|Exhibit 99.2
|------------



|TUBOS DE ACERO DE MEXICO, S. A.
 AND SUBSIDIARIES
|-------------------------------------------------



|CONSOLIDATED FINANCIAL
STATEMENTS SEPTEMBER 30, 2002 AND 2001
|-------------------------------------------------------------



| |  | 
| |  | 



---





|TUBOS DE ACERO DE MEXICO, S. A.
AND SUBSIDIARIES
|------------------------------------------------



|CONSOLIDATED FINANCIAL
STATEMENTS
|---------------------------------



|SEPTEMBER 30, 2002 AND 2001
|---------------------------



|TABLE OF CONTENTS
|-----------------

|Contents                                      |  | Page
|--------------------------------------------- |  | ----
|                                              |  |     
|Consolidated financial statements:            |  |     
|                                              |  |     
|Balance sheets                                |  | 1   
|                                              |  |     
|Statements of income                          |  | 2   
|                                              |  |     
|Statements of changes in shareholders equity |  | 3   
|                                              |  |     
|Statements of changes in financial position   |  | 4   
|                                              |  |     
|Notes to financial statements                 |  | 5   



| |  | 
| |  | 



---





|TUBOS DE ACERO DE MEXICO, S. A.
AND SUBSIDIARIES
|------------------------------------------------



|CONSOLIDATED BALANCE SHEETS
|---------------------------



|Thousands of Mexican pesos
      of 
      September 30, 2002 purchasing power
|------------------------------------------------------------------------------

|                                                                                                           | September 30,
|---------------------------------------------------------------------------------------------------------- | -------------
|                                                                                                           | 2002         
|Assets                                                                                                     |              
|CURRENT ASSETS:                                                                                            |              
|Cash and cash equivalents (Note 8a.)                                                                       | Ps           
|Accounts and notes receivable  Net (Note 8b.)                                                             |              
|Inventories  Net (Note 8c.)                                                                               |              
|Prepaid expenses and recoverable taxes (Note 8d.)                                                          |              
|                                                                                                           |              
|Total current assets                                                                                       |              
|INVESTMENTS IN ASSOCIATED COMPANIES  Net (Note 11)                                                        |              
|PROPERTY, PLANT AND EQUIPMENT  Net (Note 3)                                                               |              
|OTHER ASSETS                                                                                               |              
|                                                                                                           |              
|Total assets                                                                                               | Ps           
|                                                                                                           |              
|Liabilities and shareholders equity                                                                       |              
|CURRENT LIABILITIES:                                                                                       |              
|Notes payable to financial institutions, including current
      
      portion of long-term debt (Note 4) | Ps           
|Trade accounts and notes payable                                                                           |              
|Other accounts payable and accrued expenses (Note 8e.)                                                     |              
|                                                                                                           |              
|Total current liabilities                                                                                  |              
|                                                                                                           |              
|LONG-TERM DEBT (Note 4)                                                                                    |              
|OTHER LIABILITIES AND DEFERRED CREDITS                                                                     |              
|DEFERRED INCOME TAX (Note 6)                                                                               |              
|                                                                                                           |              
|Total non-current liabilities                                                                              |              
|                                                                                                           |              
|Total liabilities                                                                                          |              
|                                                                                                           |              
|SHAREHOLDERS EQUITY (Note 5):                                                                             |              
|Capital stock                                                                                              |              
|Additional paid-in capital                                                                                 |              
|Retained earnings                                                                                          |              
|Cumulative deferred income tax                                                                             |              
|Cumulative translation adjustment                                                                          |              
|Cumulative loss from holding non-monetary assets                                                           |              
|                                                                                                           |              
|Equity of majority shareholders                                                                            |              
|Minority interest in consolidated subsidiary                                                               |              
|                                                                                                           |              
|Total shareholders equity                                                                                 |              
|CONTINGENCIES AND COMMITMENT (Notes 9 and 10)                                                              |              
|                                                                                                           |              
|Total liabilities and shareholders equity                                                                 | Ps           
|                                                                                                           |              



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

|Guillermo Vogel H. 
      Vice Chairman of the Board |  | Claudio Gugliuzza V. 
      Administrative Director
|---------------------------------------------------- |  | ---------------------------------------------------



| |  | (1)
| |  | ---



---





|TUBOS DE ACERO DE MEXICO, S. A.
AND SUBSIDIARIES
|------------------------------------------------



|CONSOLIDATED STATEMENTS OF
INCOME (Note 7)
|------------------------------------------



|Thousands of Mexican pesos - except income
      
      per share - of September 30, 2002 purchasing power
|----------------------------------------------------------------------------------------------------------

|                                                                                                  |    | Nine-month
      period 
      ended September 30,
|------------------------------------------------------------------------------------------------- | -- | --------------------------------------------------
|                                                                                                  |    | 2002                                              
|Net sales                                                                                         | Ps | 4,856,057                                         
|Cost of products sold                                                                             |    | (2,943,870                                        
|Operating expenses                                                                                |    | (859,186                                          
|                                                                                                  |    |                                                   
|Operating profit                                                                                  |    | 1,053,001                                         
|Comprehensive financing cost (Note 1a.)                                                           |    | (170,699                                          
|                                                                                                  |    |                                                   
|Other expenses   Net                                                                             |    | (5,696                                            
|Income before the following items                                                                 |    | 876,606                                           
|Provisions for income tax, asset tax and
      employees statutory
      profit sharing (Note 6) |    | (121,988                                          
|                                                                                                  |    |                                                   
|Income before equity in associated companies
      and other item                                 |    | 754,618                                           
|Equity in income (loss) of associated companies
      (Note 11)                                   |    | 11,811                                            
|                                                                                                  |    |                                                   
|Income before the following item                                                                  |    | 766,429                                           
|Cumulative effect of change in accounting
      principle (Note 1q.)                              |    |                                                  
|                                                                                                  |    |                                                   
|Net income for the period                                                                         | Ps | 766,429                                           
|                                                                                                  |    |                                                   
|Net income corresponding to majority Shareholders                                                 | Ps | 806,744                                           
|Minority interest in (loss) income of consolidated
      subsidiary                               |    | (40,315                                           
|                                                                                                  |    |                                                   
|Net income for the period                                                                         | Ps | 766,429                                           
|                                                                                                  |    |                                                   
|Income per share in Mexican pesos (Note 1o.):                                                     |    |                                                   
|Income before the following item                                                                  | Ps | 2.26                                              
|Cumulative effect of change in accounting
      principle                                         |    | -                                                
|                                                                                                  |    |                                                   
|Net income per share                                                                              | Ps | 2.26                                              
|                                                                                                  |    |                                                   



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

|Guillermo Vogel H. 
      Vice Chairman of the Board |  | Claudio Gugliuzza V. 
      Administrative Director
|---------------------------------------------------- |  | ---------------------------------------------------



| |  | (2)
| |  | ---



---





|TUBOS DE ACERO DE MEXICO, S. A.
AND SUBSIDIARIES
|------------------------------------------------



|CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS EQUITY (Note 5)
|-------------------------------------------------------------------



|thousands of Mexican pesos of
 September 30, 2002 purchasing power
|------------------------------------------------------------------

|                                                    |  | Capital 
      stock |  | Additional 
      paid-in 
      capital |             | Retained 
      earnings |  | Cumulative
      deferred 
      income tax |   | Cumulative
      translation 
      adjustment |              | Cumulative loss 
      from holding 
      non-monetary
      assets |  | Equity of 
      majority 
      shareholders |   | Minority 
      interest in 
      consolidated
      subsidiary |               | Total 
      shareholders
      equity
|--------------------------------------------------- |  | -------------------- |  | ---------------------------------------- | ----------- | ------------------------ |  | ------------------------------------------- | - | ---------------------------------------------- | ------------ | -------------------------------------------------------------------- |  | --------------------------------------------- | - | ---------------------------------------------------------------- | ------------- | ---------------------------------------
|Balances at 
      January 1, 2001                  |  | Ps10,516,336         |  |                                          | Ps6,877,152 |                          |  | Ps15,527,934                                |   |                                                | (Ps2,349,987 | )                                                                    |  | (Ps709,629                                    | ) |                                                                  | (Ps22,235,256 | )                                      
|Dividends paid                                      |  |                      |  |                                          |             |                          |  | (306,905                                    | ) |                                                |              |                                                                      |  |                                               |   |                                                                  |               |                                        
|Comprehensive
      
      income 
      (Note 1r.) |  |                      |  |                                          |             |                          |  | 655,502                                     |   |                                                |              |                                                                      |  | (81,101                                       | ) |                                                                  | (21,566       | )                                      
|                                                    |  |                      |  |                                          |             |                          |  |                                             |   |                                                |              |                                                                      |  |                                               |   |                                                                  |               |                                        
|Balances at 
      September 30, 2001               |  | Ps10,516,336         |  |                                          | Ps6,877,152 |                          |  | Ps15,876,531                                |   |                                                | (Ps2,349,987 | )                                                                    |  | (Ps790,730                                    | ) |                                                                  | (Ps22,256,822 | )                                      
|                                                    |  |                      |  |                                          |             |                          |  |                                             |   |                                                |              |                                                                      |  |                                               |   |                                                                  |               |                                        
|Balances at 
      January 1, 2002                  |  | Ps10,516,336         |  |                                          | Ps6,887,152 |                          |  | Ps15,794,614                                |   |                                                | (Ps2,349,987 | )                                                                    |  | (Ps827,999                                    | ) |                                                                  | (Ps22,537,870 | )                                      
|Dividends paid                                      |  |                      |  |                                          |             |                          |  | (275,983                                    | ) |                                                |              |                                                                      |  |                                               |   |                                                                  |               |                                        
|Comprehensive
      
      income 
      (Note 1r.) |  |                      |  |                                          |             |                          |  | 806,744                                     |   |                                                |              |                                                                      |  | (68,103                                       | ) |                                                                  | 513,381       |                                        
|                                                    |  |                      |  |                                          |             |                          |  |                                             |   |                                                |              |                                                                      |  |                                               |   |                                                                  |               |                                        
|Balances at 
      September 30, 2002               |  | Ps10,516,336         |  |                                          | Ps6,877,152 |                          |  | Ps16,325,375                                |   |                                                | (Ps2,349,987 | )                                                                    |  | (Ps896,102                                    | ) |                                                                  | (Ps22,024,489 | )                                      
|                                                    |  |                      |  |                                          |             |                          |  |                                             |   |                                                |              |                                                                      |  |                                               |   |                                                                  |               |                                        

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

|Guillermo Vogel H. 
      Vice Chairman of the Board |  | Claudio Gugliuzza V. 
      Administrative Director
|---------------------------------------------------- |  | ---------------------------------------------------



| |  | (3)
| |  | ---



---





|TUBOS DE ACERO DE MEXICO, S. A.
AND SUBSIDIARIES
|------------------------------------------------



|CONSOLIDATED STATEMENTS OF
CHANGES IN FINANCIAL POSITION
|--------------------------------------------------------



|Thousands of Mexican pesos of 
      September 30, 2002 purchasing power
|------------------------------------------------------------------------

|                                                                                                                  |  | Nine-month
      period
      ended September 30,
|----------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------
|                                                                                                                  |  | 2002                                             
|Resources provided by operations:                                                                                 |  |                                                  
|Income before other item                                                                                          |  | Ps   766,429                                     
|                                                                                                                  |  |                                                  
|Adjustments to reconcile net income to resources
      provided 
      by operating activities:                   |  |                                                  
|Depreciation and other                                                                                            |  | 359,813                                          
|Deferred income tax                                                                                               |  | (95,817                                          
|Equity in (income) loss of associated companies                                                                   |  | (11,811                                          
|Exchange loss which did not require resources                                                                     |  | 64,755                                           
|(Increase) decrease in accounts receivable,
      notes receivable, 
      prepaid expenses and recoverable taxes |  | (673,152                                         
|Decrease (increase) in inventories                                                                                |  | 233,856                                          
|Increase (decrease) in trade accounts and
      other accounts 
      payable and accrued expenses                |  | 289,203                                          
|                                                                                                                  |  |                                                  
|Total adjustments                                                                                                 |  | 166,847                                          
|                                                                                                                  |  |                                                  
|Resources provided by operations before the
      following item                                                  |  | 933,276                                          
|Cumulative effect of change in accounting
      principle                                                         |  |                                                 
|                                                                                                                  |  |                                                  
|Resources provided by operations                                                                                  |  | 933,276                                          
|                                                                                                                  |  |                                                  
|Resources used in investing activities:                                                                           |  |                                                  
|Increase in interest in subsidiaries and
      associated companies                                               |  | (613                                             
|Acquisitions of property, plant and equipment
       Net                                                         |  | (162,760                                         
|                                                                                                                  |  |                                                  
|Resources used in investing activities                                                                            |  | (163,373                                         
|                                                                                                                  |  |                                                  
|Resources used in financing activities:                                                                           |  |                                                  
|Net increase (decrease) in short-term debt
      to banks                                                         |  | 6,100                                            
|Net increase in long-term debt to banks                                                                           |  |                                                 
|Dividends paid                                                                                                    |  | (275,983                                         
|                                                                                                                  |  |                                                  
|Resources used in financing activities                                                                            |  | (269,883                                         
|                                                                                                                  |  |                                                  
|Net increase (decrease) in cash and cash
      equivalents                                                        |  | 500,020                                          
|Cash and cash equivalents at the beginning
      of the period                                                    |  | 578,828                                          
|                                                                                                                  |  |                                                  
|Cash and cash equivalents at the end of the
      period                                                          |  | Ps1,078,848                                      
|                                                                                                                  |  |                                                  

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

|Guillermo Vogel H. 
      Vice Chairman of the Board |  | Claudio Gugliuzza V. 
      Administrative Director
|---------------------------------------------------- |  | ---------------------------------------------------

| |  | (4)
| |  | ---



---





|TUBOS DE ACERO DE MEXICO, S. A.
AND SUBSIDIARIES
|------------------------------------------------



|NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS SEPTEMBER 30, 2002 AND 2001
|--------------------------------------------------------------------------



| | (Amounts in thousands of Mexican pesos (Ps) of
      September 30, 2002 purchasing power and 
      thousands of US dollars ($), Euros (EUR) and Japanese yen (JPY), except
      for exchange rates)
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NOTE 1  MAIN ACTIVITY AND SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES:
|----------------------------------------------------------------------------



|Tubos de Acero de Mexico, S. A. (Tamsa or the
Company) was formed in 1952 and consists of a group of companies that manufacture and
sell seamless steel pipe, primarily for use in the petroleum industry.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The accompanying consolidated financial
statements are expressed in thousands of Mexican pesos of September 30, 2002 purchasing
power and have been prepared applying accounting principles generally accepted in Mexico.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The significant accounting policies, including
the concepts, methods and criteria related to the recognition of the effects of inflation
on the financial information, are summarized below:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|a. Recognition of the effects of inflation in the consolidated
      financial statements 
|-------------------------------------------------------------------------------------------



|The Company recognizes the effects of inflation
in its consolidated financial statements in accordance with accounting principles
generally accepted in Mexico. As a result of the recognition of the effects of inflation
in the consolidated financial statements, the consolidated financial statements include
the following items:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Gain (loss) from holding non-monetary assets represents the
      change in the basis of restatement of non-monetary assets (primarily property,
      plant and equipment) vis-a-vis the rate of inflation as measured by the
      National Consumer Price Index (NCPI  see Note 1f.). Additionally,
      this figure includes the effect of the restatement of inventories and cost
      of products sold at replacement cost as required by Statement B-10 issued
      by the Mexican Institute of Public Accountants (MIPA). This gain (loss)
      is included in shareholders equity as a component of the cumulative
      loss from holding non-monetary assets account.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Gain on net monetary position represents the
purchasing power gain from holding monetary items, measured by the NCPI, in Mexican pesos
of September 30, 2002 purchasing power. This effect is included in comprehensive
financing cost in the accompanying consolidated statements of income, as shown on the
next page.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (5)
| |  | ---



---



|                                           |  | Nine-month
      period
      ended September 30,
|------------------------------------------ |  | -------------------------------------------------
|                                           |  | 2002                                             
|Gain on net monetary position              |  | Ps    51,101                                     
|Interest and financing expense
       Net |  | (35,433                                          
|Foreign exchange (loss) gain
       Net   |  | (186,367                                         
|                                           |  |                                                  
|Comprehensive financing result             |  | (Ps170,699                                       
|                                           |  |                                                  

|Inflation rates in Mexico and Venezuela for the
reported periods were as follows:
|---------------------------------------------------------------------------------

|          |  | 2002 |   | 2001
|--------- |  | ---- | - | ----
|México    |  | 3.9  | % |     
|Venezuela |  | 25.0 | % |     

|b. Principles of consolidation and valuation of investments
      in associated companies 
|-------------------------------------------------------------------------------------------



|The accompanying consolidated financial
statements include the financial statements of Tamsa and its wholly-owned subsidiaries,
which are shown below:
|------------------------------------------------------------------------------------------------------------------------------------------------------

|Company                                                                                                                       |  | Main activity                                                     
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------
|Inmobiliaria Tamsa, S. A. de C. V.                                                                                            |  | Leasing of real estate                                            
|                                                                                                                              |  |                                                                   
|Tamsider, S. A. de C. V. (Tamsider)
      and subsidiaries, includes Tavsa  Tubos de
      Acero de Venezuela, S. A. (Tavsa) |  | Promotion and organization
      of steel-related companies       
|                                                                                                                              |  |                                                                   
|Tamtrade, S. A. de C. V.                                                                                                      |  | Sale of seamless steel pipe                                       
|                                                                                                                              |  |                                                                   
|Empresas Riga, S. A. de C. V. (Riga)
      (acquired on June 20, 2001)                                                        |  | Manufacture of welded connectors
      made of seamless steel pipe
|                                                                                                                              |  |                                                                   
|Socover, S. A. de C. V.
      (acquired on October 1, 2001)                                                                   |  | Sale of seamless steel pipe                                       
|                                                                                                                              |  |                                                                   
|Corporación Tamsa, S. A.
      (liquidated on August 1, 2002)                                                                 |  | Sale of seamless steel pipe                                       

|Balances and transactions between Tamsa and its
subsidiaries were eliminated in the consolidation.
|--------------------------------------------------------------------------------------------------



| |  | (6)
| |  | ---



---





|Investments in associated companies, in which
Tamsa owns 10% or more of the common stock, are accounted for by the equity method of
accounting. Investments representing less than 10% of the investees equity are carried
at acquisition cost, restated using the NCPI.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c. Cash and cash equivalents 
|------------------------------



|Cash and cash equivalents comprise cash and
highly liquid short-term securities with an initial maturity of less than three months.
Highly liquid short-term securities are carried at fair market value (see Note 8a.).
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|d. Inventories 
|----------------



|Inventories are stated at their estimated net
replacement cost, which is not in excess of their net realizable value (see Note 8c.).
The cost of products sold reflects their estimated replacement cost at the time of sale.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In conformity with industry practices,
manufacturing tools, spare parts and supplies are included under current assets, even
though they may not be consumed within one year.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Based on inventory turnover levels, the Company
increased its allowance for obsolescence, which is charged to cost of products sold, by
Ps12,743 in the nine-month period ended September 30, 2002. In the same period of 2001 it
was not necessary to increase this allowance.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|e. Maintenance expenses of production capacity 
|------------------------------------------------



|Ordinary maintenance expenses are expensed as
cost of products sold in the period in which they are incurred.
|-------------------------------------------------------------------------------------------------------------



|Special maintenance expenses incurred to
maintain the production capacity of the industrial facilities are recorded as deferred
expenses when incurred and amortized over a period of 12 to 24 months, which corresponds
to the period in which the benefits of the maintenance are expected to be realized (see
Note 8d.).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|f. Property, plant and equipment 
|----------------------------------



|The Company follows the following policies in
respect of property, plant and equipment:
|---------------------------------------------------------------------------------------

| |  | Property and domestically-sourced machinery and
      equipment are restated by applying factors derived from the NCPI to their
      carrying value as determined at December 31, 1996, or to their acquisition
      cost if purchased after that date.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Imported machinery and equipment are restated
      by applying inflation factors of the country of origin to the acquisition
      cost (expressed in the original currency), and subsequently translated at
      the period-end exchange rate.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (7)
| |  | ---



---





|As a result of the foregoing valuation methods,
the Company recorded a gain from holding non-monetary assets in the cumulative loss from
holding non-monetary assets account of Ps587,464 in 2002 and Ps17,400 in 2001, which are
shown as a component of comprehensive income of the period.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Depreciation is calculated by the straight-line
method, based on the useful lives of the assets as determined by the Company, on both
original cost and the restatement increments (see Note 3).
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Fully depreciated assets are retained in
property and accumulated depreciation accounts until they are removed from service. In
the case of disposition of assets, assets and related depreciation are removed from the
accounts and the net amount, less proceeds from the disposition, is charged or credited
to income.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|g. Licenses and computer software costs 
|-----------------------------------------



|Licenses and costs related to the development of
software for internal use are capitalized and amortized on a straight-line basis over
three years.
|---------------------------------------------------------------------------------------------------------------------------------------------------



|h. Goodwill 
|-------------



|Goodwill is restated by applying inflation
factors derived from the NCPI to the acquisition cost and is amortized by the
straight-line method over a period, not exceeding five years, that in the opinion of
management approximates the period in which the acquired subsidiaries will benefit the
Company.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|i. Long-lived assets 
|----------------------



|The Company periodically evaluates the carrying
value of long-lived assets to be held and used, including intangible assets, when events
and circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated undiscounted cash flow from such an asset is
less than its carrying value. In that event, a loss is recognized based on the amount by
which the carrying value exceeds the fair market value of the long-lived asset. Fair
market value is determined primarily using the anticipated cash flows discounted at a
rate commensurate with the risk involved.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|j. Seniority premiums 
|-----------------------



|Seniority premiums to which employees are
entitled upon termination of employment, for any cause, after 15 years of service, in
accordance with the Federal Labor Law, are recognized as expenses as these premiums
accrue, based on actuarial calculations, in conformity with Statement D-3, Labor
Liabilities issued by the MIPA. The Company has established a trust fund and created a
provision for this purpose.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (8)
| |  | ---



---





|Following is a summary of the significant data
relevant to these benefits:
|--------------------------------------------------------------------------

|                                                                                                                                 |  | September
      30,
|-------------------------------------------------------------------------------------------------------------------------------- |  | -------------------
|                                                                                                                                 |  | 2002               
|Actuarially determined projected benefit obligation                                                                              |  | (Ps11,805          
|Liability reserve to cover the plan                                                                                              |  | 10,709             
|Net assets of the trust                                                                                                          |  | 2,171              
|Unamortized prior services cost and adjustments
      and 
      other adjustments based on in supposals by experience seniority |  | (1,075             
|                                                                                                                                 |  |                    
|Net projected benefit obligation                                                                                                 |  | Ps                
|                                                                                                                                 |  |                    

|Other benefits based on length of service to
which employees may be entitled in the event of dismissal or death, in accordance with
the Federal Labor Law, are charged to income when they become payable.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|k. Foreign currency balances and transactions

|-----------------------------------------------



|Transactions in foreign currencies are recorded
at the exchange rates prevailing on the dates they are entered into. Balances denominated
in foreign currencies are translated at period-end exchange rates. Exchange differences
arising from fluctuations in rates between the date of the transaction and the date of
settlement, or the balance sheet date, are charged or credited to income.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The financial statements of foreign subsidiaries
and associated companies classified as foreign entities are restated using the NCPI of
the country in which the entity operates and subsequently translated into Mexican pesos
at the exchange rate on the date of the financial statements.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The financial statements of foreign subsidiaries
classified as integrated foreign operations are translated as follows: a) monetary assets
and liabilities at the exchange rate on the date of the financial statements; b)
non-monetary items at the historical exchange rate; c) income statement items at the
average monthly exchange rate; and d) the translation gain or loss is recorded as a
component of comprehensive financing cost. Mexican peso financial statements are restated
at the Companys balance sheet date by applying the provisions of Statement B-10.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|l. Revenue recognition 
|------------------------



|The Company recognizes its revenue in accordance
with international commercial terms (incoterms), pursuant to which delivery of products
to customers is deemed completed at different points, ranging from Tamsas to the
customers site.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|m. Debt costs 
|---------------



|Costs related to syndicated loans are amortized
over the term of the related debt.
|----------------------------------------------------------------------------------



| |  | (9)
| |  | ---



---





|n. Income tax, asset tax and employees
statutory profit sharing 
|------------------------------------------------------------------



|Income tax and employees statutory profit
sharing are charged to income of the period in which they are incurred. Asset tax is
recorded as an advance payment of income tax, at its estimated recoverable value at the
date of the financial statements.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Deferred income tax is recognized by the
comprehensive assets and liabilities method. This method consists of calculating deferred
income tax by applying the respective income tax rate to the temporary differences
between the accounting and tax values of assets and liabilities at the financial
statement date.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|o. Income per share 
|---------------------



|Income per share is computed by dividing
consolidated net income corresponding to the majority shareholders by the weighted
average number of shares outstanding during the period, taking into account the
five-to-one split mentioned in Note 5 (339,284,120 in 2002 and 2001). This weighted
average number of shares outstanding excludes 3,650,000 shares owned by Tamsider. As of
September 30, 2002 and 2001, no dilutive instruments were outstanding (see Note 5).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|p. Insurance 
|--------------



|In accordance with industry practice, the
Company is insured for catastrophic casualty and certain property and business
interruption exposures. Additionally, the Company is insured for third party liability as
well as for risks required to be covered by law or contract. Costs of insurance are
recorded as prepaid expenses and amortized by the straight-line method over the term of
the contracts. Costs resulting from noninsured losses are charged to income upon
occurrence.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|q. Derivative financial instruments 
|-------------------------------------



|The Company occasionally enters into various
derivative instruments to hedge its exchange rate exposures, mainly from balances in
United States dollars, Euros and Japanese yen. Additionally, the Company enters into
forward contracts to hedge the change in market prices related to raw material
(aluminium) and combustible (natural gas), used in its operations.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Derivative financial instruments related to
foreign currencies are valued at their fair value at the valuation date. Financial assets
and liabilities derived from these financial instruments are accounted for in the balance
sheet. Variations in the fair value of the financial instruments from one period to
another are charged to income for the period. The cost of these contracts is amortized
over their term, and is charged to interest expense (see Note 10).
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Contracts to hedge the variations in market
prices of aluminium and natural gas do not exceed the production requirements of the
period. Realized gains or losses are charged to cost of products sold upon occurrence.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (10)
| |  | ----



---





|The cumulative effect at the adoption date of
this method amounted to Ps11,374, net of taxes, and is shown as cumulative effect of
change in accounting principle in 2001, in accordance with Statement A-7 Comparability
issued by the MIPA.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|r. Comprehensive income 
|-------------------------



|The items that integrate earned capital during
the period are shown in the statement of changes in shareholders equity under
comprehensive income. Comprehensive income is shown as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                          |  | Nine-month
      period
      ended September 30,
|--------------------------------------------------------- |  | -------------------------------------------------
|                                                          |  | 2002                                             
|Majority shareholders:                                    |  |                                                  
|Net income for the period                                 |  | Ps   806,744                                     
|Cumulative translation adjustment of foreign subsidiaries |  | (68,103                                          
|Gain (loss) from holding non-monetary assets              |  | 513,381                                          
|                                                          |  |                                                  
|Comprehensive income of majority shareholders             |  | 1,252,022                                        
|Minority shareholders:                                    |  |                                                  
|Net (loss) income for the period                          |  | (40,315                                          
|Cumulative translation adjustment of foreign subsidiaries |  | (3,937                                           
|                                                          |  |                                                  
|Comprehensive (loss) income of minority shareholders      |  | (44,252                                          
|                                                          |  |                                                  
|Total comprehensive income                                |  | Ps1,207,770                                      
|                                                          |  |                                                  

|s. New accounting standards 
|-----------------------------



|In December 2001, the MIPA issued revised
Statement C-9, Liabilities, Provisions, Contingent Assets and Liabilities and
Commitments, which supersedes the original Statements C-9 and C-12, both from 1974, and
Circulars 46, 47 and 48. The provisions of this new Statement are effective for years
commencing on or after January 1, 2003; however, early adoption is recommended.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The objective of revised Statement C-9 is to
establish rules for valuation and disclosure of liabilities and provisions, to determine
particular rules for valuation and disclosure of contingent assets and liabilities, and
to provide rules for disclosure of commitments acquired by an entity as a part of its
normal activities.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In January 2002, the MIPA issued revised
Statement C-8, Intangible Assets, which supersedes the current Statement C-8, effective
since 1976. The provisions of this new Statement are effective for years commencing on or
after January 1, 2003; however, early adoption is recommended.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (11)
| |  | ----



---





|The significant provisions of revised Statement
C-8 are: (i) it establishes rules and criteria for accounting for research and
development costs; (ii) pre-operating costs identified with research and development
activities are charged to expenses; and (iii) valuation rules are based on a logical
sequence of the assets useful life, considering initial recognition and valuation of the
intangible asset, recognition of an expense, additional payments and valuation after the
initial recognition.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NOTE 2  POSITION IN FOREIGN CURRENCIES:
|----------------------------------------



|The Company had assets and liabilities
denominated in foreign currencies, mainly US dollars, as follows:
|--------------------------------------------------------------------------------------------------------

|                                          |  | September
      30,
|----------------------------------------- |  | -------------------
|                                          |  | 2002               
|Assets:                                   |  |                    
|Cash and cash equivalents                 |  | $ 95,765           
|Other current assets (mainly receivables) |  | 201,625            
|Assets of foreign subsidiaries            |  | 7,170              
|                                          |  |                    
|                                          |  | 304,560            
|                                          |  |                    
|Liabilities:                              |  |                    
|Notes payable to banks (1)                |  | 58,725             
|Other current liabilities                 |  | 66,917             
|Liabilities of foreign subsidiaries       |  | 3,226              
|Long-term debt                            |  | 108,375            
|Deferred liabilities                      |  | 17,937             
|                                          |  |                    
|                                          |  | 255,180            
|                                          |  |                    
|Net asset (liability) position            |  | $  49,380          
|                                          |  |                    

|(1) Includes $32,100 and $20,000 as of September
30, 2002 and 2001, respectively, of notes payable by Tavsa.
|------------------------------------------------------------------------------------------------------------



|All of the above monetary assets and liabilities
were translated at the exchange rates of Ps10.1667 and Ps9.5258 per US dollar at
September 30, 2002 and 2001, respectively. Assets and liabilities of Tavsa were
translated into Venezuelan bolivars (Bs) at the exchange rates of Bs1,475.5 and Bs743 per
US dollar at September 30, 2002 and 2001, respectively.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As of October, 24, 2002, date of issuance of the
consolidated financial statements, exchange rates were of Ps9.9723 and Bs1,430.75 per US
dollar.
|-------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (12)
| |  | ----



---





|NOTE 3  PROPERTY, PLANT AND EQUIPMENT:
|---------------------------------------

|                         |  | September 30, |  | Remaining estimated years of useful life | 
|------------------------ |  | ------------- |  | ---------------------------------------- | 
|                         |  | 2002          |  | 2001                                     | 
|Land                     |  | Ps 425,957    |  | Ps    416,803                            | 
|                         |  |               |  |                                          | 
|Buildings                |  | 2,218,432     |  | 2,201,031                                | 
|Machinery and equipment  |  | 13,166,538    |  | 12,525,348                               | 
|                         |  |               |  |                                          | 
|                         |  | 15,384,970    |  | 14,726,379                               | 
|Accumulated depreciation |  | (8,982,794)   |  | (8,215,336)                              | 
|                         |  |               |  |                                          | 
|                         |  | 6,402,176     |  | 6,511,043                                | 
|                         |  |               |  |                                          | 
|Construction in progress |  | 1,323,655     |  | 1,066,761                                | 
|                         |  |               |  |                                          | 
|                         |  | Ps 8,151,788  |  | Ps 7,994,607                             | 
|                         |  |               |  |                                          | 

|Depreciation expense for the nine-month periods
ended September 30, 2002 and 2001 amounted to Ps322,216 and Ps301,796, respectively.
|------------------------------------------------------------------------------------------------------------------------------------



|NOTE 4  DEBT OBLIGATIONS:
|--------------------------



|a. Short-term debt 
|--------------------



|Notes payable to financial institutions with
maturities of less than one year, and other short-term debt, were as follows:
|--------------------------------------------------------------------------------------------------------------------------

|                                                             |  | September 30,
|------------------------------------------------------------ |  | -------------
|                                                             |  | 2002         
|Unsecured loans from foreign 
        financial institutions |  | Ps 326,351   
|Current portion of long-term                                 |  |              
|unsecured loans                                              |  | 6,354        
|Current portion of long-term                                 |  |              
|syndicated loans                                             |  | 264,334      
|                                                             |  |              
|                                                             |  | Ps 597,039   
|                                                             |  |              

|The 2001 Mexican peso amounts were originally
translated using the corresponding exchange rate and are restated in thousands of Mexican
pesos of September 30, 2002 purchasing power.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The average annual interest rate over short-term
debt for the nine-month periods ended September 30, 2002 and 2001 were 3.91% and 6.18%,
respectively.
|------------------------------------------------------------------------------------------------------------------------------------------------------



|Short-term debt at September 30, 2002 was
comprised of loans to Tavsa in the amount of $32,100, guaranteed by Tamsa bearing
interest at 3.5% annually, the first installment of the long-term syndicated loan
(mentioned below in Note 4.c) in the amount of $26,000 and the first installment of the
long-term debt of Riga in the amount of $625.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (13)
| |  | ----



---





|At September 30, 2001 short-term debt was
comprised of debt of Tamsa in the amount of $10,000, bearing interest at 5.1% annually,
debt of Riga in the amount of $5,000 bearing interest at 4.6% annually and debt of Tavsa
in the amount of $20,000, guaranteed by Tamsa, bearing interest at 5.8% annually.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Interest rates include the effect of a Mexican
withholding tax of 4.9% for Tamsa and a Venezuelan withholding tax of 4.95% for Tavsa.
|-------------------------------------------------------------------------------------------------------------------------------------



|At September 30, 2002 the Company had approved
lines of credit amounting to $117,500, from which $43,700 have been utilized for
short-term loans to Tavsa and guarantees.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b. Long-term debt 
|-------------------



|Long-term debt was payable in US dollars and is
analyzed as follows:
|--------------------------------------------------------------------

|                                                                                                                                            | September 30, |          
|------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ---------
|                                                                                                                                            | 2002          |          
|Syndicated loan payable to foreignand
        
        Mexican financial institutionsmaturing in 
        May 2002,prepaid in December 2001 |               |          
|                                                                                                                                            |               |          
|Syndicated loan payable to foreign andMexican financial institutions in threesemi-annual installments from June 2003to June 2004            | Ps            | 1,321,671
|                                                                                                                                            |               |          
|Unsecured loans from financial institutions 
        to subsidiary companies                                                                |               | 50,833   
|                                                                                                                                            |               |          
|Current portion of long-term debt                                                                                                           |               | (270,688 
|                                                                                                                                            |               |          
|                                                                                                                                            | Ps            | 1,101,816
|                                                                                                                                            |               |          

|The average annual interest rates paid on
long-term debt, for the nine-month periods ended September 30, 2002 and 2001 were 3.2%
and 8.1%, respectively.
|--------------------------------------------------------------------------------------------------------------------------------------------------------



|The annual interest rate on syndicated long-term
loan as of September 30, 2002 and 2001 was 3.1% and 5.5%, respectively.
|------------------------------------------------------------------------------------------------------------------------



|At September 30, 2002, long-term debt of $5,000
is payable by Riga guaranteed by Tamsa bearing interest at an average annual rate of 3.7%
with semi-annual installments of $625 commencing on June, 2003.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At September 30, 2001, long-term debt in an
amount of $5,900 was payable by Tavsa guaranteed by Corporacion Tamsa bearing interest at
an average annual rate of 10.5%. This debt was restructured in July 2002 by contracting a
$6,500 long-term loan with a foreign financial institution bearing interest at 3.3%
annually.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (14)
| |  | ----



---





|Interest rates include the effect of a Mexican
withholding tax of 4.9% for Tamsa and a Venezuelan withholding tax of 4.95% for Tavsa.
|-------------------------------------------------------------------------------------------------------------------------------------



|Based on the terms of the above loan agreements,
payments over the next five years are expected to be as follows:
|-----------------------------------------------------------------------------------------------------------------

| | Twelve-month period
        ending September 30, |  |   |         | 
| | ------------------------------------------------ |  | - | ------- | 
| | 2003                                             |  | $ | 26,625  | 
| | 2004                                             |  |   | 105,250 | 
| | 2005                                             |  |   | 1,250   | 
| | 2006                                             |  |   | 1,250   | 
| | 2007                                             |  |   | 625     | 
| |                                                  |  |   |        
| |                                                  |  | $ | 135,000 | 
| |                                                  |  |   |        

|c. Syndicated loans 
|---------------------



|On December 14, 2001, Tamsa paid the $100,000
syndicated loan from thirteen foreign banks and two Mexican banks at LIBOR plus 1.75
percentage points, maturing on May 23, 2002. On the same date, Tamsa entered into a new
syndicated loan in the amount of $130,000, with a term of two and a half years. This new
loan provides for payments of $26,000 in June 2003 and $52,000 each in December 2003 and
June 2004, and bears interest at LIBOR plus 1.125 percentage points for the first two
years, and at LIBOR plus 1.25 percentage points for the last six months. This loan was
utilized to repay the syndicated loan of $100,000, to cover working capital needs and for
other general corporate purposes of the Company.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|d. Covenants 
|--------------



|The most significant covenants under the current
syndicated loan agreement are as follows:
|------------------------------------------------------------------------------------------

| |  | Maintenance of minimum levels of working capital
      ratio;
|- |  | -------------------------------------------------------------

| |  | Maintenance of maximum levels of total indebtness;
      and
|- |  | ------------------------------------------------------------

| |  | Compliance with debt service ratios.
|- |  | ------------------------------------



|At September 30, 2002 the Company was in
compliance with the above mentioned covenants.
|---------------------------------------------------------------------------------------



|The current syndicated loan is guaranteed by two
of the Companys subsidiaries.
|-------------------------------------------------------------------------------



| |  | (15)
| |  | ----



---





|NOTE 5  SHAREHOLDERS EQUITY:
|------------------------------



|At the April 27, 2001 ordinary meeting, the
Companys stockholders approved a five-to-one split of Tamsas shares effective July 10,
2001. Also, the conversion factor of the American Depositary Receipts (ADR) was modified,
from one ADR to one share, to one ADR to five shares, so that the value of the ADR traded
in the American Stock Exchange in New York would not be changed.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The objective of the split was to reduce the
relative price of Tamsas shares and, therefore, to increase their trading volume in
Mexico. For comparative purposes, amounts related to number of shares for periods prior
to July 10, 2001, have been adjusted to reflect the split retroactively.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|All outstanding shares have been subscribed and
paid in full and carry the same rights and obligations.
|-------------------------------------------------------------------------------------------------------



|At September 30, 2002, the Companys authorized
capital stock consisted of 342,934,120 (68,586,824 before the split) common nominative
shares with no par value. The number of authorized and outstanding shares at September
30, 2002 and 2001 was as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Series | Authorized  | In treasury (1) | Outstanding
| | ------ | ----------- | --------------- | -----------
| | Single | 342,934,120 | (3,650,000)     | 339,284,120
| |        |             |                 |            

|(1) |  | Shares owned by Tamsider, a subsidiary of the
      Company, which were eliminated in consolidation.
|--- |  | ----------------------------------------------------------------------------------------------------



|At the April 30, 2002 ordinary shareholders
meeting dividends amounting to Ps278,946 (Ps273,546 nominal, equivalent to $0.0875
dollars per share and to $0.4374 dollars per ADR at the exchange rate of Ps9.1182 per
dollar) were declared, payable on May 31, of that year. Dividends paid to parties
resident in Mexico and abroad were not subject to an income withholding tax.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At the April 27, 2001 ordinary shareholders
meeting, dividends amounting to Ps306,906 (Ps291,075 nominal, equivalent to $0.0875
dollars per share and to $0.4374 dollars per ADR at the exchange rate of Ps9.7025 per
dollar) were declared, payable on May 30 of that year. The payment of these dividends was
subject to a 7.6925% income tax withholding.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Capital stock balance at September 30, 2002 and
2001 restated as of thousands of Mexican pesos of September 30, 2002, comprised the
following:
|----------------------------------------------------------------------------------------------------------------------------------------------

|                                        |  |    |            | 
|--------------------------------------- |  | -- | ---------- | 
|Contributions in nominal pesos          |  | Ps | 1,195,221  | 
|Cumulative inflation adjustments        |  |    | 9,321,115  | 
|                                        |  |    |           
|Amounts as reported in the consolidated |  |    |            | 
|balance sheet                           |  | Ps | 10,516,336 | 
|                                        |  |    |           

|As of September 30, 2002, the Company and its
subsidiaries had retained earnings amounting to Ps908,093 appropriated to legal reserves.
|---------------------------------------------------------------------------------------------------------------------------------------



| |  | (16)
| |  | ----



---





|Dividends paid from previously taxed retained
earnings (which amounted to Ps415,366 at September 30, 2002) are not subject to any
income tax payable by the Company. Dividends paid from retained earnings not previously
taxed are subject to a 53.85% tax payable by the Company.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Capital reductions are accorded the same tax
treatment as dividends for any amount exceeding the value of the cash contributions,
adjusted for inflation, plus previously taxed earnings and reinvested previously taxed
earnings in accordance with the provisions of the Income Tax Law. Such inflation-indexed
contributions amounted to Ps14,410,122 at September 30, 2002.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At September 30, 2002, Siderca International,
ApS (Siderca, ApS) and affiliated companies had an ownership interest in the Company of
approximately 51%.
|--------------------------------------------------------------------------------------------------------------------------------------------------------



|Siderca, ApS is a wholly-owned subsidiary of
Siderca Sociedad Anonima Industrial y Comercial (Siderca), an Argentine company and one
of the worlds leading manufacturers of seamless steel pipe. As a result of this majority
ownership, in an ordinary meeting held on April 30, 2002, the Companys shareholders
appointed the eleven members of Tamsas Board of Directors following the nominations made
by Siderca.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NOTE 6  INCOME TAX, ASSET TAX AND EMPLOYEES
      STATUTORY PROFIT SHARING:
|-----------------------------------------------------------------------------



|The Company and its subsidiaries do not file a
consolidated income tax return.
|------------------------------------------------------------------------------



|The provisions for income tax, asset tax and
employees statutory profit sharing charged to income were as follows:
|-------------------------------------------------------------------------------------------------------------------

|                                          | Nine-month period 
      ended September 30,
|----------------------------------------- | --------------------------------------------
|
|
|
|                                          |                                             
|                                          |                                             
|Consolidated income tax currently payable |                                             
|Asset tax                                 |                                             
|Employees statutory profit sharing       |                                             
|                                          |                                             
|                                          |                                             
|Deferred tax                              |                                             
|Tax benefit (see last                     |                                             
|paragraph of this Note)                   |                                             
|                                          |                                             
|                                          |                                             
|                                          |                                             



| |  | (17)
| |  | ----



---





|The following table shows a reconciliation of
financial reporting income before income tax and taxable income:
|--------------------------------------------------------------------------------------------------------------

|                                                                                                                                |  | Nine-month period ended September
      30, |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | -
|                                                                                                                                |  | 2002                                        |  
|Income before income tax, asset tax, employees
        statutory profit sharing, equity in associated companies and other item |  | Ps 876,606                                  |  
|                                                                                                                                |  |                                             |  
|Permanent differences:                                                                                                          |  |                                             |  
|Net monetary loss for tax purposes                                                                                              |  | (52,620                                     | )
|Gain on net monetary position                                                                                                   |  | (51,101                                     | )
|                                                                                                                                |  |                                             |  
|Timing differences:                                                                                                             |  |                                             |  
|Depreciation and other items                                                                                                    |  | 359,813                                     |  
|Depreciation and accelerated depreciation of fixed
        asset acquisitions                                                   |  | (141,752                                    | )
|Excess of cost of sales over inventory purchases                                                                                |  | 133,051                                     |  
|                                                                                                                                |  |                                             |  
|Other                                                                                                                           |  | 276,055                                     |  
|                                                                                                                                |  |                                             |  
|Combined net taxable income                                                                                                     |  | 1,400,052                                   |  
|Current tax losses arising from the period                                                                                      |  | 22,610                                      |  
|                                                                                                                                |  |                                             |  
|Taxable income                                                                                                                  |  | 1,422,662                                   |  
|Tax rate (%)                                                                                                                    |  | 35                                          |  
|                                                                                                                                |  |                                             |  
|                                                                                                                                |  | 497,932                                     |  
|Restatement for inflation                                                                                                       |  | 7,335                                       |  
|                                                                                                                                |  |                                             |  
|                                                                                                                                |  | 505,267                                     |  
|Asset tax and income tax loss                                                                                                   |  |                                             |  
|carryforwards and other                                                                                                         |  | (65,823                                     | )
|                                                                                                                                |  |                                             |  
|Provision for income tax                                                                                                        |  | Ps 439,444                                  |  
|                                                                                                                                |  |                                             |  

|The main temporary differences of Tamsa and its
Mexican subsidiaries for which deferred income tax is recognized, are analyzed as follows:
|------------------------------------------------------------------------------------------------------------------------------------------

|                                      |  | September
      30, |  
|------------------------------------- |  | ------------------- | -
|                                      |  | 2002                |  
|                                      |  |                     |  
|Inventories                           |  | Ps 833,103          |  
|Properties, plant and equipment  Net |  | 6,110,559           |  
|Provisions and allowances             |  | (287,516            | )
|Tax loss carryforwards                |  | (68,631             | )
|                                      |  |                     |  
|                                      |  | 6,587,515           |  
|Income tax rate                       |  | 35                  | %
|                                      |  |                     |  
|Deferred income tax                   |  | 2,305,630           |  
|Asset tax carryforwards               |  | (24,789             | )
|                                      |  |                     |  
|Deferred income tax                   |  | Ps 2,280,841        |  
|                                      |  |                     |  



| |  | (18)
| |  | ----



---





|Deferred income tax of the period was determined
as follows:
|------------------------------------------------------------

|                                                   |  | Nine-month period
      ended September 30, |  
|-------------------------------------------------- |  | ------------------------------------------- | -
|                                                   |  | 2002                                        |  
|Deferred income tax at the end of the period       |  | Ps 2,280,841                                |  
|Deferred income tax at the beginning of the period |  | (2,118,300                                  | )
|Application to the loss from holding               |  |                                             |  
|non-monetary assets                                |  | (258,358                                    | )
|                                                   |  |                                             |  
|Deferred income tax of the period                  |  | (Ps 95,817                                  | )
|                                                   |  |                                             |  

|As a result of modifications to the Income Tax
Law, approved on January 1, 2002, the current income tax rate of 35% will be reduced by
1% annually beginning in 2003 until it reaches a rate of 32% in 2005. This gradual
decrease of the income tax rate will reduce deferred tax liability and will increase net
income and stockholders equity by approximately Ps176,858.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At September 30, 2002, the Company and its
subsidiaries had an aggregate Ps68,631 of accumulated tax losses, which can be amortized
against profits subject to income tax arising in subsequent years, as shown bellow:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Year      |  | Restated    |  | Year of    |  | 
| | --------- |  | ----------- |  | ---------- |  | 
| | of origin |  | amount      |  | expiration |  | 
| | 1998      |  | Ps   41,575 |  | 2008       |  | 
| | 1999      |  | 431         |  | 2009       |  | 
| | 2000      |  | 18,512      |  | 2010       |  | 
| | 2001      |  | 8,113       |  | 2011       |  | 
| |           |  |             |  |            |  | 
| |           |  | Ps   68,631 |  |            |  | 
| |           |  |             |  |            |  | 

|The tax loss carryforwards amount was restated
in accordance with the provisions of the Income Tax Law.
|-------------------------------------------------------------------------------------------------------



|According to the Mexican Tax Law, the Company
must pay annually the higher of income or asset tax, which is determined based on the
average value of assets, less certain liabilities established by Law. Asset tax payments,
when higher than income tax, are refundable and may be carried forward for ten years and
credited against future income tax to the extent they exceed future asset tax. The
Company has the right to recover the asset tax paid until 2002 in the aggregate amount of
Ps24,789, as shown on the next page.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (19)
| |  | ----



---



| | Year when    |  | Restated     |  |  | Year of    | 
| | ------------ |  | ------------ |  |  | ---------- | 
| | tax was paid |  | amount       |  |  | expiration | 
| | 1993         |  | Ps     2,538 |  |  | 2003       | 
| | 1994         |  | 1,327        |  |  | 2004       | 
| | 1995         |  | 1,259        |  |  | 2005       | 
| | 1996         |  | 2,059        |  |  | 2006       | 
| | 1997         |  | 2,568        |  |  | 2007       | 
| | 1998         |  | 4,218        |  |  | 2008       | 
| | 1999         |  | 5,196        |  |  | 2009       | 
| | 2000         |  | 4,332        |  |  | 2010       | 
| | 2001         |  | 908          |  |  | 2011       | 
| | 2002         |  | 384          |  |  | 2012       | 
| |              |  |              |  |  |            | 
| |              |  | Ps   24,789  |  |  |            | 
| |              |  |              |  |  |            | 

|The asset tax amount was restated in accordance
with the provisions of the Asset Tax Law.
|-----------------------------------------------------------------------------------------



|In the nine-month periods ended September 30,
2002 and 2001, the Company recorded provisions amounting to Ps120,151 and Ps90,098
(Ps118,431 and Ps84,441 nominal amounts), respectively, corresponding to employees
statutory profit sharing.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Tax benefit:
|------------



|During 2002, Tamsa received a favorable court
decision in the injunction case brought by Tamsa against the Ministry of Finance. This
decision increased recoverable income tax loss carryforwards of prior years, the main
effect of which was a benefit of Ps338,740 (nominal), which is included in the provision
for income tax, asset tax and employees statutory profit sharing in the statement of
income for the nine-month period ended September 30, 2002.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NOTE 7  BALANCES AND TRANSACTIONS WITH RELATED PARTIES:
|--------------------------------------------------------



|Tamsa and Siderca maintain several operating
agreements within the scope of their strategic alliance.
|-----------------------------------------------------------------------------------------------------



|The Company had the following balances with
Siderca and its affiliates:
|-----------------------------------------------------------------------

|                    |  | September 30, 
|------------------- |  | --------------
|                    |  | 2002          
|Accounts receivable |  | Ps   1,286,050
|Accounts payable    |  | 360,075       



| |  | (20)
| |  | ----



---





|Transactions with Siderca and its affiliates are
summarized as follows:
|-----------------------------------------------------------------------

|                                   |  | Nine-month
      period
      ended September 30,
|---------------------------------- |  | -------------------------------------------------
|                                   |  | 2002                                             
|Revenues:                          |  |                                                  
|Sales of pipe                      |  | Ps 2,058,397                                     
|Rent and services                  |  | 47,322                                           
|                                   |  |                                                  
|Purchases and expenses:            |  |                                                  
|Purchase of raw materials and pipe |  | Ps    297,338                                    
|Purchase of manufacturing          |  |                                                  
|equipment, tools and spare parts   |  | 6,111                                            
|Brokerage service commissions      |  | 113,458                                          
|Technical assistance and           |  |                                                  
|industrial support                 |  | 2,896                                            
|Royalties                          |  | 37,413                                           
|Investment in fixed assets         |  | 59,914                                           
|Plant maintenance                  |  | 34,885                                           
|Other expenses                     |  | 149,427                                          

|NOTE 8  OTHER INFORMATION:
|---------------------------



|Following are details of certain items included
in the consolidated balance sheets at September 30, 2002 and 2001.
|------------------------------------------------------------------------------------------------------------------

|a. |  | Cash
and cash equivalents:
|-- |  | --------------------------

| |  | The Company
places its investments with high-credit-quality financial institutions. At September 30,
2002 and 2001, the Company had cash deposits amounting to Ps4,372 and Ps63,174,
respectively, the use of which is restricted to guarantees granted in support of loans to
subsidiaries and to cover bid and performance bonds related to export operations.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b. |  | Accounts
and notes receivable:
|-- |  | ------------------------------

|                                    |  | 2002         |  | 2001        
|----------------------------------- |  | ------------ |  | ------------
|Customers                           |  | Ps 2,244,605 |  | Ps 2,009,027
|Officers and employees              |  | 24,051       |  | 23,569      
|Income tax receivable (tax benefit) |  | 97,916       |  |            
|Other accounts receivable           |  | 235,182      |  | 129,138     
|                                    |  |              |  |             
|                                    |  | 2,601,754    |  | 2,161,734   
|Allowance for doubtful accounts     |  | (61,719)     |  | (62,834)    
|                                    |  |              |  |             
|                                    |  | Ps 2,540,035 |  | Ps 2,098,900
|                                    |  |              |  |             



| |  | (21)
| |  | ----



---



| |  | The majority
of the Companys trade accounts receivable are derived from sales to unaffiliated
companies in the oil exploration and production industry. The Company performs ongoing
credit evaluations of its customers financial condition, requires collateral whenever
deemed necessary, and maintains allowances for potential credit losses.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c. |  | Inventories:
|-- |  | ------------

|                                      |  | 2002                |   | 2001                |  
|------------------------------------- |  | ------------------- | - | ------------------- | -
|Scrap, sponge iron, and other         |  | Ps   
      386,675 |   | Ps   
      356,510 |  
|Finished and in-process goods         |  | 684,795             |   | 793,622             |  
|Tools, accessories, spare parts       |  |                     |   |                     |  
|and material consumption              |  | 606,465             |   | 647,726             |  
|                                      |  |                     |   |                     |  
|                                      |  | 1,677,935           |   | 1,797,858           |  
|Allowance for obsolescent inventories |  | (237,195            | ) | (250,229            | )
|                                      |  |                     |   |                     |  
|                                      |  | Ps 1,440,740        |   | Ps 1,547,629        |  
|                                      |  |                     |   |                     |  

|d. |  | Prepaid
expenses and recoverable taxes:
|-- |  | ---------------------------------------

|                                   |  | 2002       |  | 2001      
|---------------------------------- |  | ---------- |  | ----------
|Other prepaid taxes                |  | Ps   4,760 |  | Ps  17,934
|Debt issuance expenses and other   |  | 28,861     |  | 9,859     
|Deferred special maintenance to be |  |            |  |           
|amortized                          |  | 496        |  | 17,371    
|                                   |  |            |  |           
|                                   |  | Ps 34,117  |  | Ps  45,164
|                                   |  |            |  |           

|e. |  | Other
accounts payable and accrued expenses:
|-- |  | --------------------------------------------

|                                    |  | 2002        |  | 2001         
|----------------------------------- |  | ----------- |  | -------------
|Income tax payable                  |  |             |  | Ps    118,883
|Employees statutory profit sharing |  | Ps  118,432 |  | 88,619       
|Other taxes payable                 |  | 255,695     |  | 50,238       
|Interest and commissions payable    |  | 5,231       |  | 7,791        
|Other                               |  | 84,083      |  | 131,610      
|                                    |  |             |  |              
|                                    |  | Ps  463,441 |  | Ps   397,141 
|                                    |  |             |  |              



| |  | (22)
| |  | ----



---





|NOTE 9  INFORMATION ABOUT FOREIGN OPERATIONS:
|----------------------------------------------



|The Company has been involved in the following
events regarding its foreign commercial activities:
|--------------------------------------------------------------------------------------------------

|a. |  | In June 1995 the US Department of Commerce established
      compensatory quotas of 23.79% applicable to the Oil Country Tubular Goods
      (OCTG) exports, which were reduced to 21.79% in July 1996. During the five
      years in which the antidumping order was applicable, there were three administrative
      reviews in which no dumping margin was found. In August 2000, Tamsa started
      a sunset review process on this case. On March 9, 2001, the US Department
      of Commerce issued a definitive resolution continuing the application of
      compensatory quotas of 21.79% on Mexican exports of OCTG and on June 15,
      2001, a final resolution of the US International Trade Commission was issued,
      which ratified the continuation of the antidumping order. Tamsa requested
      to appeal these decisions, which it considers unjustified, before a North
      American Free Trade Agreement (NAFTA) panelalso, the Mexican government
      is preparing an appeal to the World Trade Organization.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b. |  | On June 30, 1999, five American steel manufacturers
      (plaintiffs) filed with the US Department of Commerce an antidumping complaint
      against manufacturers of conduction seamless steel pipes of high and standard
      pressure from Japan, Romania, South Africa, Mexico and the Czech Republic.
      In July 2000, the final resolution on antidumping was issued, resulting
      in a margin of 15.05%. The plaintiffs agreed that line pipes installed in
      water deeper than 1,500 feet (458 meters) not be subject to antidumping
      restrictions, since American steel manufacturers cannot produce these types
      of pipes.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c. |  | In March 1999, Tamsa (through The Mexican Ministry
      of Commerce and Industry, currently The Ministry of Economics) requested
      the initiation of an antidumping investigation and the application of dumping
      margins on seamless steel pipe imports from Japan. The request refers to
      seamless steel line pipe with a diameter of 16 inches or less. In November
      2000, the final resolution was issued establishing compensatory quotas of
      99.9%, excluding pipe with a diameter smaller than 4 inches.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|d. |  | In June 2001, investigations were initiated in
      the United States under section 201 of the 1974 Act, concerning the need
      to impose safeguard provisions against imported steel products that could
      damage the American steel industry. On March 6, 2002, the United States
      excluded Mexico and Canada, as members of NAFTA, from these investigations.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|e. |  | In April 2002, a new process of safeguard was
      initiated by the Canadian government, relating, among other steel products,
      to non-oil conduction pipes with a diameter up to 16 inches. On July 5,
      2002, Mexico, as a member of NAFTA, was excluded from this process.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (23)
| |  | ----



---



|f. |  | On May 20, 2002, the government of The Peoples
      Republic of China initiated an investigation for the application of safeguard
      provisions against steel products imports. This investi-gation included
      OCTG pipe, as well as line pipe used in oil ducts and gas ducts. Provisional
      measures were imposed for a six-month period, which established a compensatory
      quota of 8% and a global amount of 157,000 metric tons starting on May 24,
      2002. Tamsa has provided the information required by the Chinese government
      and the hearings have concluded. The Company expects that the final resolution
      of this process will be on November 20, 2002.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|g. |  | The Mexican steel industry requested The Ministry
      of Economics to increase duties on certain steel products from countries
      that do not have trade agreements with Mexico, in order to protect against
      imports from countries that cannot sell their products in the United States
      and divert them to Mexico as an alternative market. On September 5, 2001,
      the Official Gazette established a decree modifying the duties on 41 products,
      including all non-oil related seamless tubular products, as well as welded
      steel fittings.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | On March 15, 2002, duties for these products
      were subject to another increase, from 25% to 35%; this increase was motivated
      by the significant increase in imports from Eastern Europe. On September
      24, 2002, the Mexican government reduced the duty on the above-mentioned
      products back to 25%, effective until September 2003.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NOTE 10  FAIR VALUE OF FINANCIAL INSTRUMENTS AND
      OTHER INVESTMENTS AND COMMITMENT:
|-----------------------------------------------------------------------------------------



|The following methods and assumptions were used
by the Company in estimating the fair value of its financial instruments:
|-------------------------------------------------------------------------------------------------------------------------



|Cash and cash equivalents, short-term
investments and accounts and notes receivable - The carrying amounts approximate their
fair market value.
|-----------------------------------------------------------------------------------------------------------------------------------------------



|Short-term notes payable to banks - The carrying
amounts of the Companys borrowings under its short-term credit agreements approximate
their fair value. These liabilities are presented in the consolidated balance sheets at
their face value. The interest payable on these liabilities is included in other accounts
payable and accrued expenses and the carrying amounts of these liabilities also
approximate their fair market values.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Derivative financial instruments - The Company
enters into forward contracts in foreign currencies, metals and energy sources.
|------------------------------------------------------------------------------------------------------------------------------



|Due to the variations in the aluminium market
price during 2000, the Company entered into twelve forward contracts for this commodity,
with monthly maturities, to buy aluminium from July 2000 to June 2001, resulting in a net
gain amounting to $74 during the maturity of those contracts.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (24)
| |  | ----



---





|Due to the increase in natural gas market price,
in the second half of year 2000, the Company signed two forward contracts to buy natural
gas for the period from September 2000 to February 2001, resulting in a net gain
amounting to $791 during the maturity of those contracts.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|To hedge the decrease in natural gas market
price, on March 2, 2001, the Company entered into an agreement with ENRON North America
Corp. (ENRON) for a put option to sell 200,000 million British Thermal Units (BTU) of
natural gas monthly, with a strike price of $4.05 dollars per million BTU from March 2002
to December 2003. However, as a result of Enrons bankruptcy, there is no reasonable
prospect of exercising the Companys option under this contract, consequently the premium
of $2,290 paid to ENRON was written-off in the last quarter of 2001, as there was no
future economic benefit from this asset.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In order to cover its exposure from the contract
signed with Petroleros Mexicanos (PEMEX), mentioned below, and to swap the fixed price
from $4 dollars per million BTU established in the contract into the market price, during
March and April, 2002, the Company entered into two option contracts with Citibank, N.
A., New York and JP Morgan Chase Bank to sell 160,000 million BTU of natural gas monthly
for each contract, at a strike price of $4 dollars per million BTU when market prices of
natural gas are not lower than $2 dollars and not higher than $4 dollars per million BTU,
for the period from May 1, 2002 to February 28, 2003, likewise; for the period from March
1, to December 31, 2003, the strike price is $4 dollars per million BTU when market
prices of natural gas are not lower than $2.25 dollars and not higher than $4 dollars per
million BTU. Likewise, the Company is obligated to sell natural gas at $4 dollars when
market prices are higher than $4 dollars for the period from May 1, 2002 to December 31,
2003. Additionally, the Company is obligated to buy 320,000 million BTU of natural gas
monthly at a base price of $2.765 dollars per million BTU, for the period from January 1,
2004 to December 31, 2005.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On May 17, 2001, the Company entered into two
$5,000 forward currency contracts to exchange Mexican pesos for US dollars. The first
contract had a fixed exchange rate of Ps9.48 per US dollar maturing on November 21, 2001.
The second contract had a fixed exchange rate of Ps9.94 per US dollar maturing on May 21,
2002. On September 12, 2001, the Company offset the effects of the forward contracts
entered into on May 17, 2001 by entering into two additional $5,000 forward contracts to
exchange US dollars for Mexican pesos with the same maturity dates as the contracts
mentioned above. The contract fixed exchange rates were Ps9.575 and Ps10.045,
respectively. These contracts generated a net gain of Ps475 and Ps525, respectively,
which was recorded in income of year 2001.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|To fulfill the annual payments established in
the contracts signed with NKKTubes, affiliated company, and to hedge its exchange rate
exposures between Japanese yen and US dollar, on December 14, 2001, the Company entered
into a JPY37,392 forward contract to exchange Japanese yens for US dollars at a fixed
exchange rate of JPY125.78 per US dollar, maturing on July 24, 2002. At the maturity date
of this contract, the exchange rate was JPY116.6 per US dollar, resulting in a net gain
of $23.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (25)
| |  | ----



---





|On December 18, 2001, the Company signed a
$5,000 forward contract to exchange US dollars for Mexican pesos at a fixed exchange rate
of Ps9.48 maturing on June 19, 2002. On May 13, 2002, the Company offset the effect of
the contract mentioned above by entering into a new forward contract to exchange US
dollars with the same amount and maturity date of the first contract, at a fixed exchange
rate of Ps9.56, realizing a net gain of Ps400 at the maturity date of the contracts.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On June 19 and 20, 2002, in order to hedge the
exchange rate exposures on receivables denominated in Euros maturing in July and August,
2002, the Company entered into two forward contracts to sell EUR6,800 and EUR8,975 at a
fixed exchange rate of $0.96 and $0.95 per EUR, respectively, with maturities at July 26
and August 30, 2002, respectively.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Commitment:
|-----------



|On February 22, 2001, the Company entered into a
three-year agreement with PEMEX to receive approximately 296,600 million BTUs of natural
gas, on a monthly basis, for the period from January 1, 2001 to December 31, 2003, at a
fixed price of $4.0 dollars per million BTU.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NOTE 11  INVESTMENTS IN ASSOCIATED COMPANIES:
|----------------------------------------------



|Consorcio Siderurgia Amazonia, Ltd.:
|------------------------------------



|On January 27, 1998, Consorcio Siderurgia
Amazonia, Ltd. (Amazonia), of which Tamsa owned 12.5% through its wholly-owned subsidiary
Tamsider LLC, acquired 70% of CVG Siderurgica del Orinoco, C. A. (Sidor), a Venezuelan
company, for $1,202,000. The purchase price was subsequently reduced by $150,000.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The share purchase agreement contains certain
covenants for Amazonia and its shareholders, for a period of five years that are required
to be guaranteed by Amazonias shareholders to the Fondo de Inversiones de Venezuela (The
Venezuelan Investment Fund) and Corporacion Venezolana de Guayana (CVG) for up to
$150,000. Covenants include the obligations to continue with Sidors operations, to
supply the requirements of the Venezuelan market, to make certain capital investments and
to manage the labor force, as well as the obligation to maintain majority ownership of
Sidor. This guarantee was reduced to $125,000 in 2001 and to $75,000 in 2002, since there
was no execution of the guarantee in the immediately preceding year. At September 30,
2002, Tamsas maximum proportionate exposure was $9,375; this guarantee expires in
January 2003.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Additionally, the shareholders of Amazonia
entered into an agreement under which Amazonia and its stockholders were jointly liable
to the Venezuelan government for certain debt of Sidor amounting to $602,800. This
guarantee was limited only to any interest due and unpaid during the years ended December
31, 1998 and 1999; however, from the third year onwards it also covered any principal
amounts due and unpaid.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (26)
| |  | ----



---





|On February 23, 2000, Amazonia and Sidor
completed agreements with their creditors to restructure their respective debts. The
restructuring agreement with the creditors of Amazonia and of Sidor required additional
contributions of $300,000 by the stockholders of Sidor, of which $210,000 were provided
indirectly by the stockholders of Amazonia through the subscription of subordinated
convertible debt and through capital contributions, and the Company was granted a
two-year grace period in order to amortize its restructured liabilities.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Tamsas participation, via Tamsider LLC, was
$36,144, which included capital and interest due on prior loans to Sidor of $18,866. A
portion of the funds was contributed as capital stock of $18,137, which increased
Tamsider LLCs equity in Amazonia from 12.5% to 14.1% and the remainder as subscription
of convertible debentures of subordinated debt of $18,007 issued by Amazonia. Tamsider
LLCs participation included the portion corresponding to Siderurgica Venezolana Sivensa,
S. A., a stockholder of Amazonia, which was not in a position to contribute additional
funds.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As a result of the restructuring process,
Amazonia had a debt of approximately $245,000 (excluding the subordinated convertible
debt explained in more detail below) and Sidors debt was approximately $1,200,000.
Additionally, Sidor agreed to assign a part of its fixed assets to a trust designating
its creditors as beneficiaries for up to $827,000. Tamsider LLCs shares in Amazonia
continue to be pledged to Amazonias creditors.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As a consequence of continuing negative
conditions in the worldwide steel industry, the slow-down in the financial markets, the
adverse economic and politic situation in Venezuela and other adverse factors, at
September 30, 2002, Sidor was in default on certain contractual obligations under the
restructuring agreement with its creditors and The Venezuelan Investment Fund, such as:
(i) payment of interest due on December 18, 2001, (ii) the deposit of payments of
interest, in reserve accounts, on certain debts as stated in the restructuring
agreements, and (iii) meeting certain financial ratios. As a result of this default,
Sidors debt is callable at the option of its creditors.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Amazonia and Sidor continue the negotiations
with their creditors and The Venezuelan Government, to restructure their debt. At the
date of these financial statements, such negotiations have resulted in significant
achievements, including the signing of an agreement between both parties.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Tamsa accounts for its equity in the results of
Amazonia, through its subsidiary, by translating Amazonias financial statements
expressed in US dollars at the exchange rate on the balance sheet date. Additionally,
Tamsa recognized a gain on net monetary position corresponding to Amazonia of Ps55,764
and Ps51,645 at September 30, 2002 and 2001, respectively, which is included in the
equity in income (loss) of associated companies in accordance with Statement B-15 issued
by the MIPA.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (27)
| |  | ----



---





|During the last quarter of 2001, due to the
financial condition of Sidor, as a result of the situations mentioned above, Tamsider LLC
recorded a valuation allowance of Ps152,501 ($15,000) to reduce the value of its
investment in Amazonia and the subordinated convertible debentures.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Tamsas initial investment, made through
Tamsider LLC, of $87,800 and its additional capital contribution of $18,137, and $18,006
of subordinated convertible debentures, have been reduced at September 30, 2002 due to
the recognition of Amazonias results using the equity method of accounting, and for the
valuation allowance mentioned above up to Ps205,444 ($20,208). Assets of Tamsider LLC
comprise Amazonias shares and the subordinated convertible debentures.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At September 30, 2002, Tamsider LLC continues
having an exposure of $97,131 corresponding to guarantees covering Sidors debt with The
Venezuelan Bank of Economic and Social Development (formerly the Venezuelan Investment
Fund). In addition, Tamsa continues to be guarantor on the performance bond mentioned
above.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (28)
| |  | ----



---