Notes to the Consolidated Financial Statements of Salzgitter AG(37) Notes to the Segment ReportingPrimary SegmentationThe segmentation of the Salzgitter Group into five corporate divisions accords with the Group's internal controlling and reporting functions. In the segment reporting, the business activities of the Salzgitter Group are assigned to the divisions Steel, Trading, Services, Processing and Tubes in accordance with the overall corporate structure. Salzgitter AG as the holding company is included under the heading Other/Consolidation. The operating steel companies, Salzgitter Flachstahl GmbH, Peiner Träger GmbH and Ilsenburger Grobblech GmbH, belong to the Steel Division under the intermediate holding company Salzgitter Stahl GmbH. Salzgitter Großrohre GmbH, the non-consolidated subsidiary Ilsenburger Stahl und Logistik GmbH and the shareholding in Steel Dynamics Holding Inc. (SDI) are also assigned to this division. The Trading Division consists of four domestic and five foreign companies in the Salzgitter Handel Group, Universal Eisen und Stahl GmbH, Universal Ocel spol. s.r.o. and Hövelmann & Lueg GmbH; Robert S.A.S., as a proportionately integrated joint venture, is assigned to the Trading Division. At the beginning of the reporting year, Universal Ocel spol. s.r.o., Prague, was taken out of the group of consolidated companies. The companies Le Feuillard S.A.S. and Tolcolor S.A.S., which belong to the Robert Group, are assigned to the Trading Division as associated companies in accordance with the equity method. This segment also includes the non-consolidated companies in the Salzgitter Handel Group and the Universal Handel Group. The Services Division includes DEUMU Deutsche Erz- und Metall-Union GmbH, PPS Personal-, Produktions- und Servicegesellschaft mbH, SIT Salzgitter Information und Telekommunikation GmbH, the TELCAT Group, GESIS Gesellschaft für Informationssysteme mbH, Hansaport Hafenbetriebsgesellschaft mbH, "Glückauf" Wohnungsgesellschaft mbH, VPS Verkehrsbetriebe Peine-Salzgitter GmbH and also the net income from shareholdings assigned to this segment. From this reporting year onwards, Salzgitter Mannesmann Forschung GmbH will be reported in this division, having been assigned to the Tubes Division in the previous year. The companies in this division are primarily engaged in providing services to the Group. It is intended, however, that their expertise and existing infrastructure should be made increasingly available to customers outside of the Group. The services offered include data processing, telecommunications services, scrap metal trading, the handling and storage of bulk cargo, transport and other services. The Processing Division comprises HSP Hoesch Spundwand und Profil GmbH, Salzgitter Bauelemente GmbH, Salzgitter Europlatinen GmbH, Salzgitter Automotive Engineering Beteiligungsgesellschaft mbH, Salzgitter Automotive Engineering GmbH & Co. KG, Salzgitter Automotive Engineering Immobilien GmbH & Co. KG and Salzgitter Beteiligungsgesellschaft mbH. Also assigned to this segment are the non-consolidated companies Salzgitter Magnesium-Technologie GmbH and Oswald Hydroforming GmbH & Co. KG, as well as ThyssenKrupp GfT Bautechnik GmbH which was valued at equity. The Tubes Division includes the fully consolidated units of the Mannesmannröhren-Werke Group: Mannesmannröhren-Werke GmbH, Mannesmannröhren Mülheim GmbH, MHP Mannesmann Präzisrohr GmbH, Mannesmann Line Pipe GmbH, Robur Buizenfabriek B.V., Röhrenwerk Gebr. Fuchs GmbH and the DMV Group. In addition, the Group includes the joint venture Europipe GmbH (including the subsidiaries Europipe France S.A., EB Pipe Coatings, Inc., Berg Steel Pipe Corporation, Eupec PipeCoatings GmbH and Eupec PipeCoatings France S.A.) and Mannesmannröhren-Werke 1. Verwaltungsgesellschaft mbH, which are also included proportionately in the consolidated financial statements. Vallourec S.A., Vallourec & Mannesmann Tubes S.A., Vallourec & Mannesmann Tubes Corporation and Hüttenwerke Krupp Mannesmann GmbH are likewise assigned to this business segment as associated companies in accordance with the equity method. Eupec Pipeline Services GmbH, Mülheim an der Ruhr, was taken out of the group of consolidated companies as of January 1, 2004. Sales in the various segments are additionally subdivided according to the customers' principal place of business. Inter-segment sales are basically conducted on standard market terms such as also apply to transactions with third parties. Depreciation and amortization relate solely to the fixed assets of the respective segments. The earnings reported for companies valued using the equity method also encompass amortization of goodwill and income from the reversal of negative goodwill at these companies. Segmental operating assets and liabilities comprise the assets and external funds required for operational purposes - excluding both interest-bearing debt and income tax receivables and liabilities. The investments relate to additions to tangible fixed assets and intangible assets, excluding goodwill resulting from the acquisition of shares. 
Secondary SegmentationSecondary segmentation subdivides the commercial activity by region. External sales by performance recipient subdivides Group sales with non-Group entities according to customers' principal place of business. Group external sales are also subdivided according to the principal place of business of the consolidated supplier company. The transition of the segmental assets to Group assets and the sum total of the segmental debts to Group debts are shown in the following overview:
Related Party DisclosuresIn addition to business relationships with companies consolidated fully and proportionately in the consolidated financial statements, relationships also exist with affiliated, non-consolidated companies and associated companies that must be characterized as related companies in accordance with IAS 24. Most of the delivery and service relationships between companies in the consolidated group and companies related to the Salzgitter Group are depicted in the following table:
All business transactions with related companies are conducted on terms that also customarily apply among third parties. Deliveries and services provided to related companies concern crude steel products supplied for processing and primarily deliveries of sheet piling and mine arches to ThyssenKrupp GfT Bautechnik GmbH for resale. The deliveries and services received essentially comprise deliveries of pre-material for the manufacture of large-diameter pipes and precision tubes. The receivables and liabilities resulting from transactions with related companies are specified in the notes to the consolidated financial statements under the explanation of the corresponding asset and liability items. Payment transactions, term money borrowings and deposits as well as forward exchange contracts were conducted with NORD/LB, and also with other banks, during the reporting period. The transactions were conducted on terms customary on the market. Nord/LB has notified us that it fell below the threshold of 5% of the voting rights in Salzgitter AG as of January 18, 2005. Administrative costs and operating expenses were charged on with a view to covering costs. Within the context of internal clearing transactions, demand deposits were basically charged at 6.00% p.a. In the case of term money borrowings, the subsidiaries were charged interest at rates of between 2.69% and 6.00% p. a.; Salzgitter AG paid interest at between 1.76% and 6.00% p.a. on term money deposits. Overall, these financial transactions generated interest income for Salzgitter AG in the amount of € 54.0 million (2003: € 60.0 million) and interest expenses of € 35.4 million (2003: € 36.5 million). In no case were the terms disadvantageous to the company. As of the reporting date, Salzgitter AG provided collateral to the creditors of its subsidiaries in various forms:
For members of the Executive Board and management staff of the Salzgitter Group, a warrant-linked bond was issued as part of the Long-Term Incentive Plan; details are given under No. 27. Notifications in accordance with § 15a of the German Securities Trading Act (directors' dealings) had not been received by Salzgitter AG as of December 31, 2004. As of December 31, 2004, the total of shares held by all Executive and Supervisory Board members amounted to less than 1% of the shares issued by the company.
Waiver of Disclosure in Accordance with §264, Para. 3 or §264b of the German Commercial Code (HGB)The following fully consolidated domestic subsidiaries have fulfilled the conditions required under §264, Para. 3 or §264 b of the German Commercial Code (HGB) and are therefore exempted from disclosure of their financial statements:
Supervisory Board and Executive BoardOne member of the Executive Board was granted a loan amounting to T€ 150 with a term up to June 30, 2006. The interest rate is 5.5% p.a. The contractual provisions provide for redemption payments commencing on June 30, 2004, with early redemption also being possible. T€ 50 of the T€ 150 had been redeemed by December 31, 2004. The members of the Supervisory Board and the Executive Board are stated separately. For the discharge of their duties, the members of the Executive Board received the sum of € 3.8 million (2003: € 3.4 million) in the financial year under review. Of this total, € 1.9 million (2003: € 1.2 million) was accounted for during the reporting year by performance-related remuneration components. Provisions for pension obligations to members of the Executive Board amounted to € 5.0 million (2003: € 5.6 million). Former members of the Executive Board and their surviving dependants received a total of € 1.6 million for the financial year (2003: € 1.2 million). Pension provisions totaling € 19.6 million (2003: € 17.3 million) have been set aside to cover commitments to former Executive Board members and their surviving dependants. The remuneration of the Supervisory Board is shown in the following table:
In 2003 Supervisory Board members received a total of € 0.5 million. Salzgitter, March 11, 2005
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