| Financial Terms and Expressions |

This guide is intended to assist in the understanding of financial statements. It is neither an offer to sell, nor a solicitation of an offer to buy, any securities of CSN or any other company. We recommend that you seek expert financial advice before making investment decisions.

The financial analyst who evaluates a company attempts to make a reliable investment recommendation to investors based on a company´s financial statements and other publicly available information. In addition to calculating and analyzing financial ratios, the analyst will identify and analyze a company´s strengths and weakness as well as trends and performance in the company´s business and economic environment.

Below is a description of many of the commonly used terms and financial ratios that may be used by the financial analyst in his/her report on a Brazilian company.

Financial Statements

•  BR GAAP: Generally Accepted Accounting Principles in Brazil , also referred to as Brazilian Corporate Law ("Legislação Societária").

•  US GAAP: Generally Accepted Accounting Principles in the United States of America .

•  Parent Company: The company that owns or controls subsidiaries through the ownership of stock.

•  Consolidated Financial Statements: The consolidated financial statements detail the financial situation of a parent company, its subsidiaries and affiliated companies (only those in which the company has a controlling stake or the power to influence management´s decisions).

•  Notes to Financial Statements: Include important and relevant information on items detailed in the financial statements and should be read in conjunction with them for a better understanding of the numbers presented therein.

•  Auditors Report: The auditors´ report is a declaration signed by an independent public accountant describing the scope of the examination of a company´s books and records. The accountant will issue an opinion on the financial statements which may be unqualified (fairly states the company´s financial condition) or qualified (stating certain conditions) which states an auditor´s unbiased opinion of the Company´s financial statements. The auditor´s report is usually produced annually after the close of the company´s fiscal year, but may be produced quarterly. In the latter case, the report is called an interim report or special review due to its limited scope of examination. In Brazil all companies are required to provide an annual auditor´s report. Some companies, in addition to the annual report, must also provide a quarterly auditor´s report.

•  Net income / profit / earnings: These terms are used interchangeably in this guide to refer to the net result of all revenues after deducting all costs and expenses during a period.

•  Income Statement : The income statement is a summary of the revenues, costs and expenses of a company during an accounting period. It shows how much revenue a company brings into the business by providing goods or services to its customers. It also shows the related costs and expenses during that period. Analysts use this statement to examine a company`s profitability.

•  Balance Sheet : The balance sheet is a summary of the financial condition of a company at a point in time and is comprised of assets, liabilities and Stockholders Equity. The analyst uses the balance sheet to examine a company`s liquidity and debt, among other things.

•  Statement of Cash Flows: This financial statement measures the flow of cash into and out of a company, capturing both the current operating results and the corresponding changes in the balance sheet during a period of time. Analysts use this statement to determine how a company generates and manages its cash, looking closely at the cash from operating activities. Also called Cash Flow Statement or Funds Flow Statement.

•  Value Added : This statement indicates how much value the Company adds to its stakeholders during a given period. It includes additional information about operations and factors that have contributed to the generation of a company´s wealth.

•  Stakeholders : are shareholders, employees, suppliers, customers and the companies community in general.

Income Statements

•  Gross Revenues: Represent the sales made during a determined period before customers discounts, returns or allowances, or other adjustments.

•  Net Revenues: Gross sales less returns and allowances, cash discounts allowed, and taxes.

•  Gross Profit: Net revenues less the cost of goods sold.

•  SG&A: Sales, general and administrative expenses. Such expenses include typically salaries of sales and administrative persons, advertising, communications, freight and others.

•  Operating Income: Gross profit less SG&A expenses

•  Equity Results: This account reflects the results of subsidiaries and affiliated companies.

•  Financial Income / Expenses: This account includes interest income and expenses as well as commissions related to financial transactions.

•  Monetary and Exchange Variation: reflects the difference between the value of assets and liabilities, denominated in a foreign currency, in the local currency, during that period.

•  Income Taxes: Reflects income tax and social contribution expenses.

•  et Income (Loss): This figure is often called the "bottom line", as it is the last line of the income statement. It represents the profit remaining after all costs and expenses (including taxes) are deducted from total revenues for a given period.

•  Earnings per share: The net income divided by the number of shares outstanding. It is the amount that a shareholder would receive if the company distributed all the net income (earnings) of the period to its shareholders.

•  EBITDA: Earnings before interest, taxes, depreciation and amortization. This figure is used by analysts to approximate a company´s operating cash flow.

Balance Sheet

•  Assets: Represent a company´s resources that are used to generate revenues. Assets can be either physical (cash, inventories, property and equipment) or intangible (goodwill, trademark, patents).

•  Liabilities: Represent a company´s obligations. Liabilities typically include money owed to banks, creditors and suppliers, taxes to the government and others.

•  Shareholders Equity: Represents the shareholders´ investment in a company through capital contributions or reinvested earnings. Stockholders Equity is equal to total assets less total liabilities.

•  Dividends and Interest on Shareholder`s Equity : Represent a payment (cash outflow) to shareholders from Retained Earnings.

•  Changes in Shareholder`s Equity: This statement shows the changes in the accounts of stockholder`s equity for a given period.

•  Withholding Income Tax: Income taxes credits.

•  Deferred Income Tax: Income taxes payable at a later date.

•  Provision for losses on investments : Represents a reserve for expected losses on affiliated or in subsidiaries.

•  Retained Earnings: Retained earnings represent profit that has been "retained" for use in the company after dividends have been paid. Retained earnings are part of Shareholders Equity

•  Revaluation Reserve: This amount is part of Shareholder´s Equity and reflects the difference between the value of a fixed asset on the Balance Sheet and its estimated market value. The latter is determined by independent appraisers.

•  Revenue Reserve : This amount includes reserve and investment reserve.

•  Legal Reserve: This reserve account in Shareholders Equity is constituted by 5% of each period´s net income, as required by Brazilian Corporate Legislation.

•  Investment Reserve: This reserve account in Shareholders Equity is constituted by non-distributed profit for future investments.

Ratios and Multiples

•  Price / Earnings (P/E): Price of a stock divided by its earnings per share. This ratio gives investors an idea of how much they are paying for a company earnings power. The higher the P/E, the greater the expectation of earnings.

•  Enterprise Value / EBITDA: This ratio measures the number of years necessary to generate an amount of cash equal to the value of the company (market capital + net debt).

•  EBITDA / Net Financial Expenses: This ratio gives an estimate of how much operating cash flow will cover financial expenses. The higher the ratio, the greater capacity the company has to meet its financial obligations.

•  Net Debt / EBITDA: This ratio is a measure of a company´s financial leverage. It indicates the number of years of cash generation required to pay all indebtedness.

•  Gross Margin: Gross Profit divided by Net Revenues.

•  Operating Margin: Operating Income divided by Net Revenues.

•  EBITDA margin: EBITDA divided by Net Revenues.

•  Net Margin: Net Income divided by Net Revenues.

•  ROE (Return on Equity): Net Income (Loss) divided by Shareholders Equity.

•  ROA (Return on Assets): Net Income (Loss) divided by Total Assets.

| Technical Terms and Expressions |

Click below to access the description of some useful technical terms for a better understanding of the CSN business and products.

Technical Terms and Expressions