three and ten years for certain raw materials for steel production, although in many instances the prices within these contracts are agreed on an annual basis. For these raw materials, the arrangements account for roughly 60% to 70% of Corus’ requirements, with the remainder purchased through one year contracts and options, based on market rates, which provides flexibility and commercial leverage. Recently, the growth of steel demand and production in China has contributed to significantly increased raw material and freight prices for steel production globally. In 2003, crude steel demand in China grew by 21% or 46 million tonnes compared to 2002. Although part of this growth was fed by imports, Chinese crude steel production increased by 21% or 38 million tonnes. To support this production, iron ore imports increased by 33%.

     The raw material requirements for the aluminium businesses are obtained in part by importing alumina for the production of primary aluminium and in part by buying slabs, billets and aluminium scrap. These materials are purchased by Corus from third party suppliers under competitively priced supply contracts or bidding arrangements.

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     Corus endeavours to spread its supply risk by avoiding, where possible, over-dependence on any one country or supplier for its principal raw materials.

     Further information concerning changes which are being made to improve the efficiencies of raw materials and supplies procurement is described at page 16 ‘Carbon steel – Operating costs’ of the Report & Accounts 2003, contained in the Corus Report on Form 6-K dated March 22, 2004, which is incorporated herein by reference.

Patents, trademarks and licences
     The information required by this Item is set out under Item 5 ‘Operating and Financial Review and Prospects’ in the section headed ‘Research and development, patents and licenses, etc’.

Introduction of the euro
     On January 1, 1999 the rates of conversion between the euro and the currencies of participating countries in the Economic and Monetary Union were irrevocably fixed, and the euro became a currency in its own right.

     The national currencies within the eurozone were no longer economically independent but became denominations of the euro with fixed rates of exchange. In all cases Corus businesses located in the eurozone have complied with legislation to replace national currencies with the euro by January 1, 2002. The actual changeover to the euro occurred on January 1, 2002 without any material problems arising within Corus.

     Businesses located in the UK and in other European countries outside the eurozone are currently capable of undertaking transactions in the euro, just like any other foreign currency. As regards businesses located in the UK, until the position on UK entry to the eurozone becomes clearer, the Company will refrain from undertaking the investment in computer systems necessary to convert base currency to the euro.

 Organisational structure
     Production and distribution activities of Corus are organised into individual business profit centres. Each unit has its own managing director who, with his respective management team, has responsibility for the performance of that business. The businesses are grouped in divisions for each of which an Executive committee member has particular responsibility. The members of the Executive committee and their individual responsibilities are set out under Item 6 ‘Directors, Senior Management and Employees’.

     Corus has sales offices, stockholders, service centres and joint venture or associate arrangements in a number of markets for distribution and further processing. These are supported by various agency agreements. There is an extensive network in the EU, while outside the EU Corus has sales offices in over twenty countries, supported by a worldwide trading network and a number of processing and service centres.

     Certain functions are controlled and co-ordinated centrally. These are finance, strategy and planning, commercial services, major raw material purchases, shipping and transportation activities, research and development, management development, formulation of industrial relations policy and legal services.

     Pages 105 and 106 of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004 list the principal subsidiary undertakings of Corus and is incorporated herein by reference.

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     The following table shows the principal trading companies in which Corus has an equity interest (excluding Corus’ consolidated subsidiaries):

     (a) Incorporated in England.

     (b) Lusosider Projectos Siderurgicos SA is the holding company of Lusosider Acos Planos SA.

     (c) Annual sales are extracted from the company’s most recent published financial statements.

     Corus has a long term billet supply agreement with Caparo Merchant Bar.

 Property, plants and equipment
     The following properties are the primary processing works of Corus, which are held substantially in freehold:

     (a) Production capacity is based on the maximum possible production in 2003 taking into account upstream and downstream bottlenecks, assuming full manning of facilities and including any plant mothballed. For steelworks, figures are for crude steel and are consistent with those submitted to the European Commission as part of its annual investment and capacity survey. For aluminium, figures are included for the two smelters of Corus Primary Aluminium. In practice, facilities may be manned only to the level required to provide semi-finished materials for downstream finishing processes and for sale.

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     The steelworks supply steel not only to external customers but also to other Corus operating sites. A number of Corus rolling mills and process lines are located on the same sites as the steelworks, but the substantial majority of operating sites do not have steelmaking facilities. These include: the strip mills at Llanwern, South Wales, the tinplate works at Trostre, South Wales and Bergen, Norway; the coating works at Tafarnaubach, South Wales, Shotton, North Wales and Maubeuge, North France; the electrical steels works at Newport, South Wales and Surahammar, Sweden; the tube mills at Corby and Hartlepool, England and Oosterhout, Arnhem and Maastricht, Netherlands; the plate mill at Dalzell, Scotland; the rail mills at Workington, England and Hayange, North-East France; the hot and cold rolled narrow strip mills at Brinsworth, England, Dusseldorf and Trier, Germany and Warren and Bethlehem, USA; the section mills at Skinningrove, England and Mannstaedt, Germany; and, the direct reduced iron facilities at Mobile, USA, mothballed since November 2000.

     The most significant non-steelmaking sites are Llanwern works (operational area 1,200 acres) and Shotton works (operational area 640 acres).

     The aluminium smelting works supply some other Corus operating sites. The other sites include: the aluminium rolling mills at Koblenz, Germany, Duffel, Belgium and Cap-de-la-Madeleine, Canada (60% interest); and the aluminium extrusion lines at Vogt, Bonn and Bitterfeld in Germany, Duffel, Belgium and Tianjin, China (61% interest). The Duffel site in total is 180 acres and the Koblenz site is 75 acres.

     Corus’ registered office and head office is located at 30 Millbank, London SW1P 4WY, England, where it leases office space with a gross internal area of some 29,000 square feet. The telephone number of the registered office is +44 (0)20 7717 4444.

     Corus’ facilities are generally adequate for its purposes. Capital expenditure and plans are described earlier under this Item on page 10 ‘UK restructuring’ and page 11 ‘Capital expenditure’.

 The environment
     Corus is subject to the rapidly developing and sometimes stringent environmental laws and regulations in the countries in which it operates. Although there are risks of significant environmental costs and liabilities inherent in its operations, Corus is prepared to undertake such investment and remedial action as may be reasonably required but does not consider that they will have a material adverse effect on its financial position. Liability may also arise in the context of the occupation or ownership of premises by Corus and even the prior and subsequent ownership or occupation by other parties of those premises.

     The EU Emissions Trading Scheme (ETS) was adopted on July 22, 2003 and comes into force on January 1, 2005. Participation is mandatory for defined sectors, including combustion plant, iron and steel production to slab, sinter plants, coke ovens and lime production. Primary and secondary aluminium production are not covered.

     The ETS is a cap and trade system, which means that there is an absolute cap placed on site emissions of CO2 and the difference can be bought or sold in the emissions trading market. At the end of each year, sites will have to surrender allowances equal to their emissions of CO2. Failure of sites to surrender sufficient allowances will result in a fine of €40/tonne of CO2 for 2005-2007 and €100/tonne of CO2 thereafter. The scheme is to be implemented by EU member states and the details are being developed. Corus, as a major producer of iron and steel, is consulting with the UK and Netherlands governments to ensure that the steel industry is not financially disadvantaged by the trading scheme.

     As a result of the implementation of the EU Landfill Directive, Corus has to provide some form of surety for the future closure of operational landfill sites. All of these sites are in the UK and require to be re-permitted in a phased manner from 2004 to 2007. Corus is in discussion with the UK Environment Agency on the appropriate form of such financial surety.

     Further information required by this Item is incorporated by reference from pages 23 and 24 ‘Environment and the community’ of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004, incorporated herein by reference.

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 Insurance
    Corus aims to minimise its expenditure on insurance and to reduce its exposure to catastrophe losses to a level consistent with its ability to carry such losses. To this end Corus maintains insurance cover, which it feels is appropriate for its business, through a combination of self-funding and policies purchased from external insurers. Corus arranges some of its insurance through Crucible Insurance Company Limited (“Crucible”) and Hoogovens Verzekeringsmaatschappij NV (“HVM”), two wholly owned subsidiaries. Crucible and HVM reinsure catastrophe risks with the external insurance market. Corus’ external insurance policies cover its statutory insurance requirements and certain contractual obligations, as well as catastrophe risks, ranging from single large losses to an aggregation of frequent low-value claims. External insurance is also used to insure non-catastrophe risks where it is cost-effective, and when claims handling and other specialist services are required.

     Insurance policies are arranged on a group basis for the following key classes of insurance:

• Material damage & consequential loss;
  
• Public & products liability;
  
• Professional indemnity;
  
• Aviation products liability;
  
• Marine cargo; and
  
• Directors & officers liability.
  

     Other country specific cover, for instance for the United States, is arranged as discrete policies at the regional level.

     The net book value of investments held by Crucible and HVM as at January 3, 2004 amounted to £48 million (December 28, 2002: £48 million).

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 Critical accounting policies
     The information required by this Item is incorporated herein by reference from pages 29 and 30 of the section ‘Accounting policies’ of the ‘Review of the period’ of the Report & Accounts 2003, contained in the Corus Report on Form 6-K dated March 22, 2004.

 Operating results
     The information required by this Item is incorporated herein by reference from (i) page 10 from the beginning of the section ‘Performance in the period’ to page 22 to the end of the section ‘Aluminium – Investment’ of the ‘Review of the period’, (ii) page 26 from the beginning of the section ‘Business risk management’ to the end of page 31 of the ‘Review of the period’, (iii) pages 32 to 35 ‘Financial review’ and (iv) Note 20 on pages 85 and 86 of the Report & Accounts 2003, contained in the Corus Report on Form 6-K dated March 22, 2004. The discussion is designed to comply with both the requirements of this Item and the recommendations of the Statement “Operating and Financial Review” issued by the UK Accounting Standards Board. The focus of the discussion is on the financial statements prepared in accordance with UK GAAP.

     A summary of the differences between UK GAAP and US GAAP is set out in Note 37 on pages 107 to 112, ‘Supplementary information for North American investors’ of the Report & Accounts 2003, contained in the Corus Report on Form 6-K dated March 22, 2004, incorporated herein by reference.

 Liquidity and capital resources
     The information required by this section is incorporated by reference from pages 32 to 35 ‘Financial review’, and Note 28 on page 95 of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004.

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     Under Item 3 on page 3 ‘Risk factors’ there is provided a discussion on the risk that the Supervisory Board of Corus Nederland may preclude Corus from realising the payment of dividends and the making of intra-group loans by Corus Nederland and utilising cash resources for the benefit of the Group. This could limit the Group’s operational flexibility and affect its financial condition.

     Discussion on the general purpose of capital expenditure commitments at January 3, 2004 is provided under Item 4 on page 10 ‘UK restructuring’ and page 11 ‘Capital expenditure’.

 Research and development, patents and licenses, etc
     Company-wide research and technology development is provided from the three Technology Centres of Corus in Teesside, Rotherham (both UK) and IJmuiden (Netherlands). As part of the plans to concentrate research and development activities in the UK, the Welsh Technology Centre at Port Talbot was closed at the end of 2002. It was also decided during 2003 to review the decision to build a new Technology Centre in the UK, which had been announced in 2000.

     Day to day technical support aimed at continuous improvement of process operations and products is the responsibility of works line or technical management, rather than the research and development organisation. To deliver technology more effectively, the research and development organisation has been structured so as to improve and strengthen the links with the individual businesses and with the major market sectors for Corus; namely construction, automotive, other transport, engineering and packaging. Increased emphasis has been placed on the development of downstream applications, involving close collaboration with Corus’ businesses and key customers. However, as part of the Restoring Success initiative discussed on page 9, special research and development projects have commenced in the process area aimed at achieving the target level of manufacturing excellence throughout the Group.

     Research and development expenditure in the last three financial periods is set out below.

     (a) Recoveries comprise fees received from other steel and engineering companies and funding assistance from the EU.

     Corus is the proprietor of a number of patents and national and international trademarks, and is party to a number of inward and outward technology licences, none of which has a material influence on the Corus business or profitability. At the end of 2003 Corus owned 545 valid patents and during, 2003, 66 new patent applications were filed.

 Trend information
     The information required by this section is incorporated by reference from pages 10 to 31 ‘Review of the period’ and pages 32 to 35 ‘Financial review’ of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004.

 Off balance sheet arrangements
     The information required by this section is incorporated by reference in Note 30 on pages 95 and 96 of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004. Other than disclosed, there are no off balance sheet arrangements that have or are reasonably likely to have a current or future material effect on the Group’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditure or capital resources.

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 Aggregate contractual arrangements

     The estimated employer contributions to the British Steel Pension Scheme and to the Stichting Pensioenfonds Hoogovens Scheme for 2004 are £12 million and €55 million respectively. Monthly payments of £1 million are being made to the CES Scheme in respect of past service funding requirements, subject to review at future actuarial valuations. Additional payments will also be made to the CES Scheme, where necessary, to address any funding strains resulting from early retirements.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 Directors and senior management
     The information required by this section is incorporated herein by reference from pages 36 to 43 ‘Directors’ report’, pages 44 and 45 ‘The Board’ and pages 46 and 47 ‘The Executive committee’ of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004.

     There are no family relationships between any directors and senior management.

     There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any director or member of senior management was selected for his position.

 Compensation
     The information required by this section is incorporated herein by reference from pages 48 to 58 ‘Report on remuneration’ of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004.

     The aggregate compensation for senior management amounted to £1,508,298, including bonuses and termination benefits (2002: £706,315 including bonuses). The bonus plan for these senior executives of the Company is the same as for the executive directors. The relevant bonus descriptive information required by this section is incorporated herein by reference from pages 48 to 51 ‘Report on remuneration’ of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004.

     The accumulated total amount set aside to provide pension benefits for the directors and senior management was £231,973 (2002: £88,038).

 Board practices
     Certain of the information required by this section is incorporated herein by reference from pages 36 to 43 ‘Directors’ report’, pages 44 and 45 ‘The Board’ and page 48 ‘Report on remuneration’ of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004.

     There are four main Board committees whose constitution and terms of reference are summarised below. In addition, there is an Allotment committee that operates in connection with the Company’s employee share schemes.

     Audit committee – Following a Board review, from February 2004 the Audit committee comprises Mr Andrew Robb (Chairman), Mr Richard Turner, Mr Eric van Amerongen and Dr Tony Hayward, all of whom

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are regarded by the Board as independent. It is responsible for reviewing all financial and other matters relating to internal control, financial reporting, the scope of internal audits, the appointment of and other services provided by external auditors and other matters as requested by the Board.

     Remuneration committee – Following a Board review, from February 2004 the Remuneration committee comprises Mr Eric van Amerongen (Chairman), Mr Andrew Robb and Mr Maarten van Veen, all of whom are regarded by the Board as independent. It is responsible for determining and agreeing with the Board the broad policy for the remuneration and other contract terms for the Chairman, the executive directors and the Company Secretary. It is also responsible for the granting of options and the operation of the executive share option schemes.

     Health, Safety and Environment committee – Following a Board review, from February 2004 the Health, Safety and Environment committee comprises Mr Maarten van Veen (Chairman), Mr Eric van Amerongen and Dr Tony Hayward, all of whom are regarded by the Board as independent. It is responsible for reviewing Corus’ performance in terms of compliance with health, safety and environmental legislation and formulating the Corus policies with regard to such issues.

     Nominations committee – Following a Board review, from February 2004 the Nominations committee comprises Mr Jim Leng (Chairman), Mr Eric van Amerongen, Dr Tony Hayward and Dr Kurt Lauk, all of whom are regarded by the Board as independent. It considers the nomination of Board members and proposes any new Board appointments.

     Day to day running is delegated to the Chief Executive and through him to an Executive committee comprising the executive directors and other senior executives within Corus.

 The organisation of the Group
     Corus Group plc is the parent company of Corus UK Limited and Corus Nederland BV, both of which are wholly-owned subsidiaries. Corus UK is a trading company and manages the businesses formerly owned by British Steel. Corus Nederland, previously Koninklijke Hoogovens NV, is a holding company for the businesses owned by Koninklijke Hoogovens prior to its merger with British Steel to form Corus and it is subject to the mitigated structure regime under the provisions of the Dutch Civil Code. The operations of the Group are organised into divisions and individual business profit centres (see Item 4 ‘Organisational structure’).

     The Board of Corus UK and the Management Board of Corus Nederland are responsible for the day to day management of their respective businesses in accordance with the strategy laid down by Corus Group plc. In addition to these two boards, Corus Nederland is required by the Dutch statutory mitigated structure regime to have a Supervisory Board to advise the Management Board of Corus Nederland. That Supervisory Board is also responsible for supervising the policies of the Management Board of Corus Nederland and the general course of business of the company. When exercising its duties, it must act in the best interests of Corus Nederland and its business enterprise. Certain decisions of the Management Board of Corus Nederland are reserved for approval by the Supervisory Board, including the issue of shares, the entering into or terminations of long term co-operation arrangements with third parties, the alteration of the articles of Corus Nederland and certain significant acquisitions and disposals. The Supervisory Board may extend the decisions of the Management Board that are subject to its approval. The Supervisory Board may suspend members of the Management Board.

     Members of the Supervisory Board are appointed for a minimum of four years, and any vacancies are filled by appointments made by the current members of the Supervisory Board, subject to rights of recommendation by the general meeting, the competent works council and the Management Board, and rights of objection by the general meeting and the competent works council. The Supervisory Board must consist of a minimum of three members. Members of the Management Board are appointed and dismissed by the general meeting of shareholders.

     There are changes to the Dutch mitigated structure regime proposed which, if implemented, will give the shareholder the right, among other things, to overrule nominations to the Supervisory Board and the ability to dismiss the entire Board. They will also allow the works council the right to nominate one third of the

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membership of the Supervisory Board. Once this legislation is enacted, there will be a dialogue with the Supervisory Board of Corus Nederland to ensure that the company is operating in accordance with the latest statutory, regulatory and governance procedures.

 Employees
     Corus had a total of 49,400 employees at January 3, 2004 of whom 24,600 were employed in the UK, 11,400 in the Netherlands, 6,000 in Germany, 1,700 in France, 1,600 in Belgium, 1,100 in the USA, 1,100 in Canada and 1,900 in other countries.

     Corus does not employ a significant number of temporary employees, there being only 1.2% at the balance sheet date.

     Corus has experienced no significant industrial relations problems since the 1980 national steel strike (the only industry-wide strike since the formation of BSC in 1967). Well developed procedures have operated in all parts of the Group for consulting and negotiating with the trade unions and employee representatives, and these have been used extensively in discussions on the substantial changes that have been required in the working practices and number of employees as a result of the restructuring programmes and major closures. Approximately 84% of Corus’ UK employees are members of trade unions, the ISTC having the largest representation.

     In a difficult year, the level of investment in education and training remained the same as for the previous year at around £50 million, while progress with certain initiatives continued. In particular, a revised, standard approach to assisting business units in assessing their investment in training performance was successfully tested at several locations in the Netherlands and the UK.

     Further information concerning the changes which are taking place to improve the productivity of the workforce are described at pages 22 and 23 ‘People’ of the Report & Accounts 2003, contained in the Corus Report on Form 6-K dated March 22, 2004, which is incorporated herein by reference.

     Further information regarding the average number of persons employed during the past three years and the category of activity is provided in Note 4 to the accounts of the Report & Accounts 2003 contained in the Corus Report on Form 6-K dated March 22, 2004.

 Share ownership
     The information required by this section is incorporated herein by reference from pages 48 to 58 ‘Report on remuneration’, and in Note 26 to the accounts of the Report & Accounts 2003, contained in the Corus Report on Form 6-K dated March 22, 2004.

     Mr Gerhard Buddenbaum, Mr Paul Lormor, Mr Scott MacDonald, Mr Staf Wouters and Mr Richard Reeves are senior executives of Corus. They hold in aggregate 61,571 ordinary shares being 0.001% of Corus’ issued share capital. The voting rights attached to their shares are identical to those pertaining to all other ordinary shares in issue. These senior executives hold, in aggregate, options over 973,927 Corus ordinary shares exercisable at prices ranging from 50p to 133p and exercisable between March 2003 and March 2011.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 Major shareholders
     Certain of the information required by this Item is incorporated by reference from page 36 ‘Directors’ report – Substantial shareholdings’, of the Report & Accounts 2003, contained in the Corus Report on Form 6-K dated March 22, 2004.

     So far as Corus is aware, except as otherwise indicated on page 36 ‘Directors’ report – Substantial shareholdings, of the Report & Accounts 2003, as at March 22, 2004 no person was the beneficial owner of more than 5% of the Corus’ Ordinary shares, nor was Corus directly or indirectly owned or controlled by another corporation or by any government.