20-F 1 sidform20f_2012.htm FORM 20-F 2012

As filed with the Securities and Exchange Commission on April 30, 2013

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

1 | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
| OR
R | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the fiscal year ended December 31, 2012
| OR
1 | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| OR
1 | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-14732

COMPANHIA SIDERÚRGICA NACIONAL
(Exact Name of Registrant as Specified in its Charter)

NATIONAL STEEL COMPANY
(Translation of Registrant’s name into English)

THE FEDERATIVE REPUBLIC OF BRAZIL
(Jurisdiction of incorporation or organization)

David Moise Salama, Investor Relations Executive Officer
Phone: +55 11 3049-7100 Fax: +55 11 3049-7212

invrel@csn.com.br
Av. Brigadeiro Faria Lima, 3,400 – 20th floor
04538-132, São Paulo-SP, Brazil

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class | Name of each exchange on which registered
Common Shares without par value | New York Stock Exchange*
American Depositary Shares, (as evidenced by American Depositary Receipts), each representing one share of Common Stock | New York Stock Exchange

____________________

* Not for trading purposes, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

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

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the period covered by the annual report:

Common Shares, without par value. | 1,457,970,108. For further information, see “Item 7A. Major Shareholders,” “Item 9A. Offer and Listing Details” and “Item 10B. Memorandum and Articles of Association.”

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

R Yes 1 No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

1 Yes R No

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.

R Yes 1 No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

1 Yes 1 No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer R Accelerated Filer 1 Non-accelerated Filer 1

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP 1 | International Financial Reporting Standards as issued by the International Accounting Standards Board R | Other 1

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 1 Item 18 1

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

1 Yes R No

TABLE OF CONTENTS

| Page
Introduction | 1
Forward-Looking Statements | 2
Presentation of Financial and Other Information | 3
Item 1. Identity of Directors, Senior Management and Advisors | 3
Item 2. Offer Statistics and Expected Timetable | 3
Item 3. Key Information | 3
3A. Selected Financial Data | 3
3B. Capitalization and Indebtedness | 5
3C. Reasons for the Offer and Use of Proceeds | 5
3D. Risk Factors | 6
Item 4. Information on the Company | 15
4A. History and Development of the Company | 15
4B. Business Overview | 17
4C. Organizational Structure | 57
4D. Property, Plant and Equipment | 57
Item 4A. Unresolved Staff Comments | 63
Item 5. Operating and Financial Review and Prospects | 63
5A. Operating Results | 63
5B. Liquidity and Capital Resources | 87
5C. Research & Development and Innovation | 91
5D. Trend Information | 91
5E. Off-Balance Sheet Arrangements | 92
5F. Tabular Disclosure of Contractual Obligations | 96
5G. Safe Harbor | 97
Item 6. Directors, Senior Management and Employees | 97
6A. Directors and Senior Management | 97
6B. Compensation | 100
6C. Board Practices | 101
6D. Employees | 101
6E. Share Ownership | 101
Item 7. Major Shareholders and Related Party Transactions | 102
7A. Major Shareholders | 102
7B. Related Party Transactions | 102
Item 8. Financial Information | 102
8A. Consolidated Statements and Other Financial Information | 102
8B. Significant Changes | 107
Item 9. The Offer and Listing | 107
9A. Offer and Listing Details | 107
9B. Plan of Distribution | 108
9C. Markets | 108
9D. Selling Shareholders | 111
9E. Dilution | 111
9F. Expenses of the Issue | 111
Item 10. Additional Information | 111
10A. Share Capital | 111
10B. Memorandum and Articles of Association | 111
10C. Material Contracts | 111
10D. Exchange Controls | 114
10E. Taxation | 114
10F. Dividends and Paying Agents | 123
10G. Statement by Experts | 123
10H. Documents on Display | 123

10I. Subsidiary Information | 123
Item 11. Quantitative and Qualitative Disclosures About Market Risk | 123
Item 12. Description of Securities Other Than Equity Securities | 131
Item 13. Defaults, Dividend Arrearages and Delinquencies | 131
Item 14. Material Modification to the Rights of Security Holders and Use of Proceeds | 131
Item 15. Controls and Procedures | 131
Item 16. [Reserved] | 132
16A. Audit Committee Financial Expert | 132
16B. Code of Ethics | 132
16C. Principal Accountant Fees and Services | 133
16D. Exemptions from the Listing Standards for Audit Committees | 133
16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 134
16F. Change in Registrant’s Certifying Accountant | 134
16G. Corporate Governance | 134
16H. Mine Safety Disclosure | 136
Item 17. Financial Statements | 136
Item 18. Financial Statements | 136
Item 19. Exhibits | 137

Table Of Contents

Introduction

Unless otherwise specified, all references in this annual report to:

“we,” “us,” “our” or “CSN” are to Companhia Siderúrgica Nacional and its consolidated subsidiaries;

“Brazilian government” are to the federal government of the Federative Republic of Brazil;

“real,” “reais” or “R$” are to Brazilian reais, the official currency of Brazil;

“U.S. dollars,” “$,” “US$” or “USD” are to United States dollars;

“billions” are to thousands of millions, “km” are to kilometers, “m” are to meters, “mt” or “tons” are to metric tons, “mtpy” are to metric tons per year and “MW” are to megawatts;

“TEUs” are to twenty-foot equivalent units;

“consolidated financial statements” are to the consolidated financial statements of Companhia Siderúrgica Nacional and its consolidated subsidiaries reported in International Financial Reporting Standards as issued by the IASB – IFRS as of December 31, 2011 and 2012 and for the years ended December 31, 2010, 2011 and 2012, together with the corresponding Reports of Independent Registered Public Accounting Firm;

“ADSs” are to CSN’s American Depositary Shares and “ADRs” are to CSN’s American Depositary Receipts; and

“Brazil” is to the Federative Republic of Brazil.

1

Table Of Contents

Forward-Looking Statements

This annual report includes forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, principally under the captions “Item 3. Key Information,” “Item 4. Information on the Company,” “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk.” We have based these forward-looking statements largely on our current expectations and projections about future events, industry and financial trends affecting our business. Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ substantially from those anticipated in our forward-looking statements, including, among other things:

· general economic, political and business conditions in Brazil and abroad, especially in China, which is the largest world steel producer;

· the ongoing effects of the global financial markets and economic slowdown;

· changes in competitive conditions and in the general level of demand and supply for our products;

· management’s expectations and estimates concerning our future financial performance and financing plans;

· our level of debt;

· availability and price of raw materials;

· changes in international trade or international trade regulations;

· protectionist measures imposed by Brazil and other countries;

· our capital expenditure plans;

· inflation, interest rate levels and fluctuations in foreign exchange rates;

· our ability to develop and deliver our products on a timely basis;

· lack of infrastructure in Brazil;

· electricity and natural gas shortages and government responses to them;

· existing and future governmental regulation; and

· other risk factors as set forth under “Item 3D. Risk Factors.”

The words “believe,” “may,” “will,” “aim,” “estimate,” “forecast,” “plan,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update or to revise any forward-looking statements after we distribute this annual report because of new information, future events or other factors. In light of the risks and uncertainties described above, the forward-looking events and circumstances discussed in this annual report might not occur and are not an indication of future performance. As a result of various factors, such as those risks described in “Item 3D. Risk Factors,” undue reliance should not be placed on these forward-looking statements.

2

Table Of Contents

Presentation of Financial and Other Information

Our consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010 contained in “Item 18. Financial Statements” have been presented in thousands of reais (R$) and prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). See Note 2(a) to our consolidated financial statements.

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

PART I

Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

3A. Selected Financial Data

We present in this section the summary financial and operating data derived from our audited consolidated financial statements as of and for the year ended December 31, 2012, 2011, 2010 and 2009.

The consolidated financial statements included in this annual report have been prepared in accordance with IFRS, as issued by the IASB, in reais. However, we have translated some of the real amounts contained in this annual report into U.S. dollars. The rate used to translate such amounts in respect of the year ended December 31, 2012 was R$2.0435 to US$1.00, which was the commercial rate for the purchase of U.S. dollars in effect as of December 31, 2012, as reported by the Central Bank of Brazil, or the Central Bank. The U.S. dollar equivalent information presented in this annual report is provided solely for the convenience of investors and should not be construed as implying that the real amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. See “Exchange Rates” for more detailed information regarding the translation of reais into U.S. dollars.

IFRS Summary and Financial Data

The following tables present summary historical consolidated financial and operating data for us for each of the periods indicated. Solely for the convenience of the reader, real amounts as of and for the year ended December 31, 2012 have been translated into U.S. dollars at the commercial market rate in effect as of December 31, 2012 as reported by the Central Bank of R$2.0435 to US$1.00. The selected financial data below should be read in conjunction with “Item 5. Operating and Financial Review and Prospects.”

|  | Year Ended December 31,
Income Statement Data: |  | 2012 |  | 2012 | 2011 |  | 2010 |  | 2009
|  | (in million of US$, except per share data) |  | (in million of R$, except per share data)
Net operating revenues |  | 8,268 |  | 16,896 | 16,520 |  | 14,451 |  | 10,978
Cost of products sold |  | (5,908) |  | (12,072) | (9,801) |  | (7,883) |  | (7,211)
Gross Profit |  | 2,361 |  | 4,824 | 6,719 |  | 6,568 |  | 3,768
Operating expenses |  |  |  |  |  |  |  |  |
Selling |  | (456) |  | (932) | (604) |  | (482) |  | (447)
General and Administrative |  | (282) |  | (577) | (576) |  | (537) |  | (480)
Share of profit (losses) of investees |  |  |  | (1) |  |  |  |  |
Other Expenses |  | (1,331) |  | (2,719) | (501) |  | (599) |  | (648)
Other Income |  | 23 |  | 47 | 719 |  | 49 |  | 1,369
Total |  | (2,047) |  | (4,182) | (962) |  | (1,569) |  | (206)
Operating income |  | 314 |  | 642 | 5,757 |  | 4,998 |  | 3,561
Financial Income (expenses), net |  | (975) |  | (1,992) | (2,006) |  | (1,911) |  | (246)
Income (loss) Before Taxes |  | (661) |  | (1,351) | 3,751 |  | 3,087 |  | 3,315
Income Tax |  |  |  |  |  |  |  |  |
Current |  | (100) |  | (205) | (136) |  | (363) |  | (577)
Deferred |  | 526 |  | 1,075 | 52 |  | (207) |  | (123)
Total |  | (235) |  | (481) | 3,667 |  | 2,516 |  | 2,615
Net income (loss) |  | (235) |  | (481) | 3,667 |  | 2,516 |  | 2,615
Loss attributable to noncontrolling interest |  | (29) |  | (60) | (39) |  | - |  | (4)
Net income (loss) attributable to Companhia Siderúrgica Nacional |  | (206) |  | (420) | 3,706 |  | 2,516 |  | 2,619
Basic earnings per common share |  | (0.14101) |  | (0.28815) | 2.54191 |  | 1.72594 |  | 1.75478
Diluted earnings per common share |  | (0.14101) |  | (0.28815) | 2.54191 |  | 1.72594 |  | 1.75478

3

Table Of Contents

|  | As of December 31,
Balance Sheet Data: |  | 2012 |  | 2012 | 2011 |  | 2010 |  | 2009
|  | (in million of US$) |  | (in million of R$)
Current assets |  | 10,336 |  | 21,122 | 21,945 |  | 15,794 |  | 12,835
Investments |  | 1,151 |  | 2,352 | 2,088 |  | 2,104 |  | 322
Property, plant and equipment |  | 9,987 |  | 20,409 | 17,377 |  | 13,777 |  | 11,133
Other assets |  | 2,648 |  | 5,412 | 5,460 |  | 6,380 |  | 6,436
Total assets |  | 24,123 |  | 49,295 | 46,870 |  | 38,055 |  | 30,726
Current liabilities |  | 3,136 |  | 6,408 | 6,497 |  | 4,456 |  | 3,998
Non-current liabilities |  | 16,579 |  | 33,880 | 31,956 |  | 25,776 |  | 20,139
Shareholders’ equity |  | 4,408 |  | 9,007 | 8,417 |  | 7,823 |  | 6,589
Total liabilities and shareholders’ equity |  | 24,123 |  | 49,295 | 46,870 |  | 38,055 |  | 30,726
Paid-in capital (in millions of reais) |  | 2,222 |  | 4,540 | 1,681 |  | 1,681 |  | 1,681
Common shares (in million) |  | 1,457 |  | 1,457 | 1,457 |  | 1,457 |  | 1,457
Dividends declared and interest on shareholders’ equity¹ |  | 147 |  | 300 | 1,200 |  | 1,856 |  | 1,819
Dividends declared and interest on shareholders’ equity per common share (in reais)¹ |  | 0.10 |  | 0.21 | 0.82 |  | 1.27 |  | 1.25

(1) | Amounts consist of dividends declared and accrued interest on shareholders’ equity during the year. For a discussion of our dividend policy and dividend and interest payments made in 2012, see “Item 8A. Consolidated Statements and Other Financial Information-Dividend Policy.”

4

Table Of Contents

Exchange Rates

The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures. The Brazilian real has experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies during the recent decades.

Between 2000 and 2008, the real fluctuated significantly against the U.S. dollar, reaching a peak of R$3.53 per US$1.00 at the end of 2002 and a low of R$1.56 per US$1.00 in August 2008. In the context of the crisis in the global financial markets after mid-2008, the real depreciated 31.9% against the U.S. dollar throughout 2008, reaching R$2.34 per US$1.00 on December 31, 2008. From 2009 to 2011, the real appreciated 19.7% against the U.S. dollar and reached R$1.88 per US$1.00 at year end 2011. In 2012, the real depreciated 17.6% and on December 31, 2012 the exchange rate was R$2.04 per US$1.00. On April 29, 2013 the exchange rate was R$2.00 per US$1.00. The Central Bank has intervened occasionally to mitigate volatility in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to allow the real to float freely or will intervene in the exchange rate market through a currency band system or otherwise. The real may depreciate or appreciate against the U.S. dollar substantially.

The following tables present the selling rate, expressed in reais per U.S. dollar (R$/US$), for the periods indicated.

Year ended |  | Low |  | High |  | Average (1) |  | Period-end
December 31, 2008 |  | 1.559 |  | 2.500 |  | 1.837 |  | 2.337
December 31, 2009 |  | 1.702 |  | 2.422 |  | 1.994 |  | 1.741
December 31, 2010 |  | 1.655 |  | 1.881 |  | 1.759 |  | 1.666
December 31, 2011 |  | 1.535 |  | 1.902 |  | 1.675 |  | 1.876
December 31, 2012 |  | 1.702 |  | 2.112 |  | 1.955 |  | 2.044

Month ended |  | Low |  | High |  | Average |  | Period-end
October 2012 |  | 2.022 |  | 2.038 |  | 2.030 |  | 2.031
November 2012 |  | 2.031 |  | 2.107 |  | 2.068 |  | 2.107
December 2012 |  | 2.044 |  | 2.112 |  | 2.078 |  | 2.044
January 2013 |  | 1.988 |  | 2.047 |  | 2.031 |  | 1.988
February 2013 |  | 1.957 |  | 1.989 |  | 1.973 |  | 1.975
March 2013 |  | 1.953 |  | 2.019 |  | 1.983 |  | 2.014
April 2013 (through April 29, 2013) |  | 1.974 |  | 2.024 |  | 2.002 |  | 2.000
Source: Central Bank.
(1)Represents the daily average of the close exchange rates during the period.

We will pay any cash dividends and make any other cash distributions with respect to our common shares in Brazilian currency. Accordingly, exchange rate fluctuations may affect the U.S. dollar amounts received by ADS holders on conversion into U.S. dollars of such distributions for payment by the depositary. Fluctuations in the exchange rate between the real and the U.S. dollar may also affect the U.S. dollar equivalent of the real price of our common shares on BM&FBOVESPA.

3B. Capitalization and Indebtedness

Not applicable.

3C. Reasons for the Offer and Use of Proceeds

Not applicable.

5

Table Of Contents

3D. Risk Factors

An investment in our ADSs or common shares involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. The trading price of our ADSs could decline due to any of these risks or other factors, and you may lose all or part of your investment. The risks described below are those that we currently believe may materially affect us.

Risks Relating to Brazil

The Brazilian government exercises significant influence over the Brazilian economy. This influence, as well as Brazilian political and economic conditions, could materially and adversely affect us.

The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policy and regulation. See “—Government efforts to combat inflation may hinder the growth of the Brazilian economy and could harm our business” and “Item 5A. Operating Results—Brazilian Macro-Economic Scenario, Effects of Exchange Rate Fluctuations.” The Brazilian government’s actions, policies and regulations have involved, among other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports. Our business, financial condition and results of operations may be adversely affected by political, social, and economic developments in or affecting Brazil, and by changes in policy or regulations at the federal, state or municipal levels involving or affecting factors such as:

· interest rates;

· exchange controls;

· currency fluctuations;

· inflation;

· price volatility of raw materials and our final products;

· lack of infrastructure in Brazil;

· energy shortages and rationing programs;

· liquidity of the domestic capital and lending markets;

· regulatory policy for the mining and steel industries;

· environmental policies and regulations;

· tax policies and regulations; and

· other political, social and economic developments in or affecting Brazil.

Uncertainty over whether the Brazilian government will make changes affecting these and other factors may create instability. This may also adversely affect our business, financial condition and results of operations.

Exchange rate instability may adversely affect us and the market price of our common shares and ADSs.

The Brazilian currency has long experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. For example, the real was R$1.56 per US$1.00 in August 2008. In the context of the crisis in the global financial markets after mid-2008, the real depreciated 31.9% against the U.S. dollar and reached R$2.34 per US$1.00 at December 31, 2008. Since then, the real appreciated against the U.S. dollar and reached R$1.88 per US$1.00 at year end 2011. In 2012, the real depreciated 17.6% and on December 31, 2012, the exchange rate was R$2.04 per US$1.00. On April 29, 2013 the exchange rate was R$2.00 per US$1.00.

6

Table Of Contents

Depreciation of the real against major foreign currencies could create inflationary pressures in Brazil and contribute to Central Bank increases in interest rates, which could negatively affect us and the growth of the Brazilian economy, may curtail access to foreign financial markets and may prompt government intervention, which could include recessionary measures. Depreciation of the real can also, as in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the economy as a whole.

On the other hand, appreciation of the real relative to major foreign currencies could lead to a deterioration of Brazilian foreign exchange current accounts, as well as affect export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and us as well as impact the U.S. dollar value of distributions and dividends on, and the U.S. dollar equivalent of the market price of, our common shares and our ADSs.

In the event the real depreciates in relation to the U.S. dollar, the cost in reais of our foreign currency-denominated borrowings and imports of raw materials, particularly coal and coke, will increase. On the other hand, if the real appreciates in relation to the U.S. dollar, it will cause real-denominated production costs to increase as a percentage of total production costs and cause our exports to be less competitive. We had total U.S. dollar-denominated or -linked indebtedness of R$10,829 million, or 35.76% of our total indebtedness, as of December 31, 2012.

Government efforts to combat inflation may hinder the growth of the Brazilian economy and could harm us.

Brazil has in the past experienced extremely high rates of inflation, which has led the government to pursue monetary policies that have contributed to one of the highest real interest rates in the world. Since the implementation of the Real Plan in 1994, the annual rate of inflation in Brazil has decreased significantly, as measured by the National Broad Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo, or IPCA). Inflation measured by the IPCA index was 5.9%, 6.5% and 5.8% in 2010, 2011 and 2012, respectively. Inflation and the Brazilian government’s inflation containment measures, mainly through monetary policies, have had and may have significant effects on the Brazilian economy and our business. Tight monetary policies with high interest rates may restrict Brazil’s growth and the availability of credit. Conversely, more lenient policies and interest rate decreases may trigger increases in inflation, with the consequent reaction of sudden and significant interest rate increases, which could negatively affect Brazilian economic growth and us. In addition, we may not be able to adjust the price of our products in the foreign markets to offset the effects of inflation in Brazil on our cost structure, given that most of our costs are incurred in reais.

Developments and perception of risk in other countries, especially in the United States, China and other emerging market countries, may adversely affect the trading price of Brazilian securities, including our common shares and ADSs.

The market value of securities of Brazilian companies is affected to varying degrees by economic and market conditions in other countries, including the United States, China, Latin American and other emerging market countries. Although economic conditions in these countries may differ significantly from economic conditions in Brazil, investors’ reactions to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. Crisis in, or economic policies of, other countries may diminish investor interest in securities of Brazilian issuers, including ours. This could adversely affect the trading price of our common shares and/or ADSs, and could also make it more difficult or impossible for us to access the capital markets and finance our operations on acceptable terms.

Risks Relating to Us and the Industries in Which We Operate

We are exposed to substantial changes in the demand for steel and iron ore, which has a substantial impact in the prices of our products and may adversely affect our results of operations.

The steel and mining industries are highly cyclical, both in Brazil and abroad. The demand for steel and mining products and, thus, the financial condition and results of operations of companies in the steel and mining industries, including us, are generally affected by macroeconomic fluctuations in the world economy and the economies of steel-producing countries, including trends in the automotive, construction, home appliances and packaging industries, as well as other industries which rely on steel distributors. A worldwide recession, an extended period of below-trend growth in developed countries or a slowdown in the emerging markets that are large consumers of our products (such as the domestic Brazilian market for our steel products and the Chinese market for iron ore) could sharply reduce demand for our products. Reduced demand can lead to overcapacity and excessive downtime, lower utilization of our significant fixed assets and therefore reduced operating profitability. In addition, steel competes with other materials that may be used as substitutes, such as aluminum (particularly in the automobile industry), cement, composites, glass, plastic and wood. Government regulatory initiatives mandating the use of such materials in lieu of steel, whether for environmental or other reasons, as well as the development of other new substitutes for steel products, could also significantly reduce market prices and demand for steel products and thereby reduce our cash flow and profitability. Any material decrease in demand for steel and iron ore in the domestic or export markets served by us could have a material adverse effect on us.

7

Table Of Contents

The availability and the price of raw materials that we need to produce steel, particularly coal and coke, may adversely affect our results of operations.

In 2012 and 2011, raw material costs accounted for 51.2% and 53.9%, respectively, of our total production costs. Our main raw materials include iron ore, coal, coke, limestone, dolomite, manganese, zinc, tin and aluminum. We depend on third parties for some of our raw material requirements, including importing all of the coal required to produce coke and approximately 33% of our coke requirements. In addition, we require significant amounts of energy, in the form of natural gas and electricity, to power our plants and equipment.

Any prolonged interruption in the supply of raw materials, natural gas or electricity, or substantial increases in their prices, could materially and adversely affect us. These interruptions and price increases may be a result of changes in laws or trade regulations, the availability and cost of transportation, suppliers’ allocations to other purchasers, interruptions in production by suppliers or accidents or similar events on suppliers’ premises or along the supply chain. Our inability to pass those cost increases on to our customers or to meet our customers’ demands because of non-availability of key raw materials could also have a material and adverse effect on us.

Our steel products face significant competition, including price competition, from other domestic or foreign producers, which may adversely affect our profitability and market share.

The global steel industry is highly competitive with respect to price, product quality and customer service, as well as technological advances that enable steel companies to reduce their production costs. Brazil’s export of steel products is influenced by several factors, including the protectionist policies of other countries, disputes regarding these policies before the WTO (World Trade Organization), the Brazilian government’s exchange rate policy and the growth rate of the world economy. Further, continuous advances in materials sciences and resulting technologies have given rise to improvements in products such as plastics, aluminum, ceramics and glass that permit them to substitute steel. Due to high start-up costs, the economics of operating a steelworks facility on a continuous basis may encourage mill operators to maintain high levels of output, even in times of low demand, which increases the pressure on industry profit margins. In addition, downward pressure on steel prices by our competitors may affect our profitability.

The steel industry has historically suffered from structural over-capacity which has recently worsened due to a substantial increase in production capacity in the developing world and particularly in China and India as well as other emerging markets. China is now the largest global steel producer by a large margin and Chinese and other countries’ steel exports, or conditions favorable to them (excess steel capacity, undervalued currency or higher market prices for steel in markets outside of such countries) can have a significant impact on steel prices in other markets. If we are not able to remain competitive in relation to China or other steel-producing countries, our results may be adversely affected in the future.

In 2010, steel companies in Brazil faced strong competition from imported products, mainly as a result of the reduction in demand for steel products in mature markets, the exchange rate appreciation and tax incentives. The Brazilian government adopted measures to contain imported products and, as a result, prices of imported products stabilized as compared to local products. These measures had a positive effect in 2011, when imports were consistently reduced. In 2012, imports remained in line with the number recorded in 2011. Apart from direct steel imports, the Brazilian industry has also been facing competition from imported finished goods, which affects the whole steel chain. If the Brazilian Government were to remove the current protective measures or fail to act against cheap subsidized steel imports, our results of operation may also be materially and adversely affected.

8

Table Of Contents

The shift in iron ore pricing and increase in price volatility could adversely affect our iron ore business.

The previous annual benchmark price system for iron ore adopted by the main iron ore producers, including us, was replaced in the last couple of years by different pricing systems, and is now more sensitive to spot price volatility. Fluctuations in supply and demand could increase price volatility, mainly in spot prices, which could adversely affect our mining business and, consequently, our cash flow. See “Item 5A—Operating Results—Overview—Macro-Economic Scenario—Mining.”

Protectionist and other measures adopted by foreign governments could adversely affect our export sales.

In response to the increased production and export of steel by many countries, anti-dumping and countervailing duties and safeguard measures were imposed in the late 1990s and early 2000s by foreign governments representing the main markets for our exports. In 2011, both the anti-dumping duties imposed by Argentina and the anti-dumping and countervailing duties imposed by the United States were terminated, although such decision in the United States remains suspended due to appeals filed on behalf of the U.S. steel industry. We have also adapted to the restrictions imposed by the European Union on imports of certain chemical substances contained either in products used to protect the steel products or in products used to pack them. Restrictions imposed by Canada on imports of hot-rolled products from Brazil remain in effect. The imposition of these and other protectionist measures by foreign countries may materially and adversely affect our export sales.

Our activities depend on authorizations, concessions, permits and licenses. Changes of laws and regulations and government measures could adversely affect us.

Our activities depend on authorizations, permits and licenses from, and concessions by, governmental regulatory agencies of the countries in which we operate. If laws and regulations applicable to these authorizations, concessions, permits or licenses change, modifications to our technologies and operations could be required, and we may need to make unexpected capital expenditures. These changes and additional costs may have a negative impact on the profitability of our projects or even make certain projects economically or otherwise unfeasible. Also, we cannot guarantee that we will be able to maintain, renew or obtain any required authorization, concession, permit or license. Our authorizations, concessions, permits and licenses may require that we meet certain performance thresholds or completion milestones. In case we are unable to meet these thresholds or milestones we may lose our authorizations, concessions, permits and licenses. The loss or inability to obtain any authorization, concession, permit or license, or changes in the regulatory framework we operate in, may materially and adversely affect us.

In addition, our activities are subject to government regulation in the form of taxes and royalties, which can have an important financial impact on our operations. In the countries where we operate, governments may impose new taxes or royalties, raise existing taxes and royalties, or change the basis on which they are calculated in a manner unfavorable to us.

Malfunctioning equipment or accidents on our premises, railways or ports may decrease or interrupt production, internal logistics or distribution of our products.

The steel and iron ore production processes depend on certain critical equipment, such as blast furnaces, steel converters, continuous casting machines, drillers, crushing and screening equipment and shiploaders, as well as on internal logistics and distribution channels, such as railways and seaports. This equipment and infrastructure may be affected in the case of malfunction or damage. In 2006, there was an accident involving the gas cleaning system adjacent to Blast Furnace No. 3 at the Presidente Vargas Steelworks, which prevented us from operating this blast furnace for approximately six months. Similar or any other significant interruptions in our production process, internal logistics or distribution channels (including our ports and railways) could materially and adversely affect us.

Our insurance policies may not be sufficient to cover all our losses

We maintain several types of insurance policies, in line with the risk management of our businesses, which attempt to follow industry market practices for similar activities. Coverage in such policies encompasses domestic and international (import and export) cargo transportation (road, rail, sea or air), carrier liability, life insurance, personal accidents, health, auto insurance, D&O, general liability, erection risks, boiler and machinery coverage, export credit insurance, guarantee, ports and terminal liabilities. We also have an operational risks policy for the Presidente Vargas Steelworks and some of our branches and subsidiaries for a total insured value of US$ 500 million out of a total risk amount of US$ 17.7 billion. Under the terms of this policy we remain responsible for the first US$ 300 million in losses (material damages and loss of profits). The coverage obtained in these insurance policies may not be sufficient to cover all risks we are exposed to. Additionally, we may not be able to successfully contract or renew our insurance policies in terms satisfactory to us, which may adversely affect our financial position.

9

Table Of Contents

Our projects are subject to risks that may result in increased costs or delay or prevent their successful implementation.

We are investing to further increase our steel, mining and cement production capacity, as well as our logistics capabilities. See “Item 4D. Property, Plant and Equipment—Capital Expenditures—Planned Investments.” These projects are subject to a number of risks that may adversely affect our growth prospects and profitability, including the following:

· we may encounter delays, availability problems or higher than expected costs in obtaining the necessary equipment, services and materials to build and operate a project;

· our efforts to develop projects according to schedule may be hampered by a lack of infrastructure, including availability of overburden and waste disposal areas as well as reliable power and water supplies;

· we may fail to obtain, lose, or experience delays or higher than expected costs in obtaining or renewing the required permits, authorizations, licenses, concessions and/or regulatory approvals to build or continue a project; and

· changes in market conditions, laws or regulations may make a project less profitable than expected or economically or otherwise unfeasible.

Any one or a combination of the factors described above may materially and adversely affect us.

Current, new or more stringent environmental, safety and health regulations imposed on us may result in increased liabilities and increased capital expenditures.

Our steel making, mining, cement and logistics facilities are subject to a broad range of laws, regulations and permit requirements in Brazil relating mainly to the protection of health, safety and the environment.

Brazilian pollution standards are expected to continue to change, including the introduction of new effluent and air emission standards, solid waste-handling regulations, and native forest preservation requirements in rural land. The Brazilian government has adopted a decree under the national policy for climate change (Política Nacional de Mudanças Climáticas) that contemplates a 5% reduction in carbon emissions projected for 2020 for the industrial sector (including steel making and cement sectors) and an action plan for the sector is being developed by a technical committee composed of representatives from the government, industry associations and academia. The target reduction for the mining sector is yet to be established. In addition, the state of Rio de Janeiro, through its State Environmental Agency (Instituto Estadual do Ambiente), or INEA, issued a law in effect from 2013 onwards that requires steel making and cement facilities to present action plans to reduce greenhouse gas emissions when renewing or applying for operational licenses.

New or more stringent environmental, safety and health standards imposed on us could require us to make increased capital expenditures, create additional legal preservation areas in our properties, or make modifications in operating practices or projects. As a result, the amount and timing of future environmental and related expenditures may vary substantially from those currently anticipated. These additional costs may also have a negative impact on the profitability of the projects we intend to implement or may make such projects economically unfeasible. We could also be exposed to civil penalties, criminal sanctions and closure orders for non-compliance with these regulations. Waste disposal and emission practices may result in the need for us to clean up or retrofit our facilities at substantial costs and/or could result in substantial liabilities. Environmental legislation restrictions imposed by foreign markets to which we export our products may also materially and adversely affect our export sales and us.

10

Table Of Contents

In addition, we may be requested to enter into Terms of Undertaking, or TACs, with Brazilian regulators and agencies that require us to minimize or eliminate the risk of environmental damages in the areas where we operate. If we are unable to comply with a Term of Undertaking in a timely manner, we may be exposed to penalties, such as fines, revocation of permits, or closure of facilities. See “Item 4B. Government Regulation and Other Legal Matters – Environmental Expenditures and Claims.”

Our governance and compliance processes may fail to prevent regulatory penalties and reputational harm.

We operate in a global environment, and our activities straddle multiple jurisdictions and complex regulatory frameworks with increased enforcement activities worldwide. Our governance and compliance processes may not prevent future breaches of law, accounting and/or governance standards. We may be subject to breaches of our Code of Ethics, business conduct protocols and instances of fraudulent behavior and dishonesty by our employees, contractors or other agents. Our failure to comply with applicable laws and other standards could subject us to fines, loss of operating licenses and reputational harm, which may materially and adversely affect us.

Some of our operations depend on joint ventures, consortia and other forms of cooperation, and our business could be adversely affected if our partners fail to observe their commitments.

We currently operate parts of our business through joint-ventures and consortia with other companies. We have, among others, established a joint-venture with an Asian consortium at our 60% consolidated investee Nacional Minérios S.A., or Namisa, to mine iron ore; a joint-venture with other Brazilian steel and mining companies at MRS Logística S.A., or MRS, to explore railway transportation in the Southeastern region of Brazil, a joint-venture with Tractebel Energia S.A. and Cia. de Cimento Itambé at Itá Energética S.A., or ITASA, to produce electricity, and a consortium with Vale S.A., Votorantim Metais Zinco S.A., CEMIG Geração e Transmissão S.A. and Anglo Gold Ashant Córrego do Sítio Mineração S.A. at Igarapava Hydroelectric Power Plant to produce electricity.

Our forecasts and plans for these joint-ventures and consortia assume that our partners will observe their obligations to make capital contributions, purchase products and, in some cases, provide managerial personnel or financing. In addition, many of the projects contemplated by our joint-ventures or consortia rely on financing commitments, which contain certain preconditions for each disbursement. If any of our partners fails to observe their commitments or we fail to comply with all preconditions required under our financing commitments or other partnership arrangements, the affected joint-venture, consortium or other project may not be able to operate in accordance with its business plans, or we may have to increase the level of our investment to implement these plans. Any of these events may have a material adverse effect on us.

Our mineral reserve estimates may materially differ from the mineral quantities that we may be able to actually recover; our estimates of mine life may prove inaccurate; and market price fluctuations and changes in operating and capital costs may render certain ore reserves uneconomical to mine.

Our reported ore reserves are estimated quantities of ore and minerals that we have determined can be economically mined and processed under present and anticipated conditions to extract their mineral content. There are numerous uncertainties inherent in estimating quantities of reserves and in projecting potential future rates of mineral production, including many factors beyond our control. Reserve engineering involves estimating deposits of minerals that cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment. As a result, no assurance can be given that the indicated amount of ore will be recovered or that it will be recovered at the rates we anticipate. Estimates of different engineers may vary, and results of our mining and production subsequent to the date of an estimate may lead to revision of estimates. Reserve estimates and estimates of mine life may require revision based on actual production experience and other factors. For example, fluctuations in the market prices of minerals and metals, reduced recovery rates or increased operating and capital costs due to inflation, exchange rates or other factors may render proven and probable reserves uneconomic to exploit and may ultimately result in a restatement of reserves. See “Item 4B—Business Overview—Our Mining Segment—Mineral Reserves.”

11

Table Of Contents

We may not be able to adjust our mining production volume in a timely or cost-efficient manner in response to changes in demand.

Revenues from our mining business represented in 2010, 2011 and 2012, respectively, 24%, 35% and 26% of our total net revenues. Our ability to rapidly increase production capacity is limited, which could render us unable to fully satisfy demand for our products. When demand exceeds our production capacity, we may meet excess customer demand by purchasing iron ore from unrelated parties and reselling it, which would increase our costs and narrow our operating margins. If we are unable to satisfy excess customer demand in this way, we may lose customers. In addition, operating close to full capacity may expose us to higher costs, including demurrage fees due to capacity restraints in our logistics systems.

Conversely, operating at significant idle capacity during periods of weak demand may expose us to higher unit production costs since a significant portion of our cost structure is fixed in the short-term due to the high capital intensity of mining operations. In addition, efforts to reduce costs during periods of weak demand could be limited by labor regulations or existing labor or government agreements.

Adverse economic developments in China could have a negative impact on our revenues, cash flow and profitability.

China has been the main driver of global demand for minerals and metals over the last few years. In 2012, China accounted for 66% of the global seaborne iron ore trade. The percentage of our iron ore sales volume to consumers in China was 22% in 2012. A contraction of China’s economic growth could result in lower demand for our products, leading to lower revenues, cash flow and profitability. Poor performance in the Chinese real estate sector, one of the largest consumers of carbon steel in China, could also negatively impact our results.

Drilling and production risks could adversely affect the mining process.

Once mineral deposits are discovered, it can take a number of years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial time and expenditures are required to:

· establish mineral reserves through drilling;

· determine appropriate mining and metallurgical processes for optimizing the recovery of metal contained in ore;

· obtain environmental and other licenses;

· construct mining, processing facilities and infrastructure required for greenfield properties; and

· obtain the ore or extract the minerals from the ore.

If a mining project proves not to be economically feasible by the time we are able to profit from it, we may incur substantial losses and be obliged to take write-offs. In addition, potential changes or complications involving metallurgical and other technological processes arising during the life of a project may result in delays and cost overruns that may render the project not economically feasible.

Natural and other disasters could disrupt our operations.

Our business and operating results could be negatively impacted by social, technical and/or physical risks such as flooding, fire, power loss, loss of water supply, leakages, telecommunications and information technology system failures, and political instability, including a global economic slowdown. For example, flooding in Australia at the end of 2010 affected global coal supply and consequently increased our raw material costs. In addition, heavy rainfall in the Southeast Region of Brazil could affect our iron ore and logistics operations and consequently our revenues. Such events could affect our ability to conduct our business operations and, as a result, reduce our operating results and materially and adversely affect us.

12

Table Of Contents

We may not be able to consummate proposed acquisitions successfully or integrate acquired businesses successfully.

From time to time, we may evaluate acquisition opportunities that would strategically fit our business objectives. If we are unable to complete acquisitions, or integrate successfully and develop these businesses to realize revenue growth and cost savings, our financial results could be adversely affected. Acquisitions also pose the risk that we may be exposed to successor liability involving an acquired company. Due diligence conducted in connection with an acquisition, and any contractual guarantees or indemnities that we receive, may not be sufficient to protect us from, or compensate us for, actual liabilities. A material liability associated with an acquisition, such as labor- or environmental-related, could adversely affect our reputation and financial performance and reduce the benefits of the acquisition.

In addition, we may incur asset impairment charges related to acquisitions, which may reduce our profitability. Finally, our acquisition activities may present financial, managerial and operational risks, including diversion of management attention from existing core businesses, difficulties integrating or separating personnel and financial and other systems, adverse effects on existing business relationships with suppliers and customers, inaccurate estimates of fair value made in the accounting for acquisitions and amortization of acquired intangible assets which would reduce future reported earnings, potential loss of customers or key employees of acquired businesses, and indemnities and potential disputes with the buyers or sellers. Any of these activities could affect our product sales, financial condition and results of operations.

We have a substantial amount of indebtedness, which could make it more difficult or expensive to refinance our maturing debt and /or incur new debt.

As of December 31, 2012, our total debt outstanding amounted to R$30,284 million, consisting of R$2,326 million of short-term debt and R$27,958 million of long-term debt. See “Item 5B. Liquidity and Capital Resources” and “Item 18. Financial Statements.” Although we had R$14,445 million of cash and cash equivalents as of December 31, 2012, our planned investments in all of our business segments will require a significant amount of cash over the course of 2013 and following years. See “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments.”

The level of our indebtedness could affect our credit rating and ability to obtain any necessary financing in the future and increase our cost of borrowing. In these and other circumstances, servicing our indebtedness may use a substantial portion of our cash flow from operations, which could make it more difficult for us to make payments of dividends and other distributions to our shareholders, including the holders of our ADSs, and adversely affect our financial condition and results of operations.

We have experienced labor disputes in the past that have disrupted our operations, and such disputes may recur.

A substantial number of our employees and some of the employees of our subcontractors are represented by labor unions and are covered by collective bargaining or other labor agreements, which are subject to periodic renegotiation. Strikes and other labor disruptions at any of our facilities or labor disruptions involving third parties who may provide us with goods or services, have in the past and may in the future materially and adversely affect the operation of our facilities, or the timing of completion and the cost of our projects.

We are exposed to the risk of litigation

We are currently and may in the future be party to legal proceedings and claims. For some of these legal proceedings and claims, we have not established any provision on our balance sheet or have only established provisions for part of the amounts in question, based on our and our external counsel’s judgment as to the likelihood of an outcome favorable to us.

Although we are contesting such proceedings and claims, the outcome of each specific proceeding and claim is uncertain and may result in obligations that could materially and adversely affect our business and the value of our shares and ADSs. See “Item 8A. Consolidated Statements and Other Financial Information—Legal Proceedings” for additional information.

13

Table Of Contents

Risks Relating to our Common Shares and ADSs

Our controlling shareholder has the ability to direct our business and affairs and its interests could conflict with yours.

Our controlling shareholder has the power to, among other things, elect a majority of our directors and determine the outcome of any action requiring shareholder approval, including transactions with related parties, corporate reorganizations, acquisitions, dispositions, and the timing and payment of any future dividends, subject to minimum dividend payment requirements imposed under Brazilian Corporate Law. Our controlling shareholder may have an interest in pursuing acquisitions, dispositions, financings or similar transactions that could conflict with your interests as a holder of our common shares and ADSs. For a description of our ownership structure, see “Item 7A. Major Shareholders.”

If you surrender your ADSs and withdraw common shares, you risk losing the ability to remit foreign currency abroad and certain Brazilian tax advantages.

As an ADS holder, you benefit from the electronic certificate of foreign capital registration obtained by the custodian for our common shares underlying the ADSs in Brazil, which permits the custodian to convert dividends and other distributions with respect to the common shares into non-Brazilian currency and remit the proceeds abroad. If you surrender your ADSs and withdraw common shares, you will be entitled to continue to rely on the custodian’s electronic certificate of foreign capital registration for only five business days from the date of withdrawal. Thereafter, upon the disposition of, or distributions relating to, the common shares, you will not be able to remit abroad non-Brazilian currency unless you obtain your own electronic certificate of foreign capital registration or you qualify under Brazilian foreign investment regulations that entitle some foreign investors to buy and sell shares on Brazilian stock exchanges without obtaining separate electronic certificates of foreign capital registration. If you do not qualify under the foreign investment regulations you will generally be subject to less favorable tax treatment of dividends and distributions on, and the proceeds from any sale of, our common shares. For more information regarding exchange controls, see “Item 10.D. Exchange Controls.” If you seek to obtain your own electronic certificate of foreign capital registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to our common shares or the return of your capital in a timely manner. The depositary’s electronic certificate of foreign capital registration may also be adversely affected by future legislative changes.

Holders of ADSs may not be able to exercise their voting rights.

Holders of ADSs may only exercise their voting rights with respect to the underlying common shares in accordance with the provisions of the deposit agreement. Under the deposit agreement, ADS holders must vote by giving voting instructions to the depositary. Upon receipt of the voting instructions of the ADS holder, the depositary will vote the underlying common shares in accordance with these instructions. If we ask for voting instructions, the depositary will notify ADS holders of the upcoming vote and will arrange to deliver the proxy card. We cannot assure that ADS holders will receive the proxy card in time to ensure that they can instruct the depositary to vote. In addition, the depositary and its agents are not liable for failing to carry out voting instructions or for the manner of carrying out voting instructions. Alternatively, ADS holders can exercise their right to vote by surrendering their ADSs for cancellation in exchange for our common shares. Pursuant to our bylaws, the first call for a shareholders’ meeting must be published at least 15 days in advance of the meeting, and the second call must be published at least eight days in advance of the meeting. When a shareholders’ meeting is convened, holders of ADSs may not receive sufficient advance notice to surrender their ADSs in exchange for the underlying common shares to allow them to vote with respect to any specific matter. As a result, holders of ADSs may not be able to exercise their voting rights.

The relative volatility and illiquidity of the Brazilian securities markets may substantially limit your ability to sell the common shares underlying the ADSs at the price and time you desire.

Investing in securities that trade in emerging markets, such as Brazil, often involves greater risk than investing in securities of issuers in the United States, and such investments are generally considered to be more speculative in nature. The Brazilian securities market is substantially smaller, less liquid, more concentrated and can be more volatile than major securities markets in the United States. The ten largest companies in terms of market capitalization represented 51.8% of the total market capitalization of the BM&FBOVESPA as of December 31, 2012. The top ten stocks in terms of trading volume accounted for 43.0%, 47.2% and 48.8% of all shares traded on the BM&FBOVESPA in 2012, 2011 and 2010, respectively. Accordingly, although you are entitled to withdraw the common shares underlying the ADSs from the depositary at any time, your ability to sell the common shares underlying the ADSs at a price and time at which you wish to do so may be substantially limited.

14

Table Of Contents

Holders of ADSs may be unable to exercise preemptive rights with respect to our common shares.

We may not be able to offer our common shares to U.S. holders of ADSs pursuant to preemptive rights granted to holders of our common shares in connection with any future issuance of our common shares unless a registration statement under the Securities Act is effective with respect to such common shares and preemptive rights, or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement relating to preemptive rights with respect to our common shares or to undertake steps that may be needed to find exemptions from registration available, and we cannot assure you that we will file any such registration statement or take any such steps. If such a registration statement is not filed and an exemption from registration does not exist, The JP Morgan Chase Bank, N.A., as depositary, may attempt to sell the preemptive rights, and you will be entitled to receive the proceeds of such sale. However, these preemptive rights will expire if the depositary does not sell them, and U.S. holders of ADSs will not realize any value from the granting of such preemptive rights. For a more complete description of preemptive rights with respect to the underlying shares, see “Item 10B. Memorandum and Articles of Association—Preemptive Rights.”

Item 4. Information on the Company

4A. History and Development of the Company

History

Companhia Siderúrgica Nacional is a Brazilian corporation (sociedade por ações) incorporated in 1941 pursuant to a decree of the Brazilian President at the time, Getúlio Vargas. The Presidente Vargas Steelworks, located in the city of Volta Redonda, in the State of Rio de Janeiro, started the production of coke, pig iron and steel products in 1946. Also in 1946, we incorporated both the Casa de Pedra Mine, located in Congonhas, Minas Gerais, and the Arcos Mine, located in Arcos, Minas Gerais. The Casa de Pedra Mine assures us self-sufficiency in iron ore, whereas the Arcos Mine meets all our needs for flux, limestone and dolomite.

The Company was privatized through a series of auctions held in 1993 and early 1994, through which the Brazilian government sold its 91% ownership interest.

Between 1993 and 2002, we implemented a capital improvement program aimed at increasing our annual production of crude steel, improving the quality of our products and enhancing our environmental protection and cleanup programs. As part of the investments, since February 1996, all our production has been based on the continuous casting process, rather than ingot casting, which involved an alternative method that resulted in higher energy use and metal loss. From 1996 until 2002, we spent the equivalent of US$2.4 billion on the capital improvement program and on maintaining our operational capacity, culminating with the renovation of Blast Furnace No. 3 and Hot Strip Mill No. 2 in 2001. These measures resulted in the increase of our annual production capacity to 5.6 million tons of crude steel and 5.1 million tons of rolled products.

In 2007, CSN started to sell iron ore in the seaborne market. We are now Brazil’s second largest exporter of iron ore, drawing from our high quality iron ore reserves in the Casa de Pedra and Namisa mines, located in the state of Minas Gerais. We also own the concession to operate TECAR, a solid bulks terminal from which we export this iron ore.

In 2009, we entered the cement market with our first grinding mill, next to the Presidente Vargas Steel Mill in Volta Redonda, Rio de Janeiro, taking advantage of the synergies with our steel business.

In order to diversify our product portfolio, we entered in the long steel market in 2012, with the acquisition of Stahlwerk Thüringen Gmbh, or SWT, a long steel manufacturer located in Unterwellenborn, Germany.

15

Table Of Contents

General

We are one of the largest fully integrated steel producers in Brazil and Latin America in terms of crude steel production. Our current annual crude steel capacity and rolled product capacity at the Presidente Vargas Steelworks is 5.6 million and 5.1 million tons, respectively. At the Presidente Vargas Steelworks, production of crude steel increased by 2% as compared to 2011, while the production of rolled steel products remained stable when compared to 2011. We also operate in the mining, cement, logistics and energy businesses, which have become increasingly important to our operations and growth.

Steel

Our fully integrated manufacturing facilities at the Presidente Vargas Steelworks produce a broad line of steel products, including slabs, hot- and cold-rolled, galvanized and tin mill products for the distribution, packaging, automotive, home appliance and construction industries. In 2011, we accounted for approximately 55% of the coated steel products market in Brazil. We are one of the world’s leading producers of tin mill products for packaging containers, and were responsible for approximately 98% of the market share in Brazil in 2011, according to IABr data and our sales information. Market share information for 2012 was not yet available as of the date of this annual report.

Our production process is based on the integrated steelworks concept. Below is a brief summary of the steel making process at our Presidente Vargas Steelworks:

- Iron ore produced from our own mines is processed in continuous sintering machines to produce sinter;
- Sinter and lump ore direct charges are smelted with lump coke and injected powdered coal in blast furnaces to produce pig iron;
- Pig iron is then refined into steel via basic oxygen converters;
- Steel is continuously cast in slabs; and
- Slabs are then hot rolled, producing hot bands that are coiled and sent to finishing facilities.

We currently obtain all of our iron ore, limestone and dolomite requirements, and a portion of our tin requirements from our own mines. Using imported coal, we produce approximately 67% of our coke requirements at current production levels in our own coke batteries at Volta Redonda. Imported coal is also pulverized and used directly in the pig iron production process. Zinc, manganese ore, aluminum and a portion of our tin requirements are purchased in local markets. Our steel production and distribution processes also require water, industrial gases, electricity, rail and road transportation, and port facilities.

In addition to the production of flat steel, we are investing in our long steel production capacity. We are currently building a long steel plant in Volta Redonda with a planned capacity of 500 Kt per year. This plant will also use our existing infrastructure in the Presidente Vargas Steelworks. On January 31, 2012, in an effort to strengthen our position in the long steel segment, we acquired SWT for €483.4 million. SWT is a long steel producer in Germany with annual production capacity of approximately 1.1 million tons of steel profiles.

Mining

We own a number of high quality iron ore mines, all located within Brazil’s Iron Ore Quadrangle (Quadrilátero Ferrífero), in the state of Minas Gerais, including the Casa de Pedra mine, located in Congonhas, and Namisa – Nacional Minérios S.A. mines (Fernandinho, located in Itabirito and Engenho, also located in Congonhas). Our mining assets also include TECAR, a solid bulks seaport terminal, located in Itaguaí Port in the state of Rio de Janeiro, Mineração Bocaina, located in Arcos, in the state of Minas Gerais, which produces dolomite and limestone, and Estanho de Rondônia S.A. (ERSA), which mines and casts tin, located in Ariquemes, in the state of Rondônia.

Logistics

Our verticalization strategy and intense synergies among the Company's business units are strongly dependent on the logistics created to guarantee the transportation of the inputs at a low operating cost. A number of railroads and port terminals make up the logistics system integrating CSN's mining, steelmaking and cement units.

16

Table Of Contents

CSN manages two port terminals at Itaguaí, in Rio de Janeiro, one for bulk solids (TECAR) and one for containers (Sepetiba Tecon).

CSN also has interests in two railways: MRS Logística, in which we share control and that operates the former Southeast Network of the Federal Railroad Network, along the Rio de Janeiro-São Paulo-Belo Horizonte axis, and our controlled subsidiary Transnordestina Logística S.A., whose Nova Transnordestina project will connect the interior of Northeast Brazil to Pecém and Suape Ports, with an extension of 1,728 km of track.

Cement

CSN entered the cement market in May 2009, driven by the high synergy with its current business. This segment takes advantage of the slag generated by our blast furnaces and of our limestone reserves, located in the city of Arcos, in the state of Minas Gerais. Limestone, used to produce clinker, and slag account for approximately 95% of the cost of inputs in cement production.

CSN plans to increase its market share in the cement segment in Brazil in order to diversify its product mix and markets, reducing risks and adding value for its shareholders.

Energy

CSN is one of Brazil’s largest industrial electric power consumers. Since 1999, we have invested in power generation projects in order to ensure self-sufficiency. Our electrical assets include: (i) CSN’s 29.5% stake in the Itá Hydroelectric Power Plant, in Santa Catarina, corresponding to 167 MW, through a 48.75% equity interest in Itá Energética S.A.; (ii) CSN’s 17.9% interest in the 210-MW Igarapava Hydroelectric Power Plant in Minas Gerais, corresponding to 23 MW; and (iii) a 238 MW cogeneration thermoelectric power plant in Presidente Vargas Steelworks, which is fueled by the waste gases from the steel production process. These three plants give CSN an average generation capacity of 428 MW, supplying the group’s total need for power.

Other Information

CSN’s legal and commercial name is Companhia Siderúrgica Nacional. CSN is organized for an unlimited period of time under the laws of the Federative Republic of Brazil. Our head offices are located at Av. Brigadeiro Faria Lima, 3400, 19th and 20th floors and 15th floor - part, Itaim Bibi, São Paulo, Brazil, CEP 04538-132, and our telephone number is +55-11-3049-7100. CSN’s agent for service of process in the United States is CT Corporation, with offices at 111 Eighth Avenue, New York, New York 10011.

4B. Business Overview

Competitive Strengths

We believe that we have the following competitive strengths:

Fully integrated business model. We believe we are one of the most fully integrated steelmakers in the world. This is due to our captive sources of raw materials, especially iron ore, and access to owned infrastructure, such as railroads and deep-sea water port facilities. We own a number of high quality iron ore mines, all located within Brazil’s Iron Ore Quadrangle (Quadrilátero Ferrífero), in the State of Minas Gerais, which differentiates us from our main competitors in Brazil that purchase their iron ore from mining companies such as Vale S.A., or Vale. In addition to our iron ore reserves, we have captive dolomite and limestone mines that supply our Presidente Vargas Steelworks. Our steelworks are close to the main steel consumer centers in Brazil, with easy access to port facilities and railroads. See “Item 4B. Business Overview—Our mining segment” and “Item 4D—Property Plant and Equipment.”

Profitable mining business. Our mining business has received investments in recent years, placing CSN in a prominent position among the country’s leading mining firms. Additional investments will increase capacity to approximately 89 mtpy, including third party purchases, thereby strengthening CSN’s position as an important player in the global iron ore market. The Company has high-quality iron ore reserves through Casa de Pedra mine and Namisa mines (Engenho and Fernandinho), both located in Minas Gerais. Our mining activities provide strong revenue generation. We sold 10.5 million tons in 2007, 18.5 million tons in 2008, 17.5 million tons in 2009, 18.6 million tons in 2010, 23.8 million tons in 2011 and 20.2 million tons in 2012 (considering our proportional interest in Namisa throughout this period). The company’s mining assets also include TECAR, a solid bulks seaport terminal, with a capacity for 30 mtpy, located in Itaguaí Port (RJ), Mineração Bocaina, located in Arcos (MG), which produces dolomite and limestone, and Estanho de Rondônia SA (ERSA), which mines and casts tin.

17

Table Of Contents

Thoroughly developed transport infrastructure. We have a thoroughly developed transport infrastructure, from our iron ore mine to our steel mill and to our ports. The Presidente Vargas Steelworks facility is located next to railroad systems and port facilities, facilitating the supply of raw materials, the shipment of our production and easy access to our principal clients. The concession for the main railroad used and operated by us is owned by MRS, a company in which we hold a 33.27% ownership interest. The railway connects our Casa de Pedra mine to the Presidente Vargas Steelworks and to our terminals at Itaguaí Port, which handles our iron exports and most of our steel exports. Since we obtained the concession to operate MRS railway in 1996, we have significantly improved its tracks and developed its business, with strong cash generation. We also own concessions to operate two deep-sea water terminals from which we export our products and import coal and small amounts of coke, which are the only important raw materials that we need to purchase from third parties.

Self-sufficiency in energy generation. We are self-sufficient in energy, through our interests in the hydroelectric plants of Itá and Igarapava, and our own thermoelectric plant inside the Presidente Vargas Steelworks. We also sell the excess energy we generate in the energy market. Our 238 MW thermoelectric cogeneration plant provides the Presidente Vargas Steelworks with approximately 60% of its energy needs in its steel mills, using as its primary fuel the waste gases generated by our coke ovens, blast furnaces and steel processing facilities. We hold a 29.5% stake in the Itá Hydroelectric Power Plant, in Santa Catarina, through a 48.75% equity interest in Itá Enérgetica S.A., or ITASA. This ownership grants us an assured energy of 167 MW, proportional to our interests in the project, pursuant to 30-year power purchase agreements at a fixed price per megawatt hour, adjusted annually for inflation. In addition, we own 17.9% of the Igarapava hydroelectric plant, with 210 MW fully installed capacity. We have been using part of our 23 MW of assured energy from Igarapava to supply energy to the Casa de Pedra and Arcos mines.

Low cost structure. As a result of our fully integrated business model, our thoroughly developed transportation infrastructure and our self-sufficiency in energy generation, we have been consistently generating high margins. Other factors that lead to these margins are the strategic location of our steelworks facility, the use of state of the art technology and our well qualified work force.

Diverse product portfolio and product mix. We have a diversified flat steel product mix that includes hot-rolled, cold-rolled, galvanized and steel tin mill products, in order to meet a wide range of customer needs across all steel consuming industries. We focus on selling high margin products, such as tin plate, pre-painted, galvalume and galvanized products in our product mix. Our galvanized product provides material for exposed auto parts, using hot-dip galvanized steel and laser-welded blanks. Our CSN Paraná branch provides us with additional capacity to produce high-quality galvanized, galvalume and pre-painted steel products for the construction and home appliance industries. In addition, our subsidiary Prada, one of the largest flat steel distributors in Brazil, offers a strong sales channel in the domestic market, enabling us to meet demand from smaller customers, thus creating a strong presence in this market.

Strong presence in domestic market and strategic international exposure for steel products. We have a strong presence in the domestic market for steel products, with 77% of our steel sales in the domestic market. In 2011, we accounted for approximately 55% of the market in Brazil for coated steel products, of which we had 98% of the market share in Brazil for tin mill products. Market share information for 2012 was not yet available as of the date of this annual report. In addition, we use our subsidiaries CSN LLC and Lusosider also as sales channels for our flat steel products in the United States and in Europe, with 8% of our total sales in 2012. Direct e xports accounted for 3% of our total sales in 2012. In 2012 we acquired SWT, a long steel producer in Germany with annual production capacity of approximately 1.1 million tons of steel profiles, strengthening our steel products mix and geographical diversification. In 2012, SWT accounted for 12% of our total sales.

18

Table Of Contents

Strategies

Our goal is to increase value for our shareholders by further benefiting from our competitive cost advantages, maintaining our position as one of the world’s lowest-cost steel producers, becoming an important iron ore global player, developing our cement business and optimizing our infrastructure assets (including ports, railways and power generating plants). To achieve this goal we developed specific strategies for each of our business segments, as described below.

Steel

The strategy for our steel business involves:

ü A focus on the domestic market, in which we have historically recorded higher profit margins and increased competitiveness, by expanding our market share in flat steels and entering in the Brazilian long steel market;

ü Constant pursuit of operational excellence, by implementing cost reduction projects (e.g. pellet plant and energy efficiency) and programs (e.g. internal logistic optimization, inventory reduction, project development and implementation disciplines);

ü Emphasis on high value-added steel products, such as galvanized, pre-painted and tin-coated steel;

ü Exploring synergies by using our flat steel distribution network and product portfolio to accelerate entrance into the domestic long steel market; and

ü Increase market share by expanding our services and distribution network.

For information on planned investments relating to our steel activities, see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments”

Mining

In order to strengthen our position in the iron ore market, we plan to expand our mining assets, Casa de Pedra and Namisa, and search for investment opportunities, primarily in mines in operation or in an advanced stage of development.

In the coming years, we expect to reach an annual sales level of approximately 89 mtpy of iron ore products, including third party purchases, by increasing capacity in Casa de Pedra and Namisa mines, thereby strengthening our position as an important player in the iron ore worldwide market.

To sustain this growth, we will increase capacity in TECAR, our solid bulks terminal in Itaguai Port to 84 mtpy. We are also studying seaborne shipping opportunities, focused on increasing our competitiveness in the Asian market.

In order to maximize the profitability of our product portfolio, we will also focus on pellet and pellet-feed, by using Itabirito’s deposits and investing with strategic partners and clients in pellet capacity.

For information on planned investments relating to our mining activities, see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments”.

Logistics

We expect to take advantage of and expand our current logistics capabilities, including our integrated infrastructure operations of railways and ports.

In addition to investments in TECAR, we will strengthen Sepetiba TECON, our container terminal, in order to accommodate larger ships, increasing its capacity and competitiveness by adding services to develop client loyalty.

19

Table Of Contents

In terms of railways, we plan to continue the implementation of our Nova Transnordestina project and explore its logistic potential through terminals and regional cargo, focusing on iron ore, agricultural, gypsum and fuel. We also plan to invest in increasing our efficiency and capacity in the south of Brazil through our interest in MRS.

We intend to continue to improve the delivery of our products in the domestic market (mainly steel and cement), with low cost and efficiency by integrating and increasing the use of rail transportation, and by providing more distribution centers.

Cement

Our cement business strategy involves the utilization of the limestone reserves in our Arcos mine and the slag generated by CSN’s blast furnaces in our cement plant in Volta Redonda, inaugurated in 2009, with capacity to produce 2.4 million tons per year. In 2011, CSN began producing clinker in the Arcos plant with the aim of reducing its production costs. We are evaluating other organic growth initiatives to expand our annual capacity to 5.4 million tons in order to capture the strong growth expected in construction of new housing units and infrastructure projects. For information on planned investments relating to our cement activities, see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments”.

Additional Investments

In addition to the currently planned investments and capital expenditures, we continue to consider possible acquisitions, joint ventures and brownfield or greenfield projects to increase or complement our steel, cement and mining production and logistics capabilities, logistics infrastructure and energy generation.

Our Steel Segment

We produce carbon steel, which is the world’s most widely produced type of steel, representing the vast bulk of global consumption. From carbon steel, we sell a variety of products, both domestically and abroad, to manufacturers in several industries.

20

Table Of Contents

Flat Steel

The following chart reflects our flat steel production cycle in general terms.

Our Presidente Vargas Steelworks produces flat steel products — slabs, hot-rolled, cold-rolled, galvanized and tin mill products. For further information on our production process, see “—Product Process.”

Slabs

Slabs are semi-finished products used for processing hot-rolled, cold-rolled or coated coils and sheet products. We are able to produce continuously cast slabs with a standard thickness of 250 millimeters, widths ranging from 830 to 1,600 millimeters and lengths ranging from 5,250 to 10,500 millimeters. We produce high, medium and low carbon slabs, as well as micro-alloyed, ultra-low-carbon and interstitial free slabs.

Hot-Rolled Products

Hot-rolled products include heavy and light-gauge hot-rolled coils and sheets. A heavy gauge hot-rolled product, as defined by Brazilian standards, is a flat-rolled steel coil or sheet with a minimum thickness of 5.01 millimeters. We are able to provide coils of heavy gauge hot-rolled sheet having a maximum thickness of 12.70 millimeters used to manufacture automobile parts, pipes, mechanical construction and other products. We produce light gauge hot-rolled coils and sheets with a minimum thickness of 1.20 millimeters which are used for welded pipe and tubing, automobile parts, gas containers, compressor bodies and light cold-formed shapes, channels and profiles for the construction industry.

Cold-Rolled Products

Cold-rolled products include cold-rolled coils and sheets. A cold-rolled product, as defined by Brazilian standards, is a flat cold-rolled steel coil or sheet with thickness ranging from 0.30 millimeters to 3.00 millimeters. Compared to hot-rolled products, cold-rolled products have more uniform thickness and better surface quality and are used in applications such as automotive bodies, home appliances and construction. In addition, cold-rolled products serve as the base for galvanized and tin mill products. We supply cold-rolled coils in thicknesses of between 0.30 millimeters and 2.99 millimeters.

21

Table Of Contents

Galvanized Products

Galvanized products are comprised of flat-rolled steel coated on one or both sides with zinc or a zinc-based alloy applied by either a hot-dip or an electrolytic process. We use the hot-dip process, which is approximately 20% less expensive than the electrolytic process. Galvanizing is one of the most effective and low-cost processes used to protect steel against corrosion caused by exposure to water and the atmosphere. Galvanized products are highly versatile and can be used to manufacture a broad range of products, such as:

· bodies for automobiles, trucks and buses;

· manufactured products for the construction industry, such as panels for roofing and siding, dry wall and roofing support frames, doors, windows, fences and light structural components;

· air ducts and parts for hot air, ventilation and cooling systems;

· culverts, garbage containers and other receptacles;

· storage tanks, grain bins and agricultural equipment;

· panels and sign panels; and

· pre-painted parts.

Galvanized sheets, both painted and bare, are also frequently used for gutters and downspouts, outdoor and indoor cabinets, all kinds of home appliances and similar applications. We produce galvanized sheets and coils in continuous hot-dip processing lines, with thickness ranging from 0.30 millimeters to 3.00 millimeters. The continuous process results in products with highly adherent and uniform zinc coatings capable of being processed in nearly all kinds of bending and heavy machinery.

In addition to standard galvanized products, we produce Galvanew®, galvanized steel that is subject to a special annealing process following the hot-dip coating process. This annealing process causes iron to diffuse from the base steel into the zinc coating. The resulting iron-zinc alloy coating allows better welding and paint performance. The combination of these qualities makes our Galvanew® product particularly well suited for manufacturing automobile and home appliance parts including high gloss exposed parts.

At CSN Paraná, one of our branches, we produce galvalume, a cold-rolled material coated with a zinc-aluminum alloy. The production process is similar to hot-dip galvanized coating, and galvalume has at least twice the corrosion resistance of standard galvanized steel. Galvalume is primarily used in outdoor construction applications that may be exposed to severe acid corrosion, like marine uses.

The value added from the galvanizing process permits us to price our galvanized products with a higher profit margin. Our management believes that our value-added galvanized products present one of our best opportunities for profitable growth because of the anticipated increase in Brazilian demand for such high margin products.

Through our branch CSN Paraná, we also produce pre-painted flat steel, which is manufactured in a continuous coating line. In this production line, a layer of resin-based paint in a choice of colors is deposited over either cold-rolled or galvanized base materials. Pre-painted material is a higher value-added product used primarily in the construction and home appliance markets.

Tin Mill Products

Tin mill products consist of flat-rolled low-carbon steel coils or sheets with, as defined by Brazilian standards, a maximum thickness of 0.45 millimeters, coated or uncoated. Coatings of tin or chromium are applied by electrolytic process. Coating costs place tin mill products among the highest priced products that we sell. The added value from the coating process permits us to price our tin mill products with a higher profit margin. There are four types of tin mill products, all produced by us in coil and sheet forms:

22

Table Of Contents

· Tin plate - coated on one or both sides with a thin metallic tin layer plus a chromium oxide layer, covered with a protective oil film;

· Tin free steel - coated on both sides with a very thin metallic chromium layer plus a chromium oxide layer, covered with a protective oil film;

· Low tin coated steel - coated on both sides with a thin metallic tin layer plus a thicker chromium oxide layer, covered with a protective oil film; and

· Black plate - uncoated product used as the starting material for the coated tin mill products.

Tin mill products are primarily used to make cans and other containers. With six electrolytic coating lines, we are one of the biggest producers of tin mill products in the world and the sole producer of coated tin mill products in Brazil.

Production Process

The main raw materials used in flat production in an integrated steelworks are iron ore, coal, coke, and fluxes like limestone and dolomite. The iron ore consumed at the Presidente Vargas Steelworks is extracted, crushed, screened and transported by railway from our Casa de Pedra mine located in the city of Congonhas, in the State of Minas Gerais, 328 km from the Presidente Vargas Steelworks. The high quality ores mined and sized at Casa de Pedra, with iron content of approximately 60%, and their low extraction costs are major contributors to our low steel production costs.

We import all the coal required for coke production because Brazil lacks quality coking coals. The coal is then charged in coke batteries to produce coke through a distillation process. See “—Raw Materials and Suppliers—Raw Materials and Energy Requirements.” This coal distillation process also produces coke oven gas as a byproduct, which we use as a main source of fuel for our thermoelectric co-generation power plant. After being screened, coke is transported to blast furnaces, where it is used as a combustion source and as a component for transforming iron ore into pig iron. In 2012, we produced approximately 67% of our coke needs and imported the balance, compared to 62% in 2011.

At sintering plants, fine-sized iron ore and coke or other fine-sized solid fuels are mixed with fluxes (limestone and dolomite) to produce sinter. The sinter, lump iron ore, fluxing materials and coke are then loaded into our two operational blast furnaces for smelting. We operate a pulverized coal injection, or PCI, facility, which injects low-cost pulverized coal directly into the blast furnaces as a substitute for approximately one-third of the coke otherwise required.

The iron ore is reduced to pig iron through successive chemical reactions with carbon monoxide (from the coke and PCI) in the blast furnaces, which operate 24 hours a day. The ore is gradually reduced, then melts and flows downward. Impurities are separated from the iron to form a liquid slag with the loaded fluxes (limestone and dolomite). From time to time, white-hot liquid iron and slag are drawn off from the bottom of the furnace. Slag (containing melted impurities) is granulated and used to produce cement.

The molten pig iron is transported to the steelmaking shop by 350-ton capacity torpedo cars and charged in basic oxygen furnaces together with scrap and fluxes. In the basic oxygen furnaces, oxygen is blown onto the liquid burden to oxidize its remaining impurities and to lower its carbon content, thus producing liquid steel. The molten steel is conveyed from the basic oxygen furnaces to the secondary refining equipment (degasser, ladle furnace and Argon Stirring Station). After adjusting the chemical composition, the molten steel is transferred to the continuous casting machines from which crude steel (i.e., rectangular shaped slabs) is produced. A portion of the slab products is sold directly in the export market.

23

Table Of Contents

In the hot rolling process, reheated slabs from the continuous casting machines are fed into hot strip mills to reduce the thickness of the slabs from 250 millimeters to a range of between 1.2 and 12.7 millimeters. At the end of the hot strip mill, the long, thin steel strip from each slab is coiled and conveyed to a cooling yard. Some hot-rolled coils are dispatched directly to customers in the as-rolled condition. Others are further processed in the pickling line, in a hydrochloric bath, to remove surface oxides and improve surface quality. After pickling, the hot-rolled coils selected to produce thinner materials are sent to be rolled in cold strip mills. CSN has three cold strip mills, one of which was revamped in 2011, adding 150,000 tons per year to CSN’s cold rolling capacity. The better surface characteristics of cold-rolled products enhance their value to customers when compared to hot-rolled products. Additional processing related to cold-rolling may further improve surface quality. Following cold-rolling, coils may be annealed, coated (by a hot dip or electrolytic tinning process) and painted, to enhance medium-and long-term anti-corrosion performance and to add characteristics that will broaden the range of steel utilization. Coated steel products have higher profit margins than bare steel products. Of our coated steel products, tin mill and galvanized products are our highest margin products.

Steel plant equipment regularly undergoes scheduled maintenance shutdowns. Typically the rolling mills and coating lines are maintained on a weekly or monthly basis whereas the blast furnaces and other special equipment are scheduled for routine maintenance on a semi-annual or annual basis.

Our business encompasses operations and commercial activities. Our operations are undertaken by our production sector, which is composed of the following two units:

· The operations unit - responsible for steel production operations, repair shops, in-plant railroad, and process development at our Presidente Vargas Steelworks; and

· The support unit - responsible for production planning, management of product stockyards, energy and utility facilities and work force safety assistance at the Presidente Vargas Steelworks.

The production sector is also responsible for environment and quality consultancy, new product development, capital investment implementation for steel production and processing, and the supervision of CSN Porto Real’s and CSN Paraná’s operations.

Quality Management Program

We practice Total Quality Management, a set of techniques that have been adopted by many leading companies in our industry. We also maintain a Quality Management System that has been certified to be in compliance with the ISO 9001 standards set forth by the International Standardization Organization, or ISO. In March 1993, we were awarded the ISO 9002 certificate of compliance for the manufacture of several of our products. In April 1996, we were awarded the ISO 9001 certificate of compliance which replaced ISO 9002 and included the element of “design” in its scope. In April 1998, we were awarded certification of compliance to QS 9000 standards, requirements specific to the automotive industry. Over the years the ISO 9001 certificate has been maintained and renewed, with the most recent renewal to the ISO 9001:2008 version awarded in August 2011, for the design and manufacture of slabs, hot rolled flats, pickled and oiled steel products, cold rolled, galvanized steel products and tin mill products. In June 2004, we were also awarded the automotive industry’s Technical Specification ISO/TS 16949, for the design and manufacture of hot-rolled, pickled and oiled, cold-rolled and galvanized steel products, which replaced the QS 9000 standards. The most recent renewal to the ISO/TS 16949:2009, third edition, was awarded in September 2011. Some important automotive companies, like FIAT, General Motors and Ford, require their suppliers to satisfy the ISO/TS 16949 standards.

Production Output

The following table sets forth, for the periods indicated, the annual production of crude steel within Brazil and by us and the percentage of Brazilian production attributable to us.

|  |  |  |  |  | CSN % of
Crude Steel Production |  | Brazil |  | CSN |  | Brazil
|  | (In millions of tons) |  |
2012 |  | 34.7 |  | 4.8 |  | 13.8%
2011 |  | 35.2 |  | 4.9 |  | 13.9%
2010 |  | 32.8 |  | 4.9 |  | 14.9%
2009 |  | 26.5 |  | 4.4 |  | 16.6%
2008 |  | 33.7 |  | 5.0 |  | 14.8%
_______________
Source: Brazilian Steel Institute (Instituto Aço Brasil), or IABr.

24

Table Of Contents

The following table contains some of our operating statistics for the periods indicated.

Certain Operating Statistics |  |  |  |  |  |
|  | 2012 |  | 2011 |  | 2010
|  | (In millions of tons) |  | (In millions of tons) |  | (In millions of tons)
Production of: |  |  |  |  |  |
Iron Ore * |  | 19.8 |  | 20.1 |  | 21.6
Molten Steel |  | 5.0 |  | 5.0 |  | 5.0
Crude Steel |  | 4.9 |  | 4.9 |  | 4.9
Hot-Rolled Coils and Sheets |  | 4.8 |  | 4.8 |  | 5.0
Cold-Rolled Coils and Sheets |  | 2.6 |  | 2.4 |  | 2.5
Galvanized Products |  | 1.2 |  | 1.4 |  | 1.1
Tin Mill Products |  | 0.5 |  | 0.7 |  | 0.7
Consumption of Coal for Coke Batteries |  | 1.9 |  | 2.1 |  | 2.2
Consumption of Coal for PCI |  | 0.7 |  | 0.6 |  | 0.7
*Casa de Pedra |  |  |  |  |  |

Raw Materials and Suppliers

The main raw materials we use in our integrated steel mill include iron ore, coke, coal (from which we make coke), limestone, dolomite, aluminum, tin and zinc. In addition, our production operations consume water, gases, electricity and ancillary materials.

Raw Materials and Energy Requirements

In 2010, prices of our main raw materials increased due to larger post-crisis demand and a strengthening of the steel industry worldwide.

In the first half of 2011, prices of the main raw materials used by CSN continuously increased due to unbalanced supply and demand. In the second half of 2011, prices decreased, mainly due to the worsening of the European crisis.

In the first nine months of 2012, prices of the main raw materials used by CSN continued to fall due to the global crisis in the steel market caused mainly by the decline in China’s growth rates and the European crisis. In the fourth quarter of 2012, prices increased, mainly due to the restocking of Chinese mills in preparation for the winter and Chinese holidays.

These commodity segments are highly concentrated in the hands of a few global players and there can be no assurance that price increases will not be imposed on steel producers in the future.

Iron Ore

We are able to obtain all of our iron ore requirements from our Casa de Pedra mine located in the State of Minas Gerais. For a description of our iron ore segment see “– Our Mining Segment.”

25

Table Of Contents

Coal

In 2012, our metallurgical coal consumption totaled 2.6 million tons. Metallurgical coal includes coking coal and PCI coal, which is a lower grade coal injected into the blast furnaces, in a pulverized form, to reduce coke consumption. The PCI system reduces CSN’s need for imported coke, thus reducing production costs. In 2012, we used 717,710 tons of imported PCI coal. The sources of the coking coal consumed in our plants in 2012 were as follows: USA (55%), Australia (37%) and Canada (8%). It is important to mention that Australia’s share increased when compared to 2011, due to its recovery in supply, which was strongly affected by flooding in 2011. Our sources of PCI Coal, the sources were: Russia (50%), Australia (44%) and Venezuela (6%).

In 2012, CSN’s coking coal and PCI coal costs decreased significantly when compared to 2011. The quarterly benchmark price for metallurgical coal started to decline in the first quarter of 2012, ending the year at its lowest level since the quarterly pricing mechanism began in the second quarter of 2010. The decline in metallurgical coal price reflected the slowdown in demand due to the financial crisis in Europe and weaker economic growth in China.

Coke

In 2012, in addition to the approximately 1.3 million tons of coke we produced, we also consumed 676,681 tons of coke bought from third parties in China, India and Colombia, an increase of 7.2% as compared to our consumption in 2011. The demand for coke has been increasing significantly since 2002 because China, a major player in the sea-borne trade, has increased its internal consumption and adopted restrictive export quotas. In addition, India has become a major consumer of coke, considerably increasing its imports in the past years. Due to logistical reasons, China supplies most of India’s coke and this increase in consumption tightened even more the worldwide supply-demand balance of metallurgical coke.

During 2012, Chinese coke prices remained flat until October. In the fourth quarter, producers were fully stocked in China, leading to a reduction in demand and pushing prices down significantly.

Limestone and Dolomite

Our Bocaina mine is located in Arcos, in the State of Minas Gerais, and has been supplying, since the early '70s, limestone (calcium carbonate) and dolomite (dolomitic limestone) to our Presidente Vargas Steelworks in Volta Redonda. These products are used in the process of sintering and calcination. Arcos has one of the biggest and best reserves of limestone in the world, which is used in the production of various products, including cement.

The annual production of limestone and dolomite for our steelworks is approximately 2.4 million tons.

The main products obtained from limestone and dolomite that are transferred to our steelworks in Volta Redonda are:

· Limestone and dolomite calcination: with a granulometry between 32 and 76 mm, they are used in the lime plant in Volta Redonda to produce calcitic and dolomitic lime, for further use in the steelmaking process and sintering. At the steelworks, lime is used for chemical controlling of liquid slag, in order to preserve the refractory of the converters and assist in the stabilization of the chemical reactions that occur during the steel manufacturing process. During sintering, the purpose of lime is to increase the performance of this process and the final quality of the sinter that is produced.

· Limestone and dolomite sintering: used in the production of “sinter”, in our steelworks. The sinter is composed of fine ores, solid fuel and flux, which enable semi-melting and sintering ore. The sinter is used in blast furnaces as a source of iron for the production of pig iron.

Beginning in 2009, with our entry into the cement market, the mine in Arcos also became responsible for supplying limestone for cement manufacturing in Volta Redonda.

26

Table Of Contents

Aluminum, Zinc and Tin

Aluminum is mostly used for steelmaking. Zinc and tin are important raw materials used in the production of certain higher-value steel products, such as galvanized and tin plate, respectively. We typically purchase aluminum, zinc and tin from third-party domestic suppliers under one year contracts. Specifically in relation to tin, we purchase part of our demand from CSN’s subsidiary ERSA (Estanho de Rondônia S.A). We maintain approximately 26, 27 and 140 days inventory of tin, aluminum and zinc, respectively, at the Presidente Vargas Steelworks.

Other Raw Materials

In our production of steel, we consume, on an annual basis, significant amounts of spare parts, refractory bricks and lubricants, which are generally purchased from domestic suppliers.

We also consume significant amounts of oxygen, nitrogen, hydrogen, argon and other gases at the Presidente Vargas Steelworks. These gases are supplied by a third-party under a long-term contract from its gas production facilities located on the Presidente Vargas Steelworks site. In 2012, we used 749,244 tons of oxygen to produce 4.8 million tons of crude steel.

Water

Large amounts of water are also required in the production of steel. Water serves as a solvent, a catalyst and a cleaning agent. It is also used to cool, to carry away waste, to help produce and distribute heat and power, and to dilute liquids. Our source of water is the Paraíba do Sul River, which runs through the city of Volta Redonda. Over 85% of the water used in the steelmaking process is recirculated and the balance, after processing, is returned to the Paraíba do Sul River. Since March 2003, the Brazilian government has imposed a monthly tax for our use of water from the Paraíba do Sul River, based on an annual fee of approximately R$2.5 million.

Electricity

Steelmaking also requires significant amounts of electricity to power rolling mills, production lines, hot metal processing, coking plants and auxiliary units. In 2012, our Presidente Vargas Steelworks consumed approximately 2.95 million MWh of electric energy or 608 kilowatt hours per ton of crude steel. This level means we are one of the largest consumers of electricity in Brazil, accounting for approximately 8% of the overall consumption of electricity in the State of Rio de Janeiro.

Our main source of electricity is our 238 MW thermoelectric co-generation power plant at the Presidente Vargas Steelworks, besides the Itá and Igarapava hydroelectric facilities, from which we have ensured energy of 167 MW and 23 MW, respectively. In addition, CSN is installing a new turbine generator at the Presidente Vargas Steelworks, which will add 21 MW to our existing installed capacity with start-up planned for 2013. This turbine will be located near our Blast Furnace No. 3, using the outlet gases from the iron making process to generate energy.

Natural Gas

In addition to electricity, we consume natural gas, mainly in our hot strip mill. Companhia Estadual de Gás do Rio de Janeiro S.A., or CEG Rio, which was privatized in 1997, is currently our major source of natural gas. Variations in the supply of gas can affect the level of steel production. We have not experienced any significant stoppages of production due to a shortage of natural gas. We also purchase fuel oil from Petrobras and Raízen. In 2012, the Presidente Vargas Steelworks consumed 418,284 dam3 of natural gas.

The market for natural gas is strongly correlated with the electricity market. Brazilian electricity generation is based principally on hydroelectric power, itself dependent on the level of Brazil’s reservoirs. As a contingency against low levels of rainfall, there are several thermoelectric power plants which use natural gas. Due to low levels of rainfall in 2012, reservoirs reached their lowest level in the past ten years; consequently the Brazilian Electricity System Operator (Operador Nacional do Sistema Elétrico), or ONS, increased the utilization of thermoelectric generation.

Diesel Oil

In mid-October 2006 and July 2008, we entered into agreements with Companhia Brasileira de Petróleo Ipiranga, or Ipiranga, to receive diesel oil in order to supply our equipment in our mining plants in the state of Minas Gerais, which provide the iron ore, dolomite and limestone used in our steel plant in Volta Redonda. In 2012, our consumption totaled 63,028 kiloliters of diesel oil, for which we paid US$49.8 million.

27

Table Of Contents

Suppliers

We acquire the inputs necessary for the production of our products in Brazil and abroad, with aluminum, zinc, tin, spare parts, refractory bricks, lubricants, oxygen, nitrogen, hydrogen and argon being the main inputs acquired in Brazil. Coal and coke are the only inputs acquired abroad.

Our main raw materials suppliers are set forth below:

Main Suppliers |  | Raw Material
BHP Billiton, Jim Walter Resources, Alpha Natural Resources, Rio Tinto and Marubeni |  | Coal
CI Milpa and ThyssenKrupp |  | Coke
RBA and Alubar |  | Aluminum
Votorantim Metais (1) |  | Zinc
White Solder, Coopertrading and ERSA |  | Tin
Sotreq, Gevisa, Continental, Distribuidora Cummins, Correias Mercurio, Deva Veiculos and MTU do Brasil |  | Spare parts
Magnesita, RHI, Vesuvius and Saint Gobain |  | Refractory bricks
Daido, Ipiranga and Quaker |  | Lubricants
___________
(1) We depend on Votorantim Metais as it is the only supplier of zinc in Brazil

Facilities

Flat Steel Mill

The Presidente Vargas Steelworks, located in the city of Volta Redonda, in the State of Rio de Janeiro, began operating in 1946. It is an integrated facility covering approximately 4.0 square km and containing five coke batteries (three of which are currently in operation), three sinter plants, two blast furnaces, a basic oxygen furnace steel shop, or BOF shop, with three converters, three continuous casting units, one hot strip mill, three cold strip mills, two continuous pickling lines, one continuous annealing line, three continuous galvanizing lines, four continuous annealing lines exclusively for tin mill products and six electrolytic tinning lines.

Our major operational units and corresponding effective capacities as of December 31, 2012, including CSN LLC and Lusosider, are set forth in the following chart:

Effective Capacity

|  | Tons per year |  | Equipment in operation
Process: |  |  |  |
Coking plant |  | 1,680,000 |  | 3 batteries
Sintering plant |  | 6,930,000 |  | 3 machines
Blast furnace |  | 5,380,000 |  | 2 furnaces
BOF shop |  | 5,750,000 |  | 3 converters
Continuous casting |  | 5,600,000 |  | 3 casters
Finished Products: |  |  |  |
Hot strip mill |  | 5,100,000 |  | 1 mill
Cold strip mill |  | 4,700,000 |  | 6 mills
Galvanizing line |  | 2,095,000 |  | 7 lines
Electrolytic tinning line |  | 1,190,000 |  | 7 lines

28

Table Of Contents

Downstream Facilities

CSN Paraná

Our CSN Paraná branch produces and supplies plain regular galvanized, Galvalume® and pre-painted steel products for the construction and home appliance industries. The plant has an annual capacity of 330,000 tons of galvanized products and Galvalume® products, 100,000 tons of pre-painted products, which can use cold-rolled or galvanized steel as substrate, and 220,000 tons of pickled hot-rolled coils in excess of the coils required for the coating process.

Metalic

We have a 99.99% ownership interest in Cia. Metalic Nordeste, or Metalic. Metalic is one of the few two-piece steel can producers in all the Americas. It has approximately 30% of the packaging market for carbonated drinks in the Northeastern regions of Brazil. Currently, we are Metalic’s only supplier of the steel used to make two-piece cans. The development of drawn-and-wall-ironed steel for the production of two-piece cans is an important achievement in the production process at the Presidente Vargas Steelworks.

Prada

We have a 99.99% ownership interest in Cia. Metalúrgica Prada, or Prada. Established in 1936, Prada is the largest Brazilian steel can manufacturer and has an annual production capacity of over one billion cans in its three industrial facilities: two located in the state of São Paulo and one in the state of Minas Gerais. Currently, we are the only Brazilian producer of tin plate, Prada’s main raw material, which makes Prada one of our major customers of tin plate products. Prada has important clients in the food and chemical industries, including packages of vegetables, fish, dairy products, meat, aerosols, paints and varnishes, and other business activities. On December 30, 2008, we merged one of our subsidiaries, Indústria Nacional de Aços Laminados S.A., or INAL, into Prada. INAL was a distributor of laminated steel founded in 1957 and, after the merger, it became a branch of Prada responsible for distribution of Prada’s products, or Prada Distribuição.

Prada Distribuição is also the leader in the Brazilian distribution market, with 460,000 tons per year of installed processing capacity. Prada Distribuição has two steel service centers and five distribution centers strategically located in Brazil. Its main service center is located in the city of Mogi das Cruzes between the cities of São Paulo and Rio de Janeiro. Its product mix also includes sheets, slit coils, sections, tubes, and roofing in standard or customized format, according to clients’ specifications. Prada Distribuição processes the entire range of products produced by us and services 4,000 customers annually from the civil construction, automotive and home appliances sectors, among others.

Companhia Siderurgica Nacional, LLC

CSN LLC holds the assets of former Heartland Steel, a flat-rolled steel processing facility in Terre Haute, Indiana. This facility has an annual production capacity of 800,000 tons of cold-rolled products and 315,000 tons of galvanized products. Currently, CSN LLC is obtaining hot coils by buying slabs from CSN and having them converted into hot coils by local steel companies or buying hot rolled coils directly from mills in the United States. See “Item 4B. Government Regulation and Other Legal Matters—Anti-Dumping Proceedings—United States” for a discussion about anti-dumping issues on Brazilian hot coils exports to the United States.

Lusosider, Aços Planos, S.A.

We own 99.94% of Lusosider, a producer of hot-dip galvanized products and cold-rolled located in Seixal, near Lisbon, Portugal. Lusosider produces approximately 240,000 tons of galvanized products and 50,000 tons of cold-rolled per year. Its main customers include service centers and tube making industries.

29

Table Of Contents

Inal Nordeste

Inal Nordeste, or INOR, is a distributor of laminates located in the Northeastern Region. INOR has a service center located in the city of Camaçari, in the State of Bahia, to support sales in the Northeastern and North regions. On May 30, 2011, INOR was merged into us, allowing for the optimization of processes and operations as well as the reduction of costs.

Long Steel

The acquisition in February 2012 of SWT, located in Unterwellenborn, Germany, marks our entrance into the long steel market. SWT specializes in the production of profiles, including IPE (European I Beams) and HE (European Wide Flange Beams) sections, channels and UPE (Channels with Parallel Flanges) sections and steel sleepers. In total, more than 200 types of sections are produced according to different German and international standards.

The following chart reflects our production cycle in general terms.

Production Process

Scrap arrives at the mill by rail or road. Two gantry cranes are used to transfer the scrap to a stockyard. Two remote-controlled diesel-hydraulically driven transfer wagons carry the recycled steel in containers, which also function as charging vessels to the melting shop.

30

Table Of Contents

The electric arc of the DC-furnace is generated between a graphite electrode and the bottom of the furnace, which functions as the anode. This energy, supplemented by natural gas/oxygen burners, is used to convert this material into molten steel.

After the smelting process, the molten metal is tapped into the ladle in a wagon, which is then positioned under the ladle furnace. The purpose of this process is to achieve the desired composition, by the addition of alloys, and the necessary final temperature of the steel. The ladle is then transported to the casting shop with the transport wagon and is elevated onto the turret that rotates it into the casting position. The tundish distributes the steel to four strands of water-cooled copper moulds that provide the desired beam blank shape. As soon as the strands pass through the moulds they undergo an intensive cooling process. After solidification is complete, the strands pass through guides which transport and straighten the strands out of the casting arc into the horizontal plane, where they are then cut into pieces of the required length with automatic flame-cutting torches. A transfer manipulator passes the beam blanks to the roller table of the rolling mill.

The rolling mill provides facilities for both duo and universal rolling processes. In contrast to the continuous operation where the sections are rolled in strands arranged one after the other, in this reversing mill the section bar is run forwards and backwards in several passes through rolls that either have “grooves” or function according to the universal rolling principle.

The three stand assemblies in the rolling mill include, a break down stand coupled with a cropping saw, a tandem group and a finishing group. After having passed the finishing strand, the dimensional accuracy of the rolled section is measured using laser technology.

The next stage is the finishing department, where the sections, which can be up to 100m long, cool down on a walking beam cooling bed, before being straightened. The sections are then cut on a cold saw plant to lengths between 6m and 28m, as requested by customers.

Production Output

Certain Operating Statistics |  |
|  | 2012
|  | (In thousands of tons)
Production of: |  |
Beam Blank |  | 885*
Long Steel (Finished Products) |  | 827*

*The above operating figures cover SWT’s production during the full year of 2012. As we have consolidated SWT’s results as of February 2012, its production during this period was of 812 thousand tons of beam blank and 755 thousand tons of long steel (finished products).

Raw Materials and Suppliers

Raw Materials and Energy Requirements

The main raw material we use in our long steel operation is scrap. In addition, our production operations consume electricity, natural and technical gases and ancillary materials like ferroalloys, lime, dolomite and foaming coal.

Scrap

During 2010 and 2011, prices for scrap continuously increased due to unbalanced supply and demand in Europe and increasing globalization of scrap trading worldwide. Prices in the European market were particularly affected by prices in Turkey and Asia. In 2012, the average price decreased slightly due to lower demand for scrap as a consequence of the financial crisis. In 2012, our scrap consumption totaled approximately 960,000 million tons and accounted for nearly 60% of our production cost. We are able to obtain 80% of our scrap needs from within a 250 km vicinity.

31

Table Of Contents

Ferroalloys, lime and foaming coal

Because we do not own any sources of alloys, lime and foaming coal we have to buy these materials from traders. Our traders are located mostly in Europe and the materials come from different producers around the world.

Rolls

We consume different types of rolls in our rolling mill, usually cast rolls which come from Germany, Italy, Slovenia and China.

Graphite electrodes

In the smelting shop (electric arc furnace), we use graphite electrodes with a diameter of 750mm and in the ladle furnace, we use electrodes with a diameter of 400mm. The electrodes come from Europe, Japan and China.

Other raw materials

In our production of steel we consume, on an annual basis, amounts of electrodes, rolls, refractory materials and materials for packaging and spare parts, which are mostly purchased from domestic suppliers.

Water

Large amounts of water are required in the production process. Our source of water is the Saale river, located 5 km from the plant. We use our own water station to pump water via pipelines to the plant.

Electricity and Natural Gas

Steelmaking also requires significant amounts of electricity and natural gas, for which we have supply contracts. Under normal conditions, we consume approximately 450 GWh of electric energy and an equal amount of natural gas.

Suppliers

We acquire the inputs necessary for the production of our products in Germany and other countries.

Our main raw materials suppliers are set forth below:

Main Suppliers |  | Raw Material
Scholz, TSR |  | Scrap
Verbund |  | Electric Energy
E.on Ruhrgas |  | Natural gas
RHI |  | Refractory
SGL, Graftec, NCK |  | Electrodes
Siemens, Schneider, Voith |  | Spare parts
Irle, Walzengießerei Coswig |  | Rolls

Facilities

SWT possesses a 28km internal railway system, and the logistics infrastructure to ensure supply of scrap and delivery of finished products. Main markets served by SWT include: non-residential construction, equipment industries, engineering and transport, in Germany and neighboring countries, including Poland and the Czech Republic.

32

Table Of Contents

Effective Capacity

|  | Tons per year |  | Equipment in operation
Process: |  |  |  |
EAF – Electric Arc Furnace |  | 1,100,000 |  | 1 furnace
Ladle Furnace |  | 1,100,000 |  | 1 furnace
Finished Products: |  |  |  |
Section mill |  | 1,000,000 |  | 1 mill

Our Mining Segment

Our mining activities are one of the largest in Brazil and are mainly driven by the exploration of one of the richest Brazilian iron ore reserves, Casa de Pedra, in the State of Minas Gerais. We sell our iron ore products mainly in Asia, Europe and Brazil with sales and marketing taking place through our principal hubs of Minas Gerais, in Brazil, Austria, Madeira Islands, Portugal and Hong Kong.

Our Mines

Location, Access and Operation

Casa de Pedra

Casa de Pedra mine is an open pit mine located next to the city of Congonhas in the State of Minas Gerais, Brazil, approximately 80 km south of the city of Belo Horizonte and 360 km north of the city of Rio de Janeiro. The site is approximately 1,000 meters above sea level and accessible from the cities of Belo Horizonte or Congonhas through mostly paved roads.

Casa de Pedra mine is a hematite-rich iron deposit of an early proterozoic banded iron formation in Brazil’s Iron Ore Quadrangle (Quadrilátero Ferrífero), which is located in the central part of the State of Minas Gerais in the Southeastern region of Brazil and has been one of the most important iron producing regions in Brazil for the last 50 years. It has been incorporated to CSN in 1941, but has been in operation since 1913.

Our iron ore at Casa de Pedra is currently excavated by a fleet composed of Marion 191M electric shovels, P&H 1900AL electric shovels, Komatsu PC5500 hydraulic shovels, wheel loaders (Caterpillar 994F, Komatsu WA1200 and LeTourneau 1850) and then hauled by a fleet of Terex Unit Rig MT3300AC (150 tons), Caterpillar 793D (240 tons) and Terex Unit Rig MT4400AC (240 tons).

Casa de Pedra mine is wholly-owned by us and supplies all of our iron ore needs, producing lump ore, sinter feed and pellet feed fines with high iron content. The maps below illustrate the location of our Casa de Pedra mine:

33

Table Of Contents

Namisa

We own additional iron ore assets through Namisa, our 60% consolidated investee, which acquired CFM (Companhia de Fomento Mineral e Participações) in July 2007. CFM was formed in 1996 with the purpose of utilizing and enhancing the ore treatment facilities of the Itacolomy mines, for the beneficiation of crude ore extracted from the Engenho mine.

The Engenho mine is also an open pit mine located at the Southwestern region of the Iron Ore Quadrangle, 60 km south of the city of Belo Horizonte and is accessible from the cities of Belo Horizonte or Congonhas through mostly paved roads. The map below illustrates the location of our Engenho mine:

34

Table Of Contents

The Engenho mine’s operation started in 1950. The ore in this mine is excavated by a fleet of wheel loaders (Komatsu WA470-6) and excavators (Komatsu PC600LC-8) and then hauled by a fleet of Iveco Trakker 410T42 trucks. The ore is then processed in Pires treatment facilities, which has an installed capacity of 7 million tons of products per year.

The Fernandinho mine, which we also hold through Namisa, is located in the city of Itabirito, in the State of Minas Gerais. This city is located in the Middle-East region of the State of Minas Gerais and approximately 40 km from the city of Belo Horizonte. Fernandinho is an open pit mine and is accessible from the cities of Belo Horizonte or Itabirito through mostly paved roads. The map below illustrates the location of our Fernandinho mine:

35

Table Of Contents

The Fernandinho mine’s operation also started in 1950. The ore in this mine is excavated by a fleet of wheel loaders (Komatsu WA470-6) and excavators (Komatsu PC350LC-8) and then hauled by a fleet of Iveco Trakker 410T42 and Iveco Trakker 380T42 trucks. The ore is then processed in Fernandinho treatment facilities, which has an installed capacity of 750 thousand tons of products per year.

Limestone and Dolomite Mine

Our extraction and preparation of limestone and dolomite is done at our Bocaína mining facility located in the city of Arcos, in the State of Minas Gerais. This mining facility has an installed annual production capacity of approximately 4.0 million tons. We believe this mining facility has sufficient limestone and dolomite reserves to adequately supply our steel production, at current levels, for more than 37 years. The mining facility is located 455 km from the Presidente Vargas Steelworks.

Tin

We own a tin mine in Itapuã do Oeste, in the State of Rondônia, through our subsidiary Estanho de Rondônia S.A. (ERSA). This facility has an installed annual production capacity of approximately 3,600 tons of tin, which we use substantially as a raw material to produce tin plate, a coated steel product. A small part of our tin production that is not used as raw material is sold to third parties; however, the results from these sales are insignificant to our consolidated results.

Mineral Rights and Ownership

The Mining Code and the Brazilian Federal Constitution impose requirements on mining companies relating to, among other things, the manner in which mineral deposits are exploited, the health and safety of workers, the protection and restoration of the environment, the prevention of pollution and the promotion of the health and safety of local communities where the mines are located. The Mining Code also imposes certain notifications and reporting requirements.

We hold concessions to mine iron ore, limestone and dolomite. We purchase manganese in the local market. Except for Namisa’s mines, in which we have a 60% ownership interest, we own 100% of each of our mines. In addition, each mine is an “open pit” mine. Iron ore extraction, crushing, screening and concentration are done in three different sites: Casa de Pedra (CSN’s property), Pires Beneficiation Plant and Fernandinho Mine (both Namisa’s property).

Casa de Pedra

Our mining rights for Casa de Pedra mine include the mine, a beneficiation plant, roads, a loading yard and a railway branch and are duly registered with the Brazilian Department of Mineral Production (Departamento Nacional de Produção Mineral), or DNPM. DNPM has also granted us easements in 19 mine areas located in the surrounding region, which are not currently part of Casa de Pedra mine.

We believe we have obtained and are in compliance with all licenses and authorizations for our operations and projects at Casa de Pedra mine.

Exploration undertaken at the Casa de Pedra mine is subject to mining lease restrictions, which were reflected in our iron ore reserve calculations. Quality requirements (chemical and physical) are the key “modifying factors” in the definition of ore reserves at Casa de Pedra and were properly accounted for by us.

Mineral Reserves

The following table sets forth the type of each of our mines, period of operation, projected exhaustion dates and percentage of our interest:

Mine |  | Type |  | Operating Since |  | Projected exhaustion date |  | CSN % interest
Iron: |  |  |  |  |  |  |  |
Casa de Pedra (Congonhas, Minas Gerais) |  | Open pit |  | 1913 |  | 2041 |  | 100
Engenho (Congonhas, Minas Gerais) |  | Open pit |  | 2007 (Start of operation by Namisa) |  | 2041 |  | 60
Fernandinho (Itabirito, Minas Gerais) |  | Open pit |  | 2007 (Start of operation by Namisa) |  | 2030 |  | 60
Limestone and Dolomite: |  |  |  |  |  |  |  |
Bocaina (Arcos, Minas Gerais) |  | Open pit |  | 1946 |  | 2049 |  | 100

36

Table Of Contents

The following table sets forth our estimates of proven and probable reserves and other mineral deposits at our mines reflecting the results of reserve studies. They have been calculated in accordance with the technical definitions contained in the SEC’s Industry Guide 7, and estimates of mine life described herein are derived from such reserve estimates. In the case of the Engenho and Fernandinho mines, where we own 60% of interests, the mineralized materials disclosed are for the entire mine, and not just for our proportional interest in the mine.

According to the report “Audit of Ore Reserves for CSN Casa de Pedra Iron Mine”, prepared by Golder Associates in May 2007, our reserve estimation process is subject to some smoothing, but does not reflect losses for mine dilution and mining recovery. We intend to perform studies regarding those losses during the preparation process for the new reserve audit. Likewise, Namisa’s estimation process for the Engenho and Fernandinho mines does not reflect losses for mine dilution and mining recovery.

We are in the process of performing new reserve studies for our iron ore mines. We expect to have the new audit report for Casa de Pedra by mid-2014 and the audit report for Namisa by late 2014.

|  | MINERAL RESERVES AND QUANTITY ESTIMATES FOR MINERALIZED MATERIAL – As of December 31, 2012
|  | Proven and Probable Reserves(1) |  | Quantity Estimates for Mineralized Material(2)
|  |  |  |  |  |  |  |  |  | Recoverable |  |
Mine Name |  | Ore Tonnage(3) |  |  |  |  |  | Product(5) |  | Tonnage
and Location |  | (millions of tons) |  | Grade(4) |  | Rock Type |  | (millions of tons) |  | (millions of tons)
|  | Proven(6) |  | Probable(7) |  |  |  |  |  |  |
Iron: |  |  |  |  |  |  |  |  |  |  |  |
Casa de Pedra (Congonhas, |  |  |  |  |  |  |  | Hematite (21%) |  |  |  |
Minas Gerais) |  | 957 |  | 514 |  | 47.79% Fe |  | Itabirite (79%) |  | 836 |  | 8,285
Engenho |  |  |  |  |  |  |  |  |  |  |  |
(Congonhas, Minas Gerais) |  |  |  |  |  | 46.07% |  | Itabirite (100%) |  |  |  | 852
Fernandinho |  |  |  |  |  |  |  |  |  |  |  |
(Itabirito, Minas Gerais) |  |  |  |  |  | 40.21% |  | Itabirite (100%) |  |  |  | 578
Total Iron: |  | 957 |  | 514 |  |  |  |  |  | 836 |  | 9,715
(Congonhas, Minas Gerais)
Limestone and Dolomite: |  | Proven(6) |  | Probable(7) |  |  |  |  |  |  |  |
Bocaina |  |  |  |  |  | 41.3%CaO |  | Limestone (86%) |  |  |  |
(Arcos, Minas Gerais) |  |  |  |  |  | 5.99%MgO |  | Dolomite (14%) |  |  |  | 1,190

__________________

(1) Reserves means the part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. We do not have reserve audits for the Engenho and Fernandinho. The reserves for the Casa de Pedra mine were audited in 2006 and we have reduced the amount of proven reserves by our annual production since then.
(2) Mineralization that has been sufficiently sampled at close enough intervals to reasonably assume continuity between samples within the area of influence. This material does not yet qualify as a reserve.
(3) Represents ROM material.
(4) Grade is the proportion of metal or mineral present in ore or any other host material.
(5) Represents total product tonnage after mining and processing losses.
(6) Means reserves for which: (i) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling; and (ii) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well- established.
(7) Means reserves for which quantity and grade and /or quality are computed from information similar to that used for proven (measure) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measure) reserves, is high enough to assume continuity between points of observation.

37

Table Of Contents

We do not have audited data for resources estimates, only for reserves estimates.

The metallurgical recovery factor is the proportion of iron in the ore delivered to the processing plant that is recovered by the metallurgical process. In 2012, the metallurgical recovery factor obtained by Casa de Pedra concentration plant was 76.0%. That same factor was 39.4% for the Engenho plant and 63.0% for the Fernandinho plant.

The cutoff grade is the minimum ore percentage that determines which material will be fed in the processing plant. We also plan to perform studies to determine the cutoff grade value during the preparation process for the new audit in Casa de Pedra. In the audit performed in 2006, the Benefit Function considered the lithologies to separate iron from waste. The cutoff grade value for Namisa is also yet to be determined.

The prices used in the 2006 audit for the estimation of Casa de Pedra reserves are shown in the following table (Golder’s Final Report for the Audit of Ore Reserves for CSN Casa de Pedra Iron Mine, 2007). As shown, the product price we assumed to estimate our reserves is conservative in comparison to the actual three-year average prices.

PRICE FOR THE THREE YEARS PRIOR TO THE AUDIT
| Price for the three years prior to the audit |  | Average |  | Product Price
| (US$/t) |  | (US$/t) |  | (US$/t)
| 2004 | 2005 | 2006 |  | From 2004 to 2006 |  | Assumption
Lump | 28.80 | 49.40 | 58.79 |  | 45.66 |  | 25.26
“Hematitinha” | 12.08 | 28.34 | 35.75 |  | 25.39 |  | 18.14
Sinter Feed | 21.91 | 37.58 | 44.73 |  | 34.74 |  | 20.73
Pellet Feed Fines | 21.40 | 36.69 | 43.66 |  | 33.92 |  | 20.44

Namisa does not yet have a reserve audit; therefore, we have not established prices to estimate reserves for its mines.

Casa de Pedra

In 2006, we concluded an extensive, multi-year study of our iron ore reserves at Casa de Pedra. The study consisted of three phases. Phase one, which was completed in 1999, covered the ore bodies that are currently being mined or are close to the current operating open pits. Phase two, which was completed in early 2003, covered the other iron ore deposits at Casa de Pedra site. Phase three started in 2005 and involved a complete revaluation of our mineral reserves at Casa de Pedra.

We conducted extensive work throughout 2006 to document and classify all information related to both the current and future operations of the Casa de Pedra mine. In 2006, we hired Golder Associates S.A., or Golder, to undertake an independent analysis of the Casa de Pedra iron ore reserves. Golder carried out a full analysis of all available information and has independently validated our reported reserves.

38

Table Of Contents

Golder accepts as appropriate the estimates regarding proven and probable reserves made by us, totaling 1,631 million tons of iron ore (as of December 31, 2006) at a grade of 47.79% Fe and 26.63% SiO2. This new estimate of our iron ore reserves at Casa de Pedra is significantly larger than our estimate of 444 million tons, contained in an appraisal report prepared in 2003.

Over the course of the Casa de Pedra Mine’s life we have executed different drilling campaigns and, in total, we have drilled 91,515 meters until 2011. The last completed campaign began in May 2010 and ended in April 2011. In the course of that campaign, we drilled 11,069 meters. We are extending our drilling campaign by an additional 30,000 meters to increase and improve our knowledge about the iron ore deposits at Casa de Pedra. This campaign includes the programming of laboratory tests for approximately 1,800 samples. It started in October 2012, and by December 2012 we had drilled a total of 2,055 meters. We plan to conclude drilling by December 2013. We will use this new campaign and the 2010-2011 campaign for the new reserve audit and we expect to have the new Audit Report ready by mid-2014.

Namisa

An initial study was conducted at Fernandinho and Engenho mines to define the geological reserves and final pits. In 2008 and 2009, we extended our drilling campaign with an additional 5,179 meters at Engenho mine and 2,771 meters at Fernandinho mine (totaling a campaign of 7,950 meters) to increase and improve our knowledge about the iron ore deposits at these mines. In November 2012 we started a new drilling campaign with an additional 10,000 meters in the Engenho Mine. By December 2012, we had drilled a total of 404 meters and we expect to conclude this campaign by December 2013. We also intend to conduct a drilling campaign of an additional 10,000 meters in the Fernandinho Mine in 2013. We expect that, as soon as a new model and final pit are finished (approximately in December 2013), this reserve can be audited and may be incorporated into our mineral deposits. We expect to have an audit reserve ready by late 2014.

Production

Casa de Pedra

The Casa de Pedra facilities are located in the city of Congonhas, in the State of Minas Gerais. The Casa de Pedra mine is located 350 km from the Presidente Vargas Steelworks and supplies iron ore products to our steel mill, as well as for export through the Itaguaí Port. Casa de Pedra’s equipment fleet and treatment facilities have an installed annual ROM capacity of approximately 86.0 million tons and 22 million tons, respectively.

Namisa

Namisa has two beneficiation plants: one is the Pires Plant, which receives material from our Engenho mine (located at the northern border of the Casa de Pedra mine) and the other is the Fernandinho Plant, which receives material from our Fernandinho mine (located in the city of Itabirito). The beneficiation plant at Pires also processes crude ore acquired from other companies, which along with its own ROM, generates final products such as: lump ore, small lump ore (hematitinha), sinter feed and concentrates. The beneficiation plant at Fernandinho generates sinter feed and fines as final products.

Namisa complements our strategy to be a world leading producer of high quality iron ore. Namisa remains fully integrated with our railway and port logistics corridor, through long-term contracts, which provide sufficient railway and port logistics capacity for Namisa’s current and future production. Namisa is a leading company in iron ore mining and trading, with mining and processing operations in the State of Minas Gerais. Trading iron ore is obtained from small mining companies in the neighborhood and other trading companies.

The table below sets forth production of iron ore of our mines for the last three years:

| Production(1)
| 2010 | 2011 | 2012
Casa de Pedra (Mt) | 21.6 | 20.1 | 19.8
Grade (%) | 65.6% | 65.3% | 64.4%
Pires (2) (Mt) | 6.1 | 5.7 | 4.1
Grade (%) | 62.6% | 62.3% | 62.2%
Fernandinho(2) (Mt) | 0.5 | 0.7 | 0.5
Grade (%) | 59.6% | 58.6% | 57.4%

(1) In addition to its own production, Namisa also purchases iron ore from third parties. Third party purchase volumes totaled 5.9 million tons, 7.5 million tons and 9.3 million tons in 2010, 2011 and 2012, respectively.
(2) Production information considers 100% of the mines, not just our 60% interest.

39

Table Of Contents

| CSN Consolidated Sales(1)
| 2010 | 2011 | 2012
Consolidated Sales (Mt) | 18.6 | 23.8 | 20.2
Consolidated Net Revenue Per Unit (US$/t) | 98 | 135 | 97

(1) Consolidated sales consider our proportional 60% interest in Namisa.

Distribution

Transportation costs are a significant component of our steel and iron ore production costs and are a factor in our price-competitiveness in the export market. Railway is the main means of transport by which we convey raw materials from our mines to the Presidente Vargas Steelworks and steel and iron ore products to ports for shipment overseas. Iron ore, limestone and dolomite from our two mines located in the State of Minas Gerais are transported by railroad to the Presidente Vargas Steelworks for processing into steel. The distances from our mines to the Presidente Vargas Steelworks are 328 km and 455 km. The distances from our mines to the ports are 440 km and 160 km. Imported coal and coke bought from foreign suppliers are unloaded at the port of Itaguaí, 90 km west of the city of Rio de Janeiro, and shipped 109 km by train to the Presidente Vargas Steelworks. Our finished steel products are transported by train, truck and ships to our customers throughout Brazil and abroad. Our most important local markets are the cities of São Paulo (335 km from the Presidente Vargas Steelworks), Rio de Janeiro (120 km) and Belo Horizonte (429 km).

Until recently, Brazil’s railway system (including railcars and tracks) was principally government-owned and in need of repair, but it has now been largely privatized. In an attempt to increase the reliability of our rail transportation, we hold interests in companies that hold concessions for the main railway systems we use. For further information on our railway concessions, see “—Facilities—Railways.”

We export iron ore and import coal and coke through the Itaguaí Port, in the State of Rio de Janeiro. The coal and container terminals have been operated by us since August 1997 and 1998, respectively.

Our Logistics Segment

Our logistics segment is comprised of railway and port facilities.

Railways

Southeastern Railway System

MRS has a 30-year concession to operate, through the year 2026 and renewable for an equal period of 30 years, Brazil’s Southeastern railway system. As of December 31, 2012, we held 33.27% of MRS’ total capital. The Brazilian Southeastern railway system, with 1,643 km of track, serves the São Paulo - Rio de Janeiro - Belo Horizonte industrial triangle in Southeast Brazil, and links our mines located in the State of Minas Gerais to the ports located in the states of São Paulo and Rio de Janeiro and to the steel mills of CSN, Companhia Siderúrgica Paulista, or Cosipa, and Gerdau Açominas. In addition to serving other customers, the line transports iron ore from our mines at Casa de Pedra in the State of Minas Gerais and coke and coal from Itaguaí Port in the State of Rio de Janeiro to the Presidente Vargas Steelworks and transports our exports to the ports of Itaguaí and Rio de Janeiro. The railway system connects the Presidente Vargas Steelworks to the container terminal at Itaguaí Port, which handles most of our steel exports. Our transport volumes represent approximately 25% of the Brazilian Southeastern railway system’s total volume. We are jointly and severally liable, along with the other principal MRS shareholders, for the full payment of the outstanding amount of its indebtedness (See “Item 5E. Off-Balance Sheet Arrangements”), however, we expect that MRS will make the lease payments through internally generated funds and proceeds from financing.

40

Table Of Contents

Northeastern Railway System

As of December 31, 2012, we hold 76.13% of the capital stock of Transnordestina Logística S.A.. Transnordestina Logística S.A. has a 30-year concession granted in 1997, renewable for an equal 30-year period, to operate Brazil’s Northeastern railway system. The Northeastern railway system includes 4,534 km of track and operates in the states of Maranhão, Piauí, Ceará, Paraíba, Pernambuco, Alagoas and Rio Grande do Norte. It also connects with the region’s leading ports, thereby offering an important competitive advantage through opportunities for intermodal transportation solutions and made-to-measure logistics projects.

For more information on Transnordestina, see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments.”

Port Facilities

Solid Bulks Terminal

We hold the concession to operate TECAR, a solid bulks terminal, one of four terminals that form the Itaguaí Port, located in the State of Rio de Janeiro, for a term expiring in 2022 and renewable for another 25 years. Itaguaí Port, in turn, is connected to the Presidente Vargas Steelworks, Casa de Pedra and Namisa by the Southeastern Railway System. Our imports of coal and coke are made through this terminal. Under the terms of the concession, we undertook to load and unload at least 3.0 million tons of bulk cargo annually. Among the approved investments that we announced is the development and expansion of the solid bulks terminal at Itaguaí to also handle up to 84 million tons of iron ore per year. For further information, see “Item 4. Information on the Company - D. Property, Plant and Equipment —Planned Investments—Mining.”

Container Terminal

We own 99.99% of Sepetiba Tecon S.A., or TECON, which has a concession to operate, for a 25-year term expiring in 2026 that is renewable for another 25 years, the container terminal at Itaguaí Port. As of December 31, 2012, US$152 million of the cost of the concession remained payable over the next 14 years of the lease. For more information, see “Item 5E. Off-Balance Sheet Arrangements”. The Itaguaí Port is located in Brazil’s Southeast Region, with all major exporting and importing areas of the states of São Paulo, Minas Gerais and Rio de Janeiro within 500 km from the port. This area represents more than 50% of the Brazilian gross domestic product, or GDP, according to the Brazilian Geography and Statistics Institute (Instituto Brasileiro de Geografia e Estatística). The Brazilian Federal Port Agency has spent more than US$48 million in the past few years in port infrastructure projects such as expanding the maritime access channel and increasing its depth. In addition, significant investments were made by the Brazilian federal government in adding two extra lanes to the Rio-Santos road, and are being made in constructing the Rio de Janeiro Metropolitan Bypass (ongoing project), a beltway that will cross the Rio de Janeiro metropolitan area. These factors, combined with favorable natural conditions, like natural deep waters and a low urbanization rate around the port area, allow the operation of large vessels as well as highly competitive prices for all services rendered, resulting in the terminal being a major hub port in Brazil.

41

Table Of Contents

Investments made from 2007 to 2012, mainly in two Super Post Panamax Portainers and two Rubber Tired Gantry, or RTG, cranes, 6 new Reach Stackers and 8 forklifts, among others, have shown to be successful. These investments, along with a focused marketing and sales strategy, enabled the terminal to rank first in market share among the three terminals of the state of Rio de Janeiro in 2012, with 38% of the total moves in those terminals.

We are carrying out new infrastructure and equipment investments in Sepetiba TECON, such as the Berth 301 Equalization and the acquisition of two new Super Post Panamax Portainers and four new RTG cranes to yard operations. In 2012, we carried out the dredging of Sepetiba Tecon’s Berths 302/303 and access channel to ‑15.5 m depth. These investments will increase TECON’s capacity from 320,000 containers (or 480,000 TEUs) to 410,000 containers (or 610,000 TEUs) per year and from 2.0 million tons to 6.0 million tons per year of steel products. We intend to use this port to ship all our exports of steel products. In 2012, 58% of the exported steel products (or 83,466 tons), were shipped from this port, as compared to 83% in 2011.

In 2012, the terminal continued to grow, following a 10% growth in 2011. It achieved 216,460 units handled (or 329,072 TEUs), an increase of 2% as compared to 2011, a less significant figure due to the limitations generated by the equalization work performed on Berth 301.

Our Cement Segment

Our cement segment is comprised of a cement plant in Volta Redonda, in the state of Rio de Janeiro, and a clinker plant in Arcos, in the state of Minas Gerais.

Production

The production process in CSN’s cement factory in Volta Redonda begins with the influx of raw materials: clinker, limestone, gypsum and slag. We currently import clinker, but, with the startup of our clinker plant in Arcos, in mid-2011, imports are gradually being reduced. Limestone comes from Arcos by rail. Clinker is stored in a silo (capacity: 45,000 tons) and limestone in a warehouse (capacity: 10,000 tons). Slag is a by-product of iron and steel, produced in the blast furnace, and is also stored in the warehouse (capacity: 20,000 tons), arriving at the plant by road. CSN uses natural gypsum, from Ouricuri, in the state of Pernambuco, which arrives at the plant by truck and is stored in the warehouse (capacity: 10,000 tons).

All transportation of raw materials within the plant is carried out by conveyor belts, placing inputs in scales according to a predefined formula and delivering them to the mills. There are two grinding lines and each mill has a nominal capacity of 170 tons/h. Annual plant capacity is 2.4 million tons of cement. The mill has a hydropneumatic roller system, which uses pressure to grind the layer of material on the turntable. Hot gas, derived from the combustion of natural gas or petroleum coke, is pumped into the mills to maintain the proper temperature in the circuit.

The type of cement we produce is CP III-40 RS (Sulfator resistant), which is then taken through a bucket elevator to be stored in silos. The plant has four silos, two of them with 10,000 tons of capacity and two with 5,000 tons of capacity. Cement can be shipped in bagged and bulk forms. We have two baggers with 12 filling nozzles (nominal capacity of 3600 bags/hour) and two palletizers for bagging cement.

Our Energy Segment

Our energy segment is comprised of generation plants and is aimed at enabling us to maintain our self-sufficiency in energy, reducing our production cost and our exposure to fluctuations or availability of certain energy sources.

Our energy related assets include:

Thermoelectric Co-Generation Power Plant

We completed the construction of a 238 MW thermoelectric co-generation power plant at the Presidente Vargas Steelworks in December 1999. Since October 2000, the plant has provided the steelworks with approximately 60% of the electric energy needed in its steel mills. Aside from operational improvements, the power plant supplies our strip mills with electric energy, processed steam and forced air from the blast furnaces, benefiting the surrounding environment through the elimination of flares that burn steel-processing gases into the atmosphere.

42

Table Of Contents

Itá Hydroelectric Facility

Tractebel and CSN each own 48.75% of ITASA, a special-purpose company formed for the purpose of owning and operating, under a 30-year concession granted in 2000 and renewable for an equal term, 60.5% of the Itá hydroelectric facility on the Uruguay river in Southern Brazil. Companhia de Cimento Itambé, or Itambé, owns the remaining 2.5% of ITASA. Tractebel directly owns the remaining 39.5% of the Itá hydroelectric facility.

The power facility was built using a project finance structure with an investment of approximately US$860 million. The long-term financing for the project was closed in March 2001 and consisted of US$78 million in debentures issued by ITASA, a US$144 million loan from private banks and US$116 million of direct financing from BNDES, all of which are due by 2013. The sponsors of the project have invested approximately US$306 million in this project.

Itá has an installed capacity of 1,450 MW, with a firm guaranteed output of 668 MW, and became fully operational in March 2001.

We and the other shareholders of ITASA have the right to take our pro rata share (proportional to our ownership interest in the project) of Itá’s output pursuant to 30-year power purchase agreements at a fixed price per megawatt hour, adjusted annually for inflation. Since October 2002, we have been using our entire Itá take internally.

Igarapava Hydroelectric Facility

We own 17.9% of a consortium that built and has the right to operate for 30 years the Igarapava hydroelectric facility. Other consortium members are Vale, Companhia Mineira de Metais, Votorantim Metais Zinco, AngloGold Ashanti Mineração Ltda., and Companhia Energética de Minas Gerais, or CEMIG. The plant has an installed capacity of 210 MW, corresponding to 136 MW of firm guaranteed output as of December 31, 2012. We have been using part of our 22.8 MW take from Igarapava to supply energy to the Casa de Pedra and Arcos mines and to the Presidente Vargas Steelworks.

Marketing Organization and Strategy

Flat Steel

Our steel products are sold both domestically and abroad as a main raw material for several different manufacturing industries, including the automotive, home appliance, packaging, construction and steel processing industries.

Our sales approach is to establish brand loyalty and achieve a reputation for quality products by developing relationships with our clients and focusing on their specific needs, providing tailor-made solutions for each of our clients.

Our commercial area is responsible for sales of all of our products. This area is divided into two major teams, one focused on international sales and the other on domestic sales. The domestic market oriented sales team is divided into seven market segments: Packaging, Distribution Network, Automotive Industry (Automakers and Auto Parts), Home Appliances, Original Equipment Manufacturer, or OEM, Construction and Pipes. The commercial area also has a team called “Special Sales” which is responsible for selling all the process residues, such as blast furnace slag, pitch and ammonia, which are widely used as inputs in chemical and cement industries.

The Distribution Network division is responsible for supplying large steel processors and distributors. Besides the independent distributors, CSN also has its own distributor, called Prada Distribuição. The Pipes division supplies oil and gas pipe manufacturers as well as some industries that produce small diameter pipe and light profiles. The Packaging unit acts in an integrated way with suppliers, representatives of the canning industry and distributors to respond to customer needs for finished-products. The Automotive unit is supplied by a specialized mill, CSN Porto Real, and also by a portion of the galvanized material produced at Presidente Vargas Steelworks, benefitting from a combined sales strategy.

In 2012, about 65% of our domestic sales were made through our own sales force directly to customers. The remaining sales were to independent distributors for subsequent resale to smaller clients.

43

Table Of Contents

Historically, our export sales were made primarily through international brokers. However, as part of our strategy to establish direct, longer-term relationships with end-users, we have decreased our reliance on such brokers. We have focused our international sales on more profitable markets in order to maximize revenues and shareholder returns.

All of our sales are on an order-by-order basis and have an average delivery time of 45 days. As a result, our production levels closely reflect our order log book status. We forecast sales trends in both the domestic and export markets based on the historical data available and the general economic outlook for the near future. We have our own data systems to remain informed of worldwide and Brazilian market developments. Further, our management believes that one of the keys to our success is maintaining a presence in the export market. Such presence gives us the flexibility to shift between domestic and export markets, thereby allowing us to maximize our profitability.

Unlike with other commodity products, there is no exchange trading of steel, or uniform pricing, as wide differences exist in terms of size, quality and specifications. In general, exports are priced based on international spot prices of steel at the time of sale in U.S. dollars or Euros, depending on the destination. Sales are normally paid up front, or within 14 or 28 days, and, in the case of exports, usually backed by a letter of credit and an insurance policy. Sales are made primarily on cost and freight terms.

Sales by Geographic Region

In 2012, we sold steel products to customers in Brazil as well as to customers in 25 other countries. The fluctuations in the portion of total sales assigned to domestic and international markets, which can be seen in the table below, reflect our ability to adjust sales in light of variations in the domestic and international economies, as well as steel demand and prices, both domestically and abroad.

The two main export markets for our products are North America and Europe, representing 44% and 40%, respectively, of our export sales volume in 2012.

In North America, we take advantage of our subsidiary CSN LLC, which acts as a commercial channel for our products. In order to gain a cost advantage among our U.S. competitors, CSN is able to export hot-rolled to CSN LLC which is then processed and transformed into more value-added products at CSN LLC’s plant, such as cold-rolled coil and galvanized. Moreover, we are able to export cold-rolled coils which can be directly sold or processed by CSN LLC in order to manufacture galvanized products.

CSN – Sales of Steel Products by Destination
(In thousands of metric tons and millions of R$)
| 2012 | 2011 | 2010
| Tons | % of Total | Net Operating Revenues(2) | % of Total | Tons | % of Total | Net Operating Revenues(2) | % of Total | Tons | % of Total | Net Operating Revenues(2) | % of Total
Brazil | 4,495 | 77.1% | 8,338 | 78.5% | 4,216 | 86.1% | 8,033 | 86.8% | 4,135 | 86.2% | 8,575 | 88.6%
Export | 1,334 | 22.9% | 2,278 | 21.5% | 680 | 13.9% | 1,219 | 13.2% | 661 | 13.8% | 1,107 | 11.4%
Total | 5,829 | 100.0% | 10,616 | 100.0% | 4,896 | 100.0% | 9,252 | 100.0% | 4,796 | 100.0% | 9,682 | 100.0%
Exports by Region |  |  |  |  |  |  |  |  |  |  |  |
Asia | 17 | 1.3% | 31 | 1.3% | 21 | 0.4% | 31 | 0.3% | 28 | 0.6% | 38 | 0.4%
North America(1) | 289 | 21.7% | 552 | 24.2% | 270 | 5.5% | 473 | 5.1% | 268 | 5.6% | 434 | 4.5%
Latin America | 81 | 6.1% | 199 | 8.8% | 58 | 1.2% | 144 | 1.6% | 56 | 1.2% | 136 | 1.4%
Europe | 942 | 70.6% | 1,484 | 65.2% | 312 | 6.4% | 545 | 5.9% | 277 | 5.8% | 434 | 4.5%
All Others | 5 | 0.3% | 12 | 0.5% | 19 | 0.4% | 27 | 0.3% | 32 | 0.7% | 65 | 0.7%

_______________

(1) Sales to Mexico are included in North America.

(2) Net operating revenues presented above differ from amounts in our IFRS consolidated financial statements because they do not include revenues from non-steel products (non-steel products include mainly by-products, iron ore, logistics services and cement).

44

Table Of Contents

Sales by Product

The following table sets forth our market shares for steel sales in Brazil of hot-rolled, cold-rolled, galvanized and tin mill products for 2011, 2010 and 2009. Market share information for 2012 was not yet available as of the date of this annual report.

CSN Domestic Market Share | 2011 | 2010 | 2009
Hot-Rolled Products | 66.3% | 60.7% | 53.4%
Cold-Rolled Products | 34.8% | 29.5% | 30.9%
Galvanized Products | 45.5% | 47.1% | 47.0%
Tin Mill Products | 98.2% | 96.8% | 86.1%

Soutce: IABr and CSN data

Sales by Industry

We sell our steel products to manufacturers in several industries. The table below shows our domestic shipments breakdown by volume for the last three years among our market segments:

Sales by Industrial Segment in Brazil

| 2012 | 2011 | 2010
| (In percentages of total domestic volume shipped)
Distribution Network | 42% | 41% | 41%
Packaging | 8% | 9% | 10%
Automotive | 16% | 16% | 19%
Home Appliances | 7% | 7% | 7%
OEM | 6% | 6% | 5%
Construction | 21% | 21% | 17%

We believe we have a particularly strong domestic and export position in the sale of tin mill products used for packaging in Latin America. Our customers for these products include some of the world’s most important food processing companies, as well as many small and medium-sized entities. We also maintain a strong position in the sale of galvanized products for use in the automobile manufacturing, construction and home appliance industries in Brazil and abroad, supplied by CSN Porto Real and CSN Paraná. No single customer accounts for more than 10% of our net operating revenues.

For further information on steel sales, see “Item 5A. Operating Results - Steel Markets and Product Mix - Sales Volume and Net Operating Revenues by Steel Products and Markets” and “Item 5A. Operating Results - Results of Operations - Year 2011 Compared to Year 2010 – Net Operating Revenues”.

Seasonality

Steel demand is stronger in the second quarter of the year and weaker in the last quarter. Nevertheless, our production is continuous throughout the year.

Long Steel

Our long steel products are sold both in Germany (about 30%) and other countries, mainly in Europe (60%), for industrial, infrastructure, civil construction and engineering industries.

Our sales approach is to establish brand loyalty and to maintain our reputation of high quality products and excellent delivery performance by developing long term relationships with our clients. SWT focuses on meeting specific customer needs, developing solutions for both low temperature and high temperature resistant applications, as well as optimized section shapes for special applications.

45

Table Of Contents

Our commercial area is responsible for sales of all of our products worldwide. This area is divided into the direct sales team which is organized in 13 agencies situated in Germany and our core markets in Europe, the commercial back office department (order management from entry via tracking to the final delivery and invoicing), logistics contracting (truck, rail, vessel, maritime, inventory worldwide) and a rail logistics department.

SWT does not possess its own distribution network, instead cooperating with the big steel distributors and traders in Europe and other countries. All of our sales are on an order-by-order basis. The delivery time is related to the logistics chain and varies between 2 to 6 weeks depending on Incoterm and section type. As a result, our production levels closely reflect our order log book status. We forecast sales trends in both the European and export markets based on the historical data available from the last two years and the general economic outlook for the near future. We believe that our presence in the export market outside of Europe gives us more flexibility to optimize production and maximize our profitability.

Sections are not sold based on uniform pricing in Europe, as wide differences exist in terms of size, quality and specifications. In general, exports are priced based on international spot prices of steel at the time of sale in U.S. dollars or Euros, depending on the destination. Sales are normally paid within 30 days, and, in the case of exports, usually backed by a letter of credit and an insurance policy. All SWT businesses are 100% covered by EulerHermes risk insurance, a bank guarantee or a letter of credit. Sales are made primarily on cost and freight terms.

Iron Ore

Iron ore products are commercialized by our commercial team located in Brazil and overseas. In Europe and Asia, our offices also include our technical assistance management. These three marketing units allow us to stay in close contact with our customers worldwide, understand the environment where they operate, monitor their requirements and provide all necessary assistance in a short period of time. Market intelligence analysis, planning and administration of sales are handled from Brazil by the staff in our São Paulo office, while our domestic sales team is located at Casa de Pedra mine, in the State of Minas Gerais.

We supply our iron ore to the steel industry and our main targets are the Brazilian, European, Middle Eastern and Asian markets. Prevailing and expected levels of demand for steel products directly affect demand for iron ore. Demand for steel products is correlated to many factors, such as GDP, global manufacturing production, urbanization, civil construction and infrastructure spending.

We believe our competitiveness has been improved by our customer service and market intelligence. It is paramount for us to have a clear understanding of our customers’ businesses in order to address their needs, surpass their expectations and build long-term relationships. We have a customer-oriented marketing policy and specialized local personnel in direct contact with our clients to help determine the mix that best suits each particular customer.

Iron Ore Sales

|  | CSN – Sales of Iron Ore Products by Destination (In thousands of metric tons and millions of R$)
| 2012 | 2011 | 2010
| Tons | % of Total | Net Operating Revenues | % of Total | Tons | % of Total | Net Operating Revenues | % of Total | Tons | % of Total | Net Operating Revenues | % of Total
Brazil | 478,626 | 2.4% | 713,445 | 15.9% | 1,457,381 | 6.1% | 834,144 | 14.0% | 1,519,562 | 8.2% | 573,976 | 15.9%
Export | 19,702,695 | 97.6% | 3,772,102 | 84.1% | 22,392,132 | 93.9% | 5,107,707 | 86.0% | 17,035,422 | 91.8% | 3,041,166 | 84.1%
Total | 20,181,321 | 100% | 4,485,549 | 100% | 23,849,513 | 100% | 5,941,851 | 100% | 18,554,984 | 100% | 3,615,142 | 100%
Exports by Region |  |  |  |  |  |  |  |  |  |  |  |
Asia | 15,230,579 | 77.3% | 2,971,131 | 78.8% | 18,815,484 | 84.0% | 4,250,002 | 83.2% | 14,140,642 | 83.0% | 2,513,499 | 82.6%
North America | 94,942 | 0.5% | 16,589 | 0.4% | - | 0.0% | - | 0.0% | - | 0.0% | - | 0.0%
Europe | 4,377,173 | 22.2% | 784,384 | 24.1% | 3,576,648 | 16.0% | 857,705 | 16.8% | 2,894,780 | 17.0% | 527,667 | 17.4%

The first step to our entry into the international iron ore market was taken in February 2007, with the completion of the first phase of the expansion of our coal seaport terminal in Itaguaí, in the State of Rio de Janeiro, which enabled us to also handle and export iron ore and to load from our own facilities the first shipment of our iron ore products.

46

Table Of Contents

In 2012, CSN’s iron ore sales reached 20.2 million tons, a 15% decrease compared to 2011. According to our consolidated financial statements, total mining revenue decreased 23% over the past year, due to declining iron ore prices. The share of mining revenue in CSN's total net revenue decreased from 35% in 2011 to 26% in 2012.

In 2012, 65% of our export sales went to the Asian market, mainly China, 22% were sold in the European market and the remaining 13% were sold to other countries mainly in the Middle East. Of our total sales, 78% were sinter feed, 14% pellet feed, 4% lump ore and 4% concentrated.

We expect the iron ore market to maintain a bullish trend supported by growing emerging market demand, high cost Chinese production, and infrastructure bottlenecks for low cost producers. The continued urbanization process in regions such as India, the Middle East, Latin America and China should support this tendency.

As global iron ore markets are highly competitive, we focus on our flexibility, reliability and efficient manner of supplying iron ore to the world market.

Through our marketing offices, we have long term relationships with most players in the steel industry in China, Japan, Taiwan, South Korea, Europe and Brazil.

For further information on iron ore sales, see “Item 5A. Operating Results - Results of Operations - Year 2012 Compared to Year 2011 – Net Operating Revenues.”

Cement

We sell cement type CPIII 40 RS in bagged and bulk forms and import CPII F. We operate in the markets of Rio de Janeiro, Minas Gerais, São Paulo and the northeast region (with imported cement). With the purpose of expanding and increasing competitiveness, we own six distribution centers located in strategic points: three in São Paulo, two in Rio de Janeiro and one in Minas Gerais. Supply to these distribution centers is made through railways and road transport, using mainly the MRS railway.

We have a diverse client base of over 10,000 clients, including construction material stores, home centers, concrete producers, construction companies, mortar industries and cement artifact producers.

The focus of our sales strategy is on retail. In this segment, we have a strong presence in sales points, where we reinforce the quality of the product to final customers. The retail segment operates with a low level of inventory, and a significant percentage of repurchase in the month, which highlights the competitive advantage of CSN’s distribution centers.

In 2012, we significantly increased our sales, reaching 1,972 thousand tons, representing a growth of 12.4% when compared to 2011. All our cement production is sold in the local market.

| CSN – Sales of Cement by Destination (In thousands of metric tons and millions of R$)
| 2012 | 2011 | 2010
| Tons | Net Operating Revenues | Tons | Net Operating Revenues | Tons | Net Operating Revenues
Brazil | 1,972 | 388 | 1,755 | 333 | 992 | 202

Insurance

We and our subsidiaries maintain several types of insurance policies. These insurances are contracted in line with the risk management of our business and attempt to follow the market practices for similar activities. Coverage in such policies encompasses domestic and international (import and export) cargo transportation (by road, rail, sea or air), carrier liability, life insurance, personal accidents, health, auto insurance, D&O, general liability, erection risks, boiler and machinery coverage, export credit insurance, surety, ports and terminal liabilities. These policies may not be sufficient to cover all risks we are exposed to.

47

Table Of Contents

We also have an insurance policy covering the operational risks, material damages and loss of profits of the following CSN’s branches and subsidiaries: Presidente Vargas Steelworks, Casa de Pedra Mine, Arcos Mine, Paraná Branch, CSN Porto Real (former Galvasud), Coal Terminal TECAR, Container Terminal TECON, Namisa, CSN Handel, Namisa Handel and CSN Cimentos. This policy was negotiated with domestic and foreign insurers and reinsurers and is valid until June 30, 2013 for a total insured value of US$500 million (out of a total risk amount of US$17.7 billion). Under the terms of the policy, CSN remains responsible for the first tranche of US$300 million in losses (material damages and loss of profits).

Intellectual Property

We possess patents and have technical cooperation agreements with universities and research institutes that provide us with special technical reports and advice related to specific products and processes. We are not dependent on any of such patents or agreements for the commercialization of our products.

Competition in the Steel Industry

Both the worldwide and the Brazilian steel markets are intensely competitive. The primary competitive factors in these markets include quality, price, payment terms and customer service. Further, continuous advances in materials, sciences and resulting technologies have given rise to improvements in products such as plastics, aluminum, ceramics, glass and concrete, permitting them to serve as substitutes for steel for certain purposes.

Competition in the Brazilian Steel Industry

The primary competitive factors in the domestic market include quality, price, payment terms and customer service. Also, several foreign steel companies are significant investors in Brazilian steel mills.

The following table sets forth the production of crude steel by Brazilian companies for the years indicated(2):

|  | 2011 |  | 2010 |  | 2009
|  | Ranking |  | Production |  | Ranking |  | Production |  | Ranking |  | Production
|  |  |  | (In million tons) |  |  |  | (In million tons) |  |  |  | (In million tons)
Gerdau(1) |  | 1 |  | 8.8 |  | 1 |  | 8.2 |  | 1 |  | 6.1
Usiminas |  | 2 |  | 6.7 |  | 2 |  | 7.3 |  | 2 |  | 5.6
ArcelorMittal Tubarão |  | 3 |  | 5.4 |  | 3 |  | 6.0 |  | 3 |  | 5.3
CSN |  | 4 |  | 4.9 |  | 4 |  | 4.9 |  | 4 |  | 4.4
ArcelorMittal Aços Longos |  | 5 |  | 3.5 |  | 5 |  | 3.4 |  | 5 |  | 3.2
Others |  |  |  | 5.9 |  |  |  | 3.1 |  |  |  | 1.9
Total |  |  |  | 35.2 |  |  |  | 32.9 |  |  |  | 26.5
Source: IABr |  |  |  |  |  |  |  |  |  |  |  |

1. Data from Aços Villares have been merged into data from Gerdau. 2. Information for 2012 was not yet available as of the date of this annual report

Competitive Position — Global

During 2012, Brazil maintained its place as the largest producer of crude steel in Latin America, with a production output of 34.7 million tons and a 2.3% share of total world production, according to data from the World Steel Association, or WSA. In 2012, Brazil also maintained its position as the ninth largest steel producer globally, accounting for around three-quarters of total production in Latin America, approximately twice the size of Mexico’s or 40% of the U.S.’ steel production, according to data from the WSA. According to IABr, Brazilian exports in 2012 amounted to 8.6 million tons of finished and semi-finished steel products.

48

Table Of Contents

We compete on a global basis with the world’s leading steel manufacturers. We have positioned ourselves in the world market with a product mix characterized by high margin and strong demand, such as tin plate and galvanized products. We have relatively low-cost and sufficient availability of labor and energy, and own high-grade iron ore reserves. These global market advantages are partially offset by costs of transporting steel throughout the world, usually by ship. Shipping costs, while helping to protect our domestic market, put pressure on our export price. To maintain our position in the world steel market in light of the highly competitive international environment with respect to price, our product quality and customer service must be maintained at a high level. See “Item 4B. Business Overview—Government Regulation and Other Legal Matters—Proceedings Related to Protectionist Measures” for a description of protectionist measures being taken by steel-importing countries that could negatively impact our competitive position.

Competitive Advantages of the Brazilian Steel Industry

Brazil’s principal competitive advantages are its abundant supply of low-cost, high-grade iron ore and energy resources. Brazil also benefits from a vast internal market with a large growth potential, a privatized industry making investments in plant and equipment, and deep water ports allowing the operation of large ships, which facilitates access to export markets.

Brazilian domestic steel prices have historically been higher than its export prices. However, in 2010 and 2011, lower demand in mature markets, the appreciation of the real against the U.S. dollar, certain tax incentives, and imported steel products forced Brazilian producers to adjust prices closer to export price levels in order to maintain competitiveness. In 2012, with the slowdown of European demand and the depreciation of the real against the U.S. dollar, export prices fell and domestic prices rose again. This movement was also influenced by protective government measures which raised taxes on steel imports.

Government Regulation and Other Legal Matters

Environmental Regulation

We are subject to Brazilian federal, state and municipal environmental laws and regulations governing air emissions, waste water discharges, and solid and hazardous waste handling and disposal. We are committed to controlling the substantial environmental impact caused by our steelmaking, mining, cement and logistics operations, in accordance with international standards and in compliance with environmental laws and regulations in Brazil. We believe we are currently in substantial compliance with applicable environmental requirements.

While the Brazilian government has authority to promulgate environmental regulations setting forth minimum standards of environmental protection, state and local governments have the power to enact more stringent environmental regulations. We are subject to regulation and supervision by the Brazilian Ministry of Environment, the Environmental National Council (“CONAMA”), which is the Federal body responsible for enacting technical regulations and environmental protection standards, and by the Brazilian Institute of Environment and Renewable Natural Resources (“IBAMA”), which is responsible for enforcing environmental laws at the federal level. The environmental regulations of the State of Rio de Janeiro, in which the Presidente Vargas Steelworks is located, are enforced by the State Institute of Environment (“INEA”). In the state of Minas Gerais, where our main mining operation is located, we are subject to regulation and supervision by the Environmental Policy Council (“COPAM”) and the State Environmental Foundation (“FEAM”). Specific goals and standards are established in operating permits or environmental accords issued to each company or plant. These specific operation conditions complement the standards and regulations of general applicability and are required to be observed throughout the life of the permit or accord. The terms of such operating permits are subject to change and are likely to become stricter. All of our facilities currently have operating permits.

In recent years, we requested and/or obtained several emissions permits and renewals of environmental permits, both for our current operations and for the development of new projects regarding steel and cement manufacturing, iron ore and limestone mining and logistics.

49

Table Of Contents

Environmental Expenditures and Claims

Promoting responsible environmental and social management is part of our business. We prioritize processes and equipment that offer modern and reliable technologies on environmental risks monitoring and control. We operate a corporate environmental department managed under an Environmental Management System, or EMS, compliant with ISO 14001:2004 requirements. In addition, we have established (i) an internal committee for environmental management composed of professionals from different departments of CSN’s units, whose goal is to regularly discuss any problems that may arise and to identify risks and aspects of the operations in which the group can act pro-actively in order to prevent possible environmental harm and (ii) a sustainability committee composed of external advisors, which provides guidelines for our strategic decisions. The environmental controls implemented since 2006 also contribute to mitigate the risks of environmental compliance of CSN’s operations.

To further understand our potential social and environmental risks, we use mapping criteria in accordance with the Global Reporting Initiative, or GRI, for all of our operations. Resulting data and indicators in environmental, social and economic categories allow us to track our performance, structure and monitor action plans, in an effort to improve and enhance our results.

Finally, in response to a law enacted by the State of Rio de Janeiro in effect from 2013 requiring steel making and cement facilities to present action plans to reduce greenhouse gas emissions when renewing or applying for operational licenses, we have conducted a survey of greenhouse gas emissions at our main sites in 2012, and plan to use this information in the development of a corporate carbon management program and related strategies to reduce emissions.

Since our privatization, we have invested heavily in environmental protection and remediation programs. We had environmental expenditures (capitalized and expensed) of R$436.2 million in 2012, of which R$131.4 million relate to capital expenditures and R$304.8 million relate to operational expenditures. Our environmental expenditures were R$310.6 million in 2011 and R$336.0 million in 2010.

Our investments in environmental projects during 2012 were mainly related to: (i) operation, maintenance and retrofitting of environmental control equipment; (ii) development of environmental studies for permit applications; (iii) studies, monitoring and remediation of environmental liabilities due to prior operations, especially before our privatization; and (iv) human resources (environmental team), Environmental Management System, sustainability projects and compliance programs.

In 2010, we signed with the Rio de Janeiro State Government a Term of Undertaking, or TAC, that required new investments and studies to retrofit our environmental control equipment at the Presidente Vargas Steelworks. The TAC initially estimated the total amount to be disbursed in connection with implementation of the required projects thereunder to be R$216 million. This initial estimate was updated to R$260 million as we obtained more accurate cost estimates for completion of the projects. Although we have not yet concluded the process of obtaining updates for cost estimates for all projects under the TAC, we expect that investments required may exceed our last estimates.

Our main environmental claims as of December 31, 2012 were associated with recovery services at former coal mines decommissioned in 1989 in the state of Santa Catarina, and recovery services due to previous operations in our Presidente Vargas Steelworks.

In July 2012, the Ministério Público Estadual do Rio de Janeiro (Environmental Public Prosecutor of the State of Rio de Janeiro) filed a judicial proceeding against us claiming that we must (i) remove all waste disposed in two areas used as an industrial waste disposal site in the city of Volta Redonda and (ii) relocate 750 residences located in the adjacent neighborhood Volta Grande IV Residential, also in the city of Volta Redonda. Later in 2012, we received notices for lawsuits brought by certain home owners at Volta Grande IV Residential claiming indemnification for alleged moral and material damages. For more information, please see Item 8A. Consolidated Statements and Other Financial Information – Legal Proceedings – Other Legal Proceedings.

50

Table Of Contents

We record a provision for remediation costs and environmental lawsuits when a loss is probable and the amount can be reasonably estimated. This provision is included in our statements of income in “Other Operating (Expenses) Income”. We do not include in our reserves environmental liabilities related to ERSA, as these are contractually supported by its seller. As of December 31, 2012, we had provisions for environmental liabilities in the total amount of R$386.1 million, which we believe are sufficient to cover all probable losses. Such amount compares to R$312.6 million as of December 31, 2011, and R$278.1 million as of December 31, 2010. The increase in our provisions for environmental liabilities in 2012 as compared 2011 is mainly due to receipt of new environmental notifications related to landfills and coal mines decommissioned in the state of Santa Catarina. The changes in the provision for environmental liabilities on our financial statements are as follows:

| Amounts (in millions of R$)
December 31, 2010 | 278.1
Landfills(1) | 6.2
Term of Undertaking (TAC)(2) | 28.3
Other | -
December 31, 2011 | 312.6
Landfills(1) | 34.9
Decommissioned Coal Mines (Santa Catarina) | 32.1
Other | 6.5
December 31, 2012 | 386.1

(1) Refers to an estimate calculation of recovery costs related to landfills remediation obligations.

(2) Refers to environmental compensation agreed in the TAC but not related to investments in equipment.

Brazil – mining regulation

Under the Brazilian Constitution, all mineral resources in Brazil belong to the federal government. The Brazilian Constitution and Mineral Code impose various regulatory restrictions on mining companies relating to, among other things:

· the manner in which mineral deposits must be exploited;

· the health and safety of workers and the safety of residential areas located near mining operations;

· the protection and restoration of the environment;

· the prevention of pollution; and

· the support of local communities where mines are located.

Mining companies in Brazil can only prospect and mine pursuant to prospecting authorizations or mining concessions granted by the National Department of Mineral Production (Departamento Nacional de Produção Mineral), or DNPM, an agency of the Ministry of Mines and Energy of the Brazilian Government. DNPM grants prospecting authorizations to a requesting party for an initial period of one to three years. These authorizations are renewable at DNPM’s discretion for another period of one to three years, provided that the requesting party is able to show that the renewal is necessary for proper conclusion of prospecting activities. On-site prospecting activities must start within 60 days of official publication of the issuance of a prospecting authorization. Upon completion of prospecting activities and geological exploration at the site, the holder of the prospecting authorization must submit a final report to DNPM. If the geological exploration reveals the existence of a mineral deposit that is economically exploitable, the grantee has one year (which DNPM may extend) from approval of the report by DNPM to apply for a mining concession by submitting an economic exploitation plan or to transfer its right to apply for a mining concession to an unrelated party. When a mining concession is granted, the holder of such mining concession must begin on-site mining activities within six months. DNPM grants mining concessions for an indeterminate period of time lasting until the exhaustion of the mineral deposit. Extracted minerals that are specified in the concession belong to the holder of the concession. With the prior approval of DNPM, the holder of a mining concession can transfer it to an unrelated party that is qualified to own concessions. Under certain circumstances, mining concessions may be challenged by unrelated parties.

51

Table Of Contents

Mining Concessions

Our iron ore mining activities at Casa de Pedra mine are performed based on Manifesto de Mina, which gives us full ownership over the mineral deposits existing within our property limits. Our iron ore mining activities at Engenho and Fernandinho mines are based on a concession by the Ministry of Mines and Energy, which grants us the right to exploit mineral resources from the mine for an indeterminate period of time lasting until the exhaustion of the mineral deposit. Our limestone and dolomite mining activities at the Bocaína mine and our tin mining activities at Ariquemes (ERSA mine) are based on concessions under similar conditions. See “Item 4D. Property, Plant and Equipment” for further information.

Mineral Rights and Ownership

Our mineral rights for Casa de Pedra mine include the mining concession, a beneficiation plant, roads, a loading yard and a railway branch, and are duly registered with the DNPM. We have also been granted by DNPM easements in 15 mine areas located in the surrounding region, which are not currently part of Casa de Pedra mine, with the purpose to expand our operations, and hold title to all of our proved and probable reserves.

In addition, we have obtained and are in compliance with all licenses and authorizations for our operations and projects at Casa de Pedra mine.

The exploitation in Casa de Pedra mine is subject to mining lease restrictions, which were duly addressed in our iron ore reserve calculations. Quality requirements (chemical and physical) are the key “modifying factors” in the definition of ore reserves at Casa de Pedra and were properly accounted for by our mine planning department.

The Brazilian government charges us a royalty known as the Financial Compensation for Exploiting Mineral Resources (Compensação Financeira pela Exploração de Recursos Minerais), or CFEM, on the revenues from the sale of minerals we extract, net of taxes, insurance costs and costs of transportation. DNPM is responsible for enacting regulations on CFEM and auditing the mining companies to ensure the proper payment of CFEM. The current annual rates are:

· 3% on bauxite, potash and manganese ore;

· 2% on iron ore, kaolin, copper, nickel, fertilizers and other minerals; and

· 1% on gold.

The Mineral Code and ancillary mining laws and regulations also impose other financial obligations. For example, mining companies must compensate landowners for the damages and loss of income caused by the use and occupation of the land (either for exploitation or exploration) and must also share with the landowners the results of the exploration (in a rate of 50% of the CFEM). Mining companies must also enter into agreements with the Brazilian government to use public lands and eventually compensate the government for damages caused to such public lands. A substantial majority of our mines and mining concessions are on lands owned by us or on public lands for which we hold mining concessions.

52

Table Of Contents

Antitrust Regulation

We are subject to various laws in Brazil which seek to maintain a competitive commercial environment. The competition law and practice in Brazil used to be governed primarily by Law No. 8,884/94, the Lei de Defesa da Concorrência, or Competition Defense Law, under which terms, the Brazilian Antitrust System was composed of three agencies, namely Secretaria de Direito Econômico (SDE) and Conselho Administrativo de Defesa Econômica (CADE), both entailed to Brazil’s Ministry of Justice, and Secretaria de Acompanhamento Econômico (SEAE), entailed to Brazil’s Ministry of Treasury. SDE had broad authority to promote economic competition among companies in Brazil, including the ability to suspend price increases and investigate collusive behavior between companies.

A new Antitrust Law was enacted in 2011 (Law No. 12,529/11) and came into force on May 30, 2012, which provided for significant changes in both structure, including the creation of the new CADE, and proceedings. The main change was the introduction of a mandatory pre-merger notification system, as opposed to the post-merger review system previously in force. The new CADE is now formed by an Administrative Tribunal of Economic Defense (Tribunal Administrativo de Defesa Econômica), a General-Superintendence (Superintendência-Geral) and a Department of Economic Studies (Departamento de Estudos Econômicos).

If CADE determines that certain companies have acted collusively to raise prices, it has the authority to impose fines on the offending companies, prohibit them from receiving loans from Brazilian government sources and bar them from bidding on public projects. In addition, CADE has the authority to dissolve mergers and to require a company to divest assets should it determine that the industry in which it operates is insufficiently competitive.

For further antitrust-related information, see “Item 8A. Consolidated Statements and Other Financial Information-Legal Proceedings”.

Regulation of Other Activities

In addition to mining, environmental and antitrust regulation, we are subject to comprehensive regulatory regimes for certain of our other activities, including railroad transportation, electricity generation and ports.

Our railroad business is subject to regulation and supervision by the Brazilian Ministry of Transportation and the transportation regulatory agency Agência Nacional de Transportes Terrestres (ANTT), and operates pursuant to concession contracts granted by the federal government, which impose certain limitations and obligations. As of December 31, 2012, we owned the following railroad related assets: (i) a 33.27% participation in MRS Logística S.A., which holds a concession to operate Brazil’s Southeastern railway system until 2026, renewable for an additional 30 years, and (ii) a 76.13% participation in Transnordestina Logística S.A., which holds a concession to operate Brazil’s Northeastern railway system until 2027, renewable for an additional 30 years.

Our electricity generation business is subject to regulation and supervision by the Brazilian Ministry of Mines and Energy, the electricity regulatory agency Agência Nacional de Energia Elétrica (ANEEL), and the Operador Nacional do Sistema Elétrico (ONS). As of December 31, 2012, we owned the following energy related assets: (i) a 238 MW thermoelectric co-generation power plant at our Presidente Vargas Steelworks, (ii) a 48.75% participation in Itá Energética S.A. (“Itasa”), which owns and operates 60.5% of the Itá hydroelectric facility on the Uruguay river in Southern Brazil under a renewable 30-year concession until 2030, and (iii) a 17.9% participation in the consortium that built and has the right to operate the Igarapava hydroelectric facility in Southeast Brazil under a renewable 30-year concession until 2028.

Our port business is subject to regulation and supervision by the Brazilian Ministry of Transportation and the ports and navigation agency Agência Nacional de Transportes Aquaviários (ANTAQ). As of December 31, 2012, we owned the following port related assets: (i) a concession to operate the Terminal de Carvão (“TECAR”), the solid bulks terminal at Itaguaí Port, located in the State of Rio de Janeiro, which expires in 2022, renewable for an additional 25 years, and (ii) a 99.99% participation in Sepetiba Tecon S.A. (“TECON”), which has a concession to operate the container terminal at Itaguaí Port for a 25-year term until 2026, renewable for an additional 25 years.

For further information on our logistics and energy segments, see “Item 4B. Business Overview”.

53

Table Of Contents

Proceedings Related to Protectionist Measures

Over the past several years, exports of steel products from various countries and companies, including Brazil and us, have been the subject of anti-dumping, countervailing duty and other trade related investigations from importing countries. These investigations resulted in duties that limit our access to certain markets. Despite the imposed limitations, our exports have not been significantly affected, as we were able to re-direct our sales from restricted markets to other markets, and also because the volume of exports or products available for export has been decreasing as a result of the increased demand from our domestic market and thus present participation of exports in our total sales has been significantly reduced.

In Brazil, we are subject to regulation and supervision by the Ministry of Development, Industry and Foreign Trade, the Secretaria de Comércio Exterior (SECEX) and the Departamento de Defesa Comercial (DECOM). Worldwide, our exports are subject to the protectionist measures summarized below.

United States

Anti-dumping (AD) and Countervailing Duties (CVD). In the U.S., we are subject to regulation and supervision by the U.S. Department of Commerce (DOC), the International Trade Commission (ITC), the International Trade Administration (ITA) and the Import Administration (IA). In September 1998, U.S. authorities initiated anti-dumping and countervailing duties investigations on hot-rolled steel sheet and coil imported from Brazil and other countries. In February 1999, the DOC reached a preliminary determination on the anti-dumping and countervailing duties margins. We were found to have preliminary margins of 50.66% for anti-dumping, and of 6.62% for countervailing duties.

In July 1999, Brazil and the United States signed a five-year suspension agreement, suspending the anti-dumping investigation and establishing a minimum price of US$ 327 per ton (delivery duty paid), subject to quarterly review by the DOC. In February 2002, the U.S. government terminated the anti-dumping suspension agreement and reinstated the anti-dumping margin of 41.27%. In April 2004, we requested the DOC to conduct an administrative review of the anti-dumping investigation. Through this review, in April 2005, we obtained a favorable preliminary determination of “zero” margin of dumping from the DOC. A final determination was issued in October 2005 and the “zero” margin of dumping preliminarily found by the DOC was confirmed. With respect to the countervailing duties investigation, the Brazilian and U.S. governments signed, in July 1999, a suspension agreement which limited exports of hot-rolled sheets and coils from Brazil to 295,000 tons per year. At the request of the Brazilian government, the agreement was terminated in September 2004. Upon termination of this agreement, countervailing duties of 6.35% became effective regarding imports of hot-rolled products from Brazil.

Simultaneously to the administrative review, we participated in an anti-dumping and countervailing duties expiry review which involved the exports of hot-rolled sheet and coils to the U.S. The expiry review was jointly developed by the ITC and the DOC through the IA, and was initiated in May 2004. A final determination was rendered in April 2005, retaining the anti-dumping and countervailing duties orders until May 12, 2010.

In April 2010, another anti-dumping and countervailing duties expiry review was initiated and jointly developed by the DOC and the ITC through the IA. A decision was issued by the ITC on June 6, 2011 and revoked both the anti-dumping and the countervailing duties orders. The ITC’s decision was appealed to the U.S. Court of International Trade (CIT), which, on August 14, 2012, issued its opinion upholding the ITCs decision and maintaining the revocation of both the anti-dumping and the countervailing duties orders. In September 2012, the CIT’s decision was appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC), which decision is expected in 2013. As a result, both orders remain suspended until a final decision is reached by the CAFC.

Canada

Anti-dumping. In Canada, we are subject to regulation and supervision by the Canadian International Trade Tribunal (CITT), the Canada Border Services Agency (CBSA) and the Anti-dumping and Countervailing Directorate. In January 2001, the Canadian government initiated an anti-dumping investigation process involving hot-rolled sheets and coils exported from Brazil. The investigation was concluded in August 2001, with the imposition by Canada of an anti-dumping tax of 26.3% on imports of those products from Brazil, with minimum prices to be observed. In August 2002, the CBSA initiated a revision of the values previously established and, in March 2003, the revised values were determined. These values are adjusted whenever there is an adjustment of Canadian domestic prices. In February 2005, the CBSA initiated a reinvestigation of hot-rolled sheets and coils. We did not participate in this investigation.

54

Table Of Contents

In December 2005, the CITT initiated an expiry review of hot-rolled products, in which we participated. A final determination was issued in August 2006, determining the continuation of the anti-dumping order for hot-rolled products. As a result, exports of our hot–rolled products to Canada became subject to anti-dumping duties of 77%.

In October 2010, the CITT initiated another expiry review of hot-rolled products, in which CSN decided not to participate. A final determination was issued in August 2011, determining the continuation of the anti-dumping order for hot rolled products. As a result, exports of our hot-rolled products to Canada continued to be subject to anti-dumping duties of 77%.

Overview of Steel Industry

World Steel Industry

The worldwide steel industry comprises hundreds of steelmaking facilities divided into two major categories, integrated steelworks and non-integrated steelworks, depending on the method used for producing steel. Integrated plants, which accounted for approximately 68% of worldwide crude steel production in 2012, typically produce steel by smelting in blast furnaces the iron oxide found in ore and refining the iron into steel, mainly through the use of basic oxygen furnaces or, more rarely, in electric arc furnaces. Non-integrated plants (sometimes referred to as mini-mills), which accounted for approximately 32% of worldwide crude steel production in 2012, produce steel by melting scrap metal, occasionally complemented with other metallic materials, such as direct reduction iron or hot-briquette iron, in electric arc furnaces. Industry experts expect that a lack of a reliable and continuous supply of quality scrap metal, as well as the high cost of electricity, may restrict the growth of mini-mills.

Steel continues to be the material of choice in the automotive, construction, machinery and other industries. Notwithstanding potential threats from substitute materials such as plastics, aluminum, glass and ceramics, especially for the automotive industry, steel continues to demonstrate its economic advantage. From 1990 through 2012, total global crude steel production averaged approximately 984 million tons per year. According to the WSA, in 2012, production reached a new record of 1.51 billion tons, which represents a 1.3% increase as compared to 2011. All major producing countries, except for Japan, Germany, Brazil and Ukraine, increased their production levels in 2012.

China’s crude steel production in 2012 reached 709 million tons, an increase of 3.7% as compared to 2011. Production volume in China has more than tripled in the last ten years, from 222 million tons in 2002. China’s share of world steel production increased from 45.8% in 2011 to 46.9% in 2012. In 2012, Asian countries improved their production by 3.0%, reaching 983 million tons, according to the WSA.

Brazilian Steel Industry

Since the 1940s, steel has been of vital importance to the Brazilian economy. During the 1970s, strong government investments were made to provide Brazil with a steel industry able to support the country’s industrialization boom. After a decade of little to no investment in the sector in the 1980s, the government selected the steel sector as the first for privatization commencing in 1991, resulting in a more efficient group of companies operating today.

A Privatized Industry

During almost 50 years of state control, the Brazilian flat steel sector was coordinated on a national basis under the auspices of Siderbrás, the national steel monopoly. The state had far less involvement in the non-flat steel sector, which has traditionally been made up of smaller private sector companies. The larger integrated flat steel producers operated as semi autonomous companies under the control of Siderbrás and were each individually privatized between 1991 and 1993. We believe that the privatization of the steel sector in Brazil has resulted in improved financial performance, as a result of increased efficiencies, higher levels of productivity, lower operating costs, a decline in the labor force and an increase in investment.

55

Table Of Contents

Domestic Demand

Historically, the Brazilian steel industry has been affected by substantial fluctuations in domestic demand for steel. Although national per capita consumption varies with GDP, fluctuations in steel consumption tend to be more pronounced than changes in economic activity. Crude steel consumption per capita in Brazil has increased from 104 kilograms in 1999 to 147 kilograms in 2010. It is still considered low when compared to the levels of some developed countries, such as the United States and Germany.

From 2005 to 2007, Brazilian GDP grew on average 4.4%. In 2008 and 2009, overall global economic activity slowed significantly and domestic apparent steel consumption amounted to 24.0 million tons and 19.1 million tons, respectively. In 2010, with the recovery of the global economy, domestic demand rose by 38.8% to 26.6 million tons. On the other hand, in 2011, domestic steel demand decreased 1.2% to 26.2 million tons, mainly due to high levels of inventory held by distributors and increased indirect imports. In 2012, the slowdown of the Brazilian economy led to another decrease in steel consumption of 17.6% to 21.6 million tons.

The Brazilian flat steel sector is shifting production to the higher value-added consumer durable sector. This sector is highly dependent on domestic consumer confidence, which, in turn, is affected by economic policies and certain expectations of the current government administration. Over the past years, automobile manufacturers made significant investments in Brazil. In 2009 and 2010, vehicle production recovered from the 2008 financial crisis in response to government incentives such as tax cuts. In 2012, the Brazilian market reached a record 3.8 million vehicles sold, reflecting a specific government measure, which reduced the industrialized products tax. On the other hand, exports decreased by 20.1%.

Market Participants

According to IABr (Instituto Aço Brasil), the Brazilian steel industry is composed of 28 mills managed by 10 corporate groups, with an installed annual capacity of approximately 45 million tons, producing a full range of flat, long, carbon, stainless and specialty steel.

Capacity Utilization

There were no changes in Brazilian nominal steel production capacity in 2012 compared to 2011. This capacity was estimated at 49 million tons. The local steel industry operated at approximately 70% utilization in 2012, below the level recorded in 2011.

Exports/Imports

Brazil has been playing an important role in the export market, primarily as an exporter of semi-finished products. The Brazilian steel industry has taken several steps towards expanding its capacity to produce value-added products. Brazil’s exports of slabs and billets reached 5.3 million tons in 2010, which represented 58% of total steel exports. In 2011, the exports of semi-finished products reached 7.2 million tons, representing 66% of total exports. In 2012, exports of semi-finished products were 6.6 million tons, a 7.4% decrease in relation to the previous year, representing 68% of total exports.

In 2012, Brazilian steel exports totaled 9.7 million tons, representing 31% of total Brazilian steelmakers’ sales (domestic plus exports) and accounting for US$7.0 billion in export earnings for Brazil. Over the last 20 years, the Brazilian steel industry has been characterized by a structural need to export, which is demonstrated by the industry’s supply demand curve. The Brazilian steel industry has experienced periods of overcapacity, cyclicality and intense competition during the past several years. Demand for finished steel products, as measured by domestic apparent consumption, has consistently fallen short of total supply (defined as total production plus imports). In 2012, supply totaled 38.4 million tons, as compared to apparent consumption of 25.4 million tons.

56

Table Of Contents

In 2012, steel imports were 3.8 million tons, or 15% of apparent domestic consumption, in line with the figures from 2011. In 2011, steel imports decreased 35.9% as compared to the 5.93 million tons recorded in 2010 (22% of apparent domestic consumption), according to IABr.

For information on the production by the largest Brazilian steel companies, see “Item 4B. Business Overview—Competition—Competition in the Brazilian Steel Industry.”

4C. Organizational Structure

We conduct our business directly and through subsidiaries. For more information on our organizational structure, see Note 2(b) to our consolidated financial statements included in “Item 18. Financial Statements.”

4D. Property, Plant and Equipment

Our principal executive offices are located in the city of São Paulo, the State of São Paulo at Avenida Brigadeiro Faria Lima, 3,400, 20th floor (telephone number 55-11-3049-7100), and our main production operations are located in the city of Volta Redonda, in the State of Rio de Janeiro, located approximately 120 km from the city of Rio de Janeiro. Presidente Vargas Steelworks, our steel mill, is an integrated facility covering approximately 4.0 square km and located in the city of Volta Redonda in the State of Rio de Janeiro. Our iron ore, limestone and dolomite mines are located in the State of Minas Gerais, which borders the State of Rio de Janeiro to the north. Each of these mines lies within 500 km of, and is connected by rail and paved road to, the city of Volta Redonda.

The table below sets forth certain material information regarding our property as of December 31, 2012.

Facility | Location | Size | Use | Productive Capacity | Title | Encumbrances
Presidente Vargas Steelworks | Volta Redonda, State of Rio de Janeiro | 4.0 square km | steel mill | 5.6 million tons per year | owned | None
CSN Porto Real (former GalvaSud) | Porto Real, State of Rio de Janeiro | 0.27 square km | galvanized steel producer | 350,000 tons per year | owned | mortgage(1)(2)
CSN Paraná | Araucária, State of Paraná | 0.98 square km | galvanized and pre-painted products | 100,000 tons of pre- painted product and 220,000 tons of pickled hot-rolled coils | owned | None
Metalic | Maracanaú, State of Ceará | 0.10 square km | steel can manufacturer | 900 million cans per year | owned | mortgage(3)
Prada | São Paulo, State of São Paulo and Uberlândia, State of Minas Gerais | SP – 0.14 square km; | steel can manufacturer | 1 billion cans per year | owned | None
|  | MG – 0.02 square km; |  |  |  |
CSN, LLC | Terre Haute, Indiana, USA | 0.78 square km | cold-rolled and galvanized products | 800,000 tons of cold-rolled products and 315,000 tons per year of galvanized products | owned | None

57

Table Of Contents

Lusosider | Seixal, Portugal | 0.39 square km | hot-dip galvanized, cold-rolled and tin products | 240,000 tons of galvanized products and 50,000 tons of cold-rolled products per year | owned | None
Prada | Mogi das Cruzes, State of São Paulo | 0.20 square km | distributor | 730,000 tons per year | owned | None
Casa de Pedra mine | Congonhas, State of Minas Gerais | 49.00 square km | iron ore mine | 60.0 mtpy(4) | owned(5) | None
Engenho mine(6) | Congonhas, State of Minas Gerais | 2.85square km | iron ore mine | 5.0 mtpy | concession | None
Fernandinho mine(6) | Itabirito, State of Minas Gerais | 1.47 square km | iron ore mine | 2.0 mtpy | concession | None
Bocaina mine | Arcos, State of Minas Gerais | 4.11 square km | limestone and dolomite mines | 4.0 mtpy | concession | None
ERSA mine | Ariquemes, State of Rondônia | 0.015 square km | tin mine | 1,800 tons | concession | None
Thermoelectric co-generation power plant | Volta Redonda, State of Rio de Janeiro | 0.04 square km | power plant | 238 MW | owned | None
Itá(7) | Uruguay River - Southern Brazil | 9.87 square km | power plant | 1,450 MW | concession | None
Igarapava(8) | State of Minas Gerais | 5.19 square km | power plant | 210 MW | concession | None
Southeastern | Southern and Southeastern regions of Brazil | 1.674 km of tracks | railway | -- | concession | None
Transnordestina | Northern and northeastern regions of Brazil | 4.534 km of tracks | railway | -- | concession | None
TECAR at Itaguaí Port | Itaguaí, State of Rio de Janeiro | 0.69 square km | raw materials | 4 mtpy | concession | None
Container terminal - TECON at Itaguaí port | Itaguaí, State of Rio de Janeiro | 0.44 square km | containers | 2 mtpy | concession | None
Namisa | State of Minas Gerais | 11.56 square km | mine | - | Concession/ owned | None
Land | State of Rio de Janeiro | 31.02 square km | undeveloped | -- | owned | pledge(9)/Collateral / mortgage(2)
Land | State of Santa Catarina | 6.22 square km | undeveloped | -- | owned | pledge(9)/Collateral
Land | State of Minas Gerais | 32.68 square km | undeveloped | -- | owned | None
Land | State of Piaui | 618,037 square km | undeveloped |  | owned | None
Steel plant with rolling mill | Europa / Germany / Unterwellenborn | 0.898 square km | production of sections | 1 Mio t/a | Stahlwerk Thüringen GmbH | None

(1) Pursuant to a loan agreement entered into by the State of Rio de Janeiro and Galvasud as of May 4, 2000.
(2) Pursuant to a loan agreement entered into by Kreditanstatt Für Wiederafbau, Galvasud and Unibanco as of August 23, 1999.
(3) Pursuant to a loan agreement entered into by Metalic and Banco do Nordeste do Brasil S.A as of 2007.
(4) Information on equipment fleet installed annual ROM capacity. For information on installed annual production of products capacity, and information on mineral reserves at our Casa de Pedra mine, see “—Reserves at Casa de Pedra Mine” and table under “—Casa de Pedra Mine” below.
(5) Based on the Manifesto de Mina. See, “Item 4. Information on the Company - B. Business Overview- Government Regulation and Other Legal Matters - Mining Concessions.”
(6) Property owned by our 60% consolidated investee Namisa.
(7) Property 29.5% owned by us.
(8) Property 17.9% owned by us.
(9) Pledged pursuant to various legal proceedings, mainly related to tax claims.

58

Table Of Contents

For information on environmental issues with respect to some of the facilities described above, see “Item 4B. Business Overview—Government Regulation and Other Legal Matters—Environmental Expenditures and Claims.” In addition, for information on our plans to construct, expand and improve our facilities, see “Item 4. Information on the Company - D. Property, Plant and Equipment —Planned Investments” and Note 10 to our financial statements included elsewhere in this Form 20-F.

The map above shows the locations of the Presidente Vargas Steelworks, CSN Paraná, Prada, CSN Porto Real (formerly known as GalvaSud), Metalic, Lusosider, ERSA and CSN LLC facilities, our iron ore, limestone and dolomite mines, the power generating facilities in which we have an ownership interest, and the main port used by us to export steel products and import coal and coke, as well as the main railway connections.

59

Table Of Contents

Acquisitions and Dispositions

Riversdale

On November 24, 2009, we concluded an initial acquisition, through our subsidiary CSN Europe, Lda, of a 14.9% minority interest in Riversdale Mining Limited (“Riversdale”), a mining company listed on the Australian Stock Exchange (ASX). In January 2010, we obtained the approval of the Australian Government to acquire further shares of Riversdale, and concluded the second tranche of the acquisition, reaching an equity participation of 16.3%. In addition, we participated on a capital increase carried out by Riversdale in July 2010, subscribing to new shares, but maintaining the same equity percentage. We also made several share purchases in February 2011 and reached a total equity participation of 19.9%. We were diluted in 2010 and 2011 due to the exercise of stock options issued in favor of the management of Riversdale and of third parties. On April 20, 2011, we adhered to a public takeover offer for the acquisition of Riversdale’s shares conducted by Rio Tinto and, as a consequence, sold 100% of our equity interest held in Riversdale’s capital stock, corresponding to 47,291,891 shares, at the price of A$16.50 per share, totaling A$780,316,201.50.

Segregation of Mining Assets

We are analyzing the possibility of segregating our iron ore business and correlated logistics activities into one of our subsidiaries. Such segregation would be expected to occur upon the transfer, by means of a capital increase, of assets, liabilities, rights and obligations comprising our mining and related logistics businesses as well as of investments in related operating companies, and would also depend on several aspects, including certain regulatory approvals.

Stahlwerk Thüringen Gmbh (SWT)

On January 31, 2012, CSN Steel, S.L.U., one of our Spanish subsidiaries, entered into a share purchase agreement with the Spanish group Alfonso Gallardo (“AG Group”) to establish the acquisition of all the shares held by the AG Group in (i) SWT, a long steel manufacturer located in Unterwellenborn, Germany, specialized in the production of steel sections; and (ii) Gallardo Sections S.L.U., a steel distributor of SWT’s products. The total amount of the transaction was €483.4 million, without the assumption of any indebtedness.

The transaction involved an operational steel plant located in Germany, which was contemplated to be sold pursuant to a prior share purchase agreement executed on May 19, 2011 with the AG Group, amongst other assets. The transaction brought to an end the discussions between the parties regarding different interpretations of the earlier agreement, including termination of the related arbitral proceeding which was pending before the Cámara Oficial de Comercio e Industria de Madrid.

Usiminas

On December 31, 2012, we owned, directly and indirectly, 20.69% of the preferred shares and 14.13% of the common shares of Usinas Siderúrgicas de Minas Gerais S.A. (“Usiminas”), resulting from various acquisitions in the market since mid-2010. For more information on the value of these assets, please see Item 5A. Operating Results - Critical Accounting Estimates - Impairment of long-lived assets, intangible assets, goodwill and financial assets. We are assessing strategic alternatives in relation to our investment in Usiminas. For more information on the antitrust matters regarding our investment in Usiminas see “Item 8. Financial Information - A. Consolidated Statements and Other Financial Information Selected Financial Data - Legal Proceedings - Antitrust.”

Namisa

In 2008, a consortium of Asian shareholders that currently includes Itochu Corporation, JFE Steel Corporation, Kobe Steel, Ltd, Nisshin Steel Co. Ltd., Posco and China Steel Corporation, or the Asian consortium, made an investment in our subsidiary Namisa and currently holds a 40% interest in Namisa. We and the Asian consortium have entered into a shareholders’ agreement to govern our joint control of Namisa. In case of a dead-lock among the shareholders, a resolution process requires us to initiate mediation with our partners and, if no solution is reached, the matter is then submitted to be addressed directly by the senior executives of the companies in dispute. In the event the dead-lock remains, the shareholders’ agreement provides for put and call options, which entitles the Asian consortium to elect to sell all of its ownership interest in Namisa to us and we to elect to buy all ownership interest of the Asian consortium in Namisa, in each case for the fair market value of the respective shares.

60

Table Of Contents

In addition, certain other agreements, including the share purchase agreement between us and the Asian consortium and the long-term operational agreements between Namisa and us, provide for certain obligations that, in case breached or not cured within the relevant cure period, may give rise, in certain situations, to the right of the non-breaching party to exercise a call or a put option, as the case may be, with respect to the Asian consortium’s ownership interest in Namisa.

Capital Expenditures

We invested a total of R$3,144 million in 2012, R$1,517 million of which was allocated as follows: Transnordestina Logística: R$984 million; MRS Logística: R$328 million; Namisa: R$77 million; TECON: R$43 million; other projects: R$85 million.

The remaining R$1,627 million was expended on: construction of a brownfield long steel mill at the Volta Redonda site: R$454 million; expansion of the Itaguaí Port (TECAR): R$231 million; maintenance and repairs: R$219 million; expansion of the Casa de Pedra mine: R$150 million; expansion of our clinker plant: R$73 million; technological improvements: R$24 million, and others projects: R$476 million. For further information, see “Item 5B. Liquidity and Capital Resources-Short-Term Debt and Short-Term Investments.”

In 2011, we invested R$4,401 million R$2,382 million of which was allocated as follows: Transnordestina Logística: R$1,691 million; CSN Cimentos: R$61 million; MRS Logística: R$447 million; Namisa: R$100 million and other projects: R$83 million.

The remaining R$2,019 million was expended on: maintenance and repairs: R$549 million; expansion of the Casa de Pedra mine: R$251 million; expansion of the Port of Itaguaí: R$238 million; technological improvements: R$77 million; construction of a brownfield long steel mill at the Volta Redonda site: R$220 million and others projects: R$684 million.

In 2010, we invested R$3,636 million, R$2,201 million of which was allocated as follows: Transnordestina Logística: R$1,371 million; CSN Aços Longos (merged into CSN in January 2011): R$275 million; CSN Cimentos: R$249 million; MRS Logística: R$199 million and other projects: R$107 million.

The remaining R$1,435 million was expended on: maintenance and repairs: R$483 million; expansion of the Casa de Pedra mine: R$275 million; expansion of the Port of Itaguaí: R$139 million; technological improvements: R$125 million and other projects: R$413 million.

In 2012, we continued to implement our strategy of developing downstream opportunities and projects based on synergies, new product lines and market niches by creating or expanding current capacity of galvanized products and services for the automotive sector, as described in “Item 4B. Business Overview—Facilities.”

We also intend to increase control of our main production costs and secure reliable and high quality sources of raw materials, energy and transportation supporting our steelmaking operations and other businesses such as cement, via strategic investment programs. Our main strategic investments being implemented or already in operation are set forth in “Item 4B. Business Overview—Facilities.”

Planned Investments

Our operating activities require regular investments in equipment maintenance, technological improvements, tools and spare parts, vehicles, buildings, and industrial plants, among others. These investments are classified as Sustaining (´Stay-in-Business´) Capex.

The Company also invests to increase its operational efficiency and productivity, and expand production capacity in its traditional flat steel, mining and logistics businesses, as well as new businesses such as cement and long steel.

61

Table Of Contents

Our total planned investments for the next years amount to R$20.0 billion (ongoing and new projects), of which:

· R$12.0 billion in our mining segment, including capacity expansion of the Casa de Pedra mine and of Namisa’s mines to reach annual sales of 89 mtpy and the expansion of shipping capacity of our Solid Bulk terminal at Itaguaí (TECAR) to 84 mtpy. The planned investment reflects only the portion of our investment, which is proportional to our ownership of 100% of Casa de Pedra and 60% of Namisa;

· R$0.5 billion in our steel segment, including the completion of our new brownfield long steel plant in Volta Redonda and completion/implementation of other flat steel projects, such as a service center for the auto industry at CSN Porto Real, along with the implementation of projects focused on maintaining operational excellence with constant focus on cost reduction (e.g., energy efficiency);

· R$1.3 billion in our cement segment, allocated towards expansions of our grinding capacity from 2.4 million tons to 5.4 million tons and our clinker production capacity from 0.8 million tons to 2.8 million tons;

· R$1.7 billion in our logistics segment, including the Transnordestina railway and our container terminal (TECON); investments in the MRS railway are not included in this plan nor Transnordestina Capex reviews.

· R$4.3 billion in projects to improve performance of current productive assets (“stay-in-business”).

We expect to finance these investments through our own cash, public or private financing, and/or strategic partnerships.

Our planned investments in iron ore, steel, logistics and cement are described below.

Steel

We are currently constructing a brownfield long steel plant in Volta Redonda, in the State of Rio de Janeiro, with total capacity of 500 Kt per year, making use of the existent infrastructure and energy, to produce rebar and wire rods. This investment represents the entrance of CSN into the long steel market in Brazil.

We also invested in the expansion of service centers for the automotive market at our CSN Porto Real facility, in which CSN’s market share has been successively expanded. The pre-painted plant at CSN Paraná currently operates at full capacity, and there are expansion projects underway, with the intention of doubling the current capacity via brownfield expansions.

Our investment portfolio also includes other important operational projects in development, such as the start-up of our blast furnace turbine project, which will add 21MW of electricity self-generation and several projects designed to increase productivity and efficiency.

In January 2012, CSN acquired SWT, which produces sections and Gallardo Sections S.L.U, both located in Germany. SWT has a capacity to produce 1.1 million tons of steel sections per year used in buildings, stadiums, bridges, viaducts, walkways, foundations, warehouses, cranes, among others. The plant is strategically located, reducing logistics costs of raw materials, such as scrap, and allowing access to both developed and emerging markets in Eastern Europe. The total transaction amount was €483.4 million.

Mining

We expect to achieve an annual sales level of approximately 89 mtpy of iron ore products, including third party purchases, by increasing capacity in Casa de Pedra and Namisa.

We are also investing in the expansion of TECAR to allow for annual exports of 84 mtpy of iron ore.

62

Table Of Contents

Logistics

In August 2006, in order to enable the implementation of a major infrastructure project led by the Brazilian federal government, our Board of Directors approved the merging of Transnordestina S.A., a company that was state-owned at the time, into and with Companhia Ferroviária do Nordeste – CFN, an affiliate of CSN that holds a 30-year concession, granted in 1997, to operate the Northeastern Railroad of the RFFSA, with 4,534 km of railway track. The surviving entity was later renamed Transnordestina Logística S.A., or Nova Transnordestina. The Nova Transnordestina Project includes an additional 1,728 km of large gauge, state-of-the-art railway track. We expect this extension will allow the company to increase the transportation of various products, including, oil, fuels, soybeans, cotton, sugar cane, fertilizers, iron ore and limestone. The investments for the railroad expansion will be financed through several agencies, such as FINOR – Northeastern Investment Fund, SUDENE - the Northeastern Development Federal Agency and BNDES. Environmental, geological and land expropriation issues may result in cost overruns and delays in implementing the project, which, in turn, may adversely affect the projected return on investment.

Until 2008, Transnordestina was jointly controlled by CSN and Taquari Participações S.A., or Taquari, pursuant to a shareholders’ agreement dated November 27, 1997, and amended on May 6, 1999 and November 7, 2003. During 2009, we increased the capital of Transnordestina by disbursing advances for future capital increases. Taquari decided not to participate in such capital increases, thus being diluted and relinquishing control of Transnordestina. Transnordestina is currently controlled by CSN, and has been consolidated in our financial statements since December 2009.

To meet its own demand, Transnordestina Logística S.A built the largest factory of broad gauge concrete sleepers in the world, with a daily capacity of 4,800 pieces per day. This project has been conducted by Odebrecht, through an Alliance Model formed with CSN.

Cement

The cement plant in Volta Redonda is close to reaching its full production capacity of 2.4 million tons per year. The use of slag generated by our steel operation and the ramp-up of our clinker plant should gradually reduce costs, a critical element in the cement business.

We are evaluating other organic growth initiatives to expand our annual capacity to 5.4 million tons in order to capture the strong growth expected in construction of new housing units and infrastructure projects.

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

The following discussion should be read in conjunction with our consolidated financial statements as of December 31, 2012 and 2011 and for each of the years ended December 31, 2012, 2011 and 2010 included in “Item 18. Financial Statements”. Our consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and are presented in thousands of reais (R$), as explained in Note 2(a) to our consolidated financial statements included in “Item 18. Financial Statements.”

5A. Operating Results

Overview

Macro-Economic Scenario

Brazil

According to the Brazilian Institute of Geography and Statistics (IBGE), GDP increased by 0.9% in 2012, compared to an increase of 2.7% reported in 2011. This slight growth in 2012 was led by the service and construction sectors, which moved up by 1.7% and 1.4%, respectively. Once again, domestic demand was the most important growth driver, fueled by the moderate credit expansion, job creation and increased individual earnings. However, several uncertainties are still hampering investments, resulting in a reduction in Gross Fixed Capital Formation.

63

Table Of Contents

The IPCA consumer price index (the main inflation rate) stood at 5.84% for the year, as compared to 6.50% for 2011. Personal expenditures were chiefly responsible for the upturn in 2012, while transport recorded the lowest increase.

The Selic base interest rate, which is set by the Monetary Policy Committee (COPOM), began 2012 at 11.00% and fell successively, until reaching 7.25% in October. Since then, COPOM has opted to maintain the basic interest rate stable.

According to the IBGE, industrial output fell by 2.7% in 2012, the first negative result since 2009, with 17 of the 27 sectors recording a decrease.

In 2012, the real depreciated 8.9% against the US dollar and on December 31, 2012, the exchange rate was R$2.04 per US$1.00.

USA

According to the U.S. Department of Commerce, the U.S. economy grew by 2.2% in 2012, as compared to 1.8% in 2011. The main contributors to GDP growth in 2012 were personal consumption expenditures, nonresidential fixed investment, exports, residential fixed investment and private inventory investment.

According to the latest Fed figures, industrial production edged up by 0.3% in December and 1.0% in the fourth quarter of 2012, reflecting the reconstruction after hurricane Sandy. The manufacturing PMI recorded 50.7 points in December, versus 49.5 in November.

On the monetary policy front, the Fed opted to peg interest rates to the current economic scenario, keeping them low while unemployment is above 6.5% and estimated inflation for the next two years does not exceed 2.5%.

Europe

The Eurozone manufacturing sector ended 2012 in recession, reflecting flagging international and domestic demand. Manufacturing PMI stood at 46.1 points in December, the 17th consecutive monthly decline.

Unemployment remained flat in December over November at 11.7%, equivalent to 18.2 million people out of work. Greece and Spain had the highest rates, with 26.8% and 26.1% respectively, while Germany recorded 5.3%.

According to Eurostat, Eurozone GDP dipped by 0.5% in 2012 over 2011 and by 0.6% in the fourth quarter of 2012 over the previous quarter, marking the bloc’s worst performance since the beginning of 2009. The overall downturn in the fourth quarter of 2012 was fueled by individual decreases in the four largest economies: Germany (0.6%), France (0.3%), Italy (0.9%) and Spain (0.7%).

Asia

Chinese GDP grew by 7.8% in 2012 and 9.2% in 2011, according to the country’s National Bureau of Statistics. The Chinese economy is currently recording steady growth, thanks to increased investments in infrastructure, the cut in interest rates and the reduction in reserve requirements since the end of 2011.

Chinese manufacturing PMI stood at 51.5 points in December, the highest figure since May 2011, while industrial output and retail sales climbed by 10% and 14.3%, respectively, in 2012. Annual inflation fell to 2.6%, less than half the 5.4% recorded in 2011.

Japanese GDP increased by 1.9% in 2012 over 2011. Impacted by the Japanese Central Bank’s aggressive monetary policy, the yen has depreciated by around 20% against the dollar since November 2012.

64

Table Of Contents

Segments

Steel

According to the WSA global crude steel production totaled 1.5 billion tons in 2012, 1% higher than in 2011, this growth coming mainly from Asia and North America. Existing global capacity use fell from 76.1% in November to 73.2% in December, showing a continuing imbalance between production capacity and global steel product consumption.

Brazil

According to the Brazilian Steel Institute (IABr), annual domestic crude steel production totaled 34.7 million tons, 1.5% less than in 2011, and 15.1 million tons of rolled flat steel, up by 8%.

Domestic flat steel sales remained stable over 2011 at 11.3 million tons, while exports fell by 10% to 1.9 million tons.

Apparent flat steel consumption came to 13.4 million tons, 1% down on 2011, while imports totaled 2.0 million tons, down by 11%.

Automotive

According to ANFAVEA (the Brazilian Auto Manufacturers’ Association), vehicle production totaled 3.3 million units in 2012, 2% less than in 2011. Vehicle sales totaled 3.8 million in the year, an increase of 5% in relation to 2011, spurred by government measures to encourage consumption, such as the reduction in IPI (federal VAT). Exports, on the other hand, fell by 20%, to 442,000 units.

Construction

Sinduscon (Brazilian Builders’ Association) estimates that the construction segment will end 2012 with growth of 4%, while FGV (Fundação Getúlio Vargas) expects the building materials industry and retail sales to expand by 1.9% and 8.2%, respectively.

According to ABRAMAT (the Brazilian Building Material Manufacturers’ Association), domestic sales of building materials increased by 1.4% in 2012.

Distribution

According to INDA (the Brazilian Steel Distributors’ Association), domestic flat steel sales by distributors totaled 4.4 million tons in 2012, a 1.5% increase over 2011. Purchases by the associated network came to 4.3 million tons in 2012, 5.2% higher than in 2011. Inventories closed the year at 944,000 tons, a 5.7% increase over the December 2011 figure, representing 3.0 months of sales.

Home Appliances

According to Eletros (Brazilian Home Appliance and Consumer Electronics Manufacturers’ Association), the home appliance segment closed 2012 with 15% growth in the sales of washing machines, refrigerators and stoves.

With the extension of IPI tax exemptions on home appliances until the end of January 2013, followed by a gradual increase from February through June 2013, Eletros has reviewed its estimates and now expects sales growth of 10% in 2013.

International

According to the WSA, crude steel output in China totaled 708.8 million tons in 2012, a 3.6% increase as compared to 2011 and a new record, accounting for 46.3% of the global total, while Japan's crude steel production remained virtually stable, totaling 107.2 million tons in 2012. In the European Union, production reached 169.4 million tons in 2012, corresponding to a 4.5% decrease as compared to 2011, with Germany accounting for 43 million tons, a 3.7% decrease in its production as compared to 2011. In the U.S., crude steel production totaled 88.6 million tons in 2012, a 2.7% increase as compared to 2011.

65

Table Of Contents

Mining

In 2012, the seaborne iron ore market was marked by its price volatility, reflecting global economic uncertainties. After peaking at US$151.25/dmt in April 2012, the Platts IO Fines 62% CFR China price index fell to US$88.50/dmt in September 2012, closing the year at US$144.50/dmt, reflecting the improved performance of the Chinese economy, decline in iron ore inventories in Chinese ports, weaker Indian exports and approach of the rainy season in Brazil and Australia.

Fueled by this scenario, the seaborne iron ore market grew by 7% in 2012, reaching 1,074 million tons, sustained by China, which accounted for 66% of total sales volume. Annual Chinese iron ore seaborne imports increased by 10% over 2011. In light of urbanization projects and infrastructure investments announced by the Chinese government in September, the country’s iron ore consumption should continue to expand.

In 2012, Brazil maintained its strong position in the seaborne iron ore market, with sales of 322 million tons, despite the 1% reduction in exports due to heavy rainfall at the beginning of the year.

Logistics

Railway logistics

According to ABIFER (Brazilian Railway Industry Association), Brazilian rail sector revenue is expected to reach R$4.3 billion in 2012, virtually identical to the 2011 figure.

Aiming to reduce infrastructure bottlenecks, the Brazilian government announced the construction of 15,000 km of rail track in the coming years, 5,000 km of which fall under the Growth Acceleration Program (PAC) and 10,000 km to be awarded in concessions.

Port logistics

According to ANTAQ (Brazilian National Waterway Transport Agency), Brazil’s port installations handled approximately 904 million tons of cargo in 2012, a 2.0% increase over 2011, with bulk solids totaling 554 million tons, an increase of 2.0%. Container handling amounted to 8.2 million TEUs (Twenty‐Foot Equivalent Unit – transportation unit equivalent to a standard 20-feet intermodal container), 3.8% more than in the last year.

The Brazilian government announced investments of R$54 billion in the port sector through 2017, including dredging works and projects to renovate port infrastructure and expand cargo handling capacity, in addition to R$2.6 billion allocated to railway access routes.

Cement

Preliminary figures from SNIC (the Brazilian Cement Industry Association) indicate domestic cement sales of 68.3 million tons in 2012, a 6.9% increase over the year before. According to SECEX (the Brazilian Foreign Trade Secretariat), cement imports totaled 977 thousand tons in 2012, 10.4% less than in 2011.

Energy

According to the Brazilian Energy Research Company (EPE), in 2012 Brazilian electricity consumption increased by 3.5% over 2011, led by the commercial and residential segments, which recorded respective growth of 7.9% and 5.0%. Industrial consumption remained flat.

66

Table Of Contents

Steel Markets and Product Mix

Supply and Demand for Steel

Prices of steel are sensitive to changes in worldwide and local demand, which in turn are affected by worldwide and country-specific economic cycles, and to available production capacity. While the export price of steel (which is denominated in U.S. dollars or Euros, depending on the export destination) is the spot price, there is no exchange trading of steel or uniform pricing. Unlike other commodity products, steel is not completely fungible due to wide differences in terms of size, chemical composition, quality and specifications, all of which impact prices. Many companies (including us) discount their list prices for regular customers, making their actual transaction prices difficult for us to determine.

Historically, export prices and margins have been lower than domestic prices and margins, because of the logistics costs, taxes and tariffs. The portion of production that is exported is affected by domestic demand, exchange rate fluctuations and the prices that can be charged in the international markets.

The following table shows Brazilian steel production and apparent consumption (domestic sales plus imports) and global production and demand for the periods indicated:

|  | 2012(1) |  | 2011 |  | 2010
Brazilian Market (in thousands of tons)(2) |  |  |  |  |  |
Total Flat and Long Steel |  |  |  |  |  |
Production |  | 26,381 |  | 25,053 |  | 25,450
Apparent Consumption |  | 25,426 |  | 25,053 |  | 26,104
Hot-Rolled Coils and Sheets |  |  |  |  |  |
Production |  | - |  | 4,086 |  | 4,592
Apparent Consumption |  | - |  | 3,496 |  | 3,823
Cold-Rolled Coils and Sheets |  |  |  |  |  |
Production |  | - |  | 2,738 |  | 3,159
Apparent Consumption |  | - |  | 2,728 |  | 3,419
Galvanized Sheets |  |  |  |  |  |
Production |  | - |  | 2,582 |  | 2,449
Apparent Consumption |  | - |  | 2,789 |  | 3,243
Tin Plates |  |  |  |  |  |
Production |  | - |  | 857 |  | 774
Apparent Consumption |  | - |  | 593 |  | 634
Global Market (in millions of tons) |  |  |  |  |  |
Crude Steel Production |  | 1,510 |  | 1,518 |  | 1,432
Demand |  | - |  | 1,485 |  | 1,400
___________ |
Source: IABr and WSA. 1. Some information for 2012 was not yet available as of the date of this annual report 2. Information about production excludes intra steel companies’ sales. |

Product Mix and Prices

Sales trends in both the domestic and foreign markets are forecasted monthly based on historical data of the preceding months. CSN uses its own information system to remain current on market developments so that it can respond swiftly to fluctuations in demand.

CSN considers its flexibility in shifting between markets, and its ability to monitor and optimize inventory levels in light of changing demand, as key to its success.

We have a strategy of increasing the portion of our sales attributable to higher value-added coated products, particularly galvanized flat steel and tin plate products. Galvanized products are directed at the automotive, construction and home appliance industries. Tin plate products are used by the steel packaging market.

67

Table Of Contents

According to IABr, domestic flat steel apparent consumption moved from 13.5 million tons in 2011 to 13.4 million tons in 2012, therefore a reduction of 1%.

Sales Volume and Net Operating Revenues by Steel Products and Markets

The following table sets forth our steel product sales volume and net operating revenues by product and market.

Sales Volume
| Tons |  | % of Sales Volume
|  |  |  |  | In Market |  | Total
| 2012 | 2011 | 2010 |  | 2012 | 2011 | 2010 |  | 2012 | 2011 | 2010
Domestic Sales |  |  |  |  |  |  |  |  |  |  |
Slabs | 2 | 15 | 51 |  | 0% | 0% | 1% |  | 0% | 0% | 1%
Hot-Rolled | 2,111 | 1,951 | 1,801 |  | 47% | 46% | 44% |  | 41% | 40% | 38%
Cold-Rolled | 832 | 770 | 707 |  | 18% | 18% | 17% |  | 16% | 16% | 15%
Galvanized | 1,105 | 991 | 1,065 |  | 25% | 23% | 26% |  | 22% | 20% | 22%
Tin Mill | 445 | 489 | 512 |  | 10% | 12% | 12% |  | 9% | 10% | 11%
Subtotal | 4,495 | 4,216 | 4,135 |  | 100% | 100% | 100% |  | 88% | 86% | 86%
Sales abroad |  |  |  |  |  |  |  |  |  |  |
Slabs | - | - | - |  | 0% | 0% | 0% |  | 0% | 0% | 0%
Hot-Rolled | 16 | 13 | 1 |  | 1% | 2% | 0% |  | 0% | 0% | 0%
Cold-Rolled | 52 | 49 | 19 |  | 4% | 7% | 3% |  | 1% | 1% | 0%
Galvanized | 413 | 457 | 488 |  | 31% | 67% | 74% |  | 8% | 9% | 10%
Tin Mill | 129 | 161 | 152 |  | 10% | 24% | 23% |  | 2% | 3% | 3%
Long Steel | 724 |  |  |  | 54% |  |  |  |  |  |
Subtotal | 1,334 | 680 | 661 |  | 100% | 100% | 100% |  | 12% | 14% | 14%
Total | 5,829 | 4,896 | 4,796 |  |  |  |  |  | 100% | 100% | 100%
Total Sales |  |  |  |  |  |  |  |  |  |  |
Slabs | 2 | 15 | 51 |  |  |  |  |  | 0% | 0% | 1%
Hot-Rolled | 2,127 | 1,965 | 1,803 |  |  |  |  |  | 37% | 40% | 38%
Cold-Rolled | 884 | 819 | 726 |  |  |  |  |  | 15% | 17% | 15%
Galvanized | 1,518 | 1,447 | 1,553 |  |  |  |  |  | 26% | 30% | 32%
Tin Mill | 574 | 649 | 664 |  |  |  |  |  | 10% | 13% | 14%
Long Steel | 724 |  |  |  |  |  |  |  | 12% |  |
Total | 5,829 | 4,896 | 4,796 |  |  |  |  |  | 100% | 100% | 100%

68

Table Of Contents

Net Operating Revenues
| In millions of R$ |  | % of Net Operating Revenues
|  |  |  |  | In Market |  | Total
| 2012 | 2011 | 2010 |  | 2012 | 2011 | 2010 |  | 2012 | 2011 | 2010
Domestic Sales |  |  |  |  |  |  |  |  |  |  |
Slabs | 2 | 13 | 41 |  | 0% | 0% | 1% |  | 0% | 0% | 1%
Hot-Rolled | 3,093 | 2,936 | 3,011 |  | 37% | 36% | 35% |  | 28% | 32% | 31%
Cold-Rolled | 1,474 | 1,412 | 1,387 |  | 18% | 18% | 16% |  | 14% | 15% | 14%
Galvanized | 2,350 | 2,178 | 2,559 |  | 28% | 27% | 30% |  | 22% | 24% | 27%
Tin Plate | 1,419 | 1,495 | 1,576 |  | 17% | 19% | 18% |  | 13% | 16% | 16%
Subtotal | 8,338 | 8,033 | 8,575 |  | 100% | 100% | 100% |  | 79% | 87% | 89%
Sales abroad |  |  |  |  |  |  |  |  |  |  |
Slabs | - | - | - |  | 0% | 0% | 0% |  | 0% | 0% | 0%
Hot-Rolled | 24 | 19 | 2 |  | 0% | 2% | 0% |  | 0% | 0% | 0%
Cold-Rolled | 82 | 74 | 27 |  | 4% | 6% | 3% |  | 1% | 1% | 0%
Galvanized | 750 | 786 | 778 |  | 33% | 64% | 70% |  | 6% | 8% | 8%
Tin Plate | 293 | 340 | 300 |  | 13% | 28% | 27% |  | 3% | 4% | 3%
Long steel | 1,129 |  |  |  | 50% |  |  |  | 11% |  |
Subtotal | 2,278 | 1,219 | 1,107 |  | 100% | 100% | 100% |  | 21% | 13% | 11%
Total | 10,616 | 9,252 | 9,682 |  |  |  |  |  | 100% | 100% | 100%
Total Sales |  |  |  |  |  |  |  |  |  |  |
Slabs | 2 | 13 | 41 |  |  |  |  |  |  |  |
Hot-Rolled | 3,117 | 2,955 | 3,013 |  |  |  |  |  |  |  |
Cold-Rolled | 1,556 | 1,486 | 1,414 |  |  |  |  |  |  |  |
Galvanized | 3,100 | 2,964 | 3,337 |  |  |  |  |  |  |  |
Tin Plate | 1,712 | 1,835 | 1,876 |  |  |  |  |  |  |  |
Long steel | 1,129 |  |  |  |  |  |  |  |  |  |
Subtotal | 10,616 | 9,252 | 9,682 |  |  |  |  |  | 0% | 0% | 0%
By-Product | 186 | 225 | 244 |  |  |  |  |  | 2% | 2% | 2%
Total | 10,802 | 9,477 | 9,926 |  |  |  |  |  | 100% | 100% | 100%

Brazilian Macro-Economic Scenario

As a company with the vast majority of its operations currently in Brazil, we are affected by the general economic conditions of Brazil. We believe the rate of growth in Brazil is important in determining our future growth capacity and the results of our operations.

The following table shows some Brazilian economic indicators for the periods indicated:

69

Table Of Contents

| Year ended December 31,
|  | 2012 |  | 2011 |  | 2010
GDP growth |  | 0.9% |  | 2.7% |  | 7.5%
Inflation (IPCA)(1) |  | 5.8% |  | 6.5% |  | 5.9%
Inflation (IGP-M)(2) |  | 7.8% |  | 5.1% |  | 11.3%
CDI(3) |  | 8.4% |  | 11.6% |  | 9.7%
Appreciation (depreciation) of the real against the U.S. dollar |  | (8.9)% |  | (12.6)% |  | 4.3%
Exchange rate at end of period (US$1.00) |  | R$2.044 |  | R$1.876 |  | R$1.666
Average exchange rate (US$1.00) |  | R$1.955 |  | R$1.675 |  | R$1.759
Sources: IBGE, Fundação Getúlio Vargas, Central Bank and CETIP.
(1)The IPCA is a consumer price index measured by the IBGE.
(2)The IGP-M is the general market price index measured by the Fundação Getúlio Vargas.
(3)The Interbank Deposit Rate, or CDI, represents the average interbank deposit rate performed during a given day in Brazil (accrued as of the last month of the period, annualized).

Effects of Exchange Rate Fluctuations

Our export revenues are substantially denominated in U.S. dollars. Our domestic revenues are denominated in Brazilian reais.

A significant portion of our cost of products sold is commoditized raw materials, the prices of which are denominated in U.S. dollars. The balance of our cost of products sold and our cash operating expenses (i.e., operating expenses apart from depreciation and amortization) are denominated in reais.

The appreciation of the U.S. dollar against the real has the following effects on the results of our operations expressed in U.S. dollars:

· Domestic revenues tend to be lower (in comparison with prior years) and this effect is magnified to the extent to which we sell more products than usual in the domestic as opposed to the foreign market;

· The impact of real denominated costs of products sold and operating costs tend to be lower; and

· Financial expenses are increased to the extent to which the exposure to dollar-denominated debt is not protected.

The appreciation of the real against the U.S. dollar has the following effects on the results of our operations expressed in U.S. dollars:

· Domestic revenues tend to be higher (in comparison with prior years) and this effect is magnified to the extent to which we sell more products than usual in the domestic market;

· The impact of real denominated costs of products sold and operating costs tends to be higher; and

· Financial income is increased to the extent to which the exposure to dollar-denominated debt is not protected.

The impact of fluctuations in the exchange rate of the real against other currencies on the results of our operations can be seen in the “foreign exchange and monetary gain (loss), net” line in our income statement, although that amount is partially offset by the net financial income (or expense) attributable to the profit (or loss) on the derivative transaction of our foreign currency-denominated debt. In order to minimize the effects of the exchange rate fluctuations, we often engage in derivative transactions, including currency swap and foreign currency option agreements. For a discussion of the possible impact of fluctuations in the foreign currency exchange and interest rates on our principal financial instruments and positions, see “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”

70

Table Of Contents

Effects of Inflation and Interest Rates

Inflation rates in Brazil have been significantly volatile in the past. Inflation rates remained relatively stable from 2003 to 2004, decreased in 2005 and 2006 and increased in 2007 and 2008. In 2009, for the first time since its creation in 1989, the IGP-M inflation index recorded a deflation in a calendar year, equivalent to 1.71%. In 2010, the index increased 11.3% and in 2011 and 2012, the IGP-M index increased 5.1% and 7.8%, respectively.

Inflation affects our financial performance by increasing some of our costs and expenses denominated in reais that are not linked to the U.S. dollar. Our cash costs and operating expenses are substantially denominated in reais and have tended to follow the Brazilian inflation ratio because our suppliers and service providers generally increase or decrease prices to reflect Brazilian inflation. In addition, some of our real-denominated debt is indexed to take into account the effects of inflation. Under this debt, the principal amount is generally adjusted with reference to inflation indexes. In addition, a significant portion of our real-denominated debt bears interest based on the Interbank Deposit Certificate (Certificado de Depósito Interbancário), or CDI, rate which is partially adjusted for inflation.

The table below shows the Brazilian general price index and the CDI rates for the periods shown.

|  | Year ended December 31,
|  | 2012 |  | 2011 |  | 2010
Inflation (IGP-M) (1) |  | 7.8% |  | 5.1% |  | 11.3%
CDI (2) |  | 8.4% |  | 11.6% |  | 9.7%
_______________
Source: Fundação Getúlio Vargas, or FGV, and CETIP.
(1) The IGP-M inflation is the general market price index measured by the FGV.
(2) The Interbank Deposit Rate, or CDI, represents the average interbank deposit rate performed during a given day in Brazil (accrued as of the last month of the period, annualized).

Accounting for mining production utilized by our steel production

We are currently self-sufficient regarding the iron ore used in our steel production. The iron ore required is extracted from our Casa de Pedra mine, which in 2012 amounted to approximately 6.1 million tons of its total iron ore production of approximately 19.8 million tons. The remainder of the iron ore production is sold to third parties in Brazil and throughout the world.

The cost of iron ore regarding our steel production is recorded on our income statement in the cost of goods sold line item as its extraction cost plus transport from the mine. In 2012, 2011 and 2010, these costs were R$280 million, R$283 million and R$239 million, respectively.

Critical Accounting Estimates

We prepared our consolidated financial statements as of and for the year ended December 31, 2012 in accordance with IFRS, as issued by the IASB. In preparing our consolidated financial statements, we make estimates concerning a variety of matters. Some of these matters are highly uncertain, and our estimates involve judgments we make based on the information available to us. In the discussion below, we have identified several of these matters for which our financial presentation would be materially affected if either (1) we used different estimates that we could reasonably have used or (2) in the future we change our estimates in response to changes that are reasonably likely to occur.

This discussion addresses only those estimates that we consider most important based on the degree of uncertainty and the likelihood of a material impact if we used a different estimate. There are many other areas in which we use estimates about uncertain matters, but the reasonably likely effect of changed or different estimates is not material to our financial presentation.

71

Table Of Contents

Impairment of long-lived assets, intangible assets, goodwill and financial assets

In accordance with IAS 36 “Impairment of assets”, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

A determination of the fair value of an asset requires management to make certain assumptions and estimates with respect to projected cash inflows and outflows related to future revenues and expenditures. These assumptions and estimates can be influenced by different external and internal factors, such as economic and industry trends, interest rates and changes in the marketplace. A change in the assumptions and estimates that we use could change our estimate of the expected future net cash flows and lead to the recognition of an impairment charge in results of operations relating to our property, plant and equipment.

Assets that have an indefinite useful life, such as goodwill, are not subject to amortization and are tested annually for impairment in accordance with IAS 36 “Impairment of assets”. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Goodwill is allocated to Cash-Generating Units (CGUs) for impairment testing purposes. The allocation is made to Cash-Generating Units or groups of Cash-Generating Units that are expected to benefit from the business combination from which the goodwill arose, and the unit is not greater than the operating segment.

Financial assets are reviewed for impairment at the end of each reporting period and we assess whether there is objective evidence that a financial asset or a group of financial assets is impaired.

On December 31, 2012, we owned, directly and indirectly, 20.69% of the preferred shares (USIM5) and 14.13% of the common shares (USIM3) of Usinas Siderúrgicas de Minas Gerais S.A. (“Usiminas”), resulting from various acquisitions on the stock exchange since mid-2010. The instruments are classified as financial instruments available for sale and measured at their fair value based on their quoted market price in the Brazilian stock exchange (BOVESPA) on December 31, 2012.

Considering the decline in market value of the shares of Usiminas during 2011 and 2012, we evaluated whether, at the balance sheet date, there is objective evidence of impairment of our investments in Usiminas. The Company performed a detailed analysis of the percentage and period of decline, characteristics of the instruments, the segment in which Usiminas operates and volatility of the instruments.

The table below illustrates this index for a twelve-year period, up to December 31, 2011, a sufficiently long timeframe to eliminate volatility peaks caused by domestic and international economic crises:

|  | Volatility |
Period |  |  |
| USIM3 |  | USIM5
January 3, 2000 - December 31, 2011 | 50.42% |  | 48.57%

Based on this information, the criteria adopted by management, and the relevant accounting and legal rules, management concluded that the decline in the market value as compared to the acquisition cost of the USIM3 and USIM5 shares as of June 30, 2012, of 66.3% and 59.0%, respectively, should be considered a significant decline in the market value of these equity instruments.

Considering the quantitative and qualitative analyses above, management concluded, in its best judgment, that there is evidence of impairment of the investment in Usiminas’ shares as of June 30, 2012, and, consequently, reclassified the accumulated losses recorded in other comprehensive income amounting to R$1,335 million, net of income tax and social contribution, to profit/loss for the period, recognizing R$2,023 million in other operating expenses and R$688 million in deferred taxes, and this is the current position in December 31, 2012.

72

Table Of Contents

For a more detailed description of our policy regarding impairment of financial assets, see Note 13.II. to the consolidated financial statements included in “Item 18. Financial Statements.”

Depreciation and amortization

The basis for calculation of depreciation is the cost of the asset less the estimated residual value upon sale. While no specific depreciation method is recommended, the method chosen should be applied consistently for all significant components of assets and allocation of the depreciation should be on a systematic basis for each one of the accounting periods that best represents the realization of the economic benefits during the usable lives of assets.

In light of the necessity to review useful lives at least every financial year, in 2012 management performed the review for all the Company’s units. See further details in Note 10 to our consolidated financial statements.

Fair value of business combinations

We estimate the fair value of assets acquired and liabilities assumed of our business combinations as required by IFRS 3 “Business Combination”. Accordingly, when determining the purchase price allocations of our business acquisitions, we adjust to fair value certain items such as inventories, property, plant and equipment, mines, present value of long-term assets and liabilities, among others, which are determined by independent appraisals that perform the valuations for us.

Goodwill represents the excess of the cost of an acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired company. If there is any negative goodwill determined by the acquirer in the fair value of the assets, liabilities and contingent liabilities acquired in relation to the cost of acquisition, the Company should recognize it immediately in the statement of income.

Derivatives

IAS 39, “ Financial Instruments: Recognition and Measurement”, requires that we recognize all derivative financial instruments as either assets or liabilities on our balance sheet and measure such instruments at fair value. Changes in the fair value of derivatives are recorded in each period in the statement of income or in other comprehensive income, in the latter case depending on whether a transaction is designated as an effective hedge. Our derivative instruments do not qualify for hedge accounting. Changes in the fair value of any of these derivative instruments are immediately recorded in the statements of income under “Other gains (losses), net". Although the Company uses derivative for hedging purposes, it does not apply hedge accounting. With respect to the fair value measurement, we must make assumptions such as to future foreign currency exchange and interest rates. For a discussion of the possible impact of fluctuations in the foreign currency exchange and interest rates on our principal financial instruments and positions, see “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”

Pension plans

We sponsor defined benefit pension plans covering some of our retirees. We account for these benefits in accordance with IAS 19, “Employee Benefits”. The determination of the amount of our obligations for pension benefits depends on certain actuarial assumptions. These assumptions are described in Note 28 to our consolidated financial statements and include, among others, the expected long-term rate of return on plan assets and increases in salaries. In accordance with IFRS, when the benefits of a plan are increased, the portion of the increased benefit related to past services of employees is recognized under the straight-line method over the average period until the benefits become vested. When the benefits become immediately vested, the expense is immediately recognized in profit or loss. The Company has chosen to recognize all the actuarial gains and losses resulting from defined benefit plans immediately in other comprehensive income and then transferred within equity.

Some of the Company’s entities offered a postretirement healthcare benefit to their employees. The right to these benefits is usually contingent upon an employee remaining in employment until the retirement age as well as the completion of the minimum length of service. The expected costs of these benefits were accumulated during the employment period, and are calculated using the same accounting method used for the defined benefit pension plans.

73

Table Of Contents

Deferred taxes

We compute and pay income taxes based on results of operations determined under Brazilian Corporate Law. A deferred income tax liability is recognized for all temporary tax differences, while a deferred income tax asset is recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilized. Deferred tax assets and liabilities are classified as long-term. Tax assets and liabilities are offset if the entity has a legally enforceable right to offset them and they are related to taxes levied by the same taxing authority. If the criterion for offset of current tax assets and liabilities is met, deferred tax assets and liabilities will also be offset. The income tax related to items recognized directly in equity in the current period or in a prior period is recognized directly in the same account. We regularly review the deferred income tax assets for recoverability and will only recognize these if we believe that it is probable that the deferred income tax assets will be realized, based on historical taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences. If we operate at a loss or are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or discount rates, the time period over which the underlying temporary differences become taxable or deductible, or any change in its future projections, we reduce the carrying amount of deferred income tax assets to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred income tax asset to be realized.

Contingencies and disputed taxes

We record provisions for contingencies relating to legal proceedings with respect to which we deem the likelihood of an unfavorable outcome to be probable and the loss can be reasonably estimated. This determination is made based on the legal opinion of our internal and external legal counsel. We believe these contingencies are properly recognized in our financial statements in accordance with IAS 37 “Provision, Contingent Liabilities and Contingent Assets”. We are also involved in judicial and administrative proceedings that are aimed at obtaining or defending our legal rights with respect to taxes that we believe to be unconstitutional or otherwise not required to be paid by us. We believe that these proceedings will ultimately result in the realization of contingent tax credits or benefits that can be used to settle direct and indirect tax obligations owed to the Brazilian Federal or State Governments or to settle municipal tax obligations owed to the corresponding Municipality as per our laws. We do not recognize these contingent tax credits or benefits in our financial statements until realization of such gain contingencies has been resolved. This occurs when a final irrevocable decision is rendered by the courts in Brazil. When we use contingent tax credits or benefits based on favorable temporary court decisions that are still subject to appeal to offset current direct or indirect tax obligations, we maintain the legal obligation accrued in our financial statements until a final irrevocable judicial decision on those contingent tax credits or benefits is rendered. The accrual for the legal obligation related to the current direct or indirect tax obligations offset is not reversed until such time as the utilization of the contingent tax credits or benefits is ultimately realized. The accounting for the contingent tax credits is in accordance with accounting for contingent assets under IAS 37. Our accruals include interest on the tax obligations that we may offset with contingent tax credits or benefits at the interest rate defined in the relevant tax law. The recorded accruals for these disputed taxes and other contingencies may change in the future due to new developments in each matter, such as changes in legislation, irrevocable, final judicial decisions specific to us, or changes in approach, such as a change in settlement strategy in dealing with these matters. See “Item 8A. Consolidated Statements and Other Financial Information—Legal Proceedings” for further information on the judicial and administrative proceedings in which we are involved.

Allowance for doubtful accounts

We consider a provision for bad debts in our trade accounts receivable in order to reflect our expectation as to the net realizable value thereof. This provision is estimated based on an analysis of our receivables and is periodically reviewed to maintain real expectation of collectability of our accounts receivable.

74

Table Of Contents

Property, Plant and Equipment

In accordance with our accounting policy, the cost of maintenance in operating assets is capitalized when it does not occur annually and results in an increase in the useful life of the asset. Depreciation is recognized on an accrual basis until the next maintenance event of the relevant asset. Expenditures for maintenance and repairs in operating assets, that are necessary to maintain assets under normal conditions of use, are charged to operating costs and expenses, as incurred.

As of December 31, 2011 and 2012 the amount capitalized was R$655 million and R$ 273 million respectively and the amount expended was R$969 million and R$1,219 million, respectively.

Recently Issued Accounting Pronouncements Adopted and Not Adopted by Us

For a description on the recently issued accounting pronouncements, see Note 2 to our consolidated financial statements contained in “Item 18. Financial Statements”.

Results of Operations

The following table presents certain financial information with respect to our operating results for each of the years ended December 31, 2012, 2011 and 2010:

Income Statement Data: |  | 2012 |  | 2012 | 2011 |  | 2010
|  | (in million of US$, except per share data) |  | (in million of R$, except per share data)
Net operating revenues |  | 8,268 |  | 16,896 | 16,520 |  | 14,451
Cost of products sold |  | (5,908) |  | (12,072) | (9,801) |  | (7,883)
Gross Profit |  | 2,361 |  | 4,824 | 6,719 |  | 6,568
Operating expenses |  |  |  |  |  |  |
Selling |  | (456) |  | (932) | (604) |  | (482)
General and Administrative |  | (282) |  | (577) | (576) |  | (537)
Share of profit (losses) of investees |  |  |  | (1) |  |  |
Other Expenses |  | (1,331) |  | (2,719) | (501) |  | (599)
Other Income |  | 23 |  | 47 | 719 |  | 49
Total |  | (2,047) |  | (4,182) | (962) |  | (1,569)
Operating income |  | 314 |  | 642 | 5,757 |  | 4,998
Financial Income (expenses), net |  | (975) |  | (1,992) | (2,006) |  | (1,911)
Income Before Taxes |  | (661) |  | (1,351) | 3,751 |  | 3,087
Income Tax |  |  |  |  |  |  |
Current |  | (100) |  | (205) | (136) |  | (363)
Deferred |  | 526 |  | 1,075 | 52 |  | (207)
Total |  | (235) |  | (481) | 3,667 |  | 2,516
Net income |  | (235) |  | (481) | 3,667 |  | 2,516
Loss attributable to noncontrolling interest |  | (29) |  | (60) | (39) |  | -
Net income attributable to Companhia Siderúrgica Nacional |  | (206) |  | (420) | 3,706 |  | 2,516

Year 2012 Compared to Year 2011

In addition to the consolidated figures reported above, the Company reports its integrated operations in five business segments: steel, mining, cement, logistics (including port and railway) and energy. The operating results of each segment are disclosed separately. The information on CSN’s five business segments is derived from the consolidated financial statements.

75

Table Of Contents

Our consolidated results for the years ended December 31, 2012 and 2011 by business segment are presented below:

R$ million |  |  | Logistics |  |  |  | Year Ended December 31, 2012
Consolidated Results | Steel | Mining | Port Logistics | Railway Logistics | Cement | Energy | Eliminations | Consolidated
Net operating revenues | 10,802 | 4,485 | 151 | 1,067 | 388 | 229 | (226) | 16,896
Domestic Market | 8,478 | 713 | 151 | 1,067 | 388 | 229 | (531) | 10,495
Export Market | 2,324 | 3,772 |  |  |  |  | 305 | 6,401
Cost of goods sold | (8,868) | (2,450) | (82) | (730) | (286) | (153) | 497 | (12,072)
Gross profit | 1,934 | 2,035 | 69 | 337 | 102 | 76 | 271 | 4,824
Adjusted EBITDA* | 2,068 | 2,166 | 55 | 381 | 60 | 71 | (269) | 4,532
R$ million |  |  | Logistics |  |  |  | Year Ended December 31, 2011
Consolidated Results | Steel | Mining | Port Logistics | Railway Logistics | Cement | Energy | Eliminations | Consolidated
Net operating revenues | 9,478 | 5,856 | 143 | 1,023 | 333 | 183 | (496) | 16,520
Domestic Market | 8,190 | 834 | 143 | 1,023 | 333 | 183 | (565) | 10,142
Export Market | 1,287 | 5,022 |  |  |  |  | 69 | 6,378
Cost of goods sold | (7,038) | (2,185) | (85) | (667) | (268) | (105) | 549 | (9,801)
Gross profit | 2,440 | 3,671 | 57 | 356 | 65 | 78 | 53 | 6,719
Adjusted EBITDA* | 2,575 | 3,768 | 45 | 371 | 20 | 75 | (386) | 6,468

*For more information on Adjusted EBITDA see “Results of Operations – Adjusted EBITDA”.

Net Operating Revenues

Net operating revenues were R$16,896 million in 2012, an increase of R$376 million, or 2.3%, from R$16,520 million recorded in 2011, due to an increase in revenues from our steel, cement, logistics and energy segments, partially offset by a decrease in revenues from our mining segment.

Net domestic revenues increased 3.5%, from R$10,142 million in 2011 to R$10,495 million in 2012 and total net revenues of exports and sales abroad increased 0.4%, from R$6,378 million in 2011 to R$6,401 million in 2012.

Steel

Steel net operating revenues increased R$1,324 million, or 14.0%, from R$9,478 million in 2011 to R$10,802 million in 2012, mainly due to an increase in sales volume of 19.1% from 4,896 thousand tons in 2011 to 5,829 thousand tons in 2012.

Steel net domestic revenues increased 3.5%, from R$8,190 million in 2011 to R$8,478 million in 2012, mainly due to an increase of 6.6% in sales volume from 4,216 thousand tons in 2011 to 4,495 thousand tons in 2012.

Steel net revenues from exports and sales abroad increased 80.5%, from R$1,287 million in 2011 to R$2,324 million in 2012, with sales volume increasing 96.2% to 1,334 thousand tons in 2012, from 680 thousand tons in 2011, due to the 724 thousand tons sold by SWT, which were included in our consolidated results as of February 2012.

Mining

Mining net operating revenues totaled R$4,485 million in 2012, a decrease of R$1,371 million, or 23.4%, from R$5,856 million in 2011, due to the lower volume of iron ore sold, affected by an above average rainy season in the first half of the year, and a decrease in average iron ore prices in the international market.

Mining net export revenues decreased R$1,250 million, or 24.9%, from R$5,022 million in 2011 to R$3,772 million in 2012, due to a decrease of 12.0% in sales volume from 22,392 thousand tons in 2011 to 19,703 thousand tons in 2012 and a decrease in average international iron ore prices.

76

Table Of Contents

Mining net domestic revenues decreased R$121 million, or 14.5%, from R$834 million in 2011 to R$713 million in 2012, mainly due to the decrease of sales volume from 1,457 thousand tons in 2011 to 479 thousand tons in 2012.

Logistics

Logistics net operating revenues in 2012 were R$1,218 million, an increase of 4.5% as compared with the net logistics operating revenues of R$1,166 million reported in 2011. In 2012, net revenue from railway logistics totaled R$1,067 million and net revenue from port logistics amounted to R$151 million, while in 2011, net revenue from railway logistics totaled R$1,023 million and net revenue from port logistics amounted to R$143 million.

Cement

Cement net revenue increased R$55 million, or 16.5%, to R$388 million in 2012, compared with revenue of R$333 million in 2011, due to an increase of 12.4%, or 217 thousand tons, in sales volume from 1,755 thousand tons in 2011 to 1,972 thousand tons in 2012, as we continue the ramp up of our cement plant in Volta Redonda.

Energy

In 2012 our net operating revenues from the energy segment totaled R$229 million, an increase of R$46 million, or 25.1% as compared with net operating revenues of R$183 million reported in 2011 in this segment.

Cost of Products Sold

In 2012, consolidated cost of products sold amounted to R$12,072 million, representing a 23.2% increase as compared to R$9,801 million recorded in 2011.

Steel

Consolidated steel costs of products sold were R$8,868 million in 2012, representing a 26.0% increase as compared to the R$7,038 million recorded in 2011, mainly due to the increase in sales volume of flat steel and its production costs and the consolidation of SWT’s results as of February 2012.

Other than the periodic sale of excess inventories and the purchase by our subsidiaries of semi-finished products from third parties for further processing, our cost of products sold is comparable to our flat steel production cost.

The following table sets forth our flat steel production costs, the production costs per ton of steel and the portion of production costs attributable to the primary components of our costs of production. With the exception of coal and coke, which we import, and some metals (such as aluminum, zinc and tin) with domestic prices linked to international prices, our costs of production are mostly denominated in reais.

| 2012 | 2011
Raw Materials | R$ million | R$ / ton | % | R$ million | R$ / ton | %
Iron Ore | 280 | 56.7 | 4.3% | 283 | 56.6 | 4.7%
Coal | 1,244 | 252.0 | 19.1% | 1,249 | 250.5 | 20.9%
Coke | 672 | 136.1 | 10.3% | 575 | 115.3 | 9.6%
Metals | 258 | 52.2 | 4.0% | 275 | 55.1 | 4.6%
Outsourced Slabs and Hot Coils | 144 | 29.2 | 2.2% | 221 | 44.3 | 3.7%
Pellets | 366 | 74.1 | 5.6% | 276 | 55.3 | 4.6%
Scrap | 131 | 26.5 | 2.0% | 110 | 22.0 | 1.8%
Other(1) | 242 | 49.0 | 3.7% | 237 | 47.5 | 4.0%
(1) Includes limestone and dolomite |  |  |  |  |  |
Energy / Fuel | 567 | 114.8 | 8.7% | 565 | 113.3 | 9.5%
Labor | 634 | 128.5 | 9.7% | 607 | 121.6 | 10.2%
Services and Maintenance | 911 | 184.5 | 14.0% | 716 | 143.5 | 12.0%
Tools and Supplies | 274 | 55.6 | 4.2% | 268 | 53.8 | 4.5%
Depreciation | 688 | 139.3 | 10.5% | 562 | 112.7 | 9.4%
Other | 116 | 23.5 | 1.8% | 27 | 5.5 | 0.5%
Total Steel Cost Production | 6,527 | 1,321.8 | 100.0% | 5,970 | 1,197.1 | 100.0%

77

Table Of Contents

In 2012, our steel production costs were R$6,527 million, a 9.3%, or R$557 million, increase from the R$5,970 million reported in 2011.

We are self-sufficient in almost all the raw materials used in the production of steel. The principal raw materials we use in our integrated steel mill include iron ore, coke, coal (from which we produce most of our coke necessities), limestone, dolomite, aluminum, tin and zinc. In addition, our production operations consume water, gases, electricity and ancillary materials.

We obtain all of our iron ore requirements from our Casa de Pedra mine located in the state of Minas Gerais, and the limestone and dolomite from our Bocaina mine in the city of Arcos, in the state of Minas Gerais.

The coal and coke we consume are acquired from different international producers “See Item 4B - Raw Materials and Suppliers”.

Our coke costs increased R$97 million or 16.9%, from R$575 million in 2011 to R$672 million in 2012, corresponding to 10.3% of our steel production cost, due to the increase in consumption and the depreciation of the Brazilian real.

The costs of pellets increased R$90 million or 32.6%, from R$276 million in 2011 to R$366 million in 2012, principally due to the increase in consumption.

Our costs of services and maintenance increased 27.2% or R$195 million, from R$716 million in 2011 to R$ 911 million in 2012, mainly due to preventive maintenance.

Depreciation costs increased R$126 million or 22.4%, from R$562 million in 2011 to R$688 million in 2012, mainly due to asset additions.

Mining

Our mining costs of products sold totaled R$2,450 million in 2012, an increase of R$265 million, or 12.1%, as compared to the R$2,185 million reported in 2011, mainly as a result of the increase in production costs.

Logistics

In 2012, cost of services attributable to our logistics segment totaled R$812 million, representing a 7.9% increase as compared to the R$752 million reported in 2011, mainly due to the increase in the cost of railway logistics, which totaled R$730 million in 2012, a 9.4% increase (equivalent to R$63 million) from the R$667 million reported in 2011. The railway logistics represented 89.9% of the total logistics costs in 2012 and 88.7% of the total logistics costs in 2011. In addition, cost of services from port logistics totaled R$82 million, a 3.5% decrease from the R$85 million reported in 2011.

78

Table Of Contents

Cement

Cost of products sold attributable to our cement segment reached R$286 million in 2012, R$18 million, or 6.7% up from the R$268 million reported in 2011, mainly due to the increase in sales volume.

Energy

In 2012, cost of products sold attributable to our energy segment was R$153 million, an increase of R$48 million as compared with the R$105 million reported in 2011.

Gross Profit

Gross profit totaled R$4,824 million in 2012, a decrease of 28.2% or R$1,895 million as compared to R$6,719 million in 2011, due to the increase of R$2,271 million in cost of products sold, partially offset by the increase of R$376 million in net revenues.

Steel

Gross profit in the steel segment totaled R$1,934 million in 2012, a decrease of R$506 million, or 20.7%, from R$2,440 million in 2011, due to the increase of R$1,830 million in the cost of steel products sold, partially offset by the increase of R$1,324 million in steel net revenues, as discussed above.

Mining

Our gross profit in the mining segment decreased R$1,636 million, or 44.5% from R$3,671 million in 2011 to R$2,035 million in 2012, due to the decrease of R$1,371 million in mining net operating revenues and the increase of R$265 million in cost of products sold.

Logistics

Gross profit in the logistics segment decreased 1.7% from R$413 million in 2011 to R$406 million in 2012, due to the increase of R$60 million in cost of products sold, partially offset by the increase of R$52 million in net revenues.

Cement

Gross profit in the cement segment increased R$37 million or 56.9% from R$65 million in 2011 to R$102 million in 2012, due to the increase of R$55 million in net revenues, partially offset by the R$18 million increase in the cost of products sold.

Energy

The energy segment reported in 2012 a gross profit of R$76 million, a decrease of R$2.0 million, or 3.0% as compared with the R$78 million reported in 2011.

Selling, General and Administrative Expenses

In 2012, we recorded selling, general and administrative expenses of R$1,508 million, a 27.8% increase from 2011. Selling expenses increased 54.3%, from R$604 million in 2011 to R$932 million in 2012, mainly due to the increase in the portion of our iron ore sold with freight included (CIF) and because of the inclusion of SWT’s operations in our consolidated results as of February 2012. General and administrative expenses remained largely unchanged, at R$577 million in 2012.

Other operating income (expenses)

In 2012, we recorded a net expense of R$2,673 million in the “Other Revenue and Expenses” line-item, as compared to a net income of R$218 million in 2011. The R$2,891 million variation was mostly due to:

79

Table Of Contents

• The impairment of the investment in Usiminas’ shares and consequently the reclassification of the accumulated losses recorded in shareholders’ equity in the amount of R$2,023 million to other operating expenses (income statement); and

• A positive impact of R$698 million in 2011 from the sale of CSN’s entire interest in Riversdale Mining Limited in April 2011.

Operating Income

Operating income totaled R$642 million, a decrease of 88.8%, or R$5,115 million, from R$5,757 million in 2011. This decrease was mainly due to:

• A reduction of R$1,895 million in gross profit;

• The R$2,023 million reclassification of our investments in Usiminas, as discussed above;

• The positive impact of R$698 million in the first nine months of 2011 from the sale of CSN’s entire interest in Riversdale Mining Limited;

• An increase of R$328 million in selling expenses, aforementioned.

Financial expenses (income), net

In 2012, our net financial expenses decreased by 0.7% or R$14 million, from R$2,006 million in 2011 to RS$1,992 million in 2012, mainly due to the following items:

· Interest income decreased by 41.9%, or R$301 million, from R$717 million in 2011 to R$416 million in 2012 due to a reduction of R$301 million in returns on financial investments;

· Interest expense decreased by 10.0%, or R$289 million, from R$2,884 million in 2011 to R$2,595 million in 2012 mainly due to the decrease of R$48 million in interest on loans and financing, the decrease of R$105 million in the monetary restatement of tax payment installments and expenses of R$77 million in 2011 relating to the Federal Tax Repayment Program, or REFIS.

Income Taxes

We recorded a gain for income tax and social contribution of R$870 million in 2012, as compared to an expense of R$84 million in 2011. Expressed as a percentage of pre-tax income, income tax moved from 2.2% in 2011 to -64.4% in 2012. Income tax expense in Brazil refers to federal income tax and social contribution tax. The statutory rates for these taxes applicable to the periods presented herein were 25% for federal income tax and 9% for the social contribution. Therefore, the balances for these periods totaled a gain of R$459 million in 2012 and an expense of R$1,275 million in 2011 (34% of income before taxes and equity in affiliated companies). Adjustments are made to these rates in order to reach the actual tax expense for the years.

For the year ended December 31, 2012, adjustments totaled R$411 million and were comprised of:

· a R$386 million adjustment related to equity income of subsidiaries at different rates or which are not taxable, which increased tax gains;

· a R$39 million adjustment related to non taxable income from the REFIS which increased tax gains;

· R$43 million related to tax loss and negative basis without constituted deferred tax, which decreased tax gains; and

· a R$26 million effect related to other permanent additions, which increased tax gains.

For the year ended December 31, 2011, adjustments totaled R$1,190 million and were comprised of:

80

Table Of Contents

· a R$1,279 million adjustment related to equity income of subsidiaries at different rates or which are not taxable, which decreased tax expenses;

· tax incentives that represented a net tax adjustment of R$73 million, which decreased tax expenses;

· tax incentives of R$44 million, which decreased tax expenses;

· a R$16 million adjustment related to non taxable income from the REFIS which increased tax expenses; and

· An adjustment of R$190 million related to the sale of non-deductible securities, which increased tax expenses.

It is not possible to predict the future adjustments to the federal income tax and social contribution at statutory rates, as they depend on interest on stockholder’s equity, tax incentives, non-taxable factors including income from offshore operations, and tax losses from offshore operations, especially when expressed as a percentage of income.

Net Income (Loss)

In 2012, we had a net loss of R$481 million, as compared to a net income of R$3,667 million in 2011, basically due to the impairment of the investment in Usiminas’ shares, which had an impact of R$1,335 million on the income statement.

Year 2011 Compared to Year 2010

Our consolidated results for the years ended December 31, 2011 and 2010 by business segment are presented below:

R$ million |  |  | Logistics |  |  |  | Year Ended December 31, 2011
Consolidated Results | Steel | Mining | Port Logistics | Railway Logistics | Cement | Energy | Eliminations | Consolidated
Net operating revenues | 9,478 | 5,856 | 143 | 1,023 | 333 | 183 | (496) | 16,520
Domestic Market | 8,190 | 834 | 143 | 1,023 | 333 | 183 | (565) | 10,142
Export Market | 1,287 | 5,022 |  |  |  |  | 69 | 6,378
Cost of goods sold | (7,038) | (2,185) | (85) | (667) | (268) | (105) | 549 | (9,801)
Gross profit | 2,440 | 3,671 | 57 | 356 | 65 | 78 | 53 | 6,719
Adjusted EBITDA* | 2,575 | 3,768 | 45 | 371 | 20 | 75 | (386) | 6,468
R$ million |  |  | Logistics |  |  |  | Year Ended December 31, 2010
Consolidated Results | Steel | Mining | Port Logistics | Railway Logistics | Cement | Energy | Eliminations | Consolidated
Net operating revenues | 9,926 | 3,615 | 119 | 838 | 202 | 114 | (364) | 14,451
Domestic Market | 8,763 | 574 | 119 | 838 | 202 | 114 | (364) | 10,247
Export Market | 1,163 | 3,041 |  |  |  |  |  | 4,204
Cost of goods sold | (6,226) | (1,252) | (70) | (522) | (164) | (42) | 393 | (7,883)
Gross profit | 3,700 | 2,363 | 49 | 317 | 38 | 72 | 29 | 6,568
Adjusted EBITDA* | 3,776 | 2,439 | 38 | 349 | 9 | 69 | (325) | 6,355

For more information on Adjusted EBITDA see “Results of Operations – Adjusted EBITDA”.

Net Operating Revenues

Net operating revenues were R$16,520 million in 2011, an increase of R$2,069 million, or 14.3%, from R$14,451 million recorded in 2010, mainly due to the increase in our mining revenues, which represent 35% of our total revenues.

81

Table Of Contents

Total net revenues of exports and sales abroad increased 51.7%, from R$4,204 million in 2010 to R$6,378 million in 2011, while net domestic revenues decreased 1.0%, from R$10,247 million in 2010 to R$10,142 million in 2011.

Steel

Steel net operating revenues decreased R$448 million, or 4.5%, from R$9,926 million in 2010 to R$9,478 million in 2011, mainly due to a decrease in average steel prices, partially offset by the 2.1% increase in sales volume from 4,796 thousand tons in 2010 to 4,896 thousand tons in 2011.

Steel net domestic revenues decreased 6.5%, from R$8,763 million in 2010 to R$8,190 million in 2011, mainly due to a decrease in average steel prices in the domestic market, partially offset by the 1.9% increase in sales volume from 4,135 thousand tons in 2010 to 4,216 thousand tons in 2011.

Steel net revenues from exports and sales abroad increased 10.7%, from R$1,163 million in 2010 to R$1,287 million in 2011, with increases in average steel prices in the international market as well as an increase in sales volumes, from 661 thousand tons in 2010 to 680 thousand tons in 2011.

Mining

Mining net operating revenues increased R$2,241 million, or 62.0%, from R$3,615 million in 2010 to R$5,856 million in 2011, primarily due to higher international prices and the increase in sales volume.

Mining net domestic revenues increased R$260 million, or 45.3%, from R$574 million in 2010 to R$834 million in 2011, mainly due to the increase in average iron ore prices, partially offset by the decrease of 4.1% in sales volume from 1,520 thousand tons in 2010 to 1,457 thousand tons in 2011, a function of our strategy of increasing iron ore exports.

Mining net export revenues increased R$1,981 million, or 65.1%, from R$3,041 million in 2010 to R$5,022 million in 2011, primarily due to the increase in international iron ore prices driven by the strong demand, mainly from China, and the increase of 31.4% in sales volume, from 17,035 thousand tons in 2010 to 22,392 thousand tons in 2011.

Logistics

Logistics net operating revenues in 2011 were R$1,166 million, an increase of 21.8% as compared with the net logistics operating revenues of R$957 million reported in 2010. In 2011, net revenue from railway logistics totaled R$1,023 million and net revenue from port logistics amounted to R$143 million, while in 2010, net revenue from railway logistics totaled R$838 million and net revenue from port logistics amounted to R$119 million.

Cement

As we continue the ramp-up of our cement plant in Volta Redonda, we significantly increased sales in 2011, reaching 1,755 thousand tons, which represents a growth of 76.9% when compared to 2010.

As a consequence, in 2011, net revenues from the cement segment totaled R$333 million, an increase of 65.0% from 2010 net revenues of R$202 million.

Energy

In 2011 our net operating revenues from the energy segment totaled R$183 million, an increase of R$69 million as compared with net operating revenues of R$114 million reported in 2010 in this segment.

Cost of Products Sold

In 2011, consolidated cost of products sold amounted to R$9,801 million, representing a 24.3% increase as compared to R$7,883 million recorded in 2010.

82

Table Of Contents

Steel

Consolidated steel costs were R$7,038 million in 2011, representing a 13.0% increase as compared to the R$6,226 million recorded in 2010, mainly due to the increase in raw materials costs.

Other than the periodic sale of excess inventories and the purchase by our subsidiaries of semi-finished products from third parties for further processing, our cost of products sold is equivalent to our steel production cost.

The following table sets forth our steel production costs, the production costs per ton of steel and the portion of production costs attributable to the primary components of our costs of production. With the exception of coal and coke, which we import, and some metals (such as aluminum, zinc and tin) with domestic prices linked to international prices, our costs of production are mostly denominated in reais.

| 2011 | 2010
Raw Materials | R$ million | R$ / ton | % | R$ million | R$ / ton | %
Iron Ore | 283 | 56.6 | 4.7% | 239 | 47.0 | 4.3%
Coal | 1,249 | 250.5 | 20.9% | 1,239 | 243.7 | 22.1%
Coke | 575 | 115.3 | 9.6% | 382 | 75.1 | 6.8%
Metals | 275 | 55.1 | 4.6% | 244 | 48.0 | 4.3%
Outsourced Slabs and Hot Coils | 221 | 44.3 | 3.7% | 272 | 53.5 | 4.9%
Pellets | 276 | 55.3 | 4.6% | 169 | 33.2 | 3.0%
Scrap | 110 | 22.0 | 1.8% | 64 | 12.6 | 1.1%
Other(1) | 237 | 47.5 | 4.0% | 274 | 53.9 | 4.9%
(1) Includes limestone and dolomite |  |  |  |  |  |
Energy / Fuel | 565 | 113.3 | 9.5% | 561 | 110.3 | 10.1%
Labor | 607 | 121.6 | 10.2% | 570 | 112.1 | 10.2%
Services and Maintenance | 716 | 143.5 | 12.0% | 743 | 146.1 | 13.3%
Tools and Supplies | 268 | 53.8 | 4.5% | 269 | 52.9 | 4.8%
Depreciation | 562 | 112.7 | 9.4% | 489 | 96.2 | 8.7%
Other | 27 | 5.5 | 0.5% | 59 | 16.5 | 1.5%
Total Steel Cost Production | 5,970 | 1,197.1 | 100.0% | 5,574 | 1,101.3 | 100.0%

In 2011, our steel production costs were R$5,970 million, a 7.1%, or R$396 million, increase from the R$5,574 million reported in 2010.

We are self-sufficient in almost all the raw materials used in the production of steel. The principal raw materials we use in our integrated steel mill include iron ore, coke, coal (from which we produce most of our coke necessities), limestone, dolomite, aluminum, tin and zinc. In addition, our production operations consume water, gases, electricity and ancillary materials.

We obtain all of our iron ore requirements from our Casa de Pedra mine located in the state of Minas Gerais, and the limestone and dolomite from our Bocaina mine in the city of Arcos, in the state of Minas Gerais.

The coal and coke we consume are acquired from different international producers “See Item 4B - Raw Materials and Suppliers”. In the first half of 2011, given the mismatch between supply and demand, there was an increase in the price of some raw materials used in steelmaking.

83

Table Of Contents

Our coke costs increased R$193 million or 50.5%, from R$382 million in 2010 to R$575 million in 2011, corresponding to 9.6% of our steel production cost, due to the increase in consumption and higher average prices.

The costs of pellets increased R$107 million or 63%, from R$169 million in 2010 to R$276 million in 2011, principally due to increase in consumption but also due to higher average prices.

Depreciation costs increased R$73 million from R$489 million in 2010 to R$562 million in 2011, mainly due to asset additions.

Mining

Our mining costs of products sold totaled R$2,185 million in 2011, an increase of R$933 million, or 74.5%, as compared to the R$1,252 million reported in 2010, mainly due to the increase in sales volume of iron ore.

Logistics

In 2011, cost of services attributable to our logistics segment totaled R$752 million, representing a 27.0% increase as compared to the R$592 million reported in 2010, mainly due to the increase in the cost of railway logistics, which totaled R$667 million in 2011, a 27.8% increase (equivalent to R$145 million) from the R$522 million reported in 2010. The railway logistics represented 89% of the total logistics costs in 2011 and 88% of the total logistics costs in 2010. In addition, cost of services from port logistics totaled R$85 million, a 21.4% increase from the R$70 million reported in 2010.

Cement

Cost of products sold attributable to our cement segment reached R$268 million in 2011, R$104 million, or 63.4% up from the R$164 million reported in 2010, mainly due to an increase in sales, as described above.

Energy

In 2011, cost of products sold attributable to our energy segment was R$105 million, an increase of R$63 million or 150.0% as compared with the R$42 million reported in 2010.

Gross Profit

Gross profit totaled R$6,719 million in 2011, an increase of 2.3% or R$151 million as compared to R$6,568 million in 2010, due to the increase of R$2,069 million in net operating revenues, partially offset by the increase of R$1,918 million in cost of products sold.

Steel

Gross profit in the steel segment totaled R$2,440 million in 2011, a decrease of R$1,260 million, or 34.1%, from R$3,700 million in 2010, due to the increase of R$812 million in the cost of steel products sold, in light of the increase in raw material costs, and the decrease of R$448 million in steel net revenues due to the decrease in average steel prices.

Mining

Our gross profit in the mining segment increased R$1,308 million, or 55.3% from R$2,363 million in 2010 to R$3,671 million in 2011, mainly due to the increase of R$2,241 million in mining net operating revenues, caused by higher international prices and increase in sales volume, partially offset by the increase of R$933 million in cost of products sold.

Logistics

Gross profit in the logistics segment increased 12.8% from R$366 million in 2010 to R$413 million in 2011, due to the increase of R$209 million in net revenues, partially offset by the increase of R$160 million in the cost of products sold.

84

Table Of Contents

Cement

Gross profit in the cement segment increased R$27 million or 68.4% from R$38 million in 2010 to R$65 million in 2011, due to the increase of R$131 million in net revenues, partially offset by the R$104 million increase in the cost of products sold.

Energy

The energy segment reported in 2011 a gross profit of R$78 million, an increase of 8.3% as compared with the R$72 million reported in 2010.

Selling, General and Administrative Expenses

In 2011, we recorded selling, general and administrative expenses of R$1,180 million, a 15.8% increase from 2010. Selling expenses increased 25.3%, from R$482 million in 2010 to R$604 million in 2011, mainly due to expenses relating to iron ore freight. General and administrative expenses increased 7.3%, from R$537 million in 2010 to R$576 million in 2011.

Other operating income (Expenses)

In 2011, we recorded a net income of R$218 million in the “Other Revenue and Expenses” line-item, as compared to a net expense of R$551 million in 2010. The R$769 million increase was mostly due to the R$698 million from the sale of CSN’s entire interest in Riversdale Mining Limited in April 2011.

Operating Income

Operating income increased by 15.2%, or R$759 million, from R$4,998 million in 2010 to R$5,757 million in 2011. This increase was mainly due to the R$698 million from the sale of CSN’s entire interest in Riversdale Mining Limited in April 2011.

Financial expenses (income), net

In 2011, our net financial expenses increased by 5.0% or R$95 million, from R$1,911 million in 2010 to RS$2,006 million in 2011, mainly due to the following items:

· Interest income increased by 11.5%, or R$74 million, from R$643 million in 2010 to R$717 million in 2011 mainly due to the increase of R$145 million in returns on financial investments, due to the increases in cash and cash equivalents. This decrease was partially offset by the decrease of R$46 million in other financial income;

· Interest expense increased by 31.1%, or R$684 million, from R$2,200 million in 2010 to R$2,884 million in 2011 mainly due to the increase of R$828 million in interests on loans and financing, partially offset by an increase of R$138 million in capitalized interest;

· Foreign exchange and monetary variation net, including operations with derivatives, moved from a loss of R$354 million in 2010 to a gain of R$161 million in 2011, mainly resulting from the depreciation of the real against the U.S. dollar. This depreciation affects:

o Our U.S. dollar-denominated gross debt;

o Our U.S. dollar-denominated cash and cash equivalents; and

o Our trade accounts receivable and payable account receivables.

Income Taxes

We recorded an expense for income tax and social contribution of R$84 million in 2011, as compared to R$571 million in 2010. Expressed as a percentage of pre-tax income, income tax expense decreased from 18.5% in 2010 to 2.2% in 2011. Income tax expense in Brazil refers to federal income tax and social contribution tax. The statutory rates for these taxes applicable to the periods presented herein were 25% for federal income tax and 9% for the social contribution. Therefore, the balances owed for these periods totaled R$1,275 million in 2011 and R$1,050 million in 2010 (34% of income before taxes and equity in affiliated companies). Adjustments are made to these rates in order to reach the actual tax expense for the years.

85

Table Of Contents

For the year ended December 31, 2011, adjustments totaled R$1,190 million and were comprised of:

· a R$1,279 million adjustment related to equity income of subsidiaries at different rates or which are not taxable, which decreased tax expenses;

· tax incentives that represented a net tax adjustment of R$73 million, which decreased tax expenses;

· tax incentives of R$44 million, which decreased tax expenses;

· a R$16 million adjustment related to non taxable income from REFIS which increased tax expenses; and

· An adjustment of R$190 million related to sale of non-deductible securities, which increased tax expenses.

For the year ended December 31, 2010, adjustments totaled R$478 million and were comprised of:

· a R$121 million benefit from interest on shareholders’ equity;

· a R$217 million adjustment related to equity income of subsidiaries at different rates or which are not taxable, which decreased tax expenses;

· tax incentives that represented a net tax adjustment of R$34 million, which decreased tax expenses; and

· a R$106 million benefit related to non taxable income from REFIS adjustments.

It is not possible to predict the future adjustments to the federal income tax and social contribution at statutory rates, as they depend on interest on stockholder’s equity, tax incentives, non-taxable factors including income from offshore operations, and tax losses from offshore operations, especially when expressed as a percentage of income.

Net Income

In 2011, we had a net income of R$3,667 million, a 45.7% increase as compared to 2010. The improved results were mainly due to the R$698 million from the sale of CSN’s entire interest in Riversdale Mining Limited in April 2011.

Adjusted EBITDA

The Company uses adjusted EBITDA to measure the performance of its various segments and the capacity to generate recurring operating cash. It comprises net income before the net financial result, income and social contribution taxes, depreciation and amortization, equity income and other operating revenue (expenses). However, although it is used to measure segment results, adjusted EBITDA is not a measure recognized by Brazilian accounting practices or International Financial Reporting Standards (IFRS), has no standard definition and therefore should not be compared to similar indicators adopted by other companies. As required by IFRS 8, the table below shows the reconciliation of the adjusted EBITDA with the net income (loss) for the year.

86

Table Of Contents

R$ Million |  | 2012 |  | 2011 |  | 2010
Profit/(Loss) for the year |  | (481) |  | 3,667 |  | 2,516
Depreciation |  | 1,216 |  | 929 |  | 806
Income tax and social contribution |  | (870) |  | 84 |  | 571
Finance income |  | 1,992 |  | 2,006 |  | 1,911
EBITDA |  | 1,858 |  | 6,686 |  | 5,804
Other operating income (expenses) |  | 2,673 |  | (218) |  | 551
Share of profit (losses) of investees |  | 1 |  | - |  | -
Adjusted EBITDA |  | 4,532 |  | 6,468 |  | 6,355

Adjusted EBITDA totaled R$4,532 million in 2012, a decrease of 29.9% or R$1,936 million as compared to R$6,468 million in 2011, due to the decrease in sales and average prices of iron ore and higher costs of goods sold.

Adjusted EBITDA totaled R$6,468 million in 2011, an increase of 1.8% or R$113 million as compared to R$6,355 million in 2010, due to the increase in sales and average prices of iron ore, partially offset by higher costs of goods sold and lower steel prices.

5B. Liquidity and Capital Resources

Overview

Our main uses of funds are for capital expenditures, repayment of debt and dividend payments. We have historically met these requirements by using cash generated from operating activities and through the issuance of short- and long-term debt instruments. We expect to meet our cash needs for 2013 primarily through a combination of operating cash flow, cash and cash equivalents on hand and newly issued long-term debt instruments.

In addition, from time to time, we review acquisition and investment opportunities and will, if a suitable opportunity arises, make selected acquisitions and investments to implement our business strategy. We generally make investments directly or through subsidiaries, joint ventures or affiliated companies, and fund these investments through internally generated funds, the issuance of debt, or a combination of such methods.

Sources of Funds and Working Capital

Year 2012 Compared to Year 2011

Cash Flows

Cash and cash equivalents decreased by R$973 million in 2012, compared to an increase of R$5,178 million in 2011.

Operating Activities

Cash provided by operations was R$3,488 million and R$4,202 million, in 2012 and 2011, respectively. This R$714 million decrease was mainly due to a decrease of R$1,215 million in net income adjusted for items that do not impact cash and a decrease of R$501 million in our working capital.

Investing Activities

We used cash in our investing activities in the total amount of R$3,540 million in 2012 and R$5,275 million in 2011. The decrease of R$1,735 million was mainly a result of a decrease of R$1,257 million in investments in fixed assets in our main projects.

87

Table Of Contents

Financing Activities

Cash used in financing activities was R$749 million in 2012 compared to cash provided by financing activities of R$4,741 million in 2011. This R$5,490 million difference was mainly due to:

· a decrease of R$4,102 million in proceeds from borrowings and financings;

· an increase of R$1,055 million in amortizations of borrowings and financings; and

· R$803 million in amortization of financings of SWT.

These effects were partially offset by a decrease of R$657 million in dividends and interest on equity payments.

Year 2011 Compared to Year 2010

Cash Flows

Cash and cash equivalents flow increased by R$5,178 million in 2011 and R$2,268 million in 2010.

Operating Activities

Cash provided by operations was R$4,202 million and R$2,517 million, in 2011 and 2010, respectively. This R$1,685 million increase was mainly due to an increase of R$1,171 million in net income adjusted for items that do not impact cash and a decrease of R$514 million in working capital.

Investing Activities

We used cash in our investing activities in the total amount of R$5,275 million in 2011 and R$4,636 million in 2010. The increase of R$639 million was mainly due to an increase of fixed assets to supply the projects, mainly related to: (i) the Casa de Pedra expansion; (ii) the expansion of the Itaguaí Port; (iii) the construction of the long steel mill in the city of Volta Redonda (State of Rio de Janeiro); and (iv) the extension of the Transnordestina railroad.

Financing Activities

Cash provided by financing activities totaled R$4,741 million in 2011, compared R$4,616 million in 2010. This R$125 million increase was mainly due to a decrease of R$1,238 million in amortizations of borrowings and financings, almost offset by a decrease of R$931 million in issuances and an increase of R$296 million in payments of dividends and interest on equity.

Trade Accounts Receivable Turnover Ratio

Our receivable turnover ratio (the ratio between trade accounts receivable and net operating revenues), expressed in days of sales increased to 31 days on December 31, 2012 from 29 days on December 31, 2011.

Days Sales in Inventory

Our days sales in inventory (obtained by dividing inventories by annualized cost of products sold), expressed in days of cost of products sold decreased to 76 days in 2012 from 103 days in 2011.

Trade Accounts Payable Turnover Ratio

The accounts payable turnover ratio (obtained by dividing trade accounts payable by annualized cost of products sold), expressed in days of cost of products sold, increased to 55 days on December 31, 2012 from 46 days on December 31, 2011.

Liquidity Management

Given the capital intensive and cyclical nature of our industry, and the generally volatile economic environment in certain emerging markets, we have retained a substantial amount of cash on hand to run our operations, to satisfy our financial obligations, and to be prepared for potential investment opportunities. As of December 31, 20 12, cash and cash equivalent totaled R$14,445 million.

88

Table Of Contents

We were also taking advantage of the current liquidity conditions to extend the maturity profile of our debt. These activities are unrelated to the management of any interest rate, inflation and/or foreign exchange risk exposure. Given the lack of a liquid secondary market for our short term debt instruments, we have accumulated cash instead of prepaying our debt prior to final maturity. As of December 31, 2012, short-term and long-term indebtedness accounted for 7.6% and 92.4%, respectively, of our total debt, and the average life of our existing debt was equivalent to approximately 7 years, considering a 40 year term for the perpetual bonds issued in September 2010.

Capital Expenditures and Investments

In 2012, our capital expenditures were R$3,144 million, of which R$984 million was used in the expansion of the Transnordestina railroad, R$454 million in the construction of our long steel plant in Volta Redonda, R$381 million in the Casa de Pedra mine expansion and Itaguaí Port expansion, R$73 million in our clinker plant and R$219 million in maintenance and repairs.

We expect to meet our liquidity requirements from cash generated from operations, and, if needed, the issuance of debt securities. For details on our Planned Investments see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments”.

Company Debt and Derivative Instruments

At December 31, 2012 and 2011, total debt (composed of current and non-current portions of borrowings and financings) summed R$30,284 million and R$28,067 million, respectively, equal to 330% and 333% of the stockholders’ equity at December 31, 2012 and 2011, respectively. At December 31, 2012, our short-term debt (composed of current borrowings and financings, which includes current portion of long-term debt) totaled R$2,326 million and our long-term debt (composed of non-current borrowings and financings) totaled R$27,958 million. The foregoing amounts do not include debt of others for which we are contingently liable. See “Item 5E. Off-Balance Sheet Arrangements.”

At December 31, 2012, approximately 64% of our debt was denominated in reais and substantially all of the remaining balance was denominated in U.S. dollars.

Our current policy is to protect ourselves against foreign exchange losses and interest rate losses on our debt and currently our exposure is protected through foreign exchange derivative products, including futures and swaps. For a description of our derivative instruments, see Note 13.IV to our consolidated financial statements contained in “Item 18. Financial Statements.” Also see “Item 5A. Operating Results—Results of Operations—Year 2012 Compared to Year 2011”.

The components of R$2,326 million of our consolidated current portion of short-term debt outstanding at December 31, 2012 were:

Components | Average interest rate | Total (in million of R$)
Fixed rate notes | 6.5% - 10.0% | 1,265
BNDES/Finame | TJLP + 1.5% - 5% and TJR + 1.7% - 2.7% | 448
Prepayment financing | 1% - 7.5% and 104.8% - 111% CDI |  | 335
Debentures | 1% + TJLP and 103.6% - 110.8% CDI |  | 145
CCB | 112.5% CDI | 62
Others | 1.4% - 8.0% and CDI + 1.2% | 71
Total |  | 2,326

The components of R$27,958 million of our consolidated long-term debt outstanding at December 31, 2012 were (amounts are reflected in long-term debt):

Components | Average interest rate | Total (in million of R$)
Debentures | 1% + TJLP and 103.6% - 110.8% CDI | 4,614
Fixed rate notes | 6.5% - 10% | 4,802
BNDES/Finame | TJLP + 1.5% - 5% and TJR + 1.7% - 2.7% | 1,968
Perpetual bonds | 7% | 2,043
Prepayment financing | 1% - 7.5% and 104.8% - 111% CDI | 6,839
CCB | 112.5% CDI | 7,200
Others | 1.4% - 8.0% and CDI + 1.2% | 492
Total |  | 27,958

89

Table Of Contents

The amount of interest paid in 2012 was R$2,348 million.

The local debenture is a real-denominated debt instrument, which includes:

(i) Debentures issued in February 2006, of R$600 million six-year bearing interest at a rate of 103.6% of the CDI rate per annum. On February 1, 2012, the Company liquidated these debentures in the amount of R$635,285 thousand (R$600,000 thousand principal amount and R$35,285 thousand in interest).

(ii) Debentures issued by our controlled company Transnordestina Logística S.A., which obtained approval by FDNE (Fundo de Desenvolvimento do Nordeste) on March 2010 for its First Private Emission of Debentures, convertible into shares, composed of eight series in total, with the overall amount of R$2,672,400. Until December 31, 2011, Transnordestina Logística S.A. had already issued 5 series in the total amount of R$1,615 million.

(iii) Debentures issued in July 2011, of R$1,150 million bearing interest at a rate of 105.8% of the CDI rate per annum and maturity in 2019.

(iv) Debentures issued in September 2012, of R$1,565 million comprised of two series, one maturing in March 2015 and bearing interest at a rate of 105.8% of the CDI rate per annum, and one maturing in September 2015 and bearing interest at a rate of 106.0% of the CDI rate per annum.

Eurodollar and Euronotes issued in accordance with Rule 144A and Regulation S under the Securities Act reflect senior unsecured debt instruments issued by us and our offshore subsidiaries, including (i) the US$300 million bonds, 10% per annum coupon, and the US$300 million notes, 8.25% per annum coupon, issued in 1997 with final maturity in 2047; (ii) the issuance in December 2003 and January 2004 of US$550 million notes, 9.75% per annum coupon with final maturity in 2013; (iii) the US$400 million notes, 10% per annum coupon, issued in September 2004 and January 2005 with final maturity in 2015, and (iv) the US$750 million notes, 6.875% per annum coupon, issued in September 2009 with maturity in 2019.

In July 2010, we issued US$1 billion notes, 6.50% per annum coupon and maturity date in July 2020, and in September 2010 we issued a US$1 billion Perpetual Bond, 7% per annum coupon.

We issued export credit notes, or NCEs: (i) on April 11, 2008, in the amount of R$100 million in favor of Banco do Brasil S.A., due 2013; (ii) on September 30, 2009, in the amount of R$1.0 billion, in favor of Banco do Brasil S.A., due 2014; (iii) on September 30, 2009, in the amount of R$300 million, in favor of Banco do Brasil S.A., due 2014; (iv) on May 21, 2010 in the amount of R$2.0 billion, in favor of Banco do Brasil S.A., through our subsidiary Congonhas Minérios S.A., due 2018. In April 2011, we issued another NCE, in the amount of R$1.5 billion; in favor of Banco do Brasil S.A., due to 2019.

We contracted credit facilities from Caixa Econômica Federal (CEF), under its special credit for large companies, in the form of a bank credit bill, or CCB: (i) on August 18, 2009, in the amount of R$2.0 billion and to be amortized in 36 months; (ii) on February 9, 2010, in the amount of R$1.0 billion and to be amortized in 36 months. In 2011, we contracted two more CCBs: (i) in February 2011, in the amount of R$2.0 billion and to be amortized in 94 months; and (ii) in August 2011, in the amount of R$2.2 billion and to be amortized in 108 months.

In January 2012, we priced, through our wholly-owned subsidiary CSN Resources S.A., an additional bond issuance in the amount of US$200 million, through the reopening of the US$1 billion bonds, at an interest rate of 6.5% p.a., due in July 2020. The offering price was 106.00% and yield was 5.6% p.a.

90

Table Of Contents

In January 2012, we secured financing contracted through our subsidiary CSN Steel S.L., in the amount of €120 million, to partially fund the acquisition of all shares held by the Alfonso Gallardo Group, S.L.U. (“Grupo Gallardo”) in the following companies: SWT and Gallardo Sections S.L.U.

In March 2012, we issued promissory notes in the total amount of R$800 million.

In September 2012, the Company liquidated these promissory notes, paying the principal amount of R$800 million and R$33,277 in interest.

Maturity Profile

The following table sets forth the maturity profile of our long-term debt at December 31, 2012:

Maturity in |  | Principal Amount
|  | (In millions of R$)
2014 |  | 2,917
2015 |  | 3,886
2016 |  | 3,282
2017 |  | 3,530
2018 |  | 3,727
2019 and thereafter |  | 8,573
Perpetual bonds |  | 2,043
Total |  | 27,958

5C. Research & Development and Innovation

We have been investing in Research & Development to develop new products and processes required by a demanding market. Among our projects, we can highlight:

· The development of pre-painted steel, coated with Organo-Metallic film for application in fuel tanks in automobiles, reducing fuel consumption;

· Advanced High Strength Steels, Ultra Low Carbon Steels (extra deep drawing quality), Bake-Hardening Steels, High Resistance Interstitial Free Steels, High Strength and Low Alloy and Rephosphorized High Strength Steels, allowing the production of lighter vehicles;

· CSN Extra Fino ® cold rolled steel for new applications in white goods and steel furniture, developed in response to a worldwide trend.

5D. Trend Information

Overview

The global economic activity is recovering at a moderate pace, still reflecting the high level of uncertainty surrounding the international scenario. For 2013, the International Monetary Fund (IMF) estimates global growth of 3.5%.

For the European Union, the European Central Bank is forecasting stagnation in 2013 and growth of 1.1% in 2014. The Bank of England expects GDP growth of 1% in 2013 and annualized inflation of 3%, forecasted to remain above the 2% target for two years.

With regard to the United States, the Fed estimates GDP growth of between 2.3% and 2.8% in 2013. However, the US$85 billion cut in the U.S. budget may affect several economic sectors, resulting in a reduction of up to 1% in the GDP estimates.

The Chinese Central Bank maintained its 2013 GDP growth estimate at 7.5%. During the Central Economic Work Conference held in December, the Chinese authorities singled out urban growth as a key factor in fueling domestic demand, deemed necessary in order to reduce the country’s dependence on exports, given the uncertainties in the global economy. At the same time, the Chinese government is expected to continue with its proactive fiscal policies and prudent monetary measures.

91

Table Of Contents

With regards to Brazil, GDP growth is expected to reach 3.00% in 2013, while the IPCA is expected to total 5.71%, according to the Central Bank’s FOCUS report. COPOM indicates that it will monitor the macroeconomic scenario in order to define its next steps, with the possibility of increasing the Selic interest rate if inflation continues to rise.

Steel

According to the WSA, world steel demand is expected to increase by 3.2% in 2013, totaling 1.46 billion tons, with China accounting for 659 million tons.

IABr expects domestic sales growth of 7.7% in 2013, fueled by government measures such as the reduction in electricity tariffs, the increase in import taxes for certain steel products and the end of fiscal conflicts between the Brazilian states. It also expects apparent consumption of flat and long steel of 26.4 million tons in 2013, a 4.3% increase over 2012.

Continuing with the goal of diversifying and investing in the expected growth of the construction industry in the domestic market, we are constructing a long steel plant with a capacity of 500 kta, including rebar and wire rods in our portfolio.

Mining

CRU forecasts the seaborne iron ore trade will reach 1.43 billion tons by 2017, a 33% growth as compared with the level reached in 2012.

Pressured by slower than expected GDP performance during 2012, the Chinese government announced last September a US$157 billion stimulus package focused on infrastructure investments. This change in expectations has resulted in better fundamentals for steel, and since then has been sustaining the appetite for seaborne iron ore. Chinese iron ore imports are expected to increase by 9% in 2013, reaching the record volume of 782 million tons.

According to CRU, exports in Brazil show a tendency to increase until at least 2017. By this time, exports should total approximately 452 million tons, an increase of 41% over current levels. For 2013, the forecast is for Brazil to export 332 million tons.

Considering this scenario, we expect to reach an annual sales level of 89 million tons per year of iron ore products from Casa de Pedra, Namisa and third party purchases. To ensure the production outflow, we expect the Itaguaí Port to reach an 84 mtpy shipment capacity.

Cement

Prospects for the sector remain positive. In 2013, the construction industry is expected to benefit from lower taxes and higher investments in infrastructure. ABRAMAT estimates construction material domestic sales growth 4.5% greater in 2013 than 2012, fueled by a greater number of property launches and the construction of homes within the government’s Minha Casa, Minha Vida housing program. In addition, the highway, railway, port and airport concession programs and the construction related to the World Cup are expected to gain momentum.

We are analyzing the expansion of our grinding capacity to 5.4 million tons, to capture the strong growth expected for the construction sector, fueled by increased income and employment, incentives for homebuyers and the expansion of Brazil's infrastructure. For details on our Planned Investments see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments”.

5E. Off-Balance Sheet Arrangements

In addition to the debt that is reflected on our balance sheet, we are contingently liable for the off-balance concession payments and also for “take-or-pay” contractual obligations. The following table summarizes all of the off-balance sheet obligations for which we are contingently liable and which are not reflected under liabilities in our consolidated financial statements:

92

Table Of Contents

Contingent Liability with Respect to Consolidated and Non-Consolidated Entities as of December 31, 2012

|  | Aggregate Amount |  | Maturity
|  | (In million of R$)
Guarantees of Debt: |  |  |  |
Transnordestina |  | 1,633 |  | 2012-2028
Contingent Liability for Concession Payments(1) : |  |  |  |
Sepetiba Tecon |  | 310 |  | 2026
Transnordestina |  | 101 |  | 2027
Solid Bulks Terminal - TECAR |  | 1,251 |  | 2022
MRS Logística S.A |  | 1,144 |  | 2026
Total |  | 2,806 |  |
”Take-or-Pay” Contractual Obligations |  |  |  |
MRS Logística S.A. |  | 660 |  | 2016
White Martins Gases Industriais Ltda. |  | 440 |  | 2016
Companhia Estadual de Gás do Rio de Janeiro – CEG Rio(2) |  | 0 |  |
Ferrovia Centro Atlântica – FCA |  | 270 |  | 2020
Vale S/A |  | 221 |  | 2014
Companhia Paranaense de Gás - COMPAGÁS |  | 181 |  | 2024
Companhia Paranaense de Energia - COPEL |  | 62 |  | 2021
ALL(2) |  | 0 |  |
K&K Tecnologia |  | 73 |  | 2023
Harsco Metals Ltda |  | 45 |  | 2014
Siemens |  | 20 |  | 2013
Total |  | 1,971 |  |
Total Contingent Liability with Respect to Consolidated and Non-consolidated Entities: |  | 6,411 |  |

(1) Other consortia members are also jointly and severally liable for these payments.

(2) These contracts are under renegotiations.

Guarantees

We guarantee the loans BNDES has granted to Transnordestina in May and December 2005, and in January 2006, all of which mature by May 2028, adjusted based on the TJLP plus 1.5% per annum. The total outstanding amount of the debt as of December 31, 2012 was R$1,633 million.

Concessions

Sepetiba Tecon

We own 99.99% of Sepetiba Tecon S.A., or TECON, which holds a concession to operate, for a 25-year term (renewable for additional 25 years), the container terminal at the Itaguaí Port, located in the State of Rio de Janeiro. As of December 31, 2012, R$310 million of the cost of the concession was outstanding and payable over the remaining 14 years of the concession. For more information see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments”.

Transnordestina

As of December 31, 2012, we held 76.13% of the capital stock of Transnordestina Logística S.A., which has a 30-year concession granted in 1997 to operate Brazil’s Northeastern railway system. The Northeastern railway system currently covers 4,534 km of track and operates in the states of Maranhão, Piauí, Ceará, Paraíba, Pernambuco, Alagoas and Rio Grande do Norte. It also connects with the region’s leading ports, thereby offering an important competitive advantage through opportunities for intermodal transportation solutions and made-to-measure logistics projects. As of December 31, 2012, R$101 million was outstanding over the remaining 15 years of the concession.

93

Table Of Contents

Solid Bulks Terminal

We hold the concession to operate TECAR, a solid bulks terminal, one of four terminals that form the Itaguaí Port, located in the State of Rio de Janeiro, for a term expiring in 2022 and renewable for another 25 years. Itaguaí Port, in turn, is connected to the Presidente Vargas Steelworks, Casa de Pedra and Namisa by the Southeastern railway system. Our imports of coal and coke are made through this terminal. Under the terms of the concession, we undertook to load and unload at least 3.0 million tons of bulk cargo annually. Among the approved investments that we announced is the development and expansion of the solid bulks terminal at the Itaguaí Port to handle up to 84 million tons of iron ore per year.

MRS Logística S.A

As of December 31, 2012, we held a 33.27% participation in MRS Logística S.A., which holds a concession to operate Brazil’s Southeastern railway system until 2026, renewable for an additional 30 years, We have contracts with MRS Logística S.A. for the transportation of iron ore from the mines of Casa de Pedra in Minas Gerais to Volta Redonda and coke and coal from the Port of Itaguaí (RJ) to Volta Redonda, and transportation of our exports to the Ports of Itaguaí (RJ) and Rio de Janeiro (RJ). As of December 31, 2012, R$1,144 million was outstanding over the remaining 14 years of the concession.

Contractual Obligations

Namisa

Port Operating Services Agreement

On October 21, 2008, CSN entered into an agreement for the provision of port services to Namisa for a 34-year period, consisting of receiving, handling, storing and shipping Namisa’s iron ore in annual volumes that range from 18.0 million tons to 39.0 million tonnes. On December 30, 2008, CSN has received the amount of approximately R$5.3 billion as an advance for part of the payments due for the services to be provided under this agreement. The amounts charged for these port services are reviewed on a quarterly basis and adjusted considering the changes in the market price of iron ore.

High Silica ROM

On October 21, 2008, CSN entered into an agreement for the supply of high silica crude iron ore ROM to Namisa for a period of 30 years in volumes that range from 42.0 million tons to 54.0 million tons per year. On December 30, 2008, CSN received approximately R$1.6 billion as an advance for part of the payments due for the supplies to be made under this agreement. The supply price is reviewed on a quarterly basis and adjusted considering the changes in the market price of iron ore.

Low Silica ROM

On October 21, 2008, CSN entered into an agreement for the supply of low silica crude iron ore ROM to Namisa for an effective period of 9 years in volumes that range from 8 million tons to 30.6 million tons per year. On December 30, 2008, CSN received approximately R$424 million as an advance for part of the payments due for the supplies to be made under this agreement. The supply price is reviewed on a quarterly basis and adjusted considering the changes in the market price of iron ore.

“Take-or-Pay” Contractual Obligations

MRS Logística S.A.

Transportation of Iron Ore, Coal and Coke to Volta Redonda

94

Table Of Contents

The volume set for iron ore and pellets is 8,280,000 tons per year and for coal, coke and other reduction products is 3,600,000 tons per year. Variation of up to 10% is accepted, with a guarantee of payment of at least 90%, but the obligation is for each item individually. MRS, on the other hand, is required to transport at least 80% of the volume established by the agreement. The agreement expired on December 31, 2012 and CSN and MRS are negotiating the terms of a new contract.

Transportation of Iron Ore for Export from Itaguaí

The volume set is 40,000,000 tons per year for the first three years, with gradual increases for the following years, with a guarantee of payment of at least 80%. We may increase or decrease the volume set in the agreement every year by up to 10% and 15%, respectively, taking into consideration the volume informed in the previous year. This agreement expires on November 30, 2026.

For both contracts we have flexibility to renegotiate the “take-or-pay,” if the volume is not reached. As we are a shareholder of MRS, the minimum amounts to be paid under the contract terms are calculated by a tariff model that assures competitive prices.

Transportation of Steel Products

The volume set is 2,750,000 tons per year, with an acceptable variation of up to 20%. The agreement covers the transportation of steel products from the Presidente Vargas Steelworks to third party terminals, and expires on May 31, 2016.

Cement Transportation - CSN CIMENTOS

We and MRS are negotiating the terms of a new contract.

White Martins Gases Industriais Ltda.

To secure gas supply (oxygen, nitrogen and argon), in 1994 we signed a 22-year “take-or-pay” agreement with White Martins Gases Industriais, by which we are committed to acquire at least 90% of the gas volume guaranteed in the agreement with White Martins’ plant. Under the terms of the agreement, we are not required to advance funds raised against future processing charges if White Martins is unable to meet its financial obligations.

Companhia Estadual de Gás do Rio de Janeiro

To secure natural gas supply, in 2007 we signed a five-year “take-or-pay” agreement with CEG Rio, by which we are committed to acquire at least 70% of the gas volume guaranteed in the agreement with CEG Rio. Under the terms of the agreement, we are not required to advance funds raised against future processing charges if CEG Rio is unable to meet its financial obligations. In addition, if we do not acquire the minimum volume agreed, the amount paid which relates to that difference may be compensated in future years, including one year after the contract’s expiration.

We and CEG Rio are negotiating new values for this contract.

Ferrovia Centro Atlântica - FCA

Transportation of Reduction Products

This agreement covers transportation of reduction products from the city of Arcos to the city of Volta Redonda.

The volume set for reduction products from January to April of 2012 was 633,333 tons, with an acceptable variation of up to 5%. The volume set from May to December of 2012 was 1,382,222 tons, with an acceptable variation of up to 10%.

As of 2013, volume set for reduction products is 2,073,333 tons per year, with an acceptable variation of up to 10%. This agreement will expire on August 31, 2013.

95

Table Of Contents

Transportation of Clinker

This agreement covers transportation of clinker products from the city of Arcos to the city of Volta Redonda.

The volume set for clinker transportation from January to April of 2012 was 250,000 tons, with an acceptable variation of up to 29%. The volume set from May to December of 2012 was 440,000 tons, with an acceptable variation of up to 10%.

As of 2013, the volume set for clinker is 660,000 tons per year, with an acceptable variation of up to 10%. This agreement will expire on April 19, 2020.

In 2013, the calculation of “take-or-pay” will consider the total volume performed in both contracts - clinker and reduction products – regardless of the percentage transported of each one.

Vale S.A.

To secure pellets supply, in 2009 we signed a 5-year “take-or-pay” agreement with Vale, by which we are committed to acquire at least 90% of the pellets volume guaranteed in an agreement with Vale. Under the terms of the agreement, we are not required to advance funds raised against future processing charges if Vale is unable to meet its financial obligations.

Companhia Paranaense de Gás - COMPAGÁS

We and Companhia Paranaense de Gás entered into a 20-year contract to secure natural gas supply. According to the “take or pay” clause, we are committed to acquire at least 80% of the annual natural gas volume contracted from Companhia Paranaense de Gás.

Companhia Paranaense de Energia – COPEL

To secure energy supply, we entered into a 20-year agreement with Companhia Paranaense de Energia. According to the “take or pay” clause, we are committed to acquire at least 80% of the annual energy volume contracted from Companhia Paranaense de Energia.

América Latina Logística - ALL

This agreement covers transportation of steel products from Volta Redonda to CSN Paraná. Volume set for steel products is 20,000 tons per month, with an acceptable variation of up to 10%. This agreement was initially valid until August 31, 2012, and CSN and ALL are negotiating the terms of a new contract.

K&K Tecnologia

CSN undertakes to acquire at least 3,000 metric tons of blast furnace mud for processing at CSN's mud concentration plant. This agreement is valid until March 31, 2023.

Harsco Metals Ltda

The Harsco Metals Ltda. undertakes to perform the Scrap recovery Services resulting from the process of production of pig iron and steel from Presidente Vargas Steelworks, receiving by this process the equivalent in value the result of multiplying the unit price (U.S.$/t) by the total Liquid Steel CSN’s Mill production, with a guarantee of a minimum production of liquid steel corresponding to 400,000 tons. This agreement is valid until June 30, 2014.

Siemens

Siemens Vaiz Metal Services provides Continuous Casting Machines Maintenance Services in steel production at Presidente Vargas Steelworks, with a guarantee of a minimum production of 365,000 tons per month. This agreement is valid until June 30, 2014.

5F. Tabular Disclosure of Contractual Obligations

96

Table Of Contents

The following table represents our long-term contractual obligations as of December 31, 2012:

|  | Payment due by period
|  | (In millions of R$)
|  |  |  |  |  |  |  |  |  | More
Contractual obligations |  |  |  | Less than |  |  |  |  |  | than 5
|  | Total |  | 1 year |  | 1-3 years |  | 3-5 years |  | years
Long-term accrued finance |  |  |  |  |  |  |  |  |  |
charges(1) |  | 15,196 |  | 1,885 |  | 3,328 |  | 2,360 |  | 7,623
Taxes payable in installments |  | 1,119 |  | 97 |  | 197 |  | 188 |  | 637
Long-term debt |  | 27,856 |  | 2,887 |  | 7,131 |  | 7,231 |  | 10,607
“Take-or-Pay” contracts |  | 1,971 |  | 609 |  | 817 |  | 314 |  | 231
Derivatives swap agreements(2) |  | 4 |  | 4 |  | 0 |  | 0 |  | 0
Concession agreements(3) |  | 2,806 |  | 235 |  | 486 |  | 486 |  | 1,598
Purchase obligations: |  |  |  |  |  |  |  |  |  |
Raw materials(4) |  | 1,522 |  | 998 |  | 484 |  | 11 |  | 29
Maintenance(5) |  | 296 |  | 222 |  | 74 |  | 0 |  | 0
Utilities/Fuel(6) |  | 1,668 |  | 793 |  | 409 |  | 349 |  | 117
Total |  | 3,486 |  | 2,013 |  | 967 |  | 360 |  | 147

(1) | These accrued finance charges refer to the cash outflow related to the contractual interest expense of our long-term debt and were calculated using the contractual interest rates taken forward to the maturity dates of each contract.
(2) | Derivative swap agreements were calculated based on market prices, on December 31, 2012, for futures with similar maturity to our derivative swap agreements.
(3) | Refers to TECON, TECAR, MRS and Transnordestina’s concessions agreements
(4) | Refers mainly to purchases of coal, tin, aluminum, zinc and iron ore (pellets), which comprise part of the raw materials for steel manufacturing.
(5) | We have outstanding contracts with several contractors in order to maintain our plants in good operating conditions; due to the strong demand for specialized maintenance service, the term of some of these contracts is for more than one year.
(6) | Refers mainly to natural gas, power supply and cryogenics, which are provided by limited suppliers; and with some of which we maintain long-term contracts.

5G. Safe Harbor

See “Forward-Looking Statements.”

Item 6. Directors, Senior Management and Employees

6A. Directors and Senior Management

General

We are managed by our Board of Directors (Conselho de Administração), which consists of up to eleven members, and our Board of Executive Officers (Diretoria Executiva), which consists of two to nine Executive Officers with no specific designation (one of whom is the Chief Executive Officer). In accordance with our bylaws (Estatuto Social), each Director is elected for a term of one year by our shareholders at an annual shareholders’ meeting. Our bylaws require our employees to be represented by one Director on the Board of Directors. The members of the Board of Executive Officers are appointed by the Board of Directors for a two-year term.

Our Board of Directors is responsible for setting general guidelines and policies for our business and our Board of Executive Officers is responsible for the implementation of such guidelines and policies and for our day-to-day operations. As of the date of this annual report, our Board of Directors was comprised of one Chairman, one Vice Chairman and five members, and our Board of Executive Officers was comprised of our Chief Executive Officer and six Executive Officers.

Our Directors and Executive Officers as of the date of this annual report are:

Name |  | Position |  | First Elected on |  | Last Elected on
Board of Directors |  |  |  |  |  |
Benjamin Steinbruch |  | Chairman |  | April 23, 1993 |  | April 30, 2013
Jacks Rabinovich |  | Vice Chairman |  | April 23, 1993 |  | April 30, 2013
Fernando Perrone |  | Member |  | September 26, 2002 |  | April 30, 2013
Antonio Francisco dos Santos |  | Member |  | December 23, 1997 |  | April 30, 2013
Yoshiaki Nakano |  | Member |  | April 29, 2004 |  | April 30, 2013
Antonio Bernardo Vieira Maia |  | Member |  | April 30, 2013 |  | April 30, 2013
Aloysio Meirelles de Miranda Filho |  | Member |  | April 30, 2013 |  | April 30, 2013
Board of Executive Officers |  |  |  |  |  |
Benjamin Steinbruch |  | Chief Executive Officer |  | April 30, 2002 |  | August 2, 2011
Enéas Garcia Diniz |  | Executive Officer |  | June 21, 2005 |  | August 2, 2011
José Taragano |  | Executive Officer |  | December 15, 2009 |  | August 2, 2011
David Moise Salama |  | Executive Officer |  | August 2, 2011 |  | August 2, 2011
Luis Fernando Barbosa Martinez |  | Executive Officer |  | August 2, 2011 |  | August 2, 2011
Juarez Saliba de Avelar |  | Executive Officer |  | October 26, 2011 |  | October 26, 2011
Tufi Daher Filho |  | Executive Officer |  | October 4, 2012 |  | October 4, 2012

97

Table Of Contents

The next election for our Board of Directors is expected to take place in April, 2014. The next election for our Board of Executive Officers is expected to take place in the next meeting of our Board of Directors.

Board of Directors

Benjamin Steinbruch. Mr. Steinbruch has been a member of our Board of Directors since April 23, 1993, and has simultaneously held the positions of Chairman since April 28, 1995 and CEO since April 30, 2002. He is also a member of the Administrative Board of the Portuguese Chamber, 1st Vice-President of the Federation of Industries of the State of São Paulo - FIESP since September 2004, member of FIESP’s Superior Strategic Board, advisor to the Robert Simonsen Institute, and advisor of the Institute for Industrial Development Studies - IEDI. Over the past five years, he also served as Chairman of the Board of Directors and CEO of Vicunha Siderurgia S.A., Vice Chairman of the Board of Directors of Textília S.A., Director of Vicunha Aços S.A., Vicunha Steel S.A., Vicunha S.A., Elizabeth S.A. – Indústria Têxtil, Vicunha Participações S.A., Officer of Rio Purus Participações S.A., and Officer of Rio Iaco (all these companies belong to the controlling group of CSN), Director of Prada Metallurgical Company and Nacional Minérios S.A. (both controlled by CSN), member of the Deliberative Council of the CSN Foundation, and Administrator of Fazenda Alvorada de Bragança Agro-Pastoril Ltda., Ibis Agrária Ltda., Ibis II Empreendimentos Ltda., Ibis Participações e Serviços Ltda., and Haras Phillipson Ltda. Mr. Steinbruch graduated from the Business School of Fundação Getúlio Vargas – FGV/SP and specialized in Marketing and Finance also from Fundação Getúlio Vargas - FGV/SP.

Jacks Rabinovich. Mr. Rabinovich has been a member of our Board of Directors since April 23, 1993 and Vice Chairman since April 24, 2001. Mr. Rabinovich graduated in Civil Engineering from Universidade Mackenzie - SP, and has a specialization in Textile Engineering from the Lowell Institute, Massachusetts - USA.

Fernando Perrone. Mr. Perrone has been a member of our Board of Directors since September 26, 2002, and a member of our Audit Committee since June 24, 2005, where he currently holds the position of President. He was our Infrastructure and Energy Executive Officer from July 10, 2002, to October 2, 2002. Over the past five years, he served as member of the Board of Directors of Profarma - Pharmaceuticals Distributor S.A., member of the Board of Directors of João Fortes Engenharia S.A., and member of the Management Board of Energia Sustentável S.A. Mr. Perrone graduated in Business from a program sponsored by "Chimica" Bayer S.A., holds a Law degree from Universidade Federal Fluminense – UFF/RJ, and has a graduate degree in Economics in the area of Capital Markets from Fundação Getulio Vargas – FGV/SP.

Antonio Francisco dos Santos. Mr. Santos has been a member of our Board of Directors since December 23, 1997, and a member of our Audit Committee since April 27, 2012. He is currently Chairman and Chief Executive Officer of CSN’s Employee Investment Club (Clube de Investimento CSN). Over the past five years he served as Planning and Support Officer of CSN, and Coordinator and Chief of Industrial Engineering, Chief of Production Planning and member of the Board of Directors of the Caixa Beneficente dos Empregados of CSN, or CBS, our pension plan. Mr. Santos graduated in Business and holds a graduate degree in Organization and Finance, both from the Coordination of Graduate Studies and Research - CECOP, and an MBA in Industrial Strategy and Business Management from Universidade Federal Fluminense – UFF/RJ.

98

Table Of Contents

Yoshiaki Nakano. Mr. Nakano has been a member of our Board of Directors since April 29, 2004, and a member of our Audit Committee since June 24, 2005. Over the past five years, Mr. Nakano has been a professor at the School of Economics of Fundação Getulio Vargas – FGV/SP, a board member of the Fundação de Amparo à Pesquisa do Estado de São Paulo – FAPESP, a member of the Conselho Superior de Economia (COSEC) of FIESP/Instituto Roberto Simonsen, and a member of the Consulting Board of the Grupo Pão de Açúcar. Previously, Mr. Nakano served as Special Secretary for Economic Affairs in the Ministry of Finance and as Finance Secretary of the State of São Paulo. Mr. Nakano graduated in Business Administration from Fundação Getulio Vargas and has an MBA and a Ph.D. from Cornell University, USA.

Antonio Bernardo Vieira Maia. Mr. Maia was elected member of our Board of Directors on April 30, 2013. He is also CEO of BRG Capital Ltda. since July, 2005. From April, 1995 to May, 2005 he was Officer of Credit Suisse / Banco Garantia de Investimentos S.A.. He began his career in Citibank Brazil as an intern in 1982 and moved to New York in 1986, where he acted as Institutional Investment Analyst of Citigroup in Latin America until he became an Officer of Citigroup. He was associate of Banco Bozano Simonsen de Investimentos from August, 1979 to December, 1981 and member of the Board of Directors of Banque Bénédict Hentsch & Cie SA , Geneva, Switzerland from April to December, 2005. He graduated in 1981 in Business and Public Administration from the Fundação Getulio Vargas.

Aloysio Meirelles de Miranda Filho. Mr. Miranda Filho was elected member of our Board of Directors on April 30, 2013. He is also a member of the Ulhôa Canto Advogados Associados office since 1982, becoming Advisor Partner in 1989. Mr. Miranda Filho participates in the Deliberative Council of the Instituto Fernando Henrique Cardoso, member of the board of the Instituto de Gestão Educacional of the Fundação Lemann and of the Consultive Council of the Instituto Empreender Endeavor. Mr. Miranda Filho graduated in the Universidade do Estado do Rio de Janeiro – UERJ in 1984.

Board of Executive Officers

In addition to Mr. Steinbruch, the following people were members of our Board of Executive Officers as of the date of this annual report:

Enéas Garcia Diniz. Mr. Diniz holds the position of Executive Officer in charge of the production area since June 21, 2005. He has been serving CSN since 1985, previously acting as General Manager of Hot Rolling, General Manager of Maintenance, Metallurgy Officer and General Officer of the Presidente Vargas Steelworks. Mr. Diniz is also currently President of the Board of Directors of Transnordestina Logística S.A., a member of the Board of Directors and Officer of Companhia Metalúrgica Prada and Cia. Metalic Nordeste, a member of the Board of Directors of Nacional Minérios S.A., Sepetiba Tecon S.A. and Lusosider Aços Planos S.A., Officer of CSN Cimentos S.A. and CSN Energia S.A. and a member of the Deliberative Council of Caixa Beneficente dos Empregados da Companhia Siderúrgica Nacional – CBS. Mr. Diniz graduated in Mechanical Engineering from Pontificia Universidade Católica do Rio de Janeiro - PUC / RJ, further specialized in Business Management from Universidade Federal Fluminense - UFF/RJ and has an MBA from the Fundaçăo Dom Cabral Business School of Belo Horizonte.

José Taragano. Mr. Taragano was elected Executive Officer on December 15, 2009, being in charge of the projects area. He is currently a member of the Board of Directors and Executive Officer of Cia Metalic Nordeste, a member of the Board of Directors of Companhia Metalúrgica Prada and of Nacional Minérios S.A., and Executive Officer of Estanho de Rondônia S.A. – ERSA. He previously served as COO - Executive VP of Operations of Brenco – Companhia Brasileira de Energia Renovável, Executive and Business Officer of Klabin S.A., Environment, Health & Safety Worldwide Officer of Alcoa Inc. in New York, Officer of Primary Products/Aluminum, Alumina & Chemical Products, Officer of Quality and Human Resources and Superintendent of Production of Alcoa Latin America in São Paulo, Chairman of CEMPRE – Compromisso Empresarial para a Reciclagem, member of the Healthy People 2010 Business Advisory Committee in Washington and acted as Independent Director at the Board of ECOSORB. Mr. Taragano graduated in Metallurgical Engineering from Pontifícia Universidade Católica of Rio de Janeiro - PUC-RJ, has an MBA in Marketing from the Fundação Instituto de Administração of Universidade de São Paulo / FIA-USP and further education at MIT / Sloan Executive Program and Harvard Business School / Finance for Senior Executives.

David Moise Salama. Mr. Salama was elected Executive Officer on August 2, 2011, being in charge of the investor relations area. He has been serving CSN since 2006, having previously acted as Investor Relations Manager. He is also currently serving as Executive Officer of CSN Cimentos, S.A. Prior to joining CSN, Mr. Salama acted as Financial Controller Officer at Tecnisa Engenharia e Comércio, Birmann Comércio e Empreendimentos and Goldfarb Comércio e Construções, was the head of consolidated financial information of Unilever Brasil and acted as senior auditor at PricewaterhouseCoopers. He is a member of the National Investor Relations Institute and of the Brazilian Institute of Investor Relations. Mr. Salama graduated in Accounting and has an MBA in Finance, both from the School of Economics, Business and Accounting of the Universidade de São Paulo / FEA-USP. He complemented his academic education by attending the Oxford Advanced Management and Leadership Program of Saïd Business School at Oxford University, England, and the Program on Negotiation of Harvard Law School at Harvard University, United States.

99

Table Of Contents

Luis Fernando Barbosa Martinez. Mr. Martinez was elected Executive Officer on August 2, 2011, being in charge of the steel products commercial area. He has been serving CSN since 2002, having previously acted as Sales Officer. Mr. Martinez is also President of the Brazilian Association of Steel Packaging – ABEAÇO, Officer of Cia. Metalic Nordeste, CSN Energia, S.A. and CSN Cimentos, S.A., member of the Board of Directors of Associação Brasileira de Metalurgia, Materiaise Mineração – ABM and an alternate member of the Board of Directors of Nacional Minérios, S.A. Prior to joining CSN, Mr. Martinez was a Sales Officer at Alcan Alumínio do Brasil S.A., having worked in such company for 14 years in different departments (processing, quality, product/market development and sales). He also acted as Executive Officer of the Brazilian Center of Steel Construction - CBCA and of the Brazilian Association of Metallic Construction - ABCEM. Mr. Martinez graduated in Metallurgical Engineering from Instituto Mauá de Tecnologia – IMT, has a graduate degree in Industrial Management from the School of Production Engineering of the Universidade de São Paulo, and also graduated from the Corporate Management Development Program at Alcan Aluminum Limited, Montreal, Canadá.

Juarez Saliba de Avelar. Mr. Avelar was elected Executive Officer on October 26, 2011 and is in charge of the new businesses area. Mr. Avelar previously worked at CSN from 2003 to 2010, having acted as Ports and Railroads Officer, Mining Officer, Mineral Resources Officer and New Businesses Officer. Prior to 2003, Mr. Avelar was the President of Ferteco Mineração, Officer of the Southern and Northern Systems of Vale S.A. and, from January 2010 to August 2011, acted as Chief Executive Officer of Steel do Brasil Participações S.A. Mr. Avelar is also a Director of Transnordestina Logística S.A. Mr. Avelar graduated in Mining Engineering from Universidade Federal de Minas Gerais - UFMG.

Tufi Daher Filho. Mr. Daher Filho was elected Executive Officer on October 04, 2012. He is currently the Chairman of the Board of Directors of MRS Logística, S.A. and a member of the Board of Directors of Transnordestina Logística, S.A. Mr. Daher Filho previously served as Chief Executive Officer of Transnordestina Logística, S.A. from March, 2007 to October, 2012. From January, 2000 to June, 2006, Mr. Daher Filho worked at Telemar Group as Superintendent responsible for the Amazonas and Roraima branches, Officer of Customer Services responsible for Ceará, Superintendent Officer responsible for Pernambuco, Superintendent Officer responsible for Rio de Janeiro, Officer responsible for the Southeast Region, and Operations Officer responsible for Brazil. He also acted as leader of Operations and Maintenance of Fixed and Mobile Telephony of Telemar Group beginning in July, 2004. In addition, he acted as Business Manager at Rede Ferroviária Federal S.A. (RFFSA) and Ferrovia Centro Atlântica (FCA), and Manager of Operations in Companhia Brasileira de Trens Urbanos – CBTU. He graduated in Civil Engineering from Universidade Católica de Minas Gerais and in Transportation Planning from the Japan International Cooperation Agency, Japan. He has a Corporate MBA degree from Fundação Dom Cabral and graduated in the Advanced Management Program of the European Institute of Business Administration - Insead, France.

There are no family relationships between any of the persons named above. The address for all of our directors and executive officers is Av. Brigadeiro Faria Lima, 3400, 20th floor, Itaim Bibi, city of São Paulo, State of São Paulo, Brazil (telephone number 55-11-3049-7100).

Indemnification of Officers and Directors

There is no provision for or prohibition against the indemnification of officers and directors in Brazilian law or in our bylaws. Officers are generally not individually liable for acts performed within the course of their duties. We either indemnify or maintain directors’ and officers’ liability insurance insuring our Directors, our Executive Officers and certain key employees against liabilities incurred in connection with their respective positions with us.

6B. Compensation

For the year ended December 31, 2012, the aggregate compensation paid by us to all members of our Board of Directors and the members of our Board of Executive Officers for services in all capacities was R$30.7 million, which includes salaries, bonuses, profit sharing arrangements and benefits, such as medical assistance, pension plan and life insurance, among others. See “—Item 6D. Employees” for a brief description of our profit sharing arrangements.

100

Table Of Contents

We are the principal sponsor of CBS, our employee pension plan. CBS had an excess of plan assets over pension benefit obligations of R$257 million in 2012. The fair value of the plan assets of CBS, totaled R$2,923 million as of December 31, 2012, and projected benefit obligations were R$2,666 million. See Note 28 to our consolidated financial statements contained in “Item 18. Financial Statements.”

6C. Board Practices

Fiscal Committee and Audit Committee

Under Brazilian Corporate Law, shareholders may request the appointment of a Fiscal Committee (Conselho Fiscal), which is a corporate body independent of management and our external auditors. The primary responsibility of the Fiscal Committee is to monitor management’s activities, review the financial statements, and report its findings to the shareholders.

In June 2005, an Audit Committee (Comitê de Auditoria) was appointed in compliance with SEC’s rules, which is composed of independent members of our Board of Directors. The Audit Committee is responsible for recommending to the Board of Directors the appointment of the independent auditors, reporting on our auditing policies and our annual audit plan prepared by our internal auditing team, as well as monitoring and evaluating the activities of the external auditors. Our Audit Committee has also been tasked with identifying, prioritizing and submitting actions to be implemented by our Executive Officers, analyzing our annual report and our financial statements, and making recommendations to our Board of Directors.

The Audit Committee is currently composed of Mr. Fernando Perrone, Mr. Yoshiaki Nakano and Mr. Antonio Francisco dos Santos and is constantly assisted by an outside consultant.

For information on the date of election and term of office of the members of our Board of Directors and Board of Executive Officers, see “Item 6A. Directors and Senior Management.”

Service Contracts

We permit our directors to continue to participate in our employee pension plan after ceasing to be a director of our Company.

6D. Employees

As of December 31, 2010, 2011 and 2012, we had 19,217, 20,791 and 21,232 employees, respectively. As of December 31, 2012, approximately 3,540 of our employees were members of the Steelworkers’ Union of Volta Redonda and region, which is affiliated with the Força Sindical since 2012, a national union. We believe we have a good relationship with Força Sindical. We have collective bargaining agreements, renewable annually on May 1st of every year. Moreover, we have members affiliated with other unions, such as the Engineers’ Union with 37 members, the Accountants’ Union with 7 members and the Workers’ Unions from Arcos, Casa de Pedra, Camaçari, Recife and Araucária, with a total of 332 members. At all other companies controlled by CSN, such as Prada, ERSA, Namisa and Transnordestina, we have a total of 1,308 members.

In March 1997, we established an employee profit sharing plan. All employees participate in the plan, and earn bonuses based on our reaching certain goals for each year, including a minimum EBITDA margin, as well as other measures such as sales, cost control, productivity and inventory levels, as appropriate for each sector based on its nature.

6E. Share Ownership

The Steinbruch family, which includes Mr. Benjamin Steinbruch, our Chairman and Chief Executive Officer holds an indirect majority ownership interest in Vicunha Siderurgia and Rio Iaco Participações, our controlling shareholders.

All of our Executive Officers and members of our Board of Directors held an aggregate of 5,558 shares of our outstanding common shares as of December 31, 2012.

101

Table Of Contents

Item 7. Major Shareholders and Related Party Transactions

7A. Major Shareholders

On December 31, 2012, our capital stock was composed of 1,457,970,108 common shares. Our capital stock is entirely composed of common shares and each common share entitles the holder to one vote at our shareholders’ meetings.

The following table sets forth, as of December 31, 2012, the number of our common shares owned by all persons known to us that own more than 5% of our outstanding common shares as of such date:

|  | Common Shares
|  |  |  | Percent of
|  | Shares Owned |  | Outstanding
Name of Person or Group |  |  |  | Shares
Vicunha Siderurgia S.A.(1) |  | 697,719,990 |  | 47.86%
Rio Iaco Participações S.A. (1) |  | 58,193,503 |  | 3.99%

(1) | Owned indirectly by the Steinbruch family, which includes Mr. Benjamin Steinbruch, Chairman of our Board of Directors and CEO, as well as other members of his family.

7B. Related Party Transactions

From time to time we conduct transactions with companies directly or indirectly owned by our principal shareholders or members of our Board of Directors. See “Item 4. Information on the Company – A. History and Development of the Company,” “Item 4B. Business Overview,” “Item 4D. Property, Plant and Equipment – Acquisitions and Dispositions”, “Item 6A. Directors and Senior Management”, “Item 7A. Major Shareholders” and Note 18 to the consolidated financial statements included in “Item 18. Financial Statements.”

Item 8. Financial Information

8A. Consolidated Statements and Other Financial Information

See “Item 3. Key Information—Selected Financial Data” and “Item 18. Financial Statements” for our consolidated financial statements.

Legal Proceedings

In the ordinary course of our business, we are party to several proceedings, both administrative and judicial, which we believe are incidental and arise out of our regular course of business. We believe that the outcome of the proceedings to which we are currently a party will not have a material adverse effect on our financial position, results of operations and cash flows. We have established provisions for all amounts in dispute that represent a probable loss based on the legal opinion of our internal and external legal counsels.

Labor Contingencies

As of December 31, 2012, the Company and its subsidiaries are defendants in 12,080 labor claims, for which a provision has been recorded in the amount of R$246 million. Most of the claims are related to alleged joint liability between us and our independent contractors, wage equalization, differences of 40% fine on the FGTS deposits regarding pre-retirement periods and due to inflation purge, additional payments for unhealthy and hazardous activities, overtime and profit sharing differences from 1997 to 1999 and from 2001 to 2003.

Civil Contingencies

These are mainly claims for indemnities within the civil judicial processes in which we are involved. Such proceedings, in general, result of occupational accidents, diseases and contractual disputes related to our industrial activities. As of December 31, 2012, the amount relating to probable losses for these contingencies was R$110 million.

102

Table Of Contents

We also classify as civil contingencies the administrative and judicial proceedings filed against us for alleged violation of environmental statutes, mainly as a result of our industrial activities, claims for regularization, indemnification or imposition of fines. As of December 31, 2012, the amount relating to probable losses for civil contingencies relating to environmental issues was R$7 million.

Tax Contingencies

Among our tax contingencies there are charges for alleged non-payment of income tax and social contribution taxes in Brazil, for which a provision of R$321 million has been recorded in 2012.

Refis

In November 2009, we adhered to the Tax Recovery Program (REFIS) established by the Federal Government in order to settle our tax and social security liabilities through a special settlement and installment payment system. Management’s decision took into consideration the economic benefits provided by the REFIS, such as discounts and fines exemptions, as well as the high costs of maintaining pending lawsuits. Joining the REFIS allows us to pay a reduced amount of the fines, interest and legal charges that were previously due. On December 31, 2012, the position of the debt under the REFIS, recorded under taxes payable in installments, was R$1,119 million (R$2,095 million in 2011).

Antitrust

In October 1999, CADE fined us, claiming that certain practices adopted by us and other Brazilian steel companies up to 1997 allegedly comprised a cartel. We challenged the cartel allegation and the imposition of the fine judicially and, on June 2003, obtained a partially favorable judgment by a federal trial court. CADE appealed the trial court decision and, on June 2010, a federal appellate court in Brasília held a judgment reversing the trial court’s decision and confirming the cartel allegation as well as the fine imposed by CADE in the amount of R$65 million. We appealed the decision of the appellate court to the Brazilian Superior Court of Justice. We have not yet recorded any provision in connection with this fine.

In September 2011, we received a request from Secretaria de Direito Econômico (SDE) to provide information related to the acquisition of shares of Usinas Siderúrgicas de Minas Gerais S.A. – Usiminas in order to evaluate a possible concentration act. In October 2011, SDE involved the Conselho Administrativo de Defesa Econômica (CADE) and the Secretaria de Acompanhamento Econômico (SEAE) on the subject. We have been providing the requested information to such antitrust bodies.

In April and July, 2012, CADE issued certain injunctive orders limiting our ability to, among other things, acquire more Usiminas shares or exercise our voting rights on the shares we already own. We are currently discussing with CADE alternatives to preserve our rights and protect our financial investment.

Other Legal Proceedings

The Company and its subsidiaries are defendants in other proceedings at administrative and judicial levels, in the approximate amount of R$14,631 million, of which R$12,849 million relate to tax contingencies, R$615 million to civil contingencies, R$1,137 million to labor and social security contingencies and R$30 million to environmental contingencies. The assessments made by legal counsel define these contingencies as entailing a risk of possible loss and, therefore, no provision has been recorded. Contingencies related to each of our subsidiaries are included proportionally to the percentage of these subsidiaries that we consolidate in our financial statements.

Our tax contingencies are as follows:

103

Table Of Contents

a) R$1,814 million refers to tax assessment notices issued against the Company for the alleged non-taxation of profits earned on the balances of its foreign subsidiaries for purposes of Income Tax (IRPJ) and Social Contribution on Net Income (CSLL);

b) R$154 million refers to tax assessment notices issued against our investee Namisa also for the alleged non-taxation of profits earned on the balances of its foreign subsidiary for purposes of Income Tax (IRPJ) and Social Contribution on Net Income (CSLL). The total amount of this assessment notice is R$256 million, but as we only consolidate our 60% interest in Namisa, we include only 60% of this amount in our contingencies;

c) R$6,079 million refers to a tax assessment notice issued against the Company for having allegedly failed to submit to taxation the capital gain resulting from the alleged sale of 40% of the shares of its subsidiary Namisa to the Asian consortium;

d) R$1,048 million refers to a tax assessment notice issued against our investee Namisa in connection with its alleged improper use of the goodwill resulting from the investment made by the Asian consortium in Namisa’s direct controlling entity, which was later merged into Namisa. The total amount of this assessment notice is R$1,747 million, but as we only consolidate our 60% interest in Namisa, we include only 60% of this amount in our contingencies; and

e) R$3,754 million refers to other taxes (local, state and federal taxes) and social security contingencies, which includes our own contingencies and those related to our subsidiaries, proportionally to the percentage of those subsidiaries that we consolidate in our financial statements.

The Company was also a defendant in an arbitration proceeding at the International Court of Arbitration - ICC that discussed potential damages suffered by the plaintiff due to a breach of contract in the estimated amount of R$84 million. The parties settled the case over the course of 2012 and it is currently closed.

In July 2012, the Ministério Público Estadual do Rio de Janeiro (Environmental Public Prosecutor of the State of Rio de Janeiro) filed a judicial proceeding against us claiming that we must (i) remove all waste disposed in two areas used as an industrial waste disposal site in the city of Volta Redonda and (ii) relocate 750 residences located in the adjacent neighborhood Volta Grande IV Residential, also in the city of Volta Redonda. This case is classified as having a risk of probable loss, but we have not yet recorded any provision since, at this moment, it is not possible to quantify the amounts involved in the case.

In 2012, we received notices for lawsuits brought by certain home owners at Volta Grande IV Residential claiming indemnification for alleged moral and material damages. At this point, it is not possible to quantify the amounts involved in this claim. Such lawsuits are classified as having a risk of possible loss and, therefore, we recorded no provision.

On April 8, 2013, the Rio de Janeiro State environmental authority (Instituto Estadual do Ambiente), or INEA, fined us R$35 million in connection with the matters involving Volta Grande IV Residential and requested we perform the same actions already under discussion in the July 2012 public prosecutor lawsuit. We plan to dispute this fine and the other requests made by INEA.

For further information on our legal proceedings and contingencies, see Notes 16 and 17 to our consolidated financial statements.

Dividend Policy

General

Subject to certain exceptions set forth in Brazilian Corporate Law, our bylaws require that we pay a yearly minimum dividend equal to 25% of our adjusted net profits, calculated in accordance with Brazilian Corporate Law. Proposals to declare and pay dividends in excess of the statutory minimum dividend requirement are generally made at the recommendation of our Board of Directors and approved by the vote of our shareholders. Any such proposal will be dependent upon our results of operations, financial condition, cash requirements for our business, future prospects and other factors deemed relevant by our Board of Directors. Until December 2000, it had been our policy to pay dividends on our outstanding common shares not less than the amount of our required distributions for any particular fiscal year, subject to a determination by our Board of Directors that such distributions would be inadvisable in view of our financial condition. In December 2000, our Board of Directors decided to adopt a policy of paying dividends equal to all legally available net profits, after taking into consideration the following priorities: (i) our business strategy; (ii) the performance of our obligations; (iii) the accomplishment of our required investments; and (iv) the maintenance of our good financial status.

104

Table Of Contents

Pursuant to a change in Brazilian tax law effective January 1, 1996, Brazilian companies are also permitted to pay limited amounts of interest on stockholders’ equity to holders of equity securities and to treat these payments as an expense for Brazilian income tax purposes. These payments may be counted in determining if the statutory minimum dividend requirement has been met, subject to shareholder approval.

For dividends declared during the past four years, see “Item 3A. Selected Financial Data.”

At our Annual Shareholders’ Meeting of April 30, 2013, our shareholders approved the payment of R$300 million as dividends and R$560 million as interest on shareholders’ equity relating to 2012.

Amounts Available for Distribution

At each Annual Shareholders’ Meeting, our Board of Directors is required to recommend how our earnings for the preceding fiscal year are to be allocated. For purposes of Brazilian Corporate Law, a company’s income net of income tax and social contribution for any one fiscal year, any accumulated losses from prior fiscal years and amounts allocated to employees’ and management’s participation in earnings, represents its “net profits” for that fiscal year.

In accordance with Brazilian Corporate Law, an amount equal to 50% of our net profits as further (i) reduced by amounts allocated to the legal reserve; (ii) reduced by amounts allocated to the contingency reserve and the tax incentive reserve, if any; and (iii) increased by the eventual reversion of any contingency reserves constituted in prior years, will be available for distribution to shareholders in any particular year (“Distributable Amount”).

Legal Reserve. Under Brazilian Corporate Law, we are required to maintain a “legal reserve” to which we must allocate 5% of our “net profits” for each fiscal year until the amount of the reserve equals 20% of our paid-in capital. However, we are not required to make any allocations to our legal reserve in a year in which the legal reserve, when added to our other established capital reserves, exceeds 30% of our capital stock. The amounts allocated to such reserve must be approved by our shareholders in the Annual Shareholders’ Meeting, and may be used to increase our capital stock or to offset losses and, therefore, are not available for the payment of dividends.

Discretionary (or Statutory) Reserves. Under Brazilian Corporate Law, any corporation may provide in its by-laws for the creation of additional reserves, provided that the maximum amount that may be allocated to such reserves, the purpose of such reserves and the allocation criteria of such reserves are specified. There cannot be any allocation to such reserves if it affects payment of the Mandatory Dividend (as defined below). Our by-laws currently provide that our Board of Directors may propose to our shareholders the deduction of at least 1% from our net profits to be allocated to a Working Capital and Investments Reserve. Constitution of such reserve will not affect payment of the Mandatory Dividend. Our by-laws do not provide for any other discretionary reserve.

Contingency Reserve. Under Brazilian Corporate Law, a percentage of our “net profits” may be allocated to a contingency reserve for estimable losses that are considered probable in future years. Any amount so allocated in a prior year must either be reserved in the fiscal year in which the loss had been anticipated if the loss does not occur as projected or be written off in the event that the anticipated loss occurs.

Tax Incentive Reserve. Our shareholders in a shareholders’ meeting may, following a management’s proposal, allocate to a tax incentive reserve the portion of our “net profits” resulting from donations or governmental grants for investments, which may be excluded from the taxable basis of the Mandatory Dividend. Our by-laws currently do not provide for such reserve.

105

Table Of Contents

Unrealized Profits Reserve. Under Brazilian Corporate Law, the amount by which the Mandatory Dividend exceeds our realized net profits in a given fiscal year may be allocated to an unrealized profits reserve. Brazilian Corporate Law defines “realized net profits” for the period as the amount by which our “net profits” exceeds the sum of (i) positive equity net results and (ii) the net profits, gains or returns that will be realized after the end of the subsequent fiscal year. “Net profits” allocated to the unrealized profits reserve must be added to the next Mandatory Dividend distribution after those profits have been realized, if they have not been used to absorb losses in subsequent periods.

Retained Earnings Reserve. Under Brazilian Corporate Law, our shareholders may decide at a general shareholders’ meeting to retain a portion of our net profits as provided for in a previously approved capital expenditure budget. No allocation of net profits may be made to the retained earnings reserve in case such allocation affects payment of the Mandatory Dividend.

The balance of our profit reserves, except those for contingencies, tax incentives and unrealized profits, shall not be greater than our capital stock. If such reserves reach this limit, the manner in which such surplus is used will be decided at a shareholders’ meeting.

For purposes of determining reserve amounts, the calculation of “net profits” and allocations to reserves for any fiscal year are determined on the basis of financial statements prepared in accordance with Brazilian Corporate Law. The consolidated financial statements included herein have been prepared in accordance with IFRS and, although our allocations to reserves and dividends will be reflected in the financial statements, investors will not be able to calculate the allocations or required dividend amounts from the consolidated financial statements.

Capital Reserve. Under Brazilian Corporate Law, the capital reserve consists of premiums from the issuance of shares, goodwill reserves from mergers, sales of founders' shares, and sales of warrants. Amounts allocated to our capital reserve are not taken into consideration for purposes of determining Mandatory Dividends. Our capital stock is not currently represented by founders' shares. In our case, any amounts allocated to the capital reserve may only be used to increase our capital stock, to absorb losses that surpass accumulated profits and profit reserves, or to redeem, reimburse or purchase shares.

Mandatory Dividend

Under our bylaws, we are required to distribute to shareholders as dividends in respect of each fiscal year ending on December 31, to the extent profits are available for distribution, an amount equal to at least 25% of the Distributable Amount (the “Mandatory Dividend”) in any particular year, which amount shall include any interest paid on capital during that year. See “Additional Payments on Shareholders’ Equity” below. In addition to the Mandatory Dividend, our Board of Directors may recommend that shareholders receive an additional payment of dividends from other funds legally available. Any payment of interim dividends may be netted against the amount of the Mandatory Dividend for that fiscal year. Under Brazilian Corporate Law, if the Board of Directors determines prior to the Annual Shareholders’ Meeting that payment of the Mandatory Dividend for the preceding fiscal year would be inadvisable in view of our financial condition, the Mandatory Dividend does not need to be paid. That type of determination must be reviewed by the Fiscal Committee, if one exists, and reported, together with the appropriate explanations, to the shareholders and to the CVM. Mandatory dividends not distributed as described above shall be registered as a special reserve and, if not absorbed by losses in subsequent fiscal years, shall be paid as a dividend as soon as our financial condition allows for it.

Payment of Dividends

We are required to hold Annual Shareholders’ Meetings within the first four months after the end of our fiscal year at which an annual dividend may be declared. Additionally, our Board of Directors may declare interim dividends. Under Brazilian Corporate Law, dividends are generally required to be paid to the holder of record on a dividend declaration date within 60 days following the date the dividend was declared, unless a shareholders’ resolution sets forth another date of payment, which, in either case, must occur prior to the end of the fiscal year in which the dividend was declared. A shareholder has a three-year period from the dividend payment date to claim dividends (or interest on shareholders’ equity as described under “Additional Payments on Shareholders’ Equity” below) in respect of its shares, after which we will no longer be liable for the dividend payments.

106

Table Of Contents

Our payments of cash distributions on common shares underlying the ADSs will be made in Brazilian currency to our ADR custodian on behalf of our ADR depositary. Our ADR custodian will then convert the proceeds into U.S. dollars and will cause the U.S. dollars to be delivered to our ADR depositary for distribution to holders of ADSs.

Additional Payments on Shareholders’ Equity

Since January 1, 1996, Brazilian companies have been permitted to pay interest on shareholders’ equity to holders of equity securities and to treat those payments as a deductible expense for Brazilian income tax purposes. The amount of interest payable on capital is calculated based on the TJLP – Long Term Interest Rate, as determined by the Central Bank, and applied to each shareholder’s portion of net equity. Brazilian Corporate Law establishes that current earnings are not included as part of the net equity.

The TJLP is determined by the Central Bank on a quarterly basis. The TJLP is based on the annual profitability average of Brazilian public internal and external debt. The TJLP rate for the fourth quarter of 2012 was 5.5%

Interest on shareholders’ equity is deductible up to the greater of the following amounts: (i) 50% of the net profits, as determined for accounting purposes, for the current period of interest payment after the deduction of the social contribution on net profits and before the provision for income tax and the deduction of the amount of such interest; and (ii) 50% of the balance of accumulated earnings and profits reserves from prior years.

8B. Significant Changes

None

Item 9. The Offer and Listing

9A. Offer and Listing Details

Our capital stock is comprised of common shares without par value (ações ordinárias). On January 22, 2008, our shareholders approved a one-for-three split of our common shares. As a result of this stock split, each common share of our capital stock as of January 22, 2008 became represented by three common shares after the split. The same ratio of one common share for each ADS was maintained.

On March 25, 2010, our shareholders approved a two-for-one split of our common shares. As a result of this stock split, each common share of our capital stock as of March 25, 2010 became represented by two common shares after the split. The same ratio of one common share for each ADS was maintained. See “Item 10.B. Memorandum and Articles of Association.”

The following table sets forth information concerning the high and low closing sale prices and the average daily trading volume of our common shares on the BM&FBOVESPA (per common share) and the ADSs on the NYSE for the periods indicated.

| Common Shares(1) | American Depositary Shares(1)
| US$ per Share(2) |  | Volume | US$ per ADS |  | Volume
| High |  | Low |  | (In thousands) | High |  | Low |  | (In thousands)
2007: |  |  |  |  |  |  |  |  |  |  |  |  |
Year end |  | 14.90 |  | 4.67 |  | 5,330 |  | 15.28 |  | 4.71 |  | 6,980 |
2008: |  |  |  |  |  |  |  |  |  |  |  |  |
Year end |  | 25.63 |  | 4.12 |  | 5,761 |  | 25.51 |  | 3.94 |  | 9,219 |
2009: |  |  |  |  |  |  |  |  |  |  |  |  |
Year end |  | 18.45 |  | 6.03 |  | 4,930 |  | 18.61 |  | 6.00 |  | 7,214 |
2010: |  |  |  |  |  |  |  |  |  |  |  |  |
Year end |  | 20.81 |  | 13.37 |  | 3,637 |  | 20.76 |  | 13.38 |  | 5,360 |
2011 |  |  |  |  |  |  |  |  |  |  |  |  |
First quarter |  | 17.98 |  | 15.24 |  | 3,036 |  | 18.33 |  | 15.41 |  | 4,377 |
Second quarter |  | 16.81 |  | 11.60 |  | 3,169 |  | 17.22 |  | 11.81 |  | 4,453 |
Third quarter |  | 12.55 |  | 7.89 |  | 3,780 |  | 12.62 |  | 7.94 |  | 5,932 |
Fourth quarter |  | 9.66 |  | 7.23 |  | 3,683 |  | 9.89 |  | 7.31 |  | 4,573 |
Year End |  | 17.98 |  | 7.23 |  | 3,422 |  | 18.33 |  | 7.31 |  | 4,840 |
2012 |  |  |  |  |  |  |  |  |  |  |  |  |
First quarter |  | 10.83 |  | 8.09 |  | 3,958 |  | 10.88 |  | 8.53 |  | 5,486 |
Second quarter |  | 9.58 |  | 5.23 |  | 3,914 |  | 9.63 |  | 5.24 |  | 5,078 |
Third quarter |  | 6.80 |  | 4.56 |  | 6,435 |  | 6.78 |  | 4.55 |  | 7,331 |
Fourth quarter |  | 5.84 |  | 4.75 |  | 4,940 |  | 5.90 |  | 4.72 |  | 6,695 |
Year End |  | 10.83 |  | 4.56 |  | 4,817 |  | 10.88 |  | 4.55 |  | 6,148 |
2013 |  |  |  |  |  |  |  |  |  |  |  |  |
First quarter |  | 6.25 |  | 4.49 |  | 5,561 |  | 6.23 |  | 4.48 |  | 5,213 |

107

Table Of Contents

Month Ended:

October 31, 2012 |  | 5.82 |  | 5.34 |  | 4,263 |  | 5.78 |  | 5.30 |  | 6,963
November 30, 2012 |  | 5.82 |  | 4.75 |  | 5,186 |  | 5.75 |  | 4.72 |  | 7,295
December 31, 2012 |  | 5.84 |  | 4.93 |  | 5,509 |  | 5.90 |  | 4.84 |  | 5,784
January 31, 2013 |  | 6.25 |  | 5.41 |  | 5,314 |  | 6.23 |  | 5.43 |  | 5,409
February 28, 2013 |  | 5.62 |  | 4.93 |  | 4,876 |  | 5.54 |  | 4.90 |  | 4,065
March 31, 2013 |  | 5.45 |  | 4.49 |  | 6,437 |  | 5.44 |  | 4.48 |  | 6,097

Source: Economática.
(1) | Prices and volumes of our common shares and ADSs have been adjusted to reflect the two-for-one stock split occurred in March 2010 whereby each common share of our capital stock on March 25, 2010 became represented by two common shares. See “Item 10.B. Memorandum and Articles of Association.”
(2) | U.S. dollar amounts have been translated from reais at the exchange rates in effect on the respective dates of the quotations for the common shares set forth above. These U.S. dollar amounts may reflect exchange rate fluctuations and may not correspond to changes in nominal reais prices over time.

As of April 29, 2013, the closing sale price (i) per common share on the BM&FBOVESPA was of R$7.87 and (ii) per ADS on the NYSE was of US$3.93. The ADSs are issued under a deposit agreement and JP Morgan Bank serves as depositary under that agreement.

As of December 31, 2012, approximately 343 million, or approximately 23.5%, of our outstanding common shares were held through ADSs. Substantially all of these ADSs were held of record by The Depository Trust Company. In addition, our records indicate that on that date there were approximately 155 record holders (other than our ADR depositary) with addresses in the U.S., holding an aggregate of approximately 66 million common shares, representing 4.5% of our outstanding common shares.

9B. Plan of Distribution

Not applicable.

9C. Markets

The principal trading market for our common shares is BM&FBOVESPA. Our ADSs trade on the NYSE under the symbol “SID.”

Trading on the BM&FBOVESPA and NYSE

CSN shares traded in the market are comprised of ordinary shares without nominal value. Ordinary shares are traded on the Brazilian Stock Exchange, BM&FBOVESPA, under the code CSNA3. Our ADSs, each one representing an ordinary share, are traded on the New York Stock Exchange, NYSE, under the code SID.

In 2000, the BM&FBOVESPA was reorganized through the execution of a memoranda of understanding by the Brazilian stock exchanges. Under the memoranda, all securities in Brazil are now traded only on the BM&FBOVESPA. When shareholders trade in common and preferred shares on the BM&FBOVESPA, the trade is settled in three business days after the trade date without adjustment of the purchase price for inflation. The seller is ordinarily required to deliver the shares to the exchange on the third business day following the trade date. Delivery of and payment for shares are made through the facilities of BM&FBOVESPA’s clearinghouse.

The BM&FBOVESPA is significantly less liquid than the NYSE or other major exchanges in the world. As of December 2012, the aggregate market capitalization of the BM&FBOVESPA was equivalent to R$2.5 trillion (or US$1.2 trillion). In contrast, as of December 2012, the aggregate market capitalization of the NYSE was US$14.1 trillion. The average daily trading volume of the BM&FBOVESPA and NYSE for December 2012 was of approximately R$7.5 billion (or US$3.7 billion) and US$51.2 billion, respectively. Although any of the outstanding shares of a listed company may trade on the BM&FBOVESPA, in most cases fewer than half of the listed shares are actually available for trading by the public, since the remaining shares are generally being held by small groups of controlling persons, by government entities or by one principal shareholder. See “Item 3. Risk Factors—Risks Relating to the ADSs and Our Common Shares— The relative volatility and illiquidity of the Brazilian securities markets may substantially limit your ability to sell the common shares underlying the ADSs at the price and time you desire.”

108

Table Of Contents

As of December 31, 2012, we accounted for approximately 0.69% of the market capitalization of all listed companies on the BM&FBOVESPA.

The following table reflects the fluctuations in the Ibovespa index during the periods indicated:

Ibovespa Index

|  | High |  | Low |  | Close
2007 |  | 65,790 |  | 41,179 |  | 63,886
2008 |  | 73,516 |  | 29,435 |  | 37,550
2009 |  | 69,349 |  | 36,234 |  | 68,588
2010 |  | 72,995 |  | 58,192 |  | 69,304
2011 |  | 71,632 |  | 48,668 |  | 56,754
2012 |  | 68,394 |  | 52,481 |  | 60,952

2013 (through March 31) |  | 63,312 |  | 54,873 |  | 56,352

The IBOVESPA index closed at 56,352 on March 31, 2013. Trading on the BM&FBOVESPA by nonresidents of Brazil is subject to certain limitations under Brazilian foreign investment legislation. See “Item 10D. Exchange Controls.”

Regulation of the Brazilian Securities Markets

The Brazilian securities markets are regulated by CVM, which has authority over stock exchanges and the securities markets in general, and by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions. The Brazilian securities market is governed by Law No. 6,385 dated December 7, 1976, as amended, or the Brazilian Securities Law, Brazilian Corporate Law and regulations issued by CVM.

Under Brazilian Corporate Law, a company is either public, a companhia aberta, such as CSN, or private, a companhia fechada. All public companies are registered with CVM and are subject to reporting and regulatory requirements.

Trading in securities on the BM&FBOVESPA may be suspended at the request of a company in anticipation of a material announcement. The company should also suspend its trading on international stock exchanges where its securities are traded. Trading may also be suspended on the initiative of the BM&FBOVESPA or CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a material event or has provided inadequate responses to the inquires by CVM or the BM&FBOVESPA.

The Brazilian Securities Law and the regulations issued by CVM provide for, among other things, disclosure requirements, restrictions on insider trading and price manipulation, as well as protection of minority shareholders. However, the Brazilian securities markets are not as highly regulated and supervised as the United States securities markets or markets in certain other jurisdictions.

Disclosure Requirements

109

Table Of Contents

According to Law No 6,385, a publicly held company must submit to CVM and BM&FBOVESPA certain periodic information, including annual and quarterly reports prepared by management and independent auditors. This legislation also requires companies to file with CVM shareholder agreements, notices of shareholders’ meetings and copies of the related minutes.

Pursuant to CVM Resolution No. 358, of January 3, 2002, CVM revised and consolidated the requirements regarding the disclosure and use of information related to material facts and acts of publicly held companies, including the disclosure of information in the trading and acquisition of securities issued by publicly held companies.

Such requirements include provisions that:

· Establish the concept of a material fact that gives rise to reporting requirements. Material facts include decisions made by the controlling shareholders, resolutions of the shareholders at a shareholders’ meeting and of management of the company, or any other facts related to a company’s business (whether occurring within the company or otherwise somehow related thereto) that may influence the price of its publicly traded securities, or the decision of investors to trade such securities or to exercise any of such securities’ underlying rights;

· Specify examples of facts that are considered to be material, which include, among others, the execution of agreements providing for the transfer of control of the company, the entry or withdrawal of shareholders that maintain any managing, financial, technological or administrative function with or contribution to the company, and any corporate restructuring undertaken among related companies;

· Oblige the investor relations officer, controlling shareholders, other officers, directors, members of the audit committee and other advisory boards to disclose material facts;

· Require simultaneous disclosure of material facts to all markets in which the corporation’s securities are admitted for trading;

· Require the acquirer of a controlling stake in a corporation to disclose material facts, including its intentions as to whether or not to de-list the corporation’s shares within one year from the acquisition of such controlling stake;

· Establish rules regarding disclosure requirements in the acquisition and disposal of a material ownership interest; and

· Forbid trading on the basis of material non-public information.

Pursuant to CVM Rule No. 480, of December 7, 2009, CVM expanded the quantity and improves the quality of information reported by issuers in Brazil. This Rule represents a significant step forward in providing the market with greater transparency over securities issuers and provides for issuers to file annually a comprehensive and opinative reference form (Formulário de Referência).The reference form (Formulário de Referência) is in line with the Shelf Registration System recommended by the International Organization Securities Commission (IOSCO) and adopted in other countries (England and the United States, among others), by means of which the information regarding an specific issuer is consolidated into one document and is subject to periodic update (the “Shelf Document”). This mechanism offers the investor the possibility to analyze one single document for relevant information about the issuer.

CVM Rule No. 480 also created two groups of issuers per type of securities traded. Group A issuers are authorized to trade in any securities, whereas Group B issuers must not trade in stocks, depositary receipts (BDRs, Units) and securities convertible or exchangeable into stocks or depositary receipts. The greater extend of Group A authorization is followed by more stringent disclosure and reporting requirements. We, as issuers of stocks, are part of Group A and, as such, are subject to more stringent disclosure and reporting requirements.

CVM has also enacted Rule No. 481, of December 17, 2009 to regulate two key issues involving general meetings of shareholders in publicly held companies: (i) the extent of information and documents to be provided in support of call notices (subject to prior disclosure to shareholders); and (ii) proxy solicitation for exercise of voting rights.

110

Table Of Contents

CVM Rule No. 481 is intended to (i) improve the quality of information disclosed by publicly held companies to shareholders and to the market in general, favoring the use of Internet as a vehicle to that end; (ii) make the exercise of voting rights less costly and foster the participation of shareholders in general meetings, specially for companies with widely dispersed capital; and, consequently (iii) facilitate the oversight of corporate businesses.

9D. Selling Shareholders

Not applicable.

9E. Dilution

Not applicable.

9F. Expenses of the Issue

Not applicable.

Item 10. Additional Information

10A. Share Capital

Not applicable.

10B. Memorandum and Articles of Association

Registration and Corporate Purpose

We are registered with the Department of Trade Registration under number 15,910. Our corporate purpose, as set forth in Article 2 of our bylaws, is to manufacture, transform, market, import and export steel products and steel derived by-products, as well as to explore other activities that are directly or indirectly related to our corporate purpose, including: mining, cement and carbochemical business activities, the manufacture and assembly of metallic structures, construction, transportation, navigation and port activities.

Directors’ Powers

Pursuant to our bylaws, a director may not vote on a proposal, arrangement or contract in which the director’s interests conflict with our interests. In addition, our shareholders must approve the compensation of our management and, in case a global amount is fixed, our Board of Directors is responsible for allocating individual amounts of management compensation. There is no mandatory retirement age for our directors. A detailed description of the general duties and powers of our Board of Directors may be found in “Item 6A. Directors and Senior Management.”

Description of Capital Stock

Set forth below is certain information concerning our capital stock and a brief summary of certain significant provisions of our bylaws and Brazilian Corporate Law applicable to our capital stock. This description does not purport to be complete and is qualified by reference to our bylaws and to Brazilian law. For further information, see our bylaws, which have been filed as an exhibit to this annual report.

Capital Stock

On December 31, 2012 our capital stock was composed of 1,457,970,108 common shares. Our bylaws authorize the Board of Directors to increase the capital stock up to 2,400,000,000 common shares without an amendment to our bylaws. There are currently no classes or series of preferred shares issued or outstanding. We may purchase our own shares for purposes of cancellation or to hold them in treasury subject to certain limits and conditions established by the CVM and Brazilian Corporate Law. See “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.”

111

Table Of Contents

Liability for Further Capital Calls

Pursuant to Brazilian Corporate Law, a shareholder’s liability is generally limited to the issue price of the subscribed or purchased shares. There is no obligation of a shareholder to participate in additional capital calls.

Voting Rights

Each common share entitles the holder to one vote at our shareholders’ meetings. According to CVM regulations, shareholders that represent at least 5% of our common shares may request cumulative voting in an election of our Board of Directors. Pursuant to Brazilian Corporate Law, shareholders holding at least 15% of our common shares have the right to appoint a member of our Board of Directors.

Shareholders’ Meetings

Pursuant to Brazilian Corporate Law, the shareholders present at an annual or extraordinary shareholders’ meeting, convened and held in accordance with Brazilian Corporate Law and our bylaws are empowered to decide all matters relating to our corporate purpose and to pass any resolutions they deem necessary for our protection and well-being.

In order to participate in a shareholders’ meeting, a shareholder must be a record owner of the share on the day the meeting is held, and may be represented by a proxy.

Shareholders’ meetings are called, convened and presided over by the Chairman of our Board of Directors or, in his absence, by whom he appoints. Brazilian Corporate Law requires that our shareholders’ meeting be convened by publication of a notice in the Diário Oficial do Estado de São Paulo, the official government publication of the State of São Paulo, and in a newspaper of general circulation in Brazil and in the city in which our principal place of business is located, currently the Jornal Valor Econômico, at least 15 days prior to the scheduled meeting date and no fewer than three times. Both notices must contain the agenda for the meeting and, in the case of an amendment to our bylaws, an indication of the subject matter.

In order for a shareholders’ meeting to be held, shareholders representing a quorum of at least one-fourth of the voting capital must be present, except for meetings convened to amend our bylaws, where shareholders representing at least two-thirds of the voting capital must be present. A shareholder may be represented at a shareholders’ meeting by means of a proxy, appointed not more than one year before the meeting, who must be either a shareholder, a company officer or a lawyer. For public companies, such as we are, the proxy may also be a financial institution. If no quorum is present, notice must be given in the manner described above, no fewer than eight days prior to the scheduled meeting date. On second notice, the meeting may be convened without a specific quorum requirement, subject to the minimum quorum and voting requirements for certain matters, as described below. A holder of shares with no voting rights may attend a shareholders’ meeting and take part in the discussion of matters submitted for consideration.

Except as otherwise provided by law, resolutions passed at a shareholders’ meeting require a simple majority vote, abstentions not considered. Pursuant to Brazilian Corporate Law, the approval of shareholders representing at least one-half of the issued and outstanding voting shares is required for the following actions: (i) to create a new class of preferred shares or disproportionately increase an existing class of preferred shares relative to the other classes of preferred shares, to change a priority, preference, right, privilege or condition of redemption or amortization of any class of preferred shares or to create any class of non-voting preferred shares that has a priority, preference, right, condition or redemption or amortization superior to an existing class of shares (in these cases, a majority of the issued and outstanding shares of the affected class is also required); (ii) to reduce the Mandatory Dividend; (iii) to change our corporate purpose; (iv) to merge into or consolidate with another company or to spin-off our assets; (v) to dissolve or liquidate our Company; (vi) to cancel any liquidation procedure; (vii) to authorize the issuance of founders’ shares; and (viii) to participate in a centralized group of companies as defined under Brazilian Corporate Law.

112

Table Of Contents

Pursuant to Brazilian Corporate Law, shareholders voting at a shareholders’ meeting have the power to: (i) amend our bylaws; (ii) elect or dismiss members of our Board of Directors (and members of the Fiscal Committee) at any time; (iii) receive and approve the annual management accounts, including the allocation of net profits and the distributable amounts for payment of the mandatory dividends and allocation to the various reserve accounts; (iv) authorize the issuance of debentures in general; (v) suspend the rights of a shareholder who has violated Brazilian Corporate Law or our bylaws; (vi) accept or reject the valuation of assets contributed by a shareholder in consideration of the subscription of shares in our capital stock; (vii) authorize the issuance of founders’ shares; (viii) pass resolutions authorizing reorganization of our legal form, a merger, consolidation or split of the company, dissolution and liquidation of the company, election and dismissal of our liquidators and to examine their accounts; and (ix) authorize management to declare the company insolvent and to request a recuperação judicial or recuperação extrajudicial (a procedure involving protection from creditors similar in nature to a reorganization under the U.S. Bankruptcy Code), among others.

Redemption Rights

Our common shares are not redeemable, except that a dissenting and adversely affected shareholder is entitled, under Brazilian Corporate Law, to obtain redemption upon a decision made at a shareholders’ meeting by shareholders representing at least one-half of the issued and outstanding voting shares to: (i) create a new class of preferred shares or to disproportionately increase an existing class of preferred shares relative to the other classes of preferred shares (unless these actions are provided for or authorized by our bylaws); (ii) modify a preference, privilege or condition of redemption or amortization conferred on one or more classes of preferred shares, or to create a new class with greater privileges than an existing class of preferred shares; (iii) reduce the mandatory distribution of dividends; (iv) change our corporate purpose; (v) merge us with another company or consolidate us; (vi) transfer all of our shares to another company in order to make us a wholly-owned subsidiary of that company (incorporação); (vii) approve the acquisition of control of another company at a price that exceeds certain limits set forth under Brazilian Corporate Law; (viii) approve our participation in a centralized group of companies as defined under Brazilian Corporate Law; (ix) conduct a spin-off that results in (a) a change of corporate purpose, (b) a reduction of the Mandatory Dividend or (c) any participation in a group of companies as defined under Brazilian Corporate Law; or (x) in the event that the entity resulting from (a) a merger or consolidation, (b) an incorporação as described above or (c) a spin-off of a listed company fails to become a listed company within 120 days of the shareholders’ meeting at which the decision was taken. The right o f redemption lapses 30 days after publication of the minutes of the relevant shareholders’ meeting. We would be entitled to reconsider any action giving rise to redemption rights within 10 days following the expiration of those rights, if the redemption of shares of dissenting shareholders would jeopardize our financial stability. Law No. 9,457 dated May 5, 1997, which amended Brazilian Corporate Law, contains provisions which, among others, restrict redemption rights in certain cases and allow companies to redeem their shares at their market value, subject to certain requirements. According to Brazilian Corporate Law, the reimbursement value of the common shares must equal the book value, which is determined by dividing our net assets by the total number of shares issued by us, excluding treasury shares (if any).

Preemptive Rights

Except as provided for in Brazilian Corporate Law (such as in the case of mergers and public offerings), our bylaws allow each of our shareholders a general preemptive right to subscribe to shares in any capital increase, in proportion to his or her ownership interest. A minimum period of 30 days following the publication of notice of a capital increase is allowed for the exercise of the right and the right is transferable. In the event of a capital increase that would maintain or increase the proportion of capital represented by common shares, holders of ADSs will have preemptive rights to subscribe only to newly issued common shares. In the event of a capital increase that would reduce the proportion of capital represented by common shares, holders of ADSs will have preemptive rights to subscribe for common shares, in proportion to their ownership interest, only to the extent necessary to prevent dilution of their interest in us.

Form and Transfer

As our common shares are in registered form, the transfer of shares is governed by the rules of Article 31, paragraph 3, of Brazilian Corporate Law, which provides that a transfer of shares is effected by a transfer recorded in a company’s share transfer records upon presentation of valid share transfer instructions to the company by a transferor or its representative. When common shares are acquired or sold on a Brazilian stock exchange, the transfer is effected on our records by a representative of a brokerage firm or the stock exchange’s clearing system. Transfers of shares by a non-Brazilian shareholder are made in the same way and are executed by such shareholders’ local agent.

113

Table Of Contents

The BM&FBOVESPA operates a central clearing system. A holder of our common shares may choose, at its discretion, to participate in this system and, in that case, all shares elected to be put into this system will be deposited in the custody of the BM&FBOVESPA (through a Brazilian institution duly authorized to operate by the Central Bank and having a clearing account with the BM&FBOVESPA). The fact that those common shares are held in the custody of the BM&FBOVESPA will be reflected in our register of shareholders. Each participating shareholder will, in turn, be registered in our register of beneficial shareholders maintained by the BM&FBOVESPA and will be treated in the same way as registered shareholders.

Limitations on Ownership and Voting Rights by non-Brazilians Shareholders

There are no restrictions on ownership or voting of our common shares by individuals or legal entities domiciled outside Brazil. However, the right to convert dividend payments and proceeds from the sale of common shares into foreign currency and to remit those amounts outside Brazil is subject to exchange control restrictions and foreign investment legislation which generally require, among other things, obtaining a Certificate of Registration under the Brazilian National Monetary Council’s Resolution No. 2,689 or its direct foreign investment regulations. See “Item 10D. Exchange Controls.”

Share Ownership Disclosure

There are no provisions in our bylaws governing the ownership threshold above which shareholder ownership must be disclosed. CVM regulations require the disclosure of (i) the acquisition of 5% of any class of capital stock of a listed company and any subsequent acquisition or disposition of at least 5% of any such class of capital stock, (ii) acquisition of control of a listed company and (iii) the ownership of shares of capital stock of a listed company by members of such company’s Board of Executive Officers, Board of Directors, Audit Committee, Fiscal Committee (if any) and any other consulting or technical body (if any) and certain relatives of those persons.

10C. Material Contracts

None.

10D. Exchange Controls

There are no restrictions on ownership or voting of our common shares by individuals or legal entities domiciled outside Brazil. However, the right to convert dividend payments and proceeds from the sale of common shares into foreign currency and to remit those amounts outside Brazil is subject to exchange control restrictions and foreign investment legislation which generally require, among other things, obtaining a Certificate of Registration under the Brazilian National Monetary Council’s Resolution No. 2,689 or its direct foreign investment regulations.

Resolution No. 2,689 dated March 31, 2000, introduced new rules to facilitate foreign investment in Brazil. The principal changes for foreign investors entering the Brazilian market include:

· the removal of restrictions on investments by portfolio composition (e.g., equities, fixed income and derivatives); and

· permission for foreign individuals and corporations to invest in the Brazilian market, in addition to foreign institutional investors.

Prior to Resolution No. 2,689, foreign investors had to leave and reenter the country in order to switch their investments from equity to fixed income. Now foreign investors can freely switch their investments without leaving the local market. Foreign investors registered with the CVM and acting through authorized custody accounts and a legal representative may buy and sell any local financial product traded on the local exchanges and registered on the local clearing systems, including shares on the BM&FBOVESPA, without obtaining separate Certificates of Registration for each transaction. Pursuant to Resolution No. 2,689, as amended, investors are also generally entitled to favorable tax treatment. See “Item 10E. Taxation—Brazilian Tax Considerations.”

114

Table Of Contents

A Certificate of Registration has been issued in the name of JP Morgan Chase Bank N.A., as our ADR depositary, and is maintained by the Itaú Corretora de Valores S.A., our ADR custodian, on behalf of our ADR depositary. Pursuant to the Certificate, our ADR custodian and our ADR depositary are able to convert dividends and other distributions with respect to the common shares represented by ADSs into foreign currency and remit the proceeds outside Brazil. In the event that a holder of ADSs surrenders its ADSs for common shares, that holder will be entitled to continue to rely on our ADR depositary’s Certificate of Registration for only five business days after the surrender, following which the holder must obtain its own Certificate of Registration. Thereafter, unless the common shares are held pursuant to Resolution No. 2,689 or direct foreign investment regulations, the holder may not be able to convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, those common shares, and the holder generally will be subject to less favorable Brazilian tax treatment than a holder of ADSs. See “Item 10E. Taxation—Brazilian Tax Considerations.”

A non-Brazilian holder of common shares may experience delays in obtaining a Certificate of Registration, which may delay remittances abroad. This kind of delay may adversely affect the amount, in U.S. dollars, received by the non-Brazilian holder.

Under current Brazilian legislation, the Brazilian government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments. For approximately nine months in 1989 and early 1990, the Brazilian government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors in order to conserve Brazil’s foreign currency reserves. These amounts were subsequently released in accordance with Brazilian government directives. See “Item 3D. Risk Factors—Risks Relating to our Common Shares and ADSs—If you surrender your ADSs and withdraw common shares, you risk losing the ability to remit foreign currency abroad and certain Brazilian tax advantages.”

For a description of the foreign exchange markets in Brazil, see “Item 3A. Selected Financial Data– Exchange Rates.”

10E. Taxation

The following is a summary of certain U.S. federal income and Brazilian tax consequences of the acquisition, ownership and disposition of our common shares or ADSs by an investor that holds such common shares or ADSs. This summary does not purport to address all material tax consequences of the acquisition, ownership and disposition of our common shares or ADSs, does not take into account the specific circumstances of any particular investor and does not address certain investors that may be subject to special tax rules.

This summary is based on the tax laws of the United States (including the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing and proposed Treasury regulations thereunder, published rulings and court decisions) and Brazil, as in effect on the date hereof, which are subject to change (or changes in interpretation), possibly with retroactive effect. In addition, this summary is based in part upon the representations of our ADSs depositary and the assumption that each obligation in our deposit agreement and any related agreement will be performed in accordance with its terms.

Although there is, at present, no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may result in such a treaty. Both countries have been accepting the offset of income taxes paid in one country against the income tax due in the other based on reciprocity. No assurance can be given, however, as to whether or when an income tax treaty will enter into force or how it will affect the U.S. Holders, as defined below, of our common shares or ADSs.

This discussion does not address any aspects of U.S. taxation (such as estate tax, gift tax and Medicare tax on net investment income) other than federal income taxation or any aspects of Brazilian taxation other than income, gift, inheritance and capital taxation. Prospective investors are urged to consult their own tax advisors regarding the Brazilian and U.S. federal, state and local tax consequences of the acquisition, ownership and disposition of our common shares and ADSs.

115

Table Of Contents

Brazilian Tax Considerations

The following discussion summarizes the principal Brazilian tax consequences of the acquisition, ownership and disposition of common shares or ADSs by a holder that is not domiciled in Brazil for purposes of Brazilian taxation (a “Non-Resident Holder”). It is based on Brazilian law as currently in effect. Any change in such law may change the consequences described below, possibly with retroactive effect. This discussion does not specifically address all of the Brazilian tax considerations applicable to any particular Non-Resident Holder. Each Non-Resident Holder of common shares or ADSs should consult their own tax advisor concerning the Brazilian tax consequences of an investment in our common shares or ADSs.

A Non-Resident Holder of ADSs may withdraw them in exchange for common shares in Brazil. Pursuant to Brazilian law, the Non-Resident Holder may invest in common shares under Resolution 2,689, of January 26, 2000, of the National Monetary Council (a “2,689 Holder”).

Taxation of Dividends and Interest on Shareholders’ Equity

Dividends, including stock dividends and other dividends, paid by us (i) to our ADSs depositary in respect of the common shares underlying the ADSs or (ii) to a Non-Resident Holder in respect of common shares, are currently not subject to Brazilian withholding income tax, as far as such amounts are related to profits generated on or after January 1, 1996. Dividends relating to profits generated prior to January 1, 1996 may be subject to Brazilian withholding income tax at varying rates, depending on the year such profits have been generated.

Since 1996, Brazilian companies have been permitted to pay limited amounts of interest on shareholders' equity to holders of equity securities and to treat those payments as a deductible expense for purposes of its Brazilian income tax and social contribution on net profits tax basis. For tax purposes, this interest is limited to the daily pro rata variation of the Brazilian Federal Government's Long-Term Interest Rate (“TJLP”), as determined by the Central Bank from time to time, multiplied by the net equity value of the Brazilian company, and the amount of the deduction may not exceed the greater of (i) 50% of the net income (before taking into account the amounts attributable to shareholders as interest on shareholders' equity and the provision of corporate income tax but after the deduction of the provision of the social contribution on net profits) related to the period in respect of which the payment is made; or (ii) 50% of the sum of retained profits and profits reserves as of the date of the beginning of the fiscal year in respect of which the payment is made. Payments of interest on shareholders' equity are decided by the shareholders on the basis of the recommendations of our Board of Directors.

Payment of interest on shareholders' equity to a Non-Resident Holder is subject to withholding income tax at the rate of 15%, or 25% if the Non-Resident Holder is domiciled in a tax haven.

For this purpose, a “tax haven” or “low-tax regime” is a country or location (1) that does not impose income tax, (2) where the income tax rate is lower than 20% or (3) where the local legislation imposes restrictions on disclosing the shareholding composition or ownership of the investment (“Tax Haven Jurisdiction”). These payments of interest on shareholders' equity may be included, at their net value, as part of any mandatory dividend. To the extent payment of interest on shareholders' equity is so included, the corporation is required to distribute to shareholders an additional amount to ensure that the net amount received by them, after payment of the applicable Brazilian withholding income tax, plus the amount of declared dividends is at least equal to the mandatory dividend.

No assurance can be given that our board of directors will not recommend that future distributions of income should be made by means of interest on shareholders' equity instead of dividends.

Taxation of Gains

Capital gains realized by Non-Resident Holders on the disposition of common shares sold on the Brazilian stock exchange (which includes the transactions carried out on the organized over-the-counter market):

· are exempt, when realized by a Non-Resident Holder that (i) is a 2,689 Holder and (ii) is not resident or domiciled in a Tax Haven Jurisdiction;

116

Table Of Contents

· are subject to income tax at a rate of 15% in case of gains realized by (A) a Non-Resident Holder that (i) is not a 2,689 Holder and (ii) is not resident or domiciled in a Tax Haven Jurisdiction; or (B) a Non-Resident Holder that (i) is a 2,689 Holder and (ii) is resident or domiciled in a Tax Haven Jurisdiction; and

· are subject to income tax at a rate of up to 25% in case of gains realized by a Non-Resident Holder that (i) is not a 2,689 Holder and (ii) is resident or domiciled in a Tax Haven Jurisdiction.

As a general rule, capital gains realized as a result of a disposition transaction are the positive difference between the amount realized on the disposition of the common shares and the respective acquisition cost.

According to Law No. 10,833/03, the gains recognized on a disposition of assets located in Brazil, such as our common shares, by a Non-Resident Holder, are subject to withholding income tax in Brazil. This rule is applicable regardless of whether the disposition is conducted in Brazil or abroad and/or if the disposition is or is not made to an individual or entity resident or domiciled in Brazil.

A withholding income tax of 0.005% will apply and can be offset against any income tax due on the capital gain. Such withholding does not apply to a 2,689 Holder that is not resident or domiciled in a Tax Haven Jurisdiction.

Any other gains realized on the disposition of common shares that are not carried out on the Brazilian stock exchange:

· are subject to income tax at a rate of 15% when realized by any Non-Resident Holder that is not resident or domiciled in a Tax Haven Jurisdiction, whether or not such holder is a 2,689 Holder; and

· are subject to income tax at a rate of up to 25% when realized by a Non-Resident Holder that is resident or domiciled in a Tax Haven Jurisdiction, whether or not such holder is a 2,689 Holder.

In the cases described above, if the gains are related to transactions conducted on the Brazilian non-organized over-the-counter market with intermediation, the withholding income tax of 0.005% will also apply and can be offset against any income tax due on the capital gain.

Any exercise of preemptive rights relating to common shares will not be subject to Brazilian withholding income tax. Gains realized by a Non-Resident Holder on the disposition of preemptive rights will be subject to Brazilian income tax according to the same rules applicable to disposition of common shares.

In the case of a redemption of common shares or a capital reduction, the positive difference between the amount received by the Non-Resident Holder and the acquisition cost of the common shares redeemed in reais is treated as capital gain derived from the sale or exchange of shares not carried out on a Brazilian stock exchange market and is therefore subject to income tax at the rate of 15%, or 25%, as the case may be.

Sale of ADSs by U.S. Holders to Other Non-Residents in Brazil

As discussed above, pursuant to Law No. 10,833, the sale of assets located in Brazil involving Non-Resident Holders is subject to Brazilian withholding income tax. We believe that the ADSs do not fall within the definition of assets located in Brazil for the purposes of Law No. 10,833, and, thus, should not be subject to the Brazilian withholding tax. However, due to the lack of any administrative or judicial guidance, there is no assurance that such position would prevail.

Gains on the Exchange of ADSs for Common Shares

The withdrawal of ADSs in exchange for common shares is not subject to Brazilian income tax, assuming compliance with applicable regulation regarding the registration of the investment with Central Bank.

Gains on the Exchange of Common Shares for ADSs

The deposit of common shares in exchange for the ADSs may be subject to Brazilian withholding income tax on capital gains if the amount previously registered with the Central Bank as a foreign investment in common shares or, in the case of other market investors under Resolution No. 2,689, the acquisition cost of the common shares, as the case may be, is lower than:

117

Table Of Contents

· the average price per common share on the Brazilian stock exchange on which the greatest number of such common shares were sold on the day of deposit; or

· if no common shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of common shares were sold during the 15 preceding trading sessions.

The difference between the amount previously registered, or the acquisition cost, as the case may be, and the average price of the common shares, calculated as set forth above, is considered a capital gain subject to income tax at a rate of 15%, or 25% if the Non-Resident Holder is resident or domiciled in a Tax Haven Jurisdiction.

Tax on Financial Transactions

The Tax on Financial Transactions (Imposto sobre Operações de Crédito, Câmbio e Seguro ou relativas a Títulos ou Valores Mobiliários), or “IOF”, is imposed on foreign exchange, securities, credit and insurance transactions.

IOF on Foreign Exchange Transactions

Tax on foreign exchange transactions, or “IOF/Exchange”, may be levied on foreign exchange transactions (conversion of foreign currency in reais and conversion of reais into foreign currency), affecting either or both the inflow or outflow of investments. Currently, the general IOF/Exchange rate applicable to foreign currency exchange transactions is 0.38%.

The Brazilian Government may increase the rate of the IOF/Exchange to a maximum rate of 25% of the amount of the foreign exchange transactions at any time, but such an increase will only apply in respect to future foreign exchange transactions.

Currently, for most foreign exchange transactions related to this type of investment, the IOF/Exchange rate is zero.

IOF on Bonds and Securities Transactions

IOF may also be levied on transactions involving bonds and securities, or “IOF/Securities”, including those carried out on a Brazilian stock, futures or commodities exchanges. The rate of the IOF/Securities applicable to most transactions involving common shares is currently zero percent. Since November 19, 2009, the IOF/Securities levies at a rate of 1.5% on transfer of shares traded on the Brazilian stock exchange with the specific purpose of enabling the issuance of depositary receipts to be traded outside Brazil. The Brazilian Government may increase the rate of the IOF/Exchange up to 1.5% per day at any time, but such an increase will only apply in respect of future transactions.

Other Brazilian Taxes

There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of common shares or ADSs by a non-Brazilian holder, except for gift and inheritance taxes which are levied by some states of Brazil on gifts made or inheritances bestowed by individuals or entities not resident or domiciled in Brazil to individuals or entities resident or domiciled within that state in Brazil. There are no Brazilian stamp, issue, registration or similar taxes or duties payable by holders of common shares or ADSs.

U.S. Federal Income Tax Considerations

The summary discussion below is applicable to you only if you are a “U.S. Holder” (as defined below) that is not domiciled in Brazil (or domiciled or resident in a tax haven jurisdiction) for purposes of Brazilian taxation and, in the case of a holder of common shares, that has registered its investment in common shares with the Central Bank as a U.S. dollar investment.

118

Table Of Contents

For purposes of this discussion, a U.S. Holder is any beneficial owner of common shares or ADSs that is (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax without regard to its source, or (iv) a trust if a U.S. court is able to exercise primary supervision over administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust or if the trust validly elects under applicable Treasury regulations to be taxed as a U.S. person. A “Non-U.S. Holder” is any beneficial owner of common shares or ADSs that is an individual, corporation, estate or trust who is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.

If a partnership holds our common shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A prospective investor who is a partner of a partnership holding our shares should consult its own tax advisor.

In general, and taking into account the earlier assumptions, for U.S. federal income tax purposes, holders of ADRs evidencing ADSs will be treated as the owners of the common shares represented by those ADSs, and exchanges of common shares for ADSs, and ADSs for common shares, will not be subject to U.S. federal income tax.

Taxation of Dividends

U.S. Holders

Under the U.S. federal income tax laws, and subject to the passive foreign investment company (“PFIC”) rules discussed below, U.S. Holders will include in gross income, as dividend income, the gross amount of any distribution paid by us (including payments considered “interest” in respect of stockholders’ equity under Brazilian law) (before reduction for Brazilian withholding taxes) out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) when the distribution is actually or constructively received by the U.S. Holder, in the case of common shares, or by our ADSs depositary, in the case of ADSs. Distributions in excess of current and accumulated earnings and profits, as determined under U.S. federal income tax principles, will be treated as a return of capital to the extent of the U.S. Holder’s adjusted tax basis in the common shares or ADSs and thereafter as capital gain, which will be either long-term or short-term capital gain depending on whether the U.S. holder held the common shares or ADSs for more than one year. We do not intend to maintain calculations of our earnings and profits under U.S. federal income tax principles and, unless and until such calculations are made, U.S. Holders should assume all distributions are made out of earnings and profits and constitute dividend income.

The dividend income will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations. Subject to certain exceptions for short-term and hedged positions certain non-corporate U.S. Holders (including individuals) may qualify for a maximum 20% rate of tax in respect of “qualified dividend income” received after December 31, 2012. Dividend income with respect to the ADSs will be qualified dividend income, provided that, in the year that a non-corporate U.S. Holder receives the dividend, the ADSs are readily tradable on an established securities market in the United States, and we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a PFIC. Based on existing Internal Revenue Service (“IRS”) guidance, it is not entirely clear whether dividends received with respect to the common shares not held through ADSs will be treated as qualified dividend income, because the common shares are not themselves listed on a U.S. exchange.

The amount of the dividend distribution includible in gross income of a U.S. Holder will be the U.S. dollar value of the real payments made, determined at the spot real/U.S. dollar rate on the date such dividend distribution is includible in the gross income of the U.S. Holder, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in gross income to the date such payment is converted into U.S. dollars will be treated as ordinary income or loss from sources within the United States and will not be eligible for the special tax rate applicable to qualified dividend income.

Dividends received by most U.S. holders will constitute foreign source “passive income” for foreign tax credit purposes. Subject to limitations under U.S. federal income tax law concerning credits or deductions for foreign income taxes and certain exceptions for short-term and hedged positions, any Brazilian income tax withheld from dividends paid by us would be treated as a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability (or at a U.S. Holder’s election, may be deducted in computing taxable income if the U.S. Holder has elected to deduct all foreign income taxes paid or accrued for the relevant taxable year). The rules with respect to foreign tax credits are complex and U.S. Holders are urged to consult their own tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

119

Table Of Contents

The U.S. Treasury Department has expressed concern that intermediaries in connection with depositary arrangements may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. persons who are holders of depositary shares. Accordingly, investors should be aware that the discussion above regarding the availability of foreign tax credits for Brazilian income tax withheld from dividends paid with respect to common shares represented by ADSs could be affected by future action taken by the U.S. Treasury Department.

Distributions of additional common shares to U.S. Holders with respect to their common shares or ADSs that are made as part of a pro rata distribution to all our stockholders generally will not be subject to U.S. federal income tax.

Non-U.S. Holders

Dividends paid to a Non-U.S. Holder in respect of common shares or ADSs will not be subject to U.S. federal income tax unless those dividends are effectively connected with the conduct of a trade or business within the United States by the Non-U.S. Holder (and are attributable to a permanent establishment maintained in the United States by the Non-U.S. Holder, if an applicable income tax treaty so requires as a condition for the Non-U.S. Holder to be subject to U.S. taxation on a net income basis in respect of income from common shares or ADSs), in which case the Non-U.S. Holder generally will be subject to U.S. federal income tax in respect of the dividends in the same manner as a U.S. Holder. Any such effectively connected dividends received by a corporate Non-U.S. Holder may also, under certain circumstances, be subject to an additional “branch profits tax” (at a 30% rate or at a reduced rate as may be specified by an applicable income tax treaty).

Taxation of Capital Gains

U.S. Holders

Subject to the PFIC rules discussed below, upon a sale, redemption or other taxable disposition of common shares or ADSs, a U.S. Holder will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized (before deduction of any Brazilian tax) and the U.S. Holder’s adjusted tax basis (determined in U.S. dollars) in the common shares or ADSs. Generally, the U.S. Holder’s gain or loss will be capital gain or loss. Capital gain of a non-corporate U.S. Holder that is recognized after December 31, 2012 is generally taxed at a maximum rate of 20% where the property is held for more than one year. The deductibility of capital losses is subject to limitations under the Code.

If a Brazilian income tax is withheld on the sale, exchange or other taxable disposition of common shares or ADSs, the amount realized by a U.S. Holder will include the gross amount of the proceeds of that sale, exchange or other taxable disposition before deduction of the Brazilian tax. Capital gain or loss, if any realized by a U.S. Holder on the sale, exchange or other taxable disposition of common shares or ADSs generally will be treated as U.S. source gain or loss for U.S. foreign tax credit purposes. Consequently, in the case of a gain from the disposition of a share or ADS that is subject to Brazilian income tax (see “Taxation – Brazilian Tax Considerations – Taxation of Gains”), the U.S. Holder may not be able to benefit from the foreign tax credit for that Brazilian income tax (i.e., because the gain from the disposition would be U.S. source income), unless the U.S. Holder can apply the credit against U.S. federal income tax payable on other income from foreign sources. Alternatively, the U.S. Holder may take a deduction for the Brazilian income tax if it does not elect to claim a foreign income tax credit for any foreign taxes paid or accrued during the taxable year.

Non-U.S. Holders. A Non-U.S. Holder will not be subject to U.S. federal income tax in respect of gain recognized on a sale, exchange or other taxable disposition of common shares or ADSs unless:

120

Table Of Contents

· the gain is effectively connected with a trade or business of the Non-U.S. Holder in the United States (and is attributable to a permanent establishment maintained in the United States by that Non-U.S. Holder, if an applicable income tax treaty so requires as a condition for that Non-U.S. Holder to be subject to U.S. taxation on a net income basis in respect of gain from the sale or other disposition of the common shares or ADSs); or

· in the case of a Non-U.S. Holder who is an individual, that Non-U.S. Holder is present in the United States for 183 or more days in the taxable year of the sale and certain other conditions apply.

Effectively connected gains realized by a corporate Non-U.S. Holder may also, under certain circumstances, be subject to an additional branch profits tax (at a 30% rate or at a reduced rate as may be specified by an applicable income tax treaty).

Passive Foreign Investment Companies

Based on current estimates of our gross income, gross assets and the nature of our business, we believe that our common shares and ADSs should not be treated as stock of a PFIC for U.S. federal income tax purposes. There can be no assurances in this regard, however, because the application of the relevant rules is complex and involves some uncertainty. The PFIC determination is made annually and is based on the portion of our assets and income that is characterized as passive under the PFIC rules. Moreover, our business plans may change, which may affect the PFIC determination in future years.

In general, we will be a PFIC with respect to a U.S. Holder if, for any taxable year in which the U.S. Holder held our ADSs or common shares, either (i) at least 75% of our gross income for the taxable year is passive income or (ii) at least 50% of the value (determined on the basis of a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income. For this purpose, passive income generally includes, among other things, dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation’s income.

If we are treated as a PFIC, a U.S. Holder that did not make a “mark-to-market election” or “QEF election,” each as described below, would be subject to special rules with respect to (a) any gain realized on the sale or other disposition of common shares or ADSs and (b) any “excess distribution” by CSN to the U.S. Holder (generally, any distributions to the U.S. Holder in respect of the common shares or ADSs during a single taxable year that are greater than 125% of the average annual distributions received by the U.S. Holder with respect to the common shares or ADSs during the three preceding taxable years or, if shorter, the U.S. Holder’s holding period for the common shares or ADSs). Under these rules, (i) the gain or excess distribution would be allocated ratably over the U.S. Holder’s holding period for the common shares or ADSs, (ii) the amount allocated to the taxable year in which the gain or excess distribution was realized would be taxable as ordinary income, (iii) the amount allocated to each prior year, with certain exceptions, would be subject to tax at the highest tax rate in effect for that year and (iv) the interest charge generally applicable to underpayments of tax would be imposed in respect of the tax attributable to each such prior year.

If we are treated as a PFIC and, at any time, we invest in non-U.S. corporations that are classified as PFICs (each, a “Subsidiary PFIC”), U.S. Holders generally will be deemed to own, and also would be subject to the PFIC rules with respect to, their indirect ownership interest in that Subsidiary PFIC. If we are treated as a PFIC, a U.S. Holder could incur liability for the deferred tax and interest charge described above if either (1) we receive a distribution from, or dispose of all or part of our interest in, the Subsidiary PFIC or (2) the U.S. Holder disposes of all or part of its common shares or ADSs.

The special PFIC tax rules described above will not apply to a U.S. Holder if the U.S. Holder makes an election (i) to “mark-to-market” with respect to the common shares or ADSs (a “mark-to-market election”) or (ii) to have us treated as a “qualified electing fund” (a “QEF election”). The QEF election is not available to holders unless we agree to comply with certain reporting requirements and provide the required annual information statements. The QEF and mark-to-market elections only apply to taxable years in which the U.S. Holder’s common shares or ADSs are treated as stock of a PFIC. Our ADR Depositary has agreed to distribute the necessary information to registered holders of ADSs.

121

Table Of Contents

A U.S. Holder may make a mark-to-market election, if the common shares or ADSs are regularly traded on a “qualified exchange.” Under applicable U.S. Treasury regulations, a “qualified exchange” includes a national securities exchange, such as the New York Stock Exchange, that is registered with the SEC or the national market system established under the Exchange Act. Also, under applicable Treasury Regulations, PFIC securities traded on a qualified exchange are regularly traded on such exchange for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. We cannot assure you that the common shares or ADSs will be eligible for a mark-to-market election.

A U.S. Holder that makes a mark-to-market election must include for each taxable year in which the U.S. Holder’s common shares or ADSs are treated as shares of a PFIC, as ordinary income, an amount equal to the excess of the fair market value of the common shares or ADSs at the close of the taxable year over the U.S. Holder’s adjusted tax basis in the common shares or ADSs, and is allowed an ordinary loss for the excess, if any, of the adjusted tax basis over the fair market value of the common shares or ADSs at the close of the taxable year, but only to the extent of the amount of previously included mark-to-market inclusions (not offset by prior mark-to-market losses). These amounts of ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains. A U.S. Holder’s tax basis in the common shares or ADSs will be adjusted to reflect any such income or loss amounts. Although a U.S. Holder may be eligible to make a mark-to-market election with respect to its common shares or ADSs, no such election may be made with respect to the stock of any Subsidiary PFIC that such U.S. Holder is treated as owning, because such Subsidiary PFIC stock is not marketable. Thus, the mark-to-market election will not be effective to avoid all of the adverse tax consequences described above with respect to any Subsidiary PFICs. U.S. Holders should consult their own tax advisors regarding the availability and advisability of making a mark-to-market election with respect to their common shares of ADSs based on their particular circumstances.

A U.S. Holder that makes a QEF election will be currently taxable on its pro rata share of our ordinary earnings and net capital gain (at ordinary income and capital gain rates, respectively) for each of our taxable years, regardless of whether we distributed the income and gain. The U.S. Holder’s basis in the common shares or ADSs will be increased to reflect taxed but undistributed income. Distributions of income that had previously been taxed will result in a corresponding reduction of tax basis in the common shares or ADSs and will not be taxed again as a distribution to the U.S. Holder.

In addition, notwithstanding any election that a U.S. Holder makes with regard to the common shares or ADSs, dividends that a non-corporate U.S. Holder receives from us will not constitute qualified dividend income if we are a PFIC either in the taxable year of the distribution or the preceding taxable year.

Special rules apply with respect to the calculation of the amount of the foreign tax credit with respect to excess distributions by a PFIC or, in certain cases, QEF inclusions.

A U.S. Holder who owns common shares or ADSs during any year that we are a PFIC must file IRS Form 8621.

Backup Withholding and Information Reporting

U.S. Holders

Dividends paid on, and proceeds from the sale, redemption or other taxable disposition of common shares or ADSs to a U.S. Holder generally will be subject to information reporting and backup withholding, unless, in the case of backup withholding, the U.S. Holder provides an accurate taxpayer identification number or in either case otherwise establishes an exemption. The amount of any backup withholding collected from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that certain required information is timely furnished to the IRS.

Recently enacted legislation requires certain U.S. Holders to report information with respect to their investment in certain “foreign financial assets,” which would include an investment in our common shares, not held through a custodial account with a U.S. financial institution to the IRS. Investors who fail to report required information could become subject to substantial penalties. Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of this new legislation on their investment in our common shares.

122

Table Of Contents

Non-U.S. Holders

If common shares are held by a Non-U.S. Holder through the non-U.S. office of a non-U.S. related broker or financial institution, backup withholding and information reporting generally would not be required. Information reporting, and possibly backup withholding, may apply if the common shares are held by a Non-U.S. Holder through a U.S., or U.S.-related, broker or financial institution, or the U.S. office of a non-U.S. broker or financial institution and the Non-U.S. Holder fails to provide appropriate information. Information reporting and backup withholding generally will apply with respect to ADSs if the Non-U.S. Holder fails to timely provide appropriate information. Non-U.S. Holders should consult their tax advisors regarding the application of these rules.

10F. Dividends and Paying Agents

Not applicable.

10G. Statement by Experts

Not applicable.

10H. Documents on Display

We are subject to the information requirements of the Exchange Act and accordingly file reports and other information with the SEC. Reports and other information filed by us with the SEC may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can obtain further information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the public from the SEC’s website at http://www.sec.gov. You may also inspect our reports and other information at the offices of the NYSE, 11 Wall Street , New York, New York 10005, on which our ADSs are listed. For further information on obtaining copies of our public filings at the NYSE, you should call (212) 656-5060. We also file financial statements and other periodic reports with the CVM.

10I. Subsidiary Information

Not required.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a number of different market risks arising from our normal business activities. Market risk is the possibility that changes in interest rates, currency exchange rates, commodities prices will adversely affect the value of financial assets, liabilities, expected future cash flows or earnings. We developed policies aimed at managing the volatility inherent to certain of these natural business exposures. We use financial instruments, such as derivatives, in order to achieve the main goals established by our Board of Directors to minimize the cost of capital and maximize the returns on financial assets, while observing, as determined by our Board of Directors, parameters of credit and risk. Derivatives are contracts whose value is derived from one or more underlying financial instruments, indices or prices defined in the contract. Only well-understood, conventional derivative instruments are used for these purposes. These include futures and options traded on regulated exchanges and “over-the-counter” swaps, options and forward contracts.

Market Risk Exposures and Market Risk Management

Our treasury department is responsible for managing our market risk exposures. We use some internal controls in order to:

· help us understand market risks;

· reduce the likelihood of financial losses; and

123

Table Of Contents

· diminish the volatility of financial results.

The principal tools used by our treasury department are:

· “Sensitivity Analysis,” which measures the impact that movements in the price of different market variables such as interest rates and exchange rates will have in our earnings and cash flows; and

· “Stress Testing,” which measures the worst possible loss from a set of consistent scenarios to which probabilities are not assigned. The scenarios are deliberately chosen to include extreme changes in interest and currency exchange rates.

Following is a discussion of the primary market risk exposures that we face together with an analysis of the exposure to each one of them.

Interest Rate Risk

We are exposed to interest rate risk on short- and long-term instruments and as a result of refinancing of fixed-rate instruments included in our consolidated debt. Consequently, as well as managing the currency and maturity of debt, we manage interest costs through a balance between lower-cost floating rate debt, which has inherently higher risk, and more expensive, but lower risk, fixed-rate debt. We can use swaps, options and other derivatives to achieve the desired ratio between floating-rate debt and fixed-rate debt. The desired ratio varies according to market conditions: if interest rates are relatively low, we will shift towards fixed rate debt.

We are basically exposed to the following floating interest rates:

· U.S. dollar LIBOR, due to our floating rate U.S. dollar-denominated debt (usually trade-finance related), to our cash position held offshore in U.S. dollars, which is invested in short-term instruments,

· TJLP (Long Term Interest Rate), due to real-denominated debt indexed to this interest rate, and

· CDI (benchmark Brazilian real overnight rate), due to our cash held in Brazil (onshore cash) and to our CDI indexed debt.

|  |  |  | Maturities
Exposure as of December 2012* (amortization) |  | Notional amount |  | 2013 |  | 2014 |  | 2015 |  | 2016 |  | 2017 |  | Thereafter
US dollar LIBOR |  | 2,190 |  | 194 |  | 367 |  | 467 |  | 626 |  | 536 |  | -
US dollar fixed rate |  | 8,135 |  | 1,168 |  | 31 |  | 837 |  | 57 |  | 6 |  | 6,036
CDI |  | 15,061 |  | 113 |  | 2,228 |  | 2,257 |  | 2,174 |  | 2,595 |  | 5,694
Euro fixed rate |  | 323 |  | - |  | - |  | - |  | 65 |  | 65 |  | 194
TJLP |  | 3,350 |  | 415 |  | 215 |  | 235 |  | 249 |  | 243 |  | 1,994
Other |  | 646 |  | 57 |  | 59 |  | 71 |  | 84 |  | 59 |  | 317
|  |  |  | Maturities
Exposure as of December 2011* (amortization) |  | Notional amount |  | 2012 |  | 2013 |  | 2014 |  | 2015 |  | 2016 |  | Thereafter
US dollar LIBOR |  | 2,444 |  | 547 |  | 178 |  | 308 |  | 400 |  | 547 |  | 464
US dollar fixed rate |  | 7,362 |  | 298 |  | 1,071 |  | 14 |  | 756 |  | 52 |  | 5,171
CDI |  | 14,008 |  | 1,045 |  | 546 |  | 1,446 |  | 1,041 |  | 1,707 |  | 8,223
TJLP |  | 3,231 |  | 382 |  | 335 |  | 101 |  | 90 |  | 95 |  | 2,228
Other |  | 495 |  | 26 |  | 43 |  | 65 |  | 60 |  | 43 |  | 258

*All figures in R$ million.

124

Table Of Contents

Our cash and cash equivalent were as follows:

|  | December 31, 2012 |  | December 31, 2011 |  | Exposure
Cash in reais: |  | 1,956 |  | 2,690 |  | CDI
Cash in U.S. dollars: |  | 6,111 |  | 6,784 |  | LIBOR

The table below shows the average interest rate and the average life of our debt.

|  | December 2012 |  | December 2011
|  | Average rate % |  | Average life |  | Average rate % |  | Average life
U.S. dollar LIBOR |  | 2.72 |  | 2.99 |  | 3.14 |  | 3.20
U.S. dollar fixed rate |  | 7.52 |  | 13.83 (with perpetual bond) |  | 6.37 |  | 14.37 (with perpetual bond)
Euro fixed rate |  | 3.88 |  | 5.16 |  | N/A |  | N/A
UMBNDES |  | N/A |  | N/A |  | N/A |  | N/A
C DI |  | 110,69 of CDI |  | 4.38 |  | 111.21 of CDI |  | 5.19
TJLP |  | 1.68 |  | 7.65 |  | 1.70 |  | 5.58

We entered into cross-currency swap agreements to hedge liabilities indexed to the U.S. dollar from Brazilian real fluctuations, which are affected by market, economic, political, regulatory and geopolitical conditions, among others. The gains and losses from these contracts are directly related to exchange (dollar) and CDI fluctuations. For the duration of our U.S. dollar fixed-rate derivatives, see tables below.

|  | Notional |  | Average interest rate |  | Average maturity
As of December 31, 2012 |  | (in U.S. dollar million, |  | (U.S. dollar) |  | (days)
|  | unless otherwise indicated) |  |  |  |
Swaps (U.S. dollar fixed - rate versus CDI) |  | 10 |  | 3.5% |  | 732
|  | Notional |  | Average interest rate |  | Average maturity
As of December 31, 2011 |  | (in U.S. dollar million, |  | (U.S. dollar) |  | (days)
|  | unless otherwise indicated) |  |  |  |
Swaps (U.S. dollar fixed - rate versus CDI) |  | 293 |  | 3.45% |  | 782
Swaps (U.S. dollar fixed - rate versus CDI) |  | 75 |  | 3.23% |  | 691
Swaps (U.S. dollar fixed - rate versus CDI) |  | (100) |  | 2.39% |  | 32

Foreign Currency Exchange Rate Risk

Fluctuations in exchange rates can have significant effects on our operating results. Therefore, exchange rate fluctuations affect the values of our real-denominated assets, the carrying and repayment costs of our real-denominated financial liabilities, our real-denominated production costs, the cost of real-denominated capital items and the prices we receive in the Brazilian market for our finished steel products. We attempt to manage our net foreign exchange rate exposures, trying to balance our non-real denominated assets with our non-real denominated liabilities. We use derivative instruments to match our non-real denominated assets to our non-real denominated liabilities, but at any given time we may still have significant foreign currency exchange rate risk exposure.

Our exposure to the U.S. dollar is due to the following contract categories:

· U.S. dollar-denominated debt;

· offshore cash;

125

Table Of Contents

· currency derivatives (in the case of options, we use the delta as a measure of exposure);

· U.S. dollar indexed accounts payable and receivable (usually related to international trade, i.e., imports and exports); and

· offshore investments: assets that we bought offshore and that are denominated in U.S. dollars on our balance sheet.

|  | December 31, 2012 |  | December 31, 2011
U.S. dollar Liabilities |  |  |  |
loans and financing |  | 5,103 |  | 5,300
trade accounts payable |  | 267 |  | 11
Intercompany loans |  | 14 |  | 14
Others |  | 37 |  | 43
Total Liabilities |  | 5,421 |  | 5,367
U.S. dollar Assets |  |  |  |
offshore cash and cash equivalents |  | 6,106 |  | 5,613
guarantee margin |  | 200 |  | 217
trade accounts receivable |  | 348 |  | 288
advances to suppliers |  | 12 |  | 61
Intercompany loans |  | 62 |  | 62
Other |  | 3 |  | 16
Total Assets |  | 6,731 |  | 6,257
Total U.S. dollar Exposure |  | 1,310 |  | 890
Derivative notional |  | 67 |  | 268
Total U.S. dollar Net Exposure |  | 1,377 |  | 1,158

Our exposure to the Euro is due to the following contract categories:

· Euro-denominated debt;

· offshore cash;

· U.S. dollar indexed accounts payable and receivable (usually related to international trade, i.e., imports and exports); and

· offshore investments: assets that we bought offshore and that are denominated in Euros on our balance sheet

|  | December 31, 2012 |  | December 31, 2011
Euro Liabilities |  |  |  |
loans and financing |  | 121 |  | -
trade accounts payable |  | - |  | 1
Intercompany loans |  | - |  | -
Others |  | - |  | -
Total Liabilities |  | 121 |  | 1
Euro Assets |  |  |  |
offshore cash and cash equivalents |  | 3 |  | -
guarantee margin |  | - |  | -
trade accounts receivable |  | 32 |  | 8
Intercompany loans |  | 92 |  | -
advances to suppliers |  | 1 |  | -
Other |  | 37 |  | -
Total Assets |  | 165 |  | 8
Total Euro Exposure |  | 44 |  | 7
Derivative notional |  | (90) |  | (90)
Total Euro Net Exposure |  | (46) |  | (83)

126

Table Of Contents

Our exposure to the Australian Dollar is due to the following contract categories:

· offshore cash.

|  | December 31, 2012 |  | December 31, 2011
AUD Liabilities |  | - |  | -
AUD Assets |  | - |  |
offshore cash and cash equivalents |  | - |  | 303
|  |  |  | 303
Total AUD Exposure |  | - |  | 303

Offshore investments

We have capitalized our offshore subsidiaries domiciled in U.S. dollar-based countries with equity investments, and those investments are accounted as U.S. dollar investments. The result is that they work as assets indexed to the U.S. dollar from an earnings perspective.

Commodity Price Risk

Fluctuations in the price of steel and some of the commodities used in producing steel, such as zinc, aluminum, tin, coal, coke and energy, can have an impact on our earnings. Currently, we are not hedging our exposure to commodity prices. Our biggest commodity price exposure is the price of steel and coal, but there are no liquid instruments that provide an effective hedge against their price fluctuations.

Sensitivity analysis

The economic environment in which we operate determines the main factors taken into consideration to establish risk scenarios. In the Brazilian economic environment, exchange rate variation is the most notable market risk.

The real exchange rate is significantly volatile. Between 2003 and 2012 the exchange rate had an average annual volatility of 14.79%.

· Sensitivity analysis of the US dollar-to-real exchange swap

For the consolidated foreign exchange operations with US Dollar Fluctuation risk, the sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values ​​as of 31 December, 2012 recorded as assets in the amount of R$9,046 million.

127

Table Of Contents

To develop our sensitivity analysis we analyze four different scenarios of exchange rate variation. Based on the foreign exchange rate of December 31, 2012 of R$2.0435 per US$1.00, adjustments were estimated for four scenarios: scenario 1: (25% of Real appreciation) rate of R$1.5326 per US$1.00; scenario 2: (50% of Real appreciation) rate of R$1.0218 per US$1.00; scenario 3: (25% of Real devaluation) rate of R$ 2.5544; scenario 4: (50% of Real devaluation) rate of R$ 3.0653.

December 31, 2012 (In millions of US$, except for exchange rates) |  |  |  |  |  |  |  |  |  |
| Risk |  | Scenario |  | Reference Value |  | Exchange Rates |  | Additional Results
Net current swap |  | US Dollar fluctuation |  |  |  | 67 |  | 2.0435 |  | -
|  |  |  | 1 |  |  |  | 1.5326 |  | (34)
|  |  |  | 2 |  |  |  | 1.0218 |  | (68)
|  |  |  | 3 |  |  |  | 2.5544 |  | 34
|  |  |  | 4 |  |  |  | 3.0653 |  | 68
Exchange position functional currency BRL |  | US Dollar fluctuation |  |  |  | 1,310 |  | 2.0435 |  | -
|  |  |  | 1 |  |  |  | 1.5326 |  | (669)
|  |  |  | 2 |  |  |  | 1.0218 |  | (1,339)
|  |  |  | 3 |  |  |  | 2.5544 |  | 669
|  |  |  | 4 |  |  |  | 3.0653 |  | 1,339
Consolidated exchange position |  | US Dollar fluctuation |  |  |  | 1,377 |  | 2.0435 |  | -
|  |  |  | 1 |  |  |  | 1.5326 |  | (703)
|  |  |  | 2 |  |  |  | 1.0218 |  | (1,407)
|  |  |  | 3 |  |  |  | 2.5544 |  | 703
|  |  |  | 4 |  |  |  | 3.0653 |  | 1,407

· Sensitivity analysis of the euro-to-dollar exchange swap

For the consolidated foreign exchange operations with Euro fluctuation risk, the sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values ​​as of 31 December, 2012 recorded as liabilities in the amount of R$2,441 million.

For consolidated exchange transactions with Euro fluctuation risk, based on the foreign exchange rate on December 31, 2012, of R$ 2.6954 per €$ 1.00, adjustments were estimated for four scenarios: scenario 1: (25% of Real appreciation) rate of R$2.0216 per €$ 1.00; scenario 2: (50% of Real appreciation) rate of R$1.3477 per €$ 1.00; scenario 3: (25% of Real devaluation) rate of R$ 3.3693; scenario 4: (50% of Real devaluation) rate of R$ 4.0431.

December 31, 2012 (In millions of EUR, except for exchange rates) |  |  |  |  |  |  |  |  |  |
| Risk |  | Scenario |  | Reference Value |  | Exchange Rates |  | Additional Results
Net current swap |  | EURO fluctuation |  |  |  | (90) |  | 2.6954 |  |
|  |  |  | 1 |  |  |  | 2.0216 |  | 61
|  |  |  | 2 |  |  |  | 1.3477 |  | 121
|  |  |  | 3 |  |  |  | 3.3693 |  | (61)
|  |  |  | 4 |  |  |  | 4.0431 |  | (121)
Exchange position functional currency BRL |  | EURO fluctuation |  |  |  | 44 |  | 2.6954 |  |
|  |  |  | 1 |  |  |  | 2.0216 |  | (30)
|  |  |  | 2 |  |  |  | 1.3477 |  | (59)
|  |  |  | 3 |  |  |  | 3.3693 |  | 30
|  |  |  | 4 |  |  |  | 4.0431 |  | 59
Consolidated exchange position |  | EURO fluctuation |  |  |  | (46) |  | 2.6954 |  |
|  |  |  | 1 |  |  |  | 2.0216 |  | 31
|  |  |  | 2 |  |  |  | 1.3477 |  | 62
|  |  |  | 3 |  |  |  | 3.3693 |  | (31)
|  |  |  | 4 |  |  |  | 4.0431 |  | (62)

128

Table Of Contents

· Sensitivity analysis of exchange dollar-to-euro swap

The sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values ​​as of December 31, 2012 recognized in liabilities, amounting to R$4,241 million.

To develop our sensitivity analysis we analyze four different scenarios for the real-euro parity volatility. Based on the foreign exchange rate of December 31, 2012 of R$1.3190 per US$1.00, adjustments were estimated for four scenarios: scenario 1: (25% of Real appreciation) rate of R$0.9893 per US$1.00; scenario 2: (50% of Real appreciation) rate of R$0.6595 per US$1.00; scenario 3: (25% of Real devaluation) rate of R$ 1.6488; scenario 4: (50% of Real devaluation) rate of R$ 1.9785.

December 31, 2012 (In millions of US$, except for exchange rates) |  |  |  |  |  |  |  |  |  |
| Risk |  | Scenario |  | Reference Value |  | Exchange Rates |  | Additional Results
Net current swap |  | US Dollar fluctuation |  |  |  | 44 |  | 1.3190 |  |
|  |  |  | 1 |  |  |  | 0.9893 |  | (15)
|  |  |  | 2 |  |  |  | 0.6595 |  | (29)
|  |  |  | 3 |  |  |  | 1.6488 |  | 15
|  |  |  | 4 |  |  |  | 1.9785 |  | 29
Exchange position functional currency EURO |  | US Dollar fluctuation |  |  |  | (6) |  | 1.3190 |  |
|  |  |  | 1 |  |  |  | 0.9893 |  | 2
|  |  |  | 2 |  |  |  | 0.6595 |  | 4
|  |  |  | 3 |  |  |  | 1.6488 |  | (2)
|  |  |  | 4 |  |  |  | 1.9785 |  | (4)
Consolidated exchange position |  | US Dollar fluctuation |  |  |  | 38 |  | 1.3190 |  |
|  |  |  | 1 |  |  |  | 0.9893 |  | (13)
|  |  |  | 2 |  |  |  | 0.6595 |  | (25)
|  |  |  | 3 |  |  |  | 1.6488 |  | 13
|  |  |  | 4 |  |  |  | 1.9785 |  | 25

129

Table Of Contents

Sensitivity analysis of interest rate swaps

In millions of R$, except for notional amount

| Notional |  |  |  |  |  |  |  |  |  | 12/31/2012
| Million US$ |  | Risk |  | 25% |  | 50% |  | 25% |  | 50%
Swap of interest rate libor vs CDI | 64 |  | (Libor) US$ |  | (8) |  | (10) |  | 8 |  | 10

· Sensitivity analysis of changes in interest rate

The Company considers the effects of a 5% increase or decrease in interest rates on its outstanding borrowings, financing and debentures as of December 31, 2012 in the consolidated financial statements.

In millions of R$

| Impact on profit or loss
| % p.a |  | 2012 |  | 2011
Changes in interest |  |  |  |  |
TJLP | 5.50 |  | 9,667 |  | 1,372
Libor | 0.51 |  | 6,607 |  | 7,941
CDI | 6.90 |  | 50,391 |  | 72,607

Share market price risk

· The Company is exposed to the risk of changes in equity prices due to the investments made and classified as available-for-sale.

The Company considers as probable scenario the amounts recognized at market prices as of December 31, 2012. Sensitivity analysis is based on the assumption of maintaining as probable scenario the market values as of December 31, 2012. Therefore, there is no impact on the financial instruments classified as available for sale already presented above. The Company considered the following scenarios for volatility of the shares.

- Scenario 1: (25% appreciation of shares);

- Scenario 2: (50% appreciation of shares);

- Scenario 3: (25% devaluation of shares);

- Scenario 4: (50% devaluation of shares).

| Impact on profit or loss
Companies | Probable |  | 25% |  | 50% |  | 25% |  | 50%
Usiminas | 731 |  | 200 |  | 401 |  | (200) |  | (401)
Panatlântica | 1 |  | 3 |  | 5 |  | (3) |  | (5)
| 732 |  | 203 |  | 406 |  | (203) |  | (406)

130

Table Of Contents

Item 12. Description of Securities Other Than Equity Securities

American Depositary Shares

JP Morgan Chase Bank, N.A. serves as the depositary for our ADSs. ADR holders are required to pay various fees to the depositary, and the depositary may refuse to provide any service for which a fee is assessed until the applicable fee has been paid.

ADR holders are required to pay the depositary amounts in respect of expenses incurred by the depositary or its agents on behalf of ADR holders, including expenses arising from compliance with applicable law, taxes or other governmental charges, facsimile transmission or conversion of foreign currency into U.S. dollars. In this case, the depositary may decide at its sole discretion to seek payment by either billing holders or by deducting the fee from one or more cash dividends or other cash distributions.

ADR holders are also required to pay additional fees for certain services provided by the depositary, as set forth in the table below.

### Depositary service |  | Fee payable by ADR holders
Issuance and delivery of ADRs, including in connection with share distributions, stock splits |  | US$5.00 for each 100 ADSs (or portion thereof)
Distribution of dividends |  | US$5.00 for each 100 ADSs
Deposit of securities, including in respect of share, rights and other distributions |  | US$5.00 for each 100 ADSs (or portion thereof)
Withdrawal of deposited securities |  | US$5.00 for each 100 ADSs (or portion thereof)

Direct and indirect payments by the depositary

The depositary reimburses us for certain expenses we incur in connection with the ADR program, subject to a ceiling agreed between us and the depositary from time to time. These reimbursable expenses currently include legal and accounting fees, listing fees, investor relations expenses and fees payable to service providers for the distribution of material to ADR holders. For the year ended December 31, 2012, such reimbursements totaled US$0.7 million.

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modification to the Rights of Security Holders and Use of Proceeds

None.

PART II

Item 15. Controls and Procedures

Disclosure Controls and Procedures

We have carried out an evaluation under the supervision of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and our Principal Financial Officer concluded that the design and operation of our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) collected and communicated to management, including the Chief Executive Officer and the Principal Financial Officer, to allow timely decisions regarding required disclosure as of the end of our most recent fiscal year.

131

Table Of Contents

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.

Our internal control over financial reporting is a process designed by, or under the supervision of, our Audit Committee, principal executive and principal financial officers, and effected by our board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2012 based on the criteria established in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations – COSO – of the Treadway Commission. Based on the assessment, management has concluded that, as of December 31, 2012, our internal control over financial reporting is effective.

Attestation Report of the Independent Registered Public Accounting Firm

For the report of Deloitte Touche Tohmatsu Auditores Independentes, our independent registered public accounting firm, dated April 23, 2013, on the effectiveness of our internal control over financial reporting as of December 31, 2012, see “Item 18. Financial Statements”.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16. [Reserved]

16A. Audit Committee Financial Expert

After reviewing the qualifications of the members of our Audit Committee, our Board of Directors has determined that all three members of our Audit Committee qualify as an “audit committee financial expert,” as defined by the SEC. In addition, all of the members of our Audit Committee meet the applicable independence requirements both under Brazilian Corporate Law and under the NYSE rules.

Our Audit Committee is permanently assisted by a consultant, who renders financial and consulting services, among others, to the members of our Audit Committee.

16B. Code of Ethics

132

Table Of Contents

We have adopted a Code of Ethics in 1998, reinforcing our ethical standards and values that apply to all of our employees, including executive officers and directors.

Given its importance, the Code of Ethics was updated during year 2011 and copies of the Code of Ethics were distributed to each employee of the organization, to our Board of Directors and our Audit Committee members, who have signed a Commitment Letter, which reinforces the dedication to the established values.

There was no amendment to or waiver from any provision of our Code of Ethics in 2012. Our Code of Ethics is in compliance with the SEC requirements for codes of ethics for senior financial officers. A copy of our Code of Ethics is available on our websites www.csn.com.br or www.csn.com.br/ir.

16C. Principal Accountant Fees and Services

Our interaction with our independent auditors with respect to the contracting of services unrelated to the external audit is based on principles that preserve the independence of the auditors and are otherwise permissible under applicable rules and regulations. For the fiscal year ended December 31, 2012, Deloitte Touche Tohmatsu Auditores Independentes acted as our independent auditor, while for the fiscal year ended December 31, 2011, our independent auditor was KPMG Auditores Independentes.

The following table describes the services rendered and the related fees.

|  | Year Ended December 31,
|  | 2012 |  | 2011
|  | (In thousands of R$)
Audit fees |  | 2,992 |  | 2,654
Audit – related fees |  | 1,899 |  | 285
Tax fees |  | 0 |  | 142
Total |  | 4,891 |  | 3,081

Audit fees

Audit fees in 2012 and 2011 consisted of the aggregate fees billed and billable by our independent auditors in connection with the audit of our consolidated financial statements, reviews of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements.

Audit-related fees

Audit-related fees in the above table are fees billed by our independent auditors for services that are reasonably related to the performance of the audit or review of our financial statements. In 2012 and 2011 these fees refer mainly to comfort letters for offering of bonds and due diligence processes.

Tax Fees

Fees billed in 2011 for professional services rendered by our independent auditors are for tax compliance services. In 2012 there are no fees for tax services provided by our independent auditors.

Pre-approval Policies and Procedures

Our Board of Directors and Audit Committee must approve before we engage independent auditors to provide any audit or permitted non-audit services to us or our subsidiaries.

16D. Exemptions from the Listing Standards for Audit Committees

We are in full compliance with the listing standards for audit committee pursuant to Exchange Act Rule 10A- 3. For a discussion on our audit committee, see “Item 6. Directors, Senior Management and Employees—Board Practices—Fiscal Committee and Audit Committee.”

133

Table Of Contents

16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Since the beginning of 2004, in accordance with the limits and provisions of CVM Instruction No. 10/80, our Board of Directors approved a number of share buyback programs.

In 2012, we did not carry out any form of share buyback, either through publicly announced plans or programs or otherwise.

16F. Change in Registrant’s Certifying Accountant

Not Applicable

16G. Corporate Governance

Significant Differences between our Corporate Governance Practice and NYSE Corporate Governance Standards

We are subject to the NYSE corporate governance listing standards. As a foreign private issuer, the standards applicable to us are considerably different than the standards applied to U.S. listed companies. Under the NYSE rules, we are required only to: (i) have an audit committee or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below, (ii) provide prompt certification by our Chief Executive Officer of any material non-compliance with any corporate governance rules, and (iii) provide a brief description of the significant differences between our corporate governance practices and the NYSE corporate governance practice required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below.

134

Table Of Contents

Majority of Independent Directors

The NYSE rules require that a majority of the board of directors must consist of independent directors. Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company. Brazilian law does not have a similar requirement. Under Brazilian law, neither our board of directors nor our management is required to test the independence of directors before their election to the board. However, both Brazilian Corporate Law and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation and duties and responsibilities of, as well as the restrictions applicable to, a company’s executive officers and directors. While our directors meet the qualification requirements of Brazilian Corporate Law and the CVM, we do not believe that a majority of our directors would be considered independent under the NYSE test for director independence. Brazilian Corporate Law requires that our directors be elected by our shareholders at an annual shareholders’ meeting.

Executive Sessions

NYSE rules require that the non-management directors must meet at regularly scheduled executive sessions without management present. Brazilian Corporate Law does not have a similar provision. According to Brazilian Corporate Law, up to one-third of the members of the board of directors can be elected from management. Mr. Benjamin Steinbruch, our Chief Executive Officer, is also the Chairman of our Board of Directors. There is no requirement that non-management directors meet regularly without management. As a result, the non-management directors on our Board of Directors do not typically meet in executive sessions without management present.

Nominating and Corporate Governance Committee

NYSE rules require that listed companies have a nominating and corporate governance committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company. We are not required under Brazilian Corporate Law to have, and currently we do not have, a nominating and a corporate governance committee.

Compensation Committee

NYSE rules require that listed companies have a compensation committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, reviewing corporate goals relevant to the chief executive officer’s compensation, evaluating the chief executive officer’s performance, approving the chief executive officer’s compensation levels and recommending to the board non-chief executive officer compensation, incentive-compensation and equity-based plans. We are not required under applicable Brazilian law to have, and currently do not have, a compensation committee. Under Brazilian Corporate Law, the total amount available for compensation of our directors and executive officers and for profit-sharing payments to our executive officers is established by our shareholders at the annual shareholders’ meeting. The board of directors is then responsible for determining the individual compensation and profit-sharing of each executive officer, as well as the compensation of our board and committee members.

Audit Committee

NYSE rules require that listed companies have an audit committee that (i) is composed of a minimum of three independent directors who are all financially literate, (ii) meets the SEC rules regarding audit committees for listed companies, (iii) has at least one member who has accounting or financial management expertise and (iv) is governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. However, as a foreign private issuer, we need only to comply with the requirement that the audit committee meet the SEC rules regarding audit committees for listed companies to the extent compatible with Brazilian corporate law. We have established an Audit Committee, which is equivalent to a U.S. audit committee, and provides assistance to our Board of Directors in matters involving our accounting, internal controls, financial reporting and compliance. Our Audit Committee recommends the appointment of our independent auditors to our Board of Directors and reviews the compensation of, and coordinates with, our independent auditors. They also report on our auditing policies and our annual audit plan prepared by our internal auditing team. Our Audit Committee also evaluates the effectiveness of our internal financial and legal compliance controls, and is comprised of up to three independent directors elected by our Board of Directors for a one-year term of office. The current members of our Audit Committee are Fernando Perrone, Yoshiaki Nakano and Antonio Francisco dos Santos. All members of our Audit Committee satisfy the audit committee membership independence requirements set forth by the SEC and the NYSE. All members of our Audit Committee have been determined by our Board of Directors to qualify as an “audit committee financial expert” within the meaning of the rules adopted by the SEC relating to the disclosure of financial experts on audit committees in periodic filings pursuant to the Exchange Act. For further information on our Audit Committee, see “Item 6. Directors, Senior Management and Employees—Board Practices—Fiscal Committee and Audit Committee.”

135

Table Of Contents

Code of Business Conduct and Ethics

NYSE rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Applicable Brazilian law does not have a similar requirement. We have adopted a Code of Ethics applicable to all our employees, including our executive officers and directors. We believe this code addresses the matters required to be addressed pursuant to the NYSE rules. For a further discussion of our Code of Ethics, see “Item 16B. Code of Ethics.”

Shareholder Approval of Equity Compensation Plans

NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions. We currently do not have any such plan and, pursuant to our bylaws, we would require shareholder approval to adopt an equity compensation plan.

Corporate Governance Guidelines

NYSE rules require that listed companies adopt and disclose corporate governance guidelines. We have adopted the following corporate governance guidelines, either based on Brazilian law, our Code of Ethics or institutional handbook:

· insider trading policy for securities issued by us;

· disclosure of material facts;

· disclosure of annual financial reports;

· confidential policies and procedures; and

· Sarbanes-Oxley Disclosure Committee’s duties and activities.

Item 16H. Mine Safety Disclosure

Not applicable as none of our mines are located in the United States and as such are not subject to the Federal Mine Safety and Health Act of 1977 or the Mine Safety and Health Administration.

Item 17. Financial Statements

We have responded to Item 18 in lieu of responding to this item. See “Item 18. Financial Statements.”

PART III

Item 18. Financial Statements

The following consolidated financial statements of the Registrant, together with the reports of Deloitte Touche Tohmatsu Auditores Independentes and KPMG Auditores Independentes thereon, are filed as part of this annual report.

136

Table Of Contents

|  | Page
Report of Independent Registered Public Accounting Firm |  | FS-R1
Report of Independent Registered Public Accounting Firm |  | FS-R2
Report of Independent Registered Public Accounting Firm |  | FS-R3
Consolidated financial statements: |  |
Balance sheets as of December 31, 2012 and 2011 |  | FS- 1
Statements of income for the years ended December 31, 2012, 2011 and 2010 |  | FS- 3
Statements of cash flows for the years ended December 31, 2012, 2011 and 2010 |  | FS- 4
Statements of changes in shareholders’ equity for the years ended December 31, 2012, 2011 and 2010 |  | FS-5
Statements of comprehensive income for the years ended December 31, 2012, 2011 and 2010. Notes to consolidated financial statements |  | FS-6 FS-7

Item 19. Exhibits

Exhibit |  | Description
Number |  |
1.1+ |  | Bylaws of CSN, as amended to date.
2.1 |  | Form of Amended and Restated Deposit Agreement dated as of November 1, 1997 as amended and restated as of November 13, 1997, among Companhia Siderúrgica Nacional, JP Morgan Chase Bank, N.A. (as successor to Morgan Guaranty Trust Company of New York), as successor depositary, and all holders from time to time of American Depositary Receipts issued thereunder (incorporated by reference from the Registration Statement on Form F-6 (333-7818) filed with the SEC).
2.2 |  | Form of Amendment No. 1 to the Deposit Agreement (incorporated by reference from the Registration Statement on Form F-6EF (333-115078) filed with the SEC on April 30, 2004).
2.3 |  | Form of Amendment No. 2 to Deposit Agreement, including the form of American Depositary Receipt (corporate by reference from the Registration Statement on Form F-6POS filed with the SEC on January 5, 2011)
8.1+ |  | List of subsidiaries
10.1* |  | Share Purchase Agreement, dated October 21, 2008, among CSN, Big Jump Energy Participações S.A., Itochu Corporation, JFE Steel Corporation, Nippon Steel Corporation, Sumitomo Metal Industries, Ltd., Kobe Steel, Ltd., Nishin Steel Co., Ltd., and Posco. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
10.2*+ |  | Amendment to the Share Purchase Agreement, dated June 30, 2011. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2011, filed with the SEC on February 14, 2013).
10.3* |  | Shareholders Agreement of Nacional Minérios S.A., dated October 21, 2008, between CSN and Big Jump Energy Participações S.A. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
10.4*+ |  | Amendment to the Shareholders’ Agreement of Nacional Minérios S.A., dated June 30, 2011. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2011, filed with the SEC on February 14, 2013).
10.5* |  | High Silica ROM Iron Ore Supply Contract, dated October 21, 2008, between CSN and Nacional Minérios S.A. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
10.6* |  | Low Silica ROM Iron Ore Supply Contract, dated October 21, 2008, between CSN and Nacional Minérios S.A. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
10.7* |  | Iron Ore Supply Contract, dated October 21, 2008, between CSN and Nacional Minérios S.A. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
10.8* |  | Port Operating Services Agreement, dated October 21, 2008, between CSN and Nacional Minérios S.A. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
12.1+ |  | Section 302 Certification of Chief Executive Officer.
12.2+ |  | Section 302 Certification of Principal Financial Officer.
13.1+ |  | Section 906 Certification of Chief Executive Officer.
13.2+ |  | Section 906 Certification of Principal Financial Officer.
15.1+ |  | Management’s report dated April 23, 2013, on the effectiveness of our internal control over financial reporting as of December 31, 2012.
* Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Exchange Act of 1934, as amended. + Filed herewith.

137

Table Of Contents

SIGNATURE

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

April 30, 2012 | Companhia Siderúrgica Nacional
| By: |
|  | /s/ | Benjamin Steinbruch
|  | Title: | Chief Executive Officer
| By: |
|  | /s/ | Rogério Leme Borges dos Santos
|  | Title: | Controller / Principal Financial Officer

138

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Companhia Siderurgica Nacional

São Paulo – SP, Brazil

We have audited the internal control over financial reporting of Companhia Siderurgica Nacional and subsidiaries (the "Company") as of December 31, 2012, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission - COSO. As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Stahlwerk Thüringen GmbH, which was acquired on January 31, 2012 and whose financial statements constitute 3.5% of total assets, and 6.6% of net revenues from sales and/or services, of the consolidated financial statement amounts as of and for the year ended December 31, 2012. Accordingly, our audit did not include the internal control over financial reporting at Stahlwerk Thüringen GmbH. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board - IASB. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board - IASB, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

FS-R1

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2012 of the Company and our report dated April 23, 2013 expressed an unqualified opinion on those financial statements.

/s/ Deloitte Touche Tohmatsu Auditores Independentes

DELOITTE TOUCHE TOHMATSU AUDITORES INDEPENDENTES

São Paulo – SP, Brazil

April 23, 2013

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Companhia Siderurgica Nacional

São Paulo – SP, Brazil

We have audited the accompanying consolidated balance sheet of Companhia Siderurgica Nacional and subsidiaries (the "Company") as of December 31, 2012, and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for the year ended December 31, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) - PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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, such consolidated financial statements present fairly, in all material respects, the financial position of Companhia Siderurgica Nacional and subsidiaries as of December 31, 2012, and the results of their operations and their cash flows for the year ended December 31, 2012, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board - IASB.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) - PCAOB, the Company's internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission - COSO and our report dated April 23, 2013 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte Touche Tohmatsu Auditores Independentes

DELOITTE TOUCHE TOHMATSU AUDITORES INDEPENDENTES

São Paulo – SP, Brasil

April 23, 2013

FS-R2

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Companhia Siderúrgica Nacional:

We have audited the accompanying consolidated balance sheet of Companhia Siderúrgica Nacional and subsidiaries (the “Company”) as of December 31, 2011, and the related consolidated statements of income, changes in shareholders’ equity and comprehensive income, and cash flows for each of the years in the two-year period ended December 31, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 Companhia Siderúrgica Nacional and subsidiaries as of December 31, 2011, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2011, in conformity with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

/s/ KPMG Auditores Independentes

São Paulo, Brazil
April 27, 2012

FS-R3

Companhia Siderúrgica Nacional and Subsidiaries |  |  |  |
Consolidated Balance Sheet |  |  |  |  |
Thousands of Brazilian reais |  |  |  |  |
Assets |  |  |  |  |
| Note |  | 2012 |  | 2011
CURRENT ASSETS |  |  |  |  |
Cash and cash equivalents | 4 |  | 14,444,875 |  | 15,417,393
Trade receivables | 5 |  | 1,794,566 |  | 1,616,206
Inventories | 6 |  | 3,580,025 |  | 3,734,984
Other current assets | 7 |  | 1,302,479 |  | 1,175,723
Total current assets |  |  | 21,121,945 |  | 21,944,306
NON-CURRENT ASSETS |  |  |  |  |
Long-term receivables |  |  |  |  |
Short-term investments |  |  | 116,753 |  | 139,679
Deferred income taxes | 8 |  | 2,372,501 |  | 1,840,773
Other non-current assets | 7 |  | 1,648,056 |  | 2,876,269
|  |  | 4,137,310 |  | 4,856,721
Investments | 9 |  | 2,351,774 |  | 2,088,225
Property, plant and equipment | 10 |  | 20,408,747 |  | 17,377,076
Intangible assets | 11 |  | 1,275,452 |  | 603,374
Total non-current assets |  |  | 28,173,283 |  | 24,925,396
TOTAL ASSETS |  |  | 49,295,228 |  | 46,869,702
The accompanying notes are an integral part of these consolidated financial statements.

FS-1

Companhia Siderúrgica Nacional and Subsidiaries |  |  |  |  |
Consolidated Balance Sheet |  |  |  |  |
Thousands of Brazilian reais |  |  |  |  |
Liabilities and shareholders´ equity |  |  |  |  |
| Note |  | 2012 |  | 2011
SHAREHOLDERS' EQUITY AND LIABILITIES |  |  |  |  |
CURRENT LIABILITIES |  |  |  |  |
Payroll and related taxes |  |  | 241,291 |  | 202,469
Trade payables |  |  | 1,957,789 |  | 1,232,075
Taxes payable |  |  | 336,348 |  | 325,132
Borrowings and financing | 12 |  | 2,295,409 |  | 2,702,083
Other payables | 14 |  | 1,221,350 |  | 1,728,445
Provisions for tax, social security, labor and civil risks | 16 |  | 355,889 |  | 292,178
Other provisions |  |  |  |  | 14,565
Total current liabilities |  |  | 6,408,076 |  | 6,496,947
NON-CURRENT LIABILITIES |  |  |  |  |
Borrowings and financing | 12 |  | 27,856,350 |  | 25,186,505
Other payables | 14 |  | 4,388,451 |  | 5,593,520
Deferred income taxes | 8 |  | 284,110 |  | 37,851
Provisions for tax, social security, labor and civil risks | 16 |  | 371,697 |  | 346,285
Employee Benefits | 28 |  | 565,591 |  | 469,050
Other provisions |  |  | 413,440 |  | 322,374
Total non-current liabilities |  |  | 33,879,639 |  | 31,955,585
Equity | 19 |  |  |  |
Issued capital |  |  | 4,540,000 |  | 1,680,947
Capital reserves |  |  | 30 |  | 30
Earnings reserves |  |  | 3,690,543 |  | 7,671,620
Other comprehensive income/(loss) |  |  | 386,324 |  | -1,366,776
Total equity attributable to owners of the Company |  |  | 8,616,897 |  | 7,985,821
Non-controlling interests |  |  | 390,616 |  | 431,349
Total equity |  |  | 9,007,513 |  | 8,417,170
TOTAL EQUITY AND LIABILITIES |  |  | 49,295,228 |  | 46,869,702
The accompanying notes are an integral part of these consolidated financial statements.

FS-2

Companhia Siderúrgica Nacional and Subsidiaries |  |  |  |  |  |
Consolidated Statements of Income |  |  |  |  |  |  |
Thousands of Brazilian reais |  |  |  |  |  |  |
| Note |  | 2012 |  | 2011 |  | 2010
Net Revenue from sales and/or services | 22 |  | 16,896,264 |  | 16,519,584 |  | 14,450,510
Cost of sales and/or services | 23 |  | -12,072,206 |  | -9,800,844 |  | -7,882,726
Gross profit |  |  | 4,824,058 |  | 6,718,740 |  | 6,567,784
Operating expenses |  |  | -4,182,361 |  | -961,818 |  | -1,569,438
Selling expenses | 23 |  | -931,525 |  | -604,108 |  | -481,978
General and administrative expenses | 23 |  | -576,514 |  | -575,585 |  | -536,857
Other operating income | 24 |  | 46,003 |  | 719,177 |  | 48,821
Other operating expenses | 24 |  | -2,719,373 |  | -501,302 |  | -599,424
Share of profits of investees |  |  | -952 |  |  |  |
Profit before finance income (costs) and taxes |  | 641,697 |  | 5,756,922 |  | 4,998,346
Finance income | 25 |  | 416,781 |  | 717,450 |  | 643,140
Finance costs | 25 |  | -2,409,186 |  | -2,723,253 |  | -2,554,598
(Loss) profit before income taxes |  |  | -1,350,708 |  | 3,751,119 |  | 3,086,888
Income tax and social contribution | 26 |  | 870,134 |  | -83,885 |  | -570,697
(Loss) profit from continuing operations |  |  | -480,574 |  | 3,667,234 |  | 2,516,191
(Loss) profit for the year attributed to: |  |  |  |  |  |  |
Companhia Siderúrgica Nacional |  |  | -420,113 |  | 3,706,033 |  | 2,516,376
Non-controlling interests |  |  | -60,461 |  | -38,799 |  | -185
(Losses) Earnings per common share - (reais/share) |  |  |  |  |  |  |
Basic | 27 |  | -0.28815 |  | 2.54191 |  | 1.72594
Diluted | 27 |  | -0.28815 |  | 2.54191 |  | 1.72594
The accompanying notes are an integral part of these consolidated financial statements. |  |

FS-3

Companhia Siderúrgica Nacional and Subsidiaries |  |  |  |  |
Consolidated Statements of Comprehensive Income |  |  |  |  |
Thousands of Brazilian reais |  |  |  |  |
| 2012 |  | 2011 |  | 2010
(Loss) profit for the year | -480,574 |  | 3,667,234 |  | 2,516,191
Other comprehensive income | 1,753,100 |  | -1,198,761 |  | 417,700
Exchange differences arising on translation of foreign operations, net of taxes ((R$425,510) in 2012 and (R$425,510) in 2011) | 147,735 |  | 195,046 |  | -69,270
Actuarial gains/(losses) on defined benefit plan, net of taxes (R$66,155 in 2012 and R$54,714 in 2011) | 106,209 |  | -74,331 |  | -28,603
Net change in fair value of available-for-sale financial assets, net of taxes ((R$377,164) in 2012 and R$241,484 in 2011) | -8,329 |  | -621,312 |  | 515,573
Net change in fair value of available-for-sale financial assets transferred to profit or loss |  |  | -698,164 |  |
Impairment of available-for-sale assets, net of taxes | 1,507,485 |  |  |  |
Comprehensive income for the year | 1,272,526 |  | 2,468,473 |  | 2,933,891
Attributable to: |  |  |  |  |
Companhia Siderúrgica Nacional | 1,332,987 |  | 2,507,272 |  | 2,934,076
Non-controlling interests | -60,461 |  | -38,799 |  | -185
The accompanying notes are an integral part of these consolidated financial statements.

FS-4

Companhia Siderúrgica Nacional and Subsidiaries |  |  |  |
Consolidated Statement of Cash Flow |  |  |  |  |  |  |
Thousands of Brazilian reais |  |  |  |  |  |  |
| Note |  | 2012 |  | 2011 |  | 2010
Profit for the year |  |  | -480,574 |  | 3,667,234 |  | 2,516,191
Accrued charges on borrowings and financing |  |  | 2,249,123 |  | 2,650,622 |  | 1,489,191
Depreciation/ depletion / amortization | 10.b) |  | 1,230,651 |  | 948,251 |  | 814,034
Proceeds from write-off and disposal of assets |  |  | 5,246 |  | 54,727 |  | 5,827
Impairment of available-for-sale assets | 24 |  | 2,022,793 |  |  |  |
Realization of available-for-sale investments | 24 |  |  |  | -698,164 |  |
Deferred income tax and social contribution | 8 |  | -1,075,156 |  | -52,542 |  | 207,268
Provision of swaps/forwards transactions |  |  | 4,975 |  | 110,009 |  | 126,492
Share of profits of investees |  |  | 952 |  |  |  |
Provision for actuarial liabilities |  |  | -30,655 |  | -11,412 |  | 2,393
Provision for tax, social security, labor and civil risks |  |  | 252,432 |  | 62,746 |  | 199,558
Inflation adjustment and exchange differences |  |  | 996,810 |  | -250,083 |  | 57,119
Allowance for doubtful debts |  |  |  |  | 189 |  | -46,675
Other provisions |  |  | 70,252 |  | -19,651 |  | -80,570
Cash generated from operations |  |  | 5,246,849 |  | 6,461,926 |  | 5,290,828
Trade receivables |  |  | -237,873 |  | -339,427 |  | 143,250
Inventories |  |  | 200,893 |  | -410,264 |  | -794,331
Receivables from related parties |  |  | -3,774 |  | 471,666 |  |
Recoverable taxes |  |  | 139,823 |  | 16,700 |  | 297,424
Trade payables |  |  | 663,198 |  | 544,300 |  | 11,964
Payroll and related taxes |  |  | -91,447 |  | -47,072 |  | -36,757
Taxes payable |  |  | 74,982 |  | 135,765 |  | -101,723
Taxes in installments - REFIS |  |  | -255,338 |  | -296,304 |  | -414,473
Judicial deposits |  |  | 39,023 |  | -20,253 |  | -33,822
Payables to related parties |  |  | -1,322 |  |  |  |
Contingent liabilities |  |  | -10,539 |  | 120,951 |  | 16,868
Interest paid |  |  | -2,297,833 |  | -2,145,400 |  | -1,190,423
Interest paid on swap transactions |  |  | -50,569 |  | -360,976 |  | -676,163
Other |  |  | 71,427 |  | 70,168 |  | 4,662
Increase (decrease) in assets and liabilities |  |  | -1,759,349 |  | -2,260,146 |  | -2,773,524
Net cash generated by (used in) operating activities |  | 3,487,500 |  | 4,201,780 |  | 2,517,304
Receipt/payment in derivative transactions |  |  | 57,740 |  | -57,157 |  | 395,346
Disposal of investments |  |  |  |  | 1,310,171 |  |
Cash from acquisition of subsidiaries |  |  | 14,880 |  |  |  |
Investments |  |  | -166,915 |  | -2,126,493 |  | -1,370,016
Property, plant and equipment | 10 |  | -3,142,634 |  | -4,400,825 |  | -3,635,911
Intangible assets | 11 |  | -1,532 |  | -707 |  | -25,216

FS-5

Companhia Siderúrgica Nacional and Subsidiaries |  |  |  |
Consolidated Statement of Cash Flow |  |  |  |  |  |  |
Thousands of Brazilian reais |  |  |  |  |  |  |
| Note |  | 2012 |  | 2011 |  | 2010
Acquisition of subsidiary |  |  | -301,192 |  |  |  |
Net cash used in investing activities |  |  | -3,539,653 |  | -5,275,011 |  | -4,635,797
Borrowings and financing | 12 |  | 3,721,945 |  | 7,824,012 |  | 8,754,779
Repayments to financial institutions - principal | 12 |  | -2,523,828 |  | -1,469,206 |  | -2,706,982
Dividends and interest on capital |  |  | -1,199,734 |  | -1,856,381 |  | -1,560,795
Repayments of principal - acquisition of subsidiaries |  |  | -803,456 |  |  |  |
Capital contribution by non-controlling shareholders |  |  | 56,194 |  | 242,290 |  | 128,811
Net cash generated by (used in) financing activities |  |  | -748,879 |  | 4,740,715 |  | 4,615,813
Exchange rate changes on cash and cash equivalents |  | -171,486 |  | 1,510,631 |  | -228,833
Increase (decrease) in cash and cash equivalents |  | -972,518 |  | 5,178,115 |  | 2,268,487
Cash and cash equivalents at the beginning of the year |  | 15,417,393 |  | 10,239,278 |  | 7,970,791
Cash and cash equivalents at the end of the year |  | 14,444,875 |  | 15,417,393 |  | 10,239,278
The accompanying notes are an integral part of these consolidated financial statements. |  |

FS-6

Companhia Siderúrgica Nacional and Subsidiaries |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated Statement of Changes in Shareholders' Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |
Thousands of Brazilian reais |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Paid-in Capital |  | Capital Reserve |  | Earnings Reserve |  | Retained earnings |  | Other comprehensive income |  | Shareholders´Equity |  | Non-Controling interests |  | Consolidated Equity
Opening balance at January 1, 2010 | 1,680,947 |  | 30 |  | 5,444,605 |  | (33,417) |  | (585,715) |  | 6,506,450 |  | 83,060 |  | 6,589,510
Approval of prior year’s proposed dividends |  |  |  |  | (1,178,635) |  |  |  |  |  | (1,178,635) |  |  |  | (1,178,635)
Profit for the year |  |  |  |  |  |  | 2,516,376 |  |  |  | 2,516,376 |  | (185) |  | 2,516,191
Allocation of profit for the year |  |  |  |  |  |  | (272,297) |  |  |  | (272,297) |  |  |  | (272,297)
Declared dividends (R$186.76 per thousand shares) |  |  |  |  |  |  | (356,800) |  |  |  | (356,800) |  |  |  | (356,800)
Interest on capital (R$244.72 per thousand shares) |  |  |  |  |  |  | (1,227,703) |  |  |  | (1,227,703) |  |  |  | (1,227,703)
Additional dividends proposed (R$842.06 per thousand shares) |  |  |  |  | 1,227,703 |  |  |  |  |  | 1,227,703 |  |  |  | 1,227,703
Investment reserve |  |  |  |  | 626,159 |  | (626,159) |  |  |  |  |  |  |  |
Cancelation of treasury shares |  |  |  |  | (34) |  |  |  |  |  | (34) |  |  |  | (34)
Comprehensive income |  |  |  |  |  |  |  |  | 417,700 |  | 417,700 |  |  |  | 417,700
Non-controlling interests |  |  |  |  |  |  |  |  |  |  |  |  | 107,053 |  | 107,053
Balances at December 31, 2010 | 1,680,947 |  | 30 |  | 6,119,798 |  |  |  | (168,015) |  | 7,632,760 |  | 189,928 |  | 7,822,688
Approval of prior year’s proposed dividends |  |  |  |  | (1,227,703) |  |  |  |  |  | (1,227,703) |  |  |  | (1,227,703)
Profit for the year |  |  |  |  |  |  | 3,706,033 |  |  |  | 3,706,033 |  | (38,799) |  | 3,667,234
Allocation of profit for the year |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Declared dividends (R$635.48 per thousand shared) |  |  |  |  |  |  | (926,508) |  |  |  | (926,508) |  |  |  | (926,508)
Additional dividends proposed (R$187.58 per thousand shares) |  |  |  |  | 273,492 |  | (273,492) |  |  |  |  |  |  |  |
Other comprehensive income |  |  |  |  |  |  |  |  | (1,198,761) |  | (1,198,761) |  |  |  | (1,198,761)
Recognition of rese rves |  |  |  |  | 2,506,033 |  | (2,506,033) |  |  |  |  |  |  |  |
Non-controlling interests |  |  |  |  |  |  |  |  |  |  |  |  | 280,220 |  | 280,220
Balances at December 31, 2011 | 1,680,947 |  | 30 |  | 7,671,620 |  |  |  | (1,366,776) |  | 7,985,821 |  | 431,349 |  | 8,417,170
Capital transactions with shareholders | 2,859,053 |  |  |  | (3,432,545) |  |  |  |  |  | (573,492) |  |  |  | (573,492)
Capital increases | 2,859,053 |  |  |  | (2,859,053) |  |  |  |  |  |  |  |  |  |
Declared dividends (R$205.77 per thousand shared) |  |  |  |  | (300,000) |  |  |  |  |  | (300,000) |  |  |  | (300,000)

FS-7

Companhia Siderúrgica Nacional and Subsidiaries |  |  |  |  |  |  |  |  |  |
Consolidated Statement of Changes in Shareholders' Equity |  |  |  |  |  |  |  |  |  |
Thousands of Brazilian reais |  |  |  |  |  |  |  |  |  |  |  |
| Paid-in Capital |  | Capital Reserve |  | Earnings Reserve |  | Retained earnings |  | Other comprehensive income |  | Shareholders´Equity |  | Non-Controling interests |  | Consolidated Equity
Interest on capital (R$384.10 per thousand shares) |  |  |  |  | (560,000) |  |  |  |  |  | (560,000) |  |  |  | (560,000)
Interest on capital proposed |  |  |  |  | 560,000 |  |  |  |  |  | 560,000 |  |  |  | 560,000
Approval of prior year’s proposed dividends |  |  |  |  | (273,492) |  |  |  |  |  | (273,492) |  |  |  | (273,492)
Total comprehensive income |  |  |  |  |  |  | (548,532) |  | 1,753,100 |  | 1,204,568 |  | (60,461) |  | 1,144,107
Profit for the year |  |  |  |  |  |  | (420,113) |  |  |  | (420,113) |  | (60,461) |  | (480,574)
Other comprehensive income |  |  |  |  |  |  | (128,419) |  | 1,753,100 |  | 1,624,681 |  |  |  | 1,624,681
Cumulative translation adjustments for the period |  |  |  |  |  |  |  |  | 147,735 |  | 147,735 |  |  |  | 147,735
Actuarial (losses)/gains on defined benefit pension plan |  |  |  |  |  |  |  |  | (22,210) |  | (22,210) |  |  |  | (22,210)
Available-for-sale assets, net of taxes |  |  |  |  |  |  |  |  | 1,499,156 |  | 1,499,156 |  |  |  | 1,499,156
Acturial losses reclassification |  |  |  |  |  |  | (128,419) |  | 128,419 |  |  |  |  |  |
Losses absorption for the period |  |  |  |  | (420,113) |  | (420,113) |  |  |  |  |  |  |  |
Acturial losses absorption |  |  |  |  | (128,419) |  | (128,419) |  |  |  |  |  |  |  |
Non-controlling interests in subsidiaries |  |  |  |  |  |  |  |  |  |  |  |  | 19,728 |  | 19,728
Balances at December 31, 2012 | 4,540,000 |  | 30 |  | 3,690,543 |  |  |  | 386,324 |  | 8,616,897 |  | 390,616 |  | 9,007,513

FS-8

(Expressed in thousands of reais – R$, unless otherwise stated)

1. DESCRIPTION OF BUSINESS

Companhia Siderúrgica Nacional - "CSN", also referred to as the Company, is a publicly-held company incorporated on April 9, 1941, under the laws of the Federative Republic of Brazil (Companhia Siderúrgica Nacional, its subsidiaries, associates and jointly controlled entities collectively referred to herein as the "Group”). The Company’s registered office is located in São Paulo.

CSN has shares listed on the São Paulo Stock Exchange (BM&F BOVESPA) and the New York Stock Exchange (NYSE). Accordingly, it reports its information to the Brazilian Securities Commission (CVM) and the U.S. Securities and Exchange Commission (SEC).

The Group's main operating activities are divided into five (5) operating segments as follows:

· Steel:

The Company’s main industrial facility is the Presidente Vargas Steel Mill (“UPV”), located in the city of Volta Redonda, State of Rio de Janeiro. This segment consolidates the operations related to the production, distribution and sale of flat steel, long steel, metallic containers and galvanized steel. In addition to the facilities in Brazil, CSN has operations in the United States, Portugal and Germany aimed at gaining markets and performing excellent services for final consumers. Its steels are used in the home appliances, civil construction and automobile industries.

· Mining:

The production of iron ore is developed in the city of Congonhas, in the State of Minas Gerais. It further mines tin in the State of Rondônia to supply the needs of UPV, with the excess of these raw materials being sold to subsidiaries and third parties. CSN holds the concession to operate TECAR, a solid bulk terminal, one of the 4 (four) terminals that comprise the Itaguaí Port, in Rio de Janeiro. Importations of coal and coke are carried out through this terminal.

· Cement:

CSN entered the cement market boosted by the synergy between this new activity and its already existing businesses. Next to the Presidente Vargas Steel Mill in Volta Redonda (RJ), it installed a new business unit: CSN Cimentos, which produces CP-III type cement by using slag produced by the UPV blast furnaces in Volta Redonda. It also explores limestone and dolomite at the Arches drive in the State of Minas Gerais, to supply the needs of UPV and of the cement plant.

· Logistics:

Railroads:

CSN has equity interests in two railroad companies: MRS Logística, which manages the former Southeast Network of Rede Ferroviária Federal S.A. (RFFSA), and Transnordestina Logística, which operates the former Northeast Network of the RFFSA in the states of Maranhão, Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas.

Ports:

In the State of Rio de Janeiro, the Company operates the Container Terminal known as Sepetiba Tecon at the Itaguaí Port. Located in the Bay of Sepetiba, this port has privileged highway, railroad and maritime access.

Tecon handles the shipments of CSN steel products, movement of containers, as well as storage, consolidation and deconsolidation of cargo.

FS-9

· Energy:

As energy is fundamental in its production process, the Company invested in assets for generation of electric power to guarantee its self-sufficiency.

For further details on the Group's strategic investments and segments, see Note 26 - Business Segment Reporting.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The consolidated financial statements have been prepared and are being presented in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in the notes to this report and refer to the allowance for doubtful debts, allowance for inventories losses, provision for labor, civil, tax, environmental and social security risks, depreciation, amortization, depletion, provision for impairment, deferred taxes, financial instruments and employee benefits. Actual results may differ from these estimates.

The financial statements are presented in thousands of reais (R$). Depending on the applicable IFRS standard, the measurement criterion used in preparing the financial statements considers the historical cost, net realizable value, fair value or recoverable amount.

The consolidated financial statements were approved by the Board of Directors and authorized for issue on April 23, 2013.

(b) Consolidated financial statements

The accounting policies have been consistently applied to all consolidated companies.

The consolidated financial statements for the years ended December 31, 2012 and 2011 include the following direct and indirect subsidiaries and jointly controlled entities, as well as the exclusive funds Diplic, Mugen and Vértice as follows:

FS-10

· Companies

|  | Equity interests (%) |  |
Companies |  | 12/31/2012 |  | 12/31/2011 |  | Main activities
Direct interest in subsidiaries: full consolidation |  |  |  |  |  |
CSN Islands VII Corp. |  | 100.00 |  | 100.00 |  | Financial transactions
CSN Islands VIII Corp. |  | 100.00 |  | 100.00 |  | Financial transactions
CSN Islands IX Corp. |  | 100.00 |  | 100.00 |  | Financial transactions
CSN Islands X Corp. |  | 100.00 |  | 100.00 |  | Financial transactions
CSN Islands XI Corp. |  | 100.00 |  | 100.00 |  | Financial transactions
CSN Islands XII Corp. |  | 100.00 |  | 100.00 |  | Financial transactions
Tangua Inc. (1) |  |  |  | 100.00 |  | Financial transactions
International Investment Fund |  | 100.00 |  | 100.00 |  | Equity interests and financial transactions
CSN Minerals S.L.U. |  | 100.00 |  | 100.00 |  | Equity interests
CSN Export Europe, S.L.U. |  | 100.00 |  | 100.00 |  | Financial transactions and equity interests
CSN Metals S.L.U. |  | 100.00 |  | 100.00 |  | Equity interests and financial transactions
CSN Americas S.L.U. |  | 100.00 |  | 100.00 |  | Equity interests and financial transactions
CSN Steel S.L.U. |  | 100.00 |  | 100.00 |  | Equity interests and financial transactions
TdBB S.A |  | 100.00 |  | 100.00 |  | Dormant company
Sepetiba Tecon S.A. |  | 99.99 |  | 99.99 |  | Port services
Mineração Nacional S.A. |  | 99.99 |  | 99.99 |  | Mining and equity interests
Florestal Nacional S.A. |  | 99.99 |  | 99.99 |  | Reforestation
Estanho de Rondônia S.A. |  | 99.99 |  | 99.99 |  | Tin mining
Cia Metalic Nordeste |  | 99.99 |  | 99.99 |  | Manufacture of packaging and distribution of steel products
Companhia Metalúrgica Prada |  | 99.99 |  | 99.99 |  | Manufacture of packaging and distribution of steel products
CSN Cimentos S.A. |  | 99.99 |  | 99.99 |  | Cement manufacturing
CSN Gestão de Recursos Financeiros Ltda. |  | 99.99 |  | 99.99 |  | Dormant company
Congonhas Minérios S.A. |  | 99.99 |  | 99.99 |  | Mining and equity interests
CSN Energia S.A. |  | 99.99 |  | 99.99 |  | Sale of electric power
Transnordestina Logística S.A. |  | 76.13 |  | 70.91 |  | Railroad logistics
TFNE - Transnordestina Ferrovias do Nordeste S.A. |  | 99.99 |  |  |  | Railroad logistics
Indirect interest in subsidiaries: full consolidation |  |  |  |  |  |
CSN Aceros S.A. |  | 100.00 |  | 100.00 |  | Equity interests
Companhia Siderúrgica Nacional LLC |  | 100.00 |  | 100.00 |  | Steel
CSN Europe Lda. |  | 100.00 |  | 100.00 |  | Financial transactions, product sales and equity interests
CSN Ibéria Lda. |  | 100.00 |  | 100.00 |  | Financial transactions, product sales and equity interests
CSN Portugal, Unipessoal Lda. |  | 100.00 |  | 100.00 |  | Financial transactions and product sales
Lusosider Projectos Siderúrgicos S.A. |  | 100.00 |  | 100.00 |  | Equity interests
Lusosider Aços Planos, S. A. |  | 99.94 |  | 99.94 |  | Steel and equity interests
CSN Acquisitions, Ltd. |  | 100.00 |  | 100.00 |  | Financial transactions and equity interests
CSN Resources S.A. |  | 100.00 |  | 100.00 |  | Financial transactions and equity interests
CSN Finance (UK) Ltd (1) |  |  |  | 100.00 |  | Financial transactions and equity interests
CSN Holdings (UK) Ltd |  | 100.00 |  | 100.00 |  | Financial transactions and equity interests
CSN Handel GmbH |  | 100.00 |  | 100.00 |  | Financial transactions, product sales and equity interests
Companhia Brasileira de Latas |  | 59.17 |  | 59.17 |  | Sale of cans and containers in general and equity interests
Rimet Empreendimentos Industriais e Comerciais S. A. |  | 58.96 |  | 58.08 |  | Production and sale of steel containers and forestry
Companhia de Embalagens Metálicas MMSA |  | 58.98 |  | 58.98 |  | Production and sale of cans and related activities
Empresa de Embalagens Metálicas - LBM Ltda. |  | 58.98 |  | 58.98 |  | Sales of containers and holding interests in other entities
Empresa de Embalagens Metálicas - MUD Ltda. |  | 58.98 |  | 58.98 |  | Production and sale of household appliances and related products
Empresa de Embalagens Metálicas - MTM do Nordeste |  | 58.98 |  | 58.98 |  | Production and sale of cans and related activities
Companhia de Embalagens Metálicas - MTM |  | 58.98 |  | 58.98 |  | Production and sale of cans and related activities
CSN Steel Comercializadora, S.L.U. (2) |  | 100.00 |  |  |  | Financial transactions, product sales and equity interests
CSN Steel Holdings 1, S.L.U. (2) |  | 100.00 |  |  |  | Financial transactions, product sales and equity interests
CSN Steel Holdings 2, S.L.U. (2) |  | 100.00 |  |  |  | Financial transactions, product sales and equity interests
Stalhwerk Thüringen GmbH (2) |  | 100.00 |  |  |  | Production and sale of long steel and related activities
CSN Steel Sections UK Limited (2) |  | 100.00 |  |  |  | Financial transactions, product sales and equity interests
CSN Steel Sections Czech Republic s.r.o. (2) |  | 100.00 |  |  |  | Financial transactions, product sales and equity interests
CSN Steel Sections Polska Sp.Z.o.o (2) |  | 100.00 |  |  |  | Financial transactions, product sales and equity interests
Direct interest in jointly controlled entities: proportionate consolidation |  |  |  |
Nacional Minérios S.A. |  | 60.00 |  | 60.00 |  | Mining and equity interests
Itá Energética S.A. |  | 48.75 |  | 48.75 |  | Electric power generation
MRS Logística S.A. |  | 27.27 |  | 27.27 |  | Railroad transportation
Consórcio da Usina Hidrelétrica de Igarapava |  | 17.92 |  | 17.92 |  | Electric power consortium
Aceros Del Orinoco S.A. |  | 22.73 |  | 22.73 |  | Dormant company
CBSI - Companhia Brasileira de Serviços de Infraestrutura |  | 50.00 |  | 50.00 |  | Provision of services
CGPAR - Construção Pesada S.A. (3) |  | 50.00 |  |  |  | Mining support services and equity interests
Indirect interest in jointly controlled entities: proportionate consolidation |  |  |  |
Namisa International Minérios SLU |  | 60.00 |  | 60.00 |  | Financial transactions, product sales and equity interests
Namisa Europe, Unipessoal Lda. |  | 60.00 |  | 60.00 |  | Equity interests and sales of products and minerals
Namisa Handel GmbH (4) |  | 60.00 |  | 60.00 |  | Financial transactions, product sales and equity interests
MRS Logística S.A. |  | 6.00 |  | 6.00 |  | Railroad transportation
Aceros Del Orinoco S.A. |  | 9.08 |  | 9.08 |  | Dormant company
Direct interest in associates: equity method |  |  |  |  |  |
Arvedi Metalfer do Brasil S.A. (5) |  | 20.00 |  |  |  | Metallurgy and equity interests

(1) Companies liquidated in 2012.

(2) Companies acquired on January 31, 2012 (see note 9.e).

(3) Equity interest acquired in July 2012 (see note 9.d).

(4) New corporate name of Aloadus Handel Gmbh, changed on August 13, 2012.

(5) Equity interest acquired on July 31, 2012 (see note 9.f).

FS-11

· Exclusive Funds

|  | Equity interests (%) |  |
Exclusive Funds |  | 31/12/2012 |  | 31/12/2011 |  | Main activities
Direct interests: full consolidation |  |  |  |  |  |
Diplic - Balanced mutual fund |  | 100.00 |  | 100.00 |  | Investment fund
Mugen - Balanced mutual fund |  | 100.00 |  | 100.00 |  | Investment fund
Caixa Vértice - Balanced mutual fund privite credit |  | 100.00 |  | 100.00 |  | Investment fund

In preparing the financial statements the following consolidation procedures have been applied:

Unrealized gains on transactions with subsidiaries and jointly controlled entities are eliminated to the extent of CSN’s equity interests in the related entity in the consolidation process. Unrealized losses are eliminated in the same manner as unrealized gains, although only to the extent that there are indications of impairment. The base date of the financial statements of the subsidiaries and jointly controlled entities is the same as that of the Company, and their accounting policies are in line with the policies adopted by the Company.

· Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Company has the power to determine the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are actually exercisable or convertible are taken into consideration when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date when control is transferred to the Company and are deconsolidated from the date when such control ceases.

· Joint controlled entities

The financial statements of jointly controlled entities are included in the consolidated financial statements from the date when shared control starts through the date when shared control ceases to exist. Jointly controlled entities are proportionately consolidated.

· Associates

Associates are all entities over which the Company has significant influence but not control, generally through a shareholding of 20% to 50% of the voting rights. Investments in associates are accounted for under the equity method of accounting and are initially recognized at cost.

· Transactions and non-controlling interests

The Company treats transactions with non-controlling interests as transactions with owners of Company equity. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in shareholders' equity. Gains and losses on disposals to non-controlling interests are also recognized directly in shareholders' equity, in line item “Valuation adjustments to equity”.

When the Company no longer holds control, any retained interest in the entity is remeasured to its fair value, with the change in the carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest in an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Company had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

(c) Foreign currencies

i. Functional and presentation currency

Items included in the financial statements of each one of the Company's subsidiaries are measured using the currency of the primary economic environment in which the subsidiary operates (“functional currency”). The consolidated financial statements are presented in Brazilian reais (R$), which is the Company’s functional currency and the Group’s presentation currency.

FS-12

ii. Balances and transactions

Transactions in foreign currencies are translated into the functional currency using the exchange rates in effect at the dates of the transactions or valuation on which items are remeasured. Foreign exchange gains and losses resulting from the settlement of these transactions and from the translation at exchange rates in effect as of December 31, 2012 of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except when they are recognized in shareholders' equity as qualifying cash flow hedges and qualifying net investment hedges.

The asset and liability balances are translated at the exchange rate in effect at the end of the reporting period. As of December 31, 2012, US$1 is equivalent to R$2,0435 (R$1,8758 as of December 31, 2011), EUR 1 is equivalent to R$2,6954 (R$2,4342 as of December 31, 2011), JPY 1 is equivalent to R$0.02372 (R$0.02431 as of December 31, 2011).

All other foreign exchange gains and losses, including foreign exchange gains and losses related to loans and cash and cash equivalents, are presented in the income statement as finance income or costs.

Changes in the fair value of monetary securities denominated in foreign currency, classified as available-for-sale, are segregated into translation differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Exchange differences related to changes in amortized cost are recognized in profit or loss, and other changes in the carrying amount are recognized in shareholders' equity.

Exchange differences on non-monetary financial assets and liabilities classified as measured at fair value through profit or loss are recognized in profit or loss as part of the gain or loss on the fair value. Exchange differences on non-monetary financial assets, such as investments in shares classified as available-for-sale, are included in comprehensive income in shareholders' equity.

Starting 2012, in view of the changes in operations of the subsidiary Namisa Europe, its functional currency changed from the US dollar to the Brazilian real.

iii. Group companies

The results and financial position of all the Group’s entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the reporting currency are translated into the reporting currency as follows:

· Assets and liabilities in each balance sheet presented have been translated at the exchange rate at the end of the reporting period;

· Income and expenses of each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates in effect at the transaction dates, in which case income and expenses are translated at the rate in effect at the transaction dates); and

· All resulting exchange differences are recognized as a separate component in other comprehensive income.

On consolidation, exchange differences resulting from the translation of monetary items with characteristics of net investment in foreign operations are recognized in shareholders' equity. When a foreign operation is partly disposed of or sold, exchange differences previously recorded in other comprehensive income are recognized in the income statement as part of the gain or loss on sale.

(d) Cash and cash equivalents

Cash and cash equivalents include cash on hand and in banks and other short-term highly liquid investments redeemable within 90 days from the end of the reporting period, readily convertible into a known amount of cash and subject to an insignificant risk of change in value. Certificates of deposit that can be redeemed at any time without penalties are considered as cash equivalents.

FS-13

(e) Trade receivables

Trade receivables are initially recognized at fair value, including the related taxes and expenses. Foreign currency-denominated trade receivables are adjusted at the exchange rate in effect at the end of the reporting period. The allowance for doubtful debts were recognized in an amount considered sufficient to cover any losses. Management’s assessment takes into consideration the customer’s history and financial position, as well as the opinion of our legal counsel regarding the collection of these receivables for recognizing the allowance.

(f) Inventories

Inventories are carried at the lower of cost and net realizable value. Cost is determined using the weighted average cost method on the acquisition of raw materials. The costs of finished products and work in process comprise raw materials, labor and other direct costs (based on the normal production capacity). Net realizable value represents the estimated selling price in the normal course of business, less estimated costs of completion and costs necessary to make the sale. Estimated losses for slow-moving or obsolete inventories are recognized when considered appropriate.

Stockpiled inventories are accounted for as processed when removed from the mine. The cost of finished products comprises all direct costs necessary to transform stockpiled inventories into finished products.

(g) Investments

Investments in jointly controlled entities and associates are accounted for under the equity method of accounting and are initially recognized at cost. In the case of foreign exchange differences arising on translating foreign investments that have a functional currency different from the Company’s, changes in investments due exclusively to foreign exchange differences, as well as adjustments to pension plans and available-for-sale investments that impact the subsidiaries’ shareholders' equity, are recognized in line item “Cumulative translation adjustments”, in the Company’s shareholders' equity, and are only recognized in profit or loss when the investment is disposed of or written off due to impairment loss. Other investments are recognized and maintained at cost or fair value.

When necessary, the accounting policies of subsidiaries and jointly controlled entities are changed to ensure consistency and uniformity of criteria with the policies adopted by the Company.

(h) Business combination

The acquisition method is used to account for each business combination conducted by the Company. The consideration transferred for acquiring a subsidiary is the fair value of the assets transferred, liabilities incurred and equity instruments issued by the Company. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement, where applicable. Acquisition-related costs are recognized in profit or loss, as incurred. Identifiable assets acquired and liabilities assumed in a business combination are initially measured at their fair values at the acquisition date. The Company recognizes non-controlling interests in the acquiree according to the proportional non-controlling interest held in the fair value of the acquiree’s new assets (see note 3).

(i) Property, plant and equipment

Property, plant and equipment are carried at cost of acquisition, formation or construction, less accumulated depreciation or depletion and any impairment loss. Depreciation is calculated under the straight-line method based on the remaining economic useful lives of assets, as mentioned in note 10. The depletion of mines is calculated based on the quantity of ore mined (units of production). Land is not depreciated since their useful life is considered indefinite. However, if the tangible assets are mine-specific, that is, used in the mining activity, they are depreciated over the shorter of the normal useful lives of such assets or the useful life of the mine. The Company recognizes in the carrying amount of property, plant and equipment the cost of replacement, reducing the carrying amount of the part that it is replacing if it is probable that future economic benefits embodied therein will revert to the Company, and if the cost of the asset can be reliably measured. All other disbursements are expensed as incurred. Borrowing costs related to funds obtained for construction in progress are capitalized until these projects are completed.

FS-14

If some components of property, plant and equipment have different useful lives, these components are separately recognized as property, plant and equipment items.

Gains and losses on disposal are determined by comparing the sale value less the residual value and are recognized in ‘Other operating income (expenses)’.

Mineral rights acquired are classified as other assets in property, plant and equipment.

Exploration expenditures are recognized as expenses until the viability of mining activities is established; after this period subsequent development costs are capitalized. Exploration and valuation expenditures include:

· Research and analysis of exploration area historical data;

· Topographic, geological, geochemical and geophysical studies;

· Determine the mineral asset’s volume and quality/grade of deposits;

· Examine and test the extraction processes and methods;

· Topographic surveys of transportation and infrastructure needs;

· Market studies and financial studies.

The costs for the development of new mineral deposits or capacity expansion in mines in operation are capitalized and amortized using the produced (extracted) units method based on the probable and proven ore quantities.

The development stage includes:

· Drillings to define the ore body;

· Access and draining plans;

· Advance removal of overburden (top soil and waste material removed prior to initial mining of the ore body) and waste material (non-economic material that is intermingled with the ore body).

Stripping costs (the costs associated with the removal of overburdened and other waste materials) incurred during the development of a mine, before production commences, are capitalized as part of the depreciable cost of developing the property. Such costs are subsequently amortized over the useful life of the mine based on proven and probable reserves.

Post-production stripping costs are included in the cost of the inventory produced (that is extracted), at each mine individually during the period that stripping costs are incurred.

The Company holds spare parts that will be used to replace parts of property, plant and equipment and that will increase the asset’s useful life and the useful life of which exceeds 12 months. These parts are classified in property, plant and equipment and not in inventories.

(j) Intangible assets

Intangible assets comprise assets acquired from third parties, including through business combinations and/or those internally generated.

These assets are recognized at cost of acquisition or formation, less amortization calculated on a straight-line basis based on the exploration or recovery periods (which represents the useful lives of the assets).

Intangible assets with indefinite useful lives and goodwill based on expected future profitability are not amortized.

· Goodwill

Goodwill represents the positive difference between the amount paid and/or payable for the acquisition of a business and the net fair values of the assets and liabilities of the acquiree. Goodwill on acquisitions of subsidiaries is recognized as ‘Intangible assets’ in the consolidated financial statements. In the individual balance sheet, goodwill is included in investments. Negative goodwill is recognized as a gain in profit for the period at the acquisition date. Goodwill is annually tested for impairment. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of a Cash-Generating Unit (CGU) include the carrying amount of goodwill related to the CGU sold.

FS-15

Goodwill is allocated to CGUs for impairment testing purposes. The allocation is made to Cash-Generating Units or groups of Cash-Generating Units that are expected to benefit from the business combination from which the goodwill arose, and the unit is not greater than the operating segment.

· Software

Software licenses purchased are capitalized based on the costs incurred to purchase the software and make it ready for use. These costs are amortized on a straight-line basis over the estimated useful lives of 1 to 5 years.

(k) Impairment of non-financial assets

Assets with infinite useful lives, such as goodwill, are not subject to amortization and are annually tested for impairment. Assets subject to amortization are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment loss is recognized at the amount by which the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the higher of the fair value of an asset less costs to sell and its value in use. For impairment testing purposes, assets are grouped at their lowest levels for which there are separately identifiable cash flows (Cash Generating Units - CGUs). Non-financial assets, except goodwill, that are considered impaired are subsequently reviewed for possible reversal of the impairment at the reporting date.

(l) Employee benefits

i. Employee benefits

Defined contribution plans

A defined contribution plan is as a post-employment benefit plan whereby an entity pays fixed contributions to a separate entity (pension fund) and will not have any legal or constructive obligation to pay additional amounts. Obligations for contributions to defined contribution pension plans are recognized as employee benefit expenses in the income statement for the periods during which services are provided by employees. Contributions paid in advance are recognized as an asset on condition that either cash reimbursement or reduction in future payments is available. Contributions to a defined contribution plan that is expected to mature twelve (12) months after the end of the period in which the employee provides services are discounted to their present values.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation regarding defined pension benefit plans is calculated individually for each plan by estimating the value of the future benefit that the employees accrue as return for services provided in the current period and in prior periods; such benefit is discounted to its present value. Any unrecognized costs of past services and the fair values of any plan assets are deducted. The discount rate is the yield presented at the end of the reporting period for top line debt securities whose maturity dates approximate the terms and conditions of the Company’s obligations and which are denominated in the same currency as the one in which it is expected that the benefits will be paid. The calculation is made annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit for the Company, the asset to be recognized is limited to the total amount of any unrecognized costs of past services and the present value of the economic benefits available in the form of future plan reimbursements or reduction in future contributions to the plan. In calculating the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any Company plan. An economic benefit is available to the Company if it is realizable during the life of the plan or upon settlement of the plan’s liabilities.

The Company and some of its subsidiaries offered a postretirement healthcare benefit to its employees. The right to these benefits is usually contingent to their remaining in employment until the retirement age and the completion of the minimum length of service. The expected costs of these benefits are accumulated during the employment period, and were calculated using the same accounting method used for defined benefit pension plans. These obligations are annually evaluated by qualified independent actuaries.

FS-16

When the benefits of a plan are increased, the portion of the increased benefit related to past services of employees is recognized on a straight-line basis over the average period until the benefits become vested. When the benefits become immediately vested, the expense is recognized in profit or loss.

The Company has chosen to recognize all the actuarial gains and losses resulting from defined benefit plans immediately in other comprehensive income, and subsequently are transferred to retained earnings. They are recorded in the income statement only if the plan is extinguished.

ii. Profit sharing and bonus

Employee profit sharing and executives’ variable compensation are linked to the achievement of operating and financial targets. The Company recognizes a liability and an expense substantially allocated to production cost and, where applicable, to general and administrative expenses when such goals are met.

(m) Provisions

Provisions are recognized when: (i) the Company has a present legal or constructive obligation as a result of past events, (ii) it is probable that an outflow of resources will be required to settle a present obligation, and (iii) the amount can be reliably measured. Provisions are determined discounting the expected future cash flows based on a pre-tax discount rate that reflects current market assessments of the time value of money and, where appropriate, the specific risks of the liability.

(n) Concessions

The Company has government concessions and their payments are classified as operating leases.

(o) Share capital

Common shares are classified in shareholders' equity.

Incremental costs directly attributable to the issue of new shares or options are shown in shareholders' equity as a deduction from the proceeds, net of taxes.

When any Group company buys Company shares (treasury shares), the amount paid, including any directly attributable additional costs (net of income tax), is deducted from shareholders' equity attributable to owners of the Company until the shares are canceled or reissued. When these shares are subsequently reissued, any amount received, net of any directly attributable additional transaction costs and the related income tax and social contribution effects, is included in shareholders' equity attributable to owners of the Company.

(p) Revenue recognition

Operating revenue from the sale of goods in the normal course of business is measured at the fair value of the consideration received or receivable. Revenue is recognized when there is convincing evidence that the most significant risks and rewards of ownership of goods have been transferred to the buyer, it is probable that future economic benefits will flow to the entity, the associated costs and possible return of goods can be reliably estimated, there is no continued involvement with the goods sold, and the amount of the operating revenue can be reliably measured. If it is probable that discounts will be granted and the value thereof can be reliably measured, then the discount is recognized as a reduction of the operating revenue as sales are recognized. Revenue from services provided is recognized as it is realized.

The appropriate timing for transfer of risks and rewards varies depending on the individual terms and conditions of the sales contract. For international sales, this timing depends on the incoterms of the contract.

(q) Finance income and finance costs

Finance income includes interest income from funds invested (including available-for-sale financial assets), dividend income (except for dividends received from investees accounted for under the equity method in Company), gains on disposal of available-for-sale financial assets, changes in the fair value of financial assets measured at fair value through profit or loss, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized in profit or loss under the effective interest method. Dividend income is recognized in profit or loss when the Company’s right to receive payment has been established. Distributions received from investees accounted for under the equity method reduce the investment value.

FS-17

Finance costs comprise interest expenses on borrowings, net of the discount to present value of the provisions, dividends on preferred shares classified as liabilities, losses in the fair value of financial instruments measured at fair value through profit or loss, impairment losses recognized in financial assets, and losses on hedging instruments that are recognized in profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are measured through profit or loss under the effective interest method.

Foreign exchange gains and losses are reported on a net basis.

(r) Income tax and social contribution

Current and deferred income tax and social contribution are calculated based on the tax laws enacted or substantially enacted by the end of the reporting period, including in the countries where the Group entities operate and generate taxable profit. Management periodically assesses the positions assumed in the tax calculations with respect to situations where applicable tax regulations are open to interpretations. The Company recognizes provisions, when appropriate, based on the estimated payments to tax authorities.

The income tax and social contribution expense comprises current and deferred taxes. The current and deferred taxes are recognized in profit or loss unless they are related to business combinations or items recognized directly in shareholders' equity.

Current tax is the expected tax payable or receivable on taxable profit or loss for the year at tax rates that have been enacted or substantially enacted by the end of the reporting period and any adjustment to taxes payable in relation to prior years.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax is not recognized for the following temporary differences: initial recognition of assets and liabilities in a transaction that is not a business combination and does not affect either the accounting or taxable profit or loss, and differences associated with investments in subsidiaries and controlled entities when it is probable that they will not reverse in the foreseeable future. Moreover, a deferred tax liability is not recognized for taxable temporary differences resulting in the initial recognition of goodwill. The deferred tax is measured at the rates that are expected to be applied on temporary differences when they reverse, based on the laws that have been enacted or substantially enacted by the end of the reporting period.

Current income tax and social contribution are carried at their net amounts by the taxpayer, in liabilities when there are amounts payable or in assets when prepaid amounts exceed the total amount due at the end of the reporting period.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority on the same entity subject to taxation.

A deferred income tax and social contribution asset is recognized for all tax losses, tax credits, and deductible temporary differences to the extent that it is probable that taxable profits will be available against which those tax losses, tax credits, and deductible temporary differences can be utilized.

Deferred income tax and social contribution assets are reviewed at the end of each reporting period and reduced to the extent that their realization is no longer probable.

(s) Earnings/(loss) per share

Basic earnings/loss per share are calculated by means of the profit/loss for the year attributable to owners of the Company and the weighted average number of common shares outstanding in the related period. Diluted earnings/loss per share are calculated by means of the average number of shares outstanding, adjusted by instruments potentially convertible into shares, with diluting effect, in the reported periods. The Company does not have any instruments potentially convertible into shares and, accordingly, diluted earnings/loss per share are equal to basic earnings/loss per share.

FS-18

(t) Environmental and restoration costs

The Company recognizes a provision for the costs of recovery of areas and fines when a loss is probable and the amounts of the related costs can be reliably measured. Generally, the period for providing for the amount to be used in recovery coincides with the end of a feasibility study or the commitment to adopt a formal action plan.

Expenses related to compliance with environmental regulations are charged to profit or loss or capitalized, as appropriate. Capitalization is considered appropriate when the expenses refer to items that will continue to benefit the Company and that are basically related to the acquisition and installation of equipment to control and/or prevent pollution.

(u) Research and development

All these costs are recognized in the income statement when incurred, except when they meet the criteria for capitalization. Research and development expenditures recognized as expense for the year ended December 31, 2012, amounted to R$ 6,033 (R$ 6,532 as December 31,2011).

(v) Financial instruments

i) Financial assets

Financial assets are classified into the following categories: measured at fair value through profit or loss, loans and receivables, held-to-maturity, and available-for- sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at the time of initial recognition.

· Financial assets measured at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for active and frequent trading. Derivatives are also categorized as held for trading and, accordingly, are classified in this category unless they have been designed as cash flow hedging instruments. Assets in this category are classified in current assets.

· Loans and receivables

This category includes loans and receivables that are non-derivative financial assets with fixed or determinable payments not quoted in an active market. They are included in current assets, except those with maturity of more than 12 months after the end of the reporting period (which are classified as non-current assets). Loans and receivables include loans to associates, trade receivables and cash and cash equivalents, except short-term investments. Cash and cash equivalents are recognized at fair value. Loans and receivables are carried at amortized cost using the effective interest method.

· Held-to-maturity assets

These are basically financial assets acquired with the positive intent and ability to hold to maturity. Held-to-maturity investments are initially recognized at their value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method, less any impairment loss.

· Available-for-sale financial assets

These are non-derivative financial assets, designated as available-for-sale, that are not classified in any other category. They are included in non-current assets when they are strategic investments of the Company, unless Management intends to dispose of the investment within up to 12 months from the end of the reporting period. Available-for-sale financial assets are recognized at fair value.

FS-19

· Recognition and measurement

Regular purchases and sales of financial assets are recognized at the trading date - the date on which the Company undertakes to buy or sell the asset. Investments are initially recognized at their fair value, plus transaction costs for all financial assets not classified as at fair value through profit or loss. Financial assets at fair value through profit or loss are initially recognized at their fair value and the transaction costs are charged to the income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred, in the latter case, provided that the Company has transferred significantly all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortized cost using the effective interest method.

Gains or losses resulting from changes in the fair value of financial assets at fair value through profit or loss are presented in the income statement under “finance income” in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the income statement as part of other finance income when the Company’s right to receive the dividends has been established.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are segregated into translation differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Exchange differences on monetary securities are recognized in profit or loss, while exchange differences on non-monetary securities are recognized in shareholders' equity. Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognized in other comprehensive income and are only recognized in profit or loss when the investment is sold or written off as a loss.

Interest on available-for-sale securities, calculated under the effective interest method, is recognized in the income statement as part of other income. Dividends from available-for-sale equity instruments, such as shares, are recognized in the income statement as part of other finance income when the Company’s right to receive payments has been established.

The fair values of publicly quoted investments are based on current purchase prices. If the market for a financial asset (and for instruments not listed on a stock exchange) is not active, the Company establishes the fair value by using valuation techniques. These techniques include the use of recent transactions contracted with third parties, reference to other instruments that are substantially similar, analysis of discounted cash flows, and pricing models that make maximum use of market inputs and relies as little as possible on entity-specific inputs.

ii) Impairment of financial assets

The Company assesses of the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired.

· Assets measured at amortized cost

A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and such loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The criteria used by CSN to determine whether there is objective evidence of an impairment loss include:

· significant financial difficulty of the issuer or counterparty;

· a breach of contract, such as default or delinquency in interest or principal payments;

· the issuer, for economic or legal reasons relating to the borrower’s financial difficulty, grants to the borrower a concession that the lender would not otherwise consider;

FS-20

· it becoming probable that the borrower will enter bankruptcy or other financial reorganization;

· the disappearance of an active market for that financial asset because of financial difficulties; or

· observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of such assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:

- adverse changes in the payment status of borrowers in the portfolio;

- national or local economic conditions that correlate with defaults on the assets in the portfolio.

The amount of the loss is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the original effective interest rate of the financial asset. The carrying amount of the asset is reduced and the amount of the loss is recognized in the income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate to measure an impairment loss is the current effective interest rate determined pursuant to the contract. As a practical expedient, the Company may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment loss is reversed and recognized in the consolidated income statement.

· Assets classified as available-for-sale

In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost is also objective evidence of impairment. Determining what is considered a “significant” or “prolonged” decline requires judgment. For this judgment we assess, among other factors, the historical changes in the equity prices, the duration and proportion in which the fair value of the investment is lower than its cost, and the financial health and short-term prospects of the business for the investee, including factors such as: industry and segment performance, changes in technology, and operating and financial cash flows. If there is any of this evidence of impairment of available-for-sale financial assets, the cumulative loss—measured as the difference between the acquisition cost and the current fair value, less any impairment loss on the financial asset previously recorded in profit or loss—is reclassified from shareholders' equity and recognized in the income statement. Impairment losses recognized in the income statement as available-for-sale instruments are not reversed through the income statement.

CSN tested for impairment its available-for-sale investment in Usiminas shares (see note 13).

iii) Financial liabilities

Financial liabilities are classified into the following categories: measured at fair value through profit or loss and other financial liabilities. Management determines the classification of its financial liabilities at the time of initial recognition.

· Financial liabilities measured at fair value through profit or loss

Financial liabilities at fair value through profit or loss are financial liabilities held for trading or designated as at fair value through profit or loss.

Derivatives are also classified as trading securities, and thereby are classified so, unless they have been designated as effective hedging instruments.

· Other financial liabilities

Other financial liabilities are measured at amortized cost using the effective interest method.

The Company holds the following non-derivative financial liabilities: borrowings, financing and debentures, and trade payables.

FS-21

· Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set off recognized amounts and the intention to either settle them on a net basis or to realize the asset and settle the liability simultaneously.

iv) Derivative instruments and hedging activities

· Derivatives measured at fair value through profit or loss

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any of these derivative instruments are immediately recognized in the income statement under “Other gains (losses), net”. Even though the Company uses derivatives for hedging purposes, it does not apply hedge accounting.

· Foreign exchange gains or losses on foreign operations

Gains and losses accumulated in shareholders' equity are included in the income statement when the foreign operation is partially disposed of or sold.

(w) Segment information

An operating segment is a component of the Group committed to the business activities from which it can obtain revenues and incur expenses, including revenues and expenses related to transactions with any other components of the Group. All the operating results of operating segments are reviewed regularly by the Executive Officers of CSN to make decisions regarding funds to be allocated to the segment and assessment of its performance, and for which there is distinct financial information available (see Note 26).

(x) Government grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received, when they will be recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs the grants are intended to compensate.

The Company has state tax incentives in the North and Northeast regions that are recognized in profit or loss as a reduction of the corresponding costs, expenses and taxes.

(y) New standards and interpretations issued and not yet adopted

The following standards, amendments to standards and IFRS interpretations issued by the IASB are not yet effective and were not early adopted by the Company for the year ended December 31, 2012:

Standard | Description | Effective date
Amendment to IAS 1 | Presentation of Items of Other Comprehensive Income. Groups in other comprehensive income the items that could be reclassified to profit or loss in the income statement for the year. | January 1, 2013
Amendment to IAS 19 | Employee Benefits. Eliminates the corridor approach (applied by the Company in previous years) for recognition of actuarial gains or losses and requires that finance costs be calculated on a net funding basis. Simplifies the presentation of changes in assets and liabilities of defined benefit plans and expands the disclosure requirements. | January 1, 2013

FS-22

IFRS 10 | Consolidated Financial Statements. Defines principles and requirements for the preparation and presentation of consolidated financial statements when an entity controls one or more other entities. Establishes the concept of control as the basis for consolidation and sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee. | January 1, 2013
IFRS 11 | Joint Arrangements. Establishes principles for disclosure of financial statements of entities that are parties of joint agreements. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenues and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. Proportionate consolidation of joint ventures is no longer allowed. | January 1, 2013
IFRS 12 | Disclosure of Interests in Other Entities. Consolidates all the requirements of disclosures that an entity should carry out when participating in one or more entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. | January 1, 2013
IFRS 13 | Fair Value Measurement. Provides a more precise definition of fair value, explains how to calculate it (one single source of measurement), and determines what must be disclosed. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards. | January 1, 2013
Amendment to IAS 7 | Disclosures – Offsetting Financial Assets and Financial Liabilities. Establishes disclosure requirements for compensation agreements of financial assets and liabilities. | January 1, 2013
IFRS 27 (revised in 2011) | Separate Financial Statements. Includes other considerations on separate financial statements and the control provisions of IAS 27 that have been included in the new IFRS 10. | January 1, 2013
IAS 28 (revised in 2011) | Investments in Associates and Joint Ventures. Establishes the requirements for joint ventures and associates accounted for under the equity method following the issue of IFRS 11. | January 1, 2013
IFRIC 20 | Stripping Costs in the Production Phase of a Surface Mine. IFRIC 20 includes clarifications on the recognition of stripping costs in the production phase of a surface mine. Pursuant to IFRIC 20, mining entities that present IFRS financial statements are required to derecognize existing stripping assets to retained earnings if such assets cannot be attributed to an identifiable component of a mineral deposit. | January 1, 2013
IAS 32 | Financial Instruments: Presentation" on the offsetting of assets and liabilities. Provides additional clarifications to the application guidance in IAS 32 on the requirement to set off financial assets and financial liabilities in the balance sheet. | January 1, 2014
IFRS 9 | Financial Instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis for classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. The IAS 39 guidance on the impairment of financial assets, and on hedge accounting continues to apply. The amendment postpones the effective date from 2013 to 2015. It also eliminates the requirement for restatement of comparative information and requires additional disclosures on the transition to IFRS 9. | January 1, 2015

FS-23

It is expected that some of these new standards will have a material impact on the Group’s financial statements in 2013 and 2015, such as the IFRS 10, IFRS 11 and IFRS 12, which can affect the recognition and disclosure of the investments in entities currently consolidated and/or proportionately consolidated by the Company, IFRIC 20 Shipping Costs in the Production Phase of a Surface Mine can affect the recognition of stripping costs in non-current assets, and IFRS 9 can change the classification and measurement of the Group’s financial assets. The impact of adopting these standards has not yet been measured.

As for the other new and revised standards listed in the table above, the Company estimates that their adoption will not have material impacts on its financial statements.

3. BUSINESS COMBINATION

· Companhia Brasileira de Latas (“CBL”)

On July 12, 2011, CSN conducted, through its wholly owned subsidiary “Prada”, a capital increase in Companhia Brasileira de Latas (“CBL”) through the capitalization of receivables. As a result, the Company became the holder of CBL’s control, with an equity interest equivalent to 59.17% of its voting capital, represented by 784,055,451 common shares (“Acquisition”).

The acquisition of CBL’s control will generate operating and administrative synergies that will result in a decrease in production costs, logistics costs and administrative costs.

As mentioned in note 2(i), the acquisition method was used to account for identifiable assets acquired, liabilities assumed, and non-controlling interests. Non-controlling interests in CBL equivalent to 40.83% were proportionately determined, based on the fair value of identifiable assets acquired and liabilities assumed. Some of the non-controlling shareholders are in the corporate structure of CSN’s parent group.

The purchase price of R$43,316 was allocated between identified assets acquired and liabilities assumed, measured at fair value. The asset and liability identification process considered the intangible assets that were not recognized in the acquirees’ books. The transaction costs are represented by consulting services and lawyers’ fees totaling R$485, which have been allocated to profit or loss as incurred.

The tables below show the allocation of identifiable assets acquired and liabilities assumed recognized at the acquisition date, the purchase price considered on the acquisition of CBL’s control, and the calculation of the resulting goodwill.

FS-24

|  | Carrying amounts |  | Fair value adjustments |  | Total fair value
Assets acquired and liabilities assumed |  |  |
Current assets |  | 62,182 |  | (7,465) |  | 54,717
Non-current assets (*) |  | 44,718 |  | 89,449 |  | 134,167
Current liabilities |  | (144,225) |  | 10,522 |  | (133,703)
Non-current liabilities (**) |  | (567,469) |  | 351,035 |  | (216,434)
Total assets acquired and liabilities assumed |  | (604,794) |  | 443,541 |  | (161,253)

(*) Comprising mainly the fair value adjustment to property, plant and equipment amounting to R$90,572. Total fair value of property, plant and equipment was measured at R$123,518 (see note 10).

(**) Comprising mainly the fair value adjustment to payables to CSN amounting to R$388,640.

The fair value adjustments made based on the corporate balance sheet to prepare the opening balance sheet were adjusted after the completion of the valuation report in December 2011.

Goodwill arising on acquisition |  |
(-) Book value of CBL |  | (604,794)
(+) Fair value adjustment of assets acquired and liabilities assumed |  | 443,541
(=) Total fair value of assets acquired and liabilities assumed |  | (161,253)
Purchase price |  | 43,316
Goodwill arising on acquisition |  | 204,569

Goodwill arising on the acquisition comprises mainly the expected synergies generated by the business combination of packings segments of Companhia Metalúrgica Prada with CBL.

On December 31, 2012, the business combination with Companhia Brasileira de Latas, which took place on July 12, 2011, is under review of Conselho Administrativo de Defesa Econômica, or CADE (Brazilian antitrust agency).

· Stahlwerk Thüringen GmbH (“SWT”) and Gallardo Sections

On January 31, 2012, through its wholly-owned subsidiary CSN Steel S.L., CSN completed the acquisition of all the shares (“Shares”) of the Spanish companies (a) Dankerena Guipúzcoa, S.L. (currently named CSN Steel Holdings 2, S.L.U.) and Grupo Alfonso Gallardo Thüringen, S.L.U. (currently named CSN Steel Holdings 1, S.L.U.), holding companies that together hold 100% of the capital of the German company Stahlwerk Thüringen GmbH (“SWT”), a producer of long steel located in Unterwellenborn, Germany, specialized in the production of shapes and with installed capacity of 1.1 million metric tons of steel/year; and (b) Gallardo Sections S.L.U. (currently named CSN Steel Comercializadora, S.L.U.), a trader of SWT products, all previously held by Grupo Alfonso Gallardo, S.L.U. (“AG Group”).

This acquisition helps CSN to strengthen its role in the long steel segment, by strengthening its portfolio of world class assets.

As mentioned in note 2(i), the acquisition method was used to account for identifiable assets acquired and liabilities assumed.

The purchase price of R$301,192 (€131,790), including the final adjustment to the purchase price of R$1,943 (€850), was allocated between identified assets acquired and liabilities assumed, measured at fair value. In the purchase price identification process, the Company considered the adjustments presented below and the starting point was the transaction amount of R$1,104,648 (€483,350)

FS-25

|  | Amounts in R$
Transaction price |  | 1,104,648
Net debt |  | (857,031)
Provisions |  | (11,782)
Tax credits |  | 13,498
Working capital |  | 51,859
(=) Purchase price |  | 301,192

The transaction costs are represented by consulting services and lawyers’ fees totaling R$20,879, which have been included in the income statement, in general and administrative expenses, as incurred.

The tables below show the allocation of identifiable assets acquired and liabilities assumed recognized at the acquisition date, the purchase price considered in the acquisition of SWT and Gallardo Sections, and the calculation of the resulting goodwill.

The fair value adjustments made based on the corporate balance sheet to prepare the opening balance sheet were adjusted after the completion of the valuation report in December 2012.

|  | Carrying amounts |  | Fair value adjustments |  | Total fair value
Assets acquired |  |  |
Current assets (*) |  | 400,387 |  |  |  | 400,387
Non-current assets (**) |  | 191,956 |  | 786,988 |  | 978,944
Current liabilities |  | (262,203) |  |  |  | (262,203)
Non-current liabilities (***) |  | (842,526) |  | (209,005) |  | (1,051,531)
Total assets acquired |  | (512,386) |  | 577,983 |  | 65,597

(*) Includes R$14,880 in cash and cash equivalents.

(**) Comprising mainly the fair value adjustment to property, plant and equipment amounting to R$392,817. Total fair value of property, plant and equipment was measured at R$582,478 (see note 10).

(***) Refers to the deferred income tax on the fair value adjustments.

Goodwill arising on acquisition |  |
(+) Purchase price |  | 301,192
(-) Fair value of assets acquired and liabilities assumed |  | 65,597
(=) Goodwill arising on acquisition |  | 235,595

Goodwill arising on the acquisition was mainly based on expected future earnings, as described in note 11.

FS-26

4. CASH AND CASH EQUIVALENTS

| 12/31/2012 |  | 12/31/2011
Current |  |  |
Cash and cash equivalents |  |  |
Cash and banks | 207,614 |  | 101,360
Short-term investments |  |  |
In Brazil: |  |  |
Government bonds | 862,299 |  | 646,594
Private securities | 902,159 |  | 2,017,019
| 1,764,458 |  | 2,663,613
Abroad: |  |  |
Time deposits | 12,472,803 |  | 12,652,420
Total short-term investments | 14,237,261 |  | 15,316,033
Cash and cash equivalents | 14,444,875 |  | 15,417,393

The funds available in the Company and subsidiaries set up in Brazil are basically invested in investment funds, which are considered exclusives and are consolidated with repurchase agreements backed by government and private bonds with immediate liquidity.

Private securities are short-term investments in Bank Deposit Certificates (CDBs) and Debentures with yields pegged to the Interbank Deposit Certificate (CDI) fluctuation, and government securities are basically repurchase agreements backed by National Treasury Bills (LTNs) and Financial Treasury Bills (LFTs). The exclusive funds managed by BTG Pactual Serviços Financeiros S.A. DTVM and Caixa Econômica Federal and their assets collateralize possible losses on investments and transactions carried out. Investments in funds were consolidated.

In addition, a significant part of the funds of the Company and its foreign subsidiaries is invested in time deposits with leading banks, bearing fixed rates.

5. TRADE RECEIVABLES

| 12/31/2012 |  | 12/31/2011
Trade receivables |  |  |
Third parties |  |  |
Domestic market | 832,620 |  | 895,517
Foreign market | 876,393 |  | 701,807
Allowance for doubtful debts | (111,532) |  | (124,939)
| 1,597,481 |  | 1,472,385
Related parties (Note 18 - b and c) | 117,598 |  | 86,612
| 1,715,079 |  | 1,558,997
Other receivables |  |  |
Other receivables from related parties | 17,065 |  | 1,537
Other receivables | 62,422 |  | 55,672
| 79,487 |  | 57,209
| 1,794,566 |  | 1,616,206

FS-27

The gross trade receivables balance from third parties is comprised as follows:

|  | 12/31/2012 |  | 12/31/2011
Falling due |  | 1,436,878 |  | 1,359,540
Overdue until 180 days |  | 123,379 |  | 89,766
Overdue above 180 days |  | 148,756 |  | 148,018
|  | 1,709,013 |  | 1,597,324

In order to meet the needs of some customers in the domestic market, related to the extension of the payment term for billing of steel, in common agreement with CSN’s internal commercial policy and maintenance of its very short-term receipts (up to 14 days), at the request of the customer, transactions are carried out for assignment of receivables without co-obligation negotiated between the customer and banks with common relationship, where CSN assigns the trade notes/bills that it issues to the banks with common relationship.

Due to the characteristics of the transactions for assignment of receivables without co-obligation, after assignment of the customer’s trade notes/bills and receipt of the funds from the closing of each transaction, CSN settles the trade receivables and becomes entirely free of the credit risk on the transaction. This transaction totals R$224,718 as of December 31, 2012 (R$262,367 as of December 31, 2011), less the trade receivables.

The changes in the Company’s allowance for doubtful debts are as follows:

|  | 12/31/2012 |  | 12/31/2011
Opening balance |  | (124,939) |  | (117,402)
Allowance for losses on trade receivables |  | (11,073) |  | (20,005)
Recovery (reversal) of receivables |  | 24,480 |  | 12,468
Closing balance |  | (111,532) |  | (124,939)

6. INVENTORIES

| 12/31/2012 |  | 12/31/2011
Finished products | 1,133,002 |  | 997,128
Work in process | 668,152 |  | 776,918
Raw materials | 563,533 |  | 694,383
Storeroom supplies | 1,084,854 |  | 981,086
Iron ore | 174,643 |  | 215,399
Advances to suppliers | 55,068 |  | 153,215
(-) Allowance for inventory losses | (99,227) |  | (83,145)
| 3,580,025 |  | 3,734,984

Changes in the allowance for inventory losses are as follows:

|  | 12/31/2012 |  | 12/31/2011
Opening balance |  | (83,145) |  | (64,115)
Allowance for obsolete or slow-moving inventories |  | (16,082) |  | (19,030)
Closing balance |  | (99,227) |  | (83,145)

As of December 31, 2012, the Company has long-term iron ore inventories amounting to R$144,483, classified in other non-current assets (R$144,483 as of December 31, 2011), as described in note 7.

FS-28

7. OTHER CURRENT AND NON-CURRENT ASSETS

The group of other current and non-current assets is comprised as follows:

| Current |  | Non-current
| 12/31/2012 |  | 12/31/2011 |  | 12/31/2012 |  | 12/31/2011
Judicial deposits (Note 16) |  |  |  |  | 732,666 |  | 954,711
Credits with the PGFN (*) (Note 15) |  |  |  |  | 84,392 |  | 806,103
Recoverable taxes (**) | 569,486 |  | 689,006 |  | 310,542 |  | 257,977
Prepaid taxes |  |  |  |  |  |  |
Prepaid expenses | 44,332 |  | 24,135 |  | 100,728 |  | 115,853
Actuarial asset - related party |  |  |  |  | 93,546 |  |
Unrealized gains on derivatives (Note 13 I) | 239,266 |  | 55,115 |  | 8,665 |  | 376,344
Guarantee margin on financial instruments (Note 13 V) | 435,161 |  | 407,467 |  |  |  |
Iron ore inventory (Note 6) |  |  |  |  | 144,483 |  | 144,483
Northeast Investment Fund - FINOR |  |  |  |  | 9,914 |  | 47,754
Trade receivables |  |  |  |  | 8,983 |  | 10,043
Receivable from related parties |  |  |  |  | 136,077 |  | 115,549
Other | 14,234 |  |  |  | 18,060 |  | 47,452
| 1,302,479 |  | 1,175,723 |  | 1,648,056 |  | 2,876,269

(*) Refers to the excess judicial deposit originated by the 2009 REFIS (Tax Debt Refinancing Program) as described in note 15.

(**) Refers mainly to taxes on revenue (PIS/COFINS) and State VAT (ICMS) on the acquisition of fixed assets which will be recovered over a 48-month period, and income tax and social contribution for offset.

8. INCOME TAX AND SOCIAL CONTRIBUTION

(a) Income tax and social contribution recognized in profit or loss:

The income tax and social contribution recognized in profit or loss for the year are as follows:

| 12/31/2012 |  | 12/31/2011
Income tax and social contribution income/(expenses) |  |  |
Current | (205,022) |  | (136,427)
Deferred | 1,075,156 |  | 52,542
| 870,134 |  | (83,885)

FS-29

The reconciliation of Company and consolidated income tax and social contribution expenses and income and the result from applying the effective rate on profit before income tax (IRPJ) and social contribution (CSLL) are as follows:

| 12/31/2012 |  | 12/31/2011
Profit before income tax and social contribution | (1,350,708) |  | 3,751,119
Tax rate | 34% |  | 34%
Income tax and social contribution at combined statutory rate | 459,241 |  | (1,275,380)
Adjustment to reflect effective rate: |  |  |
Income subject to special tax rates or untaxed | 386,182 |  | 1,279,431
Tax incentives | 2,115 |  | 73,134
Adjustments arising from Law 11,941 and MP 470 installment plans | 39,256 |  | (16,060)
Sale of nondeductible securities |  |  | (189,946)
Tax loss carryforwards without recognizing deferred taxes | (42,683) |  |
Income tax and social contribution credits |  |  | 44,434
Other permanent deductions (additions) | 26,023 |  | 502
Income tax and social contribution in profit (loss) for the year | 870,134 |  | (83,885)
Effective rate | -64% |  | 2%

(b) Deferred income tax and social contribution:

The deferred income tax and social contribution are calculated on income tax and social contribution loss carryforwards and related temporary differences between the tax bases of assets and liabilities and the accounting balances of the financial statements. They are presented at net amounts when related to a sole jurisdiction.

| 12/31/2012 |  | 12/31/2011
Deferred tax assets |  |  |
Income tax loss carryforwards | 818,705 |  | 425,406
Social contribution loss carryforwards | 242,606 |  | 157,858
Temporary differences | 1,311,190 |  | 1,257,509
- Provision for tax, social security, labor and civil risks | 269,803 |  | 211,835
- Allowance for asset impairment losses | 66,062 |  | 60,930
- Allowance for inventory losses | 50,295 |  | 30,814
- Allowance for gains/(losses) on financial instruments | 363,966 |  | 253,985
- Accrued pension and healthcare plan (actuarial liability) | 157,445 |  | 144,360
- Provision for interest on capital |  |  | 74
- Accrued supplies and services | 66,997 |  | 67,445
- Allowance for doubtful debts | 30,761 |  | 45,342
- Goodwill on acquisitions | 62,042 |  | 371,153
- Unrealized foreign exchange (*) | 206,711 |  |
- Other | 37,108 |  | 71,571
Non-current assets | 2,372,501 |  | 1,840,773
Deferred tax liabilities |  |  |
- Business combination | 225,965 |  | 17,960
- Other | 58,145 |  | 19,891
Non-current liabilities | 284,110 |  | 37,851

(*) In 2012, the Company opted for taxing foreign exchange on a cash basis to calculate income tax and social contribution.

FS-30

Some Group companies recognized tax credits on income tax and social contribution loss carryforwards not subject to statute of limitations and based on the history of profitability and expected future taxable profits determined in technical studies approved by Management.

Since they are subject to significant factors that may change the projections for realization, the carrying amounts of deferred tax assets and projections are reviewed annually. These studies indicate the realization of these tax assets within the term stipulated by the mentioned instruction and the limit of 30% of the taxable profit.

The estimate of recovery of the deferred income tax and social contribution assets is as follows:

Up to 1 year |  | 1,473,430
From 1 to 2 years |  | 424,119
From 2 to 3 years |  | 462,860
From 3 to 5 years |  | 12,092
|  | 2,372,501

Certain Group companies have tax assets amounting to R$789,704 and R$259,933, related to income tax and social contribution loss carryforwards, for which no deferred taxes were set up, of which R$10,769 expire in 2013, R$771 in 2014, R$30,978 in 2015, and R$50,225 in 2025. The remaining tax assets refer to domestic companies and, therefore, are not subject to statute of limitations.

The tax benefit of goodwill of National Minérios S.A., which arose on the merger of Big Jump in July 2009, amounted to R$1,391,858. Up to December 31, 2012 a total amount of R$951,104 (R$672,732 up to 2011) had been realized, leaving a remaining amount of R$440,754, which will be realized through 2014. In 2013, this realization will be R$278,372 and in 2014, the benefit will be R$162,382.

The undistributed profits of the Company’s foreign subsidiaries have been invested and will continue to be invested in their operations. These undistributed profits of the Company’s foreign subsidiaries amounted to R$8,111,394 as of December 31, 2012 (R$8,033,902 as of December 31, 2011).

(c) Income tax and social contribution recognized in shareholders' equity:

The income tax and social contribution recognized directly in shareholders' equity are as follows:

| 12/31/2012 |  | 12/31/2011
Income tax and social contribution |  |  |
Gain/(loss) on defined benefit pension plan | 66,155 |  | 54,714
Changes in the fair value on available-for-sale financial assets | (377,164) |  | 241,484
Exchange differences on translating foreign operations | (425,510) |  | (425,510)
| (736,519) |  | (129,312)

(d) Tax incentives

The Company is granted by Income Tax incentives based on the legislation in effect, such as: Worker Food Program, the Rouanet Law (tax incentives related to cultural activities), Tax Incentives for Audiovisual Activities, and Funds for the Rights of Children and Adolescents. As of December 31, 2012, these tax incentives total R$3,366 (R$1,914 as of December 31, 2011).

FS-31

9. INVESTMENTS

The number of shares, the balances of assets, liabilities and shareholders' equity, and the amounts of profit or loss for the year refer to the equity interests held by CSN in those companies.

a) Other investments

The breakdown of consolidated investments is as follows:

| 12/31/2012 |  | 12/31/2011
Panatlântica | 12,965 |  | 12,030
Usiminas | 2,323,172 |  | 2,077,277
Arvedi Metalfer do Brasil | 12,977 |  |
Other | 2,660 |  | (1,082)
| 2,351,774 |  | 2,088,225

· RIVERSDALE MINING LIMITED - Riversdale

On April 20, 2011, the Company, through its subsidiary CSN Europe Lda., adhered to the tender offer of Riversdale Mining Limited (“Riversdale”) shares conducted by Rio Tinto. Therefore, the Company sold 100% of its equity interest held in Riversdale’s share capital, corresponding to 47,291,891 shares of the price of A$16.50 per share, totaling A$780,316.

· PANATLÂNTICA

Publicly-held company, headquartered in the city of Gravataí, State of Rio Grande do Sul, engaged in the manufacturing, trade, import, export and processing of steel and ferrous or non-ferrous metals, coated or not.

CSN currently holds 9.40% of Panatlântica’s total share capital.

· USIMINAS

Usinas Siderúrgicas de Minas Gerais S.A. – USIMINAS, headquartered in Belo Horizonte, State of Minas Gerais, is engaged in steel and related operations. USIMINAS produces flat rolled steel in the Intendente Câmara and José Bonifácio de Andrada e Silva plants, located in Ipatinga, Minas Gerais, and Cubatão, São Paulo, respectively, to be sold in the domestic market and also for exports. It also exploits iron ore mines located in Itaúna, Minas Gerais, to meet its verticalization and production cost optimization strategies. USIMINAS also has service and distribution centers located in several regions of Brazil, and the Cubatão, São Paulo, and Praia Mole, Espírito Santo, ports, as well as in locations strategic for the shipment of its production.

As of December 31, 2012, the Company reached holdings of 14.13% in common shares and 20.69% in preferred shares of Usiminas' share capital.

USIMINAS is listed on the São Paulo Stock Exchange (“BM&F BOVESPA”: USIM3 and USIM5).

· ARVEDI METALFER DO BRASIL

On July 31, 2012, the Company acquired a non-controlling interest corresponding to 20% of the capital of Arvedi Metalfer do Brasil S.A., company in pre-operating stage focused on the production of pipes, headquartered in Salto, State of São Paulo.

b) Investments in jointly controlled entities

The balances of the balance sheets and income statements of the companies under shared control are stated below and have been consolidated into the Company’s financial statements according to the percentage equity interests described below.

FS-32

|  |  |  |  |  |  |  | 12/31/2012 |  |  |  |  |  |  | 12/31/2011
|  | Nacional Minérios (*) |  | Itá Energética |  | MRS Logística |  | CBSI |  |  | Nacional Minérios (*) |  | Itá Energética |  | MRS Logística
Equity interest (%) |  | 60.00% |  | 48.75% |  | 27.27% |  | 50.00% |  |  | 60.00% |  | 48.75% |  | 27.27%
Balance sheet |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets |  | 5,654,420 |  | 89,370 |  | 931,922 |  | 25,383 |  |  | 4,155,543 |  | 81,729 |  | 917,291
Non-current assets |  | 9,513,580 |  | 680,621 |  | 5,347,154 |  | 3,887 |  |  | 9,526,804 |  | 719,606 |  | 4,625,495
Long-term receivables |  | 8,296,673 |  | 39,771 |  | 440,545 |  |  |  |  | 8,422,434 |  | 44,239 |  | 336,439
Investments, PP&E and intangible assets |  | 1,216,907 |  | 640,850 |  | 4,906,609 |  | 3,887 |  |  | 1,104,370 |  | 675,367 |  | 4,289,056
Total assets |  | 15,168,000 |  | 769,991 |  | 6,279,076 |  | 29,270 |  |  | 13,682,347 |  | 801,335 |  | 5,542,786
Current liabilities |  | 1,889,429 |  | 87,658 |  | 1,209,841 |  | 16,131 |  |  | 1,260,068 |  | 100,175 |  | 1,108,938
Non-current liabilities |  | 355,401 |  | 5,812 |  | 2,555,114 |  | 9,364 |  |  | 307,352 |  | 62,637 |  | 2,134,906
Shareholders' equity |  | 12,923,170 |  | 676,521 |  | 2,514,121 |  | 3,775 |  |  | 12,114,927 |  | 638,523 |  | 2,298,942
Total liabilities and shareholders' equity |  | 15,168,000 |  | 769,991 |  | 6,279,076 |  | 29,270 |  |  | 13,682,347 |  | 801,335 |  | 5,542,786
Statements of Income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenue |  | 3,836,415 |  | 217,493 |  | 3,013,158 |  | 61,915 |  |  | 3,766,712 |  | 242,913 |  | 2,862,337
Cost of sales and services |  | (2,730,077) |  | (66,162) |  | (1,993,927) |  | (58,245) |  |  | (2,168,655) |  | (81,692) |  | (1,732,552)
Gross profit |  | 1,106,338 |  | 151,331 |  | 1,019,231 |  | 3,670 |  |  | 1,598,057 |  | 161,221 |  | 1,129,785
Operating (expenses) income |  | (412,091) |  | (48,688) |  | (262,777) |  | (3,807) |  |  | (135,782) |  | (66,223) |  | (199,754)
Finance income (costs), net |  | 1,329,707 |  | (1,745) |  | (82,417) |  | 174 |  |  | 1,040,693 |  | (12,327) |  | (134,272)
Profit before income tax and social contribution |  | 2,023,954 |  | 100,898 |  | 674,037 |  | 37 |  |  | 2,502,968 |  | 82,671 |  | 795,759
Current and deferred income tax and social contribution |  | (407,469) |  | (33,962) |  | (227,497) |  | (10) |  |  | (429,624) |  | (28,103) |  | (272,714)
Profit for the year |  | 1,616,485 |  | 66,936 |  | 446,540 |  | 27 |  |  | 2,073,344 |  | 54,568 |  | 523,045

(*) Refer to the consolidated balances and profit or loss of Nacional Minérios S. A.

The balance sheet and income statement amounts refer to 100% of the companies’ results.

· NACIONAL MINÉRIOS – NAMISA

Headquartered in Congonhas, State of Minas Gerais, this company is primarily engaged in the production, purchase and sale of iron ore and is mainly focused on foreign markets the sale of its products. Its major operations are carried out in the cities of Congonhas, Ouro Preto, Itabirito and Rio Acima, in the State of Minas Gerais, and in Itaguaí, in the State of Rio de Janeiro.

CSN holds and proportionately consolidates 60% of Namisa’s capital.

FS-33

· ITÁ ENERGÉTICA S.A. - ITASA

ITASA is a corporation originally created to carry out the construction of the Itá hydroelectric power plant: contracting for the supply of goods and services necessary to carry out the project and raising funds, including posting the corresponding guarantees.

CSN holds 48.75% of ITASA’s share capital.

· MRS LOGÍSTICA

This subsidiary is engaged in providing public railroad freight transportation services, on the basis of an onerous concession agreement, on the tracks of the Southeast Network, located between the cities of Rio de Janeiro, São Paulo and Belo Horizonte, previously belonging to Rede Ferroviária Federal S.A.- RFFSA, which was privatized on September 20, 1996.

As of December 31, 2012 the Company directly held 27.27% and indirectly, through its jointly controlled entity Nacional Minérios S.A. (Namisa), 6% of MRS’s capital.

MRS can also engage in modal transportation services related to railroad transportation and also participate in projects aimed at expanding the railroad services granted on a concession basis.

For provision of the services covered by the concession agreement obtained for a period of 30 years starting on December 1, 1996, extendable for an equal period by exclusive decision of the concession grantor, MRS leased from RFFSA for the same concession period the assets required for operation and maintenance of the railroad freight transportation activities. Upon extinction of the concession, all leased assets will be transferred to the ownership of the railroad transportation operator designated in that same act.

· CONSÓRCIO DA USINA HIDRELÉTRICA DE IGARAPAVA

Igarapava Hydroelectric Power Plant is located in Rio Grande, in the city of Conquista, MG, with installed capacity of 210 MW. It consists of 5 bulb type generating units and is considered a major mark for power generation in Brazil.

CSN holds 17.92% of investment in the consortium, whose specific purpose is the distribution of electric power, which is made according to the percentage equity interest of each company.

The balance of property, plant and equipment less depreciation as of December 31, 2012 is R$30,584 (R$31,751 as of December 31, 2011) and the amount of the expense in 2012 is R$6,620 (R$6,366 in 2011).

· CBSI - COMPANHIA BRASILEIRA DE SERVIÇOS DE INFRAESTRUTURA

In December 2011, CSN subscribed to 1,876,146 common shares, corresponding to 50% of the capital of CBSI - Companhia Brasileira de Serviços de Infraestrutura (“CBSI”). The investment is the result of a joint venture between CSN and CKLS Serviços Ltda. Based in the city of Araucária, PR, CBSI is primarily engaged in providing services to subsidiaries, associates, controlling companies and third-party entities, and can operate activities related to the refurbishment and maintenance of industrial machinery and equipment, construction maintenance, industrial cleaning, logistic preparation of products, among other activities.

· CGPAR CONSTRUÇÃO PESADA S.A.

On July 18, 2012 CSN subscribed 50,000 common shares, corresponding to 50% of the capital of CGPAR CONSTRUÇÃO PESADA S.A. (“CGPAR”), totaling R$50,000.00. This subscription is the result of a joint venture formed by CSN and GPA Construção Pesada e Mineração Ltda. Based in the city of Belo Horizonte, MG, CGPAR is mainly engaged in the provision of services related to the support to the extraction of iron ore, earth leveling, earthmoving, and dam construction.

FS-34

10. PROPERTY, PLANT AND EQUIPMENT

|  | Land |  | Buildings |  | Machinery, equipment and facilities |  | Furniture and fixtures |  | Construction in progress |  | Other (*) |  | Total
Balance at December 31, 2010 | 175,792 |  | 1,213,608 |  | 6,974,024 |  | 28,427 |  | 4,515,806 |  | 868,910 |  | 13,776,567
Effect of foreign exchange differences | 1,234 |  | 3,640 |  | 16,377 |  | 135 |  | (157) |  | 2,162 |  | 23,391
Acquisition through business combination | 3,325 |  | 10,805 |  | 14,050 |  | 562 |  | 4,204 |  | 90,572 |  | 123,518
Acquisitions |  |  |  |  |  |  |  |  | 4,400,825 |  |  |  | 4,400,825
Disposal |  |  | (6,719) |  | (30,059) |  | (17) |  |  |  | 19,097 |  | (17,698)
Depreciation |  |  | (39,364) |  | (821,672) |  | (4,931) |  |  |  | (65,441) |  | (931,408)
Reversal of estimated losses on disposal of assets |  |  |  |  |  |  |  |  |  | 4,774 |  | 4,774
Transfers to other asset categories | 14,233 |  | 273,320 |  | 1,477,118 |  | 9,172 |  | (1,848,785) |  | 74,942 |  |
Transfers to intangible assets |  |  |  |  |  |  |  |  | (11,104) |  | (383) |  | (11,487)
Other |  |  | (170) |  | (4,883) |  | 54 |  | (4,470) |  | 18,063 |  | 8,594
Balance at December 31, 2011 | 194,584 |  | 1,455,120 |  | 7,624,955 |  | 33,402 |  | 7,056,319 |  | 1,012,696 |  | 17,377,076
Cost | 194,584 |  | 1,700,245 |  | 11,138,198 |  | 139,679 |  | 7,056,319 |  | 1,459,659 |  | 21,688,684
Accumulated depreciation |  |  | (245,125) |  | (3,513,243) |  | (106,277) |  |  |  | (446,963) |  | (4,311,608)
Balance at December 31, 2011 | 194,584 |  | 1,455,120 |  | 7,624,955 |  | 33,402 |  | 7,056,319 |  | 1,012,696 |  | 17,377,076
Effect of foreign exchange differences | 5,656 |  | 22,322 |  | 246,204 |  | 379 |  | 471 |  | (148,244) |  | 126,788
Acquisition through business combination | 22,852 |  | 103,739 |  | 419,787 |  | 1,202 |  | 1,079 |  | 33,819 |  | 582,478
Acquisitions |  |  |  |  |  |  |  |  | 3,142,634 |  |  |  | 3,142,634
Capitalized interests (Notes 25 and 32) |  |  |  |  |  |  |  |  | 409,498 |  |  |  | 409,498
Disposal | (1,375) |  | (255) |  | (10,135) |  | (159) |  | (769) |  | 7,447 |  | (5,246)
Depreciation |  |  | (70,509) |  | (1,058,081) |  | (13,474) |  |  |  | (75,464) |  | (1,217,528)
Estimated losses on disposal of assets |  |  |  |  |  |  |  |  |  |  | (6,676) |  | (6,676)
Transfers to other asset categories | (32,855) |  | 101,572 |  | 1,001,977 |  | 17,076 |  | (1,123,481) |  | 35,711 |  |
Transfers to intangible assets |  |  |  |  |  |  |  |  | (8,808) |  | (787) |  | (9,595)
Other |  |  |  |  | (74,552) |  |  |  | 62,787 |  | 21,083 |  | 9,318
Balance at December 31, 2012 | 188,862 |  | 1,611,989 |  | 8,150,155 |  | 38,426 |  | 9,539,730 |  | 879,585 |  | 20,408,747
Cost | 188,862 |  | 1,917,814 |  | 12,758,762 |  | 151,008 |  | 9,539,730 |  | 1,397,841 |  | 25,954,017
Accumulated depreciation |  |  | (305,825) |  | (4,608,607) |  | (112,582) |  |  |  | (518,256) |  | (5,545,270)
Balance at December 31, 2012 | 188,862 |  | 1,611,989 |  | 8,150,155 |  | 38,426 |  | 9,539,730 |  | 879,585 |  | 20,408,747

(*) In consolidated, refer basically to railway assets, such as yards, tracks and railway sleepers.

FS-35

The breakdown of the projects comprising construction in progress is as follows:

|  | Project objective |  | Start date |  | Scheduled completion |  | 12/31/2012 |  | 12/31/2011
Logistics |  |  |  |  |  |  |  |  |  |
|  | Expansion of Transnordestina railroad by 1,728 km to boost the transportation of varied products as iron ore, limestone, soybeans, cotton, sugarcane, fertilizers, oil and fuels. |  | 2009 |  | 2016 |  | 4,642,102 |  | 3,489,871
|  | Expansion of MRS's capacity and current investments for maintenance of current operations. |  |  |  |  |  | 232,818 |  | 290,410
|  | Current investments for maintenance of current operations. |  |  |  |  |  | 37,589 |  | 15,479
|  |  |  |  |  |  |  | 4,912,509 |  | 3,795,760
Mining |  |  |  |  |  |  |  |  |  |
|  | Expansion of Casa de Pedra Mine capacity production to 42 Mtpa. |  | 2007 |  | 2015 | (1) | 1,613,130 |  | 1,322,433
|  | Expansion of TECAR to permit an annual exportation of 60 Mtpa. |  | 2009 |  | 2016 |  | 714,986 |  | 425,134
|  | Expansion of Namisa capacity production. |  | 2008 |  | 2016 | (2) | 131,408 |  | 137,059
|  | Current investments for maintenance of current operations. |  |  |  |  |  | 13,080 |  | 46,421
|  |  |  |  |  |  |  | 2,472,604 |  | 1,931,047
Steel |  |  |  |  |  |  |  |  |  |
|  | Implementation of the long steel mill in the states of Rio de Janeiro, Minas Gerais and São Paulo for production of rebar and wire rod. |  | 2008 |  | 2013 | (3) | 1,460,694 |  | 907,521
|  | Current investments for maintenance of current operations. |  |  |  |  |  | 416,855 |  | 256,718
|  |  |  |  |  |  |  | 1,877,549 |  | 1,164,239
Cement |  |  |  |  |  |  |  |  |  |
|  | Construction of integrated cement unit in Arcos, MG. |  | 2011 |  | 2014/2015 | (4) | 241,412 |  | 132,986
|  | Construction of clinquer plant in Arcos, MG |  | 2007 |  | 2013 | (5) | 10,109 |  | 27,536
|  | Current investments for maintenance of current operations. |  |  |  |  |  | 25,547 |  | 4,751
|  |  |  |  |  |  |  | 277,068 |  | 165,273
Total construction in progress |  |  |  |  |  | 9,539,730 |  | 7,056,319

(1) Expected date for completion of the 40 Mtpa and 42 Mtpa stages

(2) Expected date for completion of Magnetic Concentrators Projects in Pires and B4/B5

(3) Expected date for completion of the Rio de Janeiro unit

(4) Expected date for completion of new grinding units in Arcos – MG and new clinker furnace

(5) Start-up in March 2011, expected date for completion of ramp-up.

The costs classified in construction in progress comprise basically the acquisition of services, purchase of parts to be used as investments for improvement of performance, upgrading of technology, enlargement, expansion and acquisition of assets that will be transferred to the relevant line items and depreciated as from the time they are available for use.

The costs incurred to refurbish and replace property, plant and equipment items totaled R$273,339 as of December 31, 2012 (R$654,865 as of December 31, 2011), which were capitalized and will be depreciated over the period until the next maintenance event.

Other repair and maintenance expenses are charged to operating costs and expenses when incurred.

In view of the need to review the useful lives at least every financial year, in 2012 management performed the review for all the Company’s units. As a result, the estimated useful lives for the current year are as follows:

| Years
Buildings | 46
Machinery, equipment and facilities | 14
Furniture and fixtures | 11
Other | 30

FS-36

a) As of December 31, 2012, the Company capitalized borrowing costs amounting to R$409,498 (R$353,156 as of December 31, 2011). These costs are basically estimated for mining, cement, long steel and Transnordestina projects, mainly relating to: (i) Casa de Pedra Mine expansion; (ii) construction of the cement plant in Volta Redonda, RJ, and the clinker plant in the city of Arcos, MG; (iii) construction of the long steel mill in the city of Volta Redonda, RJ; and (iv) extension of Transnordestina railroad, which will connect the countryside of the northeast region to the Suape, State of Pernambuco, and Pecém, State of Ceará, ports (See notes 25 and 32).

The rates used to capitalize borrowing costs are as follows:

Rates |  | 12/31/2012 |  | 12/31/2011
Specífic projects |  | TJLP + 1.3% to 3.2% |  | TJLP + 1.3% to 3.2%
| UM006 + 2.7% |  | UM006 + 2.7%
Non-specífic projects |  | 8.47% |  | 10.56%

b) Additions to depreciation, amortization and depletion for the year were distributed as follows:

| 12/31/2012 |  | 12/31/2011
Production cost | 1,178,884 |  | 892,297
Selling expenses | 8,046 |  | 7,130
General and administrative expenses | 28,924 |  | 29,941
| 1,215,854 |  | 929,368
Other operating expenses (*) | 14,797 |  | 18,883
| 1,230,651 |  | 948,251

(*) Refers to the depreciation of unused equipment (see note 24).

c) The Casa de Pedra mine is an asset that belongs to CSN, which has the exclusive right to explore such mine. Our mining activities of Casa de Pedra are based on the ‘Mine Manifest’, which grants CSN full ownership over the mineral deposits existing within our property limits.

As of December 31, 2012 the net property, plant and equipment of Casa de Pedra was R$2,892,120 (R$2,485,077 as of December 31, 2011), represented mainly by construction in progress amounting to R$1,612,000 (R$1,123,821 as of December 31, 2011).

FS-37

11. INTANGIBLE ASSETS

| Goodwill |  | Intangibles with finite used lives |  | Customer relations |  | Software |  | Other |  | Total
Balance at December 31, 2010 | 423,698 |  | 4,991 |  |  |  | 32,765 |  | 1,002 |  | 462,456
Effect of foreign exchange differences |  |  |  |  |  |  | 6 |  | 72 |  | 78
Acquisitions through business combination (*) | 204,569 |  |  |  |  |  |  |  |  |  | 204,569
Acquisitions and expenditures |  |  |  |  |  |  | 350 |  | 357 |  | 707
Disposals |  |  |  |  |  |  | (784) |  | (489) |  | (1,273)
Impairment losses | (60,861) |  |  |  |  |  |  |  |  |  | (60,861)
Transfer of property, plant and equipment |  |  |  |  |  |  | 11,487 |  |  |  | 11,487
Transfer of long-term receivables |  |  |  |  |  |  |  |  | 2,977 |  | 2,977
Amortization |  |  | (4,991) |  |  |  | (9,622) |  | (2,230) |  | (16,843)
Other movements |  |  |  |  |  |  | (2,113) |  | 2,190 |  | 77
Balance at December 31, 2011 | 567,406 |  |  |  |  |  | 32,089 |  | 3,879 |  | 603,374
Cost | 908,576 |  | 4,991 |  |  |  | 86,070 |  | 6,087 |  | 1,005,724
Accumulated amortization | (280,309) |  | (4,991) |  |  |  | (53,981) |  | (2,208) |  | (341,489)
Accumulated impairment adjustment | (60,861) |  |  |  |  |  |  |  |  |  | (60,861)
Balance at December 31, 2011 | 567,406 |  |  |  |  |  | 32,089 |  | 3,879 |  | 603,374
Effect of foreign exchange differences |  |  |  |  | 30,501 |  | 104 |  | 14,045 |  | 44,650
Acquisitions through business combination (**) | 235,595 |  |  |  | 316,939 |  |  |  | 77,231 |  | 629,765
Acquisitions and expenditures |  |  |  |  |  |  | 961 |  | 571 |  | 1,532
Disposals |  |  |  |  |  |  | (1) |  | (564) |  | (565)
Transfer of property, plant and equipment |  |  |  |  |  |  | 9,595 |  |  |  | 9,595
Amortization |  |  |  |  |  |  | (12,975) |  | (148) |  | (13,123)
Other movements |  |  |  |  |  |  | 210 |  | 14 |  | 224
Balance at December 31, 2012 | 803,001 |  |  |  | 347,440 |  | 29,983 |  | 95,028 |  | 1,275,452
Cost | 1,194,059 |  |  |  | 347,441 |  | 85,183 |  | 97,405 |  | 1,724,088
Accumulated amortization | (330,197) |  |  |  |  |  | (55,200) |  | (2,378) |  | (387,775)
Accumulated impairment adjustment | (60,861) |  |  |  |  |  |  |  |  |  | (60,861)
Balance at December 31, 2012 | 803,001 |  |  |  | 347,441 |  | 29,983 |  | 95,027 |  | 1,275,452

(*) Goodwill based on expected future earnings, arising on the business combination of Prada Embalagens with CBL on July 12, 2011.

(**) Goodwill based on expected future earnings, arising on the business combination of CSN Steel S. L. with the companies Stahlwerk Thüringen Gmbh (SWT) and Gallardo Sections on January 31, 2012 (see note 3).

The useful life of software is 01 to 05 years and of other intangible assets is 13 to 30 years.

Goodwill: The economic basis of goodwill is the expected future earnings and, in accordance with the new pronouncements, these amounts are not amortized since January 1, 2009, when they became subject only to impairment testing.

· Impairment testing for goodwill

In order to conduct impairment testing, goodwill is allocated to CSN’s operating divisions that represent the lowest level of assets or group of assets at which goodwill is monitored by the Company's senior management, never above Operating Segments.

FS-38

Cash generating unit |  | Segment |  | 12/31/2012 |  | 12/31/2011 |  | Investor
Mining |  | Mining |  | 347,098 |  | 347,098 |  | Namisa
Packaging (*) |  | Steel |  | 207,217 |  | 207,217 |  | CSN
Flat steel |  | Steel |  | 13,091 |  | 13,091 |  | CSN
Long steel |  | Steel |  | 235,595 |  |  |  | CSN Steel S.L.
|  |  |  | 803,001 |  | 567,406 |  |

(*) Goodwill of the cash-generating unit (CGU) Containers is presented net of an impairment loss recorded in 2011 amounting in line item other operating income and expenses in the income statement for the year, amounting to R$60,861.

The recoverable amount of a Cash-Generating Unit (“CGU”) is determined based on value-in-use calculations.

These calculations use cash flow projections, before income tax and social contribution, based on financial budgets approved by management for a three-year period. The amounts related to cash flows subsequent to the three-year period were extrapolated based on the estimated growth rates shown below. The growth rate does not exceed the average long-term growth rate of the industry in which the Cash-Generating Unit (“CGU”) operates.

The main assumptions used in calculating the values in use as of December 31, 2012 are as follows:

|  | Mining |  | Steel containers |  | Flat steel |  | Long steel
Gross margin (i) |  | Margin was determined taking into consideration the expansion plans already approved in the Company’s business plan. We took into consideration iron ore prices in the international market based on projections prepared by official mining industry institutions and for the exchange rate we took into consideration a projected curve of the US dollar rate in relation to the Brazilian real through 2018, made available by the Central Bank of Brazil, and exchange fluctuation in 2018 and thereafter is nil; |  | Average Gross Margin of each Cash Generating Unit based on the history and projections approved by the Board for the next three years, long-term price and foreign exchange curves obtained in industry reports, and gains from the synergy between the Company’s packaging units; |  | Average Gross Margin of each Cash Generating Unit based on the history and projections approved by the Board for the next three years, and long-term price and foreign exchange curves obtained in industry reports; |  | Based on the projections approved by the Board for the next three years, long-term price and foreign exchange curves, and taking into consideration the production volume ramp up after plant start-up;
Cost adjustment |  | Cost adjustment based on historical data and price and foreign exchange curves obtained in industry reports; |  | Cost adjustment based on historical data and price and foreign exchange curves obtained in industry reports; |  | Cost adjustment based on historical data and price and foreign exchange curves obtained in industry reports; |  | Cost adjustment based on historical data and price and foreign exchange curves obtained in industry reports;
Growth rate (ii) |  | The cash flows take into consideration the projection period through 2052 due to the extension of the deadlines for the implementation of some projects, and the maturities of the main contracts for which this business plan was developed, and this it is not necessary to take into account the growth rate since the projection period exceeds 30 years; |  | Average growth rate of 2.5% p.a. used to extrapolate the cash flows after the budgeted period; |  | Average growth rate of 2.0% p.a. used to extrapolate the cash flows after the budgeted period; |  | Average growth rate of 2.0% p.a. used to extrapolate the cash flows after the budgeted period;
Discount rate (iii) |  | Effective discount rate of 8.2% p.a., before income tax and social contribution. |  | Effective discount rate of 8.2% p.a., before income tax and social contribution. |  | Effective discount rate of 8.2% p.a., before income tax and social contribution. |  | Effective discount rate of 8.2% p.a., before income tax and social contribution.

(i) Budgeted gross margin.

(ii) Weighted average growth rate, used to extrapolate the cash flows after the budgeted period.

(iii) Pretax discount rate, applied to cash flow projections.

FS-39

12. BORROWINGS, FINANCING AND DEBENTURES

The balances of borrowings, financing and debentures, which are carried at amortized cost, are as follows:

| Rates in (%) |  | Current liabilities |  | Non-current liabilities
|  | 12/31/2012 |  | 12/31/2011 |  | 12/31/2012 |  | 12/31/2011
FOREIGN CURRENCY |  |  |  |  |  |  |  |  |
Prepayment | 1% to 3.50% |  | 162,290 |  | 381,333 |  | 1,104,271 |  | 573,388
Prepayment | 3.51% to 7.50% |  | 8,954 |  | 148,597 |  | 878,705 |  | 1,281,171
Perpetual bonds | 7.00% |  | 2,781 |  | 2,553 |  | 2,043,500 |  | 1,875,800
Fixed rate notes | 6.50% to 10.00% |  | 1,265,330 |  | 119,030 |  | 4,802,225 |  | 5,064,660
Financed imports | 6.01% to 8.00% |  | 30,413 |  | 25,248 |  | 50,989 |  | 27,310
CCB | 1.54% |  |  |  | 176,440 |  |  |  |
BNDES/FINAME | Res. 635/87 interest + 1.7% and 2.7% |  | 32,395 |  | 25,903 |  | 10,755 |  | 36,750
Intercompany |  |  |  |  |  |  |  |  |
Other | 1.40% to 8.00% and CDI + 1.2% |  | 25,262 |  | 105,442 |  | 411,274 |  | 145,438
|  |  | 1,527,425 |  | 984,546 |  | 9,301,719 |  | 9,004,517
LOCAL CURRENCY |  |  |  |  |  |  |  |  |
BNDES/FINAME | TJLP + 1.5% to 5% |  | 415,480 |  | 430,432 |  | 1,956,981 |  | 1,744,727
Debentures | 103.6% to 110.8% CDI and 1% + TJLP |  | 144,902 |  | 672,073 |  | 4,613,634 |  | 2,822,424
Prepayment | 104.8%, 109.5% and 111% CDI | 163,961 |  | 537,128 |  | 4,856,557 |  | 4,523,224
CCB | 112.5% CDI |  | 62,072 |  | 101,280 |  | 7,200,000 |  | 7,200,000
Intercompany |  |  |  |  |  |  |  |  |
Other |  |  | 12,599 |  | 9,509 |  | 29,398 |  | 37,058
|  |  | 799,014 |  | 1,750,422 |  | 18,656,570 |  | 16,327,433
Total borrowings and financing |  | 2,326,439 |  | 2,734,968 |  | 27,958,289 |  | 25,331,950
Transaction costs and issue premiums |  | (31,030) |  | (32,885) |  | (101,939) |  | (145,445)
Total borrowings and financing + transaction costs |  | 2,295,409 |  | 2,702,083 |  | 27,856,350 |  | 25,186,505

The balances of prepaid intragroup borrowings related to the Company total R$2,339,776 as of December 31, 2012 (R$2,244,927 as of December 31, 2011) and the balances of Fixed rate notes and Intercompany bonds total R$3,545,340 (R$3,404,701 as of December 31, 2011), see note 18.

Funding transaction costs

As of December 31, 2012, funding transaction costs are as follows:

|  | Current |  | Non-current |  | TJ (1) |  | TIR (2)
Fixed rate notes | 1,654 |  | 1,717 |  | 6.5% to 10% |  | 6.75% to 10.7%
BNDES |  | 2,088 |  | 5,606 |  | 1.3% to 3.2% |  | 1.44% to 9.75%
Prepayment |  | 8,059 |  | 14,369 |  | 109.50% and 110.79% CDI |  | 10.08% to 12.44%
Prepayment |  | 908 |  | 2,969 |  | 2.37% and 3.24% |  | 2.68% to 4.04%
CCB |  | 17,472 |  | 72,306 |  | 112.5% CDI |  | 11.33% to 14.82%
Other |  | 849 |  | 4,972 |  | 105.8% and 110.8% CDI |  | 12.59% and 13.27%
|  | 31,030 |  | 101,939 |  |  |  |

(1) TJ – Annual interest rate contracted

(2) TIR – Annual internal rate of return

FS-40

· Maturities of borrowings, financing and debentures presented in non-current liabilities

As of December 31, 2012, the principal of long-term borrowings, financing and debentures by maturity year is as follows:

2014 |  | 2,917,379 |  | 10%
2015 |  | 3,886,092 |  | 14%
2016 |  | 3,281,664 |  | 12%
2017 |  | 3,530,240 |  | 13%
2018 |  | 3,726,463 |  | 13%
After 2018 |  | 8,572,951 |  | 31%
Perpetual bonds |  | 2,043,500 |  | 7%
|  | 27,958,289 |  | 100%

· Amortizations and new borrowings, financing and debentures

The table below shows the amortizations and new funding in the current year:

|  | 12/31/2012 |  | 12/31/2011
Opening balance |  | 27,888,588 |  | 20,089,447
Funding |  | 3,721,945 |  | 7,824,012
Amortization |  | (4,821,661) |  | (3,614,606)
Other (*) |  | 3,362,887 |  | 3,589,735
Closing balance |  | 30,151,759 |  | 27,888,588

(*) Includes unrealized foreign exchange and inflation adjustments.

Borrowing and financing contracts with certain financial institutions contain some covenants that are usual in financial agreements in general and the Company is compliant with them as of December 31, 2012.

In January 2012, the Company secured a financing facility contracted by its subsidiary CSN Steel S.L., amounting to €120 million, to partially finance the acquisition of all the shares held by Grupo Alfonso Gallardo, S.L.U. (“Gallardo Group”) in the companies Stahlwerk Thüringen GmbH (“SWT”) and Gallardo Sections S.L.U.

In January 2012, the Company priced, through its wholly-owned subsidiary CSN Resources S.A., an additional bond issue amounting to US$200 million, by reopening the US$1 billion bonds, maturing in July 2020.

In September 2012, the Company settled the commercial promissory notes by paying R$800,000 in principal and R$33,277 in interest.

· Debentures

i. Companhia Siderúrgica Nacional

# 4th issue

In February 2012, the Company settled the fourth issue debentures amounting to R$600,000 in principal and R$35,285 in interest.

# 5th issue

In July 2011 the Company issued 115 nonconvertible, unsecured debentures, in single series, with a unit face value of R$10,000 totaling R$1,150,000 that pay interest equivalent to 110.80% of the CDI Cetip rate per year, and mature in July 2019, with early redemption option.

FS-41

6h issue

In September 2012 the Company issued 156,500 nonconvertible, unsecured debentures, of which 106,500 1st series debentures and 50,000 2nd series debentures, with a unit face value of R$10 totaling R$1,565,000 that pay interest equivalent to 105.80% of the CDI Cetip rate for the 1st series and 106.00% per year for the 2nd series, maturing in March and September 2015, respectively, both with early redemption option.

ii. Transnordestina Logística

In March 2010 Transnordestina Logística S.A. obtained approval from the Northeast Development Fund – FDNE for its 1st Private Issue of convertible debentures, consisting of eight series in the total amount of R$2,672,400. The first, third, and fourth series refer to funds to be invested in the Missão Velha – Salgueiro – Trindade and Salgueiro – Porto de Suape module, which also includes the investments in the Suape Port, and the reconstruction of the Cabo to Porto Real de Colégio railroad section. The second, fifth and sixth series refer to funds to be invested in the Eliseu Martins – Trindade module. The seventh and eighth series refer to funds to be invested in the Missão Velha – Pecém module, which also includes the investments in the Pecém Port.

|  | Number |  | Unit |  |  |  |  |  |  |  | Balance (R$)
Series |  | Issued |  | face value |  | Issue |  | Maturity |  | Charges |  | 12/31/2012
1st |  | 336,647,184 |  | R$ 1.00 |  | 03/09/10 |  | 10/03/27 |  | TJLP + 0.85% p.a |  | 336,647
2nd |  | 350,270,386 |  | R$ 1.00 |  | 11/25/10 |  | 10/03/27 |  | TJLP + 0.85% p.a |  | 350,270
3rd |  | 338,035,512 |  | R$ 1.00 |  | 12/01/10 |  | 10/03/27 |  | TJLP + 0.85% p.a |  | 338,036
4th |  | 468,293,037 |  | R$ 1.00 |  | 10/04/11 |  | 10/03/27 |  | TJLP + 0.85% p.a |  | 468,293
5th |  | 121,859,549 |  | R$ 1.00 |  | 9/21/12 |  | 10/03/27 |  | TJLP + 0.85% p.a |  | 121,860

· Guarantees provided

Guarantees provided for the borrowings comprise property, plant and equipment items and sureties, as shown in the table below, and do not include guarantees provided for subsidiaries and jointly controlled entities.

|  | 12/31/2012 |  | 12/31/2011
Property, plant and equipment |  | 12,233 |  | 19,383
Collateral transfer (*) |  |  |  | 87,550
|  | 12,233 |  | 106,933

(*) In March 2012 the Company settled the loan guaranteed by a collateral transfer and paid R$89,438.

13. FINANCIAL INSTRUMENTS

I - Identification and measurement of financial instruments

The Company enters into transactions involving various financial instruments, mainly cash and cash equivalents, including short-term investments, marketable securities, trade receivables, trade payables, and borrowings and financing. Additionally, it also carries out transactions involving derivative financial instruments, especially exchange and interest rate swaps.

Considering the nature of these instruments, their fair value is basically determined by the use of Brazil’s money market and mercantile and futures exchange quotations. The amounts recorded in current assets and current liabilities have immediate liquidity or short-term maturity, mostly less than three months. Considering the maturities and features of such instruments, their carrying amounts approximate their fair values.

FS-42

· Classification of financial instruments

|  |  |  | 12/31/2012 |  | 12/31/2011
| Notes |  | Available-for-sale |  | Fair value through profit or loss |  | Loans and receivables - effective interest rate |  | Other liabilities - amortized cost method |  | Balances |  | Available-for-sale |  | Fair value through profit or loss |  | Loans and receivables - effective interest rate |  | Other liabilities - amortized cost method |  | Balances
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | 4 |  |  |  |  |  | 14,444,875 |  |  |  | 14,444,875 |  |  |  |  |  | 15,417,393 |  |  |  | 15,417,393
Trade receivables, net |  | 5 |  |  |  |  |  | 1,715,079 |  |  |  | 1,715,079 |  |  |  |  |  | 1,558,997 |  |  |  | 1,558,997
Guarantee margin on financial instruments |  | 7 and 13 |  |  |  | 435,161 |  |  |  | 435,161 |  |  |  |  |  | 407,467 |  |  |  | 407,467
Derivative financial instruments |  | 7 and 13 |  | 239,266 |  |  |  |  |  | 239,266 |  |  |  | 55,115 |  |  |  |  |  | 55,115
Non-current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other trade receivables (Note 7) |  |  |  |  |  |  |  | 8,983 |  |  |  | 8,983 |  |  |  |  |  | 57,797 |  |  |  | 57,797
Investments |  |  |  | 2,336,137 |  |  |  |  |  |  |  | 2,336,137 |  | 2,089,307 |  |  |  |  |  |  |  | 2,089,307
Derivative financial instruments |  | 7 |  |  |  | 8,665 |  |  |  |  |  | 8,665 |  |  |  | 376,344 |  |  |  |  |  | 376,344
Short-term investments |  |  |  |  |  |  |  | 116,753 |  |  |  | 116,753 |  |  |  |  |  | 139,679 |  |  |  | 139,679
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Borrowings and financing |  | 12 |  |  |  |  |  |  |  | 2,326,439 |  | 2,326,439 |  |  |  |  |  |  |  | 2,734,968 |  | 2,734,968
Derivative financial instruments |  | 13 and 14 |  | 245,692 |  |  |  |  |  | 245,692 |  |  |  | 2,971 |  |  |  |  |  | 2,971
Trade payables |  |  |  |  |  |  |  |  |  | 1,957,789 |  | 1,957,789 |  |  |  |  |  |  |  | 1,232,075 |  | 1,232,075
Non-current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Borrowings and financing |  | 12 |  |  |  |  |  |  |  | 27,958,289 |  | 27,958,289 |  |  |  |  |  |  |  | 25,331,950 |  | 25,331,950
Derivative financial instruments |  | 13 and 14 |  |  |  |  |  |  |  |  |  |  |  | 373,430 |  |  |  |  |  | 373,430

· Fair value measurement

The financial instruments recognized at fair value require the disclosure of fair value measurements in three hierarchy levels.

· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2: other available inputs, except those of Level 1 that are observable for the asset or liability, whether directly (i.e., prices) or indirectly (i.e., derived from prices)

· Level 3: inputs unavailable due to slight or no market activity and which is significant for the definition of the fair value of assets.

The following table shows the financial instruments recognized at fair value through profit or loss using a valuation method:

| 12/31/2012 |  | 12/31/2011
| Level 1 |  | Level 2 |  | Level 3 |  | Balances |  | Level 1 |  | Level 2 |  | Level 3 |  | Balances
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative financial instruments |  |  |  | 239,266 |  |  |  | 239,266 |  |  |  | 55,115 |  |  |  | 55,115
Non-current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments |  | 2,336,137 |  |  |  |  |  | 2,336,137 |  | 2,089,309 |  |  |  |  |  | 2,089,309
Derivative financial instruments |  |  |  | 8,665 |  |  |  | 8,665 |  |  |  | 376,344 |  |  |  | 376,344
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative financial instruments |  |  |  | 245,692 |  |  |  | 245,692 |  |  |  | 2,971 |  |  |  | 2,971
Non-current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative financial instruments |  |  |  |  |  |  |  |  |  |  |  | 373,430 |  |  |  | 373,430

II – investments in financial instruments classified as available for sale and measured at fair value through OCI

These consist mainly of investments in shares acquired in Brazil involving top ranked companies, which are recognized in non-current assets, and any gains or losses are recognized in shareholders' equity, where they will remain until actual realization of the securities or when any loss is considered unrecoverable.

FS-43

Potential impairment of financial assets classified as available for sale

The Company has investments in common (USIM3) and preferred (USIM5) shares (“Usiminas Shares”), designated as available-for-sale financial assets as they do not meet the criteria to be classified within any of the other categories of financial instruments (loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss). The asset is classified as a non-current asset under line item “investments” and is carried at fair value based on the quoted price on the stock exchange (BM&FBOVESPA).

Considering the volatility of the quotations of Usiminas shares, the Company evaluated whether, at the end of the reporting period, there was objective evidence of impairment of these financial assets, i.e., the Company’s management evaluated if the decline in the market value of Usiminas shares should be considered either significant or prolonged. In turn, this valuation requires judgment based on CSN’s policy, prepared according to practices used in the domestic and international markets, and consists of an instrument by instrument analysis based on quantitative and qualitative information available in the market, from the time an instrument shows a drop of 20% or more in its market value or from the time there is a significant drop in its market value as compared to its acquisition price during more than twelve months.

To determine the period of decline in the market value of Usiminas shares below their cost, CSN compared their average cost of acquisition as of the reporting date with the last date when the maximum quotation was above this weighted average. According to management, this analysis shows that neither USIM3 shares nor USIM5 shares presented a prolonged decline in their quotations, based on the Company’s policy.

To determine the decline percentage, we have analyzed volatility, which represents a dispersion measure of a share or market index returns. The more a share price varies over a short period of time, the higher is the risk of financial gain or loss if the share is traded and, therefore, volatility is a risk measure. The historical volatility of a share is calculated and taken into account to identify the expected fluctuation of the related instrument and measure the expected future volatility of the assessed equity instrument, and conclude if an instrument’s market value decline below its cost should or not be considered significant.

The table below illustrates this index for a twelve-year period (as from December 31, 2011), a sufficiently long period to eliminate volatility peaks caused by domestic and international economic crises:

Periods: | Volatility
| USIM3 | USIM5
01/03/2000 to 12/31/2011 | 50.42% | 48.57%

Based on this information, the criteria adopted by management, and the relevant accounting policies and legal rules, management concluded that the decline in the market value as compared to the acquisition cost of the USIM3 and USIM5 shares as of June 30, 2012, of 66.3% and 59.0%, respectively, should be considered a significant decline in the market value of these equity instruments.

Based on the qualitative and quantitative elements presented above, management concluded, in its best judgment, that there was evidence of a significant impairment of the investment in Usiminas shares as of June 30, 2012, and, consequently, reclassified the accumulated losses recorded in other comprehensive income amounting to R$1,599,485, net of income tax and social contribution, to profit for the year, by recognizing R$2,022,793 in other operating expenses and R$423,308 in deferred taxes.

Beginning from that date , pursuant to a Company's policy, gains arising from the positive variation of the quotation of shares during the second six month-period ended December 31, 2012 amounting to R$730,812, net of income tax and social contribution, were recognized in other comprehensive income, net of income tax.

In December 2012 there was an additional recognition of R$264,441 related to deferred taxes on accumulated losses due to the annual analysis of the effective income tax and social contribution rate that took into consideration the temporary differences generated by this investment in CSN subsidiaries resulting from the reclassification of accumulated losses.

FS-44

The Company continues to evaluate strategic alternatives with respect to its investment in Usiminas. These initiatives can impact, for example, the way an investment is recorded in the Company’s financial statements.

III – Fair values of assets and liabilities as compared to their carrying amounts

Financial assets and liabilities at fair value through profit or loss are recognized in current and non-current assets and liabilities, and any gains and possible losses are recognized as finance income or finance costs, respectively.

The amounts are recognized in the financial statements at their carrying amounts, which are substantially similar to those that would be obtained if they were traded in the market. The fair values of other long-term assets and liabilities do not differ significantly from their carrying amounts, except the amounts below.

The estimated fair values of consolidated long-term borrowings and financing were calculated at prevailing market rates, taking into consideration the nature, terms and risks similar to those of the recorded contracts, as compared below:

|  |  | 12/31/2012 |  |  |  | 12/31/2011
| Carrying amount |  | Fair value |  | Carrying amount |  | Fair value
Perpetual bonds | 2,046,281 |  | 2,102,366 |  | 1,878,353 |  | 1,819,903
Fixed rate notes | 6,067,555 |  | 6,811,081 |  | 5,183,690 |  | 5,832,364

IV Financial risk management policy

The Company has and follows a policy of managing its risks, with guidelines regarding the risks incurred by the company. Pursuant to this policy, the nature and general position of financial risks are regularly monitored and managed in order to assess the results and the financial impact on cash flow. The credit limits and the quality of counterparties’ hedge instruments are also periodically reviewed.

The risk management policy was established by the Board of Directors. Under this policy, market risks are hedged when it is considered necessary to support the corporate strategy or when it is necessary to maintain a level of financial flexibility.

Under the terms of the risk management policy, the Company manages some risks by using derivative financial instruments. The Company’s risk policy prohibits any speculative deals or short sales.

· Liquidity risk

It is the risk that the Company may not have sufficient net funds to honor its financial commitments as a result of mismatching of terms or volumes between scheduled receipts and payments.

To manage cash liquidity in domestic and foreign currency, assumptions of future disbursements and receipts are established and daily monitored by the treasury area. The payment schedules for the long-term portions of borrowings, financing and debentures are shown in note 12.

The following table shows the contractual maturities of financial liabilities, including accrued interest as of December 31, 2012.

At December 31, 2012 | Less than one year |  | From one to two years |  | From two to five years |  | Over five years |  | Total
Borrowings, financing and debentures | 2,326,439 |  | 6,803,471 |  | 10,538,367 |  | 10,616,451 |  | 30,284,728
Derivative financial instruments | 245,692 |  |  |  |  |  |  |  | 245,692
Trade payables | 1,957,789 |  |  |  |  |  |  |  | 1,957,789
At December 31, 2011 |  |  |  |  |  |  |  |  |
Borrowings, financing and debentures | 2,734,968 |  | 2,263,889 |  | 6,724,483 |  | 16,343,578 |  | 28,066,918
Derivative financial instruments | 2,971 |  | 373,430 |  |  |  |  |  | 376,401
Trade payables | 1,232,075 |  |  |  |  |  |  |  | 1,232,075

FS-45

· Foreign exchange rate risk

The Company assesses its exchange exposure by subtracting its liabilities from its assets denominated in dollar, euro and Australian dollar, thus arriving at its net exchange exposure, which is the foreign currency exposure risk. Therefore, besides the trade receivables arising from exports and investments overseas that in economic terms constitute natural hedges, the Company further considers and uses various financial instruments, such as derivative instruments (US$ to real and euro to dollar swaps, and forward exchange contracts, etc.) to manage its risks of fluctuations in currencies other than the Brazilian real.

· Policies on the use of hedging derivatives

The Company’s financial policy reflects the parameters of liquidity, credit and market risks approved by the Audit Committee and Board of Directors. The use of derivative instruments in order to prevent fluctuations in interest and exchange rates from having a negative impact on the company’s balance sheet and income statement should consider the same parameters. As provided for in internal rules, this financial investment policy has been approved and is being managed by the finance officers.

At the meetings of the Executive Officers and Board of Directors, the officers and directors routinely present and discuss the Company’s financial positions. Under the bylaws, transactions involving material amounts require the prior approval of management bodies. The use of other derivative instruments is contingent upon the express prior approval of the Board of Directors.

To finance its activities, the Company resorts to the capital markets, both locally and internationally, and based on the indebtedness profile it is seeking, part of the debt is pegged to foreign currency, basically to the US dollar, which causes Management to seek hedging for debt through derivative financial instruments.

To contract derivative financial instruments for hedging within the internal control structure, the following policies are adopted:

· ongoing calculation of exchange exposure that occurs by analyzing assets and liabilities exposed to foreign currency, under the following terms: (i) trade receivables and payables in foreign currency; (ii) cash and cash equivalents and debts in foreign currency considering the maturity of the assets and liabilities exposed to exchange fluctuations;

· presentation of the financial position and exchange exposure on a routine basis of meetings of the Executive Officers and Board of Directors that approve the hedging strategy;

· carrying out derivative hedging transactions only with leading banks, diluting the credit risk through diversification among these banks;

FS-46

The consolidated net exposure as of December 31, 2012 is as follows:

|  |  |  |  |  | 12/31/2012
|  | Foreign Exchange Exposure |  | (Amounts in US$ thousand) |  | (Amounts in € thousand)
|  | Cash and cash equivalents overseas |  | 6,106,055 |  | 2,551
|  | Derivative guarantee margin |  | 200,296 |  |
|  | Trade receivables |  | 348,361 |  | 32,298
|  | Intercompany borrowings |  | 61,628 |  | 92,322
|  | Advances to suppliers |  | 11,639 |  | 592
|  | Other assets |  | 3,478 |  | 37,118
|  | Total assets |  | 6,731,457 |  | 164,881
|  | Borrowings and financing |  | (5,102,672) |  | (120,869)
|  | Trade payables |  | (267,371) |  | (52)
|  | Other liabilities |  | (36,951) |  |
|  | Intercompany borrowings |  | (13,997) |  |
|  | Total liabilities |  | (5,420,991) |  | (120,921)
|  | Gross exposure |  | 1,310,466 |  | 43,960
|  | Notional amount of derivatives contracted |  | 66,557 |  | (90,000)
|  | Net exposure |  | 1,377,023 |  | (46,040)

Gains and losses on these transactions are consistent with the policies and strategies defined by management.

· Exchange swap transactions

The Company carries out exchange swap transactions in order to hedge its assets and liabilities against any fluctuations in the US dollar-real parity. This hedge through exchange swaps provides the Company, through the long position of the contract, with a forward rate agreement (FRA) gain on the exchange coupon, which at the same time improves our investment rates and reduces the cost of our funding in the international market.

As of December 31, 2012, the Company had a long position in exchange swap of US$10,000,000 (US$367,856,000 as of December 31, 2011) where we received, in the long position, exchange rate change plus 3.5% per year on average (in 2011, exchange rate change plus 3.4541% per year), and paid 100% of CDI, in the short position of the exchange swap contract.

As of December 31, 2011 the Company had a short position in a foreign exchange swap of US$100,000.000, where we paid, in the short position, exchange rate change plus interest of 2.39% per year.

As of December 31, 2012, the consolidated position of these contracts is as follows:

FS-47

· US dollar-to-real exchange swap

|  |  |  | 12/31/2012 |  | 12/31/2011
|  |  |  |  |  | Appreciation (R$) |  | Fair value (market) |  |  |  | Appreciation (R$) |  | Fair value (market)
Counterparties |  | Transaction maturity |  | Notional amount (US$ thousand) |  | Asset position |  | Liability position |  | Amounts receivable/ (payable) |  | Notional amount (US$ thousand) |  | Asset position |  | Liability position |  | Amounts receivable/ (payable)
HSBC |  | 6/17/2013 |  | 3,327 |  | 6,865 |  | (6,992) |  | (127) |  | 101,317 |  | 192,919 |  | (176,554) |  | 16,365
Bradesco |  | 5/13/2013 to 7/1/2013 |  | 14,971 |  | 30,961 |  | (31,101) |  | (140) |  | 3,327 |  | 6,279 |  | (5,743) |  | 536
Banco do Brasil |  | 1/2/2013 |  | 3,327 |  | 6,885 |  | (6,447) |  | 438 |  | 6,654 |  | 12,605 |  | (12,413) |  | 192
Santander |  | 10/1/2013 to 1/2/2015 |  | 14,990 |  | 33,115 |  | (30,061) |  | 3,054 |  | 14,990 |  | 28,900 |  | (28,416) |  | 484
Goldman Sachs |  | 1/2/2013 |  | 3,327 |  | 6,880 |  | (6,457) |  | 423 |  | 190,000 |  | 371,174 |  | (352,514) |  | 18,660
Banco de Tokyo |  | 12/15/2016 |  | 24,952 |  | 54,634 |  | (49,147) |  | 5,487 |  | 24,952 |  | 46,980 |  | (47,960) |  | (980)
JP Morgan |  | 12/16/2013 |  | 1,663 |  | 3,401 |  | (3,490) |  | (89) |  | 9,981 |  | 19,127 |  | (18,556) |  | 571
Société Générale |  |  |  |  |  |  |  |  |  |  |  | 16,635 |  | 30,554 |  | (29,362) |  | 1,192
|  |  |  | 66,557 |  | 142,741 |  | (133,695) |  | 9,046 |  | 367,856 |  | 708,538 |  | (671,518) |  | 37,020

· Real-to-US dollar exchange swap

|  |  |  |  |  |  |  | 12/31/2011
|  | Notional amount (US$ thousand) |  | Appreciation (R$) |  | Fair value (market)
Counterparties |  |  | Asset position |  | Liability position |  | Amount (payable)
Goldman Sachs |  | (70,000) |  | 130,266 |  | (130,787) |  | (521)
Santander |  | (30,000) |  | 55,704 |  | (56,030) |  | (326)
|  | (100,000) |  | 185,970 |  | (186,817) |  | (847)

The position of outstanding transactions was recorded in the Company’s assets amounting to R$9,046 as of December 31, 2012 (R$37,020 in assets and R$847 in liabilities as of December 31, 2011) and its effects are recognized in the Company’s finance income (costs) as a gain totaling R$17,065 for 2012 (loss of R$115,490 for 2011), of which R$8,019 refers to settled transactions (see Note 25).

· Euro-to-US dollar exchange swap

In addition to the swaps above, the Company also contracted NDFs (non-deliverable forwards) to hedge its euro-denominated assets. Basically the Company contracted financial derivatives for its euro-denominated assets, where it will receive the difference between the US dollar exchange rate change for the period, multiplied by the notional amount (long position) and pay the difference between the exchange rate change in euro for the period on the notional euro amount on the contract date (short position). In general, these are transactions conducted in the Brazilian over-the-counter market that have as counterparties prime financial institutions, contracted under the exclusive funds.

FS-48

As at December 31, 2012, the consolidated position of these contracts is as follows:

|  |  |  |  |  | 12/31/2012 |  |  |  | 12/31/2011
|  |  |  |  |  | Appreciation (R$) |  | Fair value (market) |  |  |  | Appreciation (R$) |  | Fair value (market)
Counterparties |  | Transaction maturity |  | Notional amount (€ thousand) |  | Asset position |  | Liability position |  | Amount (payable) |  | Notional amount (€ thousand) |  | Asset position |  | Liability position |  | Amount receivable
Itaú BBA |  | 10/1/2013 |  | 40,000 |  | 51,793 |  | (52,876) |  | (1,083) |  |  |  |  |  |  |  |
HSBC |  | 10/1/2013 |  | 25,000 |  | 32,373 |  | (33,047) |  | (674) |  | 25,000 |  | 51,469 |  | (48,556) |  | 2,913
Goldman Sachs |  | 10/1/2013 |  | 25,000 |  | 32,363 |  | (33,047) |  | (684) |  | 40,000 |  | 128,761 |  | (121,389) |  | 7,372
Deutsche Bank |  |  |  |  |  |  |  |  |  |  |  | 25,000 |  | 51,521 |  | (48,556) |  | 2,965
|  |  |  | 90,000 |  | 116,529 |  | (118,970) |  | (2,441) |  | 90,000 |  | 231,751 |  | (218,501) |  | 13,250

The position of outstanding transactions was recorded in the Company’s liabilities amounting to R$2,441 as of December 31, 2012 (R$13,250 in assets as of December 31, 2011) and its effects are recognized in the Company’s finance income (costs) as a loss totaling R$5,116 for 2012 (gain of R$9,574 for 2011), of which R$2,675 refers to transactions already settled (see Note 25).

· US dollar-to-Euro exchange swap

The subsidiary Lusosider carries out transactions with derivatives to hedge its exposure against the euro-dollar fluctuation. As of December 31, 2012, the gross position was US$6,162 and the net position was US$38,230 (including the derivatives below).

|  |  |  | 12/31/2012 |  | 12/31/2011
|  |  |  | Notional amount (US$ thousand) |  | Appreciation (R$) |  | Fair value (market) |  | Notional amount (US$ thousand) |  | Appreciation (R$) |  | Fair value (market)
Counterparties |  | Transaction maturity |  |  | Asset position |  | Liability position |  | Amount receivable |  |  | Asset position |  | Liability position |  | Amount receivable
BES |  | 9/28/2013 |  | 44,392 |  | 90,687 |  | (94,928) |  | (4,241) |  | 20,208 |  | 38,017 |  | (34,049) |  | 3,968
BNP |  |  |  |  |  |  |  |  |  |  |  | 15,000 |  | 28,219 |  | (25,453) |  | 2,766
|  |  |  | 44,392 |  | 90,687 |  | (94,928) |  | (4,241) |  | 35,208 |  | 66,236 |  | (59,502) |  | 6,734

The position of outstanding transactions was recorded in the Company’s liabilities amounting to R$4,241 as of December 31, 2012 (R$6,734 in assets as of December 31, 2011) and its consolidated results recognized in the finance income (costs) as a loss totaling R$8,065 for 2012 (gain of R$16,501 for 2011), of which R$3,824 refers to transactions already settled (see Note 25).

· Yen-to-US dollar exchange swap

|  |  |  | 12/31/2012 |  | 12/31/2011
|  |  |  | Notional amount (yen) |  | Accounting position |  | Fair value (market) |  | Notional amount (yen) |  | Accounting position |  | Fair value (market)
Counterparties |  | Transaction maturity |  |  | Asset position |  | Liability position |  | Amount receivable |  |  | Asset position |  | Liability position |  | Amount receivable
Deutsche Bank |  | 12/12/2013 |  | 59,090,000 |  | 237,525 |  | (236,964) |  | 561 |  | 59,090,000 |  | 374,455 |  | (373,430) |  | 1,025
|  |  |  | 59,090,000 |  | 237,525 |  | (236,964) |  | 561 |  | 59,090,000 |  | 374,455 |  | (373,430) |  | 1,025

The net effects were recognized in the finance income (costs) as a gain amounting to R$307 for 2012 (gain of R$1,460 for 2011).

· Sensitivity analysis of the US dollar-to-real exchange swap

The sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values as of December 31, 2012 recognized in assets, amounting to R$9,046. The Company considered the scenarios below for the real-dollar parity volatility.

FS-49

- Scenario 1: (25% real appreciation) R$-US$ parity of 1.5326;

- Scenario 2: (50% real appreciation) R$-US$ parity of 1.0218;

- Scenario 3: (25% real depreciation) R$-US$ parity of 2.5544;

- Scenario 4: (50% real depreciation) R$-US$ parity of 3.0653.

|  |  |  |  |  |  |  |  |  |  |  | 12/31/2012
|  | Risk |  | Notional amount (US$ thousand) |  | Scenario 1 |  | Scenario 2 |  | Scenario 3 |  | Scenario 4
|  |  |  | 2.0435 |  | 1.5326 |  | 1.0218 |  | 2.5544 |  | 3.0653
Net currency swap |  | US dollar fluctuation |  | 66,557 |  | (34,002) |  | (68,005) |  | 34,002 |  | 68,005
Exchange exposure in functional currency R$ |  | US dollar fluctuation |  | 1,310,466 |  | (669,484) |  | (1,338,969) |  | 669,484 |  | 1,338,969
(not including exchange derivatives above) |  |  |  |  |  |  |  |  |  |  |  |
Consolidated exchange exposure |  | US dollar fluctuation |  | 1,377,023 |  | (703,486) |  | (1,406,974) |  | 703,486 |  | 1,406,974
(including exchange derivatives above)

· Sensitivity analysis of the euro-to-dollar exchange swap

The sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values as of December 31, 2012 recognized in liabilities, amounting to R$2,441. The Company considered the scenarios below for the real-dollar parity volatility.

- Scenario 1: (25% real appreciation) R$-Euro parity of 2.0216;

- Scenario 2: (50% real appreciation) R$-Euro parity of 1.3477;

- Scenario 3: (25% real depreciation) R$-Euro parity of 3.3693;

- Scenario 4: (50% real depreciation) R$-Euro parity of 4.0431.

|  |  |  |  |  |  |  |  |  |  |  | 12/31/2012
|  | Risk |  | Notional amount (€ thousand) |  | Scenario 1 |  | Scenario 2 |  | Scenario 3 |  | Scenario 4
|  |  |  | 2.6954 |  | 2.0216 |  | 1.3477 |  | 3.3693 |  | 4.0431
Net currency swap |  | Euro fluctuation |  | (90,000) |  | 60,647 |  | 121,293 |  | (60,647) |  | (121,293)
Exchange exposure in functional currency R$ |  | Euro fluctuation |  | 43,960 |  | (29,622) |  | (59,245) |  | 29,622 |  | 59,245
(not including exchange derivatives above) |  |  |  |  |  |  |  |  |  |  |  |
Consolidated exchange exposure |  | Euro fluctuation |  | (46,040) |  | 31,025 |  | 62,048 |  | (31,025) |  | (62,048)
(including exchange derivatives above) |  |  |  |  |  |  |  |  |  |  |  |

· Sensitivity analysis of the dollar-to-euro swap

The sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values as of December 31, 2012 recognized in liabilities, amounting to R$4,241. The Company considered the scenarios below for the real-dollar parity volatility.

- Scenario 1: (25% real appreciation) Euro-dollar parity of 0.9893;

- Scenario 2: (50% real appreciation) Euro-dollar parity of 0.6595;

- Scenario 3: (25% real depreciation) Euro-dollar parity of 1.6488;

- Scenario 4: (50% real depreciation) Euro-dollar parity of 1.9785.

FS-50

|  |  |  |  |  |  |  |  |  |  |  | 12/31/2012
|  | Risk |  | Notional amount (US$ thousand) |  | Scenario 1 |  | Scenario 2 |  | Scenario 3 |  | Scenario 4
|  |  |  | 1.3190 |  | 0.9893 |  | 0.6595 |  | 1.6488 |  | 1.9785
Net currency swap |  | US dollar fluctuation | 44,392 |  | (14,638) |  | (29,277) |  | 14,638 |  | 29,277
Exchange exposure in functional currency euro |  | US dollar fluctuation | (6,162) |  | 2,032 |  | 4,064 |  | (2,032) |  | (4,064)
(not including exchange derivatives above) |  |  |  |  |  |  |  |  |  |  |  |
Consolidated exchange exposure |  | US dollar fluctuation | 38,230 |  | (12,606) |  | (25,213) |  | 12,606 |  | 25,213
(including exchange derivatives above) |  |  |  |  |  |  |  |  |  |  |  |

· Interest rate risk

Short- and long-term liabilities indexed to floating interest rate and inflation indices. Due to this exposure, the Company undertakes derivative transactions to better manage these risks.

· Interest rate swap transactions (LIBOR to CDI)

The objective of these transactions is to hedge transactions indexed to US dollar LIBOR against fluctuations in Brazilian interest rates. Basically, the Company carried out swaps of its obligations indexed to the LIBOR, in which it receives interest of 1.25% p.a. on the notional value of the dollar (long position) and pays 96% of the CDI on the notional amount in reais of the contract date (short position). The notional amount of this swap as of December 31, 2012 is US$64,500,000, hedging an export prepayment transaction in the same amount. The gains and losses on these contracts are directly related to fluctuations in exchange rates (US$) and interest rates (LIBOR and CDI). In general, these are transactions conducted in the Brazilian over-the-counter market that have as counterparty a prime financial institution.

As at December 31, 2012, the position of these contracts is as follows:

|  |  |  | 12/31/2012 |  |  |  | 12/31/2011
|  |  |  | Notional amount (US$ thousand) |  | Appreciation (R$) |  | Fair value (market) (R$) |  |  |  | Notional amount (US$ thousand) |  | Appreciation (R$) |  | Fair value (market) (R$)
Countraparties |  | Transaction maturity |  | 2012 |  | Asset position |  | Liability position |  | Amount payable |  | Transaction maturity |  | 2011 |  | Asset position |  | Liability position |  | Amount payable
CSFB |  | 11/13/2012 |  | 64,500 |  | 109,540 |  | (110,226) |  | (686) |  | 2/13/2012 |  | 107,500 |  | 182,432 |  | (184,556) |  | (2,124)

The position of outstanding transactions was recorded in the Company’s liabilities amounting to R$686 as of December 31, 2012 (R$2,124 in liabilities as of December 31, 2011) and its effects are recognized in the Company’s finance income (costs) as a loss totaling R$9,166 for 2012, of which R$8,480 refers to transactions already settled (loss of R$20,594 for 2011).

· Sensitivity analysis of interest rate swaps (LIBOR to CDI)

The sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values as of December 31, 2012 recognized in liabilities, amounting to R$686. The Company considered the scenarios below for the LIBOR (US$) and CDI interest rates volatility.

|  |  |  |  |  |  |  |  |  | 12/31/2012
| Notional amount (US$ thousand) |  | Risk |  | 25% |  | 50% | 25% |  | 50%
LIBOR-to-CDI interest rate swap | 64,500 |  | (Libor) US$ |  | (8,224) |  | (9,717) | 8,224 |  | 9,717

FS-51

· Sensitivity analysis of changes in interest rates

The Company considers the effects of a 5% increase or decrease in interest rates on its outstanding borrowings, financing and debentures as of December 31, 2012 in the consolidated financial statements.

|  |  |  | Impact on profit or loss
Changes in interest rates |  | % p.a. |  | 12/31/2012 |  | 12/31/2011
TJLP |  | 5.50 |  | 9,667 |  | 1,372
Libor |  | 0.51 |  | 6,607 |  | 7,941
CDI |  | 6.90 |  | 50,391 |  | 72,607

· Share market price risks

The Company is exposed to the risk of changes in equity prices due to the investments made and classified as available-for-sale. Equity investments refer to blue chips traded on BM&F BOVESPA.

The following table shows the impact of the net changes in the market value of financial instruments classified as available-for-sale on shareholders' equity, in other comprehensive income.

|  |  | Other comprehensive income
|  |  | 12/31/2012 |  | 12/31/2011
Net change in available-for-sale assets |  |  | 732.141 |  | (767.015)

The Company considers as probable scenario the amounts recognized at market values as of December 31, 2012. Sensitivity analysis is based on the assumption of maintaining as probable scenario the market values as of December 31, 2012. Therefore, there is no impact on the financial instruments classified as available for sale already presented above. The Company considered the scenarios below for volatility of the shares.

- Scenario 1: (25% appreciation of shares);

- Scenario 2: (50% appreciation of shares);

- Scenario 3: (25% devaluation of shares);

- Scenario 4: (50% devaluation of shares);

|  |  | Impact on equity
Companies |  | Probable |  | 25% |  | 50% |  | 25% |  | 50%
Usiminas |  | 730,812 |  | 200,536 |  | 401,072 |  | (200,536) |  | (401,072)
Panatlântica |  | 1,329 |  | 2,738 |  | 5,476 |  | (2,738) |  | (5,476)
|  | 732,141 |  | 203,274 |  | 406,548 |  | (203,274) |  | (406,548)

· Credit risks

The exposure to credit risks of financial institutions is in line with the parameters established in the financial policy. The Company adopts the practice of analyzing in detail the financial position of its customers and suppliers, establishing a credit limit and conducting ongoing monitoring of the outstanding balance.

As regards short-term investments, the Company only makes investments in institutions with low credit risk as rated by credit rating agencies. As part of the funds is invested in repos (repurchase agreements) backed by Brazilian government bonds, there is also exposure to Brazil’s sovereign risk.

FS-52

· Capital management

The Company manages its capital structure to ensure that it will be capable of providing return to its shareholders and benefits to other stakeholders, and maintain an optimal capital structure to reduce this cost.

V – Margin deposits

The Company holds margin deposits totaling R$426,328 (R$407,467 as of December 31, 2011); this amount is invested at Deutsche Bank and Credit Suisse as guarantee of the derivative financial instrument contracts, specifically swaps between CSN Islands VIII and CSN. In addition to this amount, the Company has, through its jointly controlled entity MRS, R$8,833 (R$8,227 as of December 31, 2011) linked to financing transactions with BNDES, which is part of the guarantee of these transactions.

14. OTHER PAYABLES

The group of other payables classified in current and non-current liabilities is comprised as follows:

| Current |  | Non-current
| 12/31/2012 |  | 12/31/2011 |  | 12/31/2012 |  | 12/31/2011
Payables to related parties (Note 18 b and c ) | 284,226 |  | 185,707 |  | 3,103,237 |  | 3,094,453
Unrealized losses on derivatives (Note 13 I) | 245,692 |  | 2,971 |  |  |  | 373,430
Dividends payable to Company owners (Note 18 a) | 155,537 |  | 622,164 |  |  |  |
Dividends payable non-controlling shareholders | 146,081 |  | 306,760 |  |  |  |
Advances from customers | 32,411 |  | 23,868 |  |  |  |
Taxes in installments (Note 15) | 167,282 |  | 313,201 |  | 1,085,079 |  | 1,922,283
Profit sharing - employees | 12,467 |  | 131,755 |  |  |  |
Other payables | 177,654 |  | 142,019 |  | 200,135 |  | 203,354
| 1,221,350 |  | 1,728,445 |  | 4,388,451 |  | 5,593,520

15. TAXES IN INSTALLMENTS

The position of the debts arising from tax installment plans, recorded in taxes in installments in current and non-current liabilities, is as follows:

| Current |  | Non-current
| 12/31/2012 |  | 12/31/2011 |  | 12/31/2012 |  | 12/31/2011
Federal REFIS (a) | 120,441 |  | 276,924 |  | 998,668 |  | 1,817,817
Other taxes in installments (b) | 46,841 |  | 36,277 |  | 86,411 |  | 104,466
| 167,282 |  | 313,201 |  | 1,085,079 |  | 1,922,283

a) Tax Recovery Program (REFIS)

On November 26, 2009, the Group companies joined the Tax Recovery Programs established by Law 11,941/09 and Provisional Measure 470/2009, aimed at settling tax liabilities through a special payment system and installment plan for the settlement of tax and social security obligations. Joining the special tax programs reduced the amount of fines, interest and legal charges previously due.

Management’s decision took into consideration matters already judged by higher courts, as well as the assessment of outside legal counsel regarding the possibility of favorable outcomes in the contingences in progress. In July 2010, the Company elected offset income tax and social contribution carryforwads against the last four installments of the installment plan, as allowed by relevant legislation.

FS-53

In February 2010, the debts payable enrolled in the installment plan under Law 11,941/09, already recognized through provisions, were reviewed based on the reductions in debits set forth in special programs, administrative appeals or legal proceedings. In the first quarter of 2010, the negative effect before income tax and social contribution of R$42,365 was accounted for in other operating income and expenses and in finance income (costs) (see 24 e 25).

In June 2011, the Group companies consolidated the debts enrolled in the tax program set forth by Law 11,941/09, payable in 180 SELIC-adjusted installments.

With respect to judicial deposits linked to REFIS proceedings, the Company obtained a favorable opinion from the National Treasury Attorney General’s Office (PGFN) that allows that part of this excess is used by the Company to partially settle the remaining balance of the tax installment program under Law 11,941/09 through offset, with the benefits granted to payments in cash. In light of this PGFN guidance and supported by previous court rulings, the Company carried out this offset. The balance of this excess deposit as of December 31, 2012 after these offsets was R$84,392 (R$806,103 as of December 31, 2011), recognized in line item Credits with the PGFN/RFB, in other non-current assets. The offset generated a net finance income gain net of taxes (pursuant to Law 11,941/09) of R$115,457 (see note 25).

b) Other tax installments (regular and other)

The Group companies also joined the Regular social security tax (INSS) installment plan and other plans.

16. PROVISIONS FOR TAX, SOCIAL SECURITY, LABOR, CIVIL AND ENVIRONMENTAL RISKS AND JUDICIAL DEPOSITS

Claims of different nature are being challenged at the appropriate courts. Details of the accrued amounts and related judicial deposits are as follows:

|  |  |  | 12/31/2012 |  |  |  | 12/31/2011
|  | Accrued liabilities |  | Judicial deposits |  | Accrued liabilities |  | Judicial deposits
Tax |  | 178,657 |  | 101,795 |  | 94,317 |  | 353,778
Social security and labor |  | 289,832 |  | 162,513 |  | 284,556 |  | 131,443
Civil |  | 109,915 |  | 42,562 |  | 94,183 |  | 50,909
Environmental |  | 7,056 |  |  |  | 6,906 |  |
Judicial deposits |  |  |  | 11,401 |  |  |  | 26,928
|  | 585,460 |  | 318,271 |  | 479,962 |  | 563,058
Legal obligations challenged in courts: |  |  |  |  |  |  |  |
Tax |  |  |  |  |  |  |  |
Salary premium for education |  | 24,077 |  | 46,193 |  | 33,121 |  | 36,189
Income tax on ”Plano Verão” |  | 20,892 |  | 348,969 |  | 20,892 |  | 345,676
Other provisions |  | 97,157 |  | 19,233 |  | 104,488 |  | 9,788
|  | 142,126 |  | 414,395 |  | 158,501 |  | 391,653
|  | 727,586 |  | 732,666 |  | 638,463 |  | 954,711

FS-54

The changes in the provisions for tax, social security, labor, civil and environmental risks in the period ended December 31, 2012 were as follows:

|  |  |  |  |  | Current + non-current |  |  |  | Current
Nature |  | 12/31/2011 |  | Additions |  | Inflation adjustment |  | Utilization |  | 12/31/2012 |  | 12/31/2012 |  | 12/31/2011
Tax |  | 252,818 |  | 127,842 |  | 5,613 |  | (65,490) |  | 320,783 |  |  |  | 220
Social security |  | 61,541 |  | 1,552 |  | 2,858 |  | (22,093) |  | 43,858 |  |  |  |
Labor |  | 223,015 |  | 42,756 |  | 29,377 |  | (49,174) |  | 245,974 |  | 245,974 |  | 204,615
Civil |  | 94,183 |  | 29,101 |  | 3,347 |  | (16,716) |  | 109,915 |  | 109,915 |  | 87,343
Environmental |  | 6,906 |  |  |  | 150 |  |  |  | 7,056 |  |  |  |
|  | 638,463 |  | 201,251 |  | 41,345 |  | (153,473) |  | 727,586 |  | 355,889 |  | 292,178

The provision for tax, social security, labor, civil and environmental liabilities was estimated by management and is mainly based on the legal counsel’s assessment. Only proceedings for which the risk is classified as probable loss are accrued. Moreover, this provision includes tax liabilities resulting from contingencies filed by the Company, subject to SELIC (Central Bank’s policy rate).

a) Tax lawsuits

I - Income tax and social contribution

“Verão” Plan - CSN is claiming the recognition of financial and tax effects on the calculation of income tax and social contribution, related to removal by the government of inflation measured according to the Consumer Price Index (IPC) in January and February 1989, involving a total percentage figure of 51.87% (‘Plano Verão”).

In 2004 the lawsuit was terminated with a final and unappealable decision that granted the right to apply the index of 42.72% (January 1989), with the 12.15% already applied to be deducted from this index. The final decision also granted application of the index of 10.14% (February 1989). The proceeding is currently at expert discovery stage.

As of December 31, 2012, there is an amount of R$348,969 (R$345,676 as of December 31, 2011) deposited in court, classified in a specific account of judicial deposits in long-term receivables, and a provision of R$20,892 (R$20,892 as of December 31, 2011), which represents the portion not recognized by the courts.

II - Salary premium for education - "Salário Educação"

CSN has filed a lawsuit challenging the constitutionality of the salary premium for education and for discussing the possibility of recovering the amounts paid in the period from January 5, 1989 to October 16, 1996. The lawsuit was unsuccessful, and the TRF upheld the decision unfavorable to CSN, a decision that is final and unappealable.

In view of the final and unappealable decision, CSN tried to make payment of the amount due, though the FNDE and INSS did not reach an agreement as to which agency should receive it. They also required that the amount should be paid along with a fine, with which the Company did not agree.

Lawsuits were then filed challenging the above events, with judicial deposit of the amounts involved in the lawsuits. In the first lawsuit, the lower court partly accepted the Company’s request, with the judge deducting the fine, but upholding the SELIC rate, with counterarguments against the defendant’s appeal against the SELIC rate.

As of December 31, 2012 the accrued amount totals R$24,077 (R$33,121 as of December 31, 2011) and the judicial deposit amounts to R$46,193 (R$36,189 as of December 31, 2011).

FS-55

III - Other

CSN has also recognized provisions for lawsuits relating to INSS, FGTS Complementary Law 110, PIS Law 10,637/02 and PIS/COFINS - Manaus Free Trade Zone, totaling R$97,157 as of December 31, 3012 (R$102,965 as at December 31, 2010), which includes legal charges.

b) Payroll and related taxes

As of December 31, 2012, the Group is a defendant in 12,080 labor lawsuits, for which a provision has been recorded in the amount of R$245,974 (R$223,015 as of December 31, 2011). Most of the claims relate to subsidiary and/or joint liability, salary equalization, health hazard premiums and hazardous duty premiums, overtime pay, difference in the 40% fine for the severance pay fund (FGTS) as a result of federal government economic plans, health care plan, indemnity claims resulting from alleged occupational diseases or on-the-job accidents, and differences in profit sharing from 1997 to 1999 and from 2001 to 2003.

c) Civil lawsuits

Among the civil lawsuits in which the Company is a defendant are claims for compensation. Generally these lawsuits result from on-the-job accidents, occupational diseases and contractual litigation related to the industrial activities of the Group, real estate actions, healthcare plan, and reimbursement of costs incurred in labor courts. For lawsuits involving civil matters, a provision has been recognized in the amount of R$109,915 as of December 31, 2012 (R$102,486 as of December 31, 2011)

d) Other

§ Competition

On June 14, 2010, the Regional Federal Court of Brasília rejected the annulment action filed by CSN against CADE, which aimed at annulling its fine for the alleged infringements laid down in Articles 20 and 21, I, of Law 8,884/1984. The Company filed appropriate appeals against this decision, which were dismissed, resulting in the filing of a Motion for clarification, which is pending judgment. The collection of the R$65,292 fine is suspended by a Court decision, which stays the collection as from the date CSN issued a guarantee letter. This proceeding is classified as risk of possible loss.

§ Environmental

The environmental administrative/judicial proceedings filed against the Company include mainly administrative proceedings for alleged environmental irregularities and the regularization of environmental permits; at the judicial level, the Company is a party to actions collecting the fines imposed for such alleged environmental irregularities, and public civil actions claim regularization coupled with compensation, in most cases claiming environmental recovery. In general these proceedings arise from alleged damages to the environment related to the Company’s industrial activities. The environmental proceedings total R$7,056 (R$6,906 as of December 31, 2011).

In July 2012 the Company received a legal notice in the lawsuit filed by the State Attorney's Office of the State of Rio de Janeiro, related to Volta Grande IV district in the city of Volta Redonda-RJ, claiming, among others, the removal of two industrial waste cells and 750 (seven hundred and fifty) homes. This lawsuit is classified as probable loss risk, but there is not an estimated amount due to the illiquidity of the claims.

As a result of the lawsuit mentioned in the paragraph above, after August 2012 the Company received legal notices related to some lawsuits filed by one of the dwellers of the Volta Grande IV district, who claims the payment of compensation for property damages and pain and suffering, whose amounts are illiquid at the moment, and this lawsuit is classified as possible loss risk.

§ Other Administrative and Judicial Processes

The Group is a defendant in other administrative and judicial proceedings (tax, social security, labor, civil, and environmental), in the approximate amount of R$14,632,211, of which R$1,137,412 related to labor and social security lawsuits, R$615,291 to civil lawsuits, and R$30,033 to environmental lawsuits. The assessments made by legal counsel define these administrative and judicial proceedings as entailing risk of possible loss and, therefore, no provision was recorded in conformity with Management’s judgment and accounting practices adopted in Brazil.

FS-56

As for the tax lawsuits these represent R$12,849,475 and are described below:

a) R$1,968,138 refers to the assessment notice issued against the Company and its jointly controlled entity Namisa for an alleged nonpayment of income tax (IRPJ) and social contribution on net income (CSLL) on profits recognized in the balance sheets of its foreign subsidiaries. In view of the recent changes in administrative and judicial decisions, our outside legal counsel classified the possibility of an unfavorable outcome as possible. The total amount of the assessment against Namisa is R$256 million, however, as we only hold a 60% interest in Namisa, when calculating the total amount of these assessments we include only R$154 million, or 60% of the amount for Namisa;

b) R$6,079,359 refers to the tax assessment notice issued against the Company for an alleged sale of 40% of the shares of its subsidiary NAMISA to a Japanese-Korean consortium, thus failing to determine and pay taxes on the capital gain resulting from this transaction. In light of the evidence that shows that such sale was not completed, our outside legal counsel classified the possibility of an unfavorable outcome as possible.

c) R$1,047,950 refers to 60% of the tax assessment notice issued against CSN’s jointly controlled entity NAMISA, concurrently with the tax assessment notice described in “b” above, for having allegedly utilized in an incorrect manner, in 2009 and 2011, goodwill arising on the investment made by the Japanese-Korean consortium in direct subsidiary NAMISA, which was subsequently merged. In light of the arguments that show that the goodwill utilization was legal based on existing previous administrative court rulings, our outside legal counsel classified the possibility of an unfavorable outcome to NAMISA as possible. The total amount of this assessment is R$ 1,747 million, however, as we only hold a 60% interest in Namisa, when calculating the amount of this particular assessment we include only 60% of the total amount.

d) R$3,754,028 related to other tax proceedings (federal, state and municipal) and social security.

17. PROVISIONS FOR ENVIRONMENTAL LIABILITIES AND ASSET DECOMMISSIONING

a) Environmental liabilities

As of December 31, 2012, a provision is recognized in the amount of R$386,114 (R$312,612 as of December 31, 2011) for expenditures relating to environmental investigation and recovery services for potentially contaminated areas surrounding establishments in the States of Rio de Janeiro, Minas Gerais and Santa Catarina. Estimated expenditures will be reviewed periodically and the amounts already recognized will be adjusted whenever needed. These are management’s best estimates considering recovery studies in areas that have been degraded and are in the process of being used for activities. This provision is recognized in operating expenses.

The provision is measured at the present value of the expenditures required to settle the obligation, using a pretax rate that reflects current market assessments of the time value of money and the specific risks of the obligation. The increase in the obligation due to passage of time is recognized as other operating expenses.

The long-term interest rate used to discount to present value and update the provision through December 31, 2012 was 11.00%. The liability recognized is periodically updated based on the general market price index (IGPM) for the period.

b) Decommissioning of assets

Obligations on decommissioning of assets consist of estimated costs for decommissioning, retirement or restoration of areas upon the termination of activities related to mining resources. The initial measurement is recognized as a liability discounted to present value and subsequently through increase in expenses over time. The asset decommissioning cost equivalent to the initial liability is capitalized as part of the carrying amount of the asset, being depreciated over the useful life of the asset. The liability recognized as of December 31, 2012 is R$27,326 (R$24,327 as of December 31, 2011).

FS-57

18. RELATED-PARTY BALANCES AND TRANSACTIONS

a) Transactions with Holding Company

Vicunha Siderurgia S.A. is a holding company set up for the purpose of holding equity interests in other companies and is the Company’s main shareholder, with 47.86% of the voting shares.

Rio Iaco Participações S.A. holds 3.99% of CSN.

· Liabilities

Companies |  | Proposed |  | Paid
| Dividends |  | Dividends |  | Interest on capital
Vicunha Siderurgia |  | 143,563 |  | 574,267 |  |
Rio Iaco |  | 11,974 |  | 47,897 |  |
Total at 12/31/2012 |  | 155,537 |  | 622,164 |  |
Total at 12/31/2011 |  | 622,164 |  | 777,706 |  | 184,987

Vicunha Siderurgia’s corporate structure is as follows (unaudited information):

Vicunha Aços S.A. – holds 99.99% of Vicunha Siderurgia S.A.

Vicunha Steel S.A. – holds 66.96% of Vicunha Aços S.A.

National Steel S.A. – holds 33.04% of Vicunha Aços S.A.

CFL Participações S.A. – holds 40% of National Steel S.A. and 40% of Vicunha Steel S.A.

Rio Purus Participações S.A. – holds 60% of National Steel S.A., 59.99% of Vicunha Steel S.A. and 99.99% of Rio Iaco Participações S.A.

b) Transactions with jointly controlled entities and associates

· Assets

Companies |  | Trade receivables |  | Loans/ Prepayment (1) |  | Other |  | Total
Joint controlled entities |  |  |  |  |  |  |  |
Nacional Minérios S.A. |  | 72,929 |  | 125,938 |  | 2,908 |  | 201,775
MRS Logística S.A. |  | 58 |  |  |  |  |  | 58
CBSI - Companhia Brasileira de Serviços e Infraestrutura |  | 4,476 |  | 4,476
CGPAR - Contrução Pesada S.A. |  |  |  |  |  | 13,854 |  | 13,854
Associates |  |  |  |  |  |  |  |
Arvedi Metalfer do Brasil S.A. |  |  |  | 5,063 |  |  |  | 5,063
Total at 12/31/2012 |  | 72,987 |  | 131,001 |  | 21,238 |  | 225,226
Total at 12/31/2011 |  | 31,741 |  | 117,086 |  |  |  | 148,827

(1) Nacional Minérios SA - Refers to Prepayment operations with indirect subsidiary CSN Europe, CSN and CSN Portugal Iberia. Contract in US$: interest of 5.37% pa to 6.8% pa maturing in June, 2015. On December 31, 2012, loans totaling R$125,938 (R$117,086 as of December 31, 2011), of which R$58 classified in short term (R$1,537 as of December 31, 2011) and R$125,880 classified in long term (R$115,549 as of December 31, 2011).

FS-58

· Liabilities

Companies |  | Other payables |  | Borrowings (1) | Trade payables |  | Total
| Accounts payables |  | Advances from customers (4) |  |
Joint controlled entities |  |  |  |  |  |  |  |  |
Nacional Minérios S.A. |  | 5,728 |  | 3,374,528 |  | 28,603 |  |  | 3,408,859
MRS Logística S.A. |  | 6,988 |  |  |  |  | 72 |  | 7,060
CBSI - Companhia Brasileira de Serviços e Infraestrutura |  |  |  |  |  |  | 3,796 |  | 3,796
CGPAR - Contrução Pesada S.A. |  |  |  |  |  |  | 2,454 |  | 2,454
Total at 12/31/2012 |  | 12,716 |  | 3,374,528 |  | 28,603 | 6,322 |  | 3,422,169
Total at 12/31/2011 |  | 8,966 |  | 3,270,663 |  | 25,567 | 7,085 |  | 3,312,281

(1) Nacional Minérios S.A. - Refers to loan with indirect subsidiaries Namisa Europe, Lda and CSN Europe Lda Contract in US$: interest of 5.37% pa maturing in June, 2015. On December 31, 2012, the loans amounted to R$28,603 (R$25,567 as of December 31, 2011).

· Profit or loss

Companies |  | Revenue |  | Expenses
| Sales |  | Interest |  | Total |  | Purchases |  | Interest |  | Total
Jointly controlled entities |  |  |  |  |  |  |  |  |  |  |  |
Nacional Minérios S.A. |  | 563,203 |  | 19,385 |  | 582,588 |  | 6,531 |  | 397,991 |  | 404,522
MRS Logística S.A. |  |  |  |  |  |  |  | 252,365 |  |  |  | 252,365
CBSI - Companhia Brasileira de Serviços e Infraestrutura |  |  |  |  |  |  |  | 33,721 |  |  |  | 33,721
CGPAR - Contrução Pesada S.A. |  |  |  |  |  |  |  | 7,972 |  |  |  | 7,972
Associates |  |  |  |  |  |  |  |  |  |  |  |
Arvedi Metalfer do Brasil S.A. |  |  |  | 87 |  | 87 |  |  |  |  |  |
Total em 12/31/2012 |  | 563,203 |  | 19,472 |  | 582,675 |  | 300,589 |  | 397,991 |  | 698,580
Total em 12/31/2011 |  | 378,020 |  | 29,300 |  | 407,320 |  | 314,108 |  | 389,059 |  | 703,167

The main transactions carried out by CSN with its subsidiaries and jointly controlled entities are sales and purchases of products and services, which include the supply of iron ore, steel, the provision of port services and railroad transportation, as well as the supply of electric power for operations.

c) Other unconsolidated related parties

· CBS Previdência

The Company is the main sponsor of this non-profit entity established in July 1960, primarily engaged in the payment of benefits that supplement the official government Social Security benefits to participants. In its capacity as sponsor, CSN carries out transactions involving the payment of contributions and recognition of actuarial liabilities calculated in defined benefit plans, as detailed in note 28.

· Fundação CSN

The Company develops socially responsible policies concentrated today in Fundação CSN, of which it is the founding. The transactions between the parties relate to the operating and financial support for Fundação CSN to carry out the social projects undertaken mainly in the locations where the Company operates.

FS-59

· Banco Fibra

Banco Fibra is under the control structure of Vicunha Siderurgia and the financial transactions carried out with this bank are limited to current account operations and investments in fixed-income securities.

· Ibis Participações e Serviços

Ibis Participações e Serviços is under the control of a Board member of the Company.

· Companhia de Gás do Ceará

A natural gas distributor under the control structure of Vicunha Siderurgia.

The balances and transactions between the Company and these entities are as follows:

I) Assets and liabilities

Companies |  | Assets |  | Liabilities
| Trade receivables |  | Loans (1) / Banks |  | Actuarial asset |  | Total |  | Accounts payables |  | Actuarial liability |  | Total
CBS Previdência (Nota 28) |  |  |  |  |  | 93,546 |  | 93,546 |  | 26 |  | 17,939 |  | 17,965
Fundação CSN |  | 1,828 |  | 903 |  |  |  | 2,731 |  | 88 |  |  |  | 88
Banco Fibra |  |  |  | 72 |  |  |  | 72 |  |  |  |  |  |
Usiminas |  | 10,802 |  |  |  |  |  | 10,802 |  | 52 |  |  |  | 52
Panatlântica |  | 31,981 |  |  |  |  |  | 31,981 |  |  |  |  |  |
Companhia de Gás do Ceará |  |  |  |  |  |  |  |  | 53 |  |  |  | 53
Total at 12/31/2012 |  | 44,611 |  | 975 |  | 93,546 |  | 139,132 |  | 219 |  | 17,939 |  | 18,158
Total at 12/31/2011 |  | 54,871 |  | 72 |  |  |  | 54,943 |  | 531 |  | 11,673 |  | 12,204

(1) Fundação CSN – R$ contracts: interest equivalent to 102% of CDI with final maturity in June 2016. As of December 31, 2012, borrowings total R$903, of which R$154 classified in short term and R$749 is classified in long term.

ii) Profit or loss

Companies |  | Revenues |  | Expenses
| Sales |  | Interest |  | Income from pension fund |  | Total |  | Expenses on pension fund |  | Purchases / other expenses |  | Total
CBS Previdência |  |  |  |  |  | 36,355 |  | 36,355 |  | 11,618 |  |  |  | 11,618
Fundação CSN |  |  |  | 3 |  |  |  | 3 |  |  |  | 2,048 |  | 2,048
Usiminas |  | 79,571 |  |  |  |  |  | 79,571 |  |  |  | 1,692 |  | 1,692
Panatlântica |  | 377,646 |  |  |  |  |  | 377,646 |  |  |  |  |  |
Ibis Participações e Serviços |  |  |  |  |  |  |  |  |  |  |  | 7,255 |  | 7,255
Companhia de Gás do Ceará |  |  |  |  |  |  |  |  |  |  |  | 2,187 |  | 2,187
Total at 12/31/2012 |  | 457,217 |  | 3 |  | 36,355 |  | 493,575 |  | 11,618 |  | 13,182 |  | 24,800
Total at 12/31/2011 |  | 575,167 |  |  |  |  |  | 575,167 |  | 51,595 |  | 22,152 |  | 73,747

d) Key management personnel

The key management personnel, who have authority and responsibility for planning, directing and controlling the Company’s activities, include the members of the Board of Directors and the executive officers. The following is information on the compensation of such personnel and the related balances as of December 31, 2012.

FS-60

|  | 12/31/2012 |  | 12/31/2011
|  | Profit or loss
Short-term benefits for employees and officers |  | 30,539 |  | 28,226
Post-employment benefits |  | 115 |  | 91
Other long-term benefits |  | n/a |  | n/a
Severance benefits |  | n/a |  | n/a
Share-based compensation |  | n/a |  | n/a
|  | 30,654 |  | 28,317

n/a – not applicable

e) Policy on investments and payment of interest on capital and dividends

At a meeting held on December 11, 2000, the Board of Directors decided to adopt a profit distribution policy which, after compliance with the provisions contained in 6,404/76, as amended by Law 9,457/97, will entail the distribution of all the profit to the Company’s shareholders, provided that the following priorities are preserved, irrespective of their order: (i) carrying out the business strategy; (ii) fulfilling its obligations; (iii) making the required investments; and (iv) maintaining a healthy financial situation of the Company.

19. SHAREHOLDERS' EQUITY

i. Paid-in capital

Fully subscribed and paid-in capital as of December 31, 2012 is R$4,540,000 (R$1,680,947 as of December 31, 2011) represented by 1,457,970,108 (1,457,970,108 as of December 31, 2011) book-entry common shares without par value. Each common share entitles its holder to one vote in Shareholders’ Meetings.

ii. Authorized capital

The Company’s bylaws in effect as of December 31, 2012 determine that the capital can be raised to up to 2,400,000,000 shares by decision of the Board of Directors.

iii. Legal reserve

This reserve is recognized at the rate of 5% of the profit for each period, as provided for by Article 193 of Law 6,404/76, up to the ceiling of 20% of share capital.

iv. Treasury shares

As of December 31, 2012, the Company did not have any treasury shares.

v. Ownership structure

As of December 31, 2012, the Company’s ownership structure was as follows:

FS-61

|  |  |  | 12/31/2012 |  |  |  | 12/31/2011
|  | Number of common shares |  | % of total shares |  | Number of common shares |  | % of total shares
Vicunha Siderurgia S.A. |  | 697,719,990 |  | 47.86% |  | 697,719,990 |  | 47.86%
Rio Iaco Participações S.A. (*) |  | 58,193,503 |  | 3.99% |  | 58,193,503 |  | 3.99%
Caixa Beneficente dos Empregados da CSN - CBS |  | 12,788,231 |  | 0.88% |  | 12,788,231 |  | 0.88%
BNDES Participações S.A. - BNDESPAR |  | 27,509,316 |  | 1.89% |  | 31,773,516 |  | 2.18%
JP Morgan Chase Bank - ADRs |  | 342,997,950 |  | 23.53% |  | 373,772,695 |  | 25.64%
BOVESPA |  | 318,761,118 |  | 21.85% |  | 283,722,173 |  | 19.45%
|  | 1,457,970,108 |  | 100.00% |  | 1,457,970,108 |  | 100.00%

(*) Rio Iaco Participação S. A. is a company part of the control group.

20. PAYMENT TO SHAREHOLDERS

|  | 12/31/2012
Profit (loss) for the year |  | (420,113)
Reversal of Investment reserve |  | 776,549
Reversal of statutory working capital reserve |  | 503,564
Profit for allocation |  | 860,000
Proposed allocation: |  |
Approved dividends |  | 300,000
Interest on capital proposed |  | 560,000
Total dividends and interest on capital |  | 860,000
Weighted average number of shares |  | 1,457,970
Dividends and interest on capital per share |  | (0.58986)

21. INTEREST ON CAPITAL

On March 26,2013, the Board of Directors´approved interest on capital payment amounting to R$560,000.

The calculation of interest on capital is based on the Long-Term Interest Rate (TJLP) fluctuation on shareholders' equity, limited to 50% of pretax profit for the period or the higher of 50% of retained earnings and profit reserves, might being used the higher of these two limits according to prevailing legislation.

22. NET SALES REVENUE

Net sales revenue is comprised as follows:

|  | 12/31/2012 |  | 12/31/2011
Gross revenue |  |  |  |
Domestic market |  | 13,784,307 |  | 13,366,345
Foreign market |  | 6,444,540 |  | 6,417,397
|  | 20,228,847 |  | 19,783,742
Deductions |  |  |  |
Cancelled sales and discounts |  | (345,914) |  | (257,888)
Taxes levied on sales |  | (2,986,669) |  | (3,006,270)
|  | (3,332,583) |  | (3,264,158)
Net revenue |  | 16,896,264 |  | 16,519,584

FS-62

23. EXPENSES BY NATURE

|  | 12/31/2012 |  | 12/31/2011
Raw materials and inputs |  | (4,941,134) |  | (3,927,105)
Labor cost |  | (1,582,481) |  | (1,647,545)
Supplies |  | (1,107,955) |  | (1,084,440)
Maintenance cost (services and materials) |  | (1,219,385) |  | (969,376)
Outsourcing services |  | (2,975,992) |  | (1,981,025)
Depreciation, amortization and depletion (Note 10 b) |  | (1,215,854) |  | (929,368)
Other (*) |  | (537,444) |  | (441,678)
|  | (13,580,245) |  | (10,980,537)
Classified as: |  |  |  |
Cost of sales (Note 26) |  | (12,072,206) |  | (9,800,844)
Selling expenses (Note 26) |  | (931,525) |  | (604,108)
General and administrative expenses (Note 26) |  | (576,514) |  | (575,585)
|  | (13,580,245) |  | (10,980,537)

(*) Includes increase/reduction in finished goods and work in process, and sundry expenses of the group of plant administrative expenses.

24. OTHER OPERATING INCOME (EXPENSES)

|  | 12/31/2012 |  | 12/31/2011
Other operating income |  |  |  |
Sale of Riversdale shares (Note 9) |  |  |  | 698,164
Sale of securities |  |  |  |
Reversal of actuarial liability/provision for actuarial asset |  | 43,749 |  |
Reversal of provisions |  | 1,953 |  | 3,091
Dividends received from third parties |  | 301 |  | 14,199
Other Income |  |  |  | 3,723
|  | 46,003 |  | 719,177
Other operating expenses |  |  |  |
Taxes and fees |  | (94,846) |  | (37,499)
Effect of REFIS - Law 11,941/09 and MP 470/09 |  |  |  | (16,119)
Provision for tax, social security, labor, civil and environmental risks, net of reversals | (280,113) |  | (75,823)
Contractual, nondeductible fines |  | (61,396) |  | (45,537)
Depreciation of unused equipment |  | (14,797) |  | (33,674)
Residual value of permanent assets written off |  | (5,246) |  | (62,917)
Allowance for inventory losses |  | (16,082) |  | (22,203)
Research and development costs |  | (61,053) |  | (42,050)
Pension plan expenses |  | (5,256) |  | (62,313)
Healthcare plan expenses (Note 28 e) |  | (51,234) |  | (42,306)
Impairment adjustment |  |  |  | (60,861)
Impairment of available-for-sale assets (Note 13 II) |  | (2,022,793) |  |
Amortization of purchase price allocation - business combination |  | (60,745) |  |
Other expenses |  | (45,812) |  |
|  | (2,719,373) |  | (501,302)
Other operating income (expenses) |  | (2,673,370) |  | 217,875

FS-63

25. FINANCE INCOME (COSTS)

|  | 12/31/2012 |  | 12/31/2011
Finance income |  |  |  |
Related parties (Note 18 b and c) |  | 19,475 |  | 29,300
Income from short-term investments |  | 237,865 |  | 538,882
Net effect of REFIS - Law 11,941/09 and MP 470/09 |  | 115,457 |  |
Other income |  | 43,984 |  | 149,268
|  | 416,781 |  | 717,450
Finance costs |  |  |  |
Borrowings and financing - foreign currency |  | (709,688) |  | (639,197)
Borrowings and financing - local currency |  | (1,550,942) |  | (1,622,365)
Related parties (Note 18 b) |  | (397,991) |  | (389,059)
Capitalized interest (Notes 10 and 32) |  | 409,498 |  | 353,156
Losses on derivatives (*) |  | (9,166) |  | (20,594)
Net effect of REFIS - Law 11,941/09 and MP 470/09 |  |  |  | (77,335)
Interest, fines and late payment charges |  | (158,936) |  | (264,359)
Other finance costs |  | (177,715) |  | (224,168)
|  | (2,594,940) |  | (2,883,921)
Inflation adjustment and exchange gains (losses), net |  |
Inflation adjustments |  | (144,446) |  | (37,451)
Exchange differences |  | 326,009 |  | 286,074
Exchange gains (losses) on derivatives (*) |  | 4,191 |  | (87,955)
|  | 185,754 |  | 160,668
Finance costs, net |  | (1,992,405) |  | (2,005,803)
(*) Statement of gains and losses on derivative transactions |  |
Dollar to real swap |  | 17,065 |  | (115,490)
Euro to dollar swap |  | (5,116) |  | 9,574
Dollar to euro swap |  | (8,065) |  | 16,501
Yen to dollar swap |  | 307 |  | 1,460
|  | 4,191 |  | (87,955)
Libor to CDI swap |  | (9,166) |  | (20,594)
|  | (9,166) |  | (20,594)
|  | (4,975) |  | (108,549)

26. SEGMENT INFORMATION

According to the Group’s structure, its businesses are distributed into five (5) operating segments.

· Steel

The Steel Segment consolidates all the operations related to the production, distribution and sale of flat steel, long steel, metallic packaging and galvanized steel, with operations in Brazil, the United States, Portugal and Germany. This segment supplies the following markets: construction, steel packaging for the Brazilian chemical and food industries, home appliances, automobile and OEM (motors and compressors). The Company’s steel units produce hot and cold rolled steel, galvanized and pre-painted steel of great durability. They also produce tinplate, a raw material used to produce metallic packaging.

Overseas, Lusosider, which is based in Portugal, also produces metal sheets, as well as galvanized steel. CSN LLC in the U.S.A. meets local market needs by supplying cold rolled and galvanized steel. In January 2012, CSN acquired Stahlwerk Thüringen (SWT), a manufacturer of long steel located in Unterwellenborn, Germany. SWT is specialized in the production of shapes used for construction and has an installed production capacity of 1.1 million metric tons of steel per year.

FS-64

For 2013, it is slated to begin production of long steel products. The initial production slated, of 500,000 metric tons per year, will consolidate the company as a source of complete construction solutions, complementing its portfolio of products with high added value in the steel chain.

· Mining

This segment encompasses the activities of iron ore and tin mining. The high–quality iron ore operations are located in the Iron Quadrilateral in MG, the Casa de Pedra mine in Congonhas, MG, that produces high quality iron ore, as well as the jointly controlled entity Nacional Minérios S.A. (Namisa), which has its own mines, also of excellent quality, and also sells third-party iron ore. Furthermore, CSN also controls Estanho de Rondônia S.A. (ERSA), a company that has both tin mining and casting units.

CSN holds the concession to operate TECAR, a solid bulk terminal, one of the 4 (four) terminals that comprise the Itaguaí Port, in Rio de Janeiro. Importations of coal and coke are carried out through this terminal.

· Logistics

i. Railroad

CSN has equity interests in two railroad companies: MRS Logística S.A., in which we share control, which manages the former Southeast Network of Rede Ferroviária Federal S.A. (RFFSA), and our controlled subsidiary Transnordestina Logística S.A., which operates the former Northeast Network of the RFFSA in the states of Maranhão, Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas.

a) MRS

The railroad transportation services provided by MRS are based on the supply of raw materials and the shipment of final products. The total amount of iron ore, coal and coke consumed by the Presidente Vargas Mill is carried by MRS, as is part of the steel produced by CSN for the domestic market and for export.

The Southeast Brazilian railroad system, encompassing 1,674 kilometers of tracks, serves the tri-state industrial area of São Paulo-Rio de Janeiro-Minas Gerais, linking the mines located in Minas Gerais to the ports located in São Paulo and Rio de Janeiro, and the steel mills of CSN, Companhia Siderúrgica Paulista (or Cosipa) and Gerdau Açominas. Besides serving other customers, the railroad system carries iron ore from the Company’s mines in Casa de Pedra, Minas Gerais, and coke and coal from the Itaguaí Port, in Rio de Janeiro, to Volta Redonda, and carries CSN’s export products to the ports of Itaguaí and Rio de Janeiro. Its volumes of cargo carried account for approximately 28% of the total volume carried by the Southeast railroad system.

b) Transnordestina Logística

Together, CSN and the federal government are making investments for implementation of the Transnordestina Project for construction of around 1,728 km of new lines. The work on this project includes complementing and renewing part of the infrastructure (or lines) of the concession held by Transnordestina Logística, which will be expanded from the nearly 2,600 kilometers of track presently operating to around 4,300 kilometers.

Transnordestina Logística S.A. has a 30-year concession granted in 1998 to operate the Northeastern Brazil railroad system. This railway system covers 4,238 kilometers of railroads in the states of Maranhão, Piauí, Ceará, Paraíba, Pernambuco, Alagoas and Rio Grande do Norte. Moreover, it links up the main ports in the region, thus providing an important competitive advantage by means of opportunities for combined transportation solutions and logistics projects tailored to customer needs.

The project underway will increase the transportation capacity of Transnordestina Logística 20-fold, bringing it up the level of the most modern railroads in the entire world.

FS-65

With its new configuration, Transnordestina will become the best logistics option for export of grains through the Pecém and Suape ports, as well as other solid bulk cargos such as iron ore from the Northeast Region, playing an important role in the region’s development.

ii. Ports

The Port logistics segment consolidates the operation of the terminal built during the post-privatization period of the ports, Sepetiba Tecon. The Sepetiba terminal features complete infrastructure to meet all the needs of exporters, importers and ship-owners. Its installed capacity exceeds that of most other Brazilian terminals. It has excellent depths of 14.5 meters in the mooring berths and a huge storage area, as well as the most modern and appropriate equipment, systems and intermodal connections.

The Company’s constant investment in projects in the terminals consolidates the Itaguaí Port Complex as one of the most modern in Brazil, at present with capacity for handling 480 thousand containers and 30 million metric tons per year of bulk cargo.

· Energy

CSN is one of the largest industrial consumers of electric power in Brazil. As energy is fundamental to its production process, the Company invests in assets for generation of electric power to guarantee its self-sufficiency. These assets are as follows: Itá hydroelectric power plant, in the State of Santa Catarina, with rated capacity of 1,450 MW, where CSN has a share of 29.5%; Igarapava hydroelectric power plant, Minas Gerais, with rated capacity of 210 MW, in which CSN holds 17.9% of the capital; and a thermoelectric co-generation Central Unit with rated capacity of 238 MW, which has been operating at the UPV since 1999. For fuel the Central Unit uses the residual gases produced by the steel mill itself. Through these three power generation assets, CSN obtains total rated capacity of 430 MW.

· Cement

The cement division consolidates the Company’s cement production, distribution and sales operations, which use the slag produced by the Volta Redonda plant’s blast furnaces. In 2011, the clinker used in cement production was acquired from third parties; however, at the end of 2011, with the completion of the first stage of the Arcos Clinker plant, MG, this plant already supplied the milling needs of CSN Cimentos in Volta Redonda.

· Sales by geographic area

Sales by geographic area are determined based on the customers’ location. On a consolidated basis, domestic sales are represented by revenues from customers located in Brazil and export sales are represented by revenues from customers located abroad.

FS-66

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 12/31/2012
|  | Steel |  | Mining |  | Logistics |  |  |  | Energy |  | Cement |  | Corporate expenses/ elimination |  | Consolidated
|  |  |  | Ports |  | Railroads |  |  |  |
Profit or loss |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Metric tons (thou.) - (unaudited) (*) |  | 5,828,718 |  | 20,181,321 |  |  |  |  |  |  |  | 1,972,020 |  |  |  |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Domestic market |  | 8,478,244 |  | 713,445 |  | 151,514 |  | 1,066,756 |  | 228,667 |  | 387,672 |  | (530,657) |  | 10,495,641
Foreign market |  | 2,324,038 |  | 3,772,104 |  |  |  |  |  |  |  |  |  | 304,481 |  | 6,400,623
|  | 10,802,282 |  | 4,485,549 |  | 151,514 |  | 1,066,756 |  | 228,667 |  | 387,672 |  | (226,176) |  | 16,896,264
Cost of sales and services (Note 23) |  | (8,867,820) |  | (2,449,839) |  | (82,585) |  | (729,684) |  | (153,031) |  | (286,316) |  | 497,069 |  | (12,072,206)
Gross profit |  | 1,934,462 |  | 2,035,710 |  | 68,929 |  | 337,072 |  | 75,636 |  | 101,356 |  | 270,893 |  | 4,824,058
General and administrative expenses (Note 23) |  | (616,976) |  | (59,404) |  | (20,482) |  | (95,246) |  | (21,792) |  | (68,195) |  | (625,944) |  | (1,508,039)
Depreciation (Note 10 b) |  | 750,507 |  | 190,019 |  | 6,653 |  | 139,386 |  | 17,238 |  | 26,902 |  | 85,149 |  | 1,215,854
Adjusted EBITDA |  | 2,067,993 |  | 2,166,325 |  | 55,100 |  | 381,212 |  | 71,082 |  | 60,063 |  | (269,902) |  | 4,531,873
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 12/31/2012
|  | Steel |  | Mining |  | Logistics |  |  |  | Energy |  | Cement |  | Corporate expenses/ elimination |  | Consolidated
|  |  |  | Ports |  | Railroads |  |  |  |
Sales by geographic area |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asia |  | 30,495 |  | 2,971,131 |  |  |  |  |  |  |  |  |  | 239,707 |  | 3,241,333
North America |  | 585,505 |  | 16,589 |  |  |  |  |  |  |  |  |  | 3,381 |  | 605,475
Latin America |  | 203,069 |  |  |  |  |  |  |  |  |  |  |  |  |  | 203,069
Europe |  | 1,491,195 |  | 784,384 |  |  |  |  |  |  |  |  |  | 71,268 |  | 2,346,847
Other |  | 13,774 |  |  |  |  |  |  |  |  |  |  |  | (9,875) |  | 3,899
Foreign market |  | 2,324,038 |  | 3,772,104 |  |  |  |  |  |  |  |  |  | 304,481 |  | 6,400,623
Domestic market |  | 8,478,244 |  | 713,445 |  | 151,514 |  | 1,066,756 |  | 228,667 |  | 387,672 |  | (530,657) |  | 10,495,641
TOTAL |  | 10,802,282 |  | 4,485,549 |  | 151,514 |  | 1,066,756 |  | 228,667 |  | 387,672 |  | (226,176) |  | 16,896,264
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 12/31/2011
|  | Steel |  | Mining |  | Logistics |  |  |  | Energy |  | Cement |  | Corporate expenses/ elimination |  | Consolidated
|  |  |  | Ports |  | Railroads |  |  |  |
Profit or loss |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Metric tons (thou.) - (unaudited) (*) |  | 4,895,581 |  | 23,849,514 |  |  |  |  |  |  |  | 1,754,596 |  |  |  |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Domestic market |  | 8,190,463 |  | 834,144 |  | 142,778 |  | 1,022,885 |  | 183,492 |  | 332,950 |  | (564,796) |  | 10,141,916
Foreign market |  | 1,287,274 |  | 5,021,814 |  |  |  |  |  |  |  |  |  | 68,580 |  | 6,377,668
|  | 9,477,737 |  | 5,855,958 |  | 142,778 |  | 1,022,885 |  | 183,492 |  | 332,950 |  | (496,216) |  | 16,519,584
Cost of sales and services (Note 23) |  | (7,038,168) |  | (2,185,149) |  | (85,474) |  | (667,186) |  | (105,497) |  | (268,432) |  | 549,062 |  | (9,800,844)
Gross profit |  | 2,439,569 |  | 3,670,809 |  | 57,304 |  | 355,699 |  | 77,995 |  | 64,518 |  | 52,846 |  | 6,718,740
General and administrative expenses (Note 23) |  | (471,003) |  | (63,967) |  | (18,303) |  | (90,020) |  | (25,408) |  | (67,712) |  | (443,280) |  | (1,179,693)
Depreciation (Note 10 b) |  | 606,810 |  | 161,655 |  | 5,674 |  | 105,454 |  | 22,495 |  | 23,222 |  | 4,058 |  | 929,368
Adjusted EBITDA |  | 2,575,376 |  | 3,768,497 |  | 44,675 |  | 371,133 |  | 75,082 |  | 20,028 |  | (386,376) |  | 6,468,415
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 12/31/2011
|  | Steel |  | Mining |  | Logistics |  |  |  | Energy |  | Cement |  | Corporate expenses/ elimination |  | Consolidated
|  |  |  | Ports |  | Railroads |  |  |  |
Sales by geographic area |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asia |  | 31,255 |  | 4,188,229 |  |  |  |  |  |  |  |  |  | 61,774 |  | 4,281,258
North America |  | 502,486 |  |  |  |  |  |  |  |  |  |  |  |  |  | 502,486
Latin America |  | 147,363 |  |  |  |  |  |  |  |  |  |  |  |  |  | 147,363
Europe |  | 560,880 |  | 833,585 |  |  |  |  |  |  |  |  |  | 24,120 |  | 1,418,585
Other |  | 45,290 |  |  |  |  |  |  |  |  |  |  |  | (17,314) |  | 27,976
Foreign market |  | 1,287,274 |  | 5,021,814 |  |  |  |  |  |  |  |  |  | 68,580 |  | 6,377,668
Domestic market |  | 8,190,463 |  | 834,144 |  | 142,778 |  | 1,022,885 |  | 183,492 |  | 332,950 |  | (564,796) |  | 10,141,916
TOTAL |  | 9,477,737 |  | 5,855,958 |  | 142,778 |  | 1,022,885 |  | 183,492 |  | 332,950 |  | (496,216) |  | 16,519,584

FS-67

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 12/31/2010
|  | Steel |  | Mining |  | Logistics |  |  |  | Energy |  | Cement |  | Corporate expenses/ elimination |  | Consolidated
|  |  |  | Ports |  | Railroad |  |  |  |
Profit or loss |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Metric tons (thou.) - (unaudited) (*) |  | 4,795,851 |  | 18,554,984 |  |  |  |  |  |  |  | 991,789 |  |  |  |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Domestic market |  | 8,763,470 |  | 573,976 |  | 119,315 |  | 838,436 |  | 113,517 |  | 201,841 |  | (363,750) |  | 10,246,805
Foreign market |  | 1,162,539 |  | 3,041,166 |  |  |  |  |  |  |  |  |  |  |  | 4,203,705
Cost of sales and services |  | (6,225,820) |  | (1,252,474) |  | (70,046) |  | (521,747) |  | (41,579) |  | (163,631) |  | 392,571 |  | (7,882,726)
Gross profit |  | 3,700,189 |  | 2,362,668 |  | 49,269 |  | 316,689 |  | 71,938 |  | 38,210 |  | 28,821 |  | 6,567,784
Selling and administrative expenses |  | (443,100) |  | (69,068) |  | (16,590) |  | (70,644) |  | (25,555) |  | (43,119) |  | (350,759) |  | (1,018,835)
Depreciation |  | 519,411 |  | 145,817 |  | 5,577 |  | 102,629 |  | 22,501 |  | 13,648 |  | (3,414) |  | 806,169
Adjusted EBITDA |  | 3,776,500 |  | 2,439,417 |  | 38,256 |  | 348,674 |  | 68,884 |  | 8,739 |  | (325,352) |  | 6,355,118
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 12/31/2010
|  | Steel |  | Mining |  | Logistics |  |  |  | Energy |  | Cement |  | Corporate expenses/ elimination |  | Consolidated
|  |  |  | Ports |  | Railroad |  |  |  |
Sales by geographical area |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asia |  | 40,752 |  | 2,513,499 |  |  |  |  |  |  |  |  |  |  |  | 2,554,251
North America |  | 432,229 |  |  |  |  |  |  |  |  |  |  |  |  |  | 432,229
Latin America |  | 193,692 |  |  |  |  |  |  |  |  |  |  |  |  |  | 193,692
Europe |  | 454,997 |  | 527,667 |  |  |  |  |  |  |  |  |  |  |  | 982,664
Other |  | 40,869 |  |  |  |  |  |  |  |  |  |  |  |  |  | 40,869
Foreign market |  | 1,162,539 |  | 3,041,166 |  |  |  |  |  |  |  |  |  |  |  | 4,203,705
Domestic market |  | 8,763,470 |  | 573,976 |  | 119,315 |  | 838,436 |  | 113,517 |  | 201,841 |  | (363,750) |  | 10,246,805
TOTAL |  | 9,926,009 |  | 3,615,142 |  | 119,315 |  | 838,436 |  | 113,517 |  | 201,841 |  | (363,750) |  | 14,450,510

(*) The ore sales volumes presented in this note take into consideration Company sales and the interest in its subsidiaries and jointly controlled entities (Namisa 60%).

Adjusted EBITDA is the tool based on which the chief operating decision maker measures segment performance and the capacity to generate recurring operating cash, and consists of profit for the year less net finance income (costs), income tax and social contribution, depreciation and amortization, share of profits of investments, and other operating income (expenses). Even though it is an indicator used in segment performance measurements, EBITDA is not a measurement recognized by accounting practices adopted in Brazil or IFRS, does not have a standard definition, and may not be comparable with measurements using similar names provided by other entities. As required by IFRS 8, the table below shows the reconciliation of the measurement used by the chief operating decision maker with the results determined using the accounting practices.

|  | 12/31/2012 |  | 12/31/2011
(Loss)/Profit for the year |  | (480,574) |  | 3,667,234
Depreciation (Note 10 b) |  | 1,215,854 |  | 929,368
Income tax and social contribution (Note 8) |  | (870,134) |  | 83,885
Finance income (Note 25) |  | 1,992,405 |  | 2,005,803
EBITDA |  | 1,857,551 |  | 6,686,290
Other operating income (expenses) (Note 24) |  | 2,673,370 |  | (217,875)
Share of profits of investees |  | 952 |  |
Adjusted EBITDA |  | 4,531,873 |  | 6,468,415

27. EARNINGS (LOSS) PER SHARE (EPS)

Basic earnings (loss) per share:

Basic earnings (loss) per share have been calculated based on the profit attributable to the owners of CSN divided by the weighted average number of common shares outstanding during the year (after the stock split), excluding the common shares purchased and held as treasury shares, as follows:

FS-68

| 12/31/2012 |  | 12/31/2011
| Common shares
Profit (loss) for the year |  |  |
Attributed to owners of the Company | (420,113) |  | 3,706,033
Weighted average number of shares | 1,457,970 |  | 1,457,970
Basic and diluted EPS | (0.28815) |  | 2.54191

28. EMPLOYEE BENEFITS

The pension plans granted by the Company cover substantially all employees. The plans are administered by Caixa Beneficente dos Empregados da CSN (‘CBS”), which is a private non-profit pension fund established in July 1960. The members of CBS are employees—and former employees—of the Company and some subsidiaries that joined the fund through an agreement, and the employees of CBS itself. The Executive Officers of CBS is comprised of a CEO and two other executive officers, all appointed by CSN, which is the main sponsor of CBS. The Decision-Making Board is the higher decision-making and guideline-setting body of CBS, presided over by the president of the pension fund and made up of ten members, six chosen by CSN in its capacity as main sponsor of CBS and four elected by the fund’s participants.

Until December 1995, CBS Previdência administered two defined benefit plans based on years of service, salary and Social Security benefits. On December 27, 1995 the then Private Pension Secretariat (“SPC”) approved the implementation of a new benefit plan, effective beginning that date, called Mixed Supplementary Benefit Plan (‘Mixed Plan”), structured in the form of a variable contribution plan. Employees hired after that date were only entitled to join the new Mixed Plan. In addition, all active employees who were participants of the old defined benefit plans had the opportunity to switch to the new Mixed Plan.

As of December 31, 2012 CBS had 33,037 participants (31,482 as of December 31, 2011), of whom 18,262 were active contributors (16,603 as of December 31, 2011), 9,587 were retired employees (9,705 as of December 31, 2011), and 5,188 were related beneficiaries (5,174 as of December 31, 2011). Out of the total participants as of December 31, 2012, 13,726 belonged to the defined benefit plan, 18,150 to the mixed plan, and 1,481 to the CBSPrev Namisa plan.

The plan assets of CBS are primarily invested in repurchase agreements (backed by federal government bonds), federal securities indexed to inflation, shares, loans and real estate. As of December 31, 2012, CBS held 12,788,231 common shares of CSN (12,788,231 common shares as of December 31, 2011). The total plan assets of the entity amounted to R$4.3 billion as of December 31, 2012 (R$3.8 billion as of December 31, 2011). The administrators of the CBS funds seek to match plan assets with benefit obligations payable on a long-term basis. Pension funds in Brazil are subject to certain restrictions regarding their capacity for investment in foreign assets and, therefore, these funds invest mainly in Brazilian securities.

Plan Assets are all available assets and the benefit plans’ investments, not including the amounts of debts to sponsors.

a. Description of the pension plans

Plan covering 35% of average salary

This plan began on February 1, 1966 and is a defined benefit plan aimed at paying pensions (for length of service, special situations, disability or old age) on a lifetime basis, equivalent to 35% of the adjusted average of the participant’s salary for the last 12 months. The plan also guarantees sick pay to participants on Official Social Security leaves of absence and further ensures payments of savings fund, funeral allowance and pecuniary aid. This plan was discontinued on October 31, 1977 when the new supplementary plan based on average salary took effect.

Supplementary average salary plan

This plan began on November 1, 1977 and is a defined benefit plan, aimed at complementing the difference between the adjusted average of the participant’s salary for the last 12 months and the Official Social Security benefit for retirement, also on a lifetime basis. As in the 35% plan, there is coverage for the benefits of sick pay, death and pension. This plan was discontinued on December 26, 1995 with the creation of the mixed supplementary benefit plan.

FS-69

Mixed supplementary benefit plan

This plan began on December 27, 1995 and is a variable contribution plan. Besides the scheduled retirement benefit, it also covers the payment of risk benefits (pension paid while the participant is still working, disability compensation and sick/accident pay). Under this plan, the retirement benefit is calculated based on the amount accumulated by the monthly contributions of the participants and sponsors, as well as on each participant’s option for the manner in which they receive them, which can be lifetime (with or without continuity of pension for death) or through a percentage applied to the balance of the fund generating the benefit (loss for indefinite period). After retirement is granted, the plan takes on the characteristics of a defined benefit plan.

CBSPrev Namisa plan

This plan began on January 6, 2012 and is a defined contribution plan, with a small portion of defined benefit. Besides the scheduled retirement benefit, it also covers the payment of risk benefits (pension paid while the participant is still working, disability compensation and sick/accident pay). Under this plan, the retirement benefit is determined based on the accumulated amount by monthly contributions of participants and sponsors. To receive the benefit, each participant can opt for: (a) a percentage of up to 25% in a bullet payment and the remaining balance through a monthly income through a percentage applied to the fund generating the benefit, or (b) receive only a monthly income through a percentage applied to the fund generating the benefit.

b. Investment policy

The investment policy establishes the principles and guidelines that will govern the investments of funds entrusted to the entity, in order to foster the security, liquidity and profitability required to ensure equilibrium between the plan’s assets and liabilities, based on an ALM (Asset Liability Management) study that takes into consideration the benefits of participants and beneficiaries for each plan.

The investment plan is reviewed annually and approved by the Decision-Making Board considering a 5-year horizon, as established by resolution CGPC 7 of December 4, 2003. The investment limits and criteria established in the policy are based on Resolution 3,792/09 published by the National Monetary Council (“CMN”).

c. Employee benefits

The actuarial calculations are updated at the end of each annual reporting period by outside actuaries and presented in the financial statements pursuant to IAS 19 Employee Benefits.

| 12/31/2012 |  | 12/31/2012 |  | 12/31/2011
| Actuarial asset (*) |  | Actuarial liability
Pension plan benefits | 93,546 |  | 17,939 |  | 11,673
Post-employment healthcare benefits |  |  | 547,652 |  | 457,377
| 93,546 |  | 565,591 |  | 469,050

(*) Beginning 2012, t he Company decided to recognize in its balance sheet the asset and the balancing items thereto resulting from the actuarial valuation of surplus plans, in accordance with paragraph 59 of IAS 19 Employee Benefits.

FS-70

The reconciliation of employee benefits’ assets and liabilities is as follows:

| 12/31/2012 |  | 12/31/2011
Present value of defined benefit obligations | 2,666,261 |  | 2,153,649
Fair value of plan assets | (2,923,483) |  | (2,384,450)
(surplus) | (257,222) |  | (230,801)
Restriction to actuarial assets due to recovery limitation | 181,615 |  | 174,926
(assets), net | (75,607) |  | (55,875)
Liabilities | 17,939 |  | 11,673
Assets | (93,546) |  | (67,548)
Net (assets)/liabilities recognized in the balance sheet | (75,607) |  | 11,673

Changes in the present value of defined benefit obligation during 2012 are as follows:

| 12/31/2012 |  | 12/31/2011
Present value of obligations at the beginning of the year | 2,153,649 |  | 1,982,556
Cost of services | 5,801 |  | 5,579
Interest cost | 215,850 |  | 202,242
Benefits paid | (193,563) |  | (178,402)
Actuarial loss | 484,524 |  | 141,674
Present value of obligations at the end of the year | 2,666,261 |  | 2,153,649

Changes in the fair values of plan assets during 2012 are as follows:

| 12/31/2012 |  | 12/31/2011
Fair value of assets at the beginning of the year | (2,384,450) |  | (2,316,018)
Expected return on plan assets | (272,406) |  | (260,163)
Sponsors' contributions | (3,797) |  | (67,709)
Participants' contributions |  |  |
Benefits paid | 193,563 |  | 178,402
Actuarial (losses)/gains | (456,393) |  | 81,038
Fair value of assets at the end of the year | (2,923,483) |  | (2,384,450)

The amounts recognized in the income statement for the year ended December 31, 2012 are comprised as follows:

| 12/31/2012 |  | 12/31/2011
Cost of current services | 5,801 |  | 5,579
Interest cost | 215,850 |  | 202,242
Expected return on plan assets | (272,406) |  | (260,163)
Sponsors' contributions transferred in prior year | (3,797) |  | (67,709)
| (54,552) |  | (120,051)
Total unrecognized (income) (*) | (37,477) |  | (16,374)
Total (income) recognized in the income statement | (17,075) |  | (103,677)
Total costs (revenue), net | (54,552) |  | (120,051)

(*) Effect of the limit of paragraph 58 (b) of IAS 19 Employee Benefits.

The (cost)/income is recognized in the income statement in other operating expenses.

Changes in actuarial gains and losses in 2012 are as follows:

FS-71

| 12/31/2012 |  | 12/31/2011
Actuarial losses | 28,131 |  | 222,712
Restriction due to recovery limitation | 6,688 |  | (105,655)
| 34,819 |  | 117,057
Actuarial (gains) and losses recognized in other comprehensive income | (2,657) |  | 28,048
Unrecognized actuarial losses (*) | 37,476 |  | 89,009
Total cost of actuarial (gains) and losses | 34,819 |  | 117,057

(*) The actuarial loss results from the fluctuation in the investments that form CBS’s asset portfolio.

The history of actuarial gains and losses is as follows:

| 12/31/2012 |  | 12/31/2011 |  | 12/31/2010 |  | 12/31/2009 |  | 01/01/2009
Present value of defined benefit obligations | 2,666,261 |  | 2,153,649 |  | 1,982,556 |  | 1,731,767 |  | (1,415,029)
Fair value of plan assets | (2,923,483) |  | (2,384,450) |  | (2,316,018) |  | (2,160,158) |  | 1,396,350
(surplus) | (257,222) |  | (230,801) |  | (333,462) |  | (428,391) |  | (18,679)
Experience adjustments to plan obligations | 484,524 |  | 141,674 |  | 225,341 |  | 287,146 |  |
Experience adjustments to plan assets | 456,393 |  | (81,038) |  | 40,669 |  | 664,341 |  |

The main actuarial assumptions used were as follows:

| 12/31/2012 |  | 12/31/2011
Actuarial financing method | Projected unit credit |  | Projected unit credit
Functional currency | Real (R$) |  | Real (R$)
Recognition of plan assets | Fair value |  | Fair value
Amount used as estimate of equity at the end of the year | Best estimate for equity at the end of the fiscal year, obtained based on a projection of October amounts recorded |  | Best estimate for equity at the end of the fiscal year, obtained based on a projection of October amounts recorded
Nominal discount rate | 9.31% |  | 10.46%
Inflation rate | 5.00% |  | 4.60%
Nominal salary increase rate | 6.05% |  | 5.65%
Nominal benefit increase rate | 5.00% |  | 4.60%
Rate of return on investments (*) | 9.31% |  | 11,52% - 12,24%
General mortality table | AT 2000 segregated by gender |  | AT 2000 segregated by gender
Disability table | Mercer Disability with probabilities multiplied by 2 |  | Mercer Disability with probabilities multiplied by 2
Disability mortality table | Winklevoss - 1% |  | Winklevoss - 1%
Turnover table | Millennium plan 3% p.a., nil for DB plans |  | Millennium plan 2% p.a., nil for DB plans
Retirement age | 100% on first date he/shed becomes eligible for programmed retirement benefit under plan |  | 100% on first date he/shed becomes eligible for programmed retirement benefit under plan
Household of active participants | 95% will be married at the time of retirement, with the wife being 4 years younger than the husband |  | 95% will be married at the time of retirement, with the wife being 4 years younger than the husband

The assumptions related to the mortality table are based on published statistics and mortality tables. These tables represent an average life expectancy in years of employees retiring at the age of 65, as shown below:

| 12/31/2012 |  | 12/31/2011
Longevity at age of 65 for current participants |  |  |
Male | 19.55 |  | 19.55
Female | 22.17 |  | 22.17
Longevity at age of 65 for current participants who are 40 |  |  |
Male | 19.55 |  | 19.55
Female | 22.17 |  | 22.17

FS-72

Allocation of plan assets:

|  |  | 12/31/2012 |  |  |  | 12/31/2011
Variable income | 110,668 |  | 3.79% |  | 360,958 |  | 15.14%
Fixed income | 2,631,187 |  | 90.00% |  | 1,756,831 |  | 73.68%
Real estate | 118,739 |  | 4.06% |  | 190,756 |  | 8.00%
Other | 62,889 |  | 2.15% |  | 75,905 |  | 3.18%
Total | 2,923,483 |  | 100.00% |  | 2,384,450 |  | 100.00%

The actual return on plan assets was R$728,800 as of December 31, 2012 (R$179,126 as of December 31, 2011).

Variable-income assets comprise mainly CSN shares.

Fixed-income assets comprise mostly debentures, Certificates of Interbank Deposit (“CDI”) and National Treasury Notes (“NTN-B”).

Real estate refers to buildings appraised by a specialized asset appraisal firm. There are no assets in use by CSN and its subsidiaries.

For the defined benefit plans, the expense as of December 31, 2012 was R$5,256 (R$67,276 as of December 31, 2011).

For the mixed plan, which has defined contribution components, the expense as of December 31, 2012 was R$31,657 (R$29,487 as of December 31, 2011).

For the defined contribution plan CBSPrev Namisa, the expense in 2012 was R$1,466.

d. Expected contributions

Expected contributions of R$3,291 will be paid to defined benefits plans in 2013.

For the mixed supplementary benefit plan, which includes defined contribution components, expected contributions of R$27,980 will be paid in 2013.

e. Post-employment health care plan

Refer to a healthcare plan created on December 1, 1996 exclusively for retired former employees, pensioners, those who received an amnesty, war veterans, widows of employees who died as a result of on-the-job accidents and former employees who retired on or before March 20, 1997 and their related dependents. The plan is sponsored by CSN and administered by Caixa Beneficente dos Empregados da Cia. Siderúrgica Nacional – CBS.

The amounts recognized in the balance sheet were determined as follows:

| 12/31/2012 |  | 12/31/2011
Present value of obligations | 547,652 |  | 457,377
Liabilities | 547,652 |  | 457,377

FS-73

The reconciliation of liabilities for healthcare benefits is as follows:

| 12/31/2012 |  | 12/31/2011
Actuarial liabilities at the beginning of the year | 457,377 |  | 367,839
Interest on actuarial obligation | 45,967 |  | 39,616
Sponsors' contributions transferred in prior year | (32,874) |  | (34,653)
Recognition of loss for the year | 77,182 |  | 84,575
Actuarial liabilities at the end of the year | 547,652 |  | 457,377

For the post-employment healthcare benefit plan, the expense as of December 31, 2012 was R$51,234 (R$42,306 as of December 31, 2011).

The actuarial gains and losses recognized in shareholders' equity are as follows:

| 12/31/2012 |  | 12/31/2011
Actuarial loss on obligation | 77,182 |  | 84,575
Loss recognized in shareholders' equity | 77,182 |  | 84,575

The history of actuarial gains and losses is as follows:

| 12/31/2012 |  | 12/31/2011 |  | 12/31/2010 |  | 12/31/2009 |  | 01/01/2009
Present value of defined benefit obligation | 547,652 |  | 457,377 |  | 367,839 |  | 317,145 |  | (296,608)
Deficit/(surplus) | 547,652 |  | 457,377 |  | 367,839 |  | 317,145 |  | (296,608)
Experience adjustments to plan obligations | 77,182 |  | 84,575 |  | 48,301 |  | 17,232 |  | 9,023

The impact on a one-percent change in the assumed trend rate of the healthcare cost is as follows:

| 12/31/2012 |  | 12/31/2011
| Increase |  | Decrease |  | Increase |  | Decrease
Effect on total cost of current service and finance cost |  |  |  |  |  |  |
Effect on defined benefit obligation | 54,292 |  | (46,668) |  | 42,032 |  | (35,916)

The actuarial assumptions used for calculating postemployment healthcare benefits were:

| 12/31/2012 |  | 12/31/2011
Biometrics |  |  |
General mortality table | AT 2000 segregated by gender |  | AT 2000 segregated by gender
Turnover | n/a |  | n/a
Household | Actual household |  | Actual household
Financial | 12/31/2011 |  | 12/31/2011
Actuarial nominal discount rate | 9.31% |  | 10.46%
Inflation | 5.00% |  | 4.60%
Nominal increase in medical cost based on age | 5,53% - 8,15% |  | 9.41%
Nominal medical costs growth rate | 8.15% |  | 7.02%
Average medical cost | 345.61 |  | 299.69

FS-74

29. GUARANTEES

The Company is liable for guarantees for its subsidiaries and jointly controlled entities, as follows:

| Currency |  | Maturities |  | Loans |  | Tax foreclosure |  | Other |  | Total
|  |  |  |  | 12/31/2012 |  | 12/31/2011 |  | 12/31/2012 |  | 12/31/2011 |  | 12/31/2012 |  | 12/31/2011 |  | 12/31/2012 |  | 12/31/2011
Transnordestina | R$ |  | Up to 5/8/2028 and indefinite |  | 1,626,509 |  | 1,358,657 |  | 1,800 |  | 1,800 |  | 4,866 |  | 7,686 |  | 1,633,175 |  | 1,368,143
CSN Cimentos | R$ |  | Up to 11/18/2014 and indefinite |  |  |  |  |  | 25,403 |  | 30,213 |  | 42,397 |  | 30,097 |  | 67,800 |  | 60,310
Prada | R$ |  | Up to 2/7/2014 and indefinite |  |  |  |  |  | 10,133 |  | 9,958 |  | 21,616 |  | 2,440 |  | 31,749 |  | 12,398
Sepetiba Tecon | R$ |  |  |  |  |  | 700 |  |  |  |  |  |  |  |  |  |  |  | 700
Itá Energética | R$ |  | 9/15/2013 |  | 7,326 |  | 7,326 |  |  |  |  |  |  |  |  |  | 7,326 |  | 7,326
CSN Energia | R$ |  | Up to 12/30/2012 and indefinite |  |  |  |  |  | 4,192 |  | 2,392 |  |  |  | 2,336 |  | 4,192 |  | 4,728
Congonhas Minérios | R$ |  | 5/21/2018 |  | 2,000,000 |  | 2,000,000 |  |  |  |  |  |  |  |  |  | 2,000,000 |  | 2,000,000
Fundação CSN | R$ |  | Indefinite |  | 1,003 |  |  |  |  |  |  |  |  |  |  |  | 1,003 |  |
Total in R$ |  |  |  |  | 3,634,838 |  | 3,366,683 |  | 41,528 |  | 44,363 |  | 68,879 |  | 42,559 |  | 3,745,245 |  | 3,453,605
CSN Islands VIII | US$ |  | 12/16/2013 |  | 550,000 |  | 550,000 |  |  |  |  |  |  |  |  |  | 550,000 |  | 550,000
CSN Islands IX | US$ |  | 1/15/2015 |  | 400,000 |  | 400,000 |  |  |  |  |  |  |  |  |  | 400,000 |  | 400,000
CSN Islands XI | US$ |  | 9/21/2019 |  | 750,000 |  | 750,000 |  |  |  |  |  |  |  |  |  | 750,000 |  | 750,000
CSN Islands XII | US$ |  | Perpetual |  | 1,000,000 |  | 1,000,000 |  |  |  |  |  |  |  |  |  | 1,000,000 |  | 1,000,000
CSN Resources | US$ |  | 7/21/2020 |  | 1,200,000 |  | 1,000,000 |  |  |  |  |  |  |  |  |  | 1,200,000 |  | 1,000,000
Total in US$ |  |  |  |  | 3,900,000 |  | 3,700,000 |  |  |  |  |  |  |  |  |  | 3,900,000 |  | 3,700,000
CSN Steel S.L. | EUR |  | 1/31/2020 |  | 120,000 |  |  |  |  |  |  |  |  |  |  |  | 120,000 |  |
Total in EUR |  |  |  |  | 120,000 |  |  |  |  |  |  |  |  |  |  |  | 120,000 |  |
Total in R$ |  |  |  |  | 8,218,991 |  | 6,940,460 |  |  |  |  |  |  |  |  |  | 8,218,991 |  | 6,940,460
|  |  |  |  | 11,853,829 |  | 10,307,143 |  | 41,528 |  | 44,363 |  | 68,879 |  | 42,559 |  | 11,964,236 |  | 10,394,065

FS-75

30. COMMITMENTS

a. Take-or-pay contracts

As of December 31, 2012 and 2011, the Company was a party to take-or-pay contracts as shown in the following table:

|  |  |  |  | Payments in the period |  |  |  |  |  |  |  |  |  |
Counterparty | Type of service |  | Agreement terms and conditions |  | 2011 |  | 2012 |  | 2013 |  | 2014 |  | 2015 |  | After 2015 |  | Total
MRS Logística | Iron ore transportation. |  | Contractual clause providing for guaranteed revenue on railway freight. In the case of CSN, this means a minimum payment of 80% of freight estimate. |  | 153,870 |  | 142,190 |  | 131,271 |  | 131,271 |  | 131,271 |  | 65,635 |  | 459,448
MRS Logística | Steel products transportation. |  | Transportation of at least 80% of annual volume agreed with MRS. |  | 17,606 |  | 68,248 |  | 58,762 |  | 58,762 |  | 58,762 |  | 24,484 |  | 200,770
(*) MRS Logística | Iron ore, coke and coal transportation. |  | Transportation of 8,280,000 metric tons per year of iron ore and 3,600,000 metric tons per year of coal, coke and other reducing agents. |  | 41,463 |  | 23,334 |  |  |  |  |  |  |  |  |  |
FCA | Mining products transportation. |  | Transportation of at least 1,900,000 metric tons per year. |  | 1,324 |  | 734 |  | 69,817 |  |  |  |  |  |  |  | 69,817
FCA | FCA railway transportation of clinker to CSN Cimentos. |  | Transportation of at least 675,000 metric tons per year of clinker in 2011 and 738,000 metric tons per year of clinker starting 2012. |  | 1,648 |  | 2,733 |  | 27,300 |  | 27,300 |  | 27,300 |  | 118,301 |  | 200,201
(*) ALL | Railway transportation of steel products. |  | Rail transportation of at least, 20,000 metric tons of steel products monthly, which can vary 10% up or down, originated at the Água Branca Terminal in São Paulo for CSN PR in Araucária, State of Paraná. |  | 14,774 |  | 11,894 |  |  |  |  |  |  |  |  |  |
White Martins | Supply of gas (oxygen, nitrogen and argon). |  | CSN undertakers to buy at least 90% of the annual volume of gas contracted with White Martins. |  | 102,274 |  | 110,999 |  | 110,113 |  | 110,113 |  | 110,113 |  | 110,113 |  | 440,452
(*) CEG Rio | Supply of natural gas. |  | CSN undertakes to buy at least 70% of the monthly natural gas volume. |  | 432,449 |  | 441,804 |  |  |  |  |  |  |  |  |  |
Vale S.A | Supply of iron ore pellets. |  | CSN undertakes to buy at least 90% of the volume of iron ore pellets secured by contract. The take-or-pay volume is determined every 18 months. |  | 349,797 |  | 444,642 |  | 132,302 |  | 88,201 |  |  |  |  |  | 220,503
Compagás | Supply of natural gas. |  | CSN undertakes to buy at least 80% of the monthly natural gas volume contracted with Compagás. |  | 16,884 |  | 18,874 |  | 15,058 |  | 15,058 |  | 15,058 |  | 135,522 |  | 180,696
COPEL | Power supply. |  | CSN undertakers to buy at least 80% of the annual energy volume contracted with COPEL. |  | 13,378 |  | 15,202 |  | 7,487 |  | 7,487 |  | 7,487 |  | 39,934 |  | 62,395
K&K Tecnologia | Processing of blast furnace sludge generated during pig iron production. |  | CSN undertakes to supply at least 3,000 metric tons per month of blast furnace sludge for processing at K&K sludge concentration plant. |  | 6,186 |  | 7,585 |  | 7,074 |  | 7,074 |  | 7,074 |  | 51,285 |  | 72,507
Harsco Metals | Processing of slag generated during pig iron and steel production. |  | Harsco Metals undertakes to process metal products and slag crushing byproducts resulting from CSN’s pig iron and steel manufacturing process, receiving for this processing the amount corresponding to the product of the multiplication of unit price (R$/t) by total production of liquid steel from CSN steel mill, ensuring a minimum production of liquid steel of 400,000 metric tons. |  | 39,739 |  | 40,506 |  | 30,000 |  | 15,000 |  |  |  |  |  | 45,000
Siemens | Manufacturing, repair, recovery and production of ingot casting machine units. |  | Siemens undertakes to manufacture, repair, recover and produce, in whole or in part, ingot casting machine units to provide the necessary off-line and on-line maintenance of continuous ingot casting machine assemblies of the Presidente Vargas plant (UPV). Payment is set at R$/t of produced steel plates. |  | 38,817 |  | 46,424 |  | 19,622 |  |  |  |  |  |  |  | 19,622
(*) in renegotiation phase. |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | 1,230,209 |  | 1,375,169 |  | 608,806 |  | 460,266 |  | 357,065 |  | 545,274 |  | 1,971,411

b. Concession agreements

Minimum future payments related to government concessions as of December 31, 2012 fall due according to the schedule set out in the following table:

Company |  |  |  |
Concession |  | Type of service |  | 2013 |  | 2014 |  | 2015 |  | After 2015 |  | Total
MRS |  | 30-year concession, renewable for another 30 years, to provide iron ore railway transportation services from the Casa de Pedra mines, in Minas Gerais, coke and coal from the Itaguaí Port, in Rio de Janeiro, to Volta Redonda, transportation of export goods to the Itaguaí and Rio de Janeiro Ports, and shipping of finished goods to the domestic market. |  | 86,322 |  | 86,322 |  | 86,322 |  | 884,804 |  | 1,143,770
Transnordestina |  | 30-year concession granted on December 31, 1997, renewable for another 30 years for the development of public utility to operate the Northeastern railway system. This railway system covers 4,238 kilometers of railroads in the states of Maranhão, Piauí, Ceará, Paraíba, Pernambuco, Alagoas and Rio Grande do Norte. |  | 7,011 |  | 7,011 |  | 7,011 |  | 80,039 |  | 101,072
Tecar |  | Concession to operate TECAR, a solid bulk terminal, one of the four terminals that comprise the Itaguaí Port, in Rio de Janeiro, for a period ending 2022 and renewable for another 25 years. |  | 117,913 |  | 125,922 |  | 125,922 |  | 881,455 |  | 1,251,212
Tecon |  | 25-year concession granted in July 2001, renewable for another 25 years, to operate the container terminal at the Itaguaí Port. |  | 23,838 |  | 23,838 |  | 23,838 |  | 238,384 |  | 309,898
|  |  |  | 235,084 |  | 243,093 |  | 243,093 |  | 2,084,682 |  | 2,805,952

FS-76

c. Projects and other commitments

· Steel – Flat and long steel

CSN intends to produce 500,000 metric tons per year of long steel products, with an estimate of 400,000 t/year of rebar and 100,000 t/year of wire rod. The facilities will use scrap and pig iron as their main raw materials. In addition to this plant, CSN is assessing the option of implementing in Brazil other similar projects, also with 500,000 t/year capacity each.

· Iron ore project

CSN projects producing 89 mtpa of iron ore products, including 50 mtpa at Casa de Pedra and 39 mtpa at Namisa. In addition, a CSN is inventing in the expansion of the Itaguaí seaport, or TECAR, for a capacity of 84 mtpa.

Coal and coke imports are made using the TECAR terminal, whose concession agreement is 25 years, extendable for another 25 years.

Upon concession termination, all rights and privileges transferred to Tecon will be handed back to CDRJ (Companhia Docas do Rio de Janeiro), together with the assets owned by CSN and those resulting from investments made by CSN in leased assets, declared as returnable assets by CDRJ as they are necessary to the continuity of the related services. Any assets declared as returnable assets will be compensated by CDRJ at their residual value, less related depreciation/amortization.

· Nova Transnordestina project

The Nova Transnordestina project includes building 1,728 km in new, next-generation, wide-gauge tracks. The Company expects that the investments will permit Transnordestina Logística S.A. to boost the transportation of several products, such as iron ore, limestone, soy, cotton, sugarcane, fertilizers, oil, and fuel. The investments are being financed by means of several agencies, such as the Northeast Investment Fund (FINOR), the Northeast Development Authority (SUDENE) and the BNDES. Transnordestina has already obtained the required environmental permits, purchased part of the equipment, contracted some of the services, and in certain regions the project is at an advanced implementation stage.

The Company is the guarantor of BNDES loans for the Transnordestina project, which as of December 31, 2012 total R$410,675 (R$392,874 as of December 31, 2011). These loans are being used to finance the investments in Transnordestina’s infrastructure. The maximum amount of future payments that can be required from the guarantor under the guarantee is R$410,675.

· CSN’s Logistic Platform Project in Itaguaí

Under the terms of the concession agreement, CSN is responsible for unloading at least 3.0 million per year of coal and coke from CSN’s suppliers through the terminal, as well as handling ore shipments. Among the approved investments announced by CSN, we highlight the development and expansion of the solid bulk terminal at Itaguaí so that it can also handle up to 84 million metric tons of iron ore per year.

· Long-term agreements with Namisa

The Company has signed long-term agreements with Namisa for the provision of port operation services and supplies of run-of-mine (ROM) iron ore from the Casa de Pedra mine, as described below:

i. Port operation service agreement

On December 30, 2008, CSN entered into an agreement for the provision of port services to Namisa for a 34-year period, consisting of receiving, handling, storing and shipping Namisa’s iron ore in annual volumes that range from 18.0 to 39.0 million metric tons. CSN has received the amount of approximately R$5.3 billion as an advance for part of the payments due for the services to be provided under this agreement. The amounts charged for these port services are reviewed on a quarterly basis and adjusted considering the changes in the market price for iron ore.

FS-77

ii. High silicon ROM

On December 30, 2008, CSN also entered into an agreement for the supply of high silicon ROM ore to Namisa for a period of 30 years in volumes that range from 42 to 54 million metric tons per year. CSN has received approximately R$1.6 billion as an advance for part of the payments due for the supplies made under this agreement. The supply price is reviewed on a quarterly basis and adjusted considering the changes in the market price for iron ore.

iii. Low silicon ROM

On December 30, 2008, CSN entered into an agreement for the supply of low silicon ROM ore to Namisa for a period of 35 years in volumes that range from 2.8 to 5.04 million metric tons per year. CSN has received approximately R$424 billion as an advance for part of the payments due for the supplies made under this agreement. The supply price is reviewed on a quarterly basis and adjusted considering the changes in the market price for iron ore.

31. INSURANCE

Aiming to properly mitigate risk and in view of the nature of its operations, the Company and its subsidiaries have taken out several different types of insurance policies. Such policies are contracted in line with the CSN Risk Management policy and are similar to the insurance taken out by other companies operating in the same lines of business as CSN and its subsidiaries. The risks covered under such policies include the following: Domestic Transportation, International Transportation, Carrier’s Civil Liability, Life and Casualty, Health Coverage, Fleet Vehicles, D&O (Civil Liability Insurance for Directors and Officers), General Civil Liability, Engineering Risks, Sundry Risks, Export Credit, Performance Bond and Port Operator’s Civil Liability.

In 2012, after negotiation with insurers and reinsurers in Brazil and abroad, an Insurance Issue Certificate was issued for the contracting of a policy of Operational Risk of Property Damages and Loss of Profits, with effect from June 30, 2012 to June 30, 2013. Under the insurance policy, the LMI (Maximum Limit of Indemnity) is US$500,000,000 and covers the following units and subsidiaries of the Company: Usina Presidente Vargas, Mineração Casa de Pedra, Mineração Arcos, CSN Paraná, CSN Porto Real, Terminal de Cargas Tecar, Terminal Tecon, Namisa and CSN Cimentos.

CSN takes responsibility for a range of retention of US$300,000,000 in excess of the deductibles for property damages and loss of profits.

In view of their nature, the risk assumptions adopted are not part of the scope of an audit of the financial statements and, accordingly, were not examined by our independent auditors.

32. ADDITIONAL INFORMATION TO CASH FLOWS

| 12/31/2012 |  | 12/31/2011
Deferred income tax and social contribution paid | 165,304 |  | 165,321
Addition to PP&E with interest capitalization | 409,498 |  | 353,156
| 574,802 |  | 518,477

33. SUBSEQUENT EVENTS

· CADE approval of merger on acquisition of Companhia Brasileira de Latas by Companhia Metalúrgica Prada

On February 20,2013, the merger on the acquisition of control, of Companhia Brasileira de Latas (“CBL”) by the Companhia Metalúrgica Prada (“PRADA”) was approved by the Conselho Administrativo de Defesa Econômica (“CADE”).

· Export Credit Loans issue

The Company issued In the first quarter of 2013 Export Credit Loans totaling R$345,000.

FS-78