Prepared and filed by St Ives Burrups

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

August 2003

Valley of the Rio Doce Company
(Translation of Registrant’s name into English)

Avenida Graca 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      Form 40-F

(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

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


Table of Contents

US GAAP Financial Statements

Brazilian GAAP Financial Statements

 

 


COMPANHIA VALE DO RIO DOCE
INDEX TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

  Page
Report of PricewaterhouseCoopers Auditores Independentes F-2
   
Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002 F-3
   
 F-5
      
      
   
 F-6
   
 F-7
   
Notes to the Consolidated Financial Information F-8
   
Supplemental Financial Information S-1

F - 1


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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Companhia Vale do Rio Doce

We have reviewed the accompanying unaudited condensed consolidated balance sheet of Companhia Vale do Rio Doce and subsidiaries as of June 30, 2003, and the unaudited condensed consolidated statements of income, of cash flows and of changes in stockholders’ equity for the three-month periods ended June 30, 2003, March 31, 2003 and June 30, 2002 and for the six-month periods ended June 30, 2003 and 2002. This financial information is the responsibility of the Company's management. The unaudited financial information of certain affiliates, the investments in which total US$ 260 million at June 30, 2003 and equity in earnings (losses) which total US$ 9 million, US$ 10 million, US$ (23) million, US$ 19 million and US$ 4 million for the three-month periods ended June 30, 2003, March 31, 2003 and June 30, 2002 and for the six-month periods ended June 30, 2003 and 2002, respectively, and that of certain subsidiaries, which statements reflect total revenues of US$ 72 million and US$ 143 million for the three-month and six-month periods ended June 30, 2002, respectively, were reviewed by other independent accountants whose reports thereon have been furnished to us.

We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews and the reports of other accountants, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Companhia Vale do Rio Doce and subsidiaries as of December 31, 2002, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended (not presented herein). In our report dated February 21, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2002 is fairly stated in all material respects, in relation to the consolidated balance sheet from which it has been derived.

As discussed in Note 4 to the financial statements, the Company changed its method of accounting for asset retirement obligations, as from January 1, 2003.

PricewaterhouseCoopers
Auditores Independentes

Rio de Janeiro, Brazil
August 7, 2003

F - 2


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Condensed Consolidated Balance Sheets
Expressed in millions of United States dollars

  June 30,   December  
  2003   31, 2002  
 
 
 
Assets
(unaudited)
     
         
Current assets        
      Cash and cash equivalents 966   1,091  
      Accounts receivable        
         Related parties 111   121  
         Unrelated parties 504   539  
      Loans and advances to related parties 55   49  
      Inventories 347   292  
      Deferred income tax 141   211  
      Others 358   286  
 
 
 
  2,482   2,589  
 
 
 
         
Property, plant and equipment, net 4,502   3,297  
         
Investments in affiliated companies and joint ventures and other        
   investments and provision for losses on equity investments 1,072   732  
Other assets        
      Goodwill on acquisition of subsidiaries 507   412  
      Loans and advances        
         Related parties 78   89  
         Unrelated parties 79   73  
      Prepaid pension cost 100   79  
      Deferred income tax 418   358  
      Judicial deposits 462   239  
      Unrealized gain on derivative instruments 1   3  
      Others 82   84  
 
 
 
         
  1,727   1,337  
 
 
 
TOTAL 9,783   7,955  
 
 
 

F - 3


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Condensed Consolidated Balance Sheets

Expressed in millions of United States dollars (Continued)  
         
  June 30,   December  
  2003   31, 2002  
 
 
 
Liabilities and stockholders' equity
(unaudited)
     
Current liabilities        
      Suppliers 354   325  
      Payroll and related charges 99   76  
      Interest attributed to stockholders 136   3  
      Current portion of long-term debt - unrelated parties 1,021   717  
      Short-term debt 131   184  
      Loans from related parties 64   64  
      Others 239   139  
 
 
 
  2,044   1,508  
 
 
 
Long-term liabilities        
      Employees post-retirement benefits 181   141  
      Long-term debt - unrelated parties 2,061   2,359  
      Loans from related parties 5   7  
      Provisions for contingencies (Note 9) 577   428  
      Unrealized loss on derivative instruments 77   76  
      Others 197   122  
 
 
 
  3,098   3,133  
 
 
 
Minority interests 79   27  
 
 
 
         
Stockholders' equity        
      Preferred class A stock - 600,000,000        
         no-par-value shares authorized and 138,575,913 issued 1,055   904  
      Common stock - 300,000,000 no-par-value        
         shares authorized and 249,983,143 issued 1,902   1,630  
      Treasury stock - 4,235 (2002 - 4,481) preferred and 4,715,170 common shares (88 ) (88 )
      Additional paid-in capital 498   498  
      Other cumulative comprehensive income (4,378 ) (5,175 )
      Appropriated retained earnings 2,292   2,230  
      Unappropriated retained earnings 3,281   3,288  
 
 
 
  4,562   3,287  
 
 
 
TOTAL 9,783   7,955  
 
 
 

See notes to condensed consolidated financial information.

F - 4


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

                   
Quarter
 
Six months
ended June 30
  
   





 



 
     
2nd
2003
   
1st
2003
 
2nd
2002
 
2003
   
2002
 
   
   
 
 
   
 
Operating revenues, net of discounts, returns and allowances                          
      Sales of ores and metals                          
            Iron ore and pellets   761     746   704   1,507     1,370  
            Gold   7     9   35   16     69  
            Manganese and ferroalloys   89     75   59   164     124  
            Potash   21     21   24   42     40  
            Others   14     16   9   30     20  
   
   
 
 
   
 
    892     867   831   1,759     1,623  
      Revenues from logistic services   138     115   131   253     242  
      Aluminum products   188     167   98   355     166  
      Other products and services   1     4   5   5     13  
   
   
 
 
   
 
    1,219     1,153   1,065   2,372     2,044  
      Value-added tax   (49 )   (43 ) (44 ) (92 )   (78 )
   
   
 
 
   
 
      Net operating revenues   1,170     1,110   1,021   2,280     1,966  
   
   
 
 
   
 
Operating costs and expenses                          
      Cost of ores and metals sold   (438 )   (428 ) (411 ) (866 )   (813 )
      Cost of logistic services   (73 )   (70 ) (74 ) (143 )   (133 )
      Cost of aluminum products   (157 )   (142 ) (95 ) (299 )   (160 )
      Others   (2 )   (1 ) (8 ) (3 )   (14 )
   
   
 
 
   
 
    (670 )   (641 ) (588 ) (1,311 )   (1,120 )
      Selling, general and administrative expenses   (45 )   (49 ) (60 ) (94 )   (108 )
      Research and development   (12 )   (11 ) (12 ) (23 )   (21 )
      Employee profit sharing plan   (9 )   (12 ) 3   (21 )   (6 )
      Others   (46 )   (34 ) (30 ) (80 )   (82 )
   
   
 
 
   
 
    (782 )   (747 ) (687 ) (1,529 )   (1,337 )
   
   
 
 
   
 
Operating income   388     363   334   751     629  
   
   
 
 
   
 
Non-operating income (expenses)                          
      Financial income   29     28   44   57     77  
      Financial expenses   (64 )   (82 ) (117 ) (146 )   (179 )
      Foreign exchange and monetary gains (losses), net   257     50   (326 ) 307     (331 )
   
   
 
 
   
 
    222     (4 ) (399 ) 218     (433 )
   
   
 
 
   
 
Income before income taxes, equity results and minority interests   610     359   (65 ) 969     196  
   
   
 
 
   
 
Income taxes                          
   Current   (135 )   (6 ) 3   (141 )   (4 )
   Deferred   (25 )   (65 ) 126   (90 )   114  
   
   
 
 
   
 
    (160 )   (71 ) 129   (231 )   110  
   
   
 
 
   
 
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments
  35     94   (82 ) 129     (48 )
Change in accounting pratice for asset retirement
obligations (note 4)
  -     (10 ) -   (10 )   -  
Minority interests   (29 )   (18 ) 4   (47 )   3  
   
   
 
 
   
 
Net income (loss)   456     354   (14 ) 810     261  
   
   
 
 
   
 
Basic earnings(losses) per Preferred Class A Share   1.19     0.92   (0.04 ) 2.11     0.68  
   
   
 
 
   
 
Basic earnings(losses) per Common Share   1.19     0.92   (0.04 ) 2.11     0.68  
   
   
 
 
   
 
Weighted average number of shares outstanding
(thousands of shares)
                         
   Common shares   245,268     245,268   245,268   245,268     245,268  
   Preferred Class A shares   138,571     138,571   138,575   138,571     138,575  

See notes to condensed consolidated financial information.

F - 5


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

             
Quarter
 
Six months
ended June 30
 
   






 



 
   
2nd
2003
   
1st
2003
 
2nd
2002
 
2003
   
2002
 
   
   
 
 
   
 
Cash flows from operating activities:                          
   Net income (loss)   456     354   (14 ) 810     261  
Adjustments to reconcile net income with cash provided by operating activities:
                         
      Depreciation, depletion and amortization   54     43   61   97     127  
      Dividends received   36     36   30   72     55  
Equity in results of affiliates and joint ventures and change in provision or losses on equity investments
  (35 )   (94 ) 82   (129 )   48  
      Deferred income taxes   25     65   (126 ) 90     (114 )
      Current income taxes   108     -   -   108     -  
      Provisions for contingencies   -     9   46   9     69  
      Impairment of property, plant and equipment   12     -   49   12     76  
Change in accounting pratice for asset retirement obligations (note 4)
  -     10   -   10     -  
      Pension plan   2     3   3   5     6  
      Foreign exchange and monetary losses (gains)   (258 )   (142 ) 467   (400 )   466  
      Net unrealized derivative losses (gains)   (1 )   3   7   2     13  
      Minority interests   29     18   (4 ) 47     (3 )
      Others   (7 )   6   68   (1 )   63  
   Decrease (increase) in assets:                          
      Accounts receivable   65     64   (16 ) 129     (82 )
      Inventories   (25 )   24   (26 ) (1 )   (25 )
      Others   (26 )   (1 ) (39 ) (27 )   (30 )
   Increase (decrease) in liabilities:                          
      Suppliers   18     (93 ) (5 ) (75 )   (14 )
      Payroll and related charges   13     (6 ) 7   7     5  
      Others   (14 )   57   22   43     6  
   
   
 
 
   
 
   Net cash provided by operating activities   452     356   612   808     927  
   
   
 
 
   
 
Cash flows from investing activities:                          
   Loans and advances receivable                          
         Related parties                          
                  Additions   (54 )   (23 ) (6 ) (77 )   (29 )
                  Repayments   -     29   26   29     29  
         Others   1     16   1   17     2  
   Guarantees and deposits   (152 )   (12 ) (29 ) (164 )   (39 )
   Additions to investments   (61 )   -   -   (61 )   (1 )
   Additions to property, plant and equipment   (308 )   (198 ) (172 ) (506 )   (317 )
Proceeds from disposals of property, plant and equipment
  37     -   1   37     1  
   Net cash used to acquire subsidiaries   -     -   (45 ) -     (45 )
   
   
 
 
   
 
   Net cash used in investing activities   (537 )   (188 ) (224 ) (725 )   (399 )
   
   
 
 
   
 
Cash flows from financing activities:                          
   Short-term debt, net issuances (repayments)   60     (93 ) (166 ) (33 )   211  
   Loans                          
         Related parties                          
                  Additions   -     -   -   -     12  
                  Repayments   (6 )   (16 ) (4 ) (22 )   (19 )
   Issuances of long-term debt                          
         Related parties   -     2   1   2     11  
         Others   40     177   71   217     513  
   Repayments of long-term debt                          
         Related parties   (4 )   -   -   (4 )   (15 )
         Others   (175 )   (101 ) (79 ) (276 )   (140 )
   Interest attributed to stockholders   (215 )   -   (329 ) (215 )   (329 )
   
   
 
 
   
 
   Net cash used in financing activities   (300 )   (31 ) (506 ) (331 )   244  
   
   
 
 
   
 
   Increase (decrease) in cash and cash equivalents   (385 )   137   (118 ) (248 )   772  
   Effect of exchange rate changes on cash and cash equivalents   67     56   (318 ) 123     (317 )
   Cash and cash equivalents, beginning of period   1,284     1,091   2,008   1,091     1,117  
   
   
 
 
   
 
   Cash and cash equivalents, end of period   966     1,284   1,572   966     1,572  
   
   
 
 
   
 
   Cash paid during the period for:                          
            Interest on short-term debt   (1 )   (6 ) (10 ) (7 )   (16 )
            Interest on long-term debt, net of interest capitalized   (28 )   (49 ) (33 ) (77 )   (68 )
                     Interest capitalized   5     4   5   9     10  
            Income tax   (27 )   (6 ) (4 ) (33 )   (4 )
   Non-cash transactions                          
            Conversion of loans receivable to investments   76     11   -   87     20  

See notes to condensed consolidated financial information.

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

      Quarter   Six months ended June 30  
 





 



 
  2nd 2003     1st 2003   2nd 2002   2003     2002  
 

 
 
 

 
 
Preferred class A stock (including one special share)                        
     Beginning of the period 904     904   820   904     904  
    Transfer from appropriated retained earnings 151     -   84   151     -  
 

 
 
 

 
 
     End of the period 1,055     904   904   1,055     904  
 

 
 
 

 
 
Common stock                        
     Beginning of the period 1,630     1,630   1,479   1,630     1,630  
    Transfer from appropriated retained earnings 272     -   151   272     -  
 

 
 
 

 
 
     End of the period 1,902     1,630   1,630   1,902     1,630  
 

 
 
 

 
 
Treasury stock                        
     End of the period (88 )   (88 ) (88 ) (88 )   (88 )
 

 
 
 

 
 
 

 
 
 

 
 
Additional paid-in capital                        
     End of the period 498     498   498   498     498  
 

 
 
 

 
 
Other cumulative comprehensive income                        
    Cumulative translation adjustments                        
     Beginning of the period (4,999 )   (5,185 ) (3,477 ) (5,185 )   (3,475 )
     Change in the period 593     186   (776 ) 779     (778 )
 

 
 
 

 
 
     End of the period (4,406 )   (4,999 ) (4,253 ) (4,406 )   (4,253 )
 

 
 
 

 
 
  Unrealized gain on available-for-sale security                        
     Beginning of the period 13     -   -   -     -  
     Change in the period 5     13   -   18     -  
 

 
 
 

 
 
     End of the period 18     13   -   18     -  
 

 
 
 

 
 
   Adjustments relating to investments in affiliates                        
     Beginning of the period 10     10   10   10     10  
     Change in the period -     -   -   -     -  
 

 
 
 

 
 
     End of the period 10     10   10   10     10  
 

 
 
 

 
 
Total other cumulative comprehensive income (4,378)     (4,976 ) (4,243 ) (4,378 )   (4,243 )
 

 
 
 

 
 
Appropriated retained earnings                        
     Beginning of the period 2,351     2,230   3,207   2,230     3,212  
     Transfer to retained earnings 364     121   (547 ) 485     (552 )
     Transfer to capital stock (423 )   -   (235 ) (423 )   (235 )
 

 
 
 

 
 
     End of the period 2,292     2,351   2,425   2,292     2,425  
 

 
 
 

 
 
Retained earnings                        
     Beginning of the period 3,321     3,288   2,328   3,288     2,184  
          Net income 456     354   (14 ) 810     261  
          Interest attributed to stockholders                        
            Preferred class A stock ($0.87 and $0.39 per share in 2003 and 2002) (48 )   (72 ) (5 ) (120 )   (54 )
            Common stock ($0.87 and $0.39 per share in 2003 and 2002) (84 )   (128 ) (10 ) (212 )   (97 )
          Appropriation from reserves (364 )   (121 ) 547   (485 )   552  
 

 
 
 

 
 
     End of the period 3,281     3,321   2,846   3,281     2,846  
 

 
 
 

 
 
Total stockholders' equity 4,562     3,640   3,972   4,562     3,972  
 

 
 
 

 
 
Comprehensive income is comprised as follows:                        
          Net income 456     354   (14 ) 810     261  
          Cumulative translation adjustments 593     186   (776 ) 779     (778 )
          Unrealized gain on available-for-sale security 5     13   -   18     -  
 

 
 
 

 
 
Total comprehensive income 1,054     553   (790 ) 1,607     (517 )
 

 
 
 

 
 
Shares                        
Preferred class A stock (including one special share) 138,575,913     138,575,913   138,575,913   138,575,913     138,575,913  
 

 
 
 

 
 
Common stock 249,983,143     249,983,143   249,983,143   249,983,143     249,983,143  
 

 
 
 

 
 
Treasury stock (1)                        
     Beginning of the period (4,719,635 )   (4,719,651 ) (4,719,921 ) (4,719,651 )   (4,715,261 )
     Acquisitions -     -   -   -     (4,390 )
     Sales 230     16   -   246     -  
 

 
 
 

 
 
     End of the period (4,719,405 )   (4,719,635 ) (4,719,921 ) (4,719,405 )   (4,719,651 )
 

 
 
 

 
 
  383,839,651     383,839,421   383,839,135   383,839,651     383,839,405  
 

 
 
 

 
 

(1)   As of June 30, 2003, 4,715,170 common shares and 4,235 preferred shares were purchased, which are held in treasury in the amount of US$ 88. The 4,715,170 commom shares guarantees an loan given to our subsidiary Alunorte.

 

See notes to condensed consolidated financial information.

F - 7


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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

 
 
 
Ferteco Mineração S.A. - FERTECO   100   Brazil   Iron ore and pellets
Pará Pigmentos S.A.   76   Brazil   Kaolin
SIBRA - Eletrosiderúrgica Brasileira S.A.   100   Brazil   Manganese and Ferroalloys
Navegação Vale do Rio Doce S.A. - DOCENAVE   100   Brazil   Shipping
Vale do Rio Doce Alumínio S.A. - ALUVALE   100   Brazil   Aluminum
Itabira Rio Doce Company Ltd. - ITACO   100   Cayman Island   Trading
Rio Doce International Finance Ltd. - RDIF   100   Bahamas   International finance
CELMAR S.A. - Indústria de Celulose e Papel   100   Brazil   Forestry
Florestas Rio Doce S.A.   100   Brazil   Forestry
Rio Doce Manganèse Europe - RDME   100   France   Ferroalloys
Urucum Mineração S.A.   100   Brazil   Iron ore and Ferroalloys
Alumina do Norte do Brasil S.A - Alunorte   57   Brazil   Aluminum
Salobo Metais S.A. (1)   100   Brazil   Copper
Mineração Serra do Sossego S.A. (1)   100   Brazil   Copper
Rio Doce Manganese Norway - RDMN   100   Norway   Ferroalloys

(1) - Development stage companies

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.

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3 Summary of significant accounting policies

Our condensed consolidated interim financial information as of June 30, 2003 for the three-month periods ended June 30, 2003, March 31, 2003 and June 30, 2002 and for the six month periods ended June 30, 2003 and 2002 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 six-month period ended June 30, 2003 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2003.

This condensed interim financial information should be read in conjunction with our consolidated financial statements for the year ended December 31, 2002.

The provision for losses on equity investments relates to our investments in affiliates which have reported negative stockholders’ equity in their financial information prepared in accordance with US GAAP and in circumstances where we have assumed commitments to fund our share of the accumulated losses, if necessary, through additional capital contributions or other means. Accordingly we (a) first reduce the value of the investment to zero and (b) subsequently provide for our portion of negative equity.

Other current assets includes $30 related to ships held for sale, at June 30, 2003.

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, 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 change 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 depleted over the useful lives of the related assets.

5 Recently-issued accounting pronouncements

In June 2002, the FASB has issued SFAS 146 - "Accounting for Costs Associated with Exit or Disposal Activities". The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. We adopted SFAS 146 as from January 1, 2003. We have not committed to disposal of or disposed of any significant activities since adoption.

In November 2002 the FASB issued FIN 45 - "Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". The Interpretation elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial information. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor’s fiscal year-end. The disclosure requirements in the Interpretation, applicable as from December 31, 2002 are disclosed in Note 9. We have not issued any material guarantees sinc e December 31, 2002.

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In January 2003, FASB issued Interpretation No. 46 (FIN 46) – Consolidation of Variable Interest Entities. FIN 46 provides guidance on when certain entities should be consolidated or the interests in those entities should be disclosed by enterprises that do not control them through majority voting interest. This interpretation applies immediately to variable interest entities created after January 31, 2003. We do not have any entities or transactions which are subject to the requirements of FIN 46 and does not expect FIN 46 to have a material impact on our financial statements.

In April 2003, FASB issued Statement of Financial Accounting Standards No. 149, an amendment of SFAS 133 on Derivative Instruments and Hedging Activities (“SFAS 149”). This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS 133. This statement is effective for contracts entered into or modified after June 30, 2003, except as stated in the following sentence and for hedging relationships designated after June 30, 2003. The provisions of this statement that relate to Statement 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. We are evaluating the impact of this standard.

In May 2003. FASB issued SFAS No. 150, Accounting For Certain Financial Instruments with Characteristics of both Liabilities and Equity (“SFAS 150”) this Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The Board decided to make this statement effective shortly after issuance for contracts created or modified after it is issued and for existing contracts at the beginning of the first interim period beginning after June 15, 2003. We have not created or modified any such contracts since June 15, 2003.

6 Income taxes

Income taxes in Brazil comprise federal income tax and social contribution, which is an additional federal tax. The statutory enacted tax rates applicable in the periods presented are as follows:

  Six months ended June 30 - %  
 
 
  2003   2002  
 
 
 
Federal income tax 25   25  
Social contribution 9   9  
 
 
 
Composite tax rate 34   34  
 
 
 

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The amount reported as income tax expense in our consolidated financial information is reconciled to the statutory rates as follows:

              Six months  
      Quarter   ended June 30  
 
 
 
  2nd   1st   2nd          
  2003   2003   2002   2003   2002  
 
 
 
 
 
 
Income before income taxes, equity results and minority interests 610   359   (65 ) 969   196  
 
 
 
 
 
 
Federal income tax and social contribution expense at statutory enacted rates (207 ) (122 ) 22   (329 ) (67 )
Adjustments to derive effective tax rate:                    
Tax benefit on interest attributed to stockholders 59   63   (3 ) 122   43  
Exempt foreign income (expenses) (26 ) (16 ) 75   (42 ) 92  
Tax incentives 40   -   (5 ) 40   2  
Valuation allowance -   9   (3 ) 9   6  
Other non-taxable gains (losses) (26 ) (5 ) 13   (31 ) 10  
Adjustment to reflect expected annual effective tax rate -   -   30   -   24  
 
 
 
 
 
 
Federal income tax and social contribution expense in consolidated statements of income (160 ) (71 ) 129   (231 ) 110  
 
 
 
 
 
 

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 expires 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

  June 30, 2003   December 31, 2002  
 
 
 
Finished products        
      Iron ore and pellets 94   86  
      Manganese 19   24  
      Ferroalloys 42   27  
      Alumina 23   15  
      Others 16   12  
Spare parts and maintenance supplies 153   128  
 
 
 
  347   292  
 
 
 

 

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8      Investments

                                                                                        Quoted  
  June 30, 2003   Investments   Goodwill   Equity Adjustments   Dividends received   market  
 
 
 
 
 
 
 
                                                      Six months         Six months   June 30,   
                Net                       Quarter   ended June 30   Quarter   ended June 30    
                income                      
 
 
 



 
 
  Participation in   Net   for the   June 30,     December   June 30,     December   2nd     1st   2nd             2nd     1st   2nd                
  capital(%)   equity   period   2003     31, 2002   2003     31, 2002   2003     2003   2002   2003     2002   2003     2003   2002   2003     2002   2003  
 
 
 
 
   
 
   
 
   
 
 
   
 
   
 
 
   
 
 
Investments in affiliated companies and joint ventures, unless otherwise started
  voting   total                                                                                  
Steel                                                                                          
Usinas Siderúrgicas de Minas Gerais S.A - USIMINAS
  22.99   11.46   175   174   20     -   -     -   10     10   (11)   20     (8 ) -     -   -   -     2   84  
Companhia Siderúrgica de Tubarão - CST (1)
  24.93   28.02   368   47   103     27   -     -   6     6   2   12     (5 ) -     5   -   5     -   247  
California Steel Industries Inc. - CSI   50.00   50.00   212   5   106     107   -     -   -     3   7   3     6   3     -   -   3     -   -  
SIDERAR (costs $24) - available for sale investments
  4.85   4.85   -   -   48     30   -     -   -     -   -   -     -   -     -   -   -     -   48  
                   
   
 
   
 
   
 
 
   
 
   
 
 
   
     
                    277     164   -     -   16     19   (2 ) 35     (7 ) 3     5   -   8     2      
Aluminum and bauxite
                                                                                         
Mineração Rio do Norte S.A. - MRN
  40.00   40.00   417   24   167     162   -     -   6     4   15   10     19   -     5   10   5     23   -  
Valesul Alumínio S.A. - VALESUL
  54.51   54.51   92   9   50     39   -     -   1     4   3   5     4   3     -   -   3     -   -  
Alumínio Brasileiro S.A. - ALBRAS
  51.00   51.00   172   156   88     -   -     -   40     39   (9 ) 79     -   -     -   -   -     -   -  
Alumina do Norte do Brasil S.A. -ALUNORTE (Consolidated as from June 30, 2002, after acquisition of control)
  62.09   57.03           -     -   -     -   -     -   (28 )       (23 ) -     -   -   -     -   -  
                   
   
 
   
 
   
 
 
   
 
   
 
 
   
     
                    305     201   -     -   47     47   (19 ) 94     -   3     5   10   8     23      
Iron ore and pellets                                                                                          
Caemi Mineração e Metalurgia S.A.
  50.00   16.86   635   71   107     77   -     -   7     5   -   12     1   -     -   3   -     3   112  
Companhia Nipo-Brasileira de Pelotização NIBRASCO
  51.11   51.00   28       14     12   -     -   (1 )   1   2   -     1   -     -   -   -     -   -  
Companhia Hispano-Brasileira de Pelotização - HISPANOBRÁS
  51.00   50.89   34   5   17     14   -     -   2     1   2   3     3   -     2   -   2     1   -  
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
  50.00   50.00           -     -   -     -   -     -   (3 ) -     (2 ) -     -   -   -     -   -  
Companhia Ítalo-Brasileira de Pelotização - ITABRASCO
  51.00   50.90   23   3   12     9   -     -   1     -   1   1     2   1     -   -   1     -   -  
Gulf Industrial Investment Company - GIIC
  50.00   50.00   75   11   38     37   -     -   4     2   1   6     3   -     5   -   5     6   -  
SAMARCO Mineração S.A. - SAMARCO   50.00   50.00   395   84   198     154   37     30   23     19   (3 ) 42     8   25     14   17   39     17   -  
Minas da Serra Gera S.A - MSG
  51.00   51.00   27   4   14     9   -         1     1   2   2     3   1     -   -   1     1   -  
Others   -   -   -   -   15     12   -                   1   -     1   -     -   -   -     -   -  
                   
   
 
   
 
   
 
 
   
 
   
 
 
   
     
                    415     324   37     30   37     29   3   66     20   27     21   20   48     28      
Others                                                                                          
Fertilizantes Fosfatados S.A. - FOSFERTIL (2)
  10.96   11.12   264   48   29     25   -     -   2     3   -   5     2   2     5   -   7     2   55  
Others   -   -           26     15   -     -   (1 )   3   (26 ) 2     (25 ) 1     -   -   1     -   -  
                   
   
 
   
 
   
 
 
   
 
   
 
 
   
     
                    55     40   -     -   1     6   (26 ) 7     (23 ) 3     5   -   8     2      
                   
   
 
   
 
   
 
 
   
 
   
 
 
   
     
                    1,052     729   37     30   101     101   (44 ) 202     (10 ) 36     36   30   72     55      
                   
   
 
   
 
   
 
 
   
 
   
 
 
   
     
Balance / Change in provision for losses on equity investments:
                                                                                         
Alumínio Brasileiro S.A. - ALBRAS
                  -     (1 ) -     -   -     1   (18 ) 1     (12 ) -     -   -   -     -   -  
Companhia Ferroviária do Nordeste - CFN
                  -     -   -     -   (2 )   -   (1 ) (2 )   (2 ) -     -   -   -     -   -  
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
                  (10 )   (16 ) -     -   6     3   (5 ) 9     (5 ) -     -   -   -     -   -  
Ferroban - Ferrovias Bandeirantes S.A.
                  -     -   -     -   -     -   -   -     (2 ) -     -   -   -     -   -  
Ferrovia Centro-Atlântica S.A. - FCA
                  -     -   -     -   (73 )   (11 ) (7 ) (84     (10 ) -     -   -   -     -   -  
MRS Logística S.A
                  (2 )   (6 ) -     -   3     1   (7 ) 4     (7 ) -     -   -   -     -   -  
CSN Aceros                   (5 )   (4 ) -     -         (1 ) -   (1 )   -   -     -   -   -     -   -  
                   
   
 
   
 
   
 
 
   
 
   
 
 
   
     
                    (17 )   (27 ) -     -   (66 )   (7 ) (38 ) (73 )   (38 ) -     -   -   -     -      
                   
   
 
   
 
   
 
 
   
 
   
 
 
   
     
Total                   1,035     702 37     30   35     94   (82)   129     (48 ) 36     36   30   72     55      
                   
   
 
   
 
   
 
 
   
 
   
 
 
   
     
   
(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 US$ 60.
(2) We have significant influence through a shareholders` agreement.

 

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9 Commitments and contingencies
   
(a) At June 30, 2003, we had extended guarantees for borrowings obtained by affiliates and joint ventures in the amount of $484, of which $350 is denominated in United States dollars and the remaining $134 in local currency, as follows:
   
    Amount of   Denominated       Final   Counter
Affiliate or Joint Venture   guarantee   currency   Purpose   maturity   guarantees

 
 
 
 
 
ALBRAS   267   US$   Debt guarantee   2007   None
    44   R$   Debt guarantee   2010   None
FCA   51   US$   Debt guarantee   2009   None
    84   R$   Debt guarantee   2012   None
SEPETIBA TECON   18   US$   Debt guarantee   2005   None
    5   R$   Debt guarantee   2012   None
SAMARCO   12   US$   Debt guarantee   2020   None
VALESUL   1   R$   Debt guarantee   2006   None
                    Collateral
NIBRASCO   2   US$   Debt guarantee   2004   Pledge
   
               
    484                
   
               

We expect no losses to arise as a result of the above guarantees. We have made no charges for extending these guarantees except in the case of Albras and Samarco.

(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.

The provision for contingencies and the related judicial deposits are composed as follows:

  June 30, 2003   December 31, 2002  
 
 
 
  Provision for   Judicial   Provision for   Judicial  
  contingencies   deposits   contingencies   deposits  
 
 
 
 
 
Labor claims 156   68   109   52  
Civil claims 123   43   95   32  
Tax - related actions 297   349   220   153  
Others 1   2   4   2  
 
 
 
 
 
  577   462   428   239  
 
 
 
 
 

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 changes in basis of calculation and rates of certain revenue taxes 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.

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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. The increase of $196 for tax deposits relates to an action in which we challenged the annual limitation on use our tax loss carryforward.

Contingencies settled in the three-month period ended June 30, 2003, and 2002 and March 31, 2003 aggregated $32, $28 and $21, respectively, and additional provisions aggregated $18, $74 and $30, respectively.

(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 information with respect to these two actions.
   
(d) We are committed under a take-or-pay agreement to take annual delivery of approximately 207,060 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 $1,366.00 per metric ton at June 30, 2003, represents an annual commitment of $283. Actual take from Albras was $67, $71 and $65 during the three-month period ended June 30, 2003 and 2002 and March 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 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, which represents half of the $410 in expenditures estimated as necessary to complete geological exploration and mineral resource development projects in the region over a period of five years. This period was extended for an additional two years. We oversee these projects and BNDES advances us half of our costs on a quarterly basis. Under the Mineral Risk Contract, as of June 30, 2003, both we and BNDES had remaining commitments to contribute an additional $54 towards exploration and development activities. In the event that either of us wishes to conduct further exploration and development after having spent such $205, 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 (1) all the rights and benefits provided for in the Mineral Risk Contract and (2) any amount 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.
   
(g) At June 30, 2003 we have provided $54 for environmental liabilities and asset retirement obligations.

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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.

10 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 financial information is required to be reported on the basis that the top decision-maker uses such information 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 gold and other non-ferrous minerals.

Logistics – comprises our transportation systems as they pertain to 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 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 Brazilian corporate law together with certain minor inter-segment allocations.

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Consolidated net income and principal assets are reconciled as follows:

Results by segment - before eliminations
  2nd Quarter 2003  

  Combined          

              Holdings          

      Non                          
  Ferrous   ferrous   Logistics   Aluminum   Steel   Others   Eliminations   Consolidated  
 
 
 
 
 
 
 
 
 
Gross revenues - Export 1,115   18   18   158   -   -   (495 ) 814  
Gross revenues - Domestic 279   22   108   41   -   -   (45 ) 405  
Cost and expenses (1,039 ) (40 ) (68 ) (175 ) 5   2   540   (775 )
Depreciation, depletion and amortization (45 ) (2 ) (3 ) (4 ) -   -   -   (54 )
Pension plan (2 ) -   -   -   -   -   -   (2 )
 
 
 
 
 
 
 
 
 
Operating profit 308   (2 ) 55   20   5   2   -   388  
Financial income 51   (1 ) 5   3   2   -   (31 ) 29  
Financial expenses (85 ) -   (2 ) (7 ) (1 ) -   31   (64 )
Foreign exchange and monetary losses, net 185   14   (12 ) 72   2   (4 ) -   257  
Equity in earnings 44   -   (72 ) 47   16   -   -   35  
Income taxes (139 ) 1   1   (24 ) 1   -   -   (160 )
Minority interests (1 ) (3 ) -   (25 ) -   -   -   (29 )
 
 
 
 
 
 
 
 
 
Net income 363   9   (25 ) 86   25   (2 ) -   456  
 
 
 
 
 
 
 
 
 
                                 
Sales classified by geographic destination:                                
Export market                                
America, except United States 121   -   4   36   -   -   (84 ) 77  
United States 70   2   -   17   -   -   (47 ) 42  
Europe 491   14   10   45   -   -   (185 ) 375  
Middle East/Africa/Oceania 68   -   1   -   -   -   (14 ) 55  
Japan 131   2   2   47   -   -   (60 ) 122  
Asia, other than Japan 234   -   1   13   -   -   (105 ) 143  
 
 
 
 
 
 
 
 
 
  1,115   18   18   158   -   -   (495 ) 814  
Domestic market 279   22   108   41   -   -   (45 ) 405  
 
 
 
 
 
 
 
 
 
  1,394   40   126   199   -   -   (540 ) 1,219  
 
 
 
 
 
 
 
 
 
Assets:                                
Property, plant and equipment, net 3,103   634   212   522   -   31   -   4,502  
Capital expenditures 177   94   17   20   -   -   -   308  
Investments in affiliated companies and joint ventures and other investments, net of provision for losses 459   -   2   305   277   29   -   1,072  
 
 
 
 
 
 
 
 
 
Capital employed 2,875   158   245   486   19   10   -   3,793  

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Operating profit by product – after eliminations

 
2nd Quarter 2003
       

                               Impairment/                
Revenues
    Gain on sale    

(1)
  of property, Depreciation,  
            Cost and   plant and depletion and Operating
Export Domestic Total expenses Net equipment amortization profit
 
 
 
 
 
 
 
 
 
Ferrous                                
Iron ore 458   135   593   (301 ) 292   -   (20 ) 272  
Pellets 118   50   168   (141 ) 27   (12 ) (4 ) 11  
Manganese 14   2   16   (3 ) 13   -   (1 ) 12  
Ferroalloys 46   27   73   (51 ) 22   -   (2 ) 20  
 
 
 
 
 
 
 
 
 
  636   214   850   (496 ) 354   (12 ) (27 ) 315  
Non ferrous                                
Gold 7   -   7   (7 ) -   -   (2 ) (2 )
Potash -   21   21   (12 ) 9   -   (1 ) 8  
Kaolin 13   1   14   (10 ) 4   -   -   4  
 
 
 
 
 
 
 
 
 
  20   22   42   (29 ) 13   -   (3 ) 10  
Aluminum                                
Alumina 65   39   104   (88 ) 16   -   (4 ) 12  
Aluminum 74   4   78   (68 ) 10   -   -   10  
Bauxite 6   -   6   (6 ) -   -   -   -  
 
 
 
 
 
 
 
 
 
  145   43   188   (162 ) 26   -   (4 ) 22  
Logistics                                
Railroads -   79   79   (27 ) 52   -   (16 ) 36  
Ports -   38   38   (32 ) 6   -   (2 ) 4  
Ships 13   8   21   (21 ) -   -   -   -  
 
 
 
 
 
 
 
 
 
  13   125   138   (80 ) 58   -   (18 ) 40  
Others -   1   1   2   3   -   (2 ) 1  
 
 
 
 
 
 
 
 
 
  814   405   1,219   (765 ) 454   (12 ) (54 ) 388  
 
 
 
 
 
 
 
 
 

(1) Cost and expenses include contingency provisions of $16.

F - 17


Back to Contents

Results by segment - before eliminations

                          1st Quarter 2003  

                    Combined        

                    Holdings

Non          
Ferrous ferrous Logistics Aluminum Steel 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 ) 1   (3 ) 517   (744 )
Depreciation, depletion and amortization (36 ) (3 ) (2 ) (2 ) -   -   -   (43 )
Pension plan (3 ) -   -   -   -   -   -   (3 )
 
 
 
 
 
 
 
 
 
Operating profit 298   6   36   25   1   (3 ) -   363  
Financial income 45   1   3   3   -   1   (25 ) 28  
Financial expenses (96 ) (2 ) (1 ) (5 ) (3 ) -   25   (82 )
Foreign exchange and monetary losses, net 25   5   (3 ) 23   -   -   -   50  
Equity in earnings 33   -   (11 ) 48   19   5   -   94  
Income taxes (66 ) (1 ) (1 ) (2 ) (1 ) -   -   (71 )
Change in accounting pratice for asset retirement                                
      obligations (note 4) (10 ) -   -   -   -   -   -   (10 )
Minority interests -   (2 ) -   (16 ) -   -   -   (18 )
 
 
 
 
 
 
 
 
 
Net income 229   7   23   76   16   3   -   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  
Asia, other than Japan 261   1   -   6   -   -   (119 ) 149  
 
 
 
 
 
 
 
 
 
  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  
Capital expenditures 91   51   32   23   -   1   -   198  
Investments in affiliated companies and joint ventures and                                
      other investments, net of provision for losses 437   -   (7 ) 233   148   28   -   839  
 
 
 
 
 
 
 
 
 
Capital employed 2,521   138   188   405   22   10   -   3,284  

F - 18


Back to Contents

Operating profit by product - after eliminations

                        1st Quarter 2003  
 
 
              Impairment/          
              Gain on sale          
  Revenues   (1)       of property,   Depreciation,      
 
  Cost and       plant and   depletion and   Operating  
  Export   Domestic   Total   expenses   Net   equipment   amortization   profit  
 
 
 
 
 
 
 
 
 
Ferrous                                
Iron ore 421   126   547   (267 ) 280  
-
  (18 ) 262  
Pellets 152   47   199   (168 ) 31  
-
  (3 ) 28  
Manganese 9   2   11   (5 ) 6  
-
  -   6  
Ferroalloys 47   17   64   (54 ) 10  
-
  (2 ) 8  
 
 
 
 
 
 
 
 
 
  629   192   821   (494 ) 327  
-
  (23 ) 304  
Non ferrous                                
Gold 9   -   9   (8 ) 1  
-
  -   1  
Potash -   21   21   (12 ) 9  
-
  (1 ) 8  
Kaolin 13   3   16   (10 ) 6  
-
  (1 ) 5  
 
 
 
 
 
 
 
 
 
  22   24   46   (30 ) 16  
-
  (2 ) 14  
Aluminum                                
Alumina 59   34   93   (73 ) 20  
-
  (2 ) 18  
Aluminum 70   -   70   (66 ) 4  
-
  -   4  
Bauxite 4   -   4   (4 ) -  
-
  -   -  
 
 
 
 
 
 
 
 
 
  133   34   167   (143 ) 24  
-
  (2 ) 22  
Logistics                                
Railroads -   66   66   (22 ) 44  
-
  (14 ) 30  
Ports -   28   28   (9 ) 19  
-
  (2 ) 17  
Ships 13   8   21   (39 ) (18 )
-
  -   (18 )
 
 
 
 
 
 
 
 
 
  13   102   115   (70 ) 45  
-
  (16 ) 29  
Others -   4   4   (10 ) (6 )
-
  -   (6 )
 
 
 
 
 
 
 
 
 
  797   356   1,153   (747 ) 406  
-
  (43 ) 363  
 
 
 
 
 
 
 
 
 
   
(1) Cost and expenses include contingency provisions of $9.

 

F - 19


Back to Contents

Results by segment - before eliminations

                          2nd Quarter 2002  
 
 
                  Combined          
 
         
                     
Holdings
         
             
         
      Non       (1)                  
  Ferrous   ferrous   Logistics   Aluminum   Steel   Others   Eliminations   Consolidated  
 
 
 
 
 
 
 
 
 
Gross revenues - Export 1,052   42   9   99   -   -   (482 ) 720  
Gross revenues - Domestic 269   26   98   -   -   2   (50 ) 345  
Cost and expenses (933 ) (46 ) (82 ) (103 ) (24 ) (11 ) 532   (667 )
Depreciation, depletion and amortization (45 ) (13 ) (3 ) (1 ) -   1   -   (61 )
Pension plan (3 ) -   -   -   -   -   -   (3 )
 
 
 
 
 
 
 
 
 
Operating profit 340   9   22   (5 ) (24 ) (8 ) -   334  
Financial income 52   -   3   3   1   -   (15 ) 44  
Financial expenses (126 ) (1 ) (2 ) -   (3 ) -   15   (117 )
Foreign exchange and monetary losses, net (291 ) (19 ) (16 ) -   -   -   -   (326 )
Equity in earnings (4 ) -   (37 ) (37 ) (2 ) (2 ) -   (82 )
Income taxes 130   -   -   (1 ) -   -   -   129  
Minority interests 1   3   -   -   -   -   -   4  
 
 
 
 
 
 
 
 
 
Net income 102   (8 ) (30 ) (40 ) (28 ) (10 ) -   (14 )
 
 
 
 
 
 
 
 
 
                                 
Sales classified by geographic destination:                                
Export market                                
America, except United States 153   -   7   6   -   -   (100 ) 66  
United States 58   16   -   1   -   -   (45 ) 30  
Europe 458   26   -   81   -   -   (187 ) 378  
Middle East/Africa/Oceania 42   -   -   -   -   -   (7 ) 35  
Japan 130   -   -   -   -   -   (61 ) 69  
Asia, other than Japan 211   -   2   11   -   -   (82 ) 142  
 
 
 
 
 
 
 
 
 
  1,052   42   9   99   -   -   (482 ) 720  
Domestic market 269   26   98   -   -   2   (50 ) 345  
 
 
 
 
 
 
 
 
 
  1,321   68   107   99   -   2   (532 ) 1,065  
 
 
 
 
 
 
 
 
 
Assets:                                
Property, plant and equipment, net 2,700   392   252   410   -   92   -   3,846  
Capital expenditures 143   15   17   -   -   (3 ) -   172  
Investments in affiliated companies and joint ventures and other investments, net of provision for losses 540   -   (2 ) 174   142   33   -   887  
 
 
 
 
 
 
 
 
 
Capital employed 2,577   345   248   266   18   38   -   3,492  
   
(1) Control of Alunorte was acquired in June 2002 and it was consolidated from then.

 

F - 20


Back to Contents

Operating profit by product – after eliminations

                        2nd Quarter 2002  
 














 
                      Impairment/          
                  Gain on sale          
          Revenues           of property,   Depreciation,      
 




  Cost and       plant and   depletion and   Operating  
  Export   Domestic   Total   expenses   Net   equipment   amortization   profit  
 
 
 
 
 
 
 
 
 
Ferrous                                
Iron ore 433   129   562   (239 ) 323   -   (20 ) 303  
Pellets 100   42   142   (151 ) (9 ) -   (4 ) (13 )
Manganese 8   1   9   (12 ) (3 ) -   (1 ) (4 )
Ferroalloys 33   17   50   (30 ) 20   -   (3 ) 17  
 
 
 
 
 
 
 
 
 
  574   189   763   (432 ) 331   -   (28 ) 303  
Non ferrous                                
Gold 35   -   35   (21 ) 14   -   (5 ) 9  
Potash -   24   24   (20 ) 4   -   (1 ) 3  
Kaolin 7   2   9   (11 ) (2 ) -   (1 ) (3 )
 
 
 
 
 
 
 
 
 
  42   26   68   (52 ) 16   -   (7 ) 9  
Aluminum                                
Alumina 16   -   16   (21 ) (5 ) -   -   (5 )
Aluminum 74   -   74   (73 ) 1   -   -   1  
Bauxite 8   -   8   (9 ) (1 ) -   -   (1 )
 
 
 
 
 
 
 
 
 
  98   -   98   (103 ) (5 ) -   -   (5 )
Logistics                                
Railroads -   72   72   (28 ) 44   5   (20 ) 29  
Ports -   39   39   (29 ) 10   -   (3 ) 7  
Ships 6   14   20   (30 ) (10 ) 1   (2 ) (11 )
 
 
 
 
 
 
 
 
 
  6   125   131   (87 ) 44   6   (25 ) 25  
Others -   5   5   (2 ) 3   -   (1 ) 2  
 
 
 
 
 
 
 
 
 
  720   345   1,065   (676 ) 389   6   (61 ) 334  
 
 
 
 
 
 
 
 
 

F - 21


Back to Contents

Results by segment - before eliminations

                      Six months ended June 30, 2003  
 














 
                      Combined          
             




         
                      Holdings          
             




         
  Ferrous   Non
ferrous
  Logistics   Aluminum   Steel   Others   Eliminations   Consolidated  
 
 
 
 
 
 
 
 
 
Gross revenues - Export 2,195   41   39   307   -   -   (971 ) 1,611  
Gross revenues - Domestic 537   46   186   78   -   -   (86 ) 761  
Cost and expenses (2,040 ) (78 ) (129 ) (334 ) 6   (1 ) 1,057   (1,519 )
Depreciation, depletion and amortization (81 ) (5 ) (5 ) (6 ) -   -   -   (97 )
Pension plan (5 ) -   -   -   -   -   -   (5 )
 
 
 
 
 
 
 
 
 
Operating profit 606   4   91   45   6   (1 ) -   751  
Financial income 96   -   8   6   2   1   (56 ) 57  
Financial expenses (181 ) (2 ) (3 ) (12 ) (4 ) -   56   (146 )
Foreign exchange and monetary losses, net 210   19   (15 ) 95   2   (4 ) -   307  
Equity in earnings 78   -   (83 ) 95   35   4   -   129  
Income taxes (205 ) -   -   (26 ) -   -   -   (231 )
Change in accounting pratice for asset
retirement obligations (note 4)
(10 ) -   -   -   -   -   -   (10 )
Minority interests (1 ) (5 ) -   (41 ) -   -   -   (47 )
 
 
 
 
 
 
 
 
 
Net income 593   16   (2 ) 162   41   -   -   810  
 
 
 


 
 
 
 
 
                                 
Sales classified by geographic destination:                                
Export market                                
America, except United States 237   -   18   67   -   -   (156 ) 166  
United States 171   6   -   19   -   -   (97 ) 99  
Europe 931   31   14   132   -   -   (355 ) 753  
Middle East/Africa/Oceania 119   -   4   -   -   -   (30 ) 93  
Japan 242   3   2   70   -   -   (109 ) 208  
Asia, other than Japan 495   1   1   19   -   -   (224 ) 292  
 
 
 
 
 
 
 
 
 
  2,195   41   39   307   -   -   (971 ) 1,611  
Domestic market 537   46   186   78   -   -   (86 ) 761  
 
 
 
 
 
 
 
 
 
  2,732   87   225   385   -   -   (1,057 ) 2,372  
 
 
 
 
 
 
 
 
 
Assets:                                
Property, plant and equipment, net 3,103   634   212   522   -   31   -   4,502  
Capital expenditures 268   145   49   43   -   1   -   506  
Investments in affiliated companies and joint ventures and other investments, net of provision for losses
459   -   2   305   277   29   -   1,072  
 
 
 
 
 
 
 
 
 
Capital employed 2,875   158   245   486   19   10   -   3,793  

F - 22


Back to Contents

Operating profit by product – after eliminations

  Six months ended June 30, 2003  
 














 
                      Impairment/          
  Revenues           Gain on sale          
 




  (1)       of property,   Depreciation,      
              Cost and       plant and   depletion and   Operating  
  Export   Domestic   Total   expenses   Net   equipment   amortization   profit  
 
 
 
 
 
 
 
 
 
Ferrous                                
Iron ore 879   261   1,140   (568 ) 572   -   (38 ) 534  
Pellets 270   97   367   (309 ) 58   (12 ) (7 ) 39  
Manganese 23   4   27   (8 ) 19   -   (1 ) 18  
Ferroalloys 93   44   137   (105 ) 32   -   (4 ) 28  
 
 
 
 
 
 
 
 
 
  1,265   406   1,671   (990 ) 681   (12 ) (50 ) 619  
Non ferrous                                
Gold 16   -   16   (15 ) 1   -   (2 ) (1 )
Potash -   42   42   (24 ) 18   -   (2 ) 16  
Kaolin 26   4   30   (20 ) 10   -   (1 ) 9  
 
 
 
 
 
 
 
 
 
  42   46   88   (59 ) 29   -   (5 ) 24  
Aluminum                                
Alumina 124   73   197   (161 ) 36   -   (6 ) 30  
Aluminum 144   4   148   (134 ) 14   -   -   14  
Bauxite 10   -   10   (10 ) -   -   -   -  
 
 
 
 
 
 
 
 
 
  278   77   355   (305 ) 50   -   (6 ) 44  
Logistics                                
Railroads -   145   145   (49 ) 96   -   (30 ) 66  
Ports -   66   66   (41 ) 25   -   (4 ) 21  
Ships 26   16   42   (60 ) (18 ) -   -   (18 )
 
 
 
 
 
 
 
 
 
  26   227   253   (150 ) 103   -   (34 ) 69  
Others -   5   5   (8 ) (3 ) -   (2 ) (5 )
 
 
 
 
 
 
 
 
 
  1,611   761   2,372   (1,512 ) 860   (12 ) (97 ) 751  
 
 
 
 
 
 
 
 
 

(1)  Cost and expenses include contingency provisions of $25.

F - 23


Back to Contents

Results by segment - before eliminations

  Six months ended June 30, 2002  
 














 
  Combined          
 










         
              Holdings          
             




         
      Non       (1)                  
  Ferrous   ferrous   Logistics   Aluminum   Steel   Others   Eliminations   Consolidated  
 
 
 
 
 
 
 
 
 
Gross revenues - Export 2,001   86   19   167   -   -   (867 ) 1,406  
Gross revenues - Domestic 485   43   179   -   -   3   (72 ) 638  
Cost and expenses (1,789 ) (95 ) (137 ) (165 ) (24 ) (11 ) 939   (1,282 )
Depreciation, depletion and amortization (98 ) (19 ) (9 ) (1 ) -   -   -   (127 )
Pension plan (6 ) -   -   -   -   -   -   (6 )
 
 
 
 
 
 
 
 
 
Operating profit 593   15   52   1   (24 ) (8 ) -   629  
Financial income 93   -   6   4   1   -   (27 ) 77  
Financial expenses (196 ) (3 ) (3 ) -   (4 ) -   27   (179 )
Foreign exchange and monetary losses, net (297 ) (18 ) (16 ) -   -   -   -   (331 )
Equity in earnings 14   -   (42 ) (12 ) (7 ) (1 ) -   (48 )
Income taxes 113   -   (1 ) (2 ) -   -   -   110  
Minority interests -   3   -   -   -   -   -   3  
 
 
 
 
 
 
 
 
 
Net income 320   (3 ) (4 ) (9 ) (34 ) (9 ) -   261  
 
 
 
 
 
 
 
 
 
                                 
Sales classified by geographic destination:                                
Export market                                
America, except United States 217   -   12   13   -   -   (125 ) 117  
United States 147   29   3   1   -   -   (85 ) 95  
Europe 851   55   2   142   -   -   (338 ) 712  
Middle East/Africa/Oceania 85   -   -   -   -   -   (11 ) 74  
Japan 243   1   -   -   -   -   (113 ) 131  
Asia, other than Japan 458   1   2   11   -   -   (195 ) 277  
 
 
 
 
 
 
 
 
 
  2,001   86   19   167   -   -   (867 ) 1,406  
Domestic market 485   43   179   -   -   3   (72 ) 638  
 
 
 
 
 
 
 
 
 
  2,486   129   198   167   -   3   (939 ) 2,044  
 
 
 
 
 
 
 
 
 
Assets:                                
Property, plant and equipment, net 2,700   392   252   410   -   92   -   3,846  
Capital expenditures 273   18   26   -   -   -   -   317  
                               
Investments in affiliated companies and joint ventures and other investments, net of provision for losses
540   -   (2 ) 174   142   33   -   887  
 
 
 
 
 
 
 
 
 
Capital employed 2,577   345   248   266   18   38   -   3,492  

(1)  Control of Alunorte was acquired in June 2002 and it was consolidated from then.

F - 24


Back to Contents

Operating profit by product – after eliminations

                      Six months ended June 30, 2002  
 










 
                      Impairment/          
                      Gain on sale          
      Revenues           of property,   Depreciation,      
 




  Cost and       plant and   depletion and   Operating  
  Export   Domestic   Total   expenses   Net   equipment   amortization   profit  
 
 
 
 
 
 
 
 
 
Ferrous                                
Iron ore 843   233   1,076   (519 ) 557   -   (46 ) 511  
Pellets 216   78   294   (268 ) 26   -   (5 ) 21  
Manganese 14   5   19   (14 ) 5   -   (2 ) 3  
Ferroalloys 66   39   105   (72 ) 33   -   (4 ) 29  
 
 
 
 
 
 
 
 
 
  1,139   355   1,494   (873 ) 621   -   (57 ) 564  
Non ferrous                                
Gold 69   -   69   (43 ) 26   -   (15 ) 11  
Potash -   40   40   (31 ) 9   -   (2 ) 7  
Kaolin 17   3   20   (17 ) 3   -   (2 ) 1  
 
 
 
 
 
 
 
 
 
  86   43   129   (91 ) 38   -   (19 ) 19  
Aluminum                                
Alumina 22   -   22   (25 ) (3 ) -   -   (3 )
Aluminum 134   -   134   (130 ) 4   -   -   4  
Bauxite 10   -   10   (11 ) (1 ) -   -   (1 )
 
 
 
 
 
 
 
 
 
  166   -   166   (166 ) -   -   -   -  
Logistics                                
Railroads -   144   144   (50 ) 94   -   (40 ) 54  
Ports -   60   60   (40 ) 20   -   (5 ) 15  
Ships 15   23   38   (43 ) (5 ) -   (4 ) (9 )
 
 
 
 
 
 
 
 
 
  15   227   242   (133 ) 109   -   (49 ) 60  
Others -   13   13   (25 ) (12 ) -   (2 ) (14 )
 
 
 
 
 
 
 
 
 
  1,406   638   2,044   (1,288 ) 756   -   (127 ) 629  
 
 
 
 
 
 
 
 
 

 

11 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.

F - 25


Back to Contents

The asset (liability) balances at June 30, 2003, 2002 and March 31, 2003 and the movement in fair value of derivative financial instruments is as follows:

      Interest              
      rates              
  Gold   (libor)   Currencies   Alumina   Total  
 
 
 
 
 
 
                     
Unrealized gains (losses) at April 1, 2003 (10 ) (68 ) (1 ) 3   (76 )
Financial settlement -   10   -   -   10  
Gains (losses) in the period -   4   -   (3 ) 1  
Effect of exchange rate changes (1 ) (11 ) -   1   (11 )
 
 
 
 
 
 
Unrealized gains (losses) at June 30, 2003 (11 ) (65 ) (1 ) 1   (76 )
 
 
 
 
 
 
                     
Unrealized gains (losses) at January 1, 2003 (15 ) (60 ) (1 ) 3   (73 )
Financial settlement -   4   -   -   4  
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 April 1, 2002 (2 ) (25 ) (6 ) -   (33 )
Change in the period (1 ) 3   5   -   7  
Gains (losses) realized in the period -   (6 ) (1 ) -   (7 )
 
 
 
 
 
 
Unrealized gains (losses) at June 30, 2002 (3 ) (28 ) (2 ) -   (33 )
 
 
 
 
 
 
                     
Unrealized gains (losses) at January 1, 2003 (15 ) (60 ) (1 ) 3   (73 )
Financial settlement -   14   -   -   14  
Gains (losses) in the period 5   (4 ) -   (3 ) (2 )
Effect of exchange rate changes (1 ) (15 ) -   1   (15 )
 
 
 
 
 
 
Unrealized gains (losses) at June 30, 2003 (11 ) (65 ) (1 ) 1   (76 )
 
 
 
 
 
 
                     
Unrealized gains (losses) at January 1, 2002 7   (36 ) (4 ) -   (33 )
Change in the period (11 ) 21   3   -   13  
Gains (losses) realized in the period 1   (13 ) (1 ) -   (13 )
 
 
 
 
 
 
Unrealized gains (losses) at June 30, 2002 (3 ) (28 ) (2 ) -   (33 )
 
 
 
 
 
 

Realized and unrealized gains (losses) are included in our income statement under the following captions:

Gold – operating costs and expenses;
Interest rates – financial expenses;
Currencies – foreign exchange and monetary losses, net;
Alumina – operating costs and expenses.

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Final maturity dates for the above instruments are as follows:

Gold
December 2006
Interest rates (libor)
May 2007
Currencies
May 2005
Alumina
Dec 2008

(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. Since May 1998, 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, 89% of our revenues are denominated in, or automatically indexed to, the U.S. dollar, while 49% of our costs are expressed 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 advent of a floating exchange rate regime in Brazil in January 1999, we adopted 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 three-month periods ended June 30, 2003, March 31, 2003 and June 30, 2002 and for the six-month periods ended June 30, 2003 and 2002 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.

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12 Subsequent Events

Acquisition of Caemi

On July 18, 2003 the European Commission approved CVRD’s acquisition of 50% of the common shares and 40% of the preferred shares of Caemi Mineração e Metalurga S.A. (Caemi). Upon conclusion of the acquisition, the Company will detain all the common shares and 40% of the preferred shares of Caemi.

CVRD's Vale Overseas Places Bonds for US$ 300 at a 9.25% Yield

On August 1, 2003 a wholly owned subsidiary, Vale Overseas Limited issued US$300 in ten-year notes. The notes bear a coupon of 9.00% per year, payable semi-annually, and will be priced at 98.386% of their principal amount. The notes will be unsecured and unsubordinated obligations of Vale Overseas Limited and will be fully and unconditionally guaranteed by CVRD.

The Company expects to file a registration statement with the United States Securities and Exchange Commission (SEC) and to make its best efforts to exchange the notes for others registered with the SEC within 180 days of the closing date of the offering.

Additionally, on July 28, 2003, another wholly owned subsidiary, CVRD Finance Ltd. issued US$ 250 of 4.48% notes due 2013.

* * *

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Supplemental Financial Information

The following information provides additional details in relation to the balance sheet and financial performance of equity investees as well as certain financial ratios.

EBITDA represents operating income plus depreciation, amortization and depletion plus impairment/gain on sale of property, plant and equipment plus dividends received from equity investees. EBITDA is not a US GAAP measurement and does not represent cash flow for the periods presented and should not be considered as an alternative to net income (loss), as an indicator of our operating performance or as an alternative to cash flow as a source of liquidity. Our definition of EBITDA may not be comparable with EBITDA as defined by other companies. Although EBITDA, as defined above, does not provide a US GAAP measure of operating cash flows, our management uses it to measure our operating performance and it is commonly used by financial analysts in evaluating our business.

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Aluminum Area - Valesul (Additional information - Unaudited)  


Information   2003   2002  






      1Q   2Q   3Q   4Q   Total   1Q   2Q   3Q   4Q   Total  
     



















                                             
Quantity sold - external market  MT (thousand)   9   15           24   9   12   8   13   42  
Quantity sold - internal market  MT (thousand)   10   9           19   12   12   10   14   48  
     



















Quantity sold - total  MT (thousand)   19   24   -   -   43   21   24   18   27   90  
      



















                                             
Average sales price - external market  US$   1.505,49   1.516,01           1.512,07   1.467,44   1.481,49   1.485,09   1.413,67   1.459,01  
Average sales price - internal market  US$   1.933,02   1.970,53           1.950,79   1.906,21   1.865,52   1.779,65   1.801,29   1.837,32  
Average sales price - total  US$   1.730,60   1.685,82           1.705,61   1.720,97   1.663,20   1.654,96   1.618,98   1.661,77  
                                              
Long-term indebtedness, gross  US$   1   1           1   2   1   1   1   1  
Short-term indebtedness, gross  US$   1   1           1   1   1   -   1   1  
     



















Total indebtedness, gross US$   2   2   -   -   2   3   2   1   2   2  
      



















Stockholders' equity  US$   84   92           92   95   83   66   72   72  
      



















                                             
EBITDA US$   10   5   -   -   15   6   9   9   14   38  
                                             
Depreciation, amortization and depletion  US$   (1 ) (2 ) -   -   (3 ) (1 ) (1 ) (1 ) (1 ) (4 )
Impairment/gain on sale  US$   -   -   -   -   -   -   -   -   -   -  
Dividends received from equity investees  US$   -   -   -   -   -   -   -   -   -   -  
     



















Operating income US$   9   3   -   -   12   5   8   8   13   34  
Net financial result  US$   -               -   -   -   -   (1 ) (1 )
     



















Income before income tax and social contribution  US$   9   3   -   -   12   5   8   8   12   33  
Income tax and social contribution  US$   (1 ) (2 )         (3 ) (2 ) (2 ) (1 ) (2 ) (7 )
     



















Net income  US$   8   1   -   -   9   3   6   7   10   26  
     



















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Aluminum Area - MRN (Additional information - Unaudited)  


Information     2003   2002  







      1Q   2Q   3Q   4Q   Total   1Q   2Q   3Q   4Q   Total  
     



















                                             
Quantity sold - external market MT (thousand)   711   958           1.669   485   790   740   601   2.616  
Quantity sold - internal market MT (thousand)   1.485   2.554           4.039   1.296   1.821   1.814   2.381   7.312  
     



















Quantity sold - total MT (thousand)   2.196   3.512   -   -   5.708   1.781   2.611   2.554   2.982   9.928  
     



















                                             
Average sales price - external market US$   21,31   21,20           21,25   20,56   19,09   19,21   21,42   19,93  
Average sales price - internal market US$   18,24   18,15           18,18   19,46   18,01   18,16   20,32   19,06  
Average sales price - total US$   19,23   18,98           19,08   19,76   18,34   18,46   20,54   18,95  
                                             
Long-term indebtedness, gross US$   69   66           66   96   90   78   76   76  
Short-term indebtedness, gross US$   44   134           134   14   19   23   29   29  
     



















Total indebtedness, gross US$   113   200   -   -   200   110   109   101   105   105  
     



















                                             
Stockholders' equity US$   402   417           417   364   377   388   405   405  
     



















                                             
EBITDA US$   24   39   -   -   63   21   22   22   35   100  
                                             
Depreciation, amortization and depletion US$   (10 ) (10 ) -   -   (20 ) (9 ) (9 ) (10 ) (10 ) (38 )
Impairment/gain on sale US$   -   -   -   -   -   -   24   -   -   24  
Dividends received from equity investees US$   -   -   -   -   -   -   -   -   -   -  
     



















Operating income US$   14   29   -   -   43   12   37   12   25   86  
                                             
Gain (loss) on investments accounted for by the equity method US$   -               -   (1 ) (4 ) -   -   (5 )
Non-operating result US$   -   -           -   -   -   -   -   -  
Net financial result US$   (2 ) (12 )         (14 ) (1 ) 13   17   (5 ) 24  
     



















Income before income tax and social contribution US$   12   17   -   -   29   10   46   29   20   105  
Income tax and social contribution US$   (2 ) (2 )         (4 ) (1 ) (8 ) 1   (3 ) (11 )
     



















Net income US$   10   15   -   -   25   9   38   30   17   94  
     



















                                             
The amounts refers 2002 and the 1st quarter 2003 were adjusted.  

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Aluminum Area - Albras (Additional information - Unaudited)























Information                   2003                   2002  






















    1Q   2Q   3Q   4Q   Total   1Q   2Q   3Q   4Q   Total  
   



















Quantity sold - external market   MT (thousand) 99   102           201   84    108   101    100   393  
Quantity  sold - internal market   MT (thousand) 4   4           8   4    2   3    4   13  
   



















Quantity sold - total     MT (thousand) 103   106    -   -   209   88    110   104    104   406  
   



















                                                
Average sales price - external market  US$ 1.336,40    1.324,49            1.330,36   1.318,33   1.409,42   1.288,20   1.304,79    1.304,70  
Average sales price - internal market US$ 1.376,14   1.365,10            1.370,62   1.352,12   1.330,47   1.335,69   1.356,26   1.355,55  
Average sales price - total US$  1.337,98   1.326,07           1.331,94   1.319,81    1.332,13   1.289,68   1.306,47   1.306,38  
                                             
Long-term  indebtedness, gross   US$  451   400           400   524    507    499   466    466  
Short-term  indebtedness, gross  US$  -    -             73   49   20   20   20  
   



















Total  indebtedness, gross   US$  451   400    -   -   400   597    556    519   486    486  
   



















Stockholders' equity     US$ 79   172           172   56   (18 ) (97 ) (3 ) (3 )
   



















                                                 
EBITDA       US$ 56   50       -   106   43    58   56    58   215  
Depreciation,  amortization and depletion  US$ (3 ) (4 )     -   (7 ) (5 ) (4 ) (4 ) (3 ) (16 )
Impairment/gain on sale US$ -   (3 )     -   (3 ) -   -   -   -   -  
   



















Operating income US$ 53   43       -   96   38    54    52   55   199  
Net financial result      US$  30    58           88   (9 ) (125 ) (153 ) 56   (231 )
   



















Income before income tax and social contribution US$  83    101   -    -   184   29   (71 ) (101 ) 111   (32 )
Income tax and social contribution      US$ (4 )   (24 )          (28 ) (2 ) 2   -   10    10   
   



















Net income       US$ 79   77       -   156    27   (69 ) (101 ) 121   (22 )
   



















                                                 
 The amounts refers 2002 and the 1st quarter 2003 were adjusted.                    

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Aluminum Area - Alunorte (Additional information - Unaudited) - Consolidated Subsidiary






















Information                   2003                   2002  






















    1Q   2Q   3Q   4Q   Total   1Q   2Q   3Q   4Q   Total  
   



















Quantity sold - external market MT (thousand) 289   303           592   222   175   115   208   720  
Quantity sold - internal market MT (thousand) 201   234           435   205   235   233   199   872  
   



















Quantity sold - total MT (thousand) 490   537   -   -   1.027   427   410   348   407   1.592  
   



















                                           
Average sales price - external market US$ 170,93   172,57           171,77   148,20   152,79   162,37   154,43   153,39  
Average sales price - internal market US$ 173,60   175,13           174,42   175,94   175,38   173,97   169,51   173,79  
Average sales price - total US$ 172,03   173,68           172,89   161,55   165,72   170,13   161,79   164,56  
                                           
Long-term indebtedness, gross US$ 482   494           494   455   455   473   481   481  
Short-term indebtedness, gross US$ -   4           4   -   -   -     - -  
   



















Total indebtedness, gross US$ 482   498   -   -   498   455   455   473   481   481  
   



















                                           
Stockholders' equity US$ 91   170           170   180   85   (30 ) 50   50  
   



















                                           
EBITDA US$ 23   17   -   -   40   14   18   23   15   70  
Depreciation, amortization and depletion US$ (3 ) (3 ) -   -   (6 ) (3 ) (3 ) (2 ) (2 ) (10 )
Impairment/gain on sale US$ -   -   -   -   -   -   -   -   -   -  
Dividends received from equity investees US$ -   -   -   -   -   -   -   -   -   -  
   



















Operating income US$ 20   14   -   -   34   11   15   21   13   60  
Non-operating result US$ -   -           -   (2 ) (1 ) 3   -   -  
Net financial result US$ 20   66           86   (3 ) (89 ) (150 ) 57   (185 )
   



















Income before income tax and social contribution US$ 40   80   -   -   120   6   (75 ) (126 ) 70   (125 )
Income tax and social contribution US$ (4)   (20 )         (24 ) -     -   - 24   24  
   



















Net income US$ 36   60   -   -   96   6   (75 ) (126 ) 94   (101 )
   



















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Aluminum Area - Aluvale (Additional information - Unaudited) - Consolidated Subsidiary

Information
               
2003
                 
2002
 

   
1Q
 
2Q
 
3Q
 
4Q
 
Total
 
1Q
 
2Q
 
3Q
 
4Q
 
Total
 
   



















Stockholders' equity US$ 354   472             472   365   275   158   282   282  
   



















EBITDA US$ 7   4    -    -   11   14   11   8   6   39  
Depreciation, amortization and depletion US$ -   -    -    -   -   -   -   -       -  
Impairment / gain on sale US$ -   -    -    -   -   -   -   -   -   -  
Dividends received from equity investees US$ (5 ) (3 )  -    -   (8 ) (13 ) (10 ) (7 ) (7 ) (37 )
   



















Operating income US$ 2   1    -    -   3   1   1   1   (1 ) 2  
Gain on investments accounted for by the equity method US$ 66   83             149   25   (43 ) (95 ) 138   25  
Net financial result US$ 1   1             2   2   4   (3 ) 2   5  
   



















Income before income tax and social contribution US$ 69   85    -    -   154   28   (38 ) (97 ) 139   32  
Income tax and social contribution US$ 2   (4 )           (2 ) (1 ) (2 ) 1   -   (2 )
   



















Net income US$ 71   81    -    -   152   27   (40 ) (96 ) 139   30  
   



















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Pelletizing Affiliates - Kobrasco (Additional information - Unaudited)

Information
                  2003                   2002  

    1Q   2Q   3Q   4Q  
Total
  1Q   2Q   3Q   4Q  
Total
 
   



















Quantity sold - external market
MT (thousand)
453    667           1.120   436   534   850   1.074   2.894  
Quantity sold - internal market
MT (thousand)
681    461           1.142   420   478   -   242   1.140  
   



















Quantity sold - total
MT (thousand)
1.134    1.128   -   -   2.262   856   1.012   850   1.316   4.034  
   



















Average sales price - external market
 US$ 
29,89    29,98           29,94   31,31   29,34   29,47   29,89   29,88  
Average sales price - internal market
 US$ 
30,72    30,90           30,79   32,08   29,24   -   30,32   30,51  
Average sales price - total
 US$ 
30,39    30,35           30,37   31,69   29,30   29,47   29,97   30,09  
 
   
                                       
Long-term indebtedness, gross
 US$ 
124    102           102   150   143   147   114   114  
   



















Total indebtedness, gross
 US$ 
124    102   -   -   102   150   143   147   114   114  
   



















Stockholders' equity
 US$ 
(28 )  (20 )         (20 ) 23   3   (21 ) (31 ) (31 )
   



















EBITDA
 US$ 
6    2   -   -   8   7   2   5   5   19  
Depreciation, amortization and depletion
 US$ 
(1 )  -   -   -   (1 ) (1 ) (1 ) (1 ) (1 ) (4 )