Edgar Filing: VALLEY OF THE RIO DOCE CO

FORM 6-K

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

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.

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

[Intentionally Left Blank]

F-2

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

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

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

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

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

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

		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.

F - 9

		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.

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

F - 10

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.

F - 11

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

Debt guarantee

2010

None

SAMARCO

US$

Debt guarantee

2008

None

VALESUL

Debt guarantee

2007

None

Collateral

NIBRASCO

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.

F - 12

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

F - 13

		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

F - 14

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

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

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

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

(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

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

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