REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

September 19, 2005

DELOITTE TOUCHE TOHMATSU
Auditores Independentes

1

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

1

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

2

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

3

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

4

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

5

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

6

Companhia Siderúrgica Nacional is a publicly-held company, incorporated on April 9, 1941 under the laws of the Federative Republic of Brazil (Companhia Siderúrgica Nacional and its subsidiaries are collectively referred to herein as "CSN" or "the Company").

CSN is a vertically integrated company that produces a wide range of value-added steel products, such as hot-dip galvanized sheets and tin mill products, and is Brazil’s sole tinplate producer. CSN also runs its own iron ore, limestone and dolomite mines, in the State of Minas Gerais and tin mine in the State of Rondônia, which supply all the needs of the Presidente Vargas Steelworks in the State of Rio de Janeiro. As a complement to its activities, the Company has also made strategic investments in railroads and power supply companies, among others.

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

7

The condensed consolidated interim financial statements of Companhia Siderúrgica Nacional for the six-months ended June 30, 2005 and 2004 are unaudited. In the opinion of management, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the interim periods presented.

These condensed consolidated interim financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America “U.S. GAAP” for the year ended December 31, 2004 and should be read in conjunction therewith. The results for the six-months ended at June 30, 2005 are not necessarily indicative of the results to be expected for the entire year. The condensed consolidated interim financial statements do not include all the disclosures required by U.S. GAAP. Such accounting principles differ in certain respects from the Brazilian accounting principles applied by the Company in its statutory financial statements prepared in accordance with the Brazilian Corporate Law.

In preparing the consolidated financial statements, the use of estimates is required to account for certain assets, liabilities and other transactions. The Company's condensed consolidated interim financial statements therefore include various estimates concerning the selection of useful lives of property, plant and equipment and goodwill, provisions necessary for losses on accounts receivable and for contingent liabilities, employee post-retirement benefits and other similar evaluations. Actual results may vary from estimates.

The U.S. dollar amounts for the periods presented have been translated from the Brazilian currency amounts in accordance with the criteria set forth in Statement of Financial Accounting Standards No. 52 –Foreign Currency Translation (“SFAS 52”).

All assets and liabilities are translated into U.S. dollars at the exchange rate at June 30, 2005 (R$ 2.3504 to US$ 1.00), and all accounts in the statements of income and cash flows (including amounts relative to local currency indexation and exchange variances on assets and liabilities denominated in foreign currency), at the average rates prevailing during the period. The translation gain or loss is included in the cumulative translation adjustment component of stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the Brazilian currency are included in the results of operations as incurred.

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3”. SFAS 154 requires retrospective application to financial statements of prior periods for changes in accounting principles. This statement is effective January 1, 2006. We do not expect FASB No. 154 to have any significant impact on our financial position, results of operations or cash flows.

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

8

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations”. This statement requires companies to recognize a liability for the fair value of a legal obligation to perform asset retirement obligations that are conditional on a future event if the amount can be reasonably estimated. This statement becomes effective on December 31, 2005. CSN is currently evaluating the impact, if any, of this statement on the Company.

Income taxes in Brazil comprise federal income tax and social contribution (which is an additional federal income tax). The statutory rates applicable in 2004 and the period as of June 30, 2005 are 25% for Federal income tax and 9% for the social contribution.

The amounts reported as income tax benefit (expense) in these financial statements are reconciled to the statutory rates as follows:

The major components of deferred income tax accounts in the balance sheet are as follows:

Management believes that the deferred income tax assets are fully realizable and that therefore no valuation allowance is required.

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

9

Deferred income tax arising from tax losses was set up based on CSN’s historical profitability and on projections of future profitability duly approved by the Company’s management bodies. These credits are expected to be substantially offset during 2005.

5 Cash and cash equivalents and Short-term investment

The Company invests surplus cash in time deposits and investment funds. Investments funds classified as cash and cash equivalents are comprised, mainly, of short-term Brazilian Government bonds with maturity of three months or less when purchased. Total short-term investments are comprised of short-term Brazilian bonds that are classified as trading investments and have maturities of over three months when purchased. At June 30, 2005, total short-term investments also include an investment in an international government bond amounting to US$470 which is classified as held to maturity. The fair value of this bond, which matures in December 2005, approximated its book value.

6 Trade accounts receivable

No single customer accounted for more than 10% of total trade accounts receivable at June 30, 2005 or December 31, 2004, or total revenues in the six-months ended June 30, 2005 and 2004.

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

10

The allowance for doubtful accounts is considered sufficient by management to absorb eventual losses on uncollectible accounts.

7 Inventories

8 Property, Plant and equipment

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

11

Construction in progress consists principally of a group of investments in equipment in order to improve the productivity of the Company’s production units and quality of its products. The main investments are in the area of environmental protection, cost reduction, infrastructure and automation, and information and telecommunication technologies. In the six-months ended June 30, 2005, capitalized interest amounted to US$1 (R$1 in 2004).

9 Loans, Financing and Debentures

The table below represents the financing by the Company through its subsidiaries during the period.

The funds raised in the foregoing table were added to working capital, increasing the Company’s liquidity.

The long-term portion of the Company´s debt outstanding at June 30, 2005 becomes due as follows

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

12

10 Commitments and contingencies

(a) Accruals and deposits

The accruals for contingencies and the related legal deposit balances are as follows:

The amounts presented below refer only to the parent company; since the accruals for contingencies relating to subsidiaries are not considered significant by management.

For the six-months ended June 30, 2005, these are primarily represented by 6,446 (5,400 in December 2004) labor claims in which CSN is the defendant. For this period, the amount of the accrual for these contingencies was US$40 (US$48 in December 2004). Most of the lawsuits are related to CSN’s joint liability with independent contractors, wage equalization, additional payments for unhealthy and hazardous activities, overtime and disagreement between employees and the Brazilian Government over the amount of severance payable by CSN.

The lawsuits related to CSN’s joint liability with independent contractors represent a large portion of the total labor lawsuits against the Company and originated from the non-payment by the independent contractors of employee obligations, which results in CSN’s inclusion in the lawsuits.

The most recent lawsuits originating from CSN’s joint liability with independent contractors have generally been decided in favor of CSN due to procedures that have been adopted by the Company in order to inspect and assure the compliance of the wage payments and social charges withdrawals by the independent contractors, which have been in operation since 2000.

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

13

The higher number in labor claims has originated from lawsuits relating to severance payable by CSN as discussed above.

These are mainly claims for indemnities associated with the civil judicial processes in which the Company is involved. Such proceedings, in general, originated from occupational accidents and diseases related to industrial activities of the Company. For all these disputes, until June 30, 2005, the Company accrued the amount of US$39 (US$28 at December 31, 2004).

• Imposto sobre produto industrializado – IPI (Excise Tax) presumed credit on inputs

The Company brought an action pleading the right to a tax credit with respect to the acquisition of the Company’s goods that were exempt, non-taxed goods, or taxed at zero rates. In May 2003 the preliminary decision was obtained in authorizing the use of these credits.

As of June 30, 2005, the accrual related to the total credits used to offset IPI tax payable, which amounted to US$281 (US$231 at December 2004).

The Company brought an action pleading the right to the IPI premium credit with respect to exports and a preliminary favorable decision was obtained authorizing the use of these credits.

As of June 30, 2005, the credits used to offset IPI tax payable amounted to US$46 (US$37 at December 2004) as update by (Selic-index used to update taxes in Brazil).

The Company claims that, in connection with the correction of the distortion in the calculation of the basis for the income tax and social contribution as a result of the use of the Consumer Price Index (“IPC”) of January 1989 (referred to as the “Plano Verão”), it is entitled to a refund of 51.87% of the tax liability determined under the “Plano Verão”. In the first quarter of 2003, the Tribunal Regional Federal – TRF, the regional tax court, confirmed lower court rulings establishing that the percentage to which CSN is entitled is 42.72% (Jan/89) minus the applicable index of 10.14% (Feb/89). As a result, as of December 31, 2002, CSN reversed US$32, or approximately half, of its accrual for this tax liability. CSN is pursuing the balance of its claim. Therefore, the Company has registered as of June 30, 2005, an accrual in the amount of US$26 (US$23 at December 2004).

In February 2003, the Company was assessed by tax authorities based on its prior years’ social contribution and income tax. On August 21, 2003, the Federal Revenue Agency canceled such tax assessment but, in November 2003, the Company was reassessed, on the same matter. Therefore, the Company has recorded an accrual as of June 30, 2005 in the amount of US$170 (US$144 at December 2004). It is regarding a fine over tax loss carryfowards calculation.

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

14

The Company filed an action questioning the assessment of social contribution on income in respect of export revenues, based on the Constitutional Amendment nº 33/01. On March 10, 2003, the Company obtained an initial decision authorizing the exclusion of export revenues from the calculation, as well as offsetting amounts paid on these revenues from 2001. On June 30, 2005, the offsetting amounts were US$183 (US$115 at December 2004), which includes legal costs.

• PIS/COFINS – Law No. 9,718/99

CSN is appealing the legality of Law No. 9,718/99, which increased the PIS and COFINS (social financial contribution tax) calculation basis and imposed this tax on the revenue of CSN. The amount of this accrual was US$116 at June 30, 2005 (US$98 at December, 2004). CSN obtained a favorable verdict in the lower court and the suit is going through a compulsory review by the TRF.

• CPMF - Provisional contribution on financial activities tax

CSN has been appealing the CPMF (Provisional Contribution on Financial Activities) tax since the promulgation of Constitutional Amendment No. 21/99. The amount of this accrual was US$138 as of June 30, 2005 (US$105 as of December 31, 2004). CSN obtained a favorable verdict in the lower court and the suit is on appeal to the TRF. The most recent precedents by the courts have not been favorable to CSN’s position. A loss is probable.

• Environmental Regulation

The Company is 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. The Company is committed to controlling the substantial environmental impact caused by steelmaking, mining and port operations, in accordance with international standards and in compliance with environmental laws and regulations in Brazil. The Company believes that it is in substantial compliance with applicable environmental requirements.

The Brazilian Federal Constitution gives both the federal and state governments power to enact environmental protection laws and issue regulations under such laws. In addition, the Company is subject to municipal environmental laws and regulations. While the Brazilian Government has power to promulgate environmental regulations setting forth-minimum standards of environmental protection, state governments have the power to enact more stringent environmental regulations. Most of the environmental regulations in Brazil are thus at the state and local level rather than at the federal level. The environmental regulations of Rio de Janeiro State, in which the Presidente Vargas steelworks is located, are plant specific. Thus, specific goals and standards are established in operating permits or environmental accords issued to each company or plant that complement the standards and regulations of general applicability and are required to be maintained 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 the Company’s facilities have operating permits, except for the Sepetiba coal terminal, which operates under a specific environmental accord, as described below.

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

15

The Company records an accrual for remediation costs and environmental lawsuits when a loss is probable and the amount can be reasonably estimated. The Company does not anticipate that costs for environmental lawsuits, to the extent not previously accrued, will have a material adverse effect on its consolidated financial position. The accrual for environmental contingencies in the amount of R$ 11 million (US$4) relates mainly to penalties and lawsuits imposed on the Company’s coal mines, which have been decommissioned since 1989; fines related to consent orders issued between 1986 and 1998 on the Presidente Vargas Steelworks; and provisional costs on environmental remediation that applies to old landfill’s liabilities around the main steelworks .

The Company operates a corporate environmental department managed under an Environmental Management System (“EMS”), compliant with ISO 14001 requirements. The Company received the ISO 14001 Certificate for its iron ore mining operations in December 2000 and for its steelmaking units and limestone mining operations in December 2002. All certifications have been periodically renewed.

The Company signed an accord relating to environmental matters at the Presidente Vargas Steelworks in September 1994 with Fundação Estadual de Engenharia do Meio-Ambiente (environmental protection agency of the State of Rio de Janeiro or “FEEMA”), which was amended in January 1996, December 1998 and January 2000 (the “FEEMA Accord”). Under the last amendment of this accord, the Company was obligated to make over three years expenditures aggregating R$181 million (US$101) on 130 items, which included environmental technology and construction of new equipment to control soil, air and water pollution. The Company also agreed in the amendment to spend R$14 million (US$5) to build sanitation facilities to benefit the Volta Redonda community (the “Compensatory Measures”), which is fully accrued.

The Accord was considered completed by the Rio de Janeiro State Environmental Authority in May 2003. Between July and October, all operations permits of Presidente Vargas Steelworks were recovered, and remain valid for 5 years. The Company had invested under the FEEMA Accord an aggregate of R$263.6 million (US$125.4 based on the average exchange rate at the date of the cash disbursement), completing all 130 items, and spent R$13 million (US$6.2) on new infrastructure and community services. Total expenditures related to the FEEMA Accord stated in reais are increased due to the impact of real devaluation on investments indexed in foreign currency.

As a result of these expenditures and the Company’s continuing compliance with the FEEMA Accord, one third of the environmental fines on the Presidente Vargas Steelworks of R$36 million (US$20) have been dismissed as of December 2003. During 2004, the procedure to dismiss the remaining two thirds of these environmental fines was suspended, but the Company believes these remaining fines will eventually be dismissed.

From 2002 to 2004, soil investigations were made in the neighboring areas of Presidente Vargas Steelworks at Volta Redonda, as a consequence of the FEEMA Accord. These areas had received landfills of solid waste from operations. The survey pointed out two areas of land that require environmental remediation. The clean-up activities are planned to be implemented until the end of 2010, at a projected total cost of R$25 million (US$8.6), which is fully accrued.

The Company also entered into an accord relating to environmental matters at the Presidente Vargas Steelworks with the city of Volta Redonda in January 1995 (the “January 1995 Accord”). Under the January 1995 Accord, the Company invested R$1.4 million (US$0.8) in an environmental quality program designed to preserve the environment and provide assistance to the Volta Redonda community. The priority of the program is to compensate the city of Volta Redonda for environmental damage allegedly caused by the Presidente Vargas Steelworks. This program, requiring total expenditures of R$16.4 million (US$5.6), has been suspended since 2000 as a result of an appeal by the state public attorney’s office, and it is still awaiting a court’s final decision.

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

16

On November 30, 2001, the Company entered into a commitment, which is similar to the January 2000 amendment of the FEEMA Accord, with SEMADS - Rio de Janeiro State, Secretariat for Environment and Sustainable Development (the “SEMADS Accord”), in which it undertook to bring the Sepetiba coal terminal into compliance with applicable environmental laws and regulations by May 31, 2004. The Company was unable to meet the deadline due to, among other things, a weather-related accident and has requested an extension of the deadline. An amendment to this “SEMADS Accord” was signed on May 28th, 2004, and extends the deadline for the completion to December 2006. Pursuant to the SEMADS Accord, the Company has already installed equipment and systems to control and monitor air emissions, as well as sea pollution from port activities and handling imported coal. The total amount involved in the original SEMADS Accord was approximately R$4.6 million (US$1.6); the additional obligations amount to approximately R$5.1 million (US$1.8) . Approximately R$2.3 million (US$0.8) remains to be spent and is fully accrued.

Prior to 1990, the Company operated coal mining facilities in the Santa Catarina State. As a part of these operations, it and other companies used waste ponds, as well as landfills for sulfur containing solid wastes. The state environmental authority has required 11 mining Companies – CSN among them – and the Federal Government to take environmental corrective actions to restore the waste ponds and landfill areas. CSN has developed and has begun to implement a restoration plan consisting of 13 Consent Orders signed with the Santa Catarina State Environmental Authority, with a total projected cost of approximately R$20 million (US$6.8) which R$11 million (US$4.1) are accrued. In 2001, this effort remedied the first areas with good results. The aggregate expenditures on this remediation in the last three years were R$0.7 million (US$0.2) in 2002; R$2.4 million (US$ 0.8) in 2003; R$4.2 million (US$1.4) in 2004 and R$2.9 million (US$1.2) from January to June 2005.

Other tax accruals relate to a variety of disputes. No single group of similar claims constitutes more than 5% of total accruals.

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

17

• Other commitments

At June 30, 2005, we had extended guarantees for borrowings obtained by affiliates, amounted US$1,630.4, as follows:

We have not provide any significant guarantees which would require fair values adjustments under FIN 45 – “ Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”
The guarantees mentioned do not have any restrictions.

At the Annual and Extraordinary General Meeting held on April 29, 2004, CSN approved the proposal made by the Board of Directors on March 30, 2004, to reverse split the shares of capital stock, whereby each share of capital stock first became represented by 4 shares, followed by a reverse split of these shares in the proportion of 1,000 shares for 1 share, which resulted in a reverse split of 250 shares into 1, as well as the change in the share-to-ADR ratio of 1 share to 1 ADR.

The Company’s capital stock on June 30, 2005 and December 31, 2004, was comprised of 270,158,346 and 276,893,446, respectively, common shares after giving retroactive effect to this reverse stock split. Each common share entitles the owner to one vote.

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

18

The Board of Directors approved share buyback programs by the Company to hold in treasury for subsequent sale and/or cancellation, made in accordance with the limits and provisions of CVM’s Instruction # 10/80.

While maintained in treasury, these shares are not entitled to receive dividends and have no property rights or voting rights. As of June 30, 2005, the market value of the shares held in treasury amounted to US$272.

Brazilian laws and CSN’s by-laws require that certain appropriations be made from retained earnings to reserve accounts on an annual basis. The purpose and basis of appropriation to such reserve accounts are described below:

(d) Dividends and interest on stockholders’ equity

The Company’s by-laws guarantee a minimum annual dividend equal to 25% of the adjusted net income for the year, as required by the Brazilian Corporate Law. Interest on stockholders’ equity since January 1, 1996 is considered part of the minimum dividend.

The Company has adopted SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”) with respect to the information it presents about its operating segments. SFAS 131 introduces a “management approach” concept for reporting segment information, whereby financial information is required to be reported on the same basis that the top decision-maker uses such information internally for evaluating segment performance and deciding how to allocate resources to segments.

The Company has five officials on its Board of Executive Officers (including the Chief Executive Officer) reporting to the CEO. Each one of them is responsible for a sector: Production, Commercial, Infrastructure/ Energy, Investments and Subsidiary Administration.

The Chief Executive Officer is responsible for finance operations, legal, corporate human resources, CBS (CSN’s Pension Fund) and procurement. The Production Executive Officer is responsible for the manufacturing of CSN’s steel, steel products and information technology. The Commercial Executive Officer is responsible for the sales and marketing of CSN’s steel products. The Infrastructure/Energy Executive Officer is responsible for the Company’s mines, investments in logistics (railways and ports), real estate, logistics and power generation. The Investments Executive Officer is responsible for future capacity expansions and opportunities in the international markets analysis, as well as for investor relations and accounting controls. The Subsidiary Administration Executive Officer is responsible for communications, CSN Foundation and for the affiliated companies.

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

19

Information presented to top management with respect to the performance of each segment is generally derived directly from the accounting records maintained in accordance with the accounting practices adopted in Brazil together with certain relatively minor intersegment allocations.

Information for the Steel–Operations and Steel–Commercial segments are being presented aggregated, as they are all related to the steel business.

Information for the functions of the CEO, Investments Executive Officer and Administration and Participation´s Executive Officer are being presented aggregated under Corporate and Investments.

Sales by geographic area are determined based on the location of the customers.

The majority of the Company’s long-term assets are located in Brazil.

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

20

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

21

Although most of the Company’s revenues are denominated in Brazilian reais, the Company’s debt was basically denominated in foreign currencies (see note 11), which includes short and long-term debt and accrued finance charges. Accordingly, the Company is exposed to market risk from changes in foreign exchange rates and interest rates. The Company manages risk arising from fluctuations in currency exchange rates, which affect the amount of Brazilian reais necessary to pay foreign currency denominated obligations, by using derivative financial instruments, primarily cross-currency swaps with financial institutions.

The Company’s contracts do not meet the criteria to qualify as the hedge of an exposure to foreign currency or interest rate risk. Therefore, the Company has accounted for the derivative transactions by calculating the unrealized gain or loss at each balance sheet date, and changes in the fair value of all derivatives are recorded in current operations.

On June 30, 2005, the consolidated position of outstanding derivative agreements was as follows:

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

22

Companhia Siderúrgica Nacional

Notes to the Condensed Consolidated Financial Statements Expressed in millions of United States dollars (Unaudited)

The Company entered into cross-currency swap agreements (intended to protect the Company from the effect that a devaluation of the real would have on its liabilities denominated in foreign currency). Basically, the Company swapped its indebtedness index from the U.S. dollar fixed rate to Brazilian real overnight floating rate (Interbank deposit certificate-CDI). The aggregated notional amount of these swaps is US$780 millions.

As of June 30, 2005, the Company had a long position of 3,735 contracts under U.S. dollar futures listed on BM&F (Bolsa de Mercadorias e Futuros – the Brazilian derivative exchange): this is equivalent to US$188 millions. These contracts are settled daily and therefore their mark-to-market value is zero as of June 30, 2005; as the value date always occurs on the following day, the amount of the contract is reset to zero after market closes and there is a cash provision to be settled on the next day. These contracts have similar effect of foreign exchange swaps in terms of hedging the company’s U.S. dollar exposure.

The contracts outstanding at December 31, 2004 and June 30, 2005, all the contracts with maturity on July 28, 2006, were as follows:

The net unrealized gain related to these contracts amounted to US$92.6 as of June 30, 2005 (US$128.8 on December 31, 2004).

14 Fair value of financial instruments, other than derivatives

Excluding the financial instruments presented in the table below, the Company considers that the carrying amount of its financial instruments generally approximates fair market value because of the short-term maturity or frequent repricing of these instruments, and the fact that non-indexed instruments are stated at present value.

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

23

The financial instruments recorded in the balance sheet as of December 31, 2004 and as of June 30, 2005, in which market value differs from the book value, are as follows:

Exchange Rate Risk

Although most of the revenues of the Company are in Brazilian reais, as of June 30, 2005, US$3,025 of the Company’s consolidated loan and financing debt were denominated in foreign currency (US$2,362 on December 31, 2004). As a consequence, the Company is subject to changes in exchange rates and manages the risk of these rate fluctuations to the value in Brazilian reais that will be necessary to pay the liabilities in foreign currency, using derivative financial instruments, mainly futures contracts, swaps and forward contracts and FX option agreement, as well as investing of a great part of its cash and funds available in securities remunerated based on U.S. dollar exchange variation.

The credit risk exposure with financial instruments is managed through the restriction of counterparties in derivative instruments to large financial institutions with high quality of credit. Thus, management believes that the risk of non-compliance by the counterparties is insignificant. The Company neither maintains nor issues financial instruments with commercial aims. The selection of customer as well as the diversification of its accounts receivable and the control on sales financing terms by business segment are procedures that CSN adopts to minimize occasional problems with its trade partners. Since part of the Company’s funds available is invested in the Brazilian government bonds, there is exposure to the credit risk with the government.

On July 7, 2005, the Company held an Extraordinary General Meeting at which the majority of those attending the meeting approved the cancellation of 14,849,099 shares held in treasury, without reduction in the Company’s common stock. The amendment to the caput of the Article 5 and the caput of the Article 7 of the Company’s Bylaws was also approved, which began to take effect with the following wordings, by means of reflecting the new capital stock structure: “Article 5 - The Company’s capital stock, fully subscribed and paid the amount of US$704, divided into two hundred, seventy two million, sixty seven thousand, nine hundred and forty six (272,067,946) non-par book-entry common shares.”; and “Article 7 - The Company’s capital stock may be increased up to four hundred million (400,000,000) shares, by means of the issue of up to one hundred, twenty seven million, nine hundred, thirty two thousand and fifty four (127,932,054) new non-par book-entry shares, by resolution of the Board of Directors.”. The cancellation approved on July 7, 2005 was made effective on July 21, 2005.

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

24

The Company, through its subsidiary CSN Islands X Corp., issued US$500 million in perpetual notes on July 7, 2005 and, in view of the large demand for the securities issued, on July 14, 2005, it issued, additionally, U$250 million. The notes without maturity bear interest at 9.5% p.a. The funds raised in this operation will be used for working capital; therefore increasing the Company’s liquidity.

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

25

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.