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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

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

For the fiscal year ended November 30, 2002

Commission file number: #000-29506

NOVAMERICAN STEEL INC.(Exact name of Registrant as specified in its charter)

Canada(Jurisdiction of incorporation or organization)

2175 Hymus Blvd., Dorval, Québec H9P 1J8, Canada(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:

|Title of each class: Common Shares, without nominal or
par value |  | Name of each exchange on which registered: NASDAQ National Market
|---------------------------------------------------------------- |  | -----------------------------------------------------------------

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:



Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of November 30, 2002:

|9,700,000 |  | Common Shares   
|--------- |  | ----------------
|-0-       |  | Preferred Shares

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

|Yes                                                                                         |  | ý | No      |  | o |  | 
|------------------------------------------------------------------------------------------- |  | - | ------- |  | - |  | 
|Indicate by check mark which financial statement item the registrant has elected to follow.
|Item 17                                                                                     |  | o | Item 18 |  | ý |  | 

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TABLE OF CONTENTS



|Item     |                                          | Caption                                                                     
|-------- | ---------------------------------------- | ----------------------------------------------------------------------------
|         |                                          |                                                                             
|         | Statement on Forward Looking Information
|Part I  
|1        |                                          | Identity of Directors, Senior Management and Advisers                       
|2        |                                          | Offer Statistics and Expected Timetable                                     
|3        |                                          | Key Information                                                             
|4        |                                          | Information on the Company                                                  
|5        |                                          | Operating and Financial Review and Prospects                                
|6        |                                          | Directors, Senior Management and Employees                                  
|7        |                                          | Major Shareholders and Related Party Transactions                           
|8        |                                          | Financial Information                                                       
|9        |                                          | The Offer and Listing                                                       
|10       |                                          | Additional Information                                                      
|11       |                                          | Quantitative and Qualitative Disclosures About Market Risk                  
|12       |                                          | Description of Securities Other Than Equity Securities                      
|Part II 
|13       |                                          | Defaults, Dividend Arrearages and Delinquencies                             
|14       |                                          | Material Modifications to the Rights of Security Holders and Use of Proceeds
|15       |                                          | Controls and Procedures                                                     
|16       |                                          | Reserved                                                                    
|Part III
|17       |                                          | Financial Statements                                                        
|18       |                                          | Financial Statements                                                        
|19       |                                          | Exhibits                                                                    
|         | Signatures                              
|         | Certifications                          

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STATEMENT ON FORWARD-LOOKING INFORMATION

Except for the statements of historical fact contained herein, the information under the headings "Item 4 Information on the Company", "Item 5 Operating and
Financial Review and Prospects", "Item 11 Quantitative and Qualitative Disclosures about Market Risk" and elsewhere in this Form 20-F Annual Report constitutes "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this document, the words "anticipate", "expect", "believe", "estimate", "project" and similar
expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions, including those identified in the section captioned "Key
InformationRisk Factors". Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those
expected, believed, estimated or projected. The Company undertakes no obligation to publicly release, furnish or file the result of any revision to the forward-looking statements herein that may be
made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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

The selected financial data presented below, other than references to tons sold and processed, have been derived from the Consolidated Financial Statements of
Novamerican Steel Inc. and Subsidiaries ("Novamerican" or the "Company") for the five years ended November 30, 2002 which were audited by Raymond Chabot Grant Thornton, Chartered
Accountants, General Partnership. The selected financial data presented below should be read in conjunction with, and are qualified in their entirety by, "Operating and Financial Review and
Prospects," the Consolidated Financial Statements and other financial information included elsewhere in this document. All financial data presented is expressed in U.S. dollars.

|                                                 |  | Years Ended (a)
|------------------------------------------------ |  | ---------------
|
|
|Statement of Operations Data:                    |  |                
|Net sales                                        |  | $              
|Cost of sales                                    |  |                
|                                                 |  |                
|Gross margin                                     |  |                
|Operating expenses                               |  |                
|                                                 |  |                
|Operating income                                 |  |                
|Interest expense                                 |  |                
|                                                 |  |                
|                                                 |  |                
|Share in income of joint ventures                |  |                
|                                                 |  |                
|                                                 |  |                
|Unrealized loss on foreign exchange contracts    |  |                
|                                                 |  |                
|Income before income taxes and minority interest |  |                
|Income taxes                                     |  |                
|                                                 |  |                
|Income before minority interest                  |  |                
|Minority interest                                |  |                
|                                                 |  |                
|Net income                                       |  | $              
|                                                 |  |                
|Basic and diluted income per share (b)           |  | $              
|                                                 |  |                
|Operating income per share                       |  | $              
|                                                 |  |                
|Weighted average Common Shares outstanding       |  |                
|                                                 |  |                

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|                                                 |                 | Years Ended (a) |        
|------------------------------------------------ | --------------- | --------------- | -------
|
|
|Other Data:                                      |                 |                 |        
|EBITDA (c)                                       |                 | $               | 23,136 
|Capital expenditures                             |                 | $               | 22,308 
|Depreciation and amortization                    |                 | $               | 3,350  
|Gross margin                                     |                 |                 | 19.1   
|Operating margin                                 |                 |                 | 5.0    
|Income before income taxes and minority interest |                 |                 | 3.7    
|Tons sold and processed (unaudited):             |                 |                 |        
|                                                 | Direct sales    |                 |        
|                                                 | Toll processing |                 |        
|                                                 |                 |                 |        
|                                                 |                 |                 | 841,000
|                                                 |                 |                 |        

|                    |  | Years Ended (a)
|------------------- |  | ---------------
|
|
|Balance Sheet Data: |  |                
|Current assets      |  | $              
|Current liabilities |  |                
|Working capital     |  |                
|Total assets        |  |                
|Total debt          |  |                
|Net assets          |  |                
|Share capital       |  |                

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Risk Factors

The following issues, among others, may have a material effect on the Company's financial performance.

Cost of Raw Materials; Impact of Changing Steel Prices.The principal raw material used by the Company is
flat-rolled carbon steel which the Company typically purchases from steel producers. The steel industry as a whole is cyclical and at times pricing and availability can be volatile due to
numerous factors beyond the Company's control, including general, regional and international economic conditions, production levels, competition, import duties and tariffs and currency exchange rates.
This volatility could adversely affect the Company's business, results of operations and financial condition.

Steel
service centers generally maintain substantial inventories of steel to accommodate the short lead times and just-in-time delivery requirements of their
customers. Accordingly, the Company purchases steel in an effort to maintain its inventory at levels that it believes to be appropriate to satisfy the anticipated needs of its customers based upon
historic buying practices, contracts with customers and market conditions. The Company's commitments for steel purchases are generally at prevailing market prices in effect at the time the Company
places its orders. The Company has no long-term, fixed-price steel purchase contracts. When raw material prices increase, competitive conditions will influence how much of the steel price
increase can be passed on to the Company's customers. When raw material prices decline and the Company uses existing steel inventory, customer demands for lower prices could result in lower sale
prices and lower margins. Changing steel prices therefore could adversely affect the Company's business, results of operations and financial condition.

Cyclicality of Demand.Certain of the Company's products are sold to industries that experience significant fluctuations in
demand based on economic conditions or other factors beyond the control of the Company. The Company's diversified customer base, geographic base and growth strategy serve to reduce such cyclicality;
however, there can be no assurance that the Company will be able to increase or maintain its level of sales or prices in periods of economic stagnation or downturn.

Sales
of the Company's products for use in the automotive industry accounted for approximately 20.3% of the Company's net sales in fiscal 2002 and approximately 16.8% of net sales in
fiscal 2001. Such sales include sales directly to the automobile manufacturers and to their component and parts suppliers as well as to manufacturers supplying the automotive "after market" components
and parts. The
automobile industry experiences fluctuation in demand based on numerous factors such as general economic conditions and consumer confidence. The automobile industry is also subject, from time to time,
to labor problems, which may result in reduced demand for the Company's products during work stoppage.

Risks Associated with Expansion.Historically, the Company has grown internally by increasing sales to existing customers,
aggressively pursuing new customers and, in response to customer demand, acquiring and upgrading processing equipment and services in order to expand the range of value-added services it can offer. In
addition, growth has occurred through external expansion by the acquisition of other steel service centers and related businesses. Although the Company intends to continue to actively pursue its
growth strategy in the future, there can be no assurance that the anticipated growth will occur. In addition, although the Company has purchased equipment only in response to identified customer
demand, the expansion of an existing facility or construction of a new facility could have an adverse effect on the Company's results of operations due to the impact of the start-up costs
and the potential for underutilization in the start-up phase of a facility. Acquisitions could result in unforeseen difficulties in integrating the acquired businesses with the Company's
existing business and could divert a disproportionate amount of management time and attention. Moreover, the incurrence of additional indebtedness to pay for expansion costs or acquisition costs could
adversely affect the Company's liquidity and financial stability and the issuance of Common Shares to effect acquisitions could result in dilution to the Company's shareholders. Although the Company
frequently evaluates potential acquisitions, the Company currently has no understandings, agreements or commitments to make any acquisitions. There

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can be no assurance that any new facility or operation of any future acquisitions, if completed, would be profitable. See "Information on the CompanyHistory and Development of the
Company."

Exchange Rate Fluctuations.Although the Company's financial results are reported in U.S. dollars, a substantial portion of
its revenues are received in, and its expenses are incurred in, Canadian dollars. In determining its results of operations, the Company converts the sales made by Canadian subsidiaries into the United
States, which are denominated in U.S. dollars, into Canadian dollars based upon the average monthly exchange rate at the time of sale.

Exchange
rate fluctuations are beyond the control of the Company and although the Company partially hedges its currency exposure, there can be no assurance that changes in the rate of
exchange between the Canadian dollar and the U.S. dollar will not adversely affect the Company's business, financial condition, results of operations and cash flow. See "Quantitative and Qualitative
Disclosures About Market Risk."

Environmental Matters.The nature of the Company's business may expose it to environmental liability claims, even if such
claims are without merit. American Steel and Aluminum Corporation ("American Steel"), one of the Company's subsidiaries, was named as one of nineteen defendants in an action brought in
October 2001 by two private parties under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") to recover costs incurred and to be incurred in connection with a
waste disposal facility in Cumberland, RI, which has been categorized as a Superfund site by federal authorities. The complaint was subsequently amended to add 17 new defendants and
further such amendments are expected. The plaintiffs claim that the Company is liable based upon alleged shipments to the site by American Steel, prior to its 1996 acquisition. The plaintiffs have
identified over 100 potentially responsible parties ("PRPs") and the Environmental Protection Agency ("EPA") has issued claim notice letters to 63 parties, some of which are defendants in the lawsuit.
The Company has not received an EPA claim letter. The plaintiffs seek recovery of approximately $0.6 million for investigative expenses, together with a declaration of liability for all future
response costs at the site. Future investigative costs are estimated at $3.0 million. It is not currently possible to estimate future remediation costs. The defendants have formed a PRP
committee (in which the Company is participating) to monitor the site investigation. The Company believes it has meritorious defenses against the claims raised in the action, and intends to defend its
position vigorously should the litigation proceed. However, the Company cannot provide assurances that it will prevail should the litigation proceed, and any significant loss could have a material
adverse effect on the financial results of the Company.

In
addition, the Company's processing centers and manufacturing facilities are subject to many federal, state, provincial and local laws and regulations in the United States and Canada
relating to the protection of the environment. The Company has made, and will continue to make, expenditures to remain in compliance with such laws and regulations. The Company believes that its
facilities are in material compliance with these laws and regulations and does not believe that continued compliance with such laws and regulations will have an adverse effect on its results of
operations or financial condition. In addition, the Company cannot predict the environmental laws or regulations that may be enacted in the future or how existing or future laws and regulations will
be administered or interpreted. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of the regulatory agencies or stricter interpretations of existing
laws and regulations, may require additional expenditures by the Company which could vary substantially from those currently anticipated.

Certain
of the facilities occupied by the Company have been in operation for many years and, over such time, the Company and prior owners or operators of such properties may have
generated and disposed of wastes which are or may be considered hazardous. Accordingly, it is possible that additional environmental liabilities may arise in the future as a result of any such waste
generation and disposal.

Dependence on Key Individuals.The success of the Company's business is dependent upon the management and leadership of D.
Bryan Jones, the Company's President and Chief Executive Officer, and

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certain other members of the Company's senior management team. The loss of any of these individuals or an inability to attract, retain and maintain additional personnel could adversely affect the
Company. There can be no assurance that the Company will be able to retain its existing senior management personnel or to attract additional qualified personnel. See "Directors, Senior Management and
Employees."

Liquidity.Although the Company's shares are registered under the Securities Act of 1933 and trade on the Nasdaq National
Market (the "Nasdaq"), currently, there is limited volume of trading. Accordingly, investors may not be able to rapidly divest a portion of their shares or liquidate their investment should they
desire to do so.

Competition.The principal markets served by the Company are highly competitive. The Company competes on a regional basis
with steel service centers and, to a certain degree, primary steel producers and intermediate steel processors. The Company has different competitors for each of its products and within each region.
Certain of these competitors have financial and operating resources in excess of those of the Company. Although the Company has been able to successfully compete in the past, no assurance can be given
that it will be able to continue to do so. Increased competition could have an adverse effect on the Company's net sales and profitability in the future. See "Information on the
CompanyCompetition."

Control by Existing Shareholders.Approximately 81.8% of the outstanding Common Shares are owned by certain officers and
directors of the Company. See "Directors, Senior Management and EmployeesShare Ownership." Accordingly, they will collectively retain the power to elect the entire Board of Directors of
the Company and determine the outcome of any other matters submitted to the Company's shareholders for approval.

Labor Contracts; Risk of Work Stoppage.Certain of the employees at ten of the Company's 24 facilities are organized by the
United Steel Workers, the Teamsters, the Sheet Metal Workers and independent employees associations, representing in the aggregate approximately 321 of its 1,142 employees. The Company's labor
contracts expire on staggered dates. During the next twelve months, the labor contract with the Teamsters covering 28 employees at the Company's Lasalle facility and the labor contract with an
independent employee association at the Company's Portland facility covering 33 employees will expire. While management does not expect that work stoppages will arise in connection with the renewal of
labor agreements expiring in the foreseeable future, no assurance can be given that work stoppages will not occur. Widespread work stoppages could have an adverse effect on the Company's business,
financial condition and results of operations if they were to last for a significant period of time. See "Directors, Senior Management and EmployeesEmployees."

Financial Leverage.The Company's indebtedness may increase as it continues to borrow under existing or future credit
arrangements in order to finance construction and expansion activities, future acquisitions and for general corporate purposes, which would increase the associated risks. These risks include:
sensitivity to adverse economic conditions; inability to fund future working capital, acquisitions, capital expenditures and other general corporate requirements; limits on its flexibility in planning
for, or reacting to, changes in its business and the steel industry; limits on future borrowings under its existing or future credit arrangements, which could affect its ability to pay its
indebtedness or to fund its other liquidity needs; inability to generate sufficient funds to cover required interest payments; and restrictions on its ability to refinance its indebtedness on
commercially reasonable terms. See "Operating and Financial Review and ProspectsLiquidity and Capital Resources."

Restrictive Loan Covenants May Limit the Company's Ability to Pursue its Acquisition Strategy.Certain of the Company's
credit facilities contain covenants restricting or limiting its ability to, among other things: incur additional indebtedness; pay dividends or make other restricted payments; make asset dispositions;
permit liens; and make capital expenditures and other investments. These restrictions may adversely affect its ability to pursue its acquisition and other growth strategies. See "Operating and
Financial Review and ProspectsLiquidity and Capital Resources."

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Lack of Dividends.The Company does not anticipate paying cash dividends on its Common Shares for the foreseeable future. The
Company, at present, intends to retain any future earnings to finance operations and expansion.

Holding Company Structure; Reliance on Distributions from Subsidiaries.The Company has no direct business operations other
than its ownership of the capital stock of its subsidiaries. As a holding company, the Company is dependent on dividends, interest payments, management fees or other intercompany transfers of funds
from its subsidiaries to enable it to pay dividends and to meet its direct obligations. The Company's subsidiaries' credit facilities allow the payment to the Company of dividends and interest under
certain conditions. See "Operating and Financial Review and ProspectsLiquidity and Capital Resources."

ITEM 4 INFORMATION ON THE COMPANY

History and Development of the Company

Novamerican Steel Inc. was incorporated on April 4, 1997 under the Canada Business Corporations Act. The Company's registered office, principal
place of business and principal executive offices are located at 2175 Hymus Blvd., Dorval, Québec, Canada H9P 1J8. The Company's telephone number at the principal executive
offices is (514) 335-6682.

Following
the incorporation of the Company in 1997, a reorganization of the various operations wholly-owned or controlled by D. Bryan Jones or Scott B. Jones, the son of D. Bryan Jones,
brought the operations under one holding company. Novamerican is the holding company for two main operating groups: (i) the Canadian affiliates, consisting of Nova Steel Ltd., Metco
Steel Inc., Nova Tube Inc., Cresswell Roll Forming Inc., Argo Steel Ltd., Nova Tube Ontario Inc., Nova Steel Processing Centre Ltd. and Delta Tube and
Company, Limited, (collectively, the "Canadian Affiliates" or "Nova"); and (ii) the U.S. affiliates, consisting of Integrated Steel Industries, Inc. ("ISI"), a U.S. holding company,
American Steel, Nova Tube and Steel, Inc. and BethNova Tube, LLC, (collectively, the "U.S. Affiliates" or "ISI"). See "Organizational Structure".

Nova
Steel Ltd. was established as a processor of hot-rolled carbon steel in 1979 by D. Bryan Jones, President and Chief Executive Officer of the Company. In 1983,
Nova Steel Ltd. acquired and installed its first tube mill in Montréal. In 1987, this operation became Nova Steel Ltd.'s (60%) contribution to a joint venture, Delta Tube
and Company, Limited, for the toll rolling of tubing, with Ispat Sidbec Inc. (40%). In 1985, the majority of the shares of Cresswell Roll Forming Inc., a roll forming, stamping and
manufacturing business in Québec, were acquired. In 1989, Argo Steel Ltd., a processor of hot-rolled, cold-rolled and galvanized steel products was
established in Montréal with a 50.9% interest at the time. This expansion was followed in October 1991 with the establishment of Metco Steel Inc. This company is a
processor of carbon steel plate and plate coil and operates in a Montréal location, formerly occupied by Candiv Steel, a company whose equipment and inventories were purchased by Nova
Steel Ltd. in February 1991.

In
July 1991, Nova Tube Inc. acquired a tube mill operation in Baie d'Urfé, Québec and, in May 1996, Nova Tube Ontario Inc.
("NTO") was established with the installation of a tube mill in Mississauga, Ontario specifically designed to meet the needs of high pressure hydroforming for the automotive industry.

American
Steel, which was founded in 1962 and acquired by the Company in August 1996, operates in nine locations in the Northeastern and Mid-Atlantic United States.
American Steel is a distributor of steel, aluminum and stainless steel products including hot and cold-rolled carbon steel, aluminum, stainless steel, alloy and coated products in sheet,
coil, bar, shapes, tubular and plate forms.

On
November 7, 1997, the Company completed its initial public offering of 2,200,000 Common Shares of its capital stock in the United States and the Company's Common Shares were
listed on the Nasdaq and currently trade under the symbol of "TONS". As of February 26, 2003, the Company had 9,700,000 Common Shares outstanding.

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In
December 1998, the Company, through its then 50.9% owned subsidiary, Argo Steel Ltd., acquired the assets of a steel slitting operation and established a processing
center in Brampton, Ontario where it installed a .134" X 75" blanking line.

During
1998, the Company built a processing facility in Stoney Creek, Ontario, Nova Steel Processing Centre Ltd. ("NSPC"), and installed a 400,000 ton per year pickling line
together with a technologically advanced 200,000 ton per year slitting line. Both the pickling line and the slitting line were commissioned and went into full production during the first quarter of
1999. A second slitting line installed in 2000 has been in full production since 2001.

During
2000, Novamerican Tube Holdings, Inc., a wholly-owned subsidiary of ISI, formed a joint venture with Bethlehem Steel Corporation ("Bethlehem"), BethNova Tube, LLC
("BethNova"), to produce
steel tubing for use in hydroforming of automobile and truck components. This state-of-the-art tube manufacturing facility in Jeffersonville, IN was completed in
2001, began ramping up production in the fourth quarter of 2001 and continues to increase its operating levels. The bulk of the tube production at the new facility is dedicated to Dana Corporation, a
major automotive parts supplier, which has built a new hydroforming plant near Elizabethtown, KY. On October 15, 2001, Bethlehem filed for protection under Chapter 11 of the United States
Bankruptcy Code. On February 6, 2003, the board of directors of Bethlehem approved the sale of substantially all of its assets, including its interest in the joint venture, to International
Steel Group, Inc. Such sale is subject to, among other things, the parties' entering into a definitive agreement and to the approval of the U.S. Bankruptcy Court. In the interim, the joint
venture is operating in the normal course. The Company does not believe that the sale of Bethlehem's joint venture interest to International Steel Group, Inc. will have a material adverse
effect on the joint venture.

In
November 2000, the Company built a new tubing facility, operated by Nova Tube and Steel, Inc. ("NTS"), in Morrisville, PA. Phase one, the structural tube mill, began
production in November 2000 and is capable of producing hollow structural sections ("HSS") up to 6" × 6" × 3/8". Phase two,
consisting of a heavy gauge slitter and cut-to-length line was completed in November 2001 and has been in full production throughout 2002.

During
2000, the Company expanded its Auburn, MA facility with an addition of 35,000 square feet. A new blanking line, which has increased American Steel's product range, was installed
and went into production in the third quarter of 2001.

In
February of 2002, the Company, through its wholly-owned subsidiary, Cresswell Roll Forming Inc., leased an 118,300 sq. ft facility in St-Hubert,
Québec to produce the upper bodies for articulated haulers. The cost of the equipment was approximately $1,100,000 which was financed by a loan amounting to $600,000 at
November 30, 2002. See "Operating and Financial Review and ProspectsLiquidity and Capital Resources."

In
2002, the Company, through a subsidiary, acquired all of the minority interest in Argo Steel Ltd. The acquisition was financed by internal sources of funds. See "Financial
StatementsNote 3".

During
2002, the Company began construction of a 158,000 sq. ft operating facility in Lasalle, Québec. The Company intends to combine in this facility certain existing
operations as well as upgrade its processing equipment. The anticipated cost of this project is approximately $10,500,000 of which $5,300,000 has been incurred through February 26, 2003. This
project will be financed in part by new debt and in part by internal sources of funds.

During
2002, the premises leased by NTO in Mississauga, Ontario were expanded by 40,000 sq. ft. The additional space will permit this facility to increase its existing capacity. The
Company will install additional equipment costing approximately $400,000 which will be financed by internal sources of funds.

Acquisition and Expansion Strategy.The Company's overall objective is to increase profits by strategically acquiring other
steel service centers and related businesses, acquiring and upgrading processing equipment and services in response to customer demand, expanding into new domestic and

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international markets, increasing sales to existing customers and aggressively pursuing new customers. The Company's acquisition strategy is to pursue opportunities which, among other things, are
located in areas geographically contiguous to regions currently served, provide value-added processing capability, expand its range of services and customer base and possess strong local management.
In addition, the Company continually reviews opportunities to internally expand its capabilities in such contiguous areas in order to better serve the needs of its customers and develop new markets
for processed steel and tubing. Although the Company regularly evaluates acquisition opportunities, the Company currently has no understandings, agreements or commitments in such regard.

Business Overview

Novamerican processes and distributes carbon steel, stainless steel and aluminum products and operates as an intermediary between primary metal producers and
manufacturers. In addition to flat-rolled processing, including pickling, slitting, blanking, cutting-to-length and roll forming to customer specifications, the
Company produces steel tubing used for a variety of markets such as the structural and automotive markets (including tubing used expressly for hydroforming) and also manufactures steel components for
heavy equipment.

Novamerican's
revenues are derived from sales in the United States and Canada, with approximately 50.7% of the Company's 2002 sales made to customers in the United States and the balance
of approximately 49.3% to customers in Canada. The United States and Canadian markets are viewed by management as generally homogeneous with respect to business environment, levels of risk and
profitability. The Company has its headquarters in Dorval, Québec and presently operates in thirteen locations in Canada and in eleven locations in the United States.

The
Company's business strategy is focused on achieving profitable growth and higher margins through investment in value-added manufacturing and processing equipment and selective
acquisitions. The Company's acquisition strategy is to pursue opportunities, which among other things, are located in areas geographically contiguous to regions currently served, provide value-added
processing capability, expand its range of services and customer base and possess strong local management. The Company believes that its steel service center and processing operations will continue to
grow as a result of four principal industry trends: (i) customer demand for higher quality products and services, (ii) outsourcing of manufacturing processes by North American
manufacturers, (iii) the consolidation of industry participants and (iv) the shift by major customers to fewer and larger suppliers.

Products and Services

The Company processes and distributes carbon steel, stainless steel and aluminum products and operates as an intermediary between primary metal producers and the
manufacturers that require processed metal, often on a just-in-time delivery basis. In addition to flat-rolled processing and roll forming to customer
specifications, Novamerican, through its subsidiaries, produces steel tubing used for a variety of markets such as structural and automotive markets (including tubing used expressly for hydroforming)
and also manufactures steel components for heavy equipment. Novamerican is the holding company for two main operating groups: Nova in Canada and ISI in the United States.

Nova,
which was founded in 1979, operates in thirteen locations in Central Canada and two in the United States. Nova is a flat-rolled service center and manufacturer of
tubing and certain specialized end-products, focusing on value-added processing to meet specific customer needs. Nova provides service to a broad base of approximately 1,500 customers in
Canada and the United States, which include manufacturers of automobiles and automotive parts, construction equipment, agricultural equipment, resellers and general steel fabricators. Nova's
flat-rolled processing capabilities include pickling, slitting, leveling and cutting-to-length, blanking, edging, shearing, burning and roll forming.

American
Steel, which was founded in 1962 and acquired in mid-1996, operates in nine locations in the Northeastern and Mid-Atlantic United States. American Steel
is a distributor of steel, aluminum and

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stainless steel products, including hot and cold-rolled carbon steel, aluminum, stainless steel, alloy and coated products in sheet, coil, bar, shapes, tubular and plate forms. In fiscal
2002, Nova supplied 2.9% of American Steel's products at market rates, and is capable of supplying American Steel with approximately one-half of its product line. American Steel provides
local service on a just-in-time basis to a broad base of approximately 7,500 U.S. customers, which include industrial manufacturers, resellers and fabricators in the
automobile, automotive supply, appliance, electrical, heavy equipment, agricultural machinery and office equipment manufacturing industries. American Steel's processing capabilities include bar
sawing, burning, shearing, leveling and cutting-to-length, blanking and slitting.

At
its processing operations, the Company maintains a substantial inventory of coil, plate coil and plate generally purchased from primary producers. The Company's inventory of carbon
and stainless steel and aluminum is purchased in the form of a continuous sheet, typically from 36 to 96 inches wide, between .015 and .750 inches thick and rolled into 10 to 30 ton coils. Because of
the width, size and weight of these coils and the equipment required to move and process them into smaller sizes, such coils do not meet the requirements of many customers without further processing
by the Company.

The
Company's tubing operations presently consist of six mills of which four are located in Canada and two are located in the United States. The majority of the Company's tube production
is HSS structural tubing. However, two of the Company's tube mills were constructed specifically to meet the needs of high pressure hydroforming for the automotive industry. Hydroforming is an
innovative technology used in the manufacture of certain automotive parts which involves the application of water at high pressure
to form and shape steel tubes and reduces the cost and the weight of a steel component. One of these tube mills is located at the NTO facility in Canada. The other mill is located at the BethNova
facility in Jeffersonville, IN, the Company's joint venture with Bethlehem. See "History and Development of the Company."

The
Company's services include pickling and the traditional service center processes of slitting, leveling and cutting-to-length and shearing as well as higher
value-added processes of tubing, roll forming, blanking and plate burning to process steel to specified lengths, widths and shapes pursuant to specific customer orders. Pickling is an
in-line process for cleaning hot-rolled steel coils of rust, scale and dirt. Slitting involves cutting steel to specified widths along the length of the coil. Leveling is a
process used to flatten any shape deficiencies in the steel coil. Cutting-to-length involves cutting steel along the width of the coil. Shearing is the process of cutting sheet
steel. Tubing is the process in which flat-rolled coils are formed into a circular, oval, square or rectangular shape. Roll forming is the process in which flat-rolled coils
can be pre-punched, in-line welded and formed into sophisticated shapes for specific purposes. Blanking cuts steel into specific shapes with close tolerances. Plate burning is
the process of cutting steel, typically in excess of one inch thick, into specific shapes and sizes.

Suppliers

The Company purchases flat-rolled steel for processing from a number of North American and international primary steel producers. The Company
concentrates on developing relationships with high-quality North American integrated steel mills and mini-mills, as well as international primary steel producers, and on
becoming a valued customer of such producers. The Company is a major customer of flat-rolled coil for many of its principal suppliers, but is not dependent on any one supplier. The Company
purchases from steel producers in quantities that are efficient for such producers. This enables the Company to maintain a continued source of supply at what it believes to be competitive prices. The
Company believes the accessibility and proximity of its facilities to major steel producers will continue to be an important factor in maintaining relationships with them.

The
steel industry as a whole is cyclical, and at times pricing and availability can be volatile due to numerous factors beyond the Company's control, including general, regional and
international economic conditions, production levels, competition, import duties and tariffs and currency exchange rates.

11

---

Customers and Distribution

Each of the Company's distribution operations maintains its own sales and marketing staff. The Company's combined sales force consists of 124 salaried inside and
outside sales representatives of which 25 are commissioned representatives. The Company's sales efforts are focused primarily on direct
customer contact. The Company believes that its commitment to quality, service and just-in-time delivery has enhanced its ability to build and maintain strong customer
relationships, while expanding its geographic growth through the continued training and addition of sales personnel.

In
fiscal 2002, the Company processed steel for sale to approximately 9,000 customers. The Company's diversified customer and geographic base serves to reduce its exposure to
fluctuations in business and economic cycles in particular industries and regions. In fiscal 2002, the Company's top twenty customers accounted for less than 22.5% of total net sales and no single
customer accounted for more than 2.5% of total net sales. Major customers include automotive parts manufacturers and stampers, other steel service centers, general fabricators and manufacturers of
transportation equipment, material handling equipment, electrical components, appliances, storage tanks, ship building material, construction and heavy equipment and agricultural equipment. Sales to
automobile manufacturers and their suppliers combined with sales to manufacturers supplying the automotive "after market" components and parts accounted for approximately 20.3% of total net sales and
sales to other steel service centers accounted for approximately 15.3% of total net sales. See also "Products and Services".

Most
of the Company's customers are located in the Northeastern and Mid-Atlantic United States and in Central Canada. Most customers are located within a 250-mile
radius of one of the Company's facilities, allowing the Company to operate an efficient delivery system capable of handling a high volume of short lead-time orders. The Company transports
most of its products directly to customers via its own fleet of trucks, through independent trucking firms and through a logistics company owned by a director of the Company. See "Major Shareholders
and Related Party TransactionsRelated Party Transactions".

The
following table sets forth the net sales of Nova and the U.S. Affiliates for the past three fiscal years:

Nov. 30,
2002

Nov. 24,
2001

Nov. 25,
2000(In thousands of U.S. dollars)Nova

$
262,160

$
220,956

$
264,188U.S. Affiliates


213,419


206,270


219,504Eliminations


(10,078
)

(10,197
)

(5,186
)$
465,501

$
417,029

$
478,506


Due
to the impact of seasons and climate in the regions predominantly served by the Company, demand for certain of the Company's products may fluctuate during the winter months.

Competition

The Company competes with other regional and national steel service centers, single location service centers and, to a certain degree, primary steel producers and
intermediate steel processors on a regional basis. The Company has different competitors for each of its products and within each geographic region. The Company competes on the basis of price, product
selection and availability, customer service, quality and geographic proximity. Certain of the Company's competitors have financial and operating resources in excess of those of the Company.

12

---

Environmental

The Company's facilities are subject to comprehensive and frequently changing federal, state, provincial and local laws and regulations in the United States and
Canada relating to the protection of the environment, including those related to air emissions, wastewater discharges, treatment, storage and disposal of hazardous substances and other materials and
wastes, occupational health and safety, and in general, the emissions of pollutants into the environment.

The
Company believes that it is in material compliance with all applicable environmental laws and regulations. The Company does not anticipate any material expenditures to meet
environmental requirements and does not believe that continued compliance with such laws and regulations will have a material adverse effect on its operations or financial condition. The Company has,
however, been named as a defendant in an action brought by two private parties under CERCLA with respect to a Superfund site. See "Key InformationRisk FactorsEnvironmental
Matters."

Organizational Structure

The following chart illustrates the organization of the Company's subsidiaries and the country of organization: GRAPHIC

13

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Property, Plants and Equipment

American Steel, founded in 1962, was acquired by the Company in mid-1996. American Steel is a processor and distributor of carbon and stainless steel
and aluminum products. The following chart describes each of American Steel's nine locations and their operations:

|Location                      |  |       |  |                                           |  |       |  | Description of Operations                                                                                                                                                          |  | Title
|----------------------------- |  | ----- |  | ----------------------------------------- |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|                             
|American Steel/Albany, NY     |  | 
   |  | 40,000 sq. ft
Shearing                    |  |      |  | Pipe and tubing, hot-rolled products and galvanized sheet                                                                                                                          |  | Owned
|                              |  |      |  | Bar sawing                                |  | 
   |  | Stainless steel and aluminum
Tubing                                                                                                                                                |  |      
|                             
|American Steel/Ashland, VA    |  | 

 |  | 45,000 sq. ft
Shearing
Bar sawing         |  | 

 |  | Stainless steel and aluminum
All carbon steel products
Tubing                                                                                                                      |  | Owned
|                             
|American Steel/Auburn, MA     |  | 

 |  | 105,000 sq. ft
Slitting line
Leveling and |  |      |  | Leading supplier of cold-rolled, high carbon, strip steel in the Northeastern United States                                                                                        |  | Owned
|                              |  |       |  | cut-to-length line                        |  |      |  | Processing of cold-rolled, galvanized,                                                                                                                                             |  |      
|                              |  |      |  | Blanking line                             |  |       |  | aluminum and stainless coils to supply sheets for the entire Company                                                                                                               |  |      
|                              |  |       |  |                                           |  |      |  | Processing of coated sheets, intermediate tempered sheets and bright finished materials                                                                                            |  |      
|                             
|American Steel/Cumberland, RI |  | 
   |  | 49,000 sq. ft
Shearing                    |  |      |  | Hot-rolled products, cold-rolled bars, specialty plate burning                                                                                                                     |  | Owned
|                              |  | 
   |  | Bar sawing
Burning                        |  | 
   |  | Tubing
Stainless steel and aluminum                                                                                                                                                |  |      
|                             
|American Steel/Harrisburg, PA |  | 
   |  | 104,000 sq. ft
Shearing                   |  |      |  | Full line of products, particularly stainless steel and aluminum sheet                                                                                                             |  | Owned
|                              |  |      |  | Bar sawing                                |  |      |  | Tubing                                                                                                                                                                             |  |      
|                             
|American Steel/Hartford, CT   |  | 

 |  | 36,000 sq. ft
Shearing
Bar sawing         |  |      |  | Cold finished carbon steel bars, cold-rolled, coated, aluminum and stainless steel sheet                                                                                           |  | Owned
|                              |  |       |  |                                           |  |      |  | Tubing                                                                                                                                                                             |  |      
|                             
|American Steel/Norwood, MA    |  | 

 |  | 55,000 sq. ft
Shearing
Bar sawing         |  |      |  | Aluminum, stainless steel, cold-rolled, hot-rolled and coated sheet                                                                                                                |  | Owned
|                              |  |       |  |                                           |  |      |  | Tubing and cold finished carbon steel bars                                                                                                                                         |  |      
|                             
|American Steel/Portland, ME   |  | 

 |  | 59,000 sq. ft
Shearing
Bar sawing         |  |      |  | All products, including high strength,
hot-rolled plates for the shipbuilding industry and stainless steel bar grating for corrosive pulp and paper and food processing industries |  | Owned
|                              |  |       |  |                                           |  |      |  | Tubing                                                                                                                                                                             |  |      
|                             
|American Steel/Syracuse, NY   |  | 

 |  | 53,000 sq. ft
Shearing
Bar sawing         |  | 

 |  | Primarily hot-rolled products
Stainless steel and aluminum
Tubing                                                                                                                  |  | Owned
|                             

14

---

In
addition to the American Steel locations, the Company also has two tubing facilities in the United States.

|Subsidiary/Location                               |  |     |  |                                                   |  |   |  | Description of Operations                                                                  |  | Title
|------------------------------------------------- |  | --- |  | ------------------------------------------------- |  | - |  | ------------------------------------------------------------------------------------------ |  | -----
|                                                 
|Nova Tube and Steel, Inc./                        |  | 
 |  | 163,300 sq. ft
HSS tube mill up to                |  |  |  | Hot-rolled HSS tubing up to 6" square                                                      |  | Owned
|Morrisville, PA                                   |  |     |  | 6" × 6" × 3/8"                                    |  |  |  | Hot-rolled sheet and plate coil                                                            |  |      
|                                                  |  |    |  | Heavy gauge slitter                               |  |   |  |                                                                                            |  |      
|                                                  |  |    |  | Heavy gauge cut-to-length line                    |  |   |  |                                                                                            |  |      
|                                                 
|BethNova Tube, LLC/Jeffersonville, IN
(50% owned) |  | 
 |  | 108,000 sq. ft
Mechanical tube mill up to 7" O.D. |  |  |  | High quality mechanical tubing targeting hydroformed automobile and truck frame components |  | Owned
|                                                 

Nova,
founded in 1979, has grown from a single slitting line operation to become a leading steel service center and tube mill operation serving the central Canadian
market. These facilities constitute a broad, equipment-based steel service center operation which provides manufacturing and value-added processing to meet specific customer needs. The following chart
describes each of Nova's thirteen locations and their operations:

|Subsidiary/Location                                     |  |       |  |                                                                        |  |   |  | Description of Operations                                                                                                                                                       |  | Title                   
|------------------------------------------------------- |  | ----- |  | ---------------------------------------------------------------------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------
|                                                       
|Nova Steel Ltd./Dorval, Québec                          |  | 
   |  | 75,500 sq. ft
Three slitting lines                                     |  |  |  | Hot-rolled, hot-rolled pickled and oiled and cold-rolled products and                                                                                                           |  | Leased to
May 31, 2003  
|                                                        |  |      |  | Cut-to-length line                                                     |  |   |  | tubing                                                                                                                                                                          |  |                         
|                                                        |  |      |  | Multiple blanking line                                                 |  |   |  |                                                                                                                                                                                 |  |                         
|                                                        |  |      |  | Three flat bar edging lines                                            |  |   |  |                                                                                                                                                                                 |  |                         
|                                                       
|Nova Steel Ltd./Cambridge, Ontario                      |  | 
   |  | 49,100 sq. ft
Two slitting lines                                       |  |  |  | Hot-rolled, hot-rolled pickled and oiled, cold-rolled and coated sheets,                                                                                                        |  | Leased to
Nov. 30, 2004 
|                                                        |  |      |  | Cut-to-length line                                                     |  |   |  | plates and slit coils                                                                                                                                                           |  |                         
|                                                        |  |      |  | Shearing                                                               |  |   |  |                                                                                                                                                                                 |  |                         
|                                                       
|Delta Tube & Co., Ltd./LaSalle, Québec (60% owned)      |  | 
   |  | 100,000 sq. ft
HSS tube mill, up to
5" × 5" × 1/4"                     |  |  |  | Toll rolling of HSS tubing for Nova and pipe for Ispat Sidbec Inc.                                                                                                              |  | Owned                   
|                                                       
|Nova Tube Inc./Baie D'Urfé, Québec                      |  | 

 |  | 47,100 sq. ft
Hot-rolled tube mill
Cold-rolled tube mill up to 3" O.D. |  |  |  | Toll rolling of tubing for Nova for the automotive and furniture industries, other manufacturers and the structural market                                                      |  | Leased to
May 31, 2003  
|                                                       
|Nova Tube Ontario Inc./Mississauga, Ontario             |  | 
   |  | 90,000 sq. ft
Cold-rolled tube mill up to 4" O.D.                      |  |  |  | Toll rolling of high quality mechanical tubing for Nova for the hydroforming process in the automotive industry and
for other automotive and general manufacturing applications |  | Leased to
April 30, 2007
|                                                       
|Nova Steel Processing Centre Ltd./Stoney Creek, Ontario |  | 

 |  | 171,000 sq. ft
Pickling line
Two slitting lines                        |  |  |  | Pickling and slitting of coils on a toll
rolling basis                                                                                                                          |  | Owned                   
|                                                       
|Argo Steel Ltd./Lachine, Québec                         |  | 

 |  | 53,000 sq. ft
Slitting line
Cut-to-length line                         |  |  |  | Hot-rolled, cold-rolled and galvanized products for general manufacturing applications                                                                                          |  | Leased to
Dec. 31, 2003 
|                                                        |  | 
   |  | Blanking line
Shearing                                                 |  |   |  |                                                                                                                                                                                 |  |                         
|                                                       

15

---

|                                              
|----------------------------------------------
|Argo Steel Ltd./Brampton, Ontario             
|                                              
|                                              
|Metco Steel Inc./Lachine, Québec              
|                                              
|                                              
|Cresswell Roll Forming Inc./                  
|Granby, Québec                                
|                                              
|                                              
|                                              
|                                              
|Cresswell Roll Forming Inc./St. Hubert, Québec
|                                              
|Cresswell Roll Forming Inc./St. Hubert, Québec
|                                              
|Cresswell Roll Forming Inc./                  
|Shawinigan, Québec                            
|                                              

Several of Nova's facilities are leased under agreements that expire within the coming year. The Company plans to exercise its existing renewal options to extend most of
these leases. See "Information on the CompanyHistory and Development of the Company".

Substantially
all the assets of certain of the Company's subsidiaries are subject to blanket liens for the benefit of certain lenders. See "Operating and Financial Review and
ProspectsLiquidity and Capital Resources".

All
of the above facilities are fully utilized.

16

---

ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with the Company's Consolidated Financial Statements and the notes thereto included
in Item 18 of this document.

Overview

All amounts are expressed in U.S. dollars.

Nova's
operations historically have been conducted by entities owned and operated under common management philosophies of the family of D. Bryan Jones. Novamerican was incorporated on
April 4, 1997 as part of a reorganization in order to consolidate the operations of American Steel and Nova under one holding company.

The
Consolidated Financial Statements include the accounts and transactions of the U.S. Affiliates and the Canadian Affiliates at historical cost, except that all material intercompany
balances and transactions have been eliminated. All references to fiscal years of the Company and its subsidiaries and affiliates in Operating and Financial Review and Prospects are to fiscal years
ended on the last Saturday of November.

Novamerican,
through its subsidiaries, sells a broad range of products, many of which have different gross margins. Products that have more value-added processing, as well as
manufactured products, generally have a greater gross margin. Toll processing, whereby the Company processes steel owned by its customers, generally results in lower selling prices per ton but higher
gross margin percentages than the Company's historical direct sales. Accordingly, the Company's overall gross margin is affected by product mix and the amount of processing performed, as well as
volatility in selling prices and material purchase costs. Net sales include direct sales and toll processing revenues. Cost of goods sold for direct sales includes raw material, freight and labor
costs.

The
Company sells products in Canada and the United States. All sales and payments are made in either Canadian dollars or U.S. dollars. Because the Company conducts its operations
generally on the basis of short-term orders, backlog is not a meaningful indicator of future performance. The Company's results of operations are affected by numerous external factors,
such as general economic and political conditions, competition and steel pricing and availability.

The
Company concentrates on internal growth and on improving the efficiency of its operations through increases in capacity, productivity and efficiency. The Company also has expanded
through selective acquisitions, including the 1996 purchase of American Steel, and through strategic capital investments, such as NTO, NSPC, the installation of the pickling and slitting facility in
Stoney Creek, Ontario, NTS, the installation of the Company's fifth tube mill in Morrisville, PA and BethNova, the Company's sixth tube mill, a joint venture with Bethlehem, established to supply
tubing for use in hydroforming of automobile and truck components. The Company has been profitable in each year since 1979, except for a loss of less than $200,000 in 1990. The Company's net income
and total tons sold and processed grew from 1998 to 2002 at a compound annual rate of 18.04% and 13.78%, respectively.

17

---

Selected Results of Operations

The following table sets forth for each of the periods presented certain statement of operations data expressed as a percentage of net sales.

|                                                 |  | Years Ended |  
|------------------------------------------------ |  | ----------- | -
|
|Net sales                                        |  | 100.0       | %
|Cost of sales                                    |  | 78.5        |  
|                                                 |  |             |  
|Gross margin                                     |  | 21.5        |  
|Operating expenses                               |  | 15.9        |  
|                                                 |  |             |  
|Operating income                                 |  | 5.6         |  
|Interest expense                                 |  | 1.3         |  
|                                                 |  |             |  
|                                                 |  | 4.3         |  
|Share in income of joint ventures                |  | 0.1         |  
|                                                 |  |             |  
|Income before income taxes and minority interest |  | 4.4         |  
|Income taxes                                     |  | 1.7         |  
|                                                 |  |             |  
|Income before minority interest                  |  | 2.7         |  
|Minority interest                                |  | 0.0         |  
|                                                 |  |             |  
|Net income                                       |  | 2.7         |  
|                                                 |  |             |  

Fiscal Year Ended 2002 Compared to Fiscal Year Ended 2001

Tons sold and processed increased by 11.4% to 1,604,000 tons in 2002 from 1,440,000 tons in 2001. Tons sold and processed in 2002 include 867,000 tons from direct
sales and 737,000 tons from toll processing, compared with 773,000 tons from direct sales and 667,000 tons from toll processing in 2001.

Net
sales increased by approximately $48.5 million, or 11.6%, to $465.5 million, compared with $417.0 million in 2001. The increase was mainly attributable to higher
selling prices and higher volumes.

Gross
margin, as a percentage of net sales, increased to 24.5% in 2002 from 22.8% in 2001. The increase was attributable to the rapid increase in selling prices during 2002, to the
increase in the number of tons processed and to the management of inventories.

Operating
expenses, as a percentage of net sales, decreased to 17.1% of sales from 18.4% in 2001. The decrease in percentage was mainly attributable to the higher selling prices. In
absolute dollars, operating expenses increased by $3.0 million. This increase was due mainly to increased operating levels.

Interest
expense decreased by approximately $1.4 million, or 21.6%, to $5.1 million, compared to $6.5 million in 2001. This decrease was mainly due to the lower
level of bank indebtedness.

Income
before income taxes and minority interest increased by $18.3 million, or 153.8%, to $30.2 million in 2002 from $11.9 million in 2001. This increase was due
mainly to higher selling prices and higher gross margins.

Income
taxes in 2002 were $10.1 million and represented 33.4% of income before taxes and minority interest, compared to $3.9 million representing 32.8% of income before
income taxes and minority interest in 2001.

18

---

Fiscal Year Ended 2001 Compared to Fiscal Year Ended 2000

Tons sold and processed increased by 3.3% to 1,440,000 tons in 2001 from 1,394,000 tons in 2000. Tons sold and processed in 2001 include 773,000 tons from direct
sales and 667,000 tons from toll processing, compared with 795,000 tons from direct sales and 599,000 tons from toll processing in 2000.

Net
sales decreased by approximately $61.5 million, or 12.9%, to $417.0 million, compared with $478.5 million in 2000. The decrease was mainly attributable to lower
selling prices and to general market conditions.

Gross
margin, as a percentage of net sales, increased to 22.8% in 2001 from 21.5% in 2000.

Operating
expenses, as a percentage of net sales, increased to 18.4% from 15.9% in 2000. The increase was a result of higher plant expenses, particularly in the new start up facilities.

Interest
expense increased by approximately $0.1 million, or 1.6%, to $6.5 million, compared to $6.4 million in 2000. This increase was mainly due to the higher
level of long-term debt.

Income
before income taxes and minority interest decreased by $9.3 million, or 43.9%, to $11.9 million in 2001 from $21.2 million in 2000. Income taxes in 2001 were
$3.9 million and represented 32.8% of income before taxes and minority interest, compared to $8.0 million representing 37.8% of income before income taxes and minority interest in 2000.

Fiscal Year Ended 2000 Compared to Fiscal Year Ended 1999

The Company finished the year with record net sales of $478.5 million, compared with $426.7 million in 1999, an increase of approximately
$51.8 million, or 12.1%. The increase was attributable to higher selling prices through the first half of the year and to higher volumes. Tons sold and processed increased by 25.4% to 1,394,000
tons in 2000 from 1,111,000 tons in 1999. Tons sold and processed in 2000 include 795,000 tons from direct sales and 599,000 tons from toll processing, compared with 761,000 tons from direct sales and
350,000 tons from toll processing in 1999.

Gross
margin, as a percentage of net sales, decreased to 21.5% in 2000 from 22.3% in 1999. The first half of fiscal 2000 began with a strong performance but was negatively impacted by
the rapid decline of selling prices in the latter part of the year due to softening demand.

Operating
expenses, as a percentage of net sales, increased to 15.9% from 15.6% in 1999. The increase was a result of higher plant expenses in the newest facilities being in full
operation during the entire year compared to only part of the year in 1999.

Interest
expense increased by approximately $1.2 million, or 23.1%, to $6.4 million, compared to $5.2 million in 1999. This increase was mainly due to the higher
bank indebtedness in 2000 required to finance inventories and increased sales volumes. As at November 25, 2000, the Company had successfully reduced inventory levels to be in position to take
advantage of well priced buying opportunities.

The
Company, from time to time, utilizes forward foreign exchange contracts to hedge its exposure to exchange rate fluctuations in connection with future sales and purchases denominated
in U.S. dollars. As at November 25, 2000, the Company had no forward foreign exchange contracts outstanding since its receipts in U.S. dollars were used for purchases and capital expenditures
in U.S. dollars. As at November 27, 1999, the fair value of the forward exchange contracts was $0.1 million below their carrying value, giving rise to unrealized exchange losses which
were required to be recognized in income.

Income
before income taxes and minority interest decreased by $2.9 million, or 12.0%, to $21.2 million in 2000 from $24.1 million in 1999. Income taxes in 2000 were
$8.0 million and represented 37.8% of income
before taxes and minority interest, compared to $9.4 million representing 39.0% of income before income taxes and minority interest in 1999.

19

---

Liquidity and Capital Resources

The Company's principal capital requirement is to fund its growth, including strategic acquisitions, the purchase and upgrading of processing equipment, the
construction and upgrading of related facilities and additional working capital. Historically, the Company has used cash generated from operations and revolving credit borrowings under its credit
facilities to finance its working capital requirements and has financed acquisitions and capital additions from the proceeds of long-term indebtedness under the credit facilities.

Net
cash from (used for) operating activities for fiscal 2000, 2001 and 2002 was $(7.1) million, $28.2 million and $13.2 million, respectively. These variations are
attributable mainly to the Company's overall inventory levels.

Net
cash used for investing activities for fiscal 2000, 2001 and 2002 was $26.6 million, $14.6 million and $16.5 million, respectively. During 2002, cash used for
investing activities consisted primarily of $13.5 million of capital expenditures together with $3.6 million for the acquisition of the Argo Steel Ltd. minority interest and
additional investment in the BethNova joint venture. See "Information on the CompanyHistory and Development of the Company".

Net
cash from (used for) financing activities for fiscal 2000, 2001 and 2002 was $32.2 million, ($7.2) million and $0.0 million, respectively. These differences are mainly
due to fluctuations in working capital items, in particular inventories and in capital expenditures.

The
Company believes that funds available under its credit facilities together with the funds from operations will be sufficient to provide the Company with the liquidity necessary to
fund its anticipated working capital requirements and capital expenditure requirements over the next 24 months. Capital requirements are subject to change as business conditions warrant and
opportunities arise. In connection with its internal and external expansion strategies, the Company may from time to time seek additional funds to finance the development of new facilities and major
improvements and additions to processing equipment to respond to customers' demands.

At
November 30, 2002, the Company's revolving credit facilities consisted of the following:



20

---



There
are no cross collateralizations among the various Canadian credit facilities or between the Canadian credit facilities and the U.S. credit facility.

At
November 30, 2002, the Company's long-term debt consisted of the following:



21

---



A
loan amounting to $0.3 million in 2001, was secured by a Personal Property Security Agreement and a first hypothec (or lien) on the universality of all present and future
equipment, machinery and vehicles of a Canadian subsidiary, that bore interest at a Canadian bank's prime rate of 6.5% minus 1% was repaid during 2002. Loans from minority shareholders amounting to
$0.3 million in 2001, that bore interest at prime plus 0.5% were repaid during 2002.

The
credit facilities contain various restrictive covenants which require minimum net worth levels, maintenance of certain financial ratios and limitations on dividends and capital
expenditures. The credit facilities allow the payment to the Company of dividends and interest from its subsidiaries under certain conditions.

The
parent guarantees and all other direct obligations rank on apari passubasis.

A
summary of the payments due under the Company's debt and other contractual obligations as at November 30, 2002 is as follows:

|                 |  | Payments due by period
|---------------- |  | ----------------------
|
|
|Long-term debt   |  | $                     
|Operating leases |  |                       
|                 |  |                       
|                 |  | $                     
|                 |  |                       

As
at November 30, 2002, the Company had $0.3 million outstanding under letters of credit related to the purchase of equipment expiring in 2003.

At
November 30, 2002, advances by an employee to the Company amounted to $2.0 million, bearing interest at prime, currently 4.5%, plus a premium of 0.5%, without repayment
terms.

Effects of Inflation

Inflation generally affects the Company by increasing the cost of personnel, processing equipment, purchased steel and borrowings under the Company's credit
facilities and other indebtedness. The Company does not believe that inflation has had a material effect on its operating income over the last three fiscal years. However, it has had and could have a
material effect on the Company's financing costs based on inflation's impact on amounts borrowed, the prime rate and LIBOR.

Hedging

The Company formally documents all relationships between hedging instruments and the hedged items, as well as its risk-management objectives and
strategies for undertaking various hedge transactions. The Company formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in cash flows of the hedged items.

22

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When
it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively
when (a) it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item; (b) the derivative expires or is sold, terminated or
exercised; or (c) management determines that designation of the derivative as a hedge instrument is no longer appropriate. In these situations where hedge accounting is discontinued, the
derivative will be carried at its fair value on the balance sheet,
with changes in its fair value recognized in current-period earnings. All gains or losses that were accumulated in other comprehensive loss will be recognized immediately in earnings upon the
discontinuance of hedge accounting.

The
Company minimizes the credit (or repayment) risk in derivative instruments by entering into transactions with reputable financial institutions and it does not hold derivative
instruments for trading purposes.

At
November 30, 2002 and November 24, 2001, a U.S. subsidiary of the Company had an interest rate swap agreement to manage its exposure to interest rate risk as required
under the terms of the term loan agreement. See "Liquidity and Capital Resources." This swap possesses a term equal to the term of the debt, with a fixed pay rate and a receive rate indexed to rates
paid on the debt. This derivative was entered into concurrently with the issuance of the debt being hedged, at which date, it was designated as a cash flow hedge and its fair value was recognized on
the balance sheet. Changes in the fair value of this derivative are reported as a separate component of shareholders' equity in accumulated other comprehensive loss.

As
at November 25, 2000, prior to the adoption of the Statement of Financial Accounting Standards ("SFAS") No. 133, the interest rate swap agreement used by the U.S.
subsidiary of the Company to hedge its exposure to interest rate risk had an unfavorable position reflecting the instrument's estimated fair value of approximately $1,600, which was not recognized in
the Company's Consolidated Financial Statements.

The
Company, from time to time, utilizes forward contracts to hedge its exposure to Canadian dollar exchange rate fluctuations in connection with future sales and purchases denominated
in U.S. dollars. Forward contracts are entered into with reputable financial institutions and the Company does not enter or hold foreign exchange forward contracts for trading purposes. There were no
forward foreign exchange contracts outstanding at year end.

Current and Pending Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and
Intangible Assets". This statement prescribes accounting for all purchased goodwill and intangible assets and states that acquired goodwill and intangible assets with indefinite lives are not
amortized, but are tested for impairment annually while other intangible assets with finite lives should be amortized over their useful economic life. The statement is effective for fiscal years
beginning after December 15, 2001 and it will first be adopted in the first quarter of the fiscal year ending in 2003. Impairment losses resulting from the transitional testing, if any, will be
recognized as a cumulative effect of a change in accounting principle. Upon adoption of the Statement, amortization expense will be reduced by approximately $0.3 million annually.

In
June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". This statement addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated retirement costs and is effective for fiscal years beginning after June 15, 2002.

In
October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived

23

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Assets and for Long-Lived Assets to be Disposed of", and the accounting and reporting provisions of APB No. 30, "Reporting the Results of OperationsReporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". SFAS No. 144 addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and is effective for fiscal years beginning after December 15, 2001.

The
FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections", effective for fiscal
years beginning May 15, 2002 or later that rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt", FASB Statement No. 64, "Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements", and FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers". This statement amends SFAS No. 4 and SFAS
No. 13, "Accounting For Leases", to eliminate an inconsistency between the required accounting for sale-leaseback transactions. This statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions.

In
July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease
termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. SFAS No. 146 replaces
Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring)". The provisions of the new standard are to be applied prospectively for exit or disposal activities initiated after December 31, 2002.

The
Company does not expect the adoption of SFAS Nos. 143, 144, 145 or 146 to have a material impact on the Consolidated Financial Statements.

In
November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others", which expands on the accounting guidance of SFAS Nos. 5, 57 and 107 and incorporates without change the provisions of FASB Interpretation No. 34, which is being superseded. The
Interpretation elaborates on
the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must
recognize an initial liability for the fair value, or market value, of the obligations it assumes under the guarantee and must disclose that information in its interim and annual financial statements.
The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor's fiscal
year-end. The disclosure requirements in the Interpretation are effective for financial statements of interim or annual periods after December 15, 2002. The requirements in the
Interpretation will be implemented in the Company's first quarter interim consolidated financial statements for the fiscal year ending November 29, 2003 and the Company does not expect the
adoption of Interpretation No. 45 to have a material impact on the Consolidated Financial Statements.

The
AICPA's Accounting Standards Executive Committee ("AcSEC") issued Statement of Position ("SOP") No. 01-6, "Accounting by Certain Entities (Including Entities with
Trade Receivables) That Lend to or Finance the Activities of Others". The SOP reconciles and conforms existing differences in the accounting and financial reporting guidance in the AICPA Audit and
Accounting Guides, "Banks and Savings Institutions", "Audits of Credit Unions" and "Audits of Finance Companies". Trade receivables of all entities, including commercial entities that finance their
customers' purchases of goods and services using trade receivables are within the scope of the current finance companies Guide and are therefore within the scope of the SOP. Such entities would have
to disclose their accounting policy for receivables and the related valuation allowance, including the policy for charging off uncollectible receivables and

24

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determining past due or delinquent status. For entities that are not financial institutions, only the SOP's guidance related to financing and lending activities would be applicable, and not other
guidance specific to financial institutions. The SOP is effective for fiscal years beginning after December 15, 2001.

Changes in Accounting Policies

Effective November 26, 2000, the Company adopted SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
requires all derivatives to be recorded on the balance sheet as assets or liabilities at their fair value. In addition, SFAS No. 133 establishes new criteria for hedge accounting. In adopting
SFAS No. 133, the Company did not incur any transition adjustments to earnings.

Application of Critical Accounting Policies

The preparation of the Company's Consolidated Financial Statements requires management to make estimates and assumptions that affect the amounts reported in the
financial statements. The estimates and assumptions are based on management's historical experience and past Company performance. Actual results could differ from these estimates under different
assumptions or conditions. On an ongoing basis, the Company monitors and evaluates its estimates and assumptions. The following
critical accounting policies reflect what management believes require its most difficult, subjective or complex judgements:

Allowance for doubtful accounts.The Company maintains an allowance for doubtful accounts for estimated losses resulting from
the inability of customers to make required payments. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, increases to the
allowance may be required.

Inventories.The Company maintains a reserve for slow-moving and unmarketable inventory to reflect the difference
between the cost of inventory and the estimated market value based on an evaluation of slow-moving products and current replacement costs. If actual market conditions are less favorable
than those anticipated by management, increases to the reserve may be required.

Income taxes.Deferred income taxes include the benefit of losses carried forward when it is reasonably likely that future
profits will result. Should the opportunity to realize the benefit of these losses expire, such amounts would result in additional deferred income tax expense.

Derivatives.The Company has designated an interest rate swap agreement to manage its exposure to interest rate risk as a
cash flow hedge. Changes in fair value are reported as a separate component of shareholders' equity in accumulated other comprehensive loss. The Company formally assesses, both at the hedge's
inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. Should this hedge cease to be
highly effective, any changes in fair value will be recognized in current period earnings. See "Financial StatementsNote 14 Financial Instruments and Hedging Activities."

Trend Information

The steel service center industry is a regional business servicing many different industrial sectors. Currently, this market is negatively affected by the general
economic slowdown, the duration and overall impact of which is difficult to assess.

25

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ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

The following table sets forth certain information regarding the Company's directors and senior management:

|Name                       |  | Age |  | Positions(s) Held                                                     
|-------------------------- |  | --- |  | ----------------------------------------------------------------------
|D. Bryan Jones(a)(b)       |  | 62  |  | Chairman of the Board, President, Chief Executive Officer and Director
|Christopher H. Pickwoad(b) |  | 63  |  | Executive Vice President, Chief Financial Officer and Director        
|Robert D. Taberner         |  | 51  |  | Vice President and General ManagerNova Steel, Ontario                
|Stephen D. Shaw            |  | 55  |  | President and Chief Operating OfficerAmerican Steel                  
|Scott B. Jones             |  | 38  |  | Vice President, Secretary and Director                                
|Roger Daigneault           |  | 46  |  | Vice PresidentCorporate Purchasing                                   
|Peter V. Balboni           |  | 56  |  | Vice President, Finance and TreasurerAmerican Steel                  
|Michael L. Richards(c)     |  | 63  |  | Director                                                              
|John LeBoutillier(a)(b)(c) |  | 58  |  | Director                                                              
|W. Allan Hopkins(a)(b)(c)  |  | 64  |  | Director                                                              

---

D. Bryan Jones has over 41 years of experience in the selling, marketing and production of flat-rolled products. In 1967, he
and a partner formed St. Laurent Steel, which was later sold to a major North American steel service center. After a number of years as Vice President and General Manager of St. Laurent Steel, he left
in 1979 and incorporated Nova Steel Ltd. He has served as President and Chief Executive Officer and as a director of Nova since its founding. He has been Chairman of the Board, President, Chief
Executive Officer and a director of the Company since April 4, 1997.

Christopher
H. Pickwoad has 22 years of experience in the steel industry and has been employed by Nova since 1982. Prior to 1982, he was a partner of a firm of chartered
accountants. Mr. Pickwoad has been Executive Vice President, Chief Financial Officer and a director of the Company since April 4, 1997.

Robert
D. Taberner has 23 years of sales and marketing experience in the Ontario flat-rolled market. He has served as the Vice President and General Manager of the
Ontario facilities since 1992.

Stephen
D. Shaw has 34 years experience in the steel industry, the last 21 years of which were in steel distribution in Canada and the United States prior to joining Nova
in August 1997.

Scott
B. Jones has fifteen years of experience in the steel industry and has been employed by Nova since 1991. He has been a Vice President, Secretary and a director of the Company since
April 4, 1997. He is the son of D. Bryan Jones.

Roger
Daigneault has been employed by Nova since 1984. He was employed by Ispat Sidbec Inc. for eight years in sales and production prior to joining Nova.

Peter
V. Balboni joined American Steel in 1975 and has served as its Vice President, Finance and Treasurer since 1980.

Michael
L. Richards has been a director of the Company since September 24, 1997. Mr. Richards is a senior partner in the law firm of Stikeman Elliott LLP, Canadian counsel
to the Company.

26

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John
LeBoutillier has been a director of the Company since September 24, 1997. Mr. LeBoutillier has been the Chairman of the Board of Intellium Technologies Inc.
since February 2001. He was formerly, from March 2000 to February 2001, a company director, from November 1996 to March 2000, President and Chief Executive Officer
of Iron Ore Company of Canada and prior to November 1996, President and Chief Executive Officer of Ispat Sidbec Inc., the major steel supplier with which the Company owns Delta Tube and
Company, Limited.

W.
Allan Hopkins has been a director of the Company since September 24, 1997 and will be resigning at or prior to the Annual Meeting of Shareholders (the "Meeting") of the
Company. See "Board Practices". Mr. Hopkins is currently a company director. He was formerly, from March 1998 to August 2000, President and Chief Executive Officer of Atlas
Steels Inc., from January 1993 to June 1996, President and Chief Executive Officer of Algoma Steel Inc. and prior to January 1993, Senior Vice President of
Stelco Inc.

At
the Meeting, Alexander Adam will be proposed as a nominee to serve as a director of the Company. Mr. Adam was formerly, from June 1996 to August 2002, the
President and Chief Executive Officer of Algoma Steel Inc. He previously held executive positions at Toyota Canada Ltd. and Stelco Inc.

Compensation

During the fiscal year ended November 30, 2002, the aggregate compensation paid by the Company to the directors and named executive officers as a group for
services rendered by them to the Company in their capacities as officers totaled $3,845,093. Payments made by the Company to the directors for their services as directors amounted to $51,750. An
executive officer of the Company receives, as a bonus, a certain percentage of pre-tax earnings of the operations that he manages, which percentage is
determined by negotiations between such officer and the Company. This bonus is included in the aggregate compensation disclosed in this paragraph.

Board Practices

Directors of the Company are elected and retire in rotation, such that at the first meeting of the shareholders for the election of directors,
one-third of the number of directors to be elected were elected to hold office until the first annual meeting of shareholders held after that meeting, one-third of the number
of directors to be elected were elected to hold office until the second annual meeting of the shareholders held after that meeting and the balance of the number of directors to be elected were elected
to hold office until the third annual meeting of shareholders held after that meeting. At each annual meeting thereafter, directors shall be elected to fill the positions of those directors whose term
of office has expired and each director so elected shall hold office until the third annual meeting after his election. A director whose term of office has expired may, if qualified, be
re-elected.

The
Board of Directors currently consists of six members. The term of office of D. Bryan Jones and John LeBoutillier will expire at the Meeting which will be held on April 1,
2003. The term of office of Christopher H. Pickwoad and Michael L. Richards will expire at the first annual meeting of shareholders held after the Meeting or until their successors are elected or
appointed. The term of office of Scott B. Jones will expire at the second annual meeting of shareholders held after the Meeting or until his successor is elected or appointed. W. Allan Hopkins will
resign as a director of the Company at or prior to the Meeting. Management will propose Alexander Adam as a nominee for election as a director to hold office until the second annual meeting of
shareholders of the Company held after the Meeting or until a successor is elected or appointed.

The
Company does not have any service contracts with any directors providing for benefits upon termination of employment or term of office.

27

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Board Committees

To date the Board of Directors has established three committees: (i) a Compensation Committee to make recommendations concerning salaries, incentive
compensation and stock option grants for employees, directors and consultants of the Company; (ii) an Audit Committee to review the annual and quarterly results, communications with
shareholders, the scope of the audit and other services provided by the Company's independent auditors and to recommend to the board the selection and remuneration of the auditors, and (iii) a
Nominating Committee to advise and make recommendations to the Board of Directors concerning the selection of candidates as nominees for directors. The Audit
Committee operates in accordance with the terms of a charter that complies with the Nasdaq's listing standards.

Employees

Currently, at its 24 facilities, the Company has approximately 1,142 employees, of whom approximately 28.1% working at ten of the Company's facilities are
organized by the United Steelworkers, the Teamsters, the Sheet Metal Workers and independent employees associations. During the next twelve months, the labor contract with the Teamsters covering 28
employees at the Company's Lasalle facility and the labor contract with an independent employee association covering 33 employees at the Portland facility will expire. Management believes relations
with its employees are good, which is supported by historically low rates of employee turnover. The Company has not experienced a work stoppage by any of its unions or employee associations in over
twenty years.

Nova's
approximately 732 employees are categorized as follows: production and warehouse employees (80%), sales personnel (6%), truck drivers (3%) and administrative employees (11%). The
U.S. Affiliates' approximately 410 employees are categorized as follows: production and warehouse employees (49%), sales personnel (19%), truck drivers (15%) and administrative employees (17%).

Share Ownership

The following table sets forth certain information with respect to the ownership of the Common Shares as of February 26, 2003 by (i) each director
and senior manager of the Company and (ii) all directors and senior managers as a group. Unless otherwise indicated, the persons named below have the sole voting and investment power with
respect to the number of Common Shares set forth opposite their names.

|Names of Beneficial Owners                   |  | Number of Common Shares
Beneficially Owned |     | Ownership Percentage |     
|-------------------------------------------- |  | ------------------------------------------ | --- | -------------------- | ----
|D. Bryan Jones                               |  | 6,263,290                                  | (a) | 64.57                | %   
|Christopher H. Pickwoad                      |  | 159,913                                    |     | 1.65                 | %   
|Robert D. Taberner                           |  | 300,000                                    | (b) | 3.00                 | %(b)
|Stephen D. Shaw                              |  | 300,000                                    | (b) | 3.00                 | %(b)
|Scott B. Jones                               |  | 1,480,701                                  | (c) | 15.26                | %   
|Roger Daigneault                             |  | 150,000                                    | (b) | 1.52                 | %(b)
|Peter V. Balboni                             |  | 2,400                                      |     | *                    |     
|Michael L. Richards                          |  | 12,400                                     |     | *                    |     
|John LeBoutillier                            |  | 10,300                                     |     | *                    |     
|W. Allan Hopkins(d)                          |  | 1,000                                      |     | *                    |     
|All directors and senior managers as a group |  | 8,680,004                                  | (e) | 83.06                | %(e)

---

28

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Share Option Plan

The following is a summary of the principal features of Novamerican Steel Inc. 1997 Share Option Plan (the "Share Option Plan").

The
Share Option Plan provides for the grant of incentive stock options ("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code"),
nonqualified stock options ("NSOs") and other rights (collectively "Awards"). The Company has reserved 1,500,000 Common Shares for issuance under the Share Option Plan. Administration of the Share
Option Plan has been assigned to the Compensation Committee, a committee consisting of two or more directors of the Company, a majority of whom are disinterested. The Compensation Committee has,
subject to the terms of the Share Option Plan, the authority to grant Awards under the Share Option Plan, to construe and interpret the Share Option Plan and to make all other determinations and take
any and all actions necessary or advisable for the administration of the Share Option Plan.

The
Company's key employees, directors and other individuals who render services of special importance to the management, operation and development of the Company or a subsidiary are
eligible to receive Awards under the Share Option Plan, but only employees of the Company and its subsidiaries are eligible to receive ISOs. Options will be exercisable during the period specified by
the Compensation Committee in each option agreement and will generally be exercisable in installments pursuant to a vesting schedule to be determined by the Compensation Committee. Notwithstanding the
provisions of any option agreement, options may, in the discretion of the Compensation Committee, become immediately exercisable in the event of a "change of control" (as defined in the Share Option
Plan) of the Company and in the event of certain mergers and reorganizations of the Company. No option will remain exercisable later than ten years after the date of grant (or five years from the date
of grant in the case of ISOs granted to holders of more than 10% of the Common Shares).

The
exercise price for ISOs granted under the Share Option Plan may be no less than the fair market value of the Common Shares on the date of grant (or 110% in the case of ISOs granted
to employees owning more than 10% of the Common Shares). The exercise price for NSOs and all other Awards granted under the Share Option Plan will be in the discretion of the Compensation Committee.

The
Compensation Committee may grant Stock Appreciation Rights ("SARs") to Share Option Plan participants as to such number of Common Shares and on such terms and conditions as it may
determine. SARs may be granted separately or in connection with ISOs or NSOs. Upon exercise of a SAR, the holder is entitled to receive payment equal to the excess of the fair market value on the date
of exercise of the number of Common Shares for which the SAR is exercised, over the exercise price for such Common Shares under a related option, or if there is no related option, over an amount per
Common Share stated in the written agreement setting forth the terms and conditions of the SAR.

On
September 24, 1997, options to purchase 750,000 Common Shares were granted to three executive officers, vesting over a five year period and expiring in ten years, at an
exercise price of $14.00 per share. Such options represent the only Awards granted and currently outstanding under the Share Option Plan. To date none of these options has been exercised.

29

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ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

The following table sets forth certain information with respect to the ownership of the Common Shares as of February 26, 2003 by each person or entity
known by the Company to beneficially own more than 5% of the Common Shares. Unless otherwise indicated, the persons named below have the sole voting and investment power with respect to the number of
Common Shares set forth opposite their names. None of these persons has different voting rights from any other holders of Common Shares.

|Names of Beneficial Owners             |  | Number of Common Shares
Beneficially Owned |     | Ownership Percentage |  
|-------------------------------------- |  | ------------------------------------------ | --- | -------------------- | -
|D. Bryan Jones                         |  | 6,263,290                                  | (a) | 64.57                | %
|Scott B. Jones                         |  | 1,480,701                                  | (b) | 15.26                | %
|Fidelity Management & Research Company |  | 979,200                                    | (c) | 10.09                | %

---

The Company believes that more than 80% of the Common Shares are held in Canada and less than 20% of the Common Shares are held in the United
States. The Company estimates it has eighteen record holders in Canada.

No
arrangements are known to the Company at this time, the result of which may at a subsequent date result in a change in control of the Company.

Shareholder Protection Rights Plan

The Company previously maintained a shareholder protection rights plan entitling holders of Common Shares the right to purchase additional shares at a
predetermined exercise price upon the occurrence of specified events. This plan expired by its terms in September 2002.

Related Party Transactions

A Canadian corporation owned by Scott B. Jones, a director and officer of the Company and the son of D. Bryan Jones, the Chairman and Chief Executive Officer of
the Company, owns five facilities located in Canada comprising a total of 281,700 square feet and leases them to the Company on a triple-net basis at an aggregate annual rent of
approximately $951,000. Another Canadian corporation owned 50% by a Canadian corporation owned by Scott B. Jones and 50% by a Canadian corporation owned by Peter J. Ouimet, an officer of Argo
Steel Ltd., a Canadian subsidiary of the Company, owns a facility located in Canada comprising a total of 43,300 square feet and leases it to the Company on a triple-net basis at an
aggregate annual rent of approximately $141,000. Another Canadian corporation owned 50% by a Canadian corporation owned by Scott B. Jones and 50% by an unrelated party owns a facility located in
Canada comprising a total of 118,300 square feet and leases it to the Company on a triple-net basis at an aggregate annual rent of approximately $301,000. All the facility leases expire at
varying dates between April 30, 2003 and December 31, 2011, and are all subject to one or two five-year renewal options.

A
Canadian corporation owned by Scott B. Jones owns thirteen trailers and seven tractors which it leases to the Company at an annual aggregate rent of $226,000 and provided
transportation arrangements amounting to $5,014,000 to the Company during 2002.

At
November 30, 2002, loans by D. Bryan Jones to the Company amounted to $299,000. See "Operating and Financial Review and ProspectsLiquidity and Capital Resources."

30

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At
November 30, 2002, advances by an employee to the Company amounted to $1,966,000.

During
2002, the Company purchased all of the minority interest in Argo Steel Ltd. from employees of the Company. The purchase price was established in accordance with the terms
of the existing shareholder agreement dated March 7, 1989, as amended on February 22, 1999. See "Financial StatementsNote 3".

Michael
L. Richards has been a director of the Company since September 24, 1997. Mr. Richards is a senior partner in the law firm of Stikeman Elliott LLP, Canadian counsel
to the Company.

The
Company has adopted the policy that all transactions with any director or officer of the Company, any person or entity that beneficially owns or exercises control or direction over
shares carrying more than 5% of the voting rights attached to all shares of the Company, or any of their affiliates, shall be (i) subject to approval by a majority of the independent members of
the Board of Directors of the Company, (ii) on terms no less favorable to the Company than could be obtained from unaffiliated parties, and (iii) reasonably expected to benefit the
Company. The terms of the above described leases and service agreements have been unanimously approved by the independent members of the Board of Directors of the Company in accordance with such
policy. In the case of service agreements, such approval is subject to certain terms and conditions, which management reasonably believes are being met.

Information
required under Item 7.B.2 has been filed with the Company's Management Proxy Circular on Form 6-K dated the date hereof.

ITEM 8 FINANCIAL INFORMATION

Consolidated Financial Statements and Other Financial Information

See Item 18 for the Financial Statements.

The
Company is a party to various claims and legal actions that it believes are ordinary in nature and incidental to the operation of its business or are covered by insurance. In the
opinion of management, the outcome of such claims and proceedings will not have a material adverse effect upon the Company's business, operations or financial condition. See also "Key
InformationRisk FactorsEnvironmental Matters."

The
Company does not anticipate paying cash dividends on the Common Shares for the foreseeable future. The Company, at present, intends to retain any future earnings to finance
operations and expansion.

During
2002, the Company's export sales amounted to $26.1 million, or 5.6%, of net sales. See "Financial StatementsNote 19."

No
significant changes have occurred since the date of the Company's Financial Statements through the date of this document.

31

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ITEM 9 THE OFFER AND THE LISTING

Offer and Listing Details

The following table sets forth the annual high and low sale price information for trading of the Common Shares on the Nasdaq under the symbol TONS for the last
five fiscal years.

Period

High

Low1998

$
14.13

$
4.001999


13.75


8.002000


10.75


5.632001


6.00


4.232002


10.02


2.05


The
following table sets forth the quarterly high and low sale price information for trading of the Common Shares on the Nasdaq under the symbol TONS for the past two fiscal years.

Period

High

LowFirst Quarter 2001

$6.00

$
4.75Second Quarter 2001

6.00


4.75Third Quarter 2001

6.00


4.75Fourth Quarter 2001

5.25


4.23First Quarter 2002

7.74


2.05Second Quarter 2002

9.35


5.86Third Quarter 2002

10.02


5.70Fourth Quarter 2002

6.63


4.70


The
following table sets forth the monthly high and low sale price information for trading of the Common Shares on the Nasdaq under the symbol TONS for the past six months.

Period

High

LowAugust 2002

$6.00

$
5.70September 2002

6.63


5.00October 2002

5.65


4.70November 2002

5.34


4.94December 2002

7.05


5.49January 2003

10.19


6.16


Markets

The Company's Common Shares currently trade on the Nasdaq where they were initially traded on October 31, 1997, in connection with the Company's initial
public offering. The Common Shares are not traded on any other exchanges. Prior to October 31, 1997, there was no public market for such shares.

32

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ITEM 10 ADDITIONAL INFORMATION

Certificate and Articles of Incorporation

The Company has been incorporated under, and is subject to the provisions of, the Canada Business Corporations Act (the "CBCA"). The Company's Articles of
Incorporation (the "Articles") does not restrict the type of business that the Company may carry on.

Common Shares.Holders of Common Shares are entitled to one vote for each share held on all matters submitted to a vote of
shareholders, except matters submitted to a vote of another class or series of shares. Holders of Common Shares do not have cumulative voting rights. Holders of Common Shares are entitled to receive
such dividends, if any, as may be declared by the Board of Directors out of funds legally available therefore. Upon the liquidation, dissolution or winding-up of the Company, the holders
of Common Shares are entitled to receive the assets of the Company. Holders of Common Shares have no preemptive, subscription, redemption or conversion rights. The rights of the holders of Common
Shares are subject to the rights of the holders of any Preferred Shares which may, in the future, be issued. The outstanding Common Shares are fully paid and non-assessable.

Preferred Shares.The Board of Directors is authorized to issue Preferred Shares, in one or more series, and to fix the
rights, privileges, restrictions, conditions and limitations, and the number of shares constituting any series or the designations of such series, without further vote or action by the shareholders.
Because the terms of the Preferred Shares may be fixed by the Board of Directors without shareholder action, the Preferred Shares could, subject to regulatory policies, be issued quickly with terms
calculated to defeat an attempted takeover of the Company or to make the removal of management more difficult. Under certain circumstances, this could have the effect of decreasing market value of the
Common Shares. Preferred Shares rank senior to the Common Shares as to the distribution of assets in the event of a liquidation, dissolution or winding-up of the Company. The Company has
no present plans to issue any Preferred Shares.

Changes to the Rights of Shareholders.The Company may amend, by special resolution, its articles of incorporation to change
the rights attached to its Common Shares. A special resolution is a resolution passed by not less than two-thirds of the votes cast by shareholders who voted in respect of that resolution
or signed by all the shareholders entitled to vote on that resolution.

Shareholders' Meetings.The annual meeting of the shareholders shall be convened at such day in each year and at such time as
the Board of Directors may by resolution determine. Other meetings of the shareholders may be convened by order of the chairman of the board, the president or a vice-president who is a
director or by the Board of Directors, to be held at such time and place as may be specified in such order. Shareholders holding between them not less than 5% of the outstanding shares may requisition
a special meeting of shareholders.

Voting Rights of Non-resident Shareholders.Neither Canadian law nor the Company's organizational documents
restrict or prohibit the right of non-resident or foreign shareholders to hold or exercise voting rights of its Common Shares. See "Exchange Controls".

Change in Control.The Company's Articles could make more difficult the acquisition of the Company by means of a tender
offer, a proxy contest or otherwise and the removal of incumbent officers and directors. Specifically, the Company has a staggered board of directors. See "Directors, Senior Management and
EmployeesBoard Practices". These provisions could discourage certain types of coercive takeover practices and inadequate takeover bids and may encourage persons seeking to acquire control
of the Company to negotiate first with the Company.

Number of Directors; Residency Requirements; Vacancies; Removal.The Articles provide that there shall be a minimum of three
directors and a maximum of fifteen directors and that the Board of Directors

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shall be elected and shall retire in rotation. The exact number of directors is fixed by the Board of Directors, subject to the requirement of the CBCA that the Company have a minimum of three
directors, at least two of whom are not officers or employees of the Company or its affiliates. The CBCA provides that one quarter of the directors of a corporation must be "resident Canadians",
defined to include Canadian citizens and permanent residents ordinarily resident in Canada.

The
CBCA provides that a vacancy on the Board of Directors may be filled by a quorum of directors, except for a vacancy resulting from an increase in the number or minimum number of
directors or from a failure to elect the number or minimum number of directors required by the Articles.

The
directors of a CBCA corporation may be removed from office by a resolution passed by a majority of votes cast at a special meeting of the shareholders, subject to any applicable
class or cumulative voting rights.

Limitations on Liability of Officers and Directors.The CBCA provides that a corporation may indemnify, and the Company's
By-laws (the "By-laws") provide that the Company shall indemnify, in each case except in respect of an action by or on behalf of the Company or a body corporate of which the
Company is or was a shareholder or creditor to procure a judgment in its favor, an officer or a director of the Company, a former officer or director of the Company or a person who acts or acted at
the Company's request as a director or officer of a body corporate of which the Company is or was shareholder or creditor, and his heirs and legal representatives, against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a
party by reason of his being or having been a director or officer of the Company or such body corporate, if he acted honestly and in good faith with a view to the best interests of the Company, and,
in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.

Amendment of Certain Provisions of the Articles; Fundamental Changes.In accordance with the provisions of the CBCA, an
amendment to the Articles of the Company (except in limited circumstances) and the
merger, consolidation or dissolution of the Company (each such event, a "fundamental change") will require the approval of not less than two-thirds of the votes cast by the shareholders
voting in person or by proxy at a special meeting of the shareholders of the Company. The By-laws of the Company provide that one person present and holding or representing by proxy at
least one issued voting share of the Company shall be a quorum of any meeting of the shareholders for the choice of a chairman of the meeting and for the adjournment of the meeting; for all other
purposes a quorum for any meeting (unless a different number of shareholders and/or a different number of shares are required to be represented by the CBCA or by the Articles or By-laws of
the Company) shall be persons present being not less than two in number and holding or representing by proxy at least 20% of the shares entitled to vote at such meeting.

Material Contracts

On April 6, 2001, a U.S. subsidiary entered into: (i) a new revolving credit agreement with a group of banks providing for borrowings, based upon a
formula, of up to $40.0 million through April 7, 2006; and (ii) a $53.0 million term loan agreement with a group of banks maturing on April 7, 2006. See "Operating
and Financial Review and ProspectsLiquidity and Capital Resources".

On
November 19, 2002, a U.S. subsidiary of the Company entered into a $4.0 million promissory note with a bank through December 1, 2007. See "Operating and Financial
Review and ProspectsLiquidity and Capital Resources".

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Exchange Controls

There is no limitation imposed by Canadian law or by the Articles or other constituent documents of the Company on the right of a non-resident or
foreign owner to hold or vote Common Shares of the Company, other than as provided in the Investment Canada Act (the "Investment Act"), as amended by the Canada-United States Free Trade Agreement
Implementation Act (Canada) and by the World Trade Organization (the "WTO") Agreement Implementation Act.

The
Investment Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is
not a "Canadian" as defined in the Investment Act (a "non-Canadian"), unless, after review, the minister responsible for the Investment Act is satisfied that the investment is likely to be
of net benefit to Canada. An investment in Common Shares of the Company by a non-Canadian (other than a "WTO investor," as defined in the Investment Act) would be reviewable under the
Investment Act if it were an investment to acquire direct control of the Company and the value of the assets of the Company (calculated as prescribed in the Regulations Respecting Investment in
Canada) were CA$5 million or more. An
indirect acquisition of control of the Company by a non-WTO investor would be reviewable under the Investment Act if the value of the assets of the Company amounted to CA$50 million
or more.

The
Investment Act defines a "WTO investor" as an individual, other than a Canadian, who is a national or permanent resident of a WTO member country; a federal, state, or local
government of a WTO member country, or an agency thereof; a WTO investor-controlled entity (defined under the Investment Act as including an entity in which WTO investors own a majority of voting
interests and in which the entity is controlled in fact by WTO investors); a corporation, a limited partnership, or a trust, which is not controlled in fact through the ownership of its voting
interests, but in which two-thirds of its board of directors, general partners, or trustees, as the case may be, are WTO investors or Canadians; or any other form of business organization
specified by regulation and controlled by a WTO investor. The current list of WTO member countries includes the United States.

An
investment in Common Shares of the Company by a WTO investor would be reviewable under the Investment Act if it were an investment to acquire direct control of the Company and the
value of the assets of the Company equaled or exceeded the prescribed amount for the calendar year in which the investment is implemented, as calculated in accordance with the Regulations to the
Investment Act. For 2002, the prescribed amount was CA$218 million. As at February 26, 2003, the prescribed amount for 2003 was CA$223 million. An indirect acquisition of control
of the Company by a WTO investor would not be reviewable but would nonetheless be subject to notification under the Investment Act.

A
non-Canadian, whether a WTO investor or otherwise, would acquire control of the Company for the purposes of the Investment Act if that person acquired a majority of the
Common Shares of the Company. The acquisition of less than a majority, but one-third or more of the Common Shares of the Company, would be presumed to be an acquisition of control of the
Company unless it could be established that the Company was not controlled in fact by the acquiror through the ownership of Common Shares.

Certain
transactions in relation to Common Shares of the Company would be exempt from the application of the Investment Act, including:



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Taxation

Purchasers of the Common Shares should consult their own tax advisers with respect to their particular circumstances and with respect to the effects of state,
local or foreign (including Canadian) tax laws to which they may be subject.

Canadian Federal Income Tax Consequences

The following, as reviewed by Stikeman Elliott LLP, Canadian counsel to the Company, accurately summarizes the material Canadian federal income tax consequences
relevant to an investment in the Common Shares listed on the Nasdaq by individuals and corporations who are residents of the United States and are not residents of Canada for the purposes of the
Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital, as amended (the "Convention"), who hold their Common Shares as capital property and deal at
arm's length with the Company for the purposes of the Income Tax Act (Canada) (the "Canadian Tax Act") and who do not use or hold and are not deemed to use or hold such Common Shares in connection
with a business carried on through a permanent establishment or a fixed base in Canada (collectively, "U.S. Residents"). Common Shares will generally be considered to be capital property to a U.S.
Resident unless they are held as inventory in the course of carrying on a business or were acquired in a transaction considered to be an adventure in the nature of trade. This summary is based upon
the current provisions of the Canadian Tax Act, the regulations thereunder and the provisions of the Convention as in effect on the date hereof. Other than specific proposals to amend the Canadian Tax
Act and regulations thereunder publicly announced by the Minister of Finance of Canada, prior to the date hereof, this summary does not take into account or anticipate any changes in law, whether by
legislative or judicial action, nor does it take into account tax laws of any province or territory of Canada or of any jurisdiction outside Canada.

This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular U.S. Resident.
Accordingly, U.S. Residents should consult with their own tax advisors for advice with respect to their own particular circumstances.

A
U.S. Resident will not be subject to tax in Canada on any capital gain realized on a disposition of Common Shares, provided that the Common Shares do not constitute "taxable Canadian
property" of the U.S. Resident at the time of the disposition for purposes of the Canadian Tax Act. So long as the Common Shares are listed on the Nasdaq, Common Shares will not generally constitute
taxable Canadian property of a U.S. Resident unless, at any time during the five-year period immediately
preceding the disposition, the U.S. Resident, persons with whom the U.S. Resident did not deal at arm's length, or any combination thereof, owned, had an interest in or the right to acquire, 25% or
more of the issued shares of any series or class of the capital stock of the Company. If the Common Shares are considered taxable Canadian property to a U.S. Resident, the Convention will generally
exempt that U.S. Resident from tax under the Canadian Tax Act in respect of a disposition of Common Shares provided the value of the shares issued by the Company is not derived principally from real
property situated in Canada. A U.S. Resident who disposes of a Common Share that is taxable Canadian property will be subject to Revenue Canada holdback, notification and certification obligations
unless the Common Shares are listed on the Nasdaq at the time of the disposition.

Dividends
paid or credited on the Common Shares, or deemed to be paid or credited, to a U.S. Resident in respect of the Common Shares will generally be subject to Canadian withholding
tax on the gross amount of the dividends. Currently, under the Convention, the rate of Canadian withholding tax which would apply on dividends paid by the Company to a U.S. Resident is (i) 5%
with respect to dividends

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paid if the beneficial owner of the dividends is a company which owns at least 10% of the voting stock of the Company and (ii) 15% in all other cases.

U.S. Federal Income Tax Considerations

General.The following, as reviewed by Sullivan & Worcester LLP, U.S. counsel to the Company, accurately summarizes
the material U.S. Federal income tax consequences to U.S. Holders of owning and disposing of Common Shares. The U.S. Federal income tax discussion is based on (i) provisions of the Internal
Revenue Code of 1986, as amended (the "Code") and U.S. Treasury Regulations thereunder, existing, temporary and proposed on the date hereof, (ii) provisions of the Convention as in effect on
the date hereof, and (iii) in part, representations of the Company. A "U.S. Holder" is a beneficial owner of the Common Shares who or which is, for U.S. Federal income tax purposes,
(i) a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or who meets the substantial presence residency test under
the U.S. Federal income tax laws; (ii) a corporation, partnership or other entity treated as a corporation or partnership for U.S. Federal income tax purposes, that is created or organized in
or under the laws of the United States, any of the fifty states or the District of Columbia, unless otherwise provided by Treasury regulations; (iii) an estate the income of which is subject to
U.S. Federal income taxation regardless of its source; or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one
or more United States persons have the authority to control all substantial decisions of the trust, or electing trusts in existence on August 20, 1996 to the extent provided in Treasury
regulations. Notwithstanding the foregoing definition, a holder's status as a U.S. holder might be overridden under the provisions of an applicable tax treaty. Conversely, a "Non-U.S.
Holder" is a beneficial owner of the Common Shares who or which is not a U.S. Holder. This summary is subject to any changes to U.S. law or practice occurring after the date hereof, possibly with
retroactive effect, including any change in applicable tax treaty provisions, or different interpretations. Furthermore, this discussion is limited to holders of Common Shares who hold such Common
Shares as a capital asset within the meaning of Section 1221 of the Code.

This discussion is intended only as a descriptive summary of the material U.S. Federal income tax consequences to certain shareholders, and does not purport to be
a complete analysis or listing of all potential tax consequences of the ownership or disposition of Common Shares. This summary is not an exhaustive discussion of all possible tax considerations. In
particular, it does not discuss estate and gift taxes, taxes imposed on the Company, and the consequences for U.S. Holders subject to special tax rules, including U.S. expatriates, certain
Non-U.S. Holders, dealers in securities, partnerships, insurance companies, regulated investment companies, tax-exempt organizations, banking and financial institutions,
persons subject to the alternative minimum tax, persons whose functional currency is not the U.S. dollar, persons holding Common Shares as part of a hedging, conversion or straddle transaction,
persons who directly or indirectly or through certain related persons own more than 10% of the capital or voting power of the Company and persons carrying on a trade or business in Canada through a
permanent establishment or fixed base for the purpose of which the Common Shares have been acquired or held. Because of these limitations, prospective purchasers of Common Shares should consult their
own tax advisors regarding all the tax consequences particular to them of their ownership and disposition of Common Shares.

Taxation of Dividends.For U.S. Federal income tax purposes, the gross amount of a distribution by the Company to U.S.
Holders (including any amounts of Canadian tax withheld) will be treated as dividend income to the extent paid out of the Company's current or accumulated earnings and profits (as determined for U.S.
Federal income tax purposes). Dividends paid by the Company generally will be treated as foreign source dividend income and will not be eligible for the dividends received deduction generally
available for United States corporations under the Code. If a dividend is paid in Canadian dollars or other property, the amount includible in income will be the U.S. dollar value of the Canadian
dollars or the fair market value of the other property distributed, as determined on the date of receipt by the U.S. Holder or by a nominee, custodian or other agent of such U.S. Holder. A U.S. Holder
will have a tax basis

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in such Canadian dollars or other property for U.S. Federal income tax purposes equal to their U.S. dollar value on the date of receipt. Any subsequent gain or loss in respect of such Canadian
dollars arising from exchange rate fluctuations will be ordinary income or loss. If a U.S. Holder has the option to receive a distribution either in cash or in the form of Common Shares, and such U.S.
Holder chooses to receive Common Shares (a "Share Distribution"), such U.S. Holder will be treated for purposes of the preceding sentences as having received a distribution to the extent of the fair
market value of these Common Shares. To the extent that an amount received by a U.S. Holder exceeds the U.S. Holder's allocable share of the Company's current and accumulated earning and profits, such
excess will be treated first as a non-taxable return of capital to the extent of the U.S. Holder's basis in the Common Shares (thereby reducing the U.S. Holder's basis in the Common
Shares), and thereafter any remaining distribution in excess of basis would constitute a taxable gain from the deemed sale or exchange of the U.S. Holder's Common Shares. See "Tax on Sale" below.
Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. Federal income tax liability for Canadian tax withheld from dividends received
in respect of the Common Shares. For the purposes of the limitations on use of foreign tax credits, dividends received from the Company generally will be characterized as passive income, or, in the
case of certain U.S. Holders, financial services income and therefore any U.S. tax imposed on these dividends cannot be offset by excess foreign tax credits that a U.S. Holder may have from foreign
source income not qualifying as passive income or financial services income, respectively. The rules relating to the determination of the foreign tax credit are complex and U.S. Holders should consult
their tax advisors to determine whether and to what extent a credit would be available. U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Canadian tax
withheld.

Tax on Sale.For U.S. Federal income tax purposes, a U.S. Holder generally will recognize gain or loss on any sale, exchange
or other disposition of Common Shares (unless a specific nonrecognition provision applies). Such gain or loss will be measured by the difference between the amount of cash (and the fair market value
of any other property) received and the U.S. Holder's tax basis in the Common Shares. A U.S. Holder's tax basis in the Common Shares will generally equal the amount paid by such U.S. Holder for the
Common Shares (or, in case of Common Shares acquired by way of a Share Distribution, the amount included in income at the time of the Share Distribution). The gain or loss arising from a sale or
exchange of Common Shares will be a long-term capital gain or loss if the U.S. Holder's holding period for such Common Shares exceeds one year. In general, the gain from a sale or exchange
of Common Shares by a U.S. Holder will be treated as United States source income. However, should any Canadian tax be imposed on the sale or other disposition of the Common Shares by a U.S. Holder and
the U.S. Holder is eligible for the benefits of the Convention, an election may be available under the Code pursuant to which a U.S. Holder would, for purposes of computing the foreign tax credit
limitation, be entitled to treat the gains as foreign source income. Alternatively, the U.S. Holder may claim a deduction for the amount of Canadian tax withheld.

Passive Foreign Investment Company, Foreign Personal Holding Company or Controlled Foreign Corporation.A "passive foreign investment
company" ("PFIC"), as to any U.S. person, is defined as any foreign corporation at least 75% of whose consolidated gross income for the taxable year is passive income, or at least 50% of the value of
whose consolidated assets is attributable to assets that produce or are held for the production of passive income at any time during such person's holding period for shares of such corporation. For
this purpose, passive income generally includes dividends, interest, royalties, rents, annuities and the excess of gains over losses from the disposition of assets which produce those types of income.
The Company intends to conduct its affairs so as to avoid the classification of the Company and its subsidiaries as PFICs with respect to U.S. persons holding Common Shares. However, if ever applied
to the Company and its subsidiaries, the PFIC rules could produce significant adverse tax consequences for a U.S. Holder, including taxation of disposition gains as ordinary income and the imposition
of an interest charge on U.S. Federal income taxes deemed to have been deferred. The Company believes that neither it nor any of its subsidiaries is a "foreign personal holding company" (a "FPHC") or
a "controlled foreign corporation" (a "CFC"). The Company currently believes that neither it nor any of its subsidiaries is a

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FPHC because it believes that no group of five or fewer United States citizens or residents owns, directly or indirectly, more than 50% of the Company's Common Shares (taking into account the effect
of applicable constructive ownership rules). In addition, the Company believes that less than 60% of its gross income will be FPHC income. FPHC income in this context is similar but not identical to
passive income under the PFIC rules. If the Company or any subsidiary were to become a FPHC in the future (for example by reason of certain constructive ownership rules or a change in the ownership of
its stock) then, in general, each U.S. Holder holding Common Shares on the last day of the Company's taxable year would be treated as receiving a dividend in an amount equal to each such U.S. Holder's
share of the Company's or subsidiary's undistributed FPHC income for such taxable year. The Company currently believes that neither it nor any of its subsidiaries is a CFC. A corporation is a CFC if
more than 50% of the shares of the corporation, by vote or value, are owned, directly or indirectly (including shares owned through attribution), by "10% CFC Shareholders" (United States persons
directly or indirectly owning at least 10% of the total combined voting power of all shares of the corporation). The Company currently believes that neither it nor any of its subsidiaries is a CFC
because U. S. citizens and residents, in the aggregate, do not own more than 50% of the Company's Common Shares (taking into account the effect of applicable constructive ownership rules). In general,
each 10% CFC Shareholder in a CFC on the last day of the CFC's taxable year is required to include
in its gross income for such taxable year its pro rata share of the CFC's earnings and profits for that year attributable to certain types of income or investments. Income recognized by a 10% CFC
Shareholder under the CFC rules would not also be recognized as undistributed FPHC income. Effective for the portion of a holder's holding period that begins after December 31, 1997, in the
case of a corporation that is both a CFC and a PFIC, 10% CFC Shareholders will be treated as shareholders of a CFC and not as shareholders of a PFIC during the time that such persons are 10% CFC
Shareholders.

Information Reporting and Backup Withholding Requirements with Respect to U.S. Holders.The Company does not currently pay dividends. If
it did, and if it used a paying agent (such as a bank) in the United States, the paying agent would be required to report the dividends to U.S. Holders not otherwise exempt from reporting
requirements. Certain U.S. Holders may be subject to backup withholding at a 30% rate on dividends received on Common Shares. This withholding generally applies only if such U.S. Holder
(i) fails to furnish a correct taxpayer identification number ("TIN") to the U.S. financial institution or any other person responsible for the payment of dividends on the Common Share,
(ii) furnishes an incorrect TIN, (iii) is notified by the U.S. Internal Revenue Service ("IRS") of the U.S. Holder's failure to properly report payments of interest and dividends and the
IRS has notified the Company to begin withholding tax from the U.S. Holder's dividends, or (iv) fails, under certain circumstances, to provide a certified statement, signed under penalties of
perjury, that the TIN provided is correct and that the U.S. Holder is not subject to backup withholding rules.

Amounts
withheld under the backup withholding rules do not constitute a separate U.S. Federal income tax. Rather, any amounts withheld under the backup withholding rules will be refunded
or allowed as a credit against the U.S. Holder's U.S. Federal income tax liability, if any, provided the required information or appropriate claim for refund is filed with the IRS.

United States State and Local Taxes.In addition to U.S. Federal income taxes, U.S. Holders may be subject to United States
state and local taxes with respect to their Common Shares. U.S. Holders should consult their own tax advisors regarding such matters.

U.S. Federal Income Tax Consequences to Non-U.S. Holders.The following discussion summarizes the U.S. Federal
income tax consequences of owning and disposing of Common Shares by a holder of Common Shares that is a Non-U.S. Holder, is not engaged in the conduct of a trade or business in the United
States and is not present in the United States for 183 days or more during the taxable year.

Distributions to Non-U.S. Holders.Under the provisions of the Convention, a Non-U.S. Holder would
generally not be subject to U.S. income tax with respect to distributions by the Company.

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Tax on Sale by Non-U.S. Holders.A Non-U.S. Holder generally will not be subject to U.S. Federal income or
withholding tax in respect of gain recognized on the disposition of shares.

Information Reporting and Backup Withholding Requirements with Respect to Non-U.S. Holders.Currently, U.S. information
reporting requirements and backup withholding will not apply to dividends on the Common Shares paid to Non-U.S. Holders at an address outside the United States if the Non-U.S
Holder files required information with the payor or qualifies for certain other exemptions. As a general matter, information reporting and backup withholding requirements will not apply to a payment
of the proceeds of a sale of the Common Shares effected outside the United States by a foreign office of a foreign broker. However, information reporting requirements (but not backup withholding) will
apply to a payment of the proceeds of a sale effected outside the United States through a "U.S. Broker," unless the broker has documentary evidence in its records that the stockholder is not a United
States person and has no actual knowledge that such evidence is false, or the Non-U.S. Holder otherwise establishes an exemption. For purposes of the preceding sentence, a U.S. Broker is a
broker that (i) is a United States person, (ii) is a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United
States, (iii) is a CFC, or (iv) is a foreign partnership if it is carrying on a United States trade or business or if more than 50% of the profits or capital interests in the partnership
are owned by United States persons. Payment by a broker of the proceeds of a sale of the Common Shares effected inside the United States is subject to both backup withholding and information reporting
requirements unless the Non-U.S. Holder certifies under penalties of perjury that he or she is not a United States person and provides his or her name and address or the
Non-U.S. Holder otherwise establishes an exemption. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder will be allowed as a refund or a
credit against such Non-U.S. Holder's U.S. Federal income tax, provided that the required information or appropriate claim for refund is furnished to the IRS.

THE FOREGOING DISCUSSION IS ONLY A SUMMARY OF THE PRINCIPAL U.S. FEDERAL INCOME TAX CONSEQUENCES AND CANADIAN TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR OTHER
DISPOSITION OF THE COMMON SHARES BY U.S. HOLDERS. ACCORDINGLY, INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES AND CANADIAN TAX CONSEQUENCES
OF THE OWNERSHIP, SALE OR OTHER DISPOSITION OF THE COMMON SHARES INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX JURISDICTION.

Documents on Display

Any documents referred to in this Annual Report may be inspected at the corporate office of the Company, 2175 Hymus Boulevard, Dorval, Québec,
H9P 1J8, upon appointment during normal business hours.

ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in interest and foreign exchange rates and, from time to time and only upon approval by senior officers, enters
into financial contracts in the ordinary course of business to hedge these exposures. The Company does not use financial instruments for trading or speculative purposes.

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Interest Rate Risk.The Company's exposure to interest rate risk is as follows. (All tabular amounts are in thousands of U.S.
dollars).

|                  |  |               |  | November 30, 2002 |       
|----------------- |  | ------------- |  | ----------------- | ------
|
|Bank indebtedness |  | Floating rate |  | $                 | 3,534 
|                  |  |               |  |                   |       
|Long-term debt    |  | Floating rate |  | $                 | 21,018
|                  |  | Fixed rate    |  |                   | 48,521
|                  |  |               |  |                   |       
|                  |  |               |  | $                 | 69,539
|                  |  |               |  |                   |       

|                             |  | November 30, 2002
|---------------------------- |  | -----------------
|
|Fair value of long-term debt |  | $                
|                             |  |                  

A
43 basis point movement in the Canadian prime rate or the U.S. base rate would result in an approximate $0.1 million, annualized for the period ended November 30, 2002,
increase or decrease in interest expense and cash flows. The modeling technique used was to apply to the Company's debt the difference between the actual interest rates at November 30, 2002 and
the what-if interest rates.

A
variable to fixed interest rate swap agreement is used by a U.S. wholly-owned subsidiary of the Company to hedge its exposure to interest rate risk related to the term credit agreement
and is accounted for on the accrual basis. Amounts to be paid or received under the interest rate swap agreement are recognized as interest expense or income in the period in which they accrue. See
"Operating and Financial Review and ProspectsHedging".

Exchange Rate Risk.The Company, from time to time, utilizes forward exchange contracts to hedge its exposure to exchange
rate fluctuations in connection with future sales and purchases by certain of its Canadian subsidiaries, denominated in U.S. dollars. Forward exchange contracts are entered into with reputable
financial institutions. At November 30, 2002, November 24, 2001 and November 25, 2000 the Company had no forward foreign currency exchange contracts outstanding.

The
Company estimates that a sixteen-cent movement in the value of the Canadian dollar would affect net sales by approximately $27.0 million annually, based on 2002
Canadian dollar net sales, without giving effect to any hedging instruments. The modeling technique used was to determine the difference between the conversion of net sales in Canadian dollars for the
period ended November 30, 2002 using the average exchange rate for the year and the what-if exchange rate. In 2002, the average exchange rate was $1.5718 Canadian. As at
February 26, 2003, the exchange rate was $1.4935.

Commodity Price Risk.The Company does not use derivative commodity instruments to hedge its exposure to the impact of price
fluctuations on its principal raw material. See "Key InformationRisk FactorsCost of Raw Materials; Impact of Changing Steel Prices."

ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

41

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PART II

ITEM 13 DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES

None.

ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15 CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this report, management, including the Company's Chief Executive Officer and Chief Financial Officer, evaluated
the effectiveness of the design and operation of the Company's disclosure controls and procedures with respect to the information generated for use in this Annual Report on
Form 20-F. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to
ensure that material information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is made known to them by others within the Company,
including its consolidated subsidiaries.

There
were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation or
corrective actions with regard to significant deficiencies or material weaknesses.

ITEM 16 [RESERVED]

PART III

ITEM 17 FINANCIAL STATEMENTS

See Item 18 for the Financial Statements.

42

---



ITEM 18 FINANCIAL STATEMENTS

[nc_cad,157]Raymond Chabot Grant Thornton Logo[nc_cad,179]

Independent Auditors' Report

To
the Board of Directors and Shareholders of
Novamerican Steel Inc.

We
have audited the accompanying consolidated balance sheets of Novamerican Steel Inc. and Subsidiaries as of November 30, 2002 and November 24, 2001 and the related
consolidated statements of operations and comprehensive income, shareholders' equity and cash flows for each of the years in the three-year period ended November 30, 2002. These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Novamerican Steel Inc. and Subsidiaries
as of November 30, 2002 and November 24, 2001 and the results of their operations and their cash flows for each of the years in the three-year period ended
November 30, 2002 in conformity with accounting principles generally accepted in the United States of America.

RAYMOND CHABOT GRANT THORNTON

Chartered
Accountants
General Partnership

Montréal,
Canada
December 20, 2002

43

---



Novamerican Steel Inc. and Subsidiaries        Consolidated Statements of Operations and Comprehensive Income        (In thousands of U.S. dollars, except per share data)

|                                                                                               |                            | Years ended |       
|---------------------------------------------------------------------------------------------- | -------------------------- | ----------- | ------
|
|
|Net sales                                                                                      |                            | 465,501     |       
|Cost of sales                                                                                  |                            | 351,229     |       
|                                                                                               |                            |             |       
|Gross margin                                                                                   |                            | 114,272     |       
|                                                                                               |                            |             |       
|Operating expenses                                                                             |                            |             |       
|                                                                                               | Plant                      |             | 31,894
|                                                                                               | Delivery                   |             | 16,230
|                                                                                               | Selling                    |             | 11,581
|                                                                                               | Administrative and general |             | 20,015
|                                                                                               |                            |             |       
|                                                                                               |                            | 79,720      |       
|                                                                                               |                            |             |       
|Operating income                                                                               |                            | 34,552      |       
|                                                                                               |                            |             |       
|Interest expense                                                                               |                            | 5,062       |       
|Share in income of joint ventures                                                              |                            | (708        | )     
|                                                                                               |                            |             |       
|                                                                                               |                            | 4,354       |       
|                                                                                               |                            |             |       
|Income before income taxes and minority interest                                               |                            | 30,198      |       
|Income taxes (Note 4)                                                                          |                            | 10,080      |       
|                                                                                               |                            |             |       
|Income before minority interest                                                                |                            | 20,118      |       
|Minority interest                                                                              |                            |             |       
|                                                                                               |                            |             |       
|Net income                                                                                     |                            | 20,118      |       
|                                                                                               |                            |             |       
|Basic and diluted income per share                                                             |                            | 2.07        |       
|                                                                                               |                            |             |       
|Comprehensive income                                                                           |                            |             |       
|Net income                                                                                     |                            | 20,118      |       
|Changes in cumulative translation adjustment                                                   |                            | 679         |       
|Changes in unrealized loss on interest rate swap, net of deferred taxes of $490 ($540 in 2001) |                            | (598        | )     
|                                                                                               |                            |             |       
|                                                                                               |                            | 20,199      |       
|                                                                                               |                            |             |       

The
accompanying notes are an integral part of the consolidated financial statements.

44

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Novamerican Steel Inc. and Subsidiaries        Consolidated Statements of Shareholders' Equity        (In thousands of U.S. dollars, except share data)

|                             |                                                                                 | Common shares |  |        |  | Accumulated
other
comprehensive
loss |        |        |       
|---------------------------- | ------------------------------------------------------------------------------- | ------------- |  | ------ |  | ------------------------------------ | ------ | ------ | ------
|
|
|
|Balance at November 27, 1999 |                                                                                 | 9,700,000     |  | 28,404 |  | 57,645                               |        | (3,637 | )     
|                             | Net income                                                                      |               |  |        |  |                                      | 13,012 |        |       
|                             | Changes in cumulative translation adjustment                                    |               |  |        |  |                                      |        |        | (2,136
|                             |                                                                                 |               |  |        |  |                                      |        |        |       
|Balance at November 25, 2000 |                                                                                 | 9,700,000     |  | 28,404 |  | 70,657                               |        | (5,773 | )     
|                             | Net income                                                                      |               |  |        |  |                                      | 8,014  |        |       
|                             | Changes in cumulative translation adjustment                                    |               |  |        |  |                                      |        |        | (973  
|                             | Changes in unrealized loss on interest rate swap, net of deferred taxes of $540 |               |  |        |  |                                      |        |        | (661  
|                             |                                                                                 |               |  |        |  |                                      |        |        |       
|Balance at November 24, 2001 |                                                                                 | 9,700,000     |  | 28,404 |  | 78,671                               |        | (7,407 | )     
|                             | Net income                                                                      |               |  |        |  |                                      | 20,118 |        |       
|                             | Changes in cumulative translation adjustment                                    |               |  |        |  |                                      |        |        | 679   
|                             | Changes in unrealized loss on interest rate swap, net of deferred taxes of $490 |               |  |        |  |                                      |        |        | (598  
|                             |                                                                                 |               |  |        |  |                                      |        |        |       
|Balance at November 30, 2002 |                                                                                 | 9,700,000     |  | 28,404 |  | 98,789                               |        | (7,326 | )     
|                             |                                                                                 |               |  |        |  |                                      |        |        |       

The
accompanying notes are an integral part of the consolidated financial statements.

45

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Novamerican Steel Inc. and Subsidiaries        Consolidated Statements of Cash Flows        (In thousands of U.S. dollars)

|                                                                                     |                                                          | Years ended |        
|------------------------------------------------------------------------------------ | -------------------------------------------------------- | ----------- | -------
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES                                                 |                                                          |             |        
|Net income                                                                           |                                                          | 20,118      |        
|Adjustments to reconcile net income to net cash from (used for) operating activities |                                                          |             |        
|                                                                                     | Depreciation and amortization                            |             | 6,228  
|                                                                                     | Share in income of joint ventures                        |             | (708   
|                                                                                     | Deferred income taxes                                    |             | 2,154  
|                                                                                     | Minority interest                                        |             |        
|                                                                                     | Loss (gain) on disposal of property, plant and equipment |             | 177    
|Changes in working capital items                                                     |                                                          |             |        
|                                                                                     | Accounts receivable                                      |             | (7,790 
|                                                                                     | Income taxes receivable                                  |             | 292    
|                                                                                     | Inventories                                              |             | (19,301
|                                                                                     | Prepaid expenses and other                               |             | 697    
|                                                                                     | Accounts payable and accrued liabilities                 |             | 7,603  
|                                                                                     | Income taxes payable                                     |             | 3,726  
|                                                                                     |                                                          |             |        
|Net cash from (used for) operating activities                                        |                                                          | 13,196      |        
|                                                                                     |                                                          |             |        
|CASH FLOWS FROM INVESTING ACTIVITIES                                                 |                                                          |             |        
|Acquisition of minority interest                                                     |                                                          | (2,088      | )      
|Investment in a joint venture                                                        |                                                          | (1,550      | )      
|Distribution from a joint venture                                                    |                                                          | 157         |        
|Additions to property, plant and equipment                                           |                                                          | (13,512     | )      
|Proceeds from disposal of property, plant and equipment                              |                                                          | 483         |        
|Other assets                                                                         |                                                          | 55          |        
|                                                                                     |                                                          |             |        
|Net cash used for investing activities                                               |                                                          | (16,455     | )      
|                                                                                     |                                                          |             |        
|CASH FLOWS FROM FINANCING ACTIVITIES                                                 |                                                          |             |        
|Net increase (decrease) in bank indebtedness                                         |                                                          | (3,672      | )      
|Advances due to an employee                                                          |                                                          | 1,966       |        
|Proceeds from long-term debt                                                         |                                                          | 9,024       |        
|Repayment of long-term debt                                                          |                                                          | (7,031      | )      
|                                                                                     |                                                          |             |        
|Net cash from (used for) financing activities                                        |                                                          | 287         |        
|                                                                                     |                                                          |             |        
|Effect of exchange rate changes on cash and cash equivalents                         |                                                          | 28          |        
|                                                                                     |                                                          |             |        
|Net increase (decrease) in cash and cash equivalents                                 |                                                          | (2,944      | )      
|Cash and cash equivalents, beginning of year                                         |                                                          | 10,534      |        
|                                                                                     |                                                          |             |        
|Cash and cash equivalents, end of year                                               |                                                          | 7,590       |        
|                                                                                     |                                                          |             |        
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                     |                                                          |             |        
|Interest paid                                                                        |                                                          | 4,532       |        
|                                                                                     |                                                          |             |        
|Income taxes paid                                                                    |                                                          | 3,995       |        
|                                                                                     |                                                          |             |        

The accompanying notes are an integral part of the consolidated financial statements.

46

---



Novamerican Steel Inc. and Subsidiaries        Consolidated Balance Sheets        (In thousands of U.S. dollars)

|                                                                     |                                                   | November 30,
2002 |        | November 24,
2001 |       
|-------------------------------------------------------------------- | ------------------------------------------------- | ----------------- | ------ | ----------------- | ------
|
|ASSETS                                                               |                                                   |                   |        |                   |       
|Current assets                                                       |                                                   |                   |        |                   |       
|                                                                     | Cash and cash equivalents                         |                   | 7,590  |                   | 10,534
|                                                                     | Accounts receivable (Note 5)                      |                   | 67,580 |                   | 59,608
|                                                                     | Income taxes receivable                           |                   |        |                   | 292   
|                                                                     | Inventories (Note 6)                              |                   | 87,672 |                   | 68,193
|                                                                     | Prepaid expenses and other                        |                   | 784    |                   | 1,480 
|                                                                     | Deferred income taxes (Note 4)                    |                   | 1,149  |                   | 441   
|                                                                     |                                                   |                   |        |                   |       
|                                                                     |                                                   | 164,775           |        | 140,548           |       
|Investment in joint ventures                                         |                                                   | 11,451            |        | 9,350             |       
|Property, plant and equipment (Note 7)                               |                                                   | 81,290            |        | 73,710            |       
|Goodwill, net of accumulated amortization of $2,035 ($1,717 in 2001) |                                                   | 12,420            |        | 11,031            |       
|Other assets                                                         |                                                   | 1,769             |        | 2,323             |       
|                                                                     |                                                   |                   |        |                   |       
|                                                                     |                                                   | 271,705           |        | 236,962           |       
|                                                                     |                                                   |                   |        |                   |       
|LIABILITIES                                                          |                                                   |                   |        |                   |       
|Current liabilities                                                  |                                                   |                   |        |                   |       
|                                                                     | Current portion of long-term debt                 |                   | 7,472  |                   | 5,797 
|                                                                     | Bank indebtedness (Note 8)                        |                   | 3,534  |                   | 7,193 
|                                                                     | Accounts payable and accrued liabilities (Note 9) |                   | 63,254 |                   | 51,504
|                                                                     | Income taxes payable                              |                   | 3,710  |                   |       
|                                                                     |                                                   |                   |        |                   |       
|                                                                     |                                                   | 77,970            |        | 64,494            |       
|Long-term debt (Note 10)                                             |                                                   | 62,067            |        | 61,694            |       
|Fair value of interest rate swap (Note 14)                           |                                                   | 2,289             |        | 1,201             |       
|Deferred income taxes (Note 4)                                       |                                                   | 9,512             |        | 7,129             |       
|Minority interest                                                    |                                                   |                   |        | 2,776             |       
|                                                                     |                                                   |                   |        |                   |       
|                                                                     |                                                   | 151,838           |        | 137,294           |       
|                                                                     |                                                   |                   |        |                   |       
|SHAREHOLDERS' EQUITY                                                 |                                                   |                   |        |                   |       
|Share capital (Note 11)                                              |                                                   | 28,404            |        | 28,404            |       
|Retained earnings                                                    |                                                   | 98,789            |        | 78,671            |       
|Accumulated other comprehensive loss                                 |                                                   | (7,326            | )      | (7,407            | )     
|                                                                     |                                                   |                   |        |                   |       
|                                                                     |                                                   | 119,867           |        | 99,668            |       
|                                                                     |                                                   |                   |        |                   |       
|                                                                     |                                                   | 271,705           |        | 236,962           |       
|                                                                     |                                                   |                   |        |                   |       

The
accompanying notes are an integral part of the consolidated financial statements.

47

---



Novamerican Steel Inc. and Subsidiaries        Notes to Consolidated Financial Statements        (In U.S. dollars; tabular amounts in thousands of U.S. dollars)

1GOVERNING STATUTES AND NATURE OF OPERATIONS

Novamerican Steel Inc. (Novamerican) was incorporated under the Canada Business Corporations Act. The Company processes and distributes, through its 24
locations in the Northeastern, Mid-Atlantic and Mid-Western United States and the Canadian provinces of Québec and Ontario, carbon steel, tubular stainless steel
and aluminum products, and operates as an intermediary between primary metal producers and manufacturers that require processed metal.

2ACCOUNTING POLICIES

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
and the reporting currency is the United States of America dollar (U.S. dollar).

A
summary of significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows.

Basis of consolidation

The consolidated financial statements include the accounts of Novamerican and all its subsidiaries (collectively, the Company). All significant intercompany
transactions and balances have been eliminated. The Company's interests in joint ventures are accounted for by the equity method. Accordingly, the Company's share in income of the joint ventures is
included in consolidated net income.

Fiscal year

The fiscal year-end of the Company is the last Saturday of November. The fiscal year ending November 30, 2002 includes 53 weeks of operations,
whereas the fiscal years ending November 24, 2001 and November 25, 2000 include 52 weeks of operations.

Translation of foreign currencies

Transactions concluded in foreign currencies by the Company are translated into their respective functional currency as follows: monetary assets and liabilities
are translated at the exchange rate in effect at year-end; revenues and expenses are translated at the average exchange rate for the year. Exchange gains and losses arising from
transactions denominated in foreign currencies are included in income. Gains amounted to $1,250,000 in 2002, $847,000 in 2001 and $594,000 in 2000.

The
financial statements of the Company are translated from their functional currency, the Canadian dollar, into the reporting currency, the U.S. dollar as follows: assets and
liabilities are translated at the exchange rate in effect at year-end; revenues and expenses are translated at the average exchange rate for the year. All cumulative translation gains or
losses are included in accumulated other comprehensive loss in the consolidated balance sheets.

Accounting estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of

48

---

the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue recognition

Revenue is recognized when products are shipped to the customer. Sales returns and allowances are treated as reductions to sales and are provided for based on
historical experience and current estimates.

Cash and cash equivalents

Cash and cash equivalents include cash in banks and term deposits which are short-term, highly liquid investments with original maturities of three
months or less.

Inventories

Inventories are stated at the lower of cost or market and include the cost of purchased steel and freight. Cost is determined using the specific identification
method or the average cost method.

Property, plant and equipment

Property, plant and equipment are stated at cost.

Depreciation
is calculated using the straight-line method over the following estimated useful lives:

Buildings and building improvements

10 to 40 yearsMachinery and equipment

5 to 20 yearsFurniture and fixtures

5 to 15 yearsTransportation equipment

3 to 7 yearsComputer equipment

3 to 5 yearsLeasehold improvements

5 to 10 yearsAircraft

15 years


Depreciation
expense was approximately $5,410,000, $5,076,000 and $4,583,000 for the years ended November 30, 2002, November 24, 2001 and November 25, 2000,
respectively. No depreciation was recorded on assets under construction.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. Goodwill arising from acquisitions completed before
July 1, 2001 is being amortized using the straight-line method over 40 years, whereas goodwill acquired during the year is not amortized. The carrying value of goodwill is
tested for impairment annually. Should this review indicate that goodwill will not be recoverable, the Company's carrying value of goodwill will be reduced by the estimated impairment. Amortization
expense was approximately $318,000 for each of the years ended November 30, 2002, November 24, 2001 and November 25, 2000.

49

---

Other assets

Other assets are recorded at cost and comprise expenses incurred in issuing long-term debt which are deferred and amortized using the
straight-line method over the term of the related debt. Amortization expense was approximately $500,000, $625,000 and $371,000 for the years ended November 30, 2002,
November 24, 2001 and November 25, 2000, respectively.

Income taxes

The provision for income taxes is computed on the pretax income of the consolidated subsidiaries located within each taxing country based on the current tax law.
Deferred income taxes are provided, based upon currently enacted tax rates, for temporary differences in the recognition of assets and liabilities on the financial statements and for income tax
purposes.

The
Company does not provide for income taxes on undistributed income of foreign subsidiaries as such income is intended to be permanently reinvested in those operations.

Earnings per share

Basic income per share is based upon the weighted average number of common shares outstanding during the respective years. Weighted average common shares
outstanding were 9,700,000 for the years ended November 30, 2002, November 24, 2001 and November 25, 2000, respectively. Stock options were not included in the computation of
diluted income per share because they are antidilutive.

Comprehensive income

Components of comprehensive income include net income, changes in cumulative translation adjustments and changes in unrealized losses on the interest rate swap
net of taxes.

Current and pending accounting changes

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Intangible
Assets. This statement prescribes accounting for all purchased goodwill and intangible assets and states that acquired goodwill
and intangible assets with indefinite lives are not amortized, but are tested for impairment annually while other intangible assets with finite lives should be amortized over their useful economic
life. The statement is effective for fiscal years beginning after December 15, 2001 and it will first be adopted in the first quarter of the fiscal year ending in 2003. Impairment losses
resulting from the transitional testing, if any, will be recognized as a cumulative effect of a change in accounting principle. Upon adoption of the Statement, amortization expense will be reduced by
approximately $318,000 annually.

In
June 2001, the FASB issued SFAS No. 143,Accounting for Asset Retirement Obligations. This statement addresses financial
accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs and is effective for fiscal years beginning after
June 15, 2002.

In
October 2001, the FASB issued SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets,
which supersedes SFAS No. 121,Accounting for the Impairment of Long-Lived Assets and

50

---

for Long-Lived Assets to be Disposed of, and the accounting and reporting provisions of APB No. 30,Reporting the Results of
OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS
No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and is effective for fiscal years beginning after December 15, 2001.

The
FASB issued SFAS No. 145,Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections, effective for fiscal years beginning May 15, 2002 or later that rescinds FASB Statement No. 4,Reporting Gains and Losses
from Extinguishment of Debt,FASB Statement No. 64,Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements, and FASB Statement No. 44,Accounting for Intangible Assets of Motor Carriers. This statement amends SFAS
No. 4 and SFAS No. 13,Accounting For Leases, to eliminate an inconsistency between the required accounting for sale-leaseback
transactions. This statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions.

In
July 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities. SFAS
No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of
costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or
disposal activity. SFAS No. 146 replaces Emerging Issues Task Force (EITF) Issue No. 94-3,Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). The provisions of the new standard are to be applied prospectively for exit
or disposal activities initiated after December 31, 2002.

The
Company does not expect the adoption of SFAS Nos. 143, 144, 145 or 146 to have a material impact on the financial statements.

In
November 2002, the FASB issued Interpretation No. 45,Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, which expands on the accounting guidance of SFAS Nos. 5, 57 and 107 and incorporates without change the provisions of FASB Interpretation
No. 34 which is being superseded. The Interpretation elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit.
It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under the guarantee
and must disclose that information in its interim and annual financial statements. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or
modified after December 31, 2002, regardless of the guarantor's fiscal year-end. The disclosure requirements in the Interpretation are effective for financial statements of interim
or annual periods after December 15, 2002. The requirements in the Interpretation will be implemented in the Company's first quarter interim consolidated financial statements for fiscal year
ending November 29, 2003 and the Company does not expect the adoption of Interpretation No. 45 to have a material impact on the financial statements.

The
AICPA's Accounting Standards Executive Committee (AcSEC) issued Statement of Position (SOP) No. 01-6,Accounting by Certain Entities
(Including Entities with Trade Receivables) That Lend to or Finance the Activities of Others. The SOP reconciles and conforms existing differences in the accounting

51

---

and financial reporting guidance in the AICPA Audit and Accounting Guides,Banks and Savings Institutions, Audits of Credit Unions and Audits of Finance
Companies. Trade receivables of all entities, including commercial entities that finance their customers' purchases of goods and services using trade receivables are within the
scope of the current finance companies Guide and are therefore within the scope of the SOP. Such entities would have to disclose their accounting policy for receivables and the related valuation
allowance, including the policy for charging off uncollectible receivables and determining past due or delinquent status. For entities that are not financial institutions, only the SOP's guidance
related to financing and lending activities would be applicable, and not other guidance specific to financial institutions. The SOP is effective for fiscal years beginning after December 15,
2001.

3ACQUISITION OF MINORITY INTEREST

During the year, the Company acquired the minority interest in one of its Canadian subsidiaries, Argo Steel Ltd. ("Argo"), (the "Acquisition"). Such
minority interest was held by certain employees of the Company. The Acquisition was accounted for using the purchase method of accounting and as a result goodwill was recorded. The terms of the
Acquisition also provide for additional consideration to be paid if Argo's earnings exceed certain targeted levels through the year 2004 which would result in additional goodwill. The Company has not
recorded the contingent liability as of November 30, 2002 as the outcome is not determinable beyond a reasonable doubt.

4INCOME TAXES

The following summarizes the Company's income taxes on the earnings of its Canadian and U.S. operations.

Income
before income taxes and minority interest by local jurisdiction:

|              |  | Years ended
|------------- |  | -----------
|
|
|Canada        |  | 22,260     
|United States |  | 7,938      
|              |  |            
|              |  | 30,198     
|              |  |            

52

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The
income tax provision is composed of the following:

|         |               | Years ended |      
|-------- | ------------- | ----------- | -----
|
|
|Current  |               |             |      
|         | Canada        |             | 6,110
|         | United States |             | 1,816
|         |               |             |      
|         |               | 7,926       |      
|         |               |             |      
|Deferred |               |             |      
|         | Canada        |             | 647  
|         | United States |             | 1,507
|         |               |             |      
|         |               | 2,154       |      
|         |               |             |      
|         |               | 10,080      |      
|         |               |             |      

The
components of the Company's net deferred income tax liability are as follows:

|                                                  |                               | November 30,
2002                |   | November 24,
2001 |  
|------------------------------------------------- | ----------------------------- | -------------------------------- | - | ----------------- | -
|
|Asset (liability)                                 |                               |                                  |   |                   |  
|                                                  | Current deferred income taxes |                                  |   |                   |  
|                                                  |                               | Investment in joint ventures     |   | (125              | )
|                                                  |                               | Inventories                      |   | 555               |  
|                                                  |                               | Accounts receivable              |   | 345               |  
|                                                  |                               | Other items                      |   | 374               |  
|                                                  |                               |                                  |   |                   |  
|                                                  |                               | 1,149                            |   | 441               |  
|                                                  |                               |                                  |   |                   |  
|Long-term deferred income taxes                   |                               |                                  |   |                   |  
|                                                  |                               | Property, plant and equipment    |   | (10,183           | )
|                                                  |                               | Investment in joint ventures     |   | (551              | )
|                                                  |                               | Intangibles                      |   | (25               | )
|                                                  |                               | Fair value of interest rate swap |   | 1,030             |  
|                                                  |                               | Other items                      |   | 217               |  
|                                                  |                               |                                  |   |                   |  
|                                                  |                               | (9,512                           | ) | (7,129            | )
|                                                  |                               |                                  |   |                   |  
|Total current and long-term deferred income taxes |                               | (8,363                           | ) | (6,688            | )
|                                                  |                               |                                  |   |                   |  

53

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The
reconciliation between the Canadian statutory income tax rate and the Company's effective income tax rate is as follows:

|                                                               |  | Years ended |  
|-------------------------------------------------------------- |  | ----------- | -
|
|
|Canadian statutory income tax rate                             |  | 39.1        |  
|United States statutory income tax rate difference             |  | 0.2         |  
|Canadian incentive for manufacturing and processing activities |  | (4.5        | )
|Reduction in income tax rate                                   |  | (0.5        | )
|Other items                                                    |  | (0.9        | )
|                                                               |  |             |  
|Effective income tax rate                                      |  | 33.4        |  
|                                                               |  |             |  

5ACCOUNTS RECEIVABLE

|                                                                                                   |  | November 30,
2002 |  | November 24,
2001
|-------------------------------------------------------------------------------------------------- |  | ----------------- |  | -----------------
|
|Trade accounts receivable, less allowance for doubtful accounts of $1,655,780 ($1,266,645 in 2001) |  | 66,766            |  | 59,021           
|Other                                                                                              |  | 814               |  | 587              
|                                                                                                   |  |                   |  |                  
|                                                                                                   |  | 67,580            |  | 59,608           
|                                                                                                   |  |                   |  |                  

6INVENTORIES

|               |  | November 30,
2002 |  | November 24,
2001
|-------------- |  | ----------------- |  | -----------------
|
|Raw materials  |  | 49,607            |  | 34,053           
|Finished goods |  | 38,065            |  | 34,140           
|               |  |                   |  |                  
|               |  | 87,672            |  | 68,193           
|               |  |                   |  |                  

54

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7PROPERTY, PLANT AND EQUIPMENT

|                                    |  | November 30,
2002 |  | November 24,
2001
|----------------------------------- |  | ----------------- |  | -----------------
|
|Land                                |  | 5,874             |  | 5,866            
|Buildings and building improvements |  | 31,827            |  | 31,540           
|Machinery and equipment             |  | 56,232            |  | 48,974           
|Furniture and fixtures              |  | 557               |  | 533              
|Transportation equipment            |  | 1,825             |  | 1,698            
|Computer equipment                  |  | 2,896             |  | 2,713            
|Leasehold improvements              |  | 789               |  | 776              
|Aircraft                            |  | 8,663             |  | 3,065            
|Assets under construction           |  | 3,488             |  | 4,072            
|                                    |  |                   |  |                  
|                                    |  | 112,151           |  | 99,237           
|Accumulated depreciation            |  | 30,861            |  | 25,527           
|                                    |  |                   |  |                  
|                                    |  | 81,290            |  | 73,710           
|                                    |  |                   |  |                  

8BANK INDEBTEDNESS

The bank indebtedness of the Company's Canadian subsidiaries consists of various demand revolving credit facilities available by either prime rate loans, bearing
interest at prime, currently 4.5% (4.5% in 2001), plus a premium varying from 0% to 0.5%, or by way of banker's acceptances having discount rates varying from 0% to 0.5%, and are secured by
inventories and movable hypothecs covering the universality of present and future book debts and a negative pledge on certain assets. There are no cross collateralizations among the various
facilities. These facilities are renegotiated on an annual basis.

The
Company's Canadian subsidiaries have approximately $30,981,000 (CA$48,500,000) in 2002 and $30,856,000 (CA$48,500,000) in 2001 of revolving credit facilities from two Canadian
financial institutions, of which approximately $27,159,000 (CA$42,515,000) was available at November 30, 2002 and $23,622,000 (CA$37,128,000) was available at November 24, 2001. In
addition, a Canadian subsidiary has a revolving demand credit facility of $479,000 in 2002 and $477,000 in 2001 (CA$750,000 in both years), bearing interest at prime, currently 4.5% (4.5% in 2001),
plus a rate varying from 0% to 0.75%, of which $479,000 was available at November 30, 2002 and $477,000 was available at November 24, 2001 (CA$750,000 in both years).

As
at November 30, 2002, the bank had issued guarantees and letters of credit to the Company's Canadian subsidiaries amounting to $288,000 (CA$450,000) and $41,000 (CA$65,000) as
at November 24, 2001.

55

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9ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

|                                                                                                                        |  | November 30,
2002 |  | November 24,
2001
|----------------------------------------------------------------------------------------------------------------------- |  | ----------------- |  | -----------------
|
|Trade accounts                                                                                                          |  | 59,937            |  | 49,624           
|Trade accounts to a company controlled by a shareholder                                                                 |  | 442               |  | 625              
|Trade accounts to a joint venture                                                                                       |  | 909               |  | 1,255            
|Advances due to an employee, bearing interest at prime, currently 4.5%, plus a premium of 0.5%, without repayment terms |  | 1,966             |  |                  
|                                                                                                                        |  |                   |  |                  
|                                                                                                                        |  | 63,254            |  | 51,504           
|                                                                                                                        |  |                   |  |                  

10LONG-TERM DEBT

|                                        |                                        | Maturity |           | November 30,
2002 |       | November 24,
2001
|--------------------------------------- | -------------------------------------- | -------- | --------- | ----------------- | ----- | -----------------
|
|Revolving line of credit(a)             |                                        | 2006     |           | 3,107             |       |                  
|Loans(b)                                |                                        |          |           |                   |       |                  
|                                        | (CA$5,423,594; CA$4,010,229 in 2001)   |          | 2003-2012 |                   | 3,465 |                  
|Term credit facility(c)                 |                                        |          |           |                   |       |                  
|                                        | (CA$15,441,028; CA$19,929,797 in 2001) |          | 2006      |                   | 9,864 |                  
|Term loan(d)                            |                                        | 2006     |           | 48,804            |       | 51,454           
|Promissory note(e)                      |                                        | 2007     |           | 4,000             |       |                  
|Loans from a shareholder(f)             |                                        |          |           |                   |       |                  
|                                        | (CA$468,629; CA$744,162 in 2001)       |          |           |                   | 299   |                  
|Loans from minority shareholders(g)     |                                        |          |           |                   |       |                  
|                                        | (CA$521,791 in 2001)                   |          |           |                   |       |                  
|                                        |                                        |          |           |                   |       |                  
|                                        |                                        |          |           | 69,539            |       | 67,491           
|Less: current portion of long-term debt |                                        |          |           | 7,472             |       | 5,797            
|                                        |                                        |          |           |                   |       |                  
|                                        |                                        |          |           | 62,067            |       | 61,694           
|                                        |                                        |          |           |                   |       |                  

56

---



Novamerican Steel Inc. and Subsidiaries        Notes to Consolidated Financial Statements        (In U.S. dollars; tabular amounts in thousands of U.S. dollars)

10LONG-TERM DEBT (Continued)





57

---





Aggregate
maturities of long-term debt are as follows:

|           |  | $     
|---------- |  | ------
|2003       |  | 7,472 
|2004       |  | 5,983 
|2005       |  | 5,774 
|2006       |  | 48,404
|2007       |  | 980   
|Thereafter |  | 926   

58

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11SHARE CAPITAL

Preferred shares

The Company is authorized to issue an unlimited number of preferred shares, issuable in one or more series, the Board of Directors being authorized to fix the
rights, dividend rates, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption price or prices, and the number of shares constituting any series or the
designation of such series, without further vote or action by the shareholders. No preferred shares were outstanding as at the dates of, and for the period covered by, the financial statements.

Common shares

The Company is authorized to issue an unlimited number of common shares, entitled to one vote per share.

Shareholders' protection rights plan

The Company has a shareholders' protection rights plan. Under the plan, each common share issued or outstanding has associated with it one right to purchase one
common share at a predetermined exercise price in certain circumstances relating to changes in the ownership of the common stock of the Company.

12SHARE OPTION PLAN

On September 24, 1997, Novamerican's Board of Directors adopted the Novamerican Steel Inc. 1997 Share Option Plan which provides for the grant of
incentive stock options (ISOs) as defined in Section 422 of the U.S. Internal Revenue Code of 1986, as amended, non-qualified stock options (NSOs)
and Other Rights (collectively, Awards) to key employees and directors of the Company. Options will be exercisable in instalments pursuant to a vesting schedule during the period specified in each
option agreement. No option will remain exercisable later than ten years after the date of grant (or five years from the date of grant in the case of ISOs granted to holders of more than 10% of the
common shares). The exercise price for ISOs granted under the Share Option Plan may be no less than the fair market value of the common shares at the date of grant (or 110% in the case of ISOs granted
to employees owning more than 10% of the common shares). The exercise price for NSOs and all other Awards will be at the discretion of the Compensation Committee. Stock Appreciation Rights (SARs) may
be granted to Share Option Plan participants separately or in connection with ISOs and NSOs. Upon exercise of a SAR, the holder is entitled to receive payment equal to the excess of the fair market
value, on the date of exercise, of the number of common shares for which the SAR is exercised, over the exercise price for such common shares under a related option, or if there is no related option,
over an amount per common share stated in the written agreement setting forth the terms and conditions of the SAR. The Company has reserved 1,500,000 common shares for issuance under the Share Option
Plan.

On
September 24, 1997, ISOs were granted to three executive officers of the Company to purchase 750,000 common shares at an exercise price equivalent to the initial public
offering price of $14.00 per common share. One-fifth of the ISOs may be exercised at each anniversary date of the grant except for 300,000 ISOs of which 40% cannot be exercised before the
second anniversary date and 20% at each anniversary date thereafter. The Company has not issued any SARs as of November 30, 2002.

59

---

A
summary of stock option activity and related information for 2001 and 2002 follows:

|                              |  | Shares  |  | Weighted
average
exercise
price
|----------------------------- |  | ------- |  | -------------------------------
|
|OutstandingNovember 25, 2000 |  | 750,000 |  | 14.00                          
|Granted                       |  |         |  |                                
|Exercised                     |  |         |  |                                
|Forfeited                     |  |         |  |                                
|                              |  |         |  |                                
|OutstandingNovember 24, 2001 |  | 750,000 |  | 14.00                          
|Granted                       |  |         |  |                                
|Exercised                     |  |         |  |                                
|Forfeited                     |  |         |  |                                
|                              |  |         |  |                                
|OutstandingNovember 30, 2002 |  | 750,000 |  | 14.00                          
|                              |  |         |  |                                

|                           |  | Shares  |  | Weighted
average
exercise
price
|-------------------------- |  | ------- |  | -------------------------------
|
|Exercisable at end of year |  |         |  |                                
|2000                       |  | 450,000 |  | 14.00                          
|2001                       |  | 600,000 |  | 14.00                          
|2002                       |  | 750,000 |  | 14.00                          

The
Company has elected to measure compensation cost related to granting of Awards using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to
Employees. In this instance, however, under SFAS No. 123,Accounting for Stock-Based
Compensation, the Company is required to make pro-forma disclosures of net income and basic income per share as if the fair value based method defined in SFAS
No. 123 had been applied. Accordingly, the Company's net income and basic income per share for the year ended November 30, 2002 would have been reduced, on a pro-forma basis,
by $0.9 million and $0.09 respectively and the Company's net income and basic income per share for the years ended November 24, 2001 and November 25, 2000 would have been reduced,
on a pro-forma basis, by $1.1 million and $0.12, respectively.

The
fair value of ISOs granted was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions: risk-free interest rate of 6.075%
per year, expected life of seven years, expected dividend yield of 0% and expected volatility of 40%. As at November 30, 2002, November 24, 2001 and November 25, 2000, the
weighted average fair value of the ISOs granted and outstanding was approximately $5.6 million.

60

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13RELATED PARTY TRANSACTIONS

The following transactions with related parties occurred in the normal course of business and were measured at their respective exchange value, which is the
amount established and agreed to by the related parties:

|                                                                     |  | Years ended
|-------------------------------------------------------------------- |  | -----------
|
|
|Processing revenue from a joint venture                              |  | 217        
|Sales to a joint venture                                             |  | 453        
|Management fees from a joint venture                                 |  | 38         
|Processing charges paid to a joint venture                           |  | 2,433      
|Rental charges paid to companies controlled by a shareholder         |  | 1,036      
|Rental charges paid to companies jointly controlled by a shareholder |  | 391        
|Freight charges paid to a company controlled by a shareholder        |  | 5,014      
|Interest paid to a shareholder                                       |  | 36         
|Interest paid to an employee                                         |  | 71         
|Purchase of property, plant and equipment from a joint venture       |  | 90         

14FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES



Fair value of financial instruments has been estimated using data which management considered the best available methodology deemed suitable for the pertinent
category of financial instruments. The estimation methodologies are as follows:

Fair
value of financial instruments:

|                   |  | November 30, 2002 |  | November 24, 2001
|------------------ |  | ----------------- |  | -----------------
|
|
|Long-term debt     |  | 69,539            |  | 69,636           
|Interest rate swap |  | 2,289             |  | 2,289            

61

---

The
fair value of the long-term debt is determined without considering any additional repayments based on excess cash flow that may be required due to the difficulty of
estimating any additional repayments.

The
notional amount of the swap is $40,000,000 to be reduced to $30,000,000 in 2003 and to $20,000,000 in 2005 with a term of five years expiring April 16, 2006. The Company
intends to use the swap as a hedge of the related debt interest rate for five years.



Effective November 26, 2000, the Company adopted SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 requires all derivatives to be recorded on the balance sheet as assets or liabilities at their fair value. As well, SFAS No. 133
establishes new criteria for hedge accounting. In adopting SFAS No. 133, the Company did not incur any transition adjustments to earnings.

At
November 30, 2002 and November 24, 2001, a U.S. subsidiary of the Company had an interest rate swap agreement to manage its exposure to interest rate risk as required
under the terms of the term loan agreement described in note 10(d). This swap possesses a term equal to the term of the debt, with a fixed pay rate and a receive rate indexed to rates paid on
the debt. This derivative was entered into concurrently with the issuance of the debt being hedged, at which date, it was designated as a cash flow hedge and its fair value was recognized on the
balance sheet. Changes in the fair value of this derivative are reported as a separate component of shareholders' equity in accumulated other comprehensive loss.

The
Company formally documents all relationships between hedging instruments and the hedged items, as well as its risk-management objectives and strategies for undertaking
various hedge transactions. The Company formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in
offsetting changes in cash flows of the hedged items.

When
it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively
when (a) it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item; (b) the derivative expires or is sold, terminated or
exercised; or (c) management determines that designation of the derivative as a hedge instrument is no longer appropriate. In these situations where hedge accounting is discontinued, the
derivative will be carried at its fair value on the balance sheet, with changes in its fair value recognized in current-period earnings. All gains or losses that were accumulated in other
comprehensive loss will be recognized immediately in earnings upon the discontinuance of hedge accounting.

The
Company minimizes the credit (or repayment) risk in derivative instruments by entering into transactions with reputable financial institutions and it does not hold derivative
instruments for trading purposes.



The Company does not have a concentration of available sources of supply, labor, service or other rights that, if suddenly eliminated, could severely impact its
operations.

62

---

The
Company's customer base is widely diversified and is involved in various industries. Therefore, the Company believes that no material concentrations of credit risk exist. To reduce
credit risk, the Company performs evaluations of its customers' creditworthiness and accordingly does not generally require collateral.

15JOINT VENTURES

The Company holds a 60% equity interest and a 50% voting interest in Delta Tube and Company, Limited, a joint venture that processes carbon steel into tubing.

The
Company also holds a 50% equity and voting interest in BethNova Tube, LLC, with Bethlehem Steel Corporation (Bethlehem) as an equal partner in the joint venture. The joint venture
manufactures steel tubing for hydroforming applications. Construction of the BethNova Tube, LLC facility was completed in May 2001 and commercial production began in fiscal year 2002.

As
at November 30, 2002, Bethlehem was still reorganizing under Chapter 11 of the United States Bankruptcy Code as originally filed on October 15, 2001. Bethlehem has
stated that it does not plan to exit any of its joint venture partnerships, and, for its part, the Company is continuing to operate the joint venture with Bethlehem in the normal course of business.
The Company does not believe that this event will have a material impact on the operations of the joint venture and accordingly, there is no impairment of its carrying value to be recorded.

63

---

Combined
condensed financial information of the joint ventures is summarized below:

|           |                         | Twelve-month period ended
|---------- | ----------------------- | -------------------------
|
|
|Operations |                         |                          
|           | Net sales               |                          
|           | Operating income (loss) |                          

|              |                          |                                           |  | November 30,
2002 |  | November 24,
2001 |  
|------------- | ------------------------ | ----------------------------------------- |  | ----------------- |  | ----------------- | -
|
|Balance sheet |                          |                                           |  |                   |  |                   |  
|              | Assets                   |                                           |  |                   |  |                   |  
|              |                          | Current assets                            |  |                   |  | 5,989             |  
|              |                          | Long-term receivable                      |  |                   |  | 9                 |  
|              |                          | Property, plant and equipment             |  |                   |  | 15,486            |  
|              |                          | Goodwill, net of accumulated amortization |  |                   |  | 5                 |  
|              |                          |                                           |  |                   |  |                   |  
|              |                          |                                           |  | 21,489            |  | 17,355            |  
|              |                          |                                           |  |                   |  |                   |  
|              | Liabilities              |                                           |  |                   |  |                   |  
|              |                          | Current liabilities                       |  |                   |  | 959               |  
|              |                          | Advances from partners                    |  |                   |  | 11,324            |  
|              | Joint venture investment |                                           |  |                   |  |                   |  
|              |                          | Capital contributions                     |  |                   |  | 10,008            |  
|              |                          | Undistributed earnings (loss)             |  |                   |  | 373               |  
|              |                          | Accumulated other comprehensive loss      |  |                   |  | (1,175            | )
|              |                          |                                           |  |                   |  |                   |  
|              |                          |                                           |  | 21,489            |  | 17,355            |  
|              |                          |                                           |  |                   |  |                   |  

16CONTINGENCIES

The Company is contingently liable under guarantees issued in the normal course of business and with respect to claims and litigation that arise from time to
time. In the opinion of management, any uninsured liability which may arise from such contingencies would not have a material adverse effect on the financial statements of the Company.

64

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17COMMITMENTS

The Company has entered into operating leases for certain facilities and equipment which expire at various dates until 2012. The following schedule outlines the
future minimum rental payments under these leases as at November 30, 2002:

|                             |  | $    
|---------------------------- |  | -----
|2003                         |  | 2,962
|2004                         |  | 2,031
|2005                         |  | 1,382
|2006                         |  | 1,058
|2007                         |  | 557  
|Thereafter                   |  | 1,275
|                             |  |      
|Total minimum lease payments |  | 9,265
|                             |  |      

Rental
expense under the operating leases amounted to approximately $3,926,000, $3,721,000 and $3,118,000 for the years ended November 30, 2002, November 24, 2001 and
November 25, 2000, respectively.

18RETIREMENT PLAN

A U.S. subsidiary makes available to substantially all of its employees a 401(k) plan. The plan allows employees to contribute a portion of their pretax income in
accordance with specified guidelines. A percentage of such contribution, up to a certain limit, is matched by the employer. Investments are in various mutual funds at the discretion of the employees
and the plan is administered by an independent third party. Costs incurred under the 401(k) plan amounted to approximately $463,000, $436,000 and $436,000 for the years ended November 30, 2002,
November 24, 2001 and November 25, 2000, respectively.

65

---

19FINANCIAL INFORMATION BY GEOGRAPHIC AREA

The Company has established that it has one single reportable segment and that it does not need to provide additional information relating to segmented
information in the financial statements.

|     |                               | United States |         | Canada  |         | Total  
|---- | ----------------------------- | ------------- | ------- | ------- | ------- | -------
|
|2002 |                               |               |         |         |         |        
|     | Net sales (a)                 |               |         |         |         |        
|     |                               | Domestic      |         | 210,733 |         | 228,622
|     |                               | Export        |         | 842     |         | 25,304 
|     |                               |               |         |         |         |        
|     | Total                         |               | 211,575 |         | 253,926 |        
|     |                               |               |         |         |         |        
|     | Operating income              |               | 12,170  |         | 22,382  |        
|     |                               |               |         |         |         |        
|     | Depreciation and amortization |               | 2,947   |         | 3,281   |        
|     |                               |               |         |         |         |        
|     | Long-lived assets             |               | 57,805  |         | 35,905  |        
|     |                               |               |         |         |         |        
|2001 |                               |               |         |         |         |        
|     | Net sales (a)                 |               |         |         |         |        
|     |                               | Domestic      |         | 205,667 |         | 190,257
|     |                               | Export        |         | 254     |         | 20,851 
|     |                               |               |         |         |         |        
|     | Total                         |               | 205,921 |         | 211,108 |        
|     |                               |               |         |         |         |        
|     | Operating income              |               | 7,578   |         | 10,720  |        
|     |                               |               |         |         |         |        
|     | Depreciation and amortization |               | 2,771   |         | 3,248   |        
|     |                               |               |         |         |         |        
|     | Long-lived assets             |               | 53,222  |         | 31,519  |        
|     |                               |               |         |         |         |        
|2000 |                               |               |         |         |         |        
|     | Net sales (a)                 |               |         |         |         |        
|     |                               | Domestic      |         | 219,504 |         | 232,360
|     |                               | Export        |         |         |         | 26,642 
|     |                               |               |         |         |         |        
|     | Total                         |               | 219,504 |         | 259,002 |        
|     |                               |               |         |         |         |        
|     | Operating income              |               | 10,344  |         | 16,584  |        
|     |                               |               |         |         |         |        
|     | Depreciation and amortization |               | 2,203   |         | 3,069   |        
|     |                               |               |         |         |         |        
|     | Long-lived assets             |               | 49,017  |         | 32,617  |        
|     |                               |               |         |         |         |        

66

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GRAPHIC

Auditors' Report on Schedule II

To
the Directors of Novamerican Steel Inc.

In
connection with our audit of the Consolidated Financial Statements of Novamerican Steel Inc. and Subsidiaries referred to in our report dated December 20, 2002 which is
included in the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the year ended November 30, 2002 on Form 20-F, we have also
audited Schedule II for each of the years in the three year period ended November 30, 2002. In our opinion this schedule presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related Consolidated Financial Statements taken as a whole.

GRAPHIC

Chartered
Accountants
General Partnership

Montréal,
Canada
December 20, 2002

67

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Schedule II

NOVAMERICAN STEEL INC. AND SUBSIDIARIES    VALUATION AND QUALIFYING ACCOUNTS    (in thousands of U.S. dollars)

|Description                     |                              | Balance at
beginning of
year |       | Additions
charged to
expenses |       | Deductions |       | Balance at
end of
year
|------------------------------- | ---------------------------- | ---------------------------- | ----- | ----------------------------- | ----- | ---------- | ----- | ----------------------
|
|Allowance for doubtful accounts |                              |                              |       |                               |       |            |       |                       
|                                | Year ended November 30, 2002 |                              | 1,267 |                               | 1,060 |            | 671   |                       
|                                | Year ended November 24, 2001 |                              | 1,250 |                               | 1,189 |            | 1,172 |                       
|                                | Year ended November 25, 2000 |                              | 1,017 |                               | 1,035 |            | 802   |                       

68

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ITEM 19 EXHIBITS

The following table sets forth the exhibits filed as part of this annual report.

|1.1(a) |  | Articles of incorporation.                                                                                                                                           
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.2(a) |  | By-laws.                                                                                                                                                             
|2.1(a) |  | Specimen of Certificate representing Common Shares.                                                                                                                  
|4.1(b) |  | 1997 Share Option Plan.                                                                                                                                              
|4.2(c) |  | Formation and Operating Agreement, dated February 2, 2000, of BethNova Tube, LLC.                                                                                    
|4.3    |  | Acquisition by 156499 Canada Inc. of the Minority Interest in Argo Steel Ltd.                                                                                        
|4.4(d) |  | $40,000,000 Revolving Credit Facility dated April 6, 2001.                                                                                                           
|4.5(e) |  | $53,000,000 Term Loan Facility dated April 6, 2001.                                                                                                                  
|4.6    |  | Promissory Note, dated November 27, 2002, between Novamerican Tube Holdings, Inc. and Key Corporate Capital Inc.                                                     
|8.1    |  | Subsidiaries of the Company.                                                                                                                                         
|10.1   |  | Consent of Raymond Chabot Grant Thornton.                                                                                                                            
|10.2   |  | Certification of Chief Executive Officer Pursuant to Title 18, United States Code, Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|10.3   |  | Certification of Chief Financial Officer Pursuant to Title 18, United States Code, Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---

69

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SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report its behalf.

|                         |  |     | NOVAMERICAN STEEL INC.(Registrant)                                                                    
|------------------------ |  | --- | ------------------------------------------------------------------------------------------------------
|Dated: February 26, 2003 |  | By: | /s/Christopher H. PickwoadChristopher H. Pickwoad Executive Vice President and
Chief Financial Officer

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CERTIFICATIONS

I, D. Bryan Jones, certify that:





Date:
February 26, 2003



71

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I,
Christopher H. Pickwoad, certify that:





Date:
February 26, 2003



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