FORM 6-K
Table of Contents

United States
Securities and Exchange Commission

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant To Rule 13a-16 or 15d-16
of the
Securities Exchange Act of 1934

For the month of

May 2004

Valley of the Rio Doce Company

(Translation of Registrant’s name into English)

Avenida Graça Aranha, No. 26
20005-900 Rio de Janeiro, RJ, Brazil
(Address of principal executive office)

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

(Check One) Form 20-F [X] Form 40-F [   ]

(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1))

(Check One) Yes [   ] No [X]

(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7))

(Check One) Yes [   ] No [X]

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

(Check One) Yes [   ] No [X]

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82- ____________.)

 


TABLE OF CONTENTS

INDEX TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION (US GAAP)
SIGNATURES


Table of Contents

This current report on Form 6-K is hereby incorporated by reference into the Registration Statement on Form F-4 of Vale Overseas Limited, File No. 333-109610; the Registration Statement on Form F-4 of Companhia Vale do Rio Doce, File No. 333-109610-01; the Registration Statement on Form F-3 of Vale Overseas Limited, File No. 333-110867-01; and the Registration Statement on Form F-3 of Companhia Vale do Rio Doce, File No. 333-110867.

 


Table of Contents

COMPANHIA VALE DO RIO DOCE

INDEX TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
         
    Page
Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003
    F-3  
Consolidated Statements of Income for the three-month periods ended March 31, 2004 and 2003 and December 31, 2003
    F-5  
Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2004 and 2003 and December 31, 2003
    F-6  
Consolidated Statements of Changes in Stockholders’ Equity for the three-month periods ended March 31, 2004 and 2003 and December 31, 2003
    F-7  
Notes to the Consolidated Financial Information
    F-8  

F - 1


Table of Contents

 

 

 

 

 

[Intentionally Left Blank]

 

 

 

 

 

F-2


Table of Contents

Condensed Consolidated Balance Sheets
Expressed in millions of United States dollars

                 
    March   December
    31, 2004
  31, 2003
    (unaudited)        
Assets
               
Current assets
               
Cash and cash equivalents
    1,001       585  
Accounts receivable
               
Related parties
    127       115  
Unrelated parties
    710       703  
Loans and advances to related parties
    14       56  
Inventories
    502       505  
Deferred income tax
    144       91  
Others
    440       419  
 
   
 
     
 
 
 
    2,938       2,474  
 
   
 
     
 
 
Property, plant and equipment, net
    6,727       6,484  
Investments in affiliated companies and joint ventures and other investments, net of provision for losses on equity investments
    1,069       1,034  
Other assets
               
Goodwill on acquisition of subsidiaries
    448       451  
Loans and advances
               
Related parties
    40       40  
Unrelated parties
    66       68  
Prepaid pension cost
    78       82  
Deferred income tax
    205       234  
Judicial deposits
    424       407  
Unrealized gain on derivative instruments
    1       5  
Others
    165       155  
 
   
 
     
 
 
 
    1,427       1,442  
 
   
 
     
 
 
TOTAL
    12,161       11,434  
 
   
 
     
 
 

F - 3


Table of Contents

Condensed Consolidated Balance Sheets
Expressed in millions of United States dollars
(Except number of shares)

(Continued)

                 
    March   December
    31, 2004
  31, 2003
    (unaudited)        
Liabilities and stockholders’ equity
               
Current liabilities
               
Suppliers
    441       482  
Payroll and related charges
    87       78  
Interest attributed to stockholders
    276       118  
Current portion of long-term debt - unrelated parties
    695       1,009  
Short-term debt
    171       129  
Loans from related parties
    87       119  
Others
    390       318  
 
   
 
     
 
 
 
    2,147       2,253  
 
   
 
     
 
 
Long-term liabilities
               
Employees post-retirement benefits
    199       198  
Long-term debt - unrelated parties
    3,288       2,767  
Loans from related parties
    3       4  
Provisions for contingencies (Note 10)
    633       635  
Unrealized loss on derivative instruments
    121       96  
Others
    318       268  
 
   
 
     
 
 
 
    4,562       3,968  
 
   
 
     
 
 
Minority interests
    353       329  
 
   
 
     
 
 
Stockholders’ equity
               
Preferred class A stock - 600,000,000 no-par-value shares authorized and 138,575,913 issued
    1,055       1,055  
Common stock - 300,000,000 no-par-value shares authorized and 249,983,143 issued
    1,902       1,902  
Treasury stock - 4,183 (2003 - 4,183) preferred and 4,715,170 common shares
    (88 )     (88 )
Additional paid-in capital
    498       498  
Other cumulative comprehensive income
    (4,403 )     (4,375 )
Appropriated retained earnings
    3,016       3,035  
Unappropriated retained earnings
    3,119       2,857  
 
   
 
     
 
 
 
    5,099       4,884  
 
   
 
     
 
 
TOTAL
    12,161       11,434  
 
   
 
     
 
 

See notes to condensed consolidated financial information.

F - 4


Table of Contents

Condensed Consolidated Statements of Income
Expressed in millions of United States dollars (Unaudited)
(except number of shares and per-share amounts)

                         
    Three months ended
    March   March   December
    31, 2004
  31, 2003
  31, 2003
Operating revenues, net of discounts, returns and allowances
                       
Sales of ores and metals
                       
Iron ore and pellets
    1,061       746       1,075  
Kaolin
    39       16       41  
Manganese and ferroalloys
    131       75       104  
Potash
    23       21       24  
Others
          9        
 
   
 
     
 
     
 
 
 
    1,254       867       1,244  
Revenues from logistic services
    191       115       192  
Aluminum products
    234       167       254  
Other products and services
    6       4        
 
   
 
     
 
     
 
 
 
    1,685       1,153       1,690  
Value-added tax
    (75 )     (43 )     (52 )
 
   
 
     
 
     
 
 
Net operating revenues
    1,610       1,110       1,638  
 
   
 
     
 
     
 
 
Operating costs and expenses
                       
Cost of ores and metals sold
    (643 )     (428 )     (670 )
Cost of logistic services
    (115 )     (70 )     (138 )
Cost of aluminum products
    (167 )     (142 )     (194 )
Others
    (3 )     (1 )     (3 )
 
   
 
     
 
     
 
 
 
    (928 )     (641 )     (1,005 )
Selling, general and administrative expenses
    (92 )     (49 )     (97 )
Research and development
    (23 )     (11 )     (37 )
Employee profit sharing plan
    (13 )     (12 )     (9 )
Others
    (25 )     (34 )     (98 )
 
   
 
     
 
     
 
 
 
    (1,081 )     (747 )     (1,246 )
 
   
 
     
 
     
 
 
Operating income
    529       363       392  
 
   
 
     
 
     
 
 
Non-operating income (expenses)
                       
Financial income
    11       28       18  
Financial expenses
    (109 )     (82 )     (122 )
Foreign exchange and monetary gains (losses), net
    (39 )     50       (8 )
Gain on sale of investments
                17  
 
   
 
     
 
     
 
 
 
    (137 )     (4 )     (95 )
 
   
 
     
 
     
 
 
Income before income taxes, equity results and minority interests
    392       359       297  
 
   
 
     
 
     
 
 
Income taxes
                       
Current
    (80 )     (6 )     10  
Deferred
    27       (65 )     (76 )
 
   
 
     
 
     
 
 
 
    (53 )     (71 )     (66 )
 
   
 
     
 
     
 
 
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments
    90       94       88  
Minority interests
    (24 )     (18 )     (49 )
 
   
 
     
 
     
 
 
Income from continuing operations
    405       364       270  
 
   
 
     
 
     
 
 
Change in accounting practice for asset retirement obligations (Note 4)
          (10 )      
 
   
 
     
 
     
 
 
Net income
    405       354       270  
 
   
 
     
 
     
 
 
Basic earnings per Preferred Class A Share
    1.06       0.92       0.70  
 
   
 
     
 
     
 
 
Basic earnings per Common Share
    1.06       0.92       0.70  
 
   
 
     
 
     
 
 
Weighted average number of shares outstanding (thousands of shares)
                       
Common shares
    245.268       245.268       245.268  
Preferred Class A shares
    138.571       138.571       138.571  

See notes to condensed consolidated financial information.

F - 5


Table of Contents

Condensed Consolidated Statements of Cash Flows
Expressed in millions of United States dollars (Unaudited)

                         
    Three months ended
    March   March   December
    31, 2004
  31, 2003
  31, 2003
Cash flows from operating activities:
                       
Net income
    405       354       270  
Adjustments to reconcile net income to cash provided by operating activities:
                       
Depreciation, depletion and amortization
    95       43       78  
Dividends received
    61       36       59  
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments
    (90 )     (94 )     (88 )
Deferred income taxes
    (27 )     65       76  
Provisions for other contingencies
          9        
Impairment of property, plant and equipment
                39  
Gain on sale of investments
                (17 )
Change in accounting pratice for asset retirement obligations (Note 4)
          10        
Pension plan
    3       3       4  
Foreign exchange and monetary losses (gains)
    43       (142 )     5  
Net unrealized derivative losses (gains)
    31       3       20  
Minority interests
    24       18       49  
Others
    (32 )     6       6  
Decrease (increase) in assets:
                       
Accounts receivable
    (25 )     64       (68 )
Inventories
          24       6  
Others
    (25 )     (1 )     (36 )
Increase (decrease) in liabilities:
                       
Suppliers
    (38 )     (93 )     59  
Payroll and related charges
    (8 )     (6 )     (17 )
Others
    131       57       69  
 
   
 
     
 
     
 
 
Net cash provided by operating activities
    548       356       514  
 
   
 
     
 
     
 
 
Cash flows from investing activities:
                       
Loans and advances receivable
                       
Related parties
                       
Additions
          (23 )     (65 )
Repayments
    42       29       9  
Others
    14       16        
Guarantees and deposits
    (20 )     (12 )     (13 )
Additions to investments
    (10 )           1  
Additions to property, plant and equipment
    (379 )     (198 )     (594 )
Proceeds from disposal of investments
                83  
 
   
 
     
 
     
 
 
Net cash used in investing activities
    (353 )     (188 )     (579 )
 
   
 
     
 
     
 
 
Cash flows from financing activities:
                       
Short-term debt, net issuances (repayments)
    44       (93 )     (1 )
Loans
                       
Related parties
                       
Additions
    21             24  
Repayments
    (55 )     (16 )     (2 )
Issuances of long-term debt
                       
Related parties
          2       12  
Others
    665       177       29  
Repayments of long-term debt
                       
Related parties
                 
Others
    (451 )     (101 )     (351 )
Interest attributed to stockholders
                (427 )
 
   
 
     
 
     
 
 
Net cash used in financing activities
    224       (31 )     (716 )
 
   
 
     
 
     
 
 
Increase (decrease) in cash and cash equivalents
    419       137       (781 )
Effect of exchange rate changes on cash and cash equivalents
    (3 )     56       26  
Cash and cash equivalents, beginning of period
    585       1,091       1,340  
 
   
 
     
 
     
 
 
Cash and cash equivalents, end of period
    1,001       1,284       585  
 
   
 
     
 
     
 
 
Cash paid during the period for:
                       
Interest on short-term debt
    (2 )     (6 )      
Interest on long-term debt
    (75 )     (53 )     (38 )
Income tax
          (6 )     (16 )
Non-cash transactions
                       
Conversion of loans receivable to investments
          (11 )     (91 )

See notes to condensed consolidated financial information.

F - 6


Table of Contents

Condensed Consolidated Statements of Changes in Stockholders’ Equity
Expressed in millions of United States dollars (Unaudited)
(except number of shares and per-share amounts)

                         
    Three months ended
    March   March   December
    31, 2004
  31, 2003
  31, 2003
Preferred class A stock (including one special share)
                       
 
   
 
     
 
     
 
 
End of the period
    1,055       904       1,055  
 
   
 
     
 
     
 
 
Common stock
                       
 
   
 
     
 
     
 
 
End of the period
    1,902       1,630       1,902  
 
   
 
     
 
     
 
 
Treasury stock
                       
 
   
 
     
 
     
 
 
End of the period
    (88 )     (88 )     (88 )
 
   
 
     
 
     
 
 
Additional paid-in capital
                       
End of the period
    498       498       498  
 
   
 
     
 
     
 
 
Other cumulative comprehensive income
                       
Cumulative translation adjustments
                       
Beginning of the period
    (4,449 )     (5,185 )     (4,473 )
Change in the period
    (31 )     186       24  
 
   
 
     
 
     
 
 
End of the period
    (4,480 )     (4,999 )     (4,449 )
 
   
 
     
 
     
 
 
Unrealized gain on available-for-sale securities
                       
Beginning of the period
    74             14  
Change in the period
    3       13       60  
 
   
 
     
 
     
 
 
End of the period
    77       13       74  
 
   
 
     
 
     
 
 
Adjustments relating to investments in affiliates
                       
Beginning of the period
          10       10  
Transfer to retained earnings
                (10 )
 
   
 
     
 
     
 
 
End of the period
          10        
 
   
 
     
 
     
 
 
Total other cumulative comprehensive income
    (4,403 )     (4,976 )     (4,375 )
 
   
 
     
 
     
 
 
Appropriated retained earnings
                       
Beginning of the period
    3,035       2,230       2,251  
Transfer (to) from retained earnings
    (19 )     121       784  
 
   
 
     
 
     
 
 
End of the period
    3,016       2,351       3,035  
 
   
 
     
 
     
 
 
Retained earnings
                       
Beginning of the period
    2,857       3,288       3,472  
Net income
    405       354       270  
Interest attributed to stockholders
                       
Preferred class A stock
    (58 )     (72 )     (40 )
Common stock
    (104 )     (128 )     (71 )
Appropriation (to) from reserves
    19       (121 )     (774 )
 
   
 
     
 
     
 
 
End of the period
    3,119       3,321       2,857  
 
   
 
     
 
     
 
 
Total stockholders’ equity
    5,099       3,640       4,884  
 
   
 
     
 
     
 
 
Comprehensive income is comprised as follows:
                       
Net income
    405       354       270  
Cumulative translation adjustments
    (31 )     186       24  
Unrealized gain (loss) on available-for-sale securities
    3       13       60  
 
   
 
     
 
     
 
 
Total comprehensive income
    377       553       354  
 
   
 
     
 
     
 
 
Shares
                       
Preferred class A stock (including one special share)
    138,575,913       138,575,913       138,575,913  
 
   
 
     
 
     
 
 
Common stock
    249,983,143       249,983,143       249,983,143  
 
   
 
     
 
     
 
 
Treasury stock (1)
                       
Beginning of the period
    (4,719,353 )     (4,719,651 )     (4,719,353 )
Sales
          16        
 
   
 
     
 
     
 
 
End of the period
    (4,719,353 )     (4,719,635 )     (4,719,353 )
 
   
 
     
 
     
 
 
 
    383,839,703       383,839,421       383,839,703  
 
   
 
     
 
     
 
 
Interest attributed to stockholders (per share)
                       
Preferred class A stock (including one special share)
    0.42       0.52       0.29  
Common stock
    0.42       0.52       0.29  

(1)   As of March 31, 2004, 4,715,170 common shares and 4,183 preferred shares were held in treasury in the amount of $ 88. The 4,715,170 common shares guarantee a loan of to our subsidiary Alunorte.

See notes to condensed consolidated financial information.

F - 7


Table of Contents

Notes to the Condensed Consolidated Financial Information
Expressed in millions of United States dollars, unless otherwise stated (Unaudited)

1   The Company and its operations
 
    Companhia Vale do Rio Doce (CVRD) is a limited liability company, duly organized and existing under the laws of the Federative Republic of Brazil. Our operations are carried out through CVRD and its subsidiary companies, joint ventures and affiliates, and mainly consist of mining, non-ferrous metal production and logistics, as well as energy, aluminum and steel activities. Further details of our operations and those of our joint ventures and affiliates are described in Note 8.
 
    The main operating subsidiaries we consolidate are as follows:
                 
            Head office   Principal
Subsidiary
  % ownership
  location
  activity
Alumina do Norte do Brasil S.A. - Alunorte
    57     Brazil   Aluminum
CADAM S.A. (2) (4)
    37     Brazil   Kaolin
CELMAR S.A. - Indústria de Celulose e Papel (3)
    100     Brazil   Forestry
CVRD Overseas Ltd.
    100     Cayman Island   Trading
Ferrovia Centro-Atlântica S.A. (4)
    100     Brazil   Logistics
Ferteco Mineração S.A. - FERTECO (3)
    100     Brazil   Iron ore and Pellets
Itabira Rio Doce Company Ltd. - ITACO
    100     Cayman Island   Trading
Mineração Serra do Sossego S.A. (1) (5)
    100     Brazil   Copper
Minerações Brasileiras Reunidas S.A. - MBR(4)(7)
    56     Brazil   Iron ore
Navegação Vale do Rio Doce S.A. - DOCENAVE
    100     Brazil   Shipping
Pará Pigmentos S.A.
    82     Brazil   Kaolin
Rio Doce International Finance Ltd. - RDIF
    100     Bahamas   International finance
Rio Doce Manganèse Europe - RDME
    100     France   Ferroalloys
Rio Doce Manganese Norway - RDMN
    100     Norway   Ferroalloys
Salobo Metais S.A. (1)
    100     Brazil   Copper
Rio Doce Manganês S.A. (6)
    100     Brazil   Manganese and Ferroalloys
Urucum Mineração S.A.
    100     Brazil   Iron ore, Ferroalloys and Manganese
Vale do Rio Doce Alumínio S.A. - ALUVALE (5)
    100     Brazil   Aluminum

(1)   Development stage companies
 
(2)   Through Caemi Mineração e Metalurgia S.A.
 
(3)   Merged with CVRD on August 29, 2003
 
(4)   Consolidated as from September 2003
 
(5)   Merged with CVRD on December 30, 2003
 
(6)   Formerly Sibra-Eletrosiderúrgica Brasileira S.A.
 
(7)   Through Caemi Mineração e Metalurgia S.A. and Belém Administrações e Participações Ltda.

2   Basis of consolidation
 
    All majority-owned subsidiaries where we have both share and management control are consolidated, with elimination of all significant intercompany accounts and transactions. Investments in unconsolidated affiliates and joint ventures are reported at cost plus our equity in undistributed earnings or losses. Included in this category are certain joint ventures in which we have majority ownership but, by force of shareholders’ agreements, do not have effective management control. We provide for losses on equity investments with negative stockholders’ equity where applicable (see Note 8).
 
    We evaluate the carrying value of our listed investments relative to publicly available quoted market prices. If the quoted market price is below book value, and such decline is considered other than temporary, we write-down our equity investments to quoted market value.
 
    We define joint ventures as businesses in which we and a small group of other partners each participate actively in the overall entity management, based on a shareholders agreement. We define affiliates as businesses in which we participate as a minority stockholder but with significant influence over the operating and financial policies of the investee.

F - 8


Table of Contents

    Investments in unincorporated joint ventures, formed for the purpose of investing in electrical energy projects, as proportionately consolidated.
 
3   Summary of significant accounting policies
 
    Our condensed consolidated interim financial information for the three-month periods ended March 31, 2004, December 31, 2003 and March 31, 2003 is unaudited. However, in our opinion, such condensed consolidated financial information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for interim periods. The results of operations for the three month period ended March 31, 2004 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2004.
 
    In preparing the consolidated financial statements, we are required to use estimates to account for certain assets, liabilities, revenues and expenses. Our consolidated financial statements therefore include various estimates concerning the selection of useful lives of property, plant and equipment, provisions necessary for contingent liabilities, fair values assigned to assets and liabilities acquired in business combinations, income tax valuation allowances, employee post-retirement benefits and other similar evaluations, actual results may vary from our estimates.
 
4   Change in accounting practice
 
    In June 2001, the FASB issued SFAS 143 - “Accounting for Asset Retirement Obligations”. We adopted SFAS 143 as from January 1, 2003, and as a consequence an additional $26 for asset retirement obligations was recorded as “Others - long-term liabilities”, a net increase of $11 in mine development costs was registered within “Property, plant and equipment” and a resulting charge of $10 was registered as “Change in Accounting Practice for Asset Retirement Obligations” on the Statement of Income, net of income tax ($15 gross of deferred income tax). Over time the liabilities will be accreted for the change in their present value and initial capitalized costs will be amortized over the useful lives of the related assets.
 
5   Recently-issued accounting pronouncements
 
    In December 2003, the FASB issued FIN 46R – “Consolidation of Variable Interest Entities, (revised December 2003)”. The primary objectives of FIN 46R are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights (variable interest entities or VIEs) and how to determine when and which business enterprise should consolidate the VIE (the primary beneficiary). This new model for consolidation applies to an entity in which either (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. In addition, FIN 46R requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures regarding the nature, purpose, size and activities of the VIE and the enterprise’s maximum exposure to loss as a result of its involvement with the VIE.
 
    The implementation date of FIN 46R is the first period ending after December 15, 2003 for Special Purpose Entities (SPEs) and as from January 1, 2004 for previously existing variable interest entities which are not SPEs. FIN 46R may be applied prospectively with a cumulative adjustment as of the date on which it is first applied or by restating previously issued financing statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated. It is possible that we will consolidate or disclose information in relation to certain joint ventures and equity investments.

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Table of Contents

    The adoption of FIN 46R did not result in consolidation of any additional entities nor any non SPE entities.
 
6   Income taxes
 
    Income taxes in Brazil comprise federal income tax and social contribution, which is an additional federal tax. The statutory composite enacted tax rate applicable in the periods presented is 34% represented by a 25% federal income tax rate plus a 9% social contribution rate.
 
    The amount reported as income tax expense in our consolidated financial statements is reconciled to the statutory rates as follows:
                         
    Three months ended
    March   March   December
    31, 2004
  31, 2003
  31, 2003
Income before income taxes, equity results and minority interests
    392       359       297  
 
   
 
     
 
     
 
 
Federal income tax and social contribution expense at statutory enacted rates
    (133 )     (122 )     (101 )
Adjustments to derive effective tax rate:
                       
Tax benefit on interest attributed to stockholders
    55       63       42  
Exempt foreign income (expenses)
    14       (16 )     (26 )
Difference on tax basis of equity investees
    (14 )           (56 )
Tax incentives
    9             12  
Valuation allowance reversal (provision)
          9       40  
Other non-taxable gains (losses)
    16       (5 )     23  
 
   
 
     
 
     
 
 
Federal income tax and social contribution expense in consolidated statements of income
    (53 )     (71 )     (66 )
 
   
 
     
 
     
 
 

We have certain tax incentives relative to our iron ore and manganese operations in Carajás and relative to alumina in Barcarena. The incentives relative to iron ore and manganese comprise full income tax exemption on defined production levels up to 2005 and partial exemption up to 2013. Both incentives relative to alumina expire in 2010. An amount equal to the tax saving must be appropriated to a reserve account within stockholders’ equity and may not be distributed in the form of cash dividends.

7   Inventories
                 
    March   December 31,
    31, 2004
  2003
Finished products
               
Iron ore and pellets
    144       146  
Manganese and ferroalloys
    80       78  
Alumina
    16       20  
Kaolin
    17       16  
Others
    6       8  
Spare parts and maintenance supplies
    239       237  
 
   
 
     
 
 
 
    502       505  
 
   
 
     
 
 

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8   Investments in affiliated companies and joint ventures
                                                 
    March 31, 2004
  Investments
    Participation in   Net   Net income for   March 31,   December
    capital (%)
  equity
  the period
  2004
  31, 2003
    voting
  total
                               
Steel
                                               
Usinas Siderúrgicas de Minas Gerais S.A. - USIMINAS
    22.99       11.46       319       157       37       31  
Companhia Siderúrgica de Tubarão - CST (1)
    26.93       28.79       364       62       102       86  
California Steel Industries Inc. - CSI
    50.00       50.00       205       (1 )     103       103  
SIDERAR (costs $15) - available for sale investments
    4.85       4.85                   93       89  
 
                                   
 
     
 
 
 
                                    335       309  
Aluminum and bauxite
                                               
Mineração Rio do Norte S.A. - MRN
    40.00       40.00       394       26       157       168  
Valesul Alumínio S.A. - VALESUL
    54.51       54.51       92       6       50       49  
Alumínio Brasileiro S.A. - ALBRAS
    51.00       51.00       226       7       115       112  
Alumínio Brasileiro S.A. - ALBRAS - change in provision for losses
                                           
 
                                   
 
     
 
 
 
                                    322       329  
Ferrous
                                               
Caemi Mineração e Metalurgia S.A. (3)
    100.00       60.23                          
Companhia Nipo-Brasileira de Pelotização - NIBRASCO
    51.11       51.00       40       5       20       18  
Companhia Hispano-Brasileira de Pelotização - HISPANOBRÁS
    51.00       50.89       33       1       17       17  
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
    50.00       50.00       4       3       2       1  
Companhia Coreano-Brasileira de Pelotização - KOBRASCO - change in provision for losses
                                           
Companhia Ítalo-Brasileira de Pelotização - ITABRASCO
    51.00       50.90       23       1       12       11  
Gulf Industrial Investment Company - GIIC
    50.00       50.00       76       8       38       40  
SAMARCO Mineração S.A. - SAMARCO (4)
    50.00       50.00       379       51       226       221  
Minas da Serra Geral S.A. - MSG
    50.00       50.00       36             18       15  
Others
                            20       21  
 
                                   
 
     
 
 
 
                                    353       344  
Logistics
                                               
Companhia Ferroviária do Nordeste - CFN - change in provision for losses (2)
                                   
Ferroban - Ferrovias Bandeirantes S.A. - change in provision for losses
                            1       1  
Ferrovia Centro-Atlântica S.A. - FCA - change in provision for losses (3)
                                   
MRS Logística S.A
                            45       39  
MRS Logística S.A. - change in provision for losses
                                   
Sepetiba Tecon S.A. - change in provision for losses
                                   
Others
                            5       4  
 
                                   
 
     
 
 
 
                                    51       44  
Other affiliates and joint ventures
                                               
Fertilizantes Fosfatados S.A. - FOSFERTIL (2)
                                   
Others
                            8       8  
 
                                   
 
     
 
 
 
                                    8       8  
 
                                   
 
     
 
 
Total
                                    1,069       1,034  
 
                                   
 
     
 
 

     

[Additional columns below]

[Continued from above table, first column(s) repeated]

                                                         
    Equity Adjustments
  Dividends received
   
                                                    Quoted
    Three months ended
  Three months ended
  market
    March 31,   March 31,   December   March 31,   March 31,   December   March 31,
    2004
  2003
  31, 2003
  2004
  2003
  31, 2003
  2004
Steel
                                                       
Usinas Siderúrgicas de Minas Gerais S.A. - USIMINAS
    18       10             13                   248  
Companhia Siderúrgica de Tubarão - CST (1)
    17       6       19             5       17       484  
California Steel Industries Inc. - CSI
    (1 )     3       2                          
SIDERAR (costs $15) - available for sale investments
                                        93  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    34       19       21       13       5       17       825  
Aluminum and bauxite
                                                       
Mineração Rio do Norte S.A. - MRN
    11       4       12       21       5       11        
Valesul Alumínio S.A. - VALESUL
    3       4       2       2             6        
Alumínio Brasileiro S.A. - ALBRAS
    4       39       10                          
Alumínio Brasileiro S.A. - ALBRAS - change in provision for losses
          1                                
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    18       48       24       23       5       17        
Ferrous
                                                       
Caemi Mineração e Metalurgia S.A. (3)
          5                                
Companhia Nipo-Brasileira de Pelotização - NIBRASCO
    2       1                                
Companhia Hispano-Brasileira de Pelotização - HISPANOBRÁS
    1       1                   2              
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
    1             1                          
Companhia Coreano-Brasileira de Pelotização - KOBRASCO - change in provision for losses
          3       8                          
Companhia Ítalo-Brasileira de Pelotização - ITABRASCO
    1                                      
Gulf Industrial Investment Company - GIIC
    4       2       3       6       5              
SAMARCO Mineração S.A. - SAMARCO (4)
    25       19       12       19       14       25        
Minas da Serra Geral S.A. - MSG
          1                                
Others
    (1 )     2       (1 )                        
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    33       34       23       25       21       25        
Logistics
                                                       
Companhia Ferroviária do Nordeste - CFN - change in provision for losses (2)
          1                                
Ferroban - Ferrovias Bandeirantes S.A. - change in provision for losses
                                         
Ferrovia Centro-Atlântica S.A. - FCA - change in provision for losses (3)
          (11 )                              
MRS Logística S.A
    6             37                          
MRS Logística S.A. - change in provision for losses
          1                                
Sepetiba Tecon S.A. - change in provision for losses
          (1 )     (1 )                        
Others
                                                 
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    6       (10 )     36                          
Other affiliates and joint ventures
                                                       
Fertilizantes Fosfatados S.A. - FOSFERTIL (2)
          3       (9 )           5              
Others
    (1 )           (7 )                        
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    (1 )     3       (16 )           5              
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total
    90       94       88       61       36       59       825  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 

(1)   During the quarter ended June 30, 2003 CVRD acquired an additional 4.42% of the voting shares and 5.64% of the preferred shares, representing 5.17% of CST’s total capital for $ 60;
 
(2)   Investment sold in 2003;
 
(3)   Consolidated as from September, 2003, after acquisition of control;
 
(4)   Investment includes goodwill of $37 in 2004 and 2003.

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9   Pension plans
                         
    Three months ended
    March   March   December
    31, 2004
  31, 2003
  31, 2003
Service cost - benefits earned during the period
    1             1  
Interest cost on projected benefit obligation
    38       31       32  
Actual return on assets
    (44 )     (31 )     (190 )
Amortization of initial transitory obligation
    2       2       2  
Net deferral
    6       1       159  
 
   
 
     
 
     
 
 
Net periodic pension cost
    3       3       4  
 
   
 
     
 
     
 
 

Employer contributions

We previously disclosed in our consolidated financial statements for the year ended December 31, 2003, that it expected to contribute $14 to our pension plan in 2004. As of March 31, 2004, $3 of contributions have been made. We do not expect any change in our previous estimate.

10   Commitments and contingencies
 
(a)   At March 31, 2004, we had extended guarantees for borrowings obtained by affiliates and joint ventures in the amount of $260, of which $221 is denominated in United States dollars and the remaining $39 in local currency, as follows:
                                         
    Amount of   Denominated           Final   Counter
Affiliate or Joint Venture
  guarantee
  currency
  Purpose
  maturity
  guarantees
ALBRAS
    213     US$   Debt guarantee     2007     None
 
    38         R$     Debt guarantee     2010     None
SAMARCO
    7     US$   Debt guarantee     2008     None
VALESUL
    1         R$     Debt guarantee     2007     None
 
                                  Collateral
NIBRASCO
    1     US$   Debt guarantee     2004     Pledge
 
   
 
                                 
 
    260                                  
 
   
 
                                 

We expect no losses to arise as a result of the above guarantees. We charge commission for extending these guarantees in the case of Albras and Samarco.

We have not provided any significant guarantees since January 1, 2003 which would require fair value adjustments under FIN 45 – “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”.

(b)   CVRD and its subsidiaries are defendants in numerous legal actions in the normal course of business. Based on the advice of our legal counsel, management believes that the provision made against contingent losses is sufficient to cover probable losses in connection with such actions.

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    The provision for contingencies and the related judicial deposits are composed as follows:
                                 
    March 31, 2004
  December 31, 2003
    Provision for   Judicial   Provision for   Judicial
    contingencies
  deposits
  contingencies
  deposits
Labor claims
    178       80       177       66  
Civil claims
    137       55       167       54  
Tax - related actions
    313       284       285       279  
Others
    5       5       6       8  
     
   
     
     
 
 
    633       424       635       407  
     
   
     
     
 

Labor - related actions principally comprise employee claims for (i) payment of time spent travelling from their residences to the work-place, (ii) additional payments for alleged dangerous or unhealthy working conditions and (iii) various other matters, often in connection with disputes about the amount of indemnities paid upon dismissal.

Civil actions principally relate to claims made against us by contractors in connection with losses alleged to have been incurred by them as a result of various past government economic plans during which full indexation of contracts for inflation was not permitted.

Tax - related actions principally comprise our challenges of certain revenue taxes, VAT and of the tax on financial movements - CPMF.

We continue to vigorously pursue our interests in all the above actions but recognize that probably we will incur some losses in the final instance, for which we have made provisions.

Our judicial deposits are made as required by the courts for us to be able to enter or continue a legal action. When judgment is favorable to us, we receive the deposits back; when unfavorable, the deposits are delivered to the prevailing party. An increase of $5 for tax deposits during 2003 refers mainly to an action in which we challenged the annual limitation on use to our tax loss carryforwards.

Contingencies settled in the three-month period ended March 31, 2004, and 2003 and December 31, 2003 aggregated $23, $21 and $19, respectively, and additional provisions aggregated $11, $30 and $73, respectively.

In addition to the contingencies for which we have made provisions we have possible losses in connection with tax contingencies totaling $309 and $214 at March 31, 2004 and 2003, respectively, for which no provision is maintained.

(c)   We are defendants in two actions seeking substantial compensatory damages brought by the Municipality of Itabira, State of Minas Gerais, which we believe are without merit. Due to the remote likelihood that any loss will arise therefrom no provision has been made in the financial statements with respect to these two actions.
 
(d)   We are committed under a take-or-pay agreement to take annual delivery of approximately 226,950 metric tons per year of aluminum from ALBRAS at market prices. This estimate is based on 51% of ALBRAS expected production and, at a market price of $1,642.71 per metric ton, at March 31, 2004, represents an annual commitment of $373. Actual take from Albras was $65, $65 and $81 during three-month period ended March 31, 2004, and 2003 and December 31, 2003, respectively.
 
(e)   We and BNDES entered into a contract, known as the Mineral Risk Contract, in March 1997, relating to prospecting authorizations for mining regions where drilling and exploration are still in their early stages. The Mineral Risk Contract provides for the joint development of certain unexplored mineral deposits in approximately two million identified hectares of land in the Carajás region, as well as proportional participation in any financial benefits earned from the

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    development of such resources. Iron ore and manganese deposits already identified and subject to development are specifically excluded from the Mineral Risk Contract.
 
    Pursuant to the Mineral Risk Contract, we and BNDES each agreed to provide $ 205 million, which represents half of the $ 410 million in expenditures estimated as necessary to complete geological exploration and mineral resource development projects in the region over a period of five years, which had already been extended for an additional period of two years and on April 28, 2004 was extended again for another 5 years. We will oversee these projects and BNDES will advance us half of our costs on a quarterly basis. Under the Mineral Risk Contract, as of March 31, 2004, the remaining contributions towards exploration and development activities totaled US$ 77 million. In the event that either of us wishes to conduct further exploration and development after having spent such $ 205 million, the contract provides that each party may either choose to match the other party’s contributions, or may choose to have its financial interest proportionally diluted. If a party’s participation in the project is diluted to an amount lower than 40% of the amount invested in connection with exploration and development projects, then the Mineral Risk Contract provides that the diluted party will lose all the rights and benefits provided for in the Mineral Risk Contract and any amounts previously contributed to the project.
 
    Under the Mineral Risk Contract, BNDES has agreed to compensate us through a finder’s fee production royalty on their share of mineral resources that are discovered and placed into production. This finder’s fee is equal to 3.5% of the revenues derived from the sale of gold, silver and platinum group metals and 1.5% of the revenues derived from the sale of other minerals, including copper, except for gold and other minerals discovered at Serra Leste, for which the finder’s fee is equal to 6.5% of revenues.
 
(f)   At the time of our privatization in 1997, we issued shareholder revenue interests known in Brazil as “debentures” to our then-existing shareholders, including the Brazilian Government. The terms of the “debentures”, were set to ensure that our pre-privatization shareholders, including the Brazilian Government, would participate alongside us in potential future financial benefits that we are able to derive from exploiting our mineral resources. On March 26, 2004 as a result of exploiting our mineral resources we declared a distribution of these “debentures” in the amount of $ 2, payable as from April 1, 2004.
 
(g)   We use various judgments and assumptions when measuring our environmental liabilities and asset retirement obligations. Changes in circumstances, law or technology may affect our estimates and we periodically review the amounts accrued and adjust them as necessary. Our accruals do not reflect unasserted claims because we are currently not aware of any such issues. Also the amounts provided are not reduced by any potential recoveries under cost sharing, insurance or indemnification arrangements because such recoveries are considered uncertain. The changes are demonstrated as follows:
         
Balance as of January 31, 2004
    81  
Increase due to new subsidiaries
     
Accretion expense
    2  
Revisions to estimated cash flows
     
Cumulative translation adjustment
    (1 )
 
   
 
 
Balance as of March 31, 2004
    82  
 
   
 
 

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11   Segment and geographical information
 
    In 1999 we adopted SFAS 131 “Disclosures about Segments of an Enterprise and Related Information” with respect to the information we present about our operating segments. SFAS 131 introduced a “management approach” concept for reporting segment information, whereby such information is required to be reported on the basis that the chief decision-maker uses internally for evaluating segment performance and deciding how to allocate resources to segments. Our business segments are currently organized as follows:
 
    Ferrous products - comprises iron ore mining and pellet production, as well as the Northern and Southern transportation systems, including railroads, ports and terminals, as they pertain to mining operations. Manganese mining and ferroalloys are also included in this segment.
 
    Non-ferrous products - comprises the production of non-ferrous minerals.
 
    Logistics - comprises our transportation systems as they pertain to the operation of our ships, ports and railroads for third-party cargos.
 
    Holdings - divided into the following sub-groups:

  Aluminum - comprises aluminum trading activities, alumina refining and investments in joint ventures and affiliates engaged in bauxite mining and aluminum metal smelting.
 
  Steel - comprises our investments in joint ventures and affiliates operating in the steel industry.
 
  Others - comprises our investments in joint ventures and affiliates engaged in other businesses.

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

F - 15


Table of Contents

Consolidated net income and principal assets are reconciled as follows:

Results by segment - before eliminations (Unaudited)

As of and for the three months ended

                                                         
    March 31, 2004
                            Holdings
       
            Non                    
    Ferrous
  ferrous
  Logistics
  Aluminum
  Others
  Eliminations
  Consolidated
Gross revenues - Export
    1,562       34       19       221             (670 )     1,166  
Gross revenues - Domestic
    287       28       184       48             (28 )     519  
Cost and expenses
    (1,366 )     (53 )     (128 )     (209 )           698       (1,058 )
Depreciation, depletion and amortization
    (78 )     (6 )     (7 )     (4 )                 (95 )
Pension plan
    (3 )                                   (3 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Operating (loss) income
    402       3       68       56                   529  
Financial income
    44             4       (18 )     1       (20 )     11  
Financial expenses
    (116 )     (1 )     (4 )     (8 )           20       (109 )
Foreign exchange and monetary gains (losses), net
    (32 )           (5 )     (3 )     1             (39 )
Gain on sale of investments
                                         
Equity in results of affiliates and joint ventures and change in provision for losses on equity investment
    33             6       18       33             90  
Income taxes
    (54 )           (2 )     3                   (53 )
Minority interests
    (14 )     (1 )           (9 )                 (24 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Income from continuing operations
    263       1       67       39       35             405  
Change in accounting pratice for asset retirement obligations (note 4)
                                         
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Net income
    263       1       67       39       35             405  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Sales classified by geographic destination:
                                                       
Export market
                                                       
America, except United States
    158             15       70             (103 )     140  
United States
    107                   25             (53 )     79  
Europe
    659       22       4       99             (262 )     522  
Middle East/Africa/Oceania
    89                               (26 )     63  
Japan
    150       8             1             (65 )     94  
China
    238       4             26             (97 )     171  
Asia, other than Japan and China
    161                               (64 )     97  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    1,562       34       19       221             (670 )     1,166  
Domestic market
    287       28       184       48             (28 )     519  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    1,849       62       203       269             (698 )     1,685  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Assets:
                                                       
Property, plant and equipment, net
    4,646       1,060       455       565       1             6,727  
Additions to Property, plant and equipment
    156       71       132       20                   379  
Investments in affiliated companies and joint ventures and other investments, net of provision
    353             51       322       343             1,069  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Capital employed
    4,316       245       404       506       28             5,499  

     

[Additional columns below]

[Continued from above table, first column(s) repeated]

                                                         
    March 31, 2003
                            Holdings
       
            Non                    
    Ferrous
  ferrous
  Logistics
  Aluminum
  Others
  Eliminations
  Consolidated
Gross revenues - Export
    1,080       23       21       149             (476 )     797  
Gross revenues - Domestic
    258       24       78       37             (41 )     356  
Cost and expenses
    (1,001 )     (38 )     (61 )     (159 )     (2 )     517       (744 )
Depreciation, depletion and amortization
    (36 )     (3 )     (2 )     (2 )                 (43 )
Pension plan
    (3 )                                   (3 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Operating (loss) income
    298       6       36       25       (2 )           363  
Financial income
    45       1       3       3       1       (25 )     28  
Financial expenses
    (96 )     (2 )     (1 )     (5 )     (3 )     25       (82 )
Foreign exchange and monetary gains (losses), net
    25       5       (3 )     23                   50  
Gain on sale of investments
                                         
Equity in results of affiliates and joint ventures and change in provision for losses on equity investment
    34             (10 )     48       22             94  
Income taxes
    (66 )     (1 )     (1 )     (2 )     (1 )           (71 )
Minority interests
          (2 )           (16 )                 (18 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Income from continuing operations
    240       7       24       76       17             364  
Change in accounting pratice for asset retirement obligations (note 4)
    (10 )                                   (10 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Net income
    230       7       24       76       17             354  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Sales classified by geographic destination:
                                                       
Export market
                                                       
America, except United States
    116             14       31             (72 )     89  
United States
    101       4             2             (50 )     57  
Europe
    440       17       4       87             (170 )     378  
Middle East/Africa/Oceania
    51             3                   (16 )     38  
Japan
    111       1             23             (49 )     86  
China
    184       1             6             (84 )     107  
Asia, other than Japan and China
    77                               (35 )     42  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    1,080       23       21       149             (476 )     797  
Domestic market
    258       24       78       37             (41 )     356  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    1,338       47       99       186             (517 )     1,153  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Assets:
                                                       
Property, plant and equipment, net
    2,563       464       162       430       27             3,646  
Additions to Property, plant and equipment
    91       51       32       23       1             198  
Investments in affiliated companies and joint ventures and other investments, net of provision
    423             (7 )     247       176             839  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Capital employed
    2,521       138       188       405       32             3,284  

     

[Additional columns below]

[Continued from above table, first column(s) repeated]

                                                         
    December 31, 2003
                            Holdings
       
            Non                    
    Ferrous
  ferrous
  Logistics
  Aluminum
  Others
  Eliminations
  Consolidated
Gross revenues - Export
    1,650       36       22       233             (732 )     1,209  
Gross revenues - Domestic
    296       30       156       41             (42 )     481  
Cost and expenses
    (1,549 )     (76 )     (146 )     (216 )     (3 )     774       (1,216 )
Depreciation, depletion and amortization
    (60 )     (7 )     (6 )     (5 )                 (78 )
Pension plan
    (3 )           (1 )                       (4 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Operating (loss) income
    334       (17 )     25       53       (3 )           392  
Financial income
    50             3       2             (37 )     18  
Financial expenses
    (136 )           (4 )     (19 )           37       (122 )
Foreign exchange and monetary gains (losses), net
    (12 )     1       (2 )     6       (1 )           (8 )
Gain on sale of investments
    17                                     17  
Equity in results of affiliates and joint ventures and change in provision for losses on equity investment
    23             36       24       5             88  
Income taxes
    (60 )     (3 )     (1 )           (2 )           (66 )
Minority interests
    (39 )     1             (11 )                 (49 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Income from continuing operations
    177       (18 )     57       55       (1 )           270  
Change in accounting pratice for asset retirement obligations (note 4)
                                         
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Net income
    177       (18 )     57       55       (1 )           270  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Sales classified by geographic destination:
                                                       
Export market
                                                       
America, except United States
    147             10       45             (86 )     116  
United States
    75                   7             (45 )     37  
Europe
    750       26       10       150             (322 )     614  
Middle East/Africa/Oceania
    88                               (20 )     68  
Japan
    165       4                         (71 )     98  
China
    290       5             12             (117 )     190  
Asia, other than Japan and China
    135       1       2       19             (71 )     86  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    1,650       36       22       233             (732 )     1,209  
Domestic market
    296       30       156       41             (42 )     481  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    1,946       66       178       274             (774 )     1,690  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Assets:
                                                       
Property, plant and equipment, net
    4,495       1,000       424       564       1             6,484  
Additions to Property, plant and equipment
    318       125       121       30                   594  
Investments in affiliated companies and joint ventures and other investments, net of provision
    344             44       329       317             1,034  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Capital employed
    4,137       266       429       498       20             5,350  

F - 16


Table of Contents

Operating income by product — after eliminations (unaudited)

As of and for the three months ended

                                                                                 
    March 31, 2004
                                                                     
    Revenues
                                  Impairment/
Gain on sale
       
                            Value                           of property,   Depreciation,    
                            added   Net   Cost and           plant and   depletion and   Operating
    Export
  Domestic
  Total
  tax
  revenues
  expenses
  Net
  equipment
  amortization
  income
Ferrous
                                                                               
Iron ore
    652       174       826       (23 )     803       (402 )     401             (53 )     348  
Pellets
    183       52       235       (8 )     227       (172 )     55             (3 )     52  
Manganes
    6       3       9       (1 )     8       (7 )     1                   1  
Ferroalloys
    91       31       122       (8 )     114       (86 )     28             (4 )     24  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    932       260       1,192       (40 )     1,152       (667 )     485             (60 )     425  
Non ferrous
                                                                               
Gold
                                                           
Potash
          23       23       (3 )     20       (9 )     11             (2 )     9  
Kaolin
    34       5       39       (2 )     37       (22 )     15             (3 )     12  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    34       28       62       (5 )     57       (31 )     26             (5 )     21  
Aluminum
                                                                               
Alumina
    98       48       146       (5 )     141       (90 )     51             (4 )     47  
Aluminum
    73             73             73       (66 )     7                   7  
Bauxite
    15             15             15       (13 )     2                   2  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    186       48       234       (5 )     229       (169 )     60             (4 )     56  
Logistics
                                                                               
Railroads
          133       133       (19 )     114       (51 )     63             (23 )     40  
Ports
          38       38       (3 )     35       (21 )     14             (3 )     11  
Ships
    11       9       20       (3 )     17       (27 )     (10 )                 (10 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    11       180       191       (25 )     166       (99 )     67             (26 )     41  
Others
    3       3       6             6       (20 )     (14 )                 (14 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    1,166       519       1,685       (75 )     1,610       (986 )     624             (95 )     529  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 

     

[Additional columns below]

[Continued from above table, first column(s) repeated]

                                                                                 
    March 31, 2003
                                                                     
    Revenues
                                  Impairment/
Gain on sale
       
                            Value                           of property,   Depreciation,    
                            added   Net   Cost and           plant and   depletion and   Operating
    Export
  Domestic
  Total
  tax
  revenues
  expenses
  Net
  equipment
  amortization
  income
Ferrous
                                                                               
Iron ore
    421       126       547       (18 )     529       (249 )     280             (18 )     262  
Pellets
    152       47       199       (5 )     194       (163 )     31             (3 )     28  
Manganes
    9       2       11       (1 )     10       (4 )     6                   6  
Ferroalloys
    47       17       64       (4 )     60       (50 )     10             (2 )     8  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    629       192       821       (28 )     793       (466 )     327             (23 )     304  
Non ferrous
                                                                               
Gold
    9             9             9       (8 )     1                   1  
Potash
          21       21       (3 )     18       (9 )     9             (1 )     8  
Kaolin
    13       3       16             16       (10 )     6             (1 )     5  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    22       24       46       (3 )     43       (27 )     16             (2 )     14  
Aluminum
                                                                               
Alumina
    59       34       93       (2 )     91       (71 )     20             (2 )     18  
Aluminum
    70             70             70       (66 )     4                   4  
Bauxite
    4             4             4       (4 )                        
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    133       34       167       (2 )     165       (141 )     24             (2 )     22  
Logistics
                                                                               
Railroads
          66       66       (7 )     59       (15 )     44             (14 )     30  
Ports
          28       28       (1 )     27       (8 )     19             (2 )     17  
Ships
    13       8       21       (2 )     19       (37 )     (18 )                 (18 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    13       102       115       (10 )     105       (60 )     45             (16 )     29  
Others
          4       4             4       (10 )     (6 )                 (6 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    797       356       1,153       (43 )     1,110       (704 )     406             (43 )     363  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 

     

[Additional columns below]

[Continued from above table, first column(s) repeated]

As of and for the three months ended

                                                                                 
    December 31, 2003
                                                                     
    Revenues
                                  Impairment/
Gain on sale
       
                            Value                           of property,   Depreciation,    
                            added   Net   Cost and           plant and   depletion and   Operating
    Export
  Domestic
  Total
  tax
  revenues
  expenses
  Net
  equipment
  amortization
  income
Ferrous
                                                                               
Iron ore
    675       146       821       (13 )     808       (442 )     366       (10 )     (36 )     320  
Pellets
    198       56       254             254       (179 )     75             (2 )     73  
Manganes
    8       3       11       (2 )     9       (15 )     (6 )           (1 )     (7 )
Ferroalloys
    62       31       93       (6 )     87       (76 )     11       (17 )     (3 )     (9 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    943       236       1,179       (21 )     1,158       (712 )     446       (27 )     (42 )     377  
Non ferrous
                                                                               
Gold
                                                           
Potash
          24       24       (3 )     21       (9 )     12             (4 )     8  
Kaolin
    36       5       41       (2 )     39       (27 )     12       (12 )     (3 )     (3 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    36       29       65       (5 )     60       (36 )     24       (12 )     (7 )     5  
Aluminum
                                                                               
Alumina
    111       38       149       (1 )     148       (107 )     41             (5 )     36  
Aluminum
    91             91             91       (88 )     3                   3  
Bauxite
    12       2       14       (1 )     13       (12 )     1                   1  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    214       40       254       (2 )     252       (207 )     45             (5 )     40  
Logistics
                                                                               
Railroads
          127       127       (14 )     113       (84 )     29             (23 )     6  
Ports
          38       38       (5 )     33       (21 )     12             (3 )     9  
Ships
    18       9       27             27       (36 )     (9 )                 (9 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    18       174       192       (19 )     173       (141 )     32             (26 )     6  
Others
    (2 )     2             (5 )     (5 )     (33 )     (38 )           2       (36 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
    1,209       481       1,690       (52 )     1,638       (1,129 )     509       (39 )     (78 )     392  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 

F - 17


Table of Contents

12   Derivative financial instruments
 
    Volatility of interest rates, exchange rates and commodity prices are the main market risks to which we are exposed - all three are managed through derivative operations. These have the exclusive aim of reducing exposure to risk. We do not use derivatives for speculation purposes.
 
    We monitor and evaluate our derivative positions on a regular basis and adjust our strategy in response to market conditions. We also periodically review the credit limits and credit worthiness of our counter-parties in these transactions. In view of the policies and practices established for operations with derivatives, management considers the occurrence of non-measurable risk situations as unlikely.
 
    The asset (liability) balances and the movement in fair value of derivative financial instruments is as follows (the quarterly information is unaudited):
                                         
            Interest            
            rates            
    Gold
  (LIBOR)
  Currencies
  Alumina
  Total
Unrealized gains (losses) at January 1, 2004
    (32 )     (46 )     5       (18 )     (91 )
Financial settlement
          3       (2 )           1  
Unrealized gains (losses) in the period
    (5 )     (6 )     (2 )     (18 )     (31 )
Effect of exchange rate changes
          1                   1  
 
   
 
     
 
     
 
     
 
     
 
 
Unrealized gains (losses) at March 31, 2004
    (37 )     (48 )     1       (36 )     (120 )
 
   
 
     
 
     
 
     
 
     
 
 
Unrealized gains (losses) at January 1, 2003
    (15 )     (60 )     (1 )     3       (73 )
Financial settlement
          4                   4  
Unrealized gains (losses) in the period
    5       (8 )                 (3 )
Effect of exchange rate changes
          (4 )                 (4 )
 
   
 
     
 
     
 
     
 
     
 
 
Unrealized gains (losses) at March 31, 2003
    (10 )     (68 )     (1 )     3       (76 )
 
   
 
     
 
     
 
     
 
     
 
 
Unrealized gains (losses) at October 1, 2003
    (22 )     (60 )     2       (5 )     (85 )
Financial settlement
    3       12                   15  
Unrealized gains (losses) in the period
    (12 )     2       3       (13 )     (20 )
Effect of exchange rate changes
    (1 )                       (1 )
 
   
 
     
 
     
 
     
 
     
 
 
Unrealized gains (losses) at December 31, 2003
    (32 )     (46 )     5       (18 )     (91 )
 
   
 
     
 
     
 
     
 
     
 
 

    Unrealized gains (losses) in the period are included in our income statement under the following captions:
 
    Gold – financial expenses;
Interest rates – financial expenses;
Currencies – financial expenses;
Alumina – financial expenses.
 
    Final maturity dates for the above instruments are as follows:
         
Gold
  Dec 2008
Interest rates (LIBOR)
  Oct 2007
Currencies
  Dec 2011
Alumina
  Dec 2008

F - 18


Table of Contents

(a)   Interest Rate and Exchange Rate Risk
 
    Interest rate risks mainly relate to that part of the foreign debt borrowed at floating rates. The foreign currency debt is largely subject to fluctuations in the London Interbank Offered Rate - LIBOR. That portion of local currency denominated debt that is subject to floating rates is linked to the Long Term Interest Rate - TJLP, fixed quarterly by the Brazilian Central Bank. We have used derivative instruments to protect ourselves against fluctuations in the LIBOR rate.
 
    There is an exchange rate risk associated with our foreign currency denominated debt. On the other hand, the majority of our revenues is denominated in, or automatically indexed to, the U.S. dollar, while the majority of our costs is denominated in reais. This provides a natural hedge against any devaluation of the Brazilian real against the U.S. dollar. When events of this nature occur, the immediate negative impact on foreign currency denominated debt is offset over time by the positive effect of devaluation on future cash flows.
 
    With the floating exchange rate regime in Brazil, we adopt a strategy of monitoring market fluctuations, using derivatives to protect against specific risks from exchange rate variation.
 
    From time to time we enter into foreign exchange derivative swap transactions seeking to change the characteristics of our real-denominated cash investments to US dollar-indexed instruments. The extent of such transactions depends on our perception of market and currency risk, but is never speculative in nature. All such operations are marked-to-market at each balance sheet date and the effect included in financial income or expense. During the periods presented our use of such instruments was not significant.
 
(b)   Commodity Price Risk
 
    We also use derivative instruments to manage exposure to changing gold prices and to ensure an average minimum profit level for future and alumina production. However, they may also have the effect of eliminating potential gains on certain price increases in the spot market. We manage our contract positions actively, and the results are reviewed at least monthly, allowing adjustments to targets and strategy to be made in response to changing market conditions.
 
    In the case of gold and alumina derivatives, our policy has been to settle all contracts through cash payments or receipts, without physical delivery of product.
 
13   Subsequents Events
 
    On April 1, 2004, we obtained a syndicated loan in the amount of $ 300 million. The loan has a term of seven years and bears interest at 6-month LIBOR plus 0.7% per annum.

*  *  *

F - 19


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

         
Date: May 14, 2004   COMPANHIA VALE DO RIO DOCE
           (Registrant)
 
       
  By:   /s/ Fabio de Oliveira Barbosa
     
 
      Fabio de Oliveira Barbosa
      Chief Financial Officer