---

---

As filed
  with the Securities and Exchange Commission on June 30, 2003

---

UNITED
  STATES SECURITIES AND EXCHANGE COMMISSIONWashington,
D.C. 20549

---

FORM 20-F

ANNUAL
  REPORT PURSUANT TO SECTION 13 OR 15(d)
  OF THE SECURITIES EXCHANGE ACT OF 1934For
  the fiscal year ended:December
  31, 2002Commission
  file number:000-26030

|COMPANHIA
          VALE DO RIO DOCE(Exact
          name of Registrant as specified in its charter) | VALE
          OVERSEAS LIMITED(Exact
          name of Registrant as specified in its charter)
|---------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------
|                                                                                                     |                                                                                                
|Valley
        of the Rio Doce Company(Translation
        of Registrants name into English)        |                                                                                                
|                                                                                                     |                                                                                                
|Federative
        Republic of Brazil                                                                | Cayman
        Islands                                                                         
|(Jurisdiction
        of incorporation or organization)                                             

Avenida
  Graça Aranha, No. 26
  20030-900 Rio de Janeiro, RJ, Brazil(Address
  of principal executive offices)

Securities
  registered or to be registered pursuant to Section 12(b) of the Act:

|Title
        of Each Class                                                                                                                                                                    | Name
        of Each Exchange
        on Which Registered
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------
|Preferred
        class A shares of CVRD, no par value per share                                                                                                                               | New
        York Stock Exchange*                         
|                                                                                                                                                                                               |                                                          
|American
        depositary shares (as evidenced by American depositary                                                                                                                        | New
        York Stock Exchange                          
|receipts)
        each representing one preferred class A share of CVRD                                                                                                                        |                                                          
|                                                                                                                                                                                               |                                                          
|Common
        shares of CVRD, no par value per share                                                                                                                                          | New
        York Stock Exchange*                         
|                                                                                                                                                                                               |                                                          
|American
        depositary shares (as evidenced by American depositary                                                                                                                        | New
        York Stock Exchange                          
|receipts)
        each representing one common share of CVRD                                                                                                                                   |                                                          
|                                                                                                                                                                                              
|*
      Shares are not listed for trading, but only in connection with the registration
      of American depositary shares pursuant to the requirements of the New York
      Stock Exchange.

Securities
  registered or to be registered pursuant to Section 12(g) of the Act:None

Securities
  for which there is a reporting obligation pursuant to Section 15(d) of the Act:None

The
  number of outstanding shares of each class of stock of CVRD as of December 31,
  2002 was:

245,267,973
  common shares, no par value per share
  138,571,432 preferred class A shares, no par value per share
  1 golden share, no par value per share

---

Indicate by
  check mark whether the registrant (1) has filed all reports required to be filed
  by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
  12 months (or for such shorter period that the registrant was required to file
  such reports) and (2) has been subject to such filing requirements for the past
  90 days.

|Yes |  | No
|--- |  | --

Indicate by check
  mark which financial statement item the registrant has elected to follow.

|Item
        17 |  | Item 18
|--------------- |  | -------



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TABLE OF CONTENTS

|                                                        |                                                                                    | Page
|------------------------------------------------------- | ---------------------------------------------------------------------------------- | ----
|                                                        |                                                                                    |     
|Glossary                                                | 2                                                                                 
|Presentation
      of Financial Information             | 5                                                                                 
|Presentation
        of Information Concerning Reserves | 5                                                                                 
|Forward-Looking
        Statements                      | 6                                                                                 
|PART
        I                                          |                                                                                    |     
|Item
        1.                                         | Identity
        of Directors, Senior Management and Advisers                      | 6   
|Item
        2.                                         | Offer
        Statistics and Expected Timetable                                    | 6   
|Item
        3.                                         | Key
        Information                                                            | 7   
|Item
        4.                                         | Information
        on the Company                                                 | 17  
|                                                        | Business
        Overview                                                          | 17  
|                                                        | Lines
        of Business                                                          | 23  
|                                                        | Regulatory
        Matters                                                         | 48  
|                                                        | Patents
        and Trademarks                                                     | 51  
|                                                        | Insurance                                                                          | 52  
|                                                        | Capital
        Expenditures                                                       | 52  
|Item
        5.                                         | Operating
        and Financial Review and Prospects                               | 53  
|Item
        6.                                         | Directors,
        Senior Management and Employees                                 | 76  
|Item
        7.                                         | Major
        Shareholders and Related Party Transactions                          | 85  
|Item
        8.                                         | Financial
        Information                                                      | 88  
|Item
        9.                                         | The
        Offer and Listing                                                      | 90  
|Item
        10.                                        | Additional
        Information                                                     | 91  
|Item
        11.                                        | Quantitative
        and Qualitative Disclosures About Market Risk                 | 106 
|Item
        12.                                        | Description
        of Securities Other than Equity Securities                     | 110 
|PART
        II                                         |                                                                                    |     
|Item
        13.                                        | Defaults,
        Dividend Arrearages and Delinquencies                            | 110 
|Item
      14.                                          | Material
      Modifications to the Rights of Security Holders and Use of Proceeds | 110 
|Item
        15.                                        | Controls
        and Procedures                                                    | 110 
|Item
        16.                                        | [Reserved]                                                                         | 110 
|PART
        III                                        |                                                                                   
|Item
        17.                                        | Financial
        Statements                                                       | 110 
|Item
        18.                                        | Financial
        Statements                                                       | 111 
|Item
        19.                                        | Exhibits                                                                           | 111 
|Signatures                                              | 112                                                                               
|Certifications                                          | 113                                                                               
|Index
          to Consolidated Financial Statements    | F-1                                                                               

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GLOSSARY

|Alumina       | Aluminum
      oxide. It is extracted from bauxite in a chemical refiningprocess
      and is the principal raw material in the electro-chemicalprocess
      from which aluminum is produced.                                                                                                                                                                   
|------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |                                                                                                                                                                                                                                                                                                                                                                  
|Bauxite       | A
      rock composed primarily of hydrated aluminum oxides. It is theprincipal
      ore of alumina, the raw material from which aluminum ismade.                                                                                                                                                                                                               
|              |                                                                                                                                                                                                                                                                                                                                                                  
|Beneficiation | The
      process of separating, concentrating and classifying ore byparticle
      size or some other characteristic (e.g.,
      specific gravity,magnetic susceptibility, surface chemistry, etc.) in order to obtain themineral
      or metal of interest.                                                                                                  
|              |                                                                                                                                                                                                                                                                                                                                                                  
|CIL           | Carbon-in-Leach.
      A method of recovering gold in solution fromslurry streams by contacting activated carbon with the pulp duringthe leaching process within agitated vessels and separating loadedcarbon
      from the pulp by screening.                                                                                                                  
|              |                                                                                                                                                                                                                                                                                                                                                                  
|CIP           | Carbon-in-Pulp.
      A method of recovering gold and silver extractedfrom
      pregnant cyanide solutions by absorbing the precious metals togranules of activated carbon, which are typically ground up coconutshells.                                                                                                                                        
|              |                                                                                                                                                                                                                                                                                                                                                                  
|Concentration | Physical,
      chemical or biological process to increase the grade of themetal or mineral of interest.                                                                                                                                                                                                                                                         
|              |                                                                                                                                                                                                                                                                                                                                                                  
|DR            | Direct
      reduction. DR iron ore pellets are used by steelmakers thatemploy
      minimill technology.                                                                                                                                                                                                                                                        
|              |                                                                                                                                                                                                                                                                                                                                                                  
|DWT           | Deadweight
      ton. The measurement unit of a vessels capacity forcargo,
      fuel oil, stores and crew, measured in metric tons of 1,000 kg.A vessels total deadweight is the total weight the vessel can carrywhen loaded to a particular load line.                                                                                                      
|              |                                                                                                                                                                                                                                                                                                                                                                  
|Fe unit       | A
      measure of the iron content in the iron ore that is equivalent to 1%iron
      content in 1 ton of iron ore.                                                                                                                                                                                                                                             
|              |                                                                                                                                                                                                                                                                                                                                                                  
|Fines         | Refers
      to iron ore with particles in the range of 0.10 mm to 6.35 mmdiameter.                                                                                                                                                                                                                                                                              
|              |                                                                                                                                                                                                                                                                                                                                                                  
|FOB           | Free
      on Board. It indicates that the purchaser pays for shipping,insurance
      and all the other costs associated with transportation of thegoods
      to their destination.                                                                                                                                                                            
|              |                                                                                                                                                                                                                                                                                                                                                                  
|Grade         | The
      proportion of metal or mineral present in ore or any other hostmaterial.                                                                                                                                                                                                                                                                               
|              |                                                                                                                                                                                                                                                                                                                                                                  
|HL            | Heap
      Leaching. A low cost method of extracting metals such as goldand
      copper from low-grade ores. It consists of building a heap of oreand applying a solution (lixiviant) that dissolves the metal to producea pregnant solution (leachate) from which the metal is recovered byprecipitation
      and smelting or carbon absorption, stripping and

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|                                                    | electrowinning
      methods.                                                                                                                                                                                                                                                                                                                                                                                                           
|--------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Kaolin                                              | A fine white
      aluminum silicate clay used as a coating agent, filler,extender and absorbent in the paper, ceramics and pharmaceuticalindustries.                                                                                                                                                                                                                                                                                   
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Lump ore                                            | Iron ore or manganese
      ore with the coarsest particle size in the rangeof 6.35 mm to 75 mm diameter, but varying slightly betweendifferent mines and ores.                                                                                                                                                                                                                                                                         
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Manganese                                           | A hard brittle
      metallic element found primarily in the mineralspyrolusite,
      hausmannite and manganate.                                                                                                                                                                                                                                                                                                                       
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Mineral deposit(s) or
      mineralized
material(s) | Refers to a mineralized
      body that has been intersected by a sufficientnumber of closely spaced drill holes and/or underground/surfacesamples
      to support sufficient tonnage and grade of metal(s) ormineral(s) of interest to warrant further exploration-developmentwork.
      The deposit does not qualify as an ore body until it can belegally
      and economically extracted at the time of ore reservedetermination.
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Open pit
      mining                               | The extraction
      method by which surface or barren rock is removedso
      that ore may be removed using power shovels, front-end loaders,hydraulic
      excavators, draglines, etc.                                                                                                                                                                                                                                               
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Oxides                                              | Compounds of oxygen with
      another element. For example,magnetite
      (Fe3O4) is an oxide mineral formed by the chemical
      unionof iron with
      oxygen.                                                                                                                                                                                                                                                                    
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Pellet feed                                         | Fine (0.10
      mm to 6.35 mm) and ultra-fine (less than 0.10 mm) ironore particles generated by the mining, grading, handling andtransporting
      of iron ore, with no practical direct application in thesteel industry, unless the material is aggregated into pellets throughan agglomeration process.                                                                                                                           
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Pellets                                             | Balls of
      agglomerated fine and ultra-fine iron ore particles of a sizeand quality suitable for particular steelmaking processes. Our pelletsrange in size from 8 mm to 18 mm.                                                                                                                                                                                                                                                     
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Pig iron                                            | Crude iron
      tapped from a blast furnace.                                                                                                                                                                                                                                                                                                                                                                                           
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Potash                                              | A potassium
      chloride compound, chiefly KCl, used in industry andagriculture.                                                                                                                                                                                                                                                                                                                                                      
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Probable
      (indicated) reserves                 | Reserves
      for which quantity and grade and/or quality are computedfrom
      information similar to that used for proven (measured) reserves,but the sites for inspection, sampling and measurement are fartherapart or are otherwise less adequately spaced. The degree ofassurance, although lower than that for proven (measured) reserves,is high enough to assume continuity between points of observation.                   
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Proven (measured)
      reserves                    | Reserves
      for which (1) quantity is computed from dimensionsrevealed
      in outcrops, trenches, workings or drill holes; (2) gradeand/or quality are computed from the results of detailed sampling;                                                                                                                                                                                                                             

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|                | and (3) the sites for
      inspection, sampling and measurement arespaced so closely and the geologic character is so well defined thatsize, shape, depth and mineral content of reserves are well-established.
|--------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |                                                                                                                                                                                                                 
|Reserve         | Refers to that part of
      a mineral deposit which could be economicallyand legally extracted or produced at the time of the reservedetermination.                                                            
|                |                                                                                                                                                                                                                 
|Run-of-mine     | Ore in its natural (unprocessed)
      state, as mined, without having beencrushed.                                                                                                                             
|                |                                                                                                                                                                                                                 
|Seaborne market | The market for iron ore
      products that are shipped in vessels whichhave a capacity in excess of 50,000 DWT.                                                                                                
|                |                                                                                                                                                                                                                 
|Sinter feed     | Iron or manganese ore
      suitable for sintering.                                                                                                                                                             
|                |                                                                                                                                                                                                                 
|Sintering       | Refers to the agglomeration
      of small particles into a coherent massby heating without melting.                                                                                                            
|                |                                                                                                                                                                                                                 
|Ton             | Metric ton, equaling 1,000
      kilograms.                                                                                                                                                                     
|                |                                                                                                                                                                                                                 
|Troy ounce      | One troy ounce equals
      31.103 grams.                                                                                                                                                                       

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PRESENTATION OF FINANCIAL INFORMATION

We have prepared our financial statements appearing in this annual report in accordance with generally accepted accounting principles in the United States (U.S. GAAP), which differ in certain respects from accounting practices adopted in Brazil (defined as Brazilian GAAP). Brazilian GAAP is determined by the requirements of Law No. 6,404, dated December 15, 1976, as amended (the Brazilian Corporation Law), and the rules and regulations of theComissão de Valores Mobiliários, or CVM, the Brazilian Securities Commission. We also publish Brazilian GAAP financial statements in Brazil, which we refer to as our Brazilian Corporation Law financial statements. We use our Brazilian Corporation Law financial statements for:


| |  | reports
      to Brazilian shareholders;     
| | - | ---------------------------------------------
| |   |                                              
| |  | filings
      with the CVM;                  
| |   |                                              
| |  | determination
      of dividend payments; and
| |   |                                              
| |  | determination
      of tax liability.        
| |   |                                              

Our financial statements and the other financial information appearing in this annual report have been translated from Brazilianreaisinto U.S. dollars on the basis explained in note 2(a) to our financial statements unless we indicate otherwise.


---

References toreal, reaisor R$ are to Brazilianreais(plural) and to the Brazilianreal(singular), the official currency of Brazil. References to U.S. dollars, dollars or US$ are to United States dollars. Unless otherwise specified,
    metric units have been used,e.g.,tons
    refer to metric tons. References to CVRD Group, us or we are to CVRD, its consolidated subsidiaries and its joint ventures and other affiliated companies. References to Vale Overseas are to Vale Overseas Limited. References to affiliated companies are to companies in which Companhia Vale do Rio Doce has a minority investment, and exclude controlled affiliates that are consolidated for financial reporting purposes. References to our ADSs or American depositary shares include both our common American depositary shares (our common ADSs), each of which represents one common share of CVRD, and our preferred American depositary shares (our preferred ADSs), each of which represents one preferred class A share of CVRD. American depositary shares are represented by American depositary receipts (ADRs) issued by JPMorgan Chase Bank, as depositary.


PRESENTATION
  OF INFORMATION CONCERNING RESERVES

The estimates of proven and
    probable reserves at mines within the CVRD Group and the estimates of mine
    life, as of December 31, 2002, included in this annual report have been calculated
    according to the technical definitions required by the U.S. Securities and
    Exchange Commission, or the SEC. We derived estimates of mine life described
    in this annual report from such reserve estimates. We have adjusted ore reserve
    estimates for extraction losses and metallurgical recoveries during extraction
    for gold, manganese and bauxite deposits. Our reserve estimates of iron, kaolin
    and potash are reported as in situ tons with adjustments for dilution and
    mining lossess. See Item 3. Key InformationRisk FactorsRisks
    Relating to Our Business. We have retained AMEC E&C
    Services, Inc., or AMEC, to audit and verify some of our estimates of proven
    and probable reserves as of December 31, 2002. Unless specifically
    stated, our reserve estimates have not been audited by AMEC.


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FORWARD-LOOKING STATEMENTS

This annual
    report contains statements that constitute forward-looking statements within
    the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
    Many of the forward-looking statements contained in this annual report can
    be identified by the use of forward-looking words such as anticipate,
    believe, could, expect, should,
    plan, intend, estimate and potential,
    among others. Those statements appear in a number of places in this annual
    report and include statements regarding our intent, belief or current expectations
    with respect to:


| |  | our direction
      and future operation;                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                 
| |  | the implementation
      of our principal operating strategies, including our potential participation
      in privatization, acquisition or joint venture transactions or other investment
      opportunities;
| |   |                                                                                                                                                                                                                 
| |  | our acquisition
      or divestiture plans;                                                                                                                                                                     
| |   |                                                                                                                                                                                                                 
| |  | the implementation
      of our financing strategy and capital expenditure plans;                                                                                                                               
| |   |                                                                                                                                                                                                                 
| |  | the exploration
      of mineral reserves and development of mining facilities;                                                                                                                                 
| |   |                                                                                                                                                                                                                 
| |  | the depletion
      and exhaustion of mines and mineral reserves;                                                                                                                                               
| |   |                                                                                                                                                                                                                 
| |  | the declaration
      or payment of dividends;                                                                                                                                                                  
| |   |                                                                                                                                                                                                                 
| |  | other factors
      or trends affecting our financial condition or results of operations; and                                                                                                                   
| |   |                                                                                                                                                                                                                 
| |  | the factors
      discussed underItem
      3. Key InformationRisk Factors.                                                                                                                                    

We
  caution you that forward-looking statements are not guarantees of future performance
  and involve risks and uncertainties. Actual results may differ materially from
  those in the forward-looking statements as a result of various factors, including
  those identified underItem
  3. Key InformationRisk Factors.
  These risks and uncertainties include factors relating to the Brazilian economy
  and securities markets, which exhibit volatility and can be adversely affected
  by developments in other countries, factors relating to the iron ore business
  and its dependence on the global steel industry, which is cyclical in nature,
  and factors relating to the highly competitive industries in which we operate.
  For additional information on factors that could cause our actual results to
  differ from expectations reflected in forward-looking statements, please seeItem
  3. Key InformationRisk Factors,
  and our reports filed with the SEC. Forward-looking statements speak only as
  of the date they are made, and we do not undertake any obligation to update
  them in light of new information or future developments.


PART
  I

Item
  1.  Identity of Directors, Senior Management and Advisers

Not
  applicable.


Item
  2.  Offer Statistics and Expected Timetable

Not applicable.


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Item
  3.  Key Information

SELECTED
  FINANCIAL DATA

The table below
    presents selected consolidated financial information as of and for the periods
    indicated. You should read this information together with our consolidated
    financial statements appearing in this annual report.


|                                                                                   | For
        the Year Ended December 31, |       
|---------------------------------------------------------------------------------- | --------------------------------------- | ------
|1998                                                                               |                                         | 1999  
|                                                                                   | (in
      millions of US$)              |       
|Statement of Income
      Data                                                     |                                         |       
|Net operating revenues                                                             | US$                                     | 3,553 
|Cost of products and services                                                      |                                         | (2,272
|Selling, general and administrative
      expenses                                 |                                         | (171  
|Research and development                                                           |                                         | (48   
|Employee profit sharing
      plan                                                 |                                         | (29   
|Other expenses                                                                     |                                         | (184  
|                                                                                   |                                         |       
|Operating income                                                                   |                                         | 849   
|                                                                                   |                                         |       
|Non-operating income (expenses):                                                   |                                         |       
|Financial
      income (expenses)                                                  |                                         | 151   
|Foreign
      exchange and monetary losses, net                                    |                                         | (108  
|Gain
      on sale of investments                                                  |                                         |      
|                                                                                   |                                         |       
|Subtotal                                                                           |                                         | 43    
|                                                                                   |                                         |       
|Income before income taxes,
      equity results and
           minority interests |                                         | 892   
|                                                                                   |                                         |       
|Income taxes benefit (charge)                                                      |                                         |      
|Equity in results of affiliates
      and joint ventures                           |                                         | 80    
|Change in provision for
      losses on equity investments                         |                                         | (273  
|Minority interests                                                                 |                                         | (1    
|                                                                                   |                                         |       
|Net income                                                                         | US$                                     | 698   
|                                                                                   |                                         |       
|Total cash paid to shareholders(1)                                                 | US$                                     | 607   

|   
|---
|(1)

|                                                                                                                                        |     |         |  |      |         |      |     |         |  |     |         |  |     |         | 
|--------------------------------------------------------------------------------------------------------------------------------------- | --- | ------- |  | ---- | ------- | ---- | --- | ------- |  | --- | ------- |  | --- | ------- | 
|For
      the Year Ended December 31,                                                                                                  
|                                                                                                                                       
|1998                                                                                                                                    |     | 1999    |  | 2000 |         | 2001 |     | 2002   
|                                                                                                                                        |     |         |  |     
|(in
      US$ except recorded dividends and interest on shareholders 
      equity per share in Brazilianreaisand
      share numbers)
|                                                                                                                                        |     |        
|Per
      Share Data                                                                                                                    |     |         |  |      |         |      |     |         |  |     |         |  |     |         | 
|Basic earnings
      per Common and Preferred Class A  Share(1):                                                                        | US$ | 1.80    |  | US$  | 1.07    |      | US$ | 2.82    |  | US$ | 3.34    |  | US$ | 1.77    | 
|Declared
      distributions on shareholders equity 
         per share in US$(2)                                                      | US$ | 1.58    |  | US$  | 1.28    |      | US$ | 1.70    |  | US$ | 1.99    |  | US$ | 0.84    | 
|Declared
      distributions on shareholders equity 
         per share in
      Brazilianreais(2)                                     | R$  | 1.86    |  | R$   | 2.28    |      | R$  | 3.33    |  | R$  | 4.61    |  | R$  | 2.68    | 
|Weighted
      average number of shares outstanding
         (in thousands):                                                            |     |         |  |      |         |      |     |         |  |     |         |  |     |         | 
|Common
      shares(1)                                                                                                                  |     | 249,983 |  |      | 249,983 |      |     | 249,983 |  |     | 249,864 |  |     | 249,864 | 
|Preferred
      shares(1)                                                                                                               |     | 137,965 |  |      | 134,917 |      |     | 134,917 |  |     | 135,042 |  |     | 135,042 | 
|                                                                                                                                        |     |         |  |      |         |      |     |         |  |     |         |  |     |         | 
|Total                                                                                                                                   |     | 387,948 |  |      | 384,900 |      |     | 384,900 |  |     | 384,906 |  |     | 384,906 | 
|                                                                                                                                        |     |         |  |      |         |      |     |         |  |     |         |  |     |         | 

|   
|---
|(1)
|(2)

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|                                                             | At December 31, |       
|------------------------------------------------------------ | --------------- | ------
|                                                            
|1998                                                         |                 | 1999  
|                                                             |                 |       
|(in
      millions of US$)                                  
|Balance
      Sheet Data                                     |                 |       
|Current
      assets                                         | US$             | 2,845 
|Property,
      plant and equipment, net                     |                 | 5,261 
|Investments
      in affiliated companies and joint ventures |                 |       
|and
      other investments                                  |                 | 1,557 
|Other assets                                                 |                 | 1,385 
|                                                             |                 |       
|Total
      assets                                           | US$             | 11,048
|                                                             |                 |       
|Current
      liabilities                                    | US$             | 2,030 
|Long-term
      liabilities(1)                               |                 | 1,169 
|Long-term
      debt(2)                                      |                 | 1,389 
|Minority
      interest                                      |                 | 68    
|                                                             |                 |       
|Total
      liabilities                                      |                 | 4,656 
|                                                             |                 |       
|Stockholders
      equity:                                  |                 |       
|Capital
      stock                                          |                 | 1,740 
|Additional
      paid-in capital                             |                 | 498   
|Reserves
      and retained earnings                         |                 | 4,154 
|                                                             |                 |       
|Total
      stockholders equity                             |                 | 6,392 
|                                                             |                 |       
|Total
      liabilities and stockholders equity             | US$             | 11,048
|                                                             |                 |       

|   
|---
|(1)
|(2)

EXCHANGE RATES

There are two
    principal foreign exchange markets in Brazil:


| |  | the
      commercial rate exchange market, and
| | - | ----------------------------------------------
| |  | the
      floating rate exchange market.      

Most trade
    and financial foreign-exchange transactions are carried out on the commercial
    rate exchange market. These transactions include the purchase or sale of shares
    or the payment of dividends or interest with respect to shares. Foreign currencies
    may only be purchased through a Brazilian bank authorized to operate in these
    markets. In both markets, rates are freely negotiated but may be influenced
    by Central Bank intervention. In 1999, the Central Bank placed the commercial
    exchange market and the floating rate exchange market under identical operational
    limits, which led to a convergence in the pricing and liquidity of both markets.
    Since February 1, 1999, the floating market rate has been the same as the
    commercial market rate. However, there is no guarantee that these rates will
    continue to be the same in the future. Despite the convergence in the pricing
    and liquidity of both markets, each market continues to be regulated differently.


Since 1999, the Central Bank
    has allowed the real/U.S. dollar exchange rate to float freely, and
    during that period, the real/U.S. dollar exchange rate has fluctuated
    considerably. In the past, the Central Bank of Brazil has intervened occasionally
    to control unstable movements in foreign exchange rates. We cannot predict
    whether the Central Bank of Brazil or the Brazilian government will continue
    to let the real float freely or will intervene in the exchange rate
    market through a currency band system or otherwise. The real may depreciate
    or appreciate substantially in the future. For more information on these risks,
    see Item 3. Key InformationRisk FactorsRisks Relating to Brazil.


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The following table sets forth the commercial selling rate, expressed inreaisper U.S. dollar (R$/US$) for the periods indicated.


|                                              | Average
        for |       
|--------------------------------------------- | ------------------- | ------
|                                             
|Period-end                                    |                     | Period
|                                              |                     |       
|Year
      ended                              |                     |       
|December
      31, 1998                       | 1.209               |       
|December
      31, 1999                       | 1.789               |       
|December
      31, 2000                       | 1.955               |       
|December
      31, 2001                       | 2.320               |       
|December
      31, 2002                       | 3.533               |       
|                                              |                     |       
|Month
      ended                             |                     |       
|December
      2002                           | 3.533               |       
|January
      2003                            | 3.526               |       
|February
      2003                           | 3.563               |       
|March 2003                                    | 3.353               |       
|April 2003                                    | 2.889               |       
|May 2003                                      | 2.966               |       
|June 2003
      (through June 25,
      2003) | 2.856               |       
|                                              |                     |       

---

|(1)                         | Average
      of the rates of each period, using the average of the exchange rates on
      the last day of each month during each period.
|--------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------
|(2)                         | Average
      of the lowest and highest rates in the month.                                                                               
|                           
|Source:
      Central Bank.

On June 25, 2003, the commercial selling rate was R$2.856 per US$ 1.00.


RISK FACTORS

Risks Relating to Our Business

Due
    to our dependence on the global steel industry, fluctuations in the demand
    for steel could adversely affect our business.


Sales prices and volumes in the worldwide iron ore mining industry depend on the prevailing and expected level of demand for iron ore in the world steel industry. The world steel industry is cyclical. A number of factors, the most significant of these being the prevailing level of worldwide demand for steel products, influence the world steel industry. During periods of sluggish or declining regional or world economic growth, demand for steel products generally decreases, which usually leads to corresponding reductions in demand for iron ore. Global steel output increased in 2002, which resulted in higher iron ore demand. Although we expect this to have a positive effect on world contract prices and sales volumes for iron ore in the short term, we cannot guarantee the length of time that demand will remain at current high levels. Future prolonged reductions or declines in world contract prices or sales volumes
for iron ore could have a material adverse effect on our revenues. In addition, poor conditions in the global steel industry could result in the bankruptcy of some of our customers.


We are subject to cyclicality and price volatility for iron ore, aluminum and other minerals.


Cyclical and other uncontrollable changes in world market prices affect our iron ore, aluminum, gold and other mining activities. In particular, aluminum and gold are sold in an active world market and traded on exchanges, such as the London Metals Exchange and the Commodity Exchange, Inc. Prices for these metals are more volatile than iron and pellet prices because they respond more quickly to actual and expected changes in supply and demand. Prolonged declines in world market prices for our products would have a material adverse effect on our revenues.


The mining industry is an intensely competitive industry, and we may have difficulty effectively competing with other mining companies in the future.


Intense competition characterizes
    the worldwide iron ore industry. We compete with a number of large mining
    companies, including international mining companies. Some of these competitors
    possess substantial iron ore mineral deposits at locations closer to our principal
    Asian and European customers. Competition from foreign or Brazilian iron ore
    producers may result in our losing market share and revenues. Our gold, aluminum,
    manganese and other activities are also subject to intense competition and
    are subject to similar risks.


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Demand for iron ore in peak periods may outstrip our production capacity, rendering us unable to satisfy customer demand.


Our ability to rapidly increase production capacity to satisfy increases in demand for iron ore is limited. In periods where customer demand exceeds our production capacity, we generally satisfy excess customer demand by reselling iron ore purchased from joint ventures or third parties. If we are unable to satisfy excess customer demand by purchasing from joint ventures or third parties, we may lose customers.


Our reserve estimates may be materially different from mineral quantities that we may actually recover, our estimates of mine life may prove inaccurate and market price fluctuations and changes in operating and capital costs may render certain ore reserves or mineral deposits uneconomical to mine.


Our reported ore reserves and mineral deposits are estimated quantities of ore and minerals that under present and anticipated conditions have the potential to be economically mined and processed to extract their mineral content. There are numerous uncertainties inherent in estimating quantities of reserves and in projecting potential future rates of mineral production, including many factors beyond our control. In addition, reserve engineering is a subjective process of estimating underground deposits of minerals that cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment. Estimates of different engineers may vary, and results of our mining and production subsequent to the date of an estimate may justify revision of estimates. Reserve estimates may require revision based on actual

production experience and other factors. For example, fluctuations in the market price of metals, reduced recovery rates or increased production costs due to inflation or other factors may render proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and may ultimately result in a restatement of reserves.


We may not be able to replenish our reserves, which could adversely affect our mining prospects.


We engage in
    mineral exploration, which is highly speculative in nature, involves many
    risks and frequently is nonproductive. Our exploration programs, which involve
    significant capital expenditures, may fail to result in the expansion or replacement
    of reserves depleted by current production. If we do not develop new reserves,
    we will not be able to sustain our current level of production beyond the
    remaining life of existing mines.


Even if we discover minerals, we remain subject to drilling and production risks, which could adversely affect the mining process.


Once we discover minerals, it can take us a number of years from the initial phases of drilling until production is possible, during which the economic feasibility of production may change. It takes substantial time and expenditures to:


| |  | establish
      ore reserves through drilling,                                                                  
| | - | ----------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                 
| |  | determine
      appropriate metallurgical processes for optimizing the recovery of metal
      contained in ore,
| |   |                                                                                                                 
| |  | obtain
      the ore or extract the metals from the ore, and                                                    
| |   |                                                                                                                 
| |  | construct
      mining and processing facilities for greenfield properties.                                     

If
  a project proves not to be economically feasible by the time we are able to
  exploit it, we may incur substantial write-offs. In addition, potential changes or complications involving metallurgical and other technological processes arising during the life of a project may result in cost overruns that may render the project not economically feasible.


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We face rising extraction costs as our deposits decrease.


Ore reserves gradually decrease in the ordinary course of a given mining operation. As reserves decrease, it becomes necessary to use more expensive processes to extract remaining ore. As a result, over time, we usually experience rising unit extraction costs with respect to each mine. Several of our mines have operated for long periods, and we will likely experience rising extraction costs per unit in the future at these operations.


Our mining and logistics activities depend on authorizations of regulatory agencies, and changes in regulations could have an adverse effect on our business.


Our mining and logistics activities in Brazil depend on authorizations and concessions by regulatory agencies of the Brazilian government. Our exploration, mining, mineral processing and logistics activities are also subject to Brazilian laws and regulations, which change from time to time. If these laws and regulations change in the future, modifications to our technologies and operations could be required, and we could be required to make unbudgeted capital expenditures, which could lead to an increase in our borrowing costs. For a more detailed discussion about the authorizations and concessions by regulatory agencies of the Brazilian government upon which our mining and logistics activities depend, seeItem 4. Information on the CompanyRegulatory Matters.


Changes in Brazilian environmental laws may adversely affect our mining and energy businesses.


Our operations often involve
    using, handling, disposing and discharging hazardous materials into the environment
    or the use of natural resources, and are therefore subject to the environmental
    laws and regulations of Brazil. Environmental regulation in Brazil has become
    stricter in recent years, and it is possible that more regulation or more
    aggressive enforcement of existing regulations will adversely affect us by
    imposing restrictions on our activities, creating new requirements for the
    issuance or renewal of environmental licenses, raising our costs or requiring
    us to engage in expensive reclamation efforts. Several Brazilian states in
    which we operate are currently considering implementing water use fees under
    the National Hydrological Resources Policy. This may require us to pay usage
    fees in the future for water rights that we currently use for free, which
    could considerably increase our costs in areas where water resources are scarce.
    In addition, we are currently a defendant in an action brought by the municipality
    of Itabira, in the state of Minas Gerais, which alleges that our Itabira iron
    ore mining operations have caused environmental and social damages. If we
    do not prevail in this lawsuit, we could incur a substantial expense. For
    more information on environmental laws and the legal challenges we face, see
    Item 4. Information on the CompanyEnvironmental Mattersand Item
    8. Financial InformationLegal Proceedings.


Our Albras joint venture
    may experience substantial electricity cost increases.


Electricity costs are a significant
    component of the cost of producing aluminum. Our aluminum plant, AlbrasAlumínio
    Brasileiro S.A., or Albras, obtains electric power at discounted rates from
    Eletronorte, a state-owned electric power utility. The contract through which
    Albras purchases electricity from this utility expires in 2004. Albras is
    unlikely to continue to benefit from favorable electricity costs following
    expiration of the contract. Albras is currently trying to negotiate a new
    contract and is examining other alternatives. Although we expect future energy
    costs for Albras to be in line with those of its peers in the industry, its
    costs will likely increase compared to current levels.


The Brazilian governments responses to energy shortages could adversely affect us.


We are a significant consumer
    of Brazils electricity production, and accounted for 4.5% of total consumption
    in Brazil in 2002. Brazil faced a shortage of energy during the second half
    of 2001 as a result of increased demand due to economic growth, inadequate
    expansion of electric generation in past years and unfavorable hydrological
    conditions. In response, the Brazilian government implemented an energy-rationing
    program to alleviate the energy shortage that aimed to decrease energy consumption
    by at least 20%. As a result of this program, we experienced a temporary reduction
    in our aluminum and ferroalloy production both of which use significant amounts
    of electrcity. By the end of 2001, weather conditions improved, leading to
    increased generation at hydroelectric plants and reducing the immediate risk
    of energy shortages. Accordingly, the Brazilian government eliminated the
    restrictions on the use of energy on March 1, 2002 for the northern,


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northeastern and southeastern regions of Brazil. Energy consumption habits in Brazil have been affected by the energy-rationing, and energy consumption has not returned to prior levels. As a result, there currently is an oversupply in the electricity markets. Although we believe the risk of another energy shortage in the next four years is low, we are unable to assess the long-term impact that the governments response to future energy shortages may have on our operations, particularly on our aluminum and ferroalloy production.

Changes in government regulations could result in lower returns on our energy sector investments.


The Brazilian power generation
    business depends on concessions granted by the government and is regulated
    and supervised by the Brazilian electricity regulatory governmental agency,
    ANEEL. The recently elected Brazilian government has not yet made clear its
    policy towards the electricity markets. Changes in the laws, regulations
    or governmental policies regarding the power generation industry, the marketing
    of energy in the wholesale market or concession requirements could lower
    the returns we are expecting from our investments in the energy business.
    For more information on the regulations governing our energy business, seeItem
    4. Information on the CompanyRegulatory Matters. We are subject to ongoing antitrust investigations. We are currently
    involved in 23 proceedings before theConselho
    Administrativo de Defesa Econômica,
    or CADE, which is the primary Brazilian antitrust regulator. Most of these
    proceedings involve post-transaction review of acquisition or joint venture
    transactions, which is required for nearly all of our acquisitions and joint
    ventures. The remaining are administrative proceedings alleging that we have
    engaged in illegal anticompetitive conduct in connection with our logistics
    and aluminum businesses. We intend to defend these claims vigorously. We cannot
    predict the outcome of these proceedings. If CADE were to determine that undue
    concentration exists in any of our industries, it could impose measures to
    safeguard competition, which could include requirements that we divest operations
    or respect price restrictions. If CADE were to find that we have engaged in
    anticompetitive conduct, it could order us to cease the conduct and / or to
    pay fines, which could be substantial. The European Commission is also reviewing
    our acquisition of Caemi Mineração e Metalurgia S.A., which
    we refer to as Caemi. SeeItem
    8. Financial InformationLegal Proceedings.
    If the European Commission fails to approve the Caemi acquisition, or imposes
    burdensome conditions, we could be required to abandon the acquisition or
    to take actions that would reduce the benefits we are expecting from the acquisition. We are vulnerable to adverse developments affecting other economies. In 2002, 6.7% of our consolidated
    net operating revenues were attributable to sales to Japanese customers, 12.9%
    were attributable to sales to other Asian customers and 36.2% were attributable
    to sales to European customers. In 2002, 7.2% of our iron ore and pellets
    sales were made to customers in China, and the Chinese market was the main
    driver of demand in the iron ore market. A weakened economy in China or in
    the other markets where we sell our products could reduce demand for our products
    in the Chinese market and such other markets, which, in turn, could result
    in lower revenues and profitability.


Our principal shareholder
    could have significant influence on our company.


Valepar, our principal shareholder,
    currently owns 52.3% of our outstanding common stock and 33.6% of our total
    outstanding capital. For a description of the ownership of our shares, see
    Item 7. Major Shareholders and Related Party TransactionsPrincipal
    Shareholder. As a result of its share ownership, Valepar can control
    the outcome of any action requiring shareholder approval. Further, the Brazilian
    government owns a golden share in us that gives it limited veto
    powers over certain actions that we could propose to take. For a detailed
    description of the veto powers granted to the Brazilian government by virtue
    of its ownership of this golden share, see Item 10. Additional InformationCommon
    Shares and Preferred SharesGeneral.


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Some of our operations depend on joint ventures and could be adversely affected if our joint venture partners do not observe their commitments.


We currently operate important parts of our pelletizing, copper exploration, logistics, energy, aluminum and steel businesses through joint ventures with other companies. Our forecasts and plans for these joint ventures assume that our joint venture partners will observe their obligations to contribute capital, purchase products and, in some cases, provide managerial talent. If any of our joint venture partners fails to observe its commitments, the affected joint venture may not be able to operate in accordance with its business plans or we may have to increase the level of our investment to give effect to these plans. For more information on our joint ventures, see Item 4. Information on the CompanyLines of Business. Our risk management strategy may not be effective. We are exposed to fluctuations in interest rates, foreign currency exchange rates, and prices relating to our iron ore, aluminum and gold production. In order to partially protect ourselves against unusual market volatility, we periodically enter into hedging transactions to manage these risks. We do not hedge risks relating to iron ore price fluctuations. See Item 11. Quantitative and Qualitative Disclosures about Market Risk.Our hedging strategy may not be successful in minimizing our exposure to these fluctuations. In addition, to the extent we hedge our commodity price exposure, we forego the benefits we would otherwise experience if commodity prices were to increase.


We
  may not have adequate, if any, insurance coverage for some business risks that
  could lead to economically harmful consequences to us.


| | Our
      businesses are generally subject to a number of risks and hazards, including
| | --------------------------------------------------------------------------------------
| |                                                                                       
| |                                                                                      
| |                                                                                       
| |                                                                                      
| |                                                                                       
| |                                                                                      
| |                                                                                       
| |                                                                                      
| |                                                                                       
| |                                                                                      
| |                                                                                       
| |                                                                                      
| |                                                                                       
| |                                                                                      

These occurrences could result in damage to, or destruction of, mineral properties, production facilities, transportation facilities, equipment or vessels. They could also result in personal injury or death, environmental damage, waste of resources or intermediate products, delays or interruption in mining, production or transportation activities, monetary losses and possible legal liability. The insurance we maintain against risks that are typical in our business may not provide adequate coverage. Insurance against some risks (including liabilities for environmental pollution or certain hazards or interruption of certain business activities) may not be available at a reasonable cost or at all. As a result, accidents or other negative developments involving our mining, production or transportation facilities could have a material adverse effect on our operations.


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Risks Relating to Brazil

The Brazilian government
    has historically exercised, and continues to exercise, significant influence
    over the Brazilian economy. Brazilian political and economic conditions have
    a direct impact on our business and the market price of our securities.


The Brazilian government
    frequently intervenes in the Brazilian economy and occasionally makes substantial
    changes in policy, as often occurs in other emerging economies. The Brazilian
    governments actions to control inflation and effect other policies have
    often involved wage and price controls, currency devaluations, capital controls
    and limits on imports, among other things. Our business, financial condition
    and results of operations may be adversely affected by factors in Brazil including:


| |  | currency
      fluctuations;                                                   
| | - | -------------------------------------------------------------------------------
| |   |                                                                                
| |  | inflation;                                                                     
| |   |                                                                                
| |  | monetary
      policy and interest rates;                                      
| |   |                                                                                
| |  | fiscal policy;                                                                 
| |   |                                                                                
| |  | tariff policy;                                                                 
| |   |                                                                                
| |  | exchange
      controls;                                                       
| |   |                                                                                
| |  | energy shortages;
      and                                                    
| |   |                                                                                
| |  | other political,
      social and economic developments in or affecting Brazil.

Inflation and government measures to curb inflation may contribute significantly to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and, consequently, may adversely affect the market value of our securities.


Brazil has
    in the past experienced extremely high rates of inflation, with annual rates
    of inflation during the last ten years reaching as high as 1,158% in 1992,
    2,708% in 1993 and 1,093% in 1994 (as measured by the Índice Geral
    de Preços do Mercado published by Fundação Getúlio
    Vargas, or IGP-M Index). More recently, Brazils rates of inflation were
    9.9% in 2000, 10.4% in 2001, 25.3% in 2002 and 7.0% for the five months ended
    May 31, 2003 (as measured by the IGP-M Index). Inflation, governmental measures
    to combat inflation and public speculation about possible future actions have
    in the past had significant negative effects on the Brazilian economy, and
    have contributed to economic uncertainty in Brazil and to heightened volatility
    in the Brazilian securities markets. If Brazil experiences substantial inflation
    in the future, our costs may increase, our operating and net margins may decrease
    and, if investor confidence declines, the price of our securities may fall.
    Inflationary pressures may also curtail our ability to access foreign financial
    markets and may lead to further government intervention in the economy, which
    could involve the introduction of government policies that may adversely affect
    the overall performance of the Brazilian economy.


Fluctuations in the value of the real against the value of the U.S. dollar may result in uncertainty in the Brazilian economy and the Brazilian securities market and could lower the market value of our securities.


The Brazilian currency has historically suffered frequent devaluation and depreciation. In the past, the Brazilian government has implemented various economic plans and exchange rate policies, including sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from daily to monthly, floating exchange rate systems, exchange controls and dual exchange rate markets. Although over long periods, depreciation of the Brazilian currency generally has correlated with the rate of inflation in Brazil, depreciation over shorter periods has resulted in significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and other currencies.


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The realdepreciated 34.3% against the U.S. dollar in 2002, and appreciated 19.1% during the first five months of 2003. The exchange rate between the real and the U.S. dollar may continue to fluctuate and may rise or decline substantially from current levels. Depreciation of the realrelative to the U.S. dollar reduces the U.S. dollar value of distributions and the dividends on our American depositary shares and may also reduce the market value of our securities. Depreciation also creates additional inflationary pressures in Brazil by generally increasing the price of imported products and requiring recessionary government policies to curb aggregate demand. On the other hand, appreciation of the real also tends to have a negative impact on our margins because most of our costs are denominated in reais, while most of our revenues are denominated in U.S. dollars. In addition, appreciation of the realagainst the U.S. dollar may lead to a deterioration of the current account and the balance of payments, as well as dampen export-driven growth. For additional information about historical exchange rates, see Item 3. Key InformationExchange Rates.


Access to international
    capital markets for Brazilian companies is influenced by the perception of
    risk in Brazil and other emerging economies, which may hurt our ability to
    finance our operations.


International investors generally consider Brazil to be an emerging market. As a result, economic and market conditions in other emerging market countries, especially those in Latin America, influence the market for securities issued by Brazilian companies. As a result of economic problems in various emerging market countries in recent years (such as the Asian financial crisis of 1997, the Russian financial crisis in 1998 and the Argentinian financial crisis which began in 2001 and is continuing), investors have viewed investments in emerging markets with heightened caution. This has resulted in a significant outflow of U.S. dollars from Brazil, and Brazilian companies have faced higher costs for raising funds, both domestically and abroad, and have been impeded from accessing international capital markets. We cannot assure you that international capital markets will remain open to Brazilian companies or that prevailing interest rates in
these markets will be advantageous to us. In addition, future financial crises in emerging market countries may have a negative impact on the Brazilian markets, which could adversely affect our share price.


Risks Relating to the American Depositary Shares

Restrictions on the movement of capital out of Brazil may hinder your ability to receive dividends and distributions on American depositary shares, and the proceeds from any sale of American depositary shares.


From time to time, the Brazilian
    government may impose restrictions on capital outflow that would hinder or
    prevent the custodian who acts on behalf of the depositary for the American
    depositary shares from converting proceeds from the shares underlying the
    American depositary shares into U.S. dollars and remitting those proceeds
    abroad. Brazilian law permits the government to impose these restrictions
    whenever there is a serious imbalance in Brazils balance of payments
    or reason to foresee a serious imbalance. The Brazilian government imposed
    remittance restrictions for approximately six months in 1989 and early 1990.
    If enacted in the future, similar restrictions would hinder or prevent the
    conversion of dividends, distributions or the proceeds from any sale of shares
    from reaisinto
    U.S. dollars and the remittance of the U.S. dollars abroad. In that event,
    the custodian, acting on behalf of the depositary, will hold the reaisit
    cannot convert for the account of the holders of American depositary receipts
    who have not been paid. The depositary will not invest the reaisand will not be liable for interest on those amounts. Furthermore, any reaisso
held will be subject to devaluation risk.


If you exchange American depositary shares for the underlying shares, as a result of Brazilian regulations you risk losing the ability to remit foreign currency abroad and Brazilian tax advantages.


The Brazilian custodian
      for the shares underlying our American depositary shares will obtain an
      electronic
    registration from the Central Bank of Brazil to entitle it to remit U.S.
       dollars abroad for payments of dividends and other distributions relating
      to the shares underlying our American depositary shares or upon the disposition
      of the underlying shares. If you decide to exchange your American depositary
      shares for the underlying shares, you will be entitled to continue to rely,
      for five business days from the date of exchange, on the custodians
       electronic registration. Thereafter, you may not be able to obtain and
      remit
    U.S. dollars abroad upon the disposition of, or


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distributions relating to,
  the underlying shares unless you obtain your own electronic registration by
  registering your investment in the underlying shares under Resolution No. 2,689
  of the National Monetary Council, which entitles foreign investors to buy and
  sell securities on the São Paulo stock exchange, or BOVESPA. For more
  information regarding these exchange controls, seeItem
  10. Additional InformationExchange Controls and Other Limitations.
  If you attempt to obtain your own electronic registration, you may incur
  expenses or suffer delays in the application process, which could delay your
  ability to receive dividends or distributions relating to the underlying shares
  or the return of your capital in a timely manner. We cannot assure you that
  the custodians electronic registration or any certificate of foreign
  capital registration obtained by you will not be affected by future legislative
  changes, or that additional restrictions applicable to you, the disposition
  of the underlying shares or the repatriation of the proceeds from disposition
  will not be imposed in the future.

Because we are not obligated to file a registration statement with respect to preemptive rights relating to our shares, you might be unable to exercise those preemptive rights.


Holders of American depositary receipts that are residents of the United States may not be able to exercise preemptive rights, or exercise other types of rights, with respect to the underlying shares. Your ability to exercise preemptive rights is not assured unless a registration statement is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement relating to preemptive rights with respect to the underlying shares, and we cannot assure you that we will file any registration statement. If a registration statement is not filed and an exemption from registration does not exist, JPMorgan Chase Bank, as depositary, will attempt to sell the preemptive rights, and you will be entitled to receive the proceeds of the sale. However, the preemptive rights will expire if the depositary cannot sell them. For a more complete
description of preemptive rights with respect to the underlying shares, seeItem 10. Additional InformationCommon Shares and Preferred SharesPreemptive Rights.


Holders of our American depositary shares may encounter difficulties in the exercise of voting rights.


Holders of our common and preferred shares are entitled to vote on shareholder matters. You may encounter difficulties in the exercise of some of your rights as a shareholder if you hold our American depositary shares rather than the underlying shares. For example, under some circumstances, such as our failure to provide the depositary with voting materials on a timely basis, you may not be able to vote by giving instructions to the depositary on how to vote for you.


Holders of our American depositary shares may have fewer and less well defined shareholders rights than in the United States and certain other jurisdictions.


Our corporate affairs are
    governed by our by-laws and the Brazilian Corporation Law, which may differ
    from the legal principles that would apply if we were incorporated in a jurisdiction
    in the United States or in certain other jurisdictions outside Brazil. Under
    the Brazilian Corporation Law holders of our common and preferred shares
    may have fewer and less well-defined rights to protect their interests relative
    to actions taken by our board of directors or the holders of common shares
    than under the laws of some jurisdictions outside Brazil. Although Brazilian
    law imposes restrictions on insider trading and price manipulation, the Brazilian
    securities markets are not as highly regulated and supervised as the U.S.
    securities markets or markets in certain other jurisdictions. In addition,
    rules and policies against self-dealing and regarding the preservation of
    minority shareholder interests may be less well developed and enforced in
    Brazil than in the United States, which could potentially disadvantage you
    as a holder of the underlying shares and American depositary shares. For
    example,
    when compared to Delaware general corporation law, Brazilian Corporation
    Law and practice has less detailed and well-established rules and judicial
    precedents
    relating to the review of management decisions against duty of care and duty
    of loyalty standards in the context of corporate restructurings, transactions
    with related parties, and sale-of-business transactions. In addition, shareholders
    in Brazilian companies ordinarily do not have standing to bring a class action.


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Item
  4. Information on the Company

BUSINESS
  OVERVIEW

General

We are one of the worlds largest producers and exporters of iron ore and pellets. We are the largest diversified mining company in the Americas by market capitalization and one of the largest companies in Brazil. We hold exploration claims that cover 7.6 million hectares (18.8 million acres). We operate large logistics systems including railroads and ports that are integrated with our mining operations. Directly and through affiliates and joint ventures, we have major investments in the energy, aluminum-related and steel businesses. For the year ended December 31, 2002, we had consolidated gross operating revenues of US$ 4,282 million, of which 65.9% were attributable to sales of iron ore and pellets, 10.7% were attributable to third-party logistics services, 10.8% were attributable to sales of aluminum-related products, 6.6% were attributable to sales of manganese and ferroalloys and 2.4% were attributable to sales of gold. For the year ended December 31, 2002, we recorded consolidated operating income of US$ 1,429 million and consolidated net income of US$ 680 million. Our principal
    lines of business are:


| |  | Mining.Our primary mining
      activities involve iron ore. We operate two world-class integrated systems
      in Brazil for producing and distributing iron ore, each consisting of mines,
      railroads and port and terminal facilities. The Southern System, based in
      the states of Minas Gerais and Espírito Santo, contains aggregate
      estimated proven and probable iron ore reserves of approximately 2.9 billion
      tons with an average grade of 54% iron. The Northern System, based in the states
      of Pará and Maranhão, contains aggregate estimated proven
      and probable iron ore reserves of approximately 1.5 billion tons with an
      average grade of 67% iron. We also operate ten pellet-producing facilities,
      six of which are joint ventures with international partners, and have a
      50% stake in Samarco Mineração S.A., or Samarco, in Ponta
      do Ubú, which owns and operates two pelletizing plants. In addition,
      as part of our mineral prospecting and development activities in Brazil,
      we have acquired extensive experience in exploration techniques and processes
      specifically designed for use in tropical areas of the world. Our current
      mineral exploration efforts are mainly in Brazil and focus on copper, gold,
      nickel, manganese, kaolin and platinum group metals. Expenditures for mineral
      exploration were US$ 50 million in 2002. We currently hold claims to explore
      approximately 7.6 million hectares (18.8 million acres). We also produce
      kaolin, potash and gold. In June 2003, we agreed to sell our one remaining
      operating gold mine.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Logistics.In
      our logistics business, we provide customers with various forms of transportation
      and related support services, such as warehouse, port and terminal services.
      We are a leading competitor in the Brazilian transportation industry. Each
      of our iron ore complexes incorporates an integrated railroad network linked
      to automated port and terminal facilities, and is designed to provide iron
      ore, freight and passenger rail transportation, bulk terminal storage and
      ship loading services to us and third parties. For 2002, our railroads transported
      approximately 55% of the total freight tonnage transported by Brazilian
      railroads, or approximately 171 million tons of cargo, of which 120 million
      tons were our iron ore and pellets. Of the total amount of iron ore and
      other products transported, 28% was for third parties and 72% was for us.
      Our two wholly-owned railroads, the Vitória-Minas railroad and the
      Carajás railroad, serve primarily to transport our iron ore products
      from interior mines to coastal port and terminal facilities. In addition,
      the Vitória-Minas railroad carries significant amounts of third-party
      cargo as well as passengers. We have nearly completed our exit from the
      dry-bulk shipping business, which began in 2001.                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Energy.Since
      2001, we have considered energy to be an important supporting business,
       although at present energy production does not yet represent a significant

      portion of our activities. We currently hold stakes in ten hydroelectric
       power generation projects (Igarapava, Porto Estrela, Funil, Candonga,
      Aimorés,
      Capim Branco I, Capim Branco II, Foz do Chapecó, Santa Isabel and
       Estreito), which have a total projected capacity of 4,451 MW. We are currently
      negotiating with ANEEL to return the concession for the Santa Isabel hydroelectric
      project. The Igarapava, the Porto Estrela and the Funil power plants started
      operations in January
       1999, September 2001 and December 2002, respectively. Our remaining power

      generation projects are scheduled to start operations within the next five
       years. Depending on market conditions, the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



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| |   | power
        generated by these plants will be sold in the market and/or used for our
        own operations. SeeItem
        4. Lines of BusinessEnergy.                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                               
| |  | Aluminum-Related
      Operations.Through
      joint ventures, we conduct major operations in the production of aluminum-related
      products. They include:                               
| |   |                                                                                                                                                                                               
| |   | o                                                                                                                                                                                             
| |   |                                                                                                                                                                                               
| |   | o                                                                                                                                                                                             
| |   |                                                                                                                                                                                               
| |   | o                                                                                                                                                                                             
| |   |                                                                                                                                                                                               
| |  | Other
      Investments.In
      addition, we also have investments in four steel companies and in the fertilizer
      business. In 2002, we sold the last of our core pulp and paper assets.

Vale Overseas

Vale Overseas, our wholly-owned subsidiary, is a finance company for the CVRD Group. It was constituted as a special purpose company to be the issuer of its US$ 300 million 8.625% Notes Due 2007, the proceeds of which were used for general corporate purposes of the CVRD Group.


Incorporation of CVRD and Vale Overseas

CVRD Our legal and commercial name is Companhia Vale do Rio Doce. We are a stock corporation, orsociedade anônima, duly organized on January 11, 1943, and existing under the laws of the Federative Republic of Brazil. We were privatized in three
    stages between 1997 and 2002. In the third stage of the privatization process,
    on March 20, 2002, the Brazilian government and Banco Nacional de Desenvolvimento
    Econômico
    e Social (BNDES) each sold 39,393,919 shares, in the form
    of common shares or American depositary shares, which together represented
    32.1% of
    our outstanding common stock. We are organized for an unlimited period of time. Our principal executive offices are located at Avenida Graça Aranha, No. 26, 20030-900 Rio de Janeiro, RJ, Brazil, and our telephone number is (011) 55-21-3814-4540. Vale Overseas Our wholly-owned subsidiary Vale Overseas was registered and incorporated as a Cayman Islands exempted company with limited liability on April 3, 2001 (registration number 113637). Vale Overseas is incorporated for an indefinite period of time. Its registered office is at Walker House, P.O. Box 908 GT, Mary Street, Georgetown, Grand Cayman, Cayman Islands.


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Acquisitions, Asset Sales and Significant Changes in 2002 and 2003

In 2002, we continued to expand our investments in copper exploration, energy and the aluminum business. Since the beginning of 2003, we have announced significant acquisition agreements in the iron ore, ferroalloys, railroad, coastal shipping and steel businesses. We have also continued our efforts to exit the pulp and paper and dry-bulk shipping businesses. The following discussion describes some of the important recent acquisitions, asset sales and significant changes in our businesses. Mining Salobo.In
    May 2002, we acquired Anglo Americans 50% interest in Salobo Metais
    S.A., or Salobo, through our subsidiary Caulim do Brasil Investimentos S.A.
    for US$ 50.9 million. Salobo is the largest of five copper projects that we
    are currently developing, with estimated mineral reserves of 784 million tons.
    We now own 100% of Salobos equity capital. Antofagasta. In July 2002, we signed an investment agreement and formed a joint venture for mining, research and exploration near Cuzco in southern Peru with Antofagasta Plc, or Antofagasta, one of Chiles largest copper producers. We have invested US$ 1.0 million in 2002 and expect to invest an additional US$ 5.7 million in the next two years. Upon completion of this investment, we will hold a 50% stake. Rio Doce Manganese Norway.
    In February 2003, we acquired 100% of Elkem Rana AS, a Norwegian ferroalloy
    producer, for US$ 17.6 million. Elkem Rana AS has changed its name to Rio
    Doce Manganese Norway AS, and has a plant located in an industrial park in
    Mo i Rana, Norway, where ferrochrome was produced until June 2002. The plant
    will be converted to produce manganese ferroalloys from 2003 onwards, and
    is expected to have a production capacity of 100 thousand tons per year.
    This acquisition expands our ferroalloy business in continental Europe, where
  our wholly-owned subsidiary Rio Doce Manganèse Europe (RDME) already operates a manganese ferroalloy plant. Caemi.
    In 2001, we acquired 50% of the voting shares of Caemi. In March 2003, we
    reached an agreement with Mitsui & Co. (Mitsui) to acquire its remaining
    stake in Caemi for US$ 426.4 million. After this transaction, we will own
    100% of Caemis common shares, 40% of its preferred shares and 60.2%
    of its total capital. Caemi, a Brazilian company with its headquarters in
    Rio de Janeiro, is the worlds fourth largest producer of iron ore and
    is listed on BOVESPA. This acquisition is subject, inter alia, to the
    review and approval of competition authorities and the completion of the Valepar
    transactions described under Item 7. Major Shareholders and Related
    Party Transactions. São
    Luís.In
    March 2002, we completed the construction of our new São Luís
    pelletizing plant. The plant produced 715,000 tons of pellets in 2002, and
    has a nominal production capacity of 6 million tons per year. Our total capital
    expenditures invested to build the plant amounted to US$ 188 million. As of
    December 31, 2002, our wholly-owned pelletizing operations had a combined
    annual production capacity of 15 million tons. Logistics Coastal Shipping.In May 2003, we signed a stock purchase agreement with Mitsui, a major Japanese participant in the global logistics market. Under the agreement, our wholly-owned subsidiary Navegação Vale do Rio Doce S.A.-Docenave, or Docenave, will own 79% of the total shares of a new company, DCNDB Overseas S.A., or DCNDB, established to develop the intermodal coastal shipping business. Mitsui will own the remaining 21% of the shares of DCNDB. The joint venture is subject to certain regulatory approvals. We expect the association with Mitsui to allow Docenave to offer service between the ports of Salvador and Itajai, a line which is currently not serviced by any other major carriers. We believe this joint venture could increase Docenaves share in the coastal shipping market and enable Docenave to attract additional domestic and
international customers. Restructuring of Certain Logistics Holdings.In April 2003, we, Companhia Siderúrgica Nacional, or CSN, and others signed an agreement for the purchase and sale of shares in logistics companies. The transactions set forth in the agreement are each conditional on the others and will take place once and only if certain conditions are fulfilled. The agreement involves three principal transactions: our acquisition of CSNs stake in Ferrovia Centro-Atlântica S.A. (FCA), the largest railroad in Latin America; the sale to CSN of our indirect stake in Sepetiba Tecon S.A., a


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company that operates a terminal at the Port of Sepetiba; and the transfer to CSN and Taquari Participações S.A. of our stake in Companhia Ferroviária do Nordeste (CFN), a railroad company. We believe these transactions will allow us to focus on our core transportation assets.

Energy Estreito.In
    July 2002, we and our joint venture partners were awarded the concession
    for the Estreito hydroelectric power plant, which has a projected capacity
    of 1,087 MW. We now have interests in ten hydroelectric power plants with
    a total projected capacity of 4,451 MW, of which the energy available to
    CVRD will be 1,810 MW. Our Funil power plant started operations in December
    2002, and we now have interests in three operational power plants (Igarapava,
    Porto Estrela and Funil). As described below, we are currently negotiating
    with ANEEL to return the concession for the Santa Isabel hydroelectric
    project. Aluminum-Related Operations Mineração Vera Cruz.In July 2002, we acquired 64% of the total capital of MVC through our wholly-owned subsidiary Aluvale for US$ 2 million. Aluvale now holds 100% of MVC, which holds active mining rights in the Paragominas region, in the state of Pará, located near our existing bauxite reserves, approximately 250 kilometers from Alunorte. This strategic location should increase our flexibility in using our existing infrastructure and should also support our planned expansion at Alunorte. Alunorte.In July 2002, we increased our stake in Alunorte to 62.09% of the common shares and 19.05% of the preferred shares, giving us 57.03% of Alunortes total capital. We began consolidating Alunorte as of this date. In April 2003, Alunorte inaugurated its third production line, which has a capacity of 825,000 tons per year. With this third line, Alunorte now has a production capacity of 2.375 million tons of alumina per year. Alunortes total investment in this project amounted to approximately US$ 300 million. Steel Companhia Siderúrgica Tubarão. In April 2003, we completed
    the acquisition of shares of Companhia Siderúrgica de Tubarão
    (CST) from Acesita S.A. (Acesita) that are not subject to the CST controlling
    shareholders agreement. We acquired 4.42% of the common shares and 5.64%
    of the preferred shares of CST, representing 5.17% of CSTs total capital,
    for US$ 59.7 million. Following this transaction, we now own 24.93% of CSTs
    common shares and 29.96% of CSTs preferred shares, totaling 28.02% of
    CSTs capital. In addition, we are currently negotiating with a group
    of Japanese shareholders led by JFE Steel (the Japanese Group)
    to acquire the Japanese Groups shares of CST, jointly with Arcelor.
    Upon the earlier of our acquisition of the Japanese Groups stake and
    the termination of the controlling shareholders agreement in 2005, we
    also expect to acquire, jointly with Arcelor, the remaining shares of CST
    held by Acesita and California Steel Industries, Inc. (CSI). We
    expect that the cost of acquiring these two stakes in CST will be approximately
    US$ 121 million. By increasing our stake in CSTs capital, we ensure
    our presence in the controlling group. We have also entered into agreements
    with Arcelor to guarantee the liquidity of our position, under which we expect
    to decrease our participation in CST between 2007 and 2009 to 20% of the shares
    of the controlling group. By 2015, we will sell our remaining stake in CST.
    Our stake in CST will be sold to Arcelor at prices to be determined based
    on a valuation performed by two investment banks.


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Others. In April 2003, we signed an investment agreement with Nucor Corporation, a North American steelmaker, in order to form a joint venture in Northern Brazil, in which approximately 78% and 22% of the voting shares will be held by CVRD and Nucor (or one of its affiliates), respectively. The main purpose of the company will be the production and sale of pig iron. Nucor will invest approximately US$ 10 million, and we will contribute our Celmar S.A.  Indústria de Celulose e Papel (Celmar) forest assets to the new company. The new company will have a total value of approximately US$ 80 million. In December 2002, we purchased 46% of the outstanding capital of Celmar from Nissho Iwai Corporation. With this purchase, we now own 100% of Celmar and will soon contribute Celmars cultivated forest assets for use as an energy source for our pig iron project with Nucor. Dispositions and Asset Sales In line with
    our focus on mining, logistics and energy, we have moved to pare down our
    holdings of non-strategic assets. We have disposed of almost all of our pulp
    and paper assets and are also pursuing the sale of assets in the logistics
    sectors that are not strategically connected to our core businesses. In the pulp
    and paper industry, in September 2002, we sold, for approximately US$ 49 million,
    our assets in the São Mateus region situated in the state of Espírito
    Santo to Aracruz Celulose S.A. and Bahia Sul Celulose S.A. This sale completed
    our planned partial divestiture of our pulp and paper businesses. Our remaining
    forest assets will be used in the pig iron project described above. In the transportation
    industry, we continued in 2002 the divestiture of our dry-bulk shipping business
    begun in 2001, by selling the fleet of vessels owned by Docenave. In February
    2002, the sale of the six Brazilian flag vessels with a total capacity of
    592,240 DWT for US$ 53 million concluded with the delivery of the last vessel
    to Empresa de Navegação Elcano S.A. In and subsequent to this period, we sold another
    six Liberian flag vessels for US$ 45.7 million. We intend to sell our remaining
    dry-bulk assets in the near future. On June 18,
    2003, we agreed to sell our one remaining gold mine, Fazenda Brasileiro, to
    Yamana Resources Inc., a Canadian mining company, for US$ 20.9 million. The
    sale is subject to certain conditions. Upon completion of the sale, our gold
    operations will be interrupted until the start-up of the copper projects we
    are currently developing in Carajás, where we expect to produce gold
    as a by-product of the copper mining process. We are currently negotiating
      with ANEEL to return the concession for the Santa Isabel hydroelectric
      project due to difficulties in obtaining the required environmental permits.


Business Strategy

Our goal is to strengthen
    our standing among the worlds leading mining companies by focusing on
    diversified growth in mining (mainly based on our own reserves and new exploration
    initiatives) and developing our new ventures in logistics and energy. We are
    pursuing disciplined growth in earnings and in cash generation, looking to
    maximize return on invested capital and the total return to our shareholders.
    We are emphasizing organic growth in our core businesses, although we will
    continue to make selective acquisitions in order to complement our strategy
    and diversify our portfolio. Over the past several years, we have developed a more efficient governance structure and a robust long-term strategic planning process. Now we are building on these changes with ambitious long-range plans in each of our principal business areas. Over the five years 2003-2007, we are planning capital expenditures of approximately US$ 6 billion for organic growth. The following paragraphs highlight specific major strategies. Maintaining Our Leadership Position in the Seaborne Iron Ore Market In 2002, we consolidated our leadership in the seaborne iron ore trade market, achieving an estimated 29.4% of the total 480 million tons traded in the year. In 2003, we expect to further increase our share of this market through the consolidation of Caemis operations. We are committed to maintaining our position in the world iron ore market by keeping close contact with our customers, focusing our product line to capture industry trends and controlling costs. We believe that our strong relationships with major customers, tailored product line and logistical advantages will enable us to achieve this goal.


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Expanding Our Pelletizing Facilities to Accommodate Current Market Demands We believe that,
    in the long term, global demand for pellets will continue to outpace the overall
    iron ore market, so we plan to continue investing in the development of this
    dynamic segment of the market. We built a new pelletizing plant at São
    Luís, and we are expanding production capacity at our Samarco pellet
    operations. With the addition of São Luís operations, and the
    completion of the Samarco expansion, we and our joint ventures have increased
    our total annual production capacity to 53 million tons. SeeLines
    of Business  Mining  Pellets. Growing Our Logistics Business We believe that the quality of our railway assets and our many years of experience as a railroad and port operator position us to establish ourselves as a leading Brazilian logistics company serving both domestic and export markets. We plan to focus on the physical and commercial integration of our transportation assets, and the development of intermodal shipping through a new joint venture. Developing Our Copper Resources We believe that our copper projects, which are all situated in the Carajás region, can be among the most competitive in the world in terms of investment cost per ton of ore. When our copper mines enter production, they will benefit from our transportation facilities serving the Northern System. We have a Mineral Risk Contract with BNDES providing for the joint development of certain unexplored mineral resources 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 those resources. Increasing Our Aluminum-Related Activities We plan to develop and increase
    production capacity in our aluminum-related operations, focusing on bauxite
    and alumina. Our bauxite joint venture, MRN, and our alumina subsidiary, Alunorte,
    are increasing annual production capacity. Our aluminum subsidiary, Albras,
    increased its production capacity by 46,000 tons in 2002. In addition, we
    own large unexplored deposits of high quality bauxite in the states of Pará
    and Maranhão that will allow us to pursue further growth opportunities
    in the aluminum sector. We may pursue acquisitions and/or partnerships in
    the production of primary aluminum, depending on the level of related electricity
    costs. Developing Power Generation Projects Energy management and supply
    has become a priority for us, driven both by structural change in the industry,
    and by the risk of rising electricity prices and electricity rationing due
    to energy shortages, such as Brazil experienced in the second half of 2001.
    We have invested in ten consortia to develop hydroelectric power generation
    projects. These projects may sell their production to third parties in the
    power market, and/or we may use the electricity from these projects for our
    internal needs. As we are a large consumer of electricity, we expect that
    investing in the energy business will help protect us against volatility in price and supply of energy.


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LINES OF BUSINESS

Our principal lines of business consist of mining, logistics and energy. For internal management purposes, we group our aluminum-related operations together with our other significant equity participations in other companies.


Mining

Ferrous Minerals

Our ferrous minerals business segment includes iron ore mining and pellet production, as well as transportation facilities in the Northern and Southern Systems (including railroads, ports and terminals) as they relate to mining operations. Manganese mining and ferroalloys are also part of our ferrous minerals business. The table below
        sets forth our ferrous minerals gross revenues by geographic market and
        by category for the periods indicated as reflected in our consolidated
        financial statements.


|                                                          | For
      the Year Ended December 31, |      
|--------------------------------------------------------- | ------------------------------------- | -----
|                                                          |                                       |      
|                                                          | 2000                                  |      
|                                                          |                                       |      
|                                                          | (In
      millions of US$)            |      
|Gross
      revenues classified by geographic destination |                                       |      
|Export sales:                                             |                                       |      
|Latin
      America                                       | US$                                   | 224  
|United States                                             |                                       | 252  
|Europe                                                    |                                       | 969  
|Middle
      East                                         |                                       | 209  
|Japan                                                     |                                       | 544  
|Asia,
      other than Japan                              |                                       | 652  
|                                                          |                                       |      
|Subtotal                                                  |                                       | 2,850
|Domestic
      sales                                      |                                       | 1,000
|                                                          |                                       |      
|Total                                                     | US$                                   | 3,850
|                                                          |                                       |      
|Gross
      revenues classified by category               |                                       |      
|Iron ore                                                  | US$                                   | 2,710
|Pellets                                                   |                                       | 770  
|Manganese
      and ferroalloys                           |                                       | 370  
|                                                          |                                       |      
|Total                                                     | US$                                   | 3,850
|                                                          |                                       |      

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Iron
  Ore We conduct our iron ore business
    primarily at the parent company level and through our subsidiaries Ferteco
    Mineração S.A., or Ferteco, and Urucum Mineração
    S.A., or Urucum. System Structure The table below
  sets forth information regarding our proven and probable iron ore reserves and
  projected exhaustion dates as of December 31, 2002. The estimates of mineral
  reserves have been audited and verified by AMEC, experts in geology, mining and ore reserve determination.
  The projected exhaustion dates are estimated based on our estimates of future
  production levels.


|Mine(1)                          |  | Began
      Operations |  | Projected
      Exhaustion
      Date |  | Production
      For the Year Ended
      December 31, |  | Proven
      and
      Probable Reserves
      at December 31,
      2002 | 
|-------------------------------- |  | ---------------------- |  | ------------------------------------- |  | ------------------------------------------------------ |  | ------------------------------------------------------------------------- | 
|                                 |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|                                 |  |                        |  |                                       |  | 2000                                                   |  | 2001                                                                      | 
|                                 |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|                                 |  |                        |  |                                       |  | (in
      millions of tons)                            |  | (In
      millions
      of tons)                                         | 
|Southern
      System            |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|Itabira:                         |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|Caué(2)                          |  | 1942                   |  |                                      |  | 20.1                                                   |  | 19.7                                                                      | 
|Conceição(3)                     |  | 1957                   |  |                                      |  | 19.8                                                   |  | 19.2                                                                      | 
|Minas
      do Meio(2)           |  |                       |  |                                      |  |                                                       |  |                                                                          | 
|                                 |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|Total
      Itabira              |  |                        |  | 2021                                  |  | 39.9                                                   |  | 38.9                                                                      | 
|                                 |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|Água Limpa Complex(4)            |  | 2000                   |  | 2013                                  |  | 3.7                                                    |  | 2.5                                                                       | 
|Alegria Complex(5)               |  | 2000                   |  | 2024                                  |  | 9.4                                                    |  | 9.7                                                                       | 
|Capanema/Ouro Fino(6)            |  | 1982                   |  | 2003                                  |  | 5.3                                                    |  | 3.9                                                                       | 
|Córrego do Meio
      Complex(7) |  | 2000                   |  | 2005                                  |  | 1.5                                                    |  | 1.2                                                                       | 
|Fazendão(8)                      |  | 1997                   |  |                                      |  | 1.2                                                    |  | 1.0                                                                       | 
|Gongo Soco Complex(9)            |  | 2000                   |  | 2020                                  |  | 6.6                                                    |  | 6.7                                                                       | 
|Timbopeba(10)                    |  | 1984                   |  | 2008                                  |  | 7.6                                                    |  | 5.5                                                                       | 
|Urucum(11)                       |  | 1993                   |  |                                      |  | 0.7                                                    |  | 0.6                                                                       | 
|                                 |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|Ferteco:                         |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|Fábrica(12)                      |  | 1956                   |  |                                      |  |                                                       |  | 5.6                                                                       | 
|Córrego
      do Feijao(12)      |  | 1956                   |  |                                      |  |                                                       |  | 5.8                                                                       | 
|                                 |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|Total
      Ferteco              |  |                        |  | 2008                                  |  |                                                       |  | 11.4                                                                      | 
|                                 |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|Total Southern
      System      |  |                        |  |                                       |  | 75.9                                                   |  | 81.4                                                                      | 
|                                 |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|Northern
      System            |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|Carajás(13)                      |  | 1986                   |  | 2024                                  |  | 47.6                                                   |  | 52.4                                                                      | 
|                                 |  |                        |  |                                       |  |                                                        |  |                                                                           | 
|Total
      CVRD Group           |  |                        |  |                                       |  | 123.5                                                  |  | 133.8                                                                     | 
|                                 |  |                        |  |                                       |  |                                                        |  |                                                                           | 

|    
|----
|    
|(1) 
|(2) 
|(3) 
|(4) 
|(5) 
|(6) 
|(7) 
|(8) 
|(9) 
|(10)
|(11)
|(12)
|(13)

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Integrated
  Systems The following map shows the
    location of our current principal operations.


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Our iron ore mining and related
    operations are concentrated in two regions in Brazil, the Southern System
    and the Northern System. The Southern System is located in the states of Minas
    Gerais and Espírito Santo, and the Northern System is located in the
    states of Pará and Maranhão. Each system includes iron ore reserves
    and other mineral deposits, mines, ore processing facilities and integrated
    railroad and terminal transportation facilities. Our railroads connect each
    system and bring products from the mines to our maritime terminals, located
    at the Tubarão Maritime Terminal Complex in the Southern System, and
    Ponta da Madeira Maritime Terminal Complex in the Northern System. The operation
    of two separate systems, each with transportation capability under our control,
    enhances reliability and consistency of service to our customers. Southern
    System  The Southern System is an
    integrated system consisting of iron ore mines, the Vitória-Minas railroad,
    and the Tubarão Maritime Terminal Complex (located in Vitória,
    in the state of Espírito Santo). The iron ore mines of the Southern
    System are located in a region called the Iron Quadrangle in the state of
    Minas Gerais, in the southeast of Brazil. The Southern System is accessible
    by road or by spur tracks of the Vitória-Minas railroad. The iron ore
    from Fertecos mines is also transported through MRS Logística
    S.A. (MRS)s railroad to our Port of Sepetiba. Transportation of the
    iron ore concentrate, lump and natural pellet ore produced in the Southern
    System is discussed below in Logistics. Iron ore in
  the Southern System is mined by open pit methods. These ore reserves have high
  ratios of itabirite ore relative to hematite ore. Itabirite is a quartz-hematite
  rock with an average iron content ranging from 35% to 65%, requiring concentration
  to achieve shipping grade, which is above a 64% average iron content. Mines
  in the Southern System generally process their run-of-mine by means of standard
  crushing, classification and concentration steps, producing sinter feed, lump
  ore and pellet feed.


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Northern
    System 
 The Northern System is an
    integrated mine, railroad and port system, including open pit mines and an
    ore processing complex. The Northern System is located in the Carajás
    region, in the states of Pará and Maranhão in the north of Brazil
    (in the Amazon River basin), on public lands for which we hold mining concessions.
    The Northern Systems reserves are among the largest iron ore deposits
    in the world. These reserves are divided into two main ranges (north and
    south),
    situated approximately 35 kilometers apart. Iron ore mining activities in
    the Northern System are currently being conducted in the north range, which
    is divided into six main mining bodies (N4E, N4WC, N4WN, N5W, N5E and N5E-N). The N4E deposit is the largest
      operational pit in the Northern Region. Industrial scale mining operations
      began at this mine in 1985. We selected the N4E mine as the first iron
      body
    to be developed in the Northern System because development of the N4E would
      facilitate access to the N4W and N5 deposits, which could share the N4E
      beneficiation
    complex and train-loading terminal. We began mining operations at N4W in
      1994, opening two pits (N4WC and N4WN). We completed the construction of
      two in-pit
    crushing systems located at N4E and N4WN mines in late December 1998. The
      N4E and N4W mines use conventional open pit benching, with drilling and
      blasting
    to open a free face followed by shovel loading. During 1998, we also started
    operations in the N5 mines (N5W and N5E). Mining of N5E-N is expected to
      begin in 2003. Because of the high iron content
    (66.6% on average) in the Northern System, we do not have to operate a concentration
    plant at Carajás. The beneficiation process consists simply of sizing
    operations, including screening, hydrocycloning, crushing and filtration.
    This allows us to produce marketable iron ore in the Northern System at a
    lower cost than in the Southern System. Output from the beneficiation process
    consists of sinter feed, pellet feed, special fines for direct reduction processes
    and lump ore, which is sampled regularly before storage at the Carajás
    stockyard by automatic sampling systems that conform to ISO 9002 standards.
    After the beneficiation process, our Carajás railroad transports Northern
    System iron ore to the Ponta da Madeira Maritime Terminal Complex located
    at São Luís in the state of Maranhão, on the Atlantic
    Ocean. Our complex in Carajás is accessible by road, air and rail. It obtains electrical power at market rates from regional utilities. To support our Carajás operations and to reduce turnover of mining personnel, we have housing and other facilities in a nearby township.


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Pellets The table
      below sets forth information regarding our share ownership and joint venture
      partners as of May 31, 2003 and total pellet production by us and our joint
      ventures for the periods indicated. System
      
      Our
        Direct orIndirect
        Share ofCapital
      
      Partners
      
      Total
        Pellet Production(1)(2)
        for the Year Ended
        December 31,
      
      NominalCapacityVoting
      
      Total
      
      
      
      2000
      
      2001
      
      2002(%)
      
      
      
      (in
        millions of tons)CVRD
      Northern/
      
      N/A
      
      N/A
      
      N/A
      
      5.0
      
      5.1
      
      5.8
      
      11.2SouthernFerteco
      Southern
      
      100
      %
      100
      %
      
      
      
      
      3.5
      
      4.5
      
      4.0GIIC
      Bahrain
      
      50.0
      
      50.0
      
      GIC
      
      3.6
      
      2.7
      
      3.1
      
      4.0Hispanobrás
      Southern
      
      51.0
      
      50.9
      
      Aceralia
      
      3.8
      
      3.7
      
      3.7
      
      3.8Itabrasco
      Southern
      
      51.0
      
      50.0
      
      Ilva
      
      3.3
      
      3.3
      
      3.3
      
      3.3Kobrasco
      Southern
      
      50.0
      
      50.0
      
      Posco
      
      4.4
      
      4.2
      
      4.1
      
      4.3Nibrasco
      Southern
      
      51.1
      
      51.0
      
      Nippon Steel
      
      8.5
      
      7.1
      
      7.1
      
      8.4SumitomoJFE SteelKobe SteelNisshin SteelNissho IwaiSamarco
      Ponta
          doUbú
      
      50.0
      
      50.0
      
      BHP Billiton
      
      12.7
      
      9.9
      
      11.6
      
      14.0Total
      
      
      
      
      
      
      
      
      41.3
      
      39.5
      
      43.2
      
      53.0 (1)
      Total
        production by joint venture entity.(2)
  Production
        figures are for the full year beginning the year of acquisition by CVRD
        of an equity interest in the entity even if acquired during
        the year. Our pellet activities
    increase our market for fine and ultrafine iron ore products. We sell pellet
    feed to our pellet joint ventures at market-based prices. Historically, we
    have supplied all of the iron ore requirements of our joint ventures located
    in the Southern System. Some of the pellets we and our joint ventures produce
    are DR pellets, which are used in steel mills that use minimill rather than
    blast furnace technology. The percentage of DR pellets our pellet joint ventures
    delivered was 23.5% in 2000, 36.2% in 2001 and 21% in 2002. In March 2002,
    we completed the construction of our new São Luís pelletizing
    plant, which is located in the Northern System and has a nominal annual production
    capacity of 6 million tons. Our total capital expenditure for the plant was
    US$ 188 million.


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The table below
  sets forth information regarding iron ore shipments to our pellet joint ventures
  for the periods indicated.


|            | For
      the Year Ended
      December 31, | 
|----------- | ------------------------------------------- | 
|            |                                             | 
|            | 2000                                        | 
|            |                                             | 
|            | (In
      millions of tons)                 | 
|GIIC        | 2.0                                         | 
|Hispanobrás | 4.1                                         | 
|Itabrasco   | 3.6                                         | 
|Kobrasco    | 4.7                                         | 
|Nibrasco    | 9.3                                         | 
|Samarco     | 1.9                                         | 
|            |                                             | 
|Total       | 25.6                                        | 
|            |                                             | 

Customers,
  Sales and Marketing (Iron Ore and Pellets) We use all
  of our iron ore and pellets (including our share of joint venture pellet production)
  to supply the steelmaking industry. Prevailing and expected levels of demand
  for steel products affect demand for our iron ore and pellets. Demand for steel
  products is influenced by many factors, such as expected rates of economic growth. Historically,
  we have exported more than two-thirds of our iron ore shipments. We export iron
  ore and pellets primarily to Asia and Europe, with customers in China, Japan,
  South Korea, France and Germany accounting for approximately 52.3% of our total
  iron ore and pellets export shipments in 2002. Our 10 largest customers collectively
  purchased 53.12 million tons of iron ore and pellets from us, representing 46%
  of our 2002 iron ore and pellet shipments and approximately 46% of our total
  iron ore and pellets revenues. No individual customer accounted for more than
  approximately 9.5% of our sales of iron ore and pellets for any of the three years ended December
  31, 2002. We strongly
    emphasize customer service in order to improve our competitiveness. We work
    with our customers to understand their principal objectives and then tailor
    our iron ore to meet specific customer needs. To provide a tailored product,
    we take advantage of our large number of iron ore mines in order to produce
    multiple iron ore products possessing different grades of iron, silica and
    alumina, and varying physical properties, including grain size. We believe
    that we offer our customers more variety than our competitors. This variety
    helps us offset disadvantages in relation to competitors who may be more conveniently
    located geographically. In addition to offering technical assistance to our
    customers, we operate sales support offices in Tokyo, Brussels, Luxemburg,
    New York and Shanghai. These offices allow us to stay in close contact with
    our customers, monitor their requirements and our contract performance, and
    ensure that our customers receive deliveries on schedule. Our central sales
    office in Rio de Janeiro coordinates the activities of these offices. Distribution
    (Iron Ore and Pellets) Our ownership
    and operation of transportation systems designed for the efficient transportation
    of iron ore products complement our iron ore mining business. We operate an
    integrated railroad and terminal network in each of our Northern and Southern
    Systems. These networks transport our iron ore products from interior mining
    locations to the maritime terminal and domestic customers. A more detailed description
    of the networks is provided in the section below entitledLogistics. Competition
    (Iron Ore and Pellets) The international
    iron ore market is highly competitive. Several large producers operate in
    this market. The principal factors affecting competition are price, quality,
    range of products offered, reliability and transportation costs. In 2002,
    the European market and the Asian market (primarily China, Japan and South
    Korea) were the primary markets for our iron ore. Our biggest
    competitors in the Asian market are located in Australia and include affiliates
    of Broken Hill Proprietary Company Limited, or BHP Billiton, and The Rio Tinto
    Corporation Plc. Although the transportation


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costs of delivering iron ore from Australia to Asian customers are generally lower than ours as a result of Australias geographical proximity, we believe we are able to remain competitive in the Asian market for two principal reasons. First, steel producers generally seek to obtain the types (or blends) of iron ore which can produce the intended final product in the most economic and efficient manner. Our iron ore has low impurity levels, which generally lead to lower processing costs. For example, the alumina content of our iron ore is very low compared to Australian ore. Our ore also has high iron ore grade, which improves productivity in blast furnaces, which is important during periods of high demand. Second, steel mills often develop sales relationships based on a reliable supply of a specific mix of iron ore. We have an aggressive marketing policy of meeting our clients needs to the extent possible, including placing
specialized personnel in direct contact with our clients to determine the blend that best suits each particular client. We sell our products FOB from our ports, which means that the invoice price includes delivery at our expense to our ports and no further. In general, our ownership of the process of producing and transporting iron ore to our ports helps ensure that our products get to our ports on schedule and at competitive costs. Consequently, we believe that the sale of our shipping dry-bulk assets will not affect our competitiveness as we have not subsidized shipping costs for those customers who have used our fleet. We believe that third-party carriers are readily available to serve our customers.



We
  are competitive in the European market for the reasons we described above, as
  well as the proximity of the Ponta da Madeira port facilities to European customers.
  Our principal competitors in Europe are:




| |  | BHP Billiton
      (Australia) and Affiliates,                      
| | - | --------------------------------------------------------------------
| |   |                                                                     
| |  | Kumba Resources
      (South Africa),                               
| |   |                                                                     
| |  | Luossavaara
      Kiirunavaara AB - LKAB (Sweden),                  
| |   |                                                                     
| |  | Rio Tinto
      (UK) and Affiliates, and                            
| |   |                                                                     
| |  | Sociétè
      Nationale Industrielle et Minière - SNIM (Mauritania).

The Brazilian
  iron ore market is highly competitive with a wide range of smaller producers.
  Although pricing is relevant, quality and reliability are important competitive
  factors as well. We believe that our integrated transportation systems, high-quality
  ore and technical services make us a strong competitor in domestic sales. Prevailing
  export market prices, with adjustments negotiated to compensate for lower transport
  costs to domestic customers, influence iron ore sales in the domestic market.


Manganese and Ferroalloys

We conduct our manganese and ferroalloy business primarily through the following subsidiaries and joint ventures, as of May 31, 2003:


|                                                      | Our
      Direct or Indirect |     |      
|----------------------------------------------------- | ---------------------------- | --- | -----
|                                                      | Share
      of Capital       |     |      
|                                                      |                              |     |      
|                                                      | Voting                       |     | Total
|                                                      |                              |     |      
|                                                      |                              | (%) |      
|Companhia
      Paulista de Ferro-Ligas (CPFL)        | 99                           | .9% |      
|                                                      |                              |     |      
|Nova Era
      Silicon S.A. (NES)                     | 49                           | .0  |      
|                                                      |                              |     |      
|                                                      |                              |     |      
|Rio Doce
      Manganèse Europe (RDME) (France)       | 100                          |     |      
|                                                      |                              |     |      
|Rio Doce
      Manganese Norway AS (RDMN)             | 100                          |     |      
|                                                      |                              |     |      
|Sibra Eletrosiderúrgica
      Brasileira S.A. (SIBRA) | 100                          |     |      
|                                                      |                              |     |      
|Urucum Mineração
      S.A. (Urucum)                  | 100                          |     |      

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In 2002, we were the largest
    Brazilian manganese ore producer, with total shipments of approximately 665
    thousand tons. We had US$ 283 million in revenues in 2002 from manganese
    ore and ferroalloy sales. We produce manganese ore products from the Azul mine in the Carajás region in the state of Pará and from the Urucum mine in the Pantanal region in the state of Mato Grosso do Sul. We operate on-site beneficiation plants at both the Azul and Urucum mines. Both mines are accessible by road and obtain electrical power at market rates from regional electric utilities. We also operate minor mines in the states of Minas Gerais and Bahia. Our manganese mines produce three types of manganese products:


| |  | metallurgical
      ore used primarily for the production of ferroalloys;                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                 
| |  | natural
      manganese dioxide suitable for the manufacture of electrolytic batteries;
      and                                                               
| |   |                                                                                                                                                                 
| |  | chemical
      ore used in several industries for the production of fertilizer, pesticides
      and animal food and used as a pigment in the ceramics industry.

The production of ferroalloys consumes significant amounts of electricity. For information on the risks associated with potential energy shortages, seeItem 3. Key InformationRisk Factors. The table below sets forth information regarding our manganese mines and recent manganese ore production for the periods indicated. The estimates of mineral reserves have been audited and verified by AMEC. We own 100% of both mines.


|          | BeganOperations |  | ProjectedExhaustionDate |  |      |  | ProductionFor the Year EndedDecember 31, |                                    |      |  |                |  |            |  |          | 
|--------- | --------------- |  | ----------------------- |  | ---- |  | ---------------------------------------- | ---------------------------------- | ---- |  | -------------- |  | ---------- |  | -------- | 
|          |                 |  |                         |  |      |  |                                          |                                    |      |  |                |  |           
|          |                 |  |                         |  |      |  |                                          | Proven
      and Probable Reserves |     
|          |                 |  |                         |  |      |  |                                          |                                   
|          |                 |  |                         |  |      |  |                                          |                                    |      |  |                |  | Ore        |  |          | 
|          |                 |  |                         |  | 2000 |  | 2001                                     |                                    | 2002 |  | Type           |  | Tonnage(1) |  | Grade(2) | 
|          |                 |  |                         |  |      |  |                                          |                                    |      |  |                |  |            |  |          | 
|Azul(3)   | 1986            |  | 2016                    |  | 1.4  |  | 1.4                                      |                                    | 1.8  |  | Open
      Pit |  | 19.5       |  | 47.0     | 
|          |                 |  |                         |  |      |  |                                          |                                    |      |  | Stockpile      |  | 0.8        |  | 47.3     | 
|Urucum(4) | 1976            |  | 2017                    |  | 0.3  |  | 0.3                                      |                                    | 0.3  |  | Underground    |  | 7.4        |  | 48.0     | 
|          |                 |  |                         |  |      |  |                                          |                                    |      |  |                |  |            |  |          | 
|Total     |                 |  |                         |  | 1.7  |  | 1.7                                      |                                    | 2.1  |  |                |  | 27.7       |  | 47.3     | 
|          |                 |  |                         |  |      |  |                                          |                                    |      |  |                |  |            |  |          | 

|   
|---
|(1)
|(2)
|(3)
|(4)

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The table below sets forth information regarding our ferroalloy production in 2002.

|                                                                                               | Production             |  | Production
      in | 
|---------------------------------------------------------------------------------------------- | ---------------------- |  | ------------------- | 
|                                                                                               | Capacity               |  | 2002                | 
|                                                                                               |                        |  |                     | 
|                                                                                               | (In
      thousands of |  | (In
      thousands | 
|                                                                                               | tons
      per year)   |  | of
      tons)      | 
|Rio Doce
      Manganese Europe (RDME)                                                         | 130                    |  | 123                 | 
|                                                                                               |                        |  |                     | 
|Companhia Paulista de
      Ferro-Ligas / Sibra Eletrosiderúrgica Brasileira S.A. (CPFL/Sibra) | 310                    |  | 316                 | 
|                                                                                               |                        |  |                     | 
|Nova Era Silicon S.A.
      (NES)                                                              | 45                     |  | 35                  | 
|                                                                                               |                        |  |                     | 
|Total                                                                                          | 485                    |  | 474                 | 
|                                                                                               |                        |  |                     | 

Competition (Manganese Ore and Ferroalloys)


The markets for manganese ore and ferroalloys are highly competitive. Competition in the manganese ore market takes place in two sectors. High-grade (40% Mn or more) manganese ore competes on a seaborne basis, while low grade ore competes on a regional basis. For some ferroalloys high-grade ore is mandatory, while for some others high and low grade ores are complementary. Besides manganese content, cost and physical-chemical features play an important role in competition (e.g. moisture, impurities). The main suppliers of high-grade (HG) ores are South Africa, Gabon and Ghana. The main producers of low-grade (LG) ores are Ukraine, China, Kazakhstan, India and Mexico. CVRD is the second largest worldwide supplier of manganese ores with HG ores in Carajás and Urucum mines, and LG ores in Minas Gerais and Bahia states. The ferroalloy market is characterized by a large number of market participants who compete primarily on the basis of price. The principal competitive factors in this market are costs of manganese ore, electricity, logistics and carbon. We compete both with standalone producers and integrated producers that also mine their own ore. Our competitors are located principally in ore or steel producing countries.


Non-Ferrous Minerals

Our non-ferrous minerals business segment includes the production of gold and other non-ferrous minerals, such as kaolin and potash. We also include our copper exploration efforts in the non-ferrous category. The table below sets forth information regarding our non-ferrous gross revenues and sales by geographic market for the periods indicated.


|                                                          |      | For
        the Year Ended December 31, |     
|--------------------------------------------------------- | ---- | --------------------------------------- | ----
|                                                          |      |                                         |     
|                                                          | 2000 |                                         | 2001
|                                                          |      |                                         |     
|                                                          |      | (In
      millions of US$)              |     
|Gross
      revenues classified by geographic destination |      |                                         |     
|Export sales:                                             |      |                                         |     
|United
      States                                       | US$  | 156                                     |     
|Europe                                                    |      | 35                                      |     
|Japan                                                     |      | 4                                       |     
|Asia,
      other than Japan                              |      | 3                                       |     
|                                                          |      |                                         |     
|Subtotal                                                  |      | 198                                     |     
|                                                          |      |                                         |     
|Domestic
      sales                                      |      | 90                                      |     
|                                                          |      |                                         |     
|Total                                                     | US$  | 288                                     |     
|                                                          |      |                                         |     
|Gross
      revenues classified by category               |      |                                         |     
|Gold                                                      | US$  | 156                                     |     
|Potash                                                    |      | 85                                      |     
|Kaolin                                                    |      | 47                                      |     
|                                                          |      |                                         |     
|Total                                                     | US$  | 288                                     |     
|                                                          |      |                                         |     

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Gold We conduct our gold business
    primarily at the parent company level. We produced 314.5 thousand troy ounces
    of refined gold in 2002, and were responsible for approximately 22% of all
    gold produced on an industrial scale in Brazil during 2002. Gold sales generated
    US$ 103 million of revenues in 2002. We started gold operations
    in 1984. In June 2002, we closed our Igarapé Bahia mine, leaving us
    with only one remaining gold mine, Fazenda Brasileiro, in operation at the
    end of 2002. On June 18, 2003, we agreed to sell Fazenda Brasileiro to Yamana
    Resources Inc., a Canadian mining company, for US$ 20.9 million. The sale
    is subject to certain conditions. Upon completion of the sale, our gold operations
    will be interrupted until the start-up of the copper projects we are currently
    developing in Carajás. We expect these projects to produce gold as
    a by-product of their copper mining operations. The table below sets forth
    information regarding estimated gold proven and probable reserves as of December
    31, 2002. The estimates of gold reserves have been audited and verified by
    AMEC. Fazenda Brasileiro is 100% owned by the Company and is principally an
    underground operation with limited oxide mineralization being mined by open
    pit. Average drill spacing is 25 by 10 meters for proven reserves and 100
    by 50 meters for probable reserves.


|                         | Proven
      and Probable Reserves |                             
|------------------------ | ---------------------------------- | ----------------------------
|                         |                                    |                             
|Ore
      Type(2)        |                                    | Ore
      Tonnage
      (Mt)
|                         |                                    |                             
|                         | (Millions
      of
        tons)   | (gram/ton)                  
|Fazenda
      Brasileiro | Sulfide
      Carbon-in-Pulp       |                             
|                         | Heap
        Leaching              |                             
|                         |                                    |                             
|                         | Total                              |                             
|                         |                                    |                             

The table below sets forth
    information regarding our gold mines and recent gold production for the periods
    indicated. The projected exhaustion date is based on 2002 production levels.
    The average total cash cost of production (US$ per troy ounce) was US$ 165
    in 2000, US$ 146 in 2001 and US$ 141 in 2002.


|                         | Commencement          |                                       | Actual/Projected |      | Production                       |     
|------------------------ | --------------------- | ------------------------------------- | ---------------- | ---- | -------------------------------- | ----
|of
      Operations      | Exhaustion
      Date | For
      the Year Ended December 31,
|                         |                       |                                      
|                         |                       | 2000                                  |                  | 2001 |                                  | 2002
|                         |                       |                                      
|                         |                       |                                       |                  |      | (Thousands
      of troy ounces) |     
|Almas                    | 1985                  |                                       | 2001             |      | 13.2                             |     
|Caeté                    | 1996                  |                                       | 2001             |      | 11.0                             |     
|Fazenda
      Brasileiro | 1984                  |                                       | 2005             |      | 154.6                            |     
|Igarapé
      Bahia      | 1991                  |                                       | 2002             |      | 333.9                            |     
|Itabira                  | 1984                  |                                       | 2002             |      | 22.4                             |     
|                         |                       |                                       |                  |      |                                  |     
|Total                    |                       |                                       |                  |      | 535.1                            |     
|                         |                       |                                       |                  |      |                                  |     

The Fazenda Brasileiro gold mine includes an on-site processing facility to producedorébars from raw ore. We shipdoré bars to a third-party refinery for remelting and chemical treatment, which yields gold bars with 99.99% purity. Our gold is insured from the time we place it in its mine vaults until it reaches the customer. As of December 31, 2002, our proven and probable gold reserves represented less than three years of production. In 2002, we spent US$ 5 million for gold exploration and resource development, including US$ 0.4 million related to prospecting for new deposits and US$ 4.6 million directed to the extension of existing reserves. None of these expenses were reimbursed under the Mineral Risk Contract. See Current Copper ProspectsMineral Risk Contract.


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Kaolin We conduct our kaolin business through our stake in Pará Pigmentos S.A., which began operations in August 1996. Our total and voting interests in Pará Pigmentos are 75.5% and 80.0%, respectively. Our partners in Pará Pigmentos are Mitsubishi Corporation and International Finance Corporation. Our proven and probable reserves of 6.4 million tons are projected to be exhausted in 2007. Kaolin is a fine white aluminum silicate clay used in the paper, ceramic and pharmaceutical industries as a coating agent and filler. Pará Pigmentos sold approximately 330,000 tons of kaolin in 2002. Potash Potash is an important raw material used in the production of fertilizers. We lease a potash mine in the state of Sergipe from Petrobras-Petróleo Brasileiro S.A. (Petrobras), the Brazilian oil company. The lease was signed in 1991 for a period of 25 years, and is renewable for another 25 years. The mine is the only potash mine in Brazil and has a current nominal capacity of 600,000 tons per year. We had gross revenues of US$ 91 million from potash sales in 2002. We have budgeted US$ 67 million in capital expenditures to expand the mine capacity to 850,000 tons per year by 2005. Our proven and probable reserves should be sufficient to ensure the estimated production for the next 5 years. Current Copper Prospects The table below sets forth information, at May 31, 2003, regarding our joint ventures and the status and potential productivity of our principal copper (Cu) prospects, all but one of which features a gold (Au) by-product:


|                     | Our
      Direct or |                    |                                   |                     |                                             |     |     |  |      | 
|-------------------- | ------------------- | ------------------ | --------------------------------- | ------------------- | ------------------------------------------- | --- | --- |  | ---- | 
|Indirect
      Share | Total               | Total             
|of Capital           | Expected            | Expected          
|(Voting
      and    | Other
      Mineral | Capital            | Anticipated                      
|Total)
      (1)     | Status              | Deposits           | Expenditures                      | Start-up
      Date
|                     |                     |                    |                                   |                    
|%                    |                     | (Millions
      of | (In
      millions of             |                    
|                     | tons)               | US$)              
|                     |                     |                    |                                   |                     |                                             |     |     |  |      | 
|Sossego              | 100%                |                    | Under                             |                     | 196
      at 1.02%                          | US$ | 383 |  | 2004 | 
|                     |                     |                    | construction                      |                     | Cu and 0.3
      g/t Au                     |     |     |  |      | 
|                     |                     |                    |                                   |                     |                                             |     |     |  |      | 
|Project 118          | 50.0                |                    | Feasibility in
      progress     |                     | 64 at 0.80%
      Cu                        |     | 154 |  | 2005 | 
|                     |                     |                    |                                   |                     |                                             |     |     |  |      | 
|Salobo               | 100                 |                    | Feasibility in
      progress     |                     | 784 at 0.96%
      Cu and 0.6 g/t Au        |     | 418 |  | 2006 | 
|                     |                     |                    |                                   |                     |                                             |     |     |  |      | 
|Cristalino           | 50.0                |                    | Pre-feasibility
      in progress |                     | 250 at 0.79%
      Cu and 0.15
      g/t Au |     | 385 |  | 2007 | 
|                     |                     |                    |                                   |                     |                                             |     |     |  |      | 
|Alemão               | 67.0                |                    | Pre-feasibility
      in progress |                     | 200 at 1.60%
      Cu and 0.90 g/t Au       |     | 508 |  | 2008 | 
|                     |                     |                    |                                   |                     |                                             |     |     |  |      | 

|   
|---
|(1)

In addition, we and BNDES are prospecting the Carajás region for new copper exploration projects. See 
Mineral Risk Contract.


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Exploration As part of our mineral prospecting
    and development activities in Brazil, we have acquired extensive experience
    in exploration techniques and processes specifically designed for use in tropical
    areas of the world. Our current mineral exploration efforts are mainly in
    Brazil, other Latin American countries and Asia, and focus primarily on copper,
    gold, nickel, manganese, kaolin and platinum group metals. Exploration costs
    are recorded as expenses until viability of mining activities is established
    (see note 2(e) to our financial statements). Expenditures for our mineral
    exploration program in 2002 amounted to US$ 50 million and the budget for
    2003 is US$ 72.0 million. Since 1998, we have focused our exploration efforts on areas where geological knowledge was more advanced, focusing primarily on gold and copper, and let lapse those claims we did not consider economically attractive. As a result, our undeveloped acreage claims decreased from approximately 31.2 million hectares as of December 31, 1997, to 7.6 million hectares as of December 31, 2002. Mineral Risk Contract We and BNDES entered into a 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, which is part of the Northern System, 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 were specifically excluded from the Mineral Risk Contract. Pursuant to the Mineral Risk Contract, we and BNDES each agreed to provide US$ 205 million, which represents half of the US$ 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 was extended for an additional period of two 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 December 31, 2002, we and BNDES each had remaining commitments to contribute an additional US$ 63 million toward exploration and development activities. We both expect to fund a portion of these contributions each year through 2004. In the event that either of us wishes to conduct further exploration and development after having spent such US$ 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 for our contribution of existing development and ownership rights in the Carajás region through a finders fee production royalty on 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.


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Logistics

We operate our logistics business, which is comprised of the transportation of third-party products and passengers, through the following subsidiaries and joint ventures as of May 31, 2003:


|                                                          | Principal
      Activity            | Our
        Direct or Indirect
      Share
        of Capital |        | Partners
|--------------------------------------------------------- | ----------------------------------- | ------------------------------------------------------------- | ------ | --------
|                                                          |                                     |                                                               |        |         
|                                                          |                                     |                                                               | Voting |         
|                                                          |                                     |                                                               |        |         
|                                                          |                                     | (%)                                                           |        |         
|Cia. Portuária
      Baía de Sepetiba (CPBS)              | Ports
        and
        Terminals |                                                               | 100.00 | %       
|                                                          |                                     |                                                               |        |         
|Companhia
      Ferroviária do Nordeste (CFN) (1)         | Railroad                            |                                                               | 33.17  |         
|                                                          |                                     |                                                               |        |         
|DCNDB Overseas
      S.A. (DCNDB)                         | Shipping                            |                                                               | 79.00  |         
|                                                          |                                     |                                                               |        |         
|Navegação
      Vale do Rio Doce S.A- Docenave (Docenave) | Shipping                            |                                                               | 100.00 |         
|                                                          |                                     |                                                               |        |         
|Ferroban-Ferrovias
      Bandeirantes S.A. (Ferroban)     | Railroad                            |                                                               | 0.00   |         
|                                                          |                                     |                                                               |        |         
|Ferrovia
      Centro-Atlântica S.A. (FCA)                | Railroad                            |                                                               | 20.00  |         
|                                                          |                                     |                                                               |        |         
|MRS Logística
      S.A. (MRS)                            | Railroad                            |                                                               | 28.90  |         
|                                                          |                                     |                                                               |        |         
|Sepetiba
      Tecon S.A. (Sepetiba Tecon) (1)            | Ports
        and
      Terminals   |                                                               | 50.00  |         
|                                                          |                                     |                                                               |        |         
|                                                          |                                     |                                                               |        |         
|Terminal
      de Vila Velha S.A. (TVV)                   | Ports
        and
      Terminals   |                                                               | 99.89  |         
|                                                          |                                     |                                                               |        |         

|
|

|   
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The table below sets forth information regarding our third-party logistics revenues and sales by geographic market for the periods indicated.


|                                                     |     | For
        the Year Ended December 31, | 
|---------------------------------------------------- | --- | --------------------------------------- | 
|                                                     |     |                                        
|                                                     |     | 2000                                    | 
|                                                     |     |                                         | 
|                                                     |     | (in
        millions of US$)            | 
|Revenues classified
      by geographic destination: |     |                                         | 
|Export sales:                                        |     |                                         | 
|Latin
      America                                  | US$ | 30                                      | 
|United
      States                                  |     | 64                                      | 
|Europe                                               |     | 75                                      | 
|Middle
      East                                    |     | 6                                       | 
|Japan                                                |     | 15                                      | 
|Asia,
      other than Japan                         |     | 5                                       | 
|                                                     |     |                                         | 
|Subtotal                                             |     | 195                                     | 
|                                                     |     |                                         | 
|Domestic sales                                       |     | 403                                     | 
|                                                     |     |                                         | 
|Total                                                | US$ | 598                                     | 
|                                                     |     |                                         | 
|                                                     |     |                                         | 
|Revenues classified
      by category                |     |                                         | 
|Railroads                                            | US$ | 203                                     | 
|Ports                                                |     | 86                                      | 
|Ships                                                |     | 309                                     | 
|                                                     |     |                                         | 
|Total                                                | US$ | 598                                     | 
|                                                     |     |                                         | 

Railroads Vitória-Minas Railroad.The Vitória-Minas
    railroad, in the Southern System, originates near the city of Belo Horizonte
    and our Itabira mines in the state of Minas Gerais. We operate this railroad
    under a 30-year renewable concession granted by the Brazilian government in
    July 1997. This railroad extends 905 kilometers to our Tubarão Maritime
    Terminal Complex located near the Port of Vitória in the state of Espírito
    Santo. The Vitória-Minas railroad consists of two lines of track extending
    for a distance of 601 kilometers to permit continuous railroad travel in opposite
    directions, and single-track branches of 304 kilometers. Industrial manufacturers
    are located near this area and major agricultural regions are adjacent and
    accessible to the Vitória-Minas railroad. The Vitória-Minas
    has a daily capacity of 300,000 tons of iron ore. In 2002, the Vitória-Minas
    railroad carried a total of 112 million tons of iron ore and other cargo (of
    which 41.4 million tons, or 36.9%, consisted of cargo transported for third
    parties). The Vitória-Minas railroad also carried approximately one
    million passengers in 2002. The principal
    cargo of the Vitória-Minas railroad consists of:


| |  | iron
        ore and pellets, carried for us and third parties;                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                     
| |  | steel,
        coal and pig iron carried for steel manufacturers located along the railroad;                        
| |   |                                                                                                                     
| |  | limestone
        carried for steel mills located in the states of Minas Gerais and Espírito
        Santo; and     
| |   |                                                                                                                     
| |  | other general
      cargo such as agricultural products, construction products and fuel and
      chemical products.

We charge market
    rates for third-party freight, including pellets and aluminum originating
    from joint ventures and other enterprises in which we do not own 100% of the
    equity interest. Market rates vary based upon the distance traveled, the kind
    of product and the weight of the freight in question. Carajás Railroad.We operate the
    Carajás railroad under a 30-year renewable concession granted by the
    Brazilian government in June 1997. This railroad, located in the Northern
    System, starts at our Carajás iron ore mine in the state of Pará,
    and extends 892 kilometers to our Ponta da Madeira Maritime Terminal Complex
    facilities located near the Port of São Luís in the state of
    Maranhão. The Carajás railroad consists of one line of track,
    with




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spur tracks
    and turnouts to permit the passage of trains in opposite directions. The Carajás
    railroad has a daily capacity of 130,000 tons of iron ore. In 2002, the Carajás
    railroad carried a total of 58.9 million tons of iron ore and other cargo
    (of which 7.1 million tons, or 12%, consisted of cargo transported for third
    parties). The Carajás railroad also carried approximately 450 thousand
    passengers in 2002. The principal cargo of the Carajás railroad consists
    of iron ore, principally carried for us.

Other
    Investments.We
    hold a 20% interest in the voting capital of FCA, which operates the central
    east regional railway network of the Brazilian national railway system under
    a 30-year renewable concession granted in 1996. The central east network contains
    approximately 7,000 kilometers of track extending into the states of Sergipe,
    Bahia, Espírito Santo, Minas Gerais, Goiás, Rio de Janeiro and
    Distrito Federal. It connects with our Vitória-Minas railroad near
    the cities of Belo Horizonte and Vitória. FCA currently operates on
    the same track gauge as our Vitória-Minas railroad. In 2002, FCA reported
    net revenues of US$ 116.5 million and a net loss of US$ 92.9 million. In April
    2003, we signed a contract to acquire CSNs stake in FCA. This acquisition
    is still subject to governmental approval and certain conditions. SeeBusiness
    OverviewAcquisitions, Asset Sales and Significant Changes in 2002 and
    2003Logistics. We currently
      hold 3.75% of the total capital of Ferroban-Ferrovias Bandeirantes S.A.,
      or Ferroban. Ferroban operates a 4,236 kilometer railroad linking the states
      of São Paulo, Minas Gerais, Paraná and Mato Grosso do Sul.
      In 2002, Ferroban reported net revenues of US$ 38.4 million and a net loss
      of US$ 86.2 million. The section of Ferrobans network between Araguari
      and Vale Fertil, in the state of Minas Gerais, has been operated by FCA
      since 1998 and in January 2002 FCA began operating the section between Vale
      Fertil in the state of Minas Gerais and Boa Vista in the state of São
      Paulo. This connection allows FCA to reach the Santos port. We own directly and indirectly
    17.3% of the total capital and 28.9% of the voting capital in MRS. Caemi has
    a direct 17% interest in the total capital and 27.9% in the voting capital
    of MRS. MRS is a 1,612 kilometer railroad which links the states of Rio de
    Janeiro, São Paulo and Minas Gerais with a capacity to transport 85
    million tons per year. MRS operates under a 30-year renewable concession granted
    by the Brazilian government in November 1996. The Brazilian government has the option to extend our railroad concessions when they expire. All of our railroad concessions expire between August 2026 and December 2028. Through CFN,
    we also hold a 32.4% stake in the Malha Nordeste railroad. The Malha Nordeste
    railroad operates under a 30-year concession granted by the Brazilian government
    in December 1997. Malha Nordeste is an existing rail line with 4,342 kilometers
    of track extending into the states of Maranhão, Piauí, Ceará,
    Rio Grande do Norte, Paraíba, Pernambuco, Alagoas and Sergipe. The
    Malha Nordeste line comes close to our Carajás line in the Northern
    System but is built on a narrower gauge. In 2002, CFN reported net revenues
    of US$ 7.8 million and a net loss of US$ 10.7 million. In April 2003, as described
    above inBusiness
    OverviewAcquisitions, Asset Sales and Significant Changes in 2002 and
    2003,
    we signed an agreement to transfer our stake in CFN to CSN and Taquari Participações
    S.A. A portion of the consideration we will pay in connection with this and
    the related transactions will be allocated to our share of CFNs negative
    shareholders equity. This acquisition is still subject to governmental
    approval and certain conditions. Ports and Terminals We operate ports and terminals principally as a means to complete the distribution of our iron ore and pellets to ocean-going vessels serving the export market. SeeFerrous MineralsPelletsDistributionIron Ore and Pellets. We also use our ports and terminals to handle third-party cargo. In 2002, 20% of the cargo handled by our ports and terminals represented cargo handled for third parties. Tubarão Maritime
    Terminal Complex.The
    Tubarão Maritime Terminal Complex, which covers an area of approximately
    18 square kilometers, is located near the Port of Vitória in the state
    of Espírito Santo and has two piers. Pier I can accommodate two vessels
    at a time, one of up to 80,000 DWT on the southern side and one of up to 180,000
    DWT on the northern side. Pier II can accommodate one vessel of up to 330,000
    DWT at a time. In Pier I there are two shiploaders, which can load up to a
    combined total of 14,000 tons per hour. In Pier II there are two shiploaders
    that work alternately and can each load up to 16,000 tons per hour. Praia
    Mole Terminal, located in the


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Tubarão Maritime Terminal
  Complex, is principally a coal terminal and has an annual capacity of 12 million
  tons of coal, which is being expanded to 15 million tons per year in a project
  expected to be completed by 2004. In 2003, we have budgeted US$ 11 million for
  the expansion of the Praia Mole Terminal. The Tubarão Maritime Terminal
  Complex has a 75 million ton capacity of iron ore per year. We operate a grain
  terminal, accessible by highway in the Tubarão area, with an annual capacity
  of 6.0 million tons (4.5 million tons for grains and 1.5 million tons for general
  cargo) and a maximum loading speed of 1,500 tons per hour. We also operate a
  bulk liquid terminal with a capacity of 2.0 million cubic meters per year.

Cargo shipped through our
    Tubarão Maritime Terminal Complex consists principally of iron ore
    and pellets. In 2002, 63,972thousand tons of
    iron ore and pellets were shipped though the terminal (of which 58,980 thousand
    tons were shipped for us and 4,992 thousand tons were shipped for third-parties).
    Other cargo included coal, grain, coking coal, pig iron and fertilizers for
    a total of all cargo shipped of 83,897 thousand tons in 2002. Ponta da Madeira Maritime
    Terminal Complex.The
    Ponta da Madeira Maritime Terminal Complex is located near the Port of São
    Luís in the state of Maranhão. The Ponta da Madeira port facilities
    can accommodate two vessels. Pier I can accommodate vessels displacing up
    to 420,000 DWT. Pier II can accommodate vessels of up to 155,000 DWT. The
    two berths have a maximum loading rate of 16,000 tons per hour at Pier I and
    8,000 tons per hour at Pier II. In 2003, we have budgeted US$ 16.4 million
    to build Pier III. Pier III will be able to accommodate vessels of up to 220,000
    DWT and will have a maximum loading rate of 8,000 tons per hour. Cargo shipped through our Ponta
    da Madeira Maritime Terminal Complex by tonnage consists principally of iron
    ore for us. Other cargo includes manganese ore for us and pig iron and soy
    beans for third parties. In 2002, 52,360thousand tons were
    shipped through the terminal for us and 2,576thousand tons were
    shipped through the terminal for third parties. Other Investments.In
    September 1994, we licensed the Inácio Barbosa Maritime Terminal, a
    maritime terminal located in the state of Sergipe, near our potash mine. Under
    the terms of the ten-year agreement we entered into with Sergiportos, a state-owned
    port company, we receive 40% of the net operating profit of the terminal and
    must manage the terminal. In May 1998, we entered into
    a 25-year lease for the Capuaba maritime terminal in Vitória, in the
    state of Espírito Santo. We shipped 2.0 million tons of cargo during
    2002, and 1.7 million tons of cargo during 2001. In September 1998, we acquired
    a 50% indirect interest in the lease of the Sepetiba container terminal, operated
    by Sepetiba Tecon S.A. CSN holds the remaining 50% of Sepetiba Tecon. The
    lease has a term of 25 years and we can renew it for an additional period
    of 25 years. The price for the concession was approximately US$ 79 million,
    of which we have already paid US$ 33 million. The remainder is due in 276
    monthly installments, which started in January 2003. We have agreed, subject
    to certain conditions, to sell our indirect interest in Sepetiba Tecon to
    CSN. See Business
    OverviewAcquisitions, Asset Sales and Significant Changes in 2002 and
    2003Logistics. The Terminal de Vila Velha
    S.A. (TVV) is a port option for loading and unloading of containers, in addition
    to being an alternative for general cargo (import and export operations) and
    automobile operations in Southeast and Midwest Brazil. By connecting to the
    Vitória-Minas railroad and with easy access to the BR101 and BR262
    highways, TVV is multimodal. The terminal is formed by berths 203 and 204
    at the Capuaba Quay, has a 450 meter berth area and retro-area measuring nearly
    100 thousand square meters. It has a covered storage area measuring 13,300
    square meters and a yard with capacity for 3,300 containers. TVV is equipped
    with four quays cranes, two portainers and four transtainers. In 2002, TVV
    shipped over 102 thousand containers and approximately 735 thousand tons of
    diverse cargo, granite, iron ore and steel products and vehicles. Cia. Portuária Baía de Sepetiba (CPBS) is a company owned by Ferteco created to operate the ore export terminal in the Port of Sepetiba. The ore export terminal has a pier that allows the boarding of ships of up to 18.1 meters and up to 230,000 DWT. In 2002 the terminal uploaded approximately 9.6 million tons of iron ore, of which 2.8 million tons were uploaded for Minerações Brasileiras Reunidas (MBR), a subsidiary of Caemi, and 798 thousand tons for companies unrelated to the CVRD Group.


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Shipping The table below sets forth information on the volume of cargo that our dry bulk shipping service carried for the periods indicated.


|                  | For
      the Year Ended December 31, | 
|----------------- | ------------------------------------- | 
|                  |                                       | 
|                  | 2000                                  | 
|                  |                                       | 
|                  | (Thousands
      of tons)             | 
|Iron ore:         |                                       | 
|CVRD
      Group  | 3,058                                 | 
|Third
      party | 15,608                                | 
|Coal              | 7,452                                 | 
|Other             | 9,031                                 | 
|                  |                                       | 
|Total             | 35,149                                | 
|                  |                                       | 

In the dry-bulk shipping business, Docenave generated total revenue of US$ 40 million in 2002. In 2001, the total revenue was US$ 183 million. The reduction in the year 2002 is due to the divestiture of Docenaves dry-bulk assets. In the third quarter of 2002, Docenaves general cargo transportation service was reassessed and integrated into our intermodal logistics chain. Nine commercial representative offices throughout the coast of Brazil were opened to attend to our clients interests. Docenave also operated a
    fleet of eight tugboats in the ports of Vitória in the state of Espírito
    Santo, Trombetas in the state of Pará, São Luís in the
    state of Maranhão and Aracajú in the state of Sergipe. In addition
    to Docenaves fleet, we also have three chartered tugboats, one operating
    in Trombetas and the other two in São Luís. In 2002 Docenave
    tugboats were responsible for 6,822 operations (manoeuvers) at the ports,
    generating total revenue of US$ 14.3 million. We continued in 2002 the divestiture
    of our dry-bulk shipping business which we began in 2001, by selling the
    fleet of vessels owned by Docenave. In February 2002, the sale of the six
    Brazilian flag vessels with a total capacity of 592,240 DWT for US$ 53 million
    concluded with the delivery of the last vessel to Empresa de Navegação
    Elcano S.A. We have also sold another six Liberian flag vessels for US$ 45.7
    million. We intend to sell our remaining dry-bulk assets in the near future. Competition in the logistics industry.Our railroads compete with road transport, including trucks, with the main factors being cost and shipping time. We also have many international competitors in shipping.


Energy

In 2002 and 2001, we consumed 14.1 TWh and 12.5 TWh of electricity, respectively. Energy management and supply has become a priority for us, driven both by the uncertainties and opportunities associated with the Brazilian governments privatization of the industry, and by the risk of rising electricity prices and electricity rationing due to energy shortages, such as the one Brazil experienced in the second half of 2001. We currently perceive favorable investment opportunities in the Brazilian electricity sector and are taking advantage of them to invest in the hydroelectric power generation projects set forth in the table below. These projects may sell their production to third parties in the power market. Our energy business includes the sale but not the delivery of electricity. We may use the electricity from these projects for our internal needs. As we are a large consumer of electricity, we expect that investing in the energy
business will help protect us against volatility in price and supply of energy.


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The following table sets forth information regarding our power generation projects as of May 31, 2003:


|                | Location                                                                                                    |  | Our
      Ownership
      Interest |   | Partners |                                                                                                                          | Began
      Operations |                          | Projected
      Capacity |         | Our
      Investment                                |                           
|--------------- | ----------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | - | -------- | ------------------------------------------------------------------------------------------------------------------------ | ---------------------- | ------------------------ | ------------------------ | ------- | --------------------------------------------------- | --------------------------
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|                |                                                                                                             |  | (%)                                |   |          |                                                                                                                          |                        |                          | (in
      MW)            |         | As
        of
      December
      31,
        2002 |                           
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     | (in
      millions of US$)
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|Aimorés         | Rio
        Doce basin, in the state of Minas Gerais.                                                       |  | 51.00                              | % |          | Cemig-Capim
        
           Branco                                                                                   |                        | December
        2003(1) |                          | 330MW   |                                                     | US$                       
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|Candonga        | Rio
        Doce basin, in the state of Minas Gerais.                                                       |  | 50.00                              |   |          | EPP                                                                                                                      |                        | November
        2003(1) |                          | 140     |                                                     |                           
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|Capim Branco I  | Araguari
        river, in the state of Minas Gerais.                                                       |  | 48.42                              |   |          | Cemig-Capim
        
            Branco 
        Paineiras 
        CMM                                                  |                        | February
      2006(1)   |                          | 240     |                                                     |                           
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|Capim Branco II | Araguari
        river, in the state of Minas Gerais.                                                       |  | 48.42                              |   |          | Cemig-Capim
        
           Branco 
        Paineiras 
        CMM 
        Camargo Corrêa 
           Cimentos S.A. |                        | June
        2006(1)     |                          | 210     |                                                     |                           
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|Estreito        | Tocantins
        river, on the border of the states of Maranhão and Tocantins.                             |  | 30.00                              |   |          | Tractebel
        
        Alcoa 
        BHP Billiton 
        Camargo 
           Energia S.A.                         |                        | July
      2007(1)       |                          | 1,087   |                                                     |                           
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|Foz do Chapecó  | Uruguai river, on
      the border of the
      states of Santa
      Catarina and Rio
      Grande do Sul. |  | 40.00                              |   |          | Foz do ChapecóEnergia                                                                                                    |                        | July
      2007(1)       |                          | 855     |                                                     |                           
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|Funil           | Rio
        Grande, on the border between São Paulo and Minas Gerais.                                       |  | 51.00                              |   |          | Cemig-Capim
        
           Branco                                                                                   |                        | December
        2002    |                          | 180     |                                                     |                           
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|Igarapava       | Rio
        Grande, on the border between São Paulo and Minas Gerais.                                       |  | 38.15                              |   |          | CMM
        
        CSN 
        Cemig-Capim 
           Branco
        MMV                                             |                        | January
        1999     |                          | 210     |                                                     |                           
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|Porto Estrela   | Santo
        Antonio river, in the stateof
        Minas Gerais.                                           |  | 33.33                              |   |          | Cemig-Capim
        
            Branco 
        Coteminas                                                               |                        | September
        2001   |                          | 112     |                                                     |                           
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|Santa Isabel(2) | Araguaia
        river, on the border of the states of Tocantins and Pará.                                  |  | 43.85                              |   |          | BHP
        Billiton 
        Alcoa 
        Camargo Corrêa 
           S.A. 
        Votorantim 
           Cimentos    |                        | August
        2007(1)   |                          | 1,087   |                                                     |                           
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           
|Total           |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          | 4,451MW |                                                     | US$                       
|                |                                                                                                             |  |                                    |   |          |                                                                                                                          |                        |                          |                          |         |                                                     |                           

|   
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|(1)
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| | Our
      partners in our energy investments include:
| | -----------------------------------------------------
| |                                                      
| |                                                     
| |                                                      
| |                                                     
| |                                                      
| |                                                     
| |                                                      
| |                                                     
| |                                                      
| |                                                     
| |                                                      
| |                                                     
| |                                                      
| |                                                     
| |                                                      
| |                                                     

Our total projected investment in these hydroelectric projects is estimated at US$ 987 million. We cannot assure you that the aggregate cost will not escalate or that the projects will be completed on schedule. In addition
      to the above, some of our affiliates generate part of their own energy.


Aluminum-Related Operations

The table below
    sets forth information regarding our consolidated bauxite, alumina and aluminum
    revenues and sales by geographic market for the periods indicated. These figures
    do not include the revenues of our unconsolidated joint ventures.


|                                                    |                              | For
      the Year Ended December 31, |     
|--------------------------------------------------- | ---------------------------- | ------------------------------------- | ----
|                                                   
|2000                                                |                              |                                       | 2001
|                                                    |                              |                                      
|Revenues
      classified by geographic destination |                              |                                       |     
|Export sales:                                       |                              |                                       |     
|                                                    | Latin America                | US$                                   | 23  
|                                                    | Europe                       |                                       | 237 
|                                                    | Middle East                  |                                       | 16  
|                                                    | Japan                        |                                       | 34  
|                                                    | United States                |                                       | 39  
|                                                    | Asia, other
      than Japan |                                       | 1   
|                                                    |                              |                                       |     
|                                                    | Subtotal                     |                                       | 350 
|Domestic sales                                      |                              | 12                                    |     
|                                                    |                              |                                       |     
|                                                    | Total                        | US$                                   | 362 
|                                                    |                              |                                       |     
|Revenues
      classified by category               |                              |                                       |     
|                                                    | Bauxite                      |                                       | 18  
|                                                    | Alumina                      |                                       | 54  
|                                                    | Aluminum                     |                                       | 290 
|                                                    |                              |                                       |     
|                                                    | Total                        | US$                                   | 362 
|                                                    |                              |                                       |     

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We operate
      our aluminum-related businesses through the following subsidiaries and joint
      ventures, as of May 31, 2003:


|                                                          |          |        | Our
      Direct orIndirect
      Share ofCapital
      (Voting,Total) |       | Partners
|--------------------------------------------------------- | -------- | ------ | ---------------------------------------------------------------------- | ----- | --------
|                                                          |          |       
|                                                          |          |       
|                                                          | Business |       
|                                                          |          |        |                                                                        |       |         
|                                                          |          | Voting |                                                                        | Total |         
|                                                          |         
|(%)                                                      
|                                                          |          |        |                                                                        |       |         
|Albras-Aluminio
        Brasileiro S.A. (Albras)          | Aluminum |        | 51.00                                                                  | %     | 51.00   
|                                                          |          |        |                                                                        |       |         
|Alunorte-Alumina
      do Norte do Brasil S.A. (Alunorte) | Alumina  |        | 62.09                                                                  |       | 57.03   
|                                                          |          |        |                                                                        |       |         
|                                                          |          |        |                                                                        |       |         
|                                                          |          |        |                                                                        |       |         
|                                                          |          |        |                                                                        |       |         
|Mineração
        Rio do Norte S.A. (MRN)                 | Bauxite  |        | 40.00                                                                  |       | 40.00   
|                                                          |          |        |                                                                        |       |         
|                                                          |          |        |                                                                        |       |         
|                                                          |          |        |                                                                        |       |         
|                                                          |          |        |                                                                        |       |         
|                                                          |          |        |                                                                        |       |         
|Mineração
        Vera Cruz S.A. (MVC)                    | Bauxite  |        | 100.00                                                                 |       | 100.00  
|                                                          |          |        |                                                                        |       |         
|Valesul
        Aluminio S.A. (Valesul)                   | Aluminum |        | 54.50                                                                  |       | 54.50   

| |                                                        |                                                                     
| | ------------------------------------------------------ | --------------------------------------------------------------------
| | These
      subsidiaries and joint ventures engage in:
| |                                                        |                                                                     
| |                                                       | mining bauxite,                                                     
| |                                                        |                                                                     
| |                                                       | refining
      bauxite into alumina, and                            
| |                                                        |                                                                     
| |                                                       | using alumina
      to produce primary aluminum and aluminum alloys.

Aluvales principal operating activity consists of marketing the aluminum products produced by its subsidiaries and affiliated companies. In 2002, net revenues from aluminum products totaled US$ 462 million. Bauxite MRN, the largest bauxite producer in Latin America and one of the largest in the world, produces bauxite for sale to us and our joint venture partners. Excess production may be sold to third parties. MRN operates three open-pit bauxite mines which produce high quality bauxite. In addition, MRN controls substantial additional high quality bauxite resources which it believes can be produced economically in the future. MRN had net revenues of US$ 173 million and net income of US$ 94 million in 2002. MRNs mines are located in the northern region of the state of Pará.


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The table
      below sets forth information regarding MRNs bauxite reserves as of
      December 31, 2002. The estimates of mineral reserves have been audited and
      verified by AMEC.We
      are in the process of confirming the amount of proven and probable reserves
      at MVC.


|                                      | Proven
      and Probable Reserves(1) |                  
|------------------------------------- | ------------------------------------- | -----------------
|                                     
|Type                                  |                                       | Ore
      Tonnage
|                                      |                                       |                  
|                                      | (Millions
      of tons)              | (%
      Al203)  
|Mineração
      Rio do Norte S.A. (3) | Open
      pit                        |                  

|   
|---
|(1)
|(2)
|(3)



Operations at MRNs mines commenced in 1979 and the proven and probable reserves are projected to be exhausted in 2017. For 2000, 2001 and 2002, production equaled 11.2, 10.7 and 9.9 million tons, respectively. MRN operates ore beneficiation facilities at its mines, which are connected by rail to a loading terminal and port facilities on the Trombetas River. The Trombetas River is a tributary of the Amazon River and MRNs port facilities can handle vessels of up to 50,000 DWT. MRN owns and operates the rail and the port facilities serving its mines. The MRN bauxite mines are accessible by road from the port area and obtain electricity from their own thermoelectric power station. MRN expanded its capacity from 11.0 million tons to 16.3 million tons in 2003. The cost of this expansion is estimated at approximately US$ 230 million. In July 2002, we acquired 64% of the total capital of MVC, through our wholly-owned subsidiary Aluvale. Aluvale now holds 100% of MVC, which holds active mining rights in the Paragominas region in the state of Pará. A new bauxite mine wholly-owned by MVC, and located in Paragominas, will begin operations in December 2005 to supply Alunortes new expansion with 4.5 million tons per year of wet 12% moisture bauxite. The bauxite quality will be similar to MRNs, and the project will use the strip mining method of extraction, and have a beneficiation plant including milling and a 230 kilometer long slurry pipeline. We expect that total capital expenditures on this project will be approximately US$ 280 million. Our MRN bauxite joint venture
    produces bauxite for sale on a take-or-pay basis to us and our joint venture
    partners at a price that is determined by a formula based on prevailing world
    prices of aluminum. Our Alunorte alumina subsidiary, which we began consolidating
    in July 2002, purchases all of its bauxite requirements from MRN. Our annual
    purchase commitment for 2002 was approximately US$ 82 million. Alumina Alunorte began operations in July 1995 and produces alumina by refining bauxite which MRN supplies. The Alunorte plant recently concluded an expansion of capacity and now has a production capacity of 2.375 million tons of alumina per year. In 2002, it produced 1.7 million tons. Alunorte sells the major portion of its production to Albras, Valesul and third-party aluminum companies for the production of aluminum. The Alunorte plant is located near Belém in the state of Pará next to Albrass aluminum production facilities. This allows Alunorte and its principal customer, Albras, to share infrastructure and other resources. Alunorte had net revenues of US$ 265 million and net loss of US$ 101 million in 2002. Each Alunorte joint venture partner must purchase on a take-or-pay basis all alumina produced by Alunorte in proportion to its respective interest. The joint venturers each pay the same price, which is determined by a formula based on prevailing world market prices of alumina and aluminum. In the aggregate, we are committed to take-or-pay 131,000 metric tons per year of alumina produced by Alunorte, which at a market price of US$ 171.36 per metric ton at December 31, 2002, represents an annual commitment of US$ 22 million. In 2000, we and our joint
    venture partners in Alunorte agreed to contribute an additional US$ 126 million
    in equity capital to expand Alunortes capacity from 1.5 million tons
    of alumina per year to 2.3 million tons by 2003, a project which cost approximately
    US$ 300 million. Our share of this contribution was US$ 37 million.


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In June 2002, we acquired common shares and preferred shares representing 12.62% of the total capital of Alunorte from MRN. Following the acquisition, we now hold, directly or indirectly, 62.09% of the common shares and 19.05% of the preferred shares, representing 57.03% of Alunortes total capital. Aluminum Albras and Valesul each produce aluminum using alumina which Alunorte supplies. Alunorte has supplied all of Albrass alumina requirements since October 1995. Albras produces aluminum ingots and Valesul produces aluminum ingots, slabs, bars, billets and alloys. Aluminum is produced from alumina by means of a continuous electro-chemical process which requires substantial amounts of electricity. Albras. The Albras plant is one of the largest aluminum plants in Latin America, with a capacity of approximately 430,000 tons per year. Albras started its operations in 1985 at a plant located near Belém in the state of Pará. Albras had net revenues of US$ 529 million and net income of US$ 21 million in 2002. The Albras joint venture partners must purchase on a take-or-pay basis all aluminum produced by Albras in proportion to their ownership interests which represents an annual commitment from us of US$ 279 million. See note 15(d) to our consolidated financial statements. We generally market our share of Albrass output in international export markets to third-party aluminum processing companies. The table below sets forth information regarding Albrass recent aluminum production and our recent purchases from Albras.


|                                | For
      the Year Ended December 31, | 
|------------------------------- | ------------------------------------- | 
|                                |                                       | 
|                                | 2000                                  | 
|                                |                                       | 
|                                | (Thousands
        of tons)           | 
|Albras production               | 366.0                                 | 
|Our purchases
      from Albras | 187.0                                 | 

As of December 31, 2002, Albras had US$ 323 million of long-term outstanding debt, of which US$ 60 million was denominated in Japanese yen (approximately 50% of which was hedged into U.S. dollars). To reduce the impact of price fluctuations and to assure adequate cash flow, Albras engages in hedging activities. SeeItem 11. Quantitative and Qualitative Disclosures About Market RiskCommodity Price Risk. The production
      of aluminum requires a continuous flow of substantial amounts of electricity.
      Albras purchases electrical power from Eletronorte, a state-owned electric
      power utility. Eletronorte generates electricity at the Tucuruí Hydroelectric
      Power Plant located on the Tocantins River. This plant is the sole source
      of electrical power in the region in the quantities required for Albrass
      operations. Albras consumes approximately one-quarter of the non-peak period
      output of the Eletronorte plant. We currently benefit from a contract between Albras and Eletronorte pursuant to which Albras is able to purchase electricity at discounted prices. This contract is scheduled to expire in 2004. We, together with other aluminum producers in the region, are currently investigating alternative electricity sources, as well as negotiating the possible renewal of this contract on new terms. SeeEnergy. Valesul.Valesul started its operations in 1982 and operates a plant located in the state of Rio de Janeiro. Valesul produces primary aluminum and aluminum alloys in the form of ingots, slabs, bars and billets. Valesuls aluminum is sold primarily in the domestic Brazilian market on a spot basis. Valesul had net revenues of US$ 139 million and net income of US$ 25 million in 2002. Valesul sells directly to its own clients. The table below sets forth information regarding Valesuls recent primary aluminum production and third-party scrap recycled by Valesul.


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|                                   | For
          the Year Ended December 31, | 
|---------------------------------- | ----------------------------------------- | 
|                                   |                                           | 
|                                   | 2000                                      | 
|                                   |                                           | 
|                                   | (Thousands
          of tons)             | 
|Valesul
        production         | 93.8                                      | 
|Third-party
        scrap recycled | 19.5                                      | 

Valesul currently obtains a portion of its electrical energy requirements from four wholly-owned hydroelectric power plants located in the state of Minas Gerais, a portion from the Machadinho hydroelectric power plant in which Valesul has a share of 7% and the remainder from a third-party power company at market rates. Valesul is able to supply 100% of its own energy requirements during peak hours. Competition in Bauxite, Alumina and Aluminum Competition in the bauxite export market is based primarily on two key factors: quality of bauxite and reliability of purchasers. We believe that MRN remains competitive in this market because of:


| |  | the high
      quality of Brazilian bauxite, and                                          
| | - | ------------------------------------------------------------------------------------------
| |   |                                                                                           
| |  | our aluminum
      production system which ensures internal use of our bauxite production.

Competition in the alumina market is based primarily on quality, price and reliability of supply. We believe that Alunorte is competitive in the alumina market because of:


| |  | its proximity
      to MRNs bauxite mines,                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                        
| |  | its newly
      developed refinery facilities,                                                                         
| |   |                                                                                                                        
| |  | its efficient
      port facilities, and                                                                               
| |   |                                                                                                                        
| |  | the ongoing
      support of its owners in committing to purchase a substantial portion of
      its annual production.

As aluminum is a commodity, competition in the aluminum market is based primarily on the economics of transportation and the costs of production. We believe that Albras is competitive in the aluminum market because of:


| |  | its relatively
      efficient and accessible port facilities, and
| | - | ------------------------------------------------------------------
| |   |                                                                   
| |  | its generally prevailing
      lower costs of production.         

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Steel Investments

We have investments in the following joint ventures in the steel business, as of May 31, 2003:


|                          | Our
        Direct or Indirect
        Share of Capital
        (VotingTotal) |  |       | Partners |  | 2002
      Production      |  | 2002
      Net
      Revenues |     | Principal
      Products
|------------------------- | ------------------------------------------------------------------------------ |  | ----- | -------- |  | -------------------------- |  | ----------------------------- | --- | ------------------------
|                          |                                                                                |  |       |          |  |                            |  |                               |     |                         
|                          | Voting                                                                         |  | Total |          |  |                            |  |                               |     |                         
|                          |                                                                                |  |       |          |  |                            |  |                               |     |                         
|                          | (%)                                                                            |  |       |          |  | (Millions
      oftons)(1) |  | (InmillionsofUS$)(2)          |     |                         
|CSI (California)          | 50.0%                                                                          |  | 50.0  | %        |  | JFE
      Steel            |  | 1,827                         | US$ | 754                     
|                          |                                                                                |  |       |          |  |                            |  |                               |     |                         
|                          |                                                                                |  |       |          |  |                            |  |                               |     |                         
|                          |                                                                                |  |       |          |  |                            |  |                               |     |                         
|                          |                                                                                |  |       |          |  |                            |  |                               |     |                         
|CST (Brazil)              | 24.9                                                                           |  | 28.0  | (3)      |  | Acesita                    |  | 4,865                         |     | 976                     
|                          |                                                                                |  |       |          |  | Usinor                     |  |                               |     |                         
|                          |                                                                                |  |       |          |  | JFE Steel                  |  |                               |     |                         
|                          |                                                                                |  |       |          |  | Others                     |  |                               |     |                         
|                          |                                                                                |  |       |          |  |                            |  |                               |     |                         
|Siderar
      (Argentina) | 5.0                                                                            |  | 4.9   |          |  | Techint
      Group        |  | 2,175                         |     | 915                     
|                          |                                                                                |  |       |          |  | Employees                  |  |                               |     |                         
|                          |                                                                                |  |       |          |  | Usiminas                   |  |                               |     |                         
|                          |                                                                                |  |       |          |  | Others                     |  |                               |     |                         
|                          |                                                                                |  |       |          |  |                            |  |                               |     |                         
|                          |                                                                                |  |       |          |  |                            |  |                               |     |                         
|Usiminas
      (Brazil)   | 23.0                                                                           |  | 11.5  |          |  | Nippon                     |  | 8,447                         |     | 2,265                   
|                          |                                                                                |  |       |          |  | PREVI                      |  |                               |     |                         
|                          |                                                                                |  |       |          |  | Caixa does                 |  |                               |     |                         
|                          |                                                                                |  |       |          |  | Empregados                 |  |                               |     |                         
|                          |                                                                                |  |       |          |  | da
      Usiminas          |  |                               |     |                         
|                          |                                                                                |  |       |          |  | Others                     |  |                               |     |                         

|   
|---
|(1)
|(2)
|(3)

The market value of our investments in CST, Usiminas and Siderar, all of which have publicly traded equity, was US$ 206 million at December 31, 2002. The aggregate net book value of these investments was US$ 57 million at December 31, 2002. The aggregate net book value of our total investments in steel producing companies (including CSI, a privately held company) was US$ 164 million at December 31, 2002. We earned US$ 17 million in dividends from these investments in 2002. In line with our strategy to consolidate and focus on mining, logistics and energy, in March 2001, we unwound our cross-holding relationships with CSN. As part of the unwinding transaction, CSN granted us the following rights of first refusal relating to CSNs Casa de Pedra mine, each of which lasts for a period of 30 years:


| |  | the right
      to purchase at market rates any iron ore produced by the mine beyond CSNs
      internal requirements,                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                     
| |  | the right
      to purchase or to rent the mine should CSN decide to sell or lease it, and                                                                          
| |   |                                                                                                                                                                     
| |  | the right
      to become a joint venture partner should CSN decide to form a pelletizing
      joint venture with a third-party with iron ore produced by the mine.

In return, we have granted CSN a right of first refusal to participate with us in the construction of any new steel producing facilities that we undertake prior to March 2006.


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This unwinding
  transaction, as a whole, is subject to post-notification review by the Brazilian
  antitrust authorities. In April 2003,
  we acquired shares of CST from Acesita that are not subject to the CST controlling
  shareholders agreement. In this transaction, we acquired 4.42% of the
  common shares and 5.64% of the preferred shares of CST, representing 5.17% of
  CSTs total capital, for US$ 59.7 million. Following this transaction,
  we now own 24.93% of CSTs common shares and 29.96% of CSTs preferred
  shares, totaling 28.02% of CSTs capital. In addition, we are currently
  negotiating with the Japanese Group to acquire the Japanese Groups shares
  of CST, jointly with Arcelor. Upon the earlier of our acquisition of the Japanese
  Groups stake and the termination of the controlling shareholders
  agreement in 2005, we also expect to acquire, jointly with Arcelor, the remaining
  shares of CST held by Acesita and CSI. We expect that the cost of acquiring
  these two stakes in CST will be approximately US$ 121 million. By increasing
  our stake in CSTs capital, we ensure our presence in the controlling group.
  We have also entered into agreements with Arcelor to guarantee the liquidity
  of our position, under which we expect to decrease our participation in CST
  between 2007 and 2009 to 20% of the shares owned by the controlling group. By
  2015, we will sell any remaining stake in CST. Our stake in CST will be sold
  at prices based on a valuation performed by two investment banks.


Fertilizers

We conduct our
  fertilizer business primarily through our stake in Fertilizantes Fosfatados
  S.A., or Fosfértil, a company that produces and sells nitrate and phosphate
  based fertilizers. Our total and voting interest in Fosfértil is 11.0%.
  Our main partner in Fosfértil is Fertifós-Administração
  e Participações S.A. Fosfértil generated gross revenues
  of US$ 233 million in 2002.


REGULATORY MATTERS

Mining

Under the Brazilian
  Constitution, all mineral resources in Brazil belong to the Brazilian government.
  The Brazilian Constitution requires that mining companies incorporate in accordance
  with Brazilian law. The Brazilian
    Constitution and Mining Code impose on mining companies various regulatory
    restrictions relating to, among other things:


| |  | the
      manner in which mineral deposits are exploited,        
| | - | -----------------------------------------------------------------
| |   |                                                                  
| |  | the
      health and safety of workers,                          
| |   |                                                                  
| |  | the
      protection and restoration of the environment,         
| |   |                                                                  
| |  | the
      prevention of pollution, and                           
| |   |                                                                  
| |  | the
      promotion of local communities where mines are located.
| |   |                                                                  

Mining companies
  in Brazil can only prospect and mine for mineral resources pursuant to prospecting
  authorizations or mining concessions granted by the National Mineral Production
  Department,Departamento
  Nacional de Produção Mineral,
  or DNPM, an agency of the Ministry of Mines and Energy of the Brazilian government.
  DNPM grants prospecting authorizations to a requesting party for an initial
  period of three years. These authorizations are renewable at DNPMs discretion
  for another period of one to three years, provided that the requesting party
  is able to show that the renewal is necessary for proper conclusion of prospecting
  activities. On-site prospecting activities must start within 60 days of official
  publication of the issuance of a prospecting authorization. Upon completion
  of prospecting activities and geological exploration at the site, the grantee
  must submit a final report to DNPM. If the geological exploration reveals the
  existence of a mineral deposit that is economically exploitable, the grantee
  will have one year (which DNPM may extend) from approval of the report by DNPM
  to apply for a mining concession or to transfer its right to apply for a mining
  concession to a third-party. When a


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mining concession is granted, the holder of the concession must begin on-site mining activities within six months. DNPM grants mining concessions for an indeterminate period of time lasting until the exhaustion of the mineral deposit. Extracted minerals that are specified in the concession belong to the holder of the concession. With the prior approval of DNPM, the holder of a mining concession can transfer it to a third-party that is qualified to own concessions. In some cases, mining concessions are challenged by third parties.

The Brazilian
  government charges us a royalty, known asFinancial Compensation for Exploiting Mineral Resources(CFEM), on the revenues from the sale of minerals we extract, net of taxes,
  insurance costs and costs of transportation. The annual rates paid on our products
  are:

| | o | iron
      ore and potash fertilizer, 2%;
| | - | -----------------------------------------
| |   |                                          
| | o | bauxite
      and manganese, 3%; and     
| |   |                                          
| | o | gold,
      1%.                          
| |   |                                          

It also imposes other financial obligations. For example, mining companies must compensate landowners for the damages and loss of income caused by the use and occupation of the land (either for exploitation or exploration) and must also share with the landowners the results of the exploration based on 50% of the CFEM. Mining companies must also compensate the government for damages caused to public lands. A substantial majority of our mines and mining concessions are on lands owned by us or on public lands for which we hold mining concessions.

Railroads

The Brazilian
  government, acting through the Ministry of Transportation and the National Agency
  of Terrestrial Transportation (ANTT), regulates and supervises the policies
  for the railroad transportation sector. The Federal Government may grant private
  companies concessions for the construction, operation or commercial exploration
  of railroads. The ANTT sets different tariff limits for railroad services for
  each of the concessionaires and each of the different products transported.
  So long as these limits are respected, the actual prices charged can be negotiated
  directly with the users of such services.


Energy

The power industry
  in Brazil is comprehensively regulated by the Brazilian government, acting through
  the Ministry of Mines and Energy and ANEEL, the Brazilian electricity regulatory
  governmental agency. The role of the Ministry of Mines and Energy is to develop
  policies and regulations aimed at organizing and regulating the electricity
  sector. ANEELs main function is to ensure the efficient and economical
  supply of energy to consumers by monitoring prices and promoting market competition. Under Law No.
  8,987, concessions grant exclusive rights to generate and transmit or to distribute
  electricity in a particular area for a period of time that, in the opinion of
  ANEEL, is sufficient for the concessionaire to recover its investment, up to
  a limit of 35 years in the case of concessions for power generation. Concessions
  may be renewed at ANEELs discretion for an additional period of equal
  duration. Concessionaires are required to supply electricity for public services
  at the established prices, on a continuing basis, in sufficient quantity and
  within approved standards of quality. To mitigate
  the potential volatility of revenues for hydroelectric generators, ANEEL has
  implemented regulations that create the Energy Reallocation Mechanism, known
  as MRE, a mechanism for sharing hydrological risk among all generators. In order to
  implement the MRE, ANEEL designates a level of energy production, known as Assured
  Energy, for each generator, every five years. Assured Energy is calculated in
  accordance with a statistical model based on average rainfalls in the relevant
  region, water flows of rivers and water levels in each plants reservoir
  over a multi-year time frame. Each generator is promised payment for the amount
  of its Assured Energy, as long as MRE members as a whole are able to meet MRE
  Assured Energy levels. To the extent a generator has signed contracts for the
  sale of its Assured Energy, it receives payments based on these contractual
  terms, regardless of its level of


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actual generation. Each generator is allowed to enter into contracts to sell up to 100% of its Assured Energy. If all MRE members meet their contracted energy and there is a surplus of energy remaining, the net regional surplus generation is allocated among generators in different regions.

All contracts
  for the wholesale purchase and sale of energy are recorded in the wholesale
  energy market, or MAE. The MAE is a non-profit private entity subject to the
  authorization, regulation and supervision of ANEEL, and is responsible for operating
  the wholesale energy market and for ensuring that purchases of energy in the
  short-term market are settled and cleared in an efficient manner. The MAE is
  primarily designed to effect the settlement of differences between the contracted
  energy amounts under bilateral contracts of the several market agents, and the
  amounts actually consumed and produced. The settlement is done in accordance
  with the MAE spot prices, which are expressed in R$/MWh and are calculated for
  each settlement period for each sub-market. Financial settlement of the balances
  traded on the MAE are still under review by outside auditors and only 50% of
  the volume has been settled, with the remainder expected to be settled in July
  2003. The recently elected Brazilian
    government has yet not made clear its policy towards the electricity markets,
    and no concrete measures have been enacted to date. We will not be able
    to make a fair assessment of the new regulatory environment until the government
    releases its new policies. Changes in the regulatory environment could negatively
    affect our energy investments.


Environmental
      Matters

Federal, state
  and municipal legislation contain provisions for the control and protection
  of the environment in Brazil. These laws govern the use of natural resources,
  the reclamation and restoration of mined areas, the control of atmospheric emissions,
  the treatment of industrial effluents, as well as the use, handling and final
  disposal of hazardous materials and the control of water resources under the
  National Hydrological Resources Policy, which establishes hydrologic use rights
  and the fees applicable to that use. It is possible that environmental regulations
  will become more strict in the future. Any strengthening of these laws may lead
  to greater costs for environmental compliance. In order to
  conduct our mining, energy generation and industrial activities, we must prepare
  environmental impact assessments and submit them to authorities who oversee
  the granting of environmental permits. We seek to comply with all legal requirements
  and to achieve good relationships with interested parties, especially the communities
  located near our operations. Our environmental management system is designed
  to provide a systematic approach to environmental issues. Under Brazilian
  Federal Law No. 9,605, non-compliance with environmental laws and regulations
  can result in criminal penalties, such as imprisonment and other restrictions
  for individuals (including directors, officers and managers of companies), and
  fines and the mandatory rendering of public services by companies. Administrative
  penalties range from warnings and fines to the suspension of corporate activities,
  and may also include the loss or reduction of incentives, or the cancellation
  or interruption of credit facilities granted by governmental institutions. Issuance
  of Environmental Licenses.We
  must obtain environmental licenses in order to build, install, expand and operate
  facilities that use natural resources or may pollute the environment. We seek
  to obtain the legally required licenses for each of our facilities and activities.
  We have entered into agreements with the appropriate environmental authorities
  with respect to facilities where environmental non-compliance has been detected
  in order to make these facilities compliant. Prevention
  and Environmental Control Measures.Our
  environmental policies also aim to prevent, control and reduce the environmental
  impact caused by our business operations. To that end, we have made significant
  environment related investments in our facilities and in employee training programs
  (approximately US$ 10.8 million in 2002). We are also investing to develop environmental
  projects directed at the communities located near our facilities (approximately
  US$ 2.4 million in 2002).


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Water Use.We are intensive water users in eleven states with hydrological resources that vary from very high water availability in the Amazon to the scarcity in the northeast of Brazil. The Hydrical Resources Management System that is being implemented throughout CVRD, includes evaluation of the availability of water in the areas where we operate and rationalization and control of water use. We continually monitor new water legislation and regulations and take particular interest in requirements adopted under the National Policy of Hydrical Resources, established by Law 9433/97, which defines the conditions for obtaining the water use grants and for effluents disposal. ISO
    Certifications.
    Our environmental management system is based on International Organization
    for Standardization (ISO) standard 14001. We have obtained 12 certificates.
    In 2002 the following installations were certified under ISO 14001:


| |  | Docenave
      Tug Wharf, Espírito Santo State;                                              
| | - | ---------------------------------------------------------------------------------------------
| |   |                                                                                              
| |  | The iron
      and gold mining complexes of Itabira and Conceição, Minas
      Gerais State; 
| |   |                                                                                              
| |  | Gongo Soco,
      Minas Gerais State;                                                        
| |   |                                                                                              
| |  | Sociedade
      Mineira de Mineração manganese mine, Minas Gerais State;                     
| |   |                                                                                              
| |  | Ferteco
      Mineração iron ore mines, Minas Gerais State;                                  
| |   |                                                                                              
| |  | Companhia
      Portuária Baía de Sepetiba Maritime Terminal, Rio de Janeiro
      State; and
| |   |                                                                                              
| |  | Rio Doce
      Manganèse Europe, France.                                                     

Environmental
  Control Systems.As
  a mining company, air emissions control is one of our main objectives, including
  in our pelletizing plants. Control equipment and systems at our facilities are
  complemented by monitoring systems and control software. With respect
  to improvements in water quality, we strive to treat and control the pollutants
  disposed into the sea and into the local rivers or other water sources and also
  use extensive water recycling in our operations. Through a comprehensive
  waste management system under implementation, we aim to achieve greater control
  of the generation and disposal of our waste, to develop opportunities to reuse
  and recycle, and to reduce waste. Our environmental
      program also includes reforestation projects which are intended to protect
      the soil against erosion processes, or to create buffers between our activities
      and communities in the surrounding areas. We are also
  pursuing other legally required projects in connection with the restoration
  of lands degraded in the course of our mining operations. Environmental laws
  require us to spend at least 0.5% of the total cost of each venture with a material
  environmental impact to create and maintain protected sites. In 2002 we spent
  US$ 4.7 million on these activities. We also participate in the maintenance
  and preservation of Brazilian forests, including the National Carajás
  Forest in the Amazon, and we own and preserve the Vale do Rio Doce Natural Reserve,
  one of the remaining areas of the Atlantic Forest in the state of Espírito
  Santo. In the last twenty years we have provided support to the indigenous communities
  in the areas of education, health, infrastructure development and technical
  assistance with the aim of enhancing life quality and self-sustainability of
  these communities. Expenditures on these programs amounted to US$ 3.7 million
  in 2002.


PATENTS AND TRADEMARKS

We hold a significant
  number of patents, registered with the U.S. Patent and Trademark Office, and
  with the BrazilianInstituto
  Nacional de Propriedade Industrial,or
  INPI, which are the governmental agencies responsible for the granting and registration
  of patent and trademarks rights in the United States and in Brazil, as well
  as in other countries. The majority of our patents relate to proprietary ore
  dressing processes. One of our most successful


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patents relates to a concentration process for lower grade iron ore, generally known as itabirite, which is widely used by other iron ore mining companies around the world. We are currently conducting technological research to permit commercial exploitation of our deposits of hard itabirites. We have also registered our trademark and our proprietary logo with the INPI. We renew our trademark registrations with the INPI every ten years.

INSURANCE

We carry insurance
  covering various types of risks, such as property, liability, vehicles, liability
  of maritime terminals and transportation, as well as a group life insurance policy
  for our employees. The policies are currently in full force and the related
  premiums were duly paid. We believe that our insurance coverage is adequate
  for the scope of our operations.


CAPITAL
  EXPENDITURES

Capital expenditures in 2002 included:


| |  | the construction of the
      São Luís pelletizing plant;                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                
| |  | the expansion of the logistics
      capacity for iron ore produced in the Northern System, which includes part
      of the construction of Pier III at the Ponta da Madeira Maritime Terminal
      and the expansion of iron ore stockyards;
| |   |                                                                                                                                                                                                                                                
| |  | the purchase of new locomotives
      and the expansion of cargo capacity in the Southern System;                                                                                                                                              
| |   |                                                                                                                                                                                                                                                
| |  | the acquisition of the
      stake of our partner in the Salobo copper project in the Carajás
      region;                                                                                                                                    
| |   |                                                                                                                                                                                                                                                
| |  | preparation for the start-up
      of operations of the Sossego copper project in the Carajás region
      in 2004;                                                                                                                            
| |   |                                                                                                                                                                                                                                                
| |  | the pre-feasibility study
      on the Vermelho nickel deposit, which we expect will conclude in the second
      half of 2003;                                                                                                                
| |   |                                                                                                                                                                                                                                                
| |  | part of the project to
      expand the capacity of the Taquari-Vassouras potash mine in the state of
      Sergipe;                                                                                                                           
| |   |                                                                                                                                                                                                                                                
| |  | part of the expansion
      of alumina production capacity at Alunorte and bauxite production capacity
      at MRN; and                                                                                                                       
| |   |                                                                                                                                                                                                                                                
| |  | part of the construction
      of hydroelectric plants, particularly the Aimorés and Candonga plants,
      which we expect will begin operating in late 2003, and the Funil plant,
      which began operations in December 2002.             

The table
      below sets forth our historical capital expenditures by business area for
      the periods indicated. Our capital expenditures have historically been more
      intensive in the second half of the year. SeeItem
      5for a description of our divestitures and budgeted capital expenditures.


|                       | For
      the Year Ended December 31, |    
|---------------------- | ------------------------------------- | ---
|                       |                                       |    
|                       | 2000                                  |    
|                       |                                       |    
|                       | (In
        millions of US$)          |    
|Ferrous                | US$                                   | 354
|Non-ferrous            |                                       | 50 
|Logistics              |                                       | 14 
|Energy                 |                                       | 19 
|Aluminum               |                                       |   
|Corporate
      center |                                       | 10 
|                       |                                       |    
|Total                  | US$                                   | 447
|                       |                                       |    

Capital expenditures
  relating to non-ferrous products increased 230% from US$ 40 million in 2001
  to US$ 132 million in 2002, primarily due to the implementation of copper projects.


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Item 5. Operating and Financial Review and Prospects

OVERVIEW

Despite a sluggish world
    economy and lower selling prices for our iron ore and pellets, our net operating
    revenues continued to improve in 2002, rising 4.8% to US$ 4,123 million, largely
    as a result of strong Chinese demand for iron ore and pellets. Operating income
    also improved, rising 48.5% to US$ 1,429 million. The increase in operating
    income resulted primarily from the devaluation of thereal,
    which reduced our costs, 52% of which were denominated inreais.
    Despite the increases in revenues and operating income, our net income was
    sharply lower in 2002, declining by 47.1% to US$ 680 million from US$ 1,287
    million in 2001. This decline resulted primarily from gains on sales of investments
    (paper and pulp, steel and dry-bulk shipping) in 2001 of US$ 784 million.
    Net income in 2002 was also negatively affected by a 36.1% increase in foreign
    exchange and monetary losses resulting from the impact of the devaluation
    of therealon our U.S. dollar denominated debt.


Key Factors Affecting Revenue
  and Results of Operations

Prices Ores and Metals


Iron Ore.Our
    iron ore export sales are generally made pursuant to long-term supply contracts
    which provide for annual price adjustments. Cyclical changes in the world
    demand for steel products affect sales prices and volumes in the world iron
    ore market. Different factors, such as the iron content of specific ore deposits,
    the various beneficiation and purifying processes required to produce the
    desired final product, particle size, moisture content, and the type and concentration
    of contaminants (such as phosphorus, alumina and manganese) in the ore, influence
    contract prices for iron ore. Fines, lump ore and pellets typically command
    different prices. We generally conduct annual price negotiations beginning
    in November of each year and ending early in the following year. Separate
    prices are established for the Asian and European iron ore markets. In the
    Asian market, the renegotiated prices are effective from April of the current
    year until March of the following year. In the European market, the renegotiated
    prices are effective for the calendar year. Because of the wide variety of
    iron ore and pellet quality and physical characteristics, iron ore and pellets
    are less commodity-like than other minerals. This factor combined with the
    structure of the market has prevented the development of an iron ore futures
    market. We do not hedge our exposure to iron ore price volatility.




|Reference
      Prices for Europe in US$ cents/metric ton Fe unit
|-----------------------------------------------------------------
|Year                                                             
|                                                                 
|2000                                                             
|2001                                                             
|2002                                                             
|2003                                                             

Our reference prices per
    Fe unit for iron ore declined across-the-board in 2002 by 2.4% from 2001 levels,
    after rising by 4.5% in 2001 from 2000 levels. We experienced similar trends
    in the market for pellets, where reference prices declined by 5.5% in 2002,
    after rising by 1.7% in 2001. In light of high levels of demand for iron ore,
    in May 2003, we concluded agreements with several major steelmakers under
    which our iron ore reference prices for 2003 will increase by an average of
    9%. In June 2003, we concluded agreements under which our pellet reference
    prices for 2003 will increase by an average of 9.8%.


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Gold.We sell gold in an active world market in which prices respond to daily changes in supply and demand. The following table sets forth the London Gold Market prices for the periods indicated.


|                       | Gold          | 
|---------------------- | ------------- | 
|                      
|(per
      troy ounce)
|1Q00                   | US$
      277 | 
|2Q00                   | 288           | 
|3Q00                   | 274           | 
|4Q00                   | 274           | 
|1Q01                   | 258           | 
|2Q01                   | 269           | 
|3Q01                   | 293           | 
|4Q01                   | 278           | 
|1Q02                   | 299           | 
|2Q02                   | 319           | 
|3Q02                   | 324           | 
|4Q02                   | 347           | 

We generally seek to manage the risks associated with changes in gold prices
through hedging. For more information about our gold hedging activities, see Item 11. Quantitative and Qualitative
Disclosures about Market Risk. Average gold prices were higher in 2002 than in 2001, reflecting a number of factors
including weakness in the U.S. dollar, international political tension and equity market declines that increased the
attractiveness of gold as an alternative investment. Aluminum-Related Operations.We operate our
    aluminum operations through a combination of subsidiaries and non-consolidated
    joint ventures. We consolidate the revenues of (i) Alunorte, which sells alumina,
    and (ii) our wholly-owned trading subsidiary Itabira Rio Doce Company Ltd.,
    which we refer to as Itaco, which resells bauxite, alumina and aluminum. Our
    remaining bauxite, alumina and aluminum operations are reflected in the line
    item Equity in results of affiliates and joint ventures and change in
    provision for losses on equity investments in our consolidated income
    statement. Through Itaco, we sell our aluminum in an active world market where prices are determined by reference to prices prevailing on terminal markets, such as the London Metals Exchange and the Commodity Exchange, Inc., or COMEX, at the time of delivery. The following table sets forth the three-month average market prices for aluminum on the London Metals Exchange for the periods indicated.


|                  | Aluminum       | 
|----------------- | -------------- | 
|                 
|(per
      pound)
|1Q00              | US$
      0.75 | 
|2Q00              | 0.68           | 
|3Q00              | 0.72           | 
|4Q00              | 0.69           | 
|1Q01              | 0.71           | 
|2Q01              | 0.69           | 
|3Q01              | 0.64           | 
|4Q01              | 0.61           | 
|1Q02              | 0.63           | 
|2Q02              | 0.62           | 
|3Q02              | 0.60           | 
|4Q02              | 0.62           | 

Three-month average market prices for aluminum on the London Metals Exchange declined during 2002 from US$ 1,454 / ton in 2001 to US$ 1,365 / ton in 2002, primarily reflecting an increase in world aluminum production that more than offset a modest recovery in world demand. Albras and Alunorte seek to manage the risks associated with changes in aluminum prices by hedging. For more information about aluminum hedging, seeItem 11. Quantitative and Qualitative Disclosures about Market Risk. During the first five months of 2003 three-month average market prices for aluminum on the London Metals Exchange rose by 4.23%. During the same period, world alumina prices also increased substantially.


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We conduct our bauxite, alumina
    and aluminum business through subsidiaries and consolidated and unconsolidated
    joint ventures. Our unconsolidated joint venture MRN sells a substantial proportion
    of its bauxite to our consolidated subsidiary Alunorte, which in turn sells
    a substantial portion of its alumina production to our unconsolidated joint
    ventures Albras and Valesul. The basic arrangements under which these sales
    are made are as follows:


| |  | Our MRN bauxite joint
      venture produces bauxite for sale on a take-or-pay basis to us and our joint
      venture partners at a price that is determined by a formula based on prevailing
      world prices of aluminum. Our Alunorte alumina subsidiary, which we began
      consolidating in July 2002, purchases all of its bauxite requirements from
      MRN. Our annual purchase commitment for 2002 was approximately US$ 82 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Each Alunorte
      joint venture partner must purchase on a take-or-pay basis all alumina produced
      by Alunorte in proportion to its respective interest. Each joint venture
      partner pays the same price, which is determined by a formula based on prevailing
      world prices of aluminum and alumina. Our annual purchase commitment for
      2002 was approximately US$ 22 million. In June 2002, we increased our stake
      in and acquired control of Alunorte (alumina) and began consolidating it
      in our financial statements. As a result, since June 2002, payments we make
      to Alunorte under our take-or-pay commitment are eliminated in preparing
      our consolidated financial statements.                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Each Albras
      aluminum joint venture partner must purchase on a take-or-pay basis all
      aluminum produced by Albras in proportion to its ownership interest. In
      our case, our take-or-pay commitment is 51% (representing our proportional
      ownership interest) of the joint ventures annual aluminum production.
      Although our annual purchase commitment to Albras can be substantial, approximately
      US$ 279 million in 2002, prevailing world market prices for aluminum (subject
      to discount in accordance with the terms of our joint venture agreements)
      determine the aluminum prices at which we purchase from Albras. We resell
      the aluminum we receive from Albras through our trading subsidiary Itaco
      and earn a margin on the sale. We do not have a take-or-pay commitment to
      Valesul, which sells aluminum directly to its customers.

Manganese and Ferroalloys.Manganese and ferroalloy
    prices are strongly influenced by trends in the steel market. Manganese prices
    are generally negotiated on an annual basis using a benchmark established
    in the Japanese market based on the reference price for the related ferroalloys.
    Ferroalloy prices are negotiated in open bids, quarterly contracts (particularly
    in Europe) or on a spot basis. They are influenced by a number of factors
    and are more volatile than prices for manganese. Among the principal factors
    are the price of manganese, the inventories held by producers or traders,
    occasional interruptions in production and anti-dumping tariffs in the principal
    markets (U.S., Europe, Japan and Korea). Average manganese prices declined
    to US$ 54 per ton in 2002 from US$ 63 per ton in 2001, primarily reflecting
    poor conditions in the world steel market at the time the annual prices for
    2002 were established. Average ferroalloy prices declined from US$ 456 per
    ton in 2001 to US$ 423 per ton in 2002, reflecting changes in our product
    mix. Potash and Kaolin.Potash
    prices were lower in 2002 than in 2001, primarily reflecting lower world prices
    due to an increase in low-price exports from Russia and Jordan, which have
    cut prices to gain market share. Kaolin prices have remained fairly stable
    over the last decade, and showed little movement during 2002 and 2001. The
    average prices per ton for each of the years 2002 and 2001 were US$ 136 and
    US$ 130, respectively, an increase of 5%, primarily reflecting increased demand. Logistics We earn our logistics revenues primarily from fees charged to customers for the transportation of cargo via our railroads, ports and ships. Most of these revenues are earned by our railways, and nearly all of our logistics revenues are denominated inreais.Prices in the Brazilian railroad market are subject to maximum levels set by the Brazilian regulatory authorities but in practice have historically fallen well below the maximum levels permitted by law, primarily reflecting railroads need to remain competitive with the trucking industry. In 2002, prices for transportation


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of general cargo increased inrealterms from 2001 levels, reflecting inflation as well as rising demand and an increase in trucking prices, which are used as a reference when setting railroad freight prices.

Demand Demand for Mineral Products Demand for our iron ore products is a function of worldwide demand for steel, which is, in turn, heavily influenced by worldwide economic activity. Worldwide demand for steel experienced a downward trend over the three-year period from 2000 to 2002. A slowdown in economic activity in Europe or Asia will generally affect demand for our iron ore products, although there will typically be a lag effect. In recent years, we have experienced a significant increase in demand from China that has offset lower demand in Europe and elsewhere in Asia. Demand for our other mineral products is also influenced to varying degrees by worldwide economic activity. Driven primarily by demand from China, demand for iron ore and pellets increased throughout 2002, and by the fourth quarter of 2002, had begun to exceed our production capacity. We expect that demand will continue to exceed our production capacity in 2003. We plan to invest US$ 217 million in 2003 to increase the production capacity of our mines and to expand the capacity of our ports in order to better meet rising customer demand. In the interim, to the extent demand exceeds our production capacity, we expect to purchase and resell iron ore and pellets from third parties to attempt to meet any shortfall. Demand for Third-Party Transportation Services. Demand for our third party transportation services is influenced by Brazilian economic growth as well as by Brazilian exports and imports of goods. Demand for general cargo services was higher in 2002, primarily reflecting the improved health of the Brazilian economy and a strong grain crop. We expect logistics demand to continue to increase in 2003, reflecting continued growth in the Brazilian gross domestic product and international trade. Currency Fluctuations Most of our sales are dollar-denominated, while most of our costs (other than debt expenses) are denominated in Brazilian currency. As a result, when therealis relatively strong against the dollar, this tends to have a negative effect on our reported financial results from operations, and vice versa. On the other hand, because
most of our debt (and debt at the joint venture and affiliate level) is dollar-denominated, a relatively weakrealcauses us to record monetary and foreign-exchange losses. The 34.3%decline of
therealhad a significant impact on our results in 2002. During the first five months of 2003, therealhas appreciated 19.1% against the dollar. We cannot predict the future direction of exchange rates. Acquisitions In June 2002, we increased
    our stake in and acquired control of Alunorte (alumina) and began consolidating
    it in our financial statements. We previously had accounted for Alunorte under
    the equity method. We also increased our stakes in Salobo and MVC in 2002,
    but these acquisitions did not have a significant impact on our gross revenues,
    net income or total assets. The following table shows
    the effect of the Alunorte acquisition on our gross revenues, net income and
    total assets.


|                                 | As of
      and for
      the Year Ended |    
|-------------------------------- | ---------------------------------------- | ---
|December
      31,              
|                                
|2002                            
|                                
|Increase
      in gross revenues | 3                                        | .0%
|Increase
      in net income     | 3                                        | .8 
|Increase
      in total assets   | 7                                        | .4 

We have continued to make
    acquisitions in 2003, as more fully described in Item 4. Information on
    the CompanyBusiness Overview. In particular, in March 2003, we reached
    an agreement with Mitsui to acquire its remaining stake in Caemi, for US$
    426.4 million. After the transaction, we will own 100% of Caemis common
    shares, 40% of its preferred shares and 60.2% of its total capital. Caemi,
    a Brazilian company with its headquarters in Rio de Janeiro, is the worlds
    fourth largest producer of iron ore and is listed on BOVESPA. This acquisition
    is subject, inter alia,
    to the review and approval of competition authorities and the completion of
    the Valepar transactions described under
    Item 7. Major Shareholder and Related Party Transactions.


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Divestitures
  and Asset Sales


In 2001,
      we divested our interests in Bahia Sul (pulp and paper), Cenibra (pulp and
      paper) and CSN (steel). In addition to these divestitures, in 2001 and 2002,
      we recorded the sale of the remaining forestry assets in connection with
      our exit from the pulp and paper business and ships in connection with our
      exit from the dry-bulk shipping business. The following table shows the
      effects of these divestitures on our gross revenues, net income and total
      assets. The percentages in the table represent the portion of our revenues,
      net income and total assets attributable to the divested businesses and
      assets in the periods indicated prior to disposal.


|                                        | As
      of and for the Year Ended December 31, |  
|--------------------------------------- | ----------------------------------------------- | -
|                                        |                                                 |  
|                                        | 2002                                            |  
|                                        |                                                 |  
|Decrease
      in gross revenues        | 0.1                                             | %
|Decrease
      (increase) in net income | 0.1                                             | %
|Decrease
      in total assets          | 0.7                                             | %

On June 18, 2003,
  we agreed to sell our one remaining gold mine, Fazenda Brasileiro, to Yamana
  Resources Inc., a Canadian mining company, for US$ 20.9 million. The sale is
  subject to certain conditions. Upon completion of the sale, our gold operations
  will be interrupted until the start-up of the copper projects we are currently
  developing in Carajás, where we expect to produce gold as a by-product
  of the copper mining process.


Effects of Certain Equity Method Affiliates and Investments Carried at Cost


The financial
  condition and results of operations of our joint ventures, affiliated companies
  and investments can have a significant effect on our results of operations and
  financial condition. See note 10 to our consolidated financial statements for
  information on these effects.


Rising Unit Extraction Costs


Several of our
  mines, such as Cauê, Conceição and Capanema, have operated
  for long periods and may experience rising extraction costs per unit as more
  expensive processes become necessary to extract remaining ore in these mines.
  Increases in extraction costs at each of theses mines have not materially affected
  our results of operations as such increases were offset by productivity gains
  and by the favorable foreign exchange effects on these costs.


Electricity Costs


Electricity costs are a significant
    component of the cost of producing aluminum. Our aluminum plant, Albras, entered
    into a 20-year contract with Eletronorte, a state-owned power utility, pursuant
    to which Albras purchases electricity at rates which are lower than the prevailing
    market rates in the region. For the years ended December 31, 2002, 2001 and
    2000 the prevailing market rate was US$ 20.62, US$ 22.87 and US$ 24.48 per
    MWh, respectively. The average price paid by Albras for the same periods was
    US$ 12.86, US$ 11.27 and US$ 11.93 per MWh, respectively. The Eletronorte
    contract is scheduled to expire in May 2004. Albras is currently negotiating
    a possible new contract and is examining other alternatives. Although we expect
    future energy costs for Albras to be in line with those of its peers in the
    industry, its costs will likely increase compared to current levels following
    expiration of the current contract.


Effects of Brazilian Energy Shortages


On June 1, 2001,
  the Brazilian government, as part of its energy rationing program, required
  reductions in energy consumption of at least 20% compared to average consumption
  for May, June and July 2000. Aluminum and ferroalloy activities were categorized
  as electricity-intensive activities and energy consumption relating to these
  activities was required to decrease by 25% relative to average consumption for
  May, June and July 2000. Our total expected energy consumption for 2001 was
  14.5 TWh. However, due to this rationing program, our actual energy consumption
  for 2001 was 12.5 TWh. In 2000, our total energy consumption was 13.8 TWh. As
  a result, we reduced our ferroalloy production in the six-month period ending
  November 30, 2001 by 46,000 tons, from the previously planned 220,000 tons to
  174,000 tons. We also reduced 2001 aluminum production at Albras by 46,000 tons
  to 333,000 tons from the previously planned 379,000 tons, and at Valesul by
  13,000 tons to 80,000 tons from the previously planned 93,000 tons. By the end
  of 2001, climate conditions in Brazil improved, reducing the immediate risk
  of energy shortages. Therefore, on March 1, 2002, the Brazilian government eliminated
  the rationing in the rest of the country.


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For a discussion about the
  possible consequences and risks associated with future energy shortages, seeItem 3. Risk FactorsRisks
  Relating to Brazil.

Domestic Inflation
    Rates in Brazil


As measured by
      the IGP-M Index, the Brazilian inflation rate was approximately 9.9% in
      2000, 10.4% in 2001 and 25.3% in 2002. Most of our costs are incurred in
      Brazil inreais,while
      most of our revenues are earned outside of Brazil in U.S. dollars.Inflation generally has a negative impact on our operating margins only
      in periods where it exceeds the rate of devaluation of therealagainst the U.S. dollar. In recent years and in 2002, domestic inflation
      in Brazil has been more than offset by devaluation of thereal.


Brazilian Taxes


We are subject
  to a number of Brazilian taxes. Brazilian tax legislation changes, which are
  frequent, can have a significant impact on our results of operations. The principal
  taxes we pay are:


| |  | Value-Added Tax and
      Revenue Taxes.
      Our gross revenues consist of total revenues from sales, net of discounts,
      returns and allowances, together with amounts we collect in respect of value-added
      tax. Net operating revenues represent revenues less value-added tax, which
      we collect on behalf of, and must remit to, state taxing authorities. We
      also collect other revenue taxes for social programs that are recorded under
      the line items value-added tax and other financial expenses in our financial
      statements. Export sales are currently exempt from both the value-added
      tax and the social taxes.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | Income
        tax and Social Contribution on Profits.We
        pay income taxes, which include a tax called the social contribution on
        profits. The social contribution on profits tax rate has fluctuated in
        the past three years from 8% to 12% and is currently at 9%.                                                                                                                                                                                                                                                                                                                                                                           

Critical Accounting Policies

We believe that
  the following are our critical accounting policies. We consider an accounting
  policy to be critical if it is important to our financial condition and results
  of operations and requires significant judgments and estimates on the part of
  our management. For a summary of all of our significant accounting policies,
  see note 1 to our consolidated financial statements.


Translation Adjustments


Our reporting
  currency is the U.S. dollar, but our functional currency for the majority of
  our operations is thereal.
  In accordance with Statement of Financial Accounting Standards (SFAS) 52 
  Foreign Currency Translation, we translate statement of income items
  to reflect the approximate results that would have occurred if each transaction
  had been translated using the exchange rate in effect on the date that the transaction
  was recognized. Because the separate translation of every transaction is impractical,
  an appropriate weighted-average exchange rate for the period is used. In most
  cases, we translate our statement of income accounts and those of subsidiaries
  that use therealas their functional currency into U.S. dollars at weighted average monthly rates
  for the relevant reporting period. In the case of material exceptional items,
  we translate the amounts into U.S. dollars using the exchange rate on the date
  of the transaction. Additionally, during periods of high exchange rate volatility,
  we use estimated daily rates to translate our foreign exchange and monetary
  losses, financial currency, financial income and financial expenses. The determination
  of the appropriate weighted-average exchange rate requires significant management
  judgment and estimates. During 2002, therealdevalued by approximately 34.3% against the U.S. dollar and generated a debit
  for the year recorded directly in the cumulative translation adjustment account
  of US$ 1,710 million.


Reserves and Life of Mines


We regularly evaluate and
    update our estimates of proven and probable mineral reserves. Our proven and
    probable mineral reserves are determined using generally accepted estimation
    techniques and are audited by AMEC, an expert in geology, mining and iron
    ore reserves. Calculating our reserves requires us to make assumptions about
    future conditions that are highly uncertain, including future ore prices,


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foreign currency
    exchange rates, inflation rates, mining technology, availability of permits
    and production costs. Changes in some or all of these assumptions could have
    a significant impact on our recorded proven and probable reserves.

One of the ways
  we use our ore reserve estimates is to determine the mine closure dates used
  in recording the fair value liability for our asset retirement obligations and
  the periods over which we amortize our mining assets. Any change in our estimates
  of total expected future mine or asset lives could have a significant impact
  on the depreciation, depletion and amortization charges recorded in our consolidated
  financial statements under cost of goods sold. Changes in the estimated lives
  of our mines could also significantly impact our estimates of environmental
  and site reclamation costs, which are described in greater detail below.


Environmental and Site
    Reclamation costs


Expenditures
  relating to ongoing compliance with environmental regulations are charged against
  earnings or capitalized as appropriate. These ongoing programs are designed
  to minimize the environmental impact of our activities. Until December
  31, 2002, we provided only for environmental liabilities relating to site restoration
  at mines already closed or which were expected to close in the next two years.
  The estimation of environmental costs was based on projections limited to the
  next two years and was not discounted to present value. Effective January
  1, 2003, we adopted SFAS 143  Accounting for Asset Retirement Obligations.
  SFAS 143 requires that we recognize a liability for the fair value of our estimated
  asset retirement obligations in the period in which they are incurred, if a
  reasonable estimate can be made. We consider the accounting estimates related
  to reclamation and closure costs to be critical accounting estimates because:


| |  | we will
      not incur most of these costs for a number of years, requiring us to make
      estimates over a long period;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | reclamation
      and closure laws and regulations could change in the future or circumstances
      affecting our operations could change, either of which could result in significant
      changes to our current plans;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | calculating
      the fair value of our asset retirement obligations in accordance with SFAS
      143 requires us to assign probabilities to projected cash flows, to make
      long-term assumptions about inflation rates, to determine our credit-adjusted
      risk-free interest rates and to determine market risk premiums that are
      appropriate for our operations; and                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | given the significance
      of these factors in the determination of our estimated environmental and
      site reclamation costs, changes in any or all of these estimates could have
      a material impact on net income. In particular, given the long periods over
      which many of these charges are discounted to present value, changes in
      our assumptions about credit-adjusted risk-free interest rates could have
      a significant impact on the size of our provision.At January 1,
      2003, we estimated the fair value of our aggregate total asset retirement
      obligations to be approximately US$ 41 million, representing an increase
      of US$ 26 million over the amount recorded under the prior accounting policy.

Impairment
  of Long-Lived Assets and Goodwill


We evaluate
  our investments and long-lived assets, which primarily include identifiable
  property, plant and equipment, for impairment whenever events or changes in
  circumstances indicate that the balance sheet carrying value of the asset may
  not be recoverable. If the asset is determined to be impaired, we record an
  impairment loss, and write down the asset, based upon the amount by which the
  carrying amount of the asset exceeds the higher of net realizable value and
  value in use. We generally determine value in use by discounting expected future
  cash flows using a risk-adjusted pre-tax discount rate that we believe is appropriate
  to the risks inherent in the asset. In order to estimate future cash flows,
  we must make various assumptions about matters that are highly uncertain, including
  future production and sales, product prices (which we estimate based on current
  and historical prices, price trends and related factors), recoverable reserves,
  operating costs, environmental and site reclamation costs and


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planned capital costs. Arriving
  at assumptions and estimates concerning these matters is a complex and often
  subjective process. These assumptions and estimates can be affected by a variety
  of matters, including external factors such as industry and economic trends,
  and internal factors such as changes in our business strategy and our internal
  forecasts. Although we believe the assumptions and estimates we have made in
  the past have been reasonable and appropriate, different assumptions and estimates
  could materially impact our reported financial results. More conservative assumptions
  of the anticipated future benefits from these businesses would result in greater
  impairment charges, which would decrease net income and result in lower asset
  values on our balance sheet. Conversely, less conservative assumptions would
  result in smaller impairment charges, higher net income and higher asset values.

In assessing
      potential impairment of our equity investments, we evaluate the carrying
      value of our listed equity investments relative to publicly available quoted
      market prices. If the quoted market price is below carrying value, and we
      consider the decline to be other than temporary, we write down our equity
      investments to quoted market value. For investments for which quoted market
      prices are not readily available, we evaluate the investments for impairment
      whenever the performance of the underlying entity indicates that impairment
      may exist. In such cases, the fair value of the investments is estimated
      principally based on discounted estimated cash flows using assumptions similar
      to those described above. In relation to goodwill, each year on September 30, we use a two-step process to test for the recoverability of goodwill for each of our reporting units. Step one requires a comparison of the fair value of the reporting unit to the book value of its net assets. The fair value of the net assets is based on discounted cash flows using assumptions similar to those used in the process described above. Step two requires an estimate of the fair value of the individual assets and liabilities within the reporting unit. Write-down of goodwill on equity investees amounted to US$ 86 million in the year ended December 31, 2002. There were no other write-downs of goodwill during 2002.


Derivatives and Hedging
    Activity


As of January
    1, 2001 we adopted SFAS 133  Accounting for Derivative Financial
    Instruments and Hedging Activities, as amended by SFAS 137 and SFAS
    138. Those standards require that we recognize all derivative financial instruments
    as either assets or liabilities on our balance sheet and measure such instruments
    at fair value. Changes in the fair value of derivatives are recorded in each
    period in current earnings or in other comprehensive income (outside net income),
    in the latter case depending on whether a transaction is designated as an
    effective hedge. In 2002, we did not designate any derivative financial instruments
    as hedges and the fair value adjustments to our derivatives were thus recorded
    in current net income. Had we designated our hedging instruments as permitted
    under SFAS 133 there would have been corresponding fair value adjustments,
    for certain of our hedging instruments, to the related hedged items in the
    case of fair value hedges or directly to stockholders equity in the
    case of cash flow hedges. During the year ended December 31, 2002 we recorded
    a charge of US$ 92 million in relation to fair value adjustments on derivative
    instruments.


Income Taxes


In accordance
    with SFAS 109  Accounting for Income Taxes, we recognize
    deferred tax effects of temporary differences in our consolidated financial
    statements. We record a valuation allowance when we believe that it is more
    likely than not that tax assets will not be fully recoverable in the future. When we prepare our consolidated financial statements, we estimate our income taxes based on regulations in the various jurisdictions where we conduct business. This requires us to estimate our actual current tax exposure and to assess temporary differences that result from differing treatment of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which we show on our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income. To the extent we believe that recovery is not likely, we establish a valuation allowance. When we establish a valuation allowance or increase this allowance in an accounting period, we record a tax expense in our statement of operations. Determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance to be recorded against our net deferred tax assets requires significant management judgment and estimates and


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assumptions about matters that are highly uncertain. For each future income tax asset, we evaluate the likelihood of whether some portion or all of the asset will not be recognized. The valuation allowance made in relation to accumulated income tax losses depends on our assessment of the probability of generation of future taxable profits within the legal entity in which the related deferred tax asset is recorded based on our production and sales plans, commodity prices, operating costs, environmental, group restructuring plans for subsidiaries and site reclamation costs and planned capital costs.

As of December 31, 2002 we
    recorded a valuation allowance of US$ 230 million on our net deferred income
    tax assets totaling US$ 799 million and we recorded a deferred tax expense
    of US$ 12 million related to the net increase in the valuation allowance during
    the year.


Contingencies


We disclose material contingent
    liabilities unless the possibility of any loss arising is considered remote
    and of material contingent assets where the inflow of economic benefits is
    probable. We discuss our material contingencies in note 15 to our financial
    statements. We account for
    contingencies in accordance with SFAS 5  Accounting for Contingencies
    which requires that we record an estimated loss from a loss contingency when
    information available prior to issuance of our financial statements indicates
    that it is probable that a future event will confirm that an asset has been
    impaired or a liability has been incurred at the date of the financial statements,
    and the amount of the loss can be reasonably estimated. In particular, given
    the uncertain nature of Brazilian tax legislation, the assessment of potential
    tax liabilities requires significant management judgment. By their nature
    contingencies will only be resolved when one or more future events occur or
    fail to occur  and typically those events will occur a number of years
    in the future. Assessing such liabilities, particularly in the uncertain Brazilian
    legal environment, inherently involves the exercise of significant management
    judgment and estimates of the outcome of future events. The provision for contingencies at December 31, 2002, totaling US$ 428 million, consists of provisions of US$ 109 million, US$ 95 million, US$ 220 million and US$ 4 million for labor, civil, tax and other claims, respectively.


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RESULTS OF OPERATIONS

2002 Compared To 2001

Revenues


The following table summarizes our gross revenues by product and our net operating revenues for the periods indicated:


|                                      | For
      the Year Ended December 31, |       |      |    
|------------------------------------- | ------------------------------------- | ----- | ---- | ---
|                                      |                                       |       |      |    
|                                      | 2002                                  |       | 2001 |    
|                                      |                                       |       |      |    
|                                      | (In
      millions of US$)            |       |      |    
|Iron ore and
      pellets            |                                       |       |      |    
|Iron
      ore                        | US$                                   | 2,147 |      | US$
|Pellets                               |                                       | 673   |      |    
|                                      |                                       |       |      |    
|Subtotal                              |                                       | 2,820 |      |    
|                                      |                                       |       |      |    
|Gold                                  |                                       | 103   |      |    
|Manganese and Ferroalloys             |                                       | 283   |      |    
|Potash                                |                                       | 91    |      |    
|Others                                |                                       | 45    |      |    
|Revenues from logistic
      services |                                       | 458   |      |    
|Aluminum-related Products             |                                       | 462   |      |    
|Other products and services           |                                       | 20    |      |    
|                                      |                                       |       |      |    
|Gross Revenues                        |                                       | 4,282 |      |    
|Value Added Tax                       |                                       | (159  | )    |    
|                                      |                                       |       |      |    
|Net Operating Revenues                | US$                                   | 4,123 |      | US$
|                                      |                                       |       |      |    

Net operating
    revenues increased 4.8% to US$ 4,123 million in 2002 from US$ 3,935 million
    in 2001. This increase reflected higher gross revenues from our iron ore and
    pellets, aluminum-related products and other mining products, which were partially
    offset by decreases in gross revenues from logistics, gold and other products
    and services.


Iron ore and Pellets


Gross revenues from iron ore and pellets increased 8.5% to US$ 2,820 million in 2002 from US$ 2,600 million in 2001, reflecting a 10.4% increase in volume sold, partially offset by lower average selling prices. Sales of iron ore attained record levels in 2002, amounting to 143.6 million tons in 2002, compared to 130.8 million tons in 2001, an increase of 9.8%. The expansion seen in sales of pellets was greater in percentage terms than sales growth for iron ore, reflecting the strong demand for steel and the use of pellets to increase the productivity of blast furnaces in making steel, particularly in China. Pellet sales rose from 17.9 million tons in 2001 to 20.6 million tons in 2002, a 14.8% increase. The increase in volume of iron ore and pellets in 2002 was driven primarily by strong demand from China, where increased demand for consumer durables, coupled with substantial investment in infrastructure and housing, resulted in sharply higher steel consumption, leading Chinese steelmakers to dramatically increase their purchases of iron ore and pellets. Demand in our other principal markets was stable.




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Actual average selling prices
    for iron and pellets declined by 1.7%, reflecting an across-the-board reduction
    in reference prices following the 2002 price negotiations with steel manufacturers,
    and a decrease of 0.2% due to an increase in the proportion of pellets in
    the product mix, which accentuated the effect of reductions in pellet prices.


Gold


Revenues from gold sales
    decreased 25.9% to US$ 103 million in 2002 from US$ 139 million in 2001, reflecting
    a 34.8% decrease in volume sold, which was partially offset by an 8.9% increase
    in average selling prices. The 34.8% decrease in volume from 508,472 troy
    ounces in 2001 to 331,479 troy ounces in 2002 was primarily due to the closure
    of our Igarapé Bahia gold mine in 2002 and reduced production at Fazenda
    Brasileiro, which is nearing the end of its productive life and has encountered
    lower gold yields. We have since agreed to sell Fazenda Brasileiro as described
    above. The 8.9% increase in average selling prices reflects the increase in
    world gold prices during 2002 as a result of increased political uncertainty,
    lower equity prices, weakness in the U.S. dollar and other factors which made
    gold an attractive alternative investment.


Manganese and Ferroalloys


Gross revenues from sales of manganese and ferroalloys increased by 9.3%, from US$ 259 million in 2001 to US$ 283 million in 2002, driven by higher sales of ferroalloys, which more than offset a decline in sales of manganese. Gross revenues from ferroalloys increased by US$ 45 million or 22%, driven by a 107% increase in volume resulting from strong demand for steel and from the end of the energy rationing in Brazil, which was partially offset by a decline in prices due to the shift in product mix. Gross revenues from sales of manganese declined by US$ 21 million, or 37%, primarily as a result of a 27% decline in volume. The decline in manganese volumes resulted primarily from the delay of a major shipment in December 2002. Average selling prices for manganese fell by 15% in 2002, driven by lower overall demand for manganese from the steel industry at the
time the annual prices were established.


Potash


Gross revenues from sales of potash increased by 28.2% from US$ 71 million in 2001 to US$ 91 million in 2002, primarily due to a 45% increase in volume, which more than offset a 16.7% decline in average selling prices. The significant increase in volume resulted from strong demand from the domestic fertilizer sector. The decline in average selling prices primarily reflects a reduction in prices to match our international competitors.


Others


Gross revenues from sales of kaolin increased by 9.8% from US$ 41 million in 2001 to US$ 45 million in 2002, mainly due to an increase in sales volume as well as higher average selling prices.


Logistic Services


Gross revenues from logistic services decreased by 24.7% to US$ 458 million in 2002 from US$ 608 million in 2001. This reduction is principally due to a decrease of US$ 140 million in our world-wide logistics revenues due principally to our divestitures in the dry-bulk shipping business in the second half of 2001. It also reflects the impact of a decrease relating to revenues from services provided to Ferteco and Samitri in 2001 prior to our acquisition of these companies. In addition, gross logistics revenues were adversely affected by the devaluation of thereal, which largely offset increases in volumes in the domestic market. General cargo shipped by our railroads increased by 14.0% from 12.9 billion net ton kilometers in 2001 to 14.7 billion net ton kilometers in 2002. The increase in
volume reflects strong increases in the transport of grains and soybeans, increases in steel shipments, and increases in the inter-modal transport of containers, which exploits the connections between highway transportation, rail, ports and coastal shipping. Our ports handled 26.3 million tons of general cargo in 2002, compared with 21.7 million tons in the previous year.


Aluminum-Related Products


Revenues from aluminum products (bauxite, alumina, aluminum) increased 62.7% to US$ 462 million in 2002 from US$ 284 million in 2001. Of the total increase of US$ 178 million, US$ 124 million was due to the consolidation of Alunorte beginning in June 2002 when we acquired control of this previously affiliated company.The remaining US$ 54 million resulted from:


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| |  | resales
      by us of increased aluminum purchased from our affiliate Albras, under take-or-pay
      arrangements, reflecting Albras increase in production capacity beginning
      at the start of 2002 and the end of energy rationing; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                  
| |  | US$ 21 million
      in resales of alumina purchased from third parties to meet excess customer
      demand at Alunorte.                                                                                                                        

Other products and services


Revenues from other products and services decreased 73.3% to US$ 20 million in 2002 from US$ 75 million in 2001, reflecting our exit from the pulp and paper business, which began in 2001 with the sale of Bahia Sul and Cenibra, and was completed in 2002 upon the sale of approximately 47,700 hectares of Eucalyptus forest owned by our subsidiary Florestas Rio Doce S.A.


Operating Costs and Expenses


The following table summarizes our operating costs and expenses for the periods indicated.


|                                                                                     | For
      the Year Ended December 31, |      
|------------------------------------------------------------------------------------ | ------------------------------------- | -----
|                                                                                     |                                       |      
|                                                                                     |                                       | 2002 
|                                                                                     |                                       |      
|                                                                                     | (In
      millions of US$)            |      
|Cost of ores and metals
      sold                                                   | US$                                   | 1,579
|Cost of logistic services                                                            |                                       | 252  
|Cost of aluminum-related
      products                                              |                                       | 412  
|Others                                                                               |                                       | 20   
|                                                                                     |                                       |      
|Cost
      of goods sold                                                             |                                       | 2,263
|                                                                                     |                                       |      
|                                                                                     |                                       |      
|Selling, general and administrative
      expenses                                   |                                       | 224  
|Research and development,
      employee profit sharing and other costs and expenses |                                       | 207  
|                                                                                     |                                       |      
|Total operating costs
      and expenses                                             | US$                                   | 2,694
|                                                                                     |                                       |      

Cost of goods sold


Total cost of goods sold decreased 0.4% to US$ 2,263 million in 2002 from US$ 2,272 million in 2001. Our costs, as expressed in U.S. dollars, were favorably affected by the significant devaluation of therealagainst the U.S. dollar during the period (from R$2.3204 to US$ 1.00 at December 31, 2001 to R$3.5333 to US$ 1.00 at December 31, 2002, or a devaluation of 34.3%), because the majority of these costs and expenses are denominated inreais.The average rate of exchange was R$2.9286 to US$ 1.00 during 2002 and R$2.2464 to US$ 1.00 during 2001, representing a devaluation of 23.3%. The average rate of devaluation is lower than year-on-year
devaluation because the exchange rate movements were concentrated in the second half of 2002. Cost of ores and metal sold
    increased 1.8% to US$ 1,579 million in 2002 from US$ 1,550 million in 2001,
    primarily due to increased production volumes required by the 10.3% increase
    in sales of iron ore and pellets, offset by an near-equivalent decrease attributed
    to the effects of devaluation of therealon our domestic costs (approximately 52% of our total costs is denominated
    in reais) net of wage and price increases linked to local inflation. The amount
    in 2002 also includes US$ 22 million in gold derivatives losses. A portion
    of the increase in cost of ores and metal sold also reflects higher costs
    associated with purchases of iron ore from third parties to meet excess demand. Cost of logistic services decreased 33.3% to US$ 252 million in 2002 from US$ 378 million in 2001, whereas our corresponding revenue decreased only 24.7%. The decrease in costs at a rate greater than the decrease in revenue is due to the effects of the devaluation of therealon our domestic costs as described above.


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Cost of aluminum-related products increased 53.2% to US$ 412 million in 2002 from US$ 269 million in 2001. The increase is partly due to the consolidation of Alunorte beginning in June 2002, which contributed US$ 91 million to consolidated costs. The remaining US$ 52 million cost increase relates to the take-or-pay arrangements and third party sales described above. The effects of exchange rate movements on the cost of aluminum-related products were insignificant, since the related costs are primarily determined by international market prices. Cost of other products and services decreased 73.3% to US$ 20 million in 2002 from US$ 75 million in 2001, reflecting principally the decreases in volumes of pulp purchases as a result of our divestitures in this line of business.


Selling, general and administrative expenses


Selling, general and administrative
    expenses decreased 7.1% to US$ 224 million in 2002 from US$ 241 million in
    2001, due principally to the favorable effects of exchange rate movements,
    partly offset by the effects of increased selling expenses due to increased
    volumes. As a percentage of net operating revenues, selling, general and administrative
    expenses declined from 6.1% in 2001 to 5.4% in 2002.


Research and development, employee profit sharing and other operating costs and expenses


Research and development, employee profit sharing and other costs and expenses decreased 55.0% to US$ 207 million in 2002 from US$ 460 million in 2001. This decrease resulted primarily from a US$ 260 million reduction in other operating costs and expenses, which more than offset a US$ 7 million increase in research and development expenses. The US$ 260
    million reduction in other operating costs and expenses primarily reflects
    three asset impairment provisions that occurred in 2001:


| |                                   | plant and
      equipment impairment provisions of US$ 67 million and US$ 34 million due
      to impairment of certain shipping assets;
| | ---------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------
| |                                    |                                                                                                                                         
| |                                   | amortization
      of goodwill of US$ 34 million; and                                                                                   
| |                                    |                                                                                                                                         
| |                                   | a write-off
      of value added taxes of US$ 54 million on products purchased based on our
      agreement with a state government.    
| |                                    |                                                                                                                                         
| | The
      reduction also reflects:
| |                                    |                                                                                                                                         
| |                                   | a US$ 26
      million reduction in contingency provisions, to US$ 53 million in 2002 from
      US$ 79 million in 2001; and            
| |                                    |                                                                                                                                         
| |                                   | a gain in 2002 of US$
      49 million on the sale of certain forestry assets of our subsidiary Florestas
      Rio Doce S.A.           

Together, these two factors more than offset a US$ 40 million provision in 2002 related to the acceleration of the expected closing date for our Fazenda Brasileiro gold mine, from 2009 to 2005.


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Non-Operating Income (Expenses)


|                                                | For
          the Year Ended December 31, |     
|----------------------------------------------- | ----------------------------------------- | ----
|                                                |                                           |     
|                                                | 2002                                      |     
|                                                |                                           |     
|                                                | (In
          millions of US$)            |     
|                                                |                                           |     
|Financial income                                | US$                                       | 127 
|Financial expenses                              |                                           | (375
|Foreign exchange and monetary
      losses, net |                                           | (580
|Gain on sale of investments                     |                                           |    
|                                                |                                           |     
|Non-operating
      income (expenses)           | US$                                       | (828
|                                                |                                           |     

Net non-operating
    expenses in 2002 were US$ 828 million compared to net non-operating income
    of US$ 158 million in 2001. The principal reasons for this change were:


| |  | the negative
      effect of exchange rate movements on our net U.S.-dollar denominated liabilities
      (mainly short and long-term debt less cash and cash equivalents). Our net
      foreign exchange and monetary losses amounted to US$ 580 million in 2002
      compared to US$ 426 million in 2001; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                  
| |  | gains of
      US$ 784 million in 2001 upon divestitures of our interests in Bahia Sul,
      CSN and Cenibra.                                                                                                                                                                                                   

In addition, our financial
    income decreased to US$ 127 million in 2002 from US$ 135 million in 2001,
    due primarily to lower international interest rates following the terrorist
    attacks in the United States in September 2001. Our financial expenses increased
    to US$ 375 million in 2002 from US$ 335 million in 2001 mainly due to our
    consolidation of Alunorte, which increased our financial expenses by US$ 14
    million in the second half of 2002, and to US$ 76 million in losses we incurred
    on interest rate derivatives. In 2002 we included the cost of contractual increases in supplementary benefits related to early retirement programs (US$ 35 million in 2002) in financial expenses. Until 2001, this cost had been recorded under other operating expenses. For comparison purposes US$ 33 million in 2001 and US$ 98 million in 2000 have been reclassified accordingly.


Income Taxes


In 2002 we recorded a tax benefit of US$ 149 million as compared to a tax benefit of US$ 218 million in 2001. Our tax expense at statutory rates would have been US$ 204 million in 2002 and US$ 381 million in 2001. The difference is principally due to the tax benefit of tax-deductible dividends that we pay in the form of interest on shareholders equity, which amounted to US$ 99 million in 2002, as compared to US$ 260 million in 2001, and US$ 196 million due to tax-exempt foreign income in 2002 as compared to US$ 226 million in 2001.


Affiliates and Joint Ventures


Our equity in the results of affiliates and joint ventures and provisions for losses on equity investments in aggregate totaled a loss of US$ 87 million in 2002 compared to a loss of US$ 53 million in 2001. Iron Ore and Pellets.Our equity in the
    results of iron ore and pellet affiliates and joint ventures amounted to a
    loss of US$ 55 million in 2002, compared to a loss of US$ 7 million in 2001.
    The loss in 2002 included a charge of US$ 86 million for a goodwill write-down
    relating to our investment in Caemi, which more than offset improved results
    at several of our other pellet joint ventures, including Samarco, where earnings
    were helped by volumes that increased by 29% and the elimination of goodwill
    amortization expenses in 2002. The writedown of


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our investment
  at Caemi reflects the decline in the listed market price of Caemis preferred
  shares. We also recorded a provision for losses at Kobrasco in the amount of
  US$ 14 million.

Aluminum and Bauxite.Our equity in the
    results of aluminum and bauxite affiliates and joint ventures declined from
    US$ 37 million in 2001 to US$ 29 million in 2002, and we recorded a US$ 10
    million release of a provision related to our investment in Albras. Our portion
    of Alunortes losses up until the time we acquired control in June 2002
    was US$ 23 million, compared to losses of US$ 6 million for the whole of 2001.
    The increased losses at Alunorte primarily reflect the effects of the devaluation
    of therealon
    Alunortes U.S.-dollar denominated debt. Like Alunorte,
      in 2002, our affiliates in the aluminum sector recorded increased losses
      due to the effects of the depreciation of therealon their foreign currency denominated debt.In addition to exchange rate effects, the operating results of Albras and
      MRN in 2002 compared to 2001 were influenced by the following factors:


| |  | Albras.In
      2002, Albras generated net income of US$ 20 million on net sales of US$
      529 million. This compares to net income of US$ 8 million in 2001 on net
      sales of US$ 472 million. Our portion of net income of Albras was US$ 10
      million in 2002 compared with US$ 4 million in 2001. The increase in sales
      at Albras primarily reflects a 22.3% increase in sales volume resulting
      from a capacity expansion completed at the beginning of 2002. This increase
      in volume was partially offset by an 8.6% decline in the average sales price
      of aluminum from US$ 1,428 per ton in 2001 to US$ 1,306 per ton in 2002.                                                                                                                                                                                                                                                                          
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | MRN.In
      2002, MRN generated net income of US$ 94 million on net sales of US$ 173
      million. This compares to net income of US$ 81 million in 2001 on net sales
      of US$ 211 million. Our portion of the net income of MRN was US$ 38 million
      in 2002 compared with US$ 32 million in 2001. MRNs revenues declined
      in 2002 due to an 8.1% reduction in the average sales price of bauxite to
      US$ 18.95 per ton in 2002 from US$ 20.63 per ton in 2001, and a 9.3% decline
      in sales volume to 9.9 million tons in 2002 from 10.9 million tons in 2001
      due to lower demand in the first half of the year and interference from
      the expansion work in the second half of the year. However, since most of
      MRNs costs are incurred inreais,
      the reduction in costs as expressed in U.S. dollars more than offset the
      reduction in revenue, resulting in an increase in net income.

Steel.Our
    equity in the results of steel affiliates and joint ventures increased from
    US$ 5 million in 2001 to US$ 23 million in 2002, reflecting higher net income
    at CST and CSI, which more than offset a loss at Usiminas. The improved performance
    at CST and CSI primarily reflects lower energy costs in 2002 in Brazil and
    California, respectively. The loss at Usiminas primarily reflects the effects
    of the devaluation of therealon Usiminas
    U.S. dollar-denominated debt. Paper and Pulp.Reflecting
    our sale of Cenibra and Bahia Sul in 2001, we recorded no equity in results
    of paper and pulp affiliates and joint ventures in 2002. These companies had
    contributed in aggregate US$ 20 million to our equity results up to the date
    of sale. Other Affiliates and Joint
    Ventures.Our equity
    in the results of other affiliates and joint ventures amounted to a loss of
    US$ 25 million in 2002, compared to a loss of US$ 95 million in 2001. We recorded
    a provision for losses related to FCA of US$ 42 million in 2002, after recording
    a loss of US$ 95 million in 2001 (which had included a US$ 74 million write-off
    of goodwill). In addition, our affiliate MRS generated significant losses
    in 2002, of which our portion was US$ 20 million; in addition to this amount,
    we recorded a provision for losses of US $ 7 million related to MRS. We and
    the other shareholders of these companies continue to explore various alternatives
    to restructure their businesses. Upon adoption
    of SFAS 142 Goodwill and other intangible assets, beginning January
    1, 2002 we ceased amortizing goodwill. In 2001, we recorded goodwill amortization
    of US $ 45 million relating to us and our consolidated subsidiaries and US$
    47 million related to equity investees.


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2001 compared to 2000

Revenues


The following table summarizes our gross revenues by product and net operating revenues for the periods indicated:


|                                      | For
        the Year Ended December 31, |       |      |    
|------------------------------------- | --------------------------------------- | ----- | ---- | ---
|                                      |                                         |       |      |    
|                                      | 2001                                    |       | 2000 |    
|                                      |                                         |       |      |    
|                                      | (In
        millions of US$)            |       |      |    
|                                      |                                         |       |      |    
|Iron Ore and Pellets                  | US$                                     | 2,600 |      | US$
|Gold                                  |                                         | 139   |      |    
|Other mining products                 |                                         |       |      |    
|Manganese
      and Ferroalloys       |                                         | 259   |      |    
|Potash                                |                                         | 71    |      |    
|Others                                |                                         | 41    |      |    
|Subtotal                              |                                         | 371   |      |    
|Revenues from Logistic
      Services |                                         | 608   |      |    
|Aluminum-related Products             |                                         | 284   |      |    
|Other products and services           |                                         | 75    |      |    
|                                      |                                         |       |      |    
|Gross Revenues                        |                                         | 4,077 |      |    
|Value Added Tax                       |                                         | (142  | )    |    
|                                      |                                         |       |      |    
|Net Operating Revenues                | US$                                     | 3,935 |      | US$
|                                      |                                         |       |      |    

Net operating revenues remained constant at US$ 3,935 million in both 2001 and 2000, reflecting an increase in our iron ore and pellets revenues which was partially offset by decreases in revenues from other lines of business. Revenues from iron ore and pellets increased 19.4% to US$ 2,600 million in 2001 from US$ 2,177 million in 2000, reflecting a 19.4% increase in volume sold to 148.8 million tons in 2001 from 124.5 million tons in 2000 partially offset by an increase in average selling prices of 0.4% and an increase of 19.6% due to changes in product mix. In 2001, there was an increase in demand from the growing market in China and therefore our exports to this country increased to 14.9 million tons in 2001 compared to 9.2 million tons in 2000. Our acquisition of Ferteco in April 2001 increased our 2001 sales volume for iron ore and pellets by 11.7 million tons. Revenues from gold sales decreased 10.9% to US$ 139 million in 2001 from US$ 156 million in 2000, representing a 9.0% decrease in volume sold and a 2.1% decrease in average selling prices. The reduction in volume sold was principally due to the closure of our Almas and Caeté mines at the end of 2000 and to a reduction in gold extracted during the first quarter of 2001, due to operational problems at two other mines, which problems were subsequently resolved. Revenues from
    other mining products decreased 10.0% to US$ 371 million in 2001 from US$
    412 million in 2000. This decrease is mainly due to a US$ 49 million reduction
    of sales of our ferroalloys partially offset by a price increase of US $23
    million of manganese sold by our subsidiary Sibra. Potash and kaolin sales
    also decreased as a result of a reduction in demand.


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Revenues from transportation services decreased 20.0% to US$ 608 million in 2001 from US$ 760 million in 2000, principally due to the loss of revenues from services provided to Ferteco and Samitri following our acquisition of these companies in May 2000 and in April 2001, respectively, which are now eliminated in our consolidated financial statements. Revenues from services provided to Ferteco and Samitri prior to their acquisition totaled US$ 86 million in 2000 and US$ 22 million in 2001. Other factors leading to the reduction in revenues from transportation services include a 13.0% decline in prices for domestic transport as a result of the depreciation of therealin 2001, as well as a decrease in our international transportation revenues due to our
divestments in the dry-bulk shipping business. Revenues from aluminum-related products (bauxite, alumina and aluminum) decreased 21.5% to US$ 284 million in 2001 from US$ 362 million in 2000. This decrease of US$ 78 million was due to a US$ 60 million or 20.3% reduction in aluminum-related sales as a result of lower production due to the energy rationing program, and to a US$ 18 million reduction in our resales of alumina provided by our alumina affiliate Alunorte as a result of increased alumina sales by Alunorte to its other shareholders. Revenues from other products
and services decreased 62.9% to US$ 75 million in 2001 from US$ 202 million
in 2000, primarily representing decreases in pulp and paper product revenues
following our divestment of Cenibra. Operating Costs and Expenses The
following table summarizes our operating costs and expenses for the periods
indicated.


|                                                                                     | For
      the Year Ended December 31, |      
|------------------------------------------------------------------------------------ | ------------------------------------- | -----
|                                                                                     |                                       |      
|                                                                                     | 2001                                  |      
|                                                                                     |                                       |      
|                                                                                     | (In
      millions of US$)            |      
|Cost of ores and metals
      sold                                                   | US$                                   | 1,550
|Cost of transportation
      services                                                |                                       | 378  
|Cost of aluminum-related
      products                                              |                                       | 269  
|Others                                                                               |                                       | 75   
|                                                                                     |                                       |      
|Cost
      of Goods Sold                                                             |                                       | 2,272
|                                                                                     |                                       |      
|Selling, general and administrative
      expenses                                   |                                       | 241  
|Research and development,
      employee profit sharing and other costs and expenses |                                       | 460  
|                                                                                     |                                       |      
|Total
      operating costs and expenses                                             | US$                                   | 2,973
|                                                                                     |                                       |      

Overall costs of goods sold decreased 6.5% to US$ 2,272 million in 2001 from US$ 2,429 million in 2000. Our costs and expenses, as expressed in U.S. dollars, were favorably affected by the significant depreciation of therealagainst the U.S. dollar during the year (from R$1.9554 to US$ 1.00 at December 31, 2000 to R$2.3204 to US$ 1.00 at December 31, 2001, or a depreciation of 15.7%), because the majority of these costs and expenses are denominated inreais.The average exchange rate was R$2.2854 to US$ 1.00 during 2001 and R$l.7975 to US$ 1.00 during 2000, or a depreciation of 21.3%. This decrease was
partially offset by an increase of US$ 109 million, or 4.8%, in 2001 relating to our acquisition of Ferteco (which added approximately US$ 33 million in additional costs) and a smaller increase due to the inclusion of Samitri costs in 2001. Cost of ores and metal sold
    increased 8.9% to US$ 1,550 million in 2001 from US$ 1,423 million in 2000.
    The increase of US$ 127 million was principally due to an increase of US$
    124 million in costs due to the consolidation of Ferteco. This increase in
    costs was partially offset by the favorable impact of exchange rate movements
    which is estimated at US$ 90 million. Cost of transportation services decreased 21.4% to US$ 378 million in 2001 from US$ 481 million in 2000, due to improved cost management related to our ships in addition to the decrease in associated revenues.


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Cost of aluminum-related products decreased 19.5% to US$ 269 million in 2001 from US$ 334 million in 2000 as a result of lower levels of activity. The favorable effect of exchange rate movements on the cost of aluminum-related products is insignificant, since the related costs are primarily determined by international market prices. Cost of other products and services decreased 60.7% to US$ 75 million in 2001 from US$ 191 million in 2000, reflecting principally the decreases in volumes of pulp and paper purchases as a result of our divestitures in this line of business. Selling, general and administrative expenses increased 7.1% to US$ 241 million in 2001 from US$ 225 million in 2000, due principally to the acquisition of Ferteco which increased these expenses by US$ 25 million or 11.1% in 2001, partially offset by the effects of exchange rate movements. Research and development,
      employee profit sharing and other costs and expenses increased 79% to US$
      460 million in 2001 from US$ 257 million in 2000. This increase is mainly
      attributable to plant and equipment and ship impairment provisions of US$
      101 million, including expected losses on the sale of ships (US$ 34 million),
      amortization of goodwill of US$ 34 million and a write-off of value-added
      taxes of US$ 54 million based on our agreement with a state government. Non-Operating Income (Expenses)


|                                                | For
      the Year Ended December 31, |     
|----------------------------------------------- | ------------------------------------- | ----
|                                                |                                       |     
|                                                | 2001                                  |     
|                                                |                                       |     
|                                                | (In
      millions of US$)            |     
|Financial
      income                          | US$                                   | 135 
|Financial
      expenses                        |                                       | (335
|Foreign
      exchange and monetary losses, net |                                       | (426
|Gain on
      sale of investments               |                                       | 784 
|                                                |                                       |     
|Non-operating
      income (expenses)           | US$                                   | 158 
|                                                |                                       |     

Net non-operating income was US$ 158 million in 2001 compared to net non-operating expenses of US$ 293 million in 2000. This decrease resulted from a reduction in the contractual cost of supplementary benefits related to early retirement programs which were recorded as financial expenses of US$ 33 million in 2001 and US$ 98 million in 2000, whereas until 2000 this cost had been classified as other operating expenses. For comparison purposes US$ 98 million have been reclassified accordingly. The aggregate favorable change of US$ 386 million was principally due to gains on sales of investments (US$ 784 million) upon divestment of our interests in Bahia Sul, CSN and Cenibra in 2001. This was partially offset by additional net financial expenses of US$ 93 million in 2001 due principally to a reduction in financial income as a result of lower average balances of cash and cash equivalents and the negative effect of
exchange rate movements on our U.S. dollar denominated liabilities, mainly short and long-term debt totaling US$ 186 million.


Income Taxes


In 2001 we recorded a tax
    benefit of US$ 218 million. However, our Federal income tax and social contribution
    expense at statutory rates for 2001 was US$ 381 million. The difference was
    principally due to the tax benefit we derived from making distributions to
    our shareholders in the form of interest on shareholders equity in the
    amount of US$ 260 million and US$ 226 million due to tax-exempt foreign income.


Affiliates and Joint Ventures


Our equity in the results of affiliates and joint ventures and provisions for losses on equity investments in aggregate totaled a loss of US$ 53 million in 2001 compared to a gain of US$ 322 million in 2000.


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Steel.In 2001, our steel sector affiliates were affected in addition to a devaluation of therealagainst the U.S. dollar, by a weaker market for steel products which resulted in decreased average sales prices in 2001. Our U.S. affiliate, CSI, was also affected by higher costs resulting from the energy crisis in California. In 2001 we recorded a loss of US$ 3 million in respect of our steel sector affiliates compared to a gain of US$ 17 million in 2000. Aluminum-Related Products.In 2001, our affiliates in the aluminum sector recorded losses due to the effects of the depreciation of therealon their foreign currency denominated debt. Albras reported a gain in 2001, of which we recognized our portion of US$ 4 million through a reduction in our provision for losses on equity investments. Alunorte reported a loss, of which we recognized our portion of US$ 6 million through equity accounting. In the same period of 2000, our portion of gains reported by Albras and Alunorte were US$ 66 million and US$ 11 million, respectively. In addition to exchange rate effects, the operating results of our major aluminum sector affiliates and joint ventures in 2001 compared to 2000, were influenced by the following factors:


| | Albras
      -   | Aluminum
      sales volume decreased 9.3% to 332,000 tons in 2001 from 366,000 tons in
      2000 and average sales prices decreased 5.3% to US$ l,428.99 per ton in
      2001 from US$ 1,508.42 per ton in 2000.                
| | ---------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                  |                                                                                                                                                                                                                                    
| | Alunorte
      - | Alumina
      sales volume decreased 3.5% to 1,540,000 tons in 2001 from 1,596,000 tons
      in 2000 and the average sales prices decreased by 5.7% to US$ 185.51 per
      ton in 2001 as compared to US$ 196.63 per ton in 2000.
| |                  |                                                                                                                                                                                                                                    
| | MRN
      -      | Bauxite
      sales volume decreased 2.6% to 10,952,000 tons in 2001 from 11,242,000 tons
      in 2000 and average sales prices increased 1.1% to US$ 20.95 per ton in
      2001 from US$ 21.18 per ton in 2000.                 

Paper and Pulp.During
    2001, we sold our respective interests in Bahia Sul and Cenibra, which had
    jointly contributed US$ 108 million to our 2000 consolidated net income. Through
    the date of their respective sales in 2001, these two companies jointly contributed
    US$ 11 million to our 2001 consolidated net income. However, the sale of Bahia
    Sul and Cenibra resulted in one-time gains of US$ 170 million and US$ 507
    million, respectively, which are included in non-operating income (expenses). Others.As
    for ourrailroad affiliate,
    FCA, we recorded an equity loss of US$ 95 million (which included a write-off
    of goodwill in the amount of US$ 74 million) against a loss of US$ 30 million
    in 2000. In 2001, the results of our other equity investments were generally
    lower than in 2000 due to the effects of the devaluation of the real
    and to lower results of operations of these affiliates as a result of difficult
    trading conditions in the markets for their respective products.


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LIQUIDITY AND CAPITAL RESOURCES

Overview

Our principal uses of funds are for capital expenditures, dividend payments and repayment of debt. We have historically met these requirements by using cash generated from operating activities and also short-term and long-term debt. We believe these sources of funds, together with our cash and cash equivalents on hand, will continue to be adequate to meet our currently anticipated capital requirements. In addition, from time to time, we review acquisition and investment opportunities and will, if a suitable opportunity arises, make selected acquisitions and investments to implement our business strategy. We generally make investments either directly or through subsidiaries, joint ventures or affiliated companies, and fund these investments through internally generated funds, the issuance of debt or a combination of these methods. In 2003,
      our major cash needs include announced expected capital expenditures of
      US$ 1.7 billion, an announced minimum cash dividend of US$ 400 million,
      and repayment or refinancing of US$ 717 million in long-term debt that matures
      in 2003. In addition, we have signed an agreement to acquire, subject to
      fulfillment or waiver of certain conditions, the remaining 50% of Caemi
      from Mitsui for US$ 426 million. We expect to meet our cash needs for 2003
      primarily through a combination of operating cash flow and new long-term
      debt.


Sources of Funds

Our principal sources of liquidity are cash and cash equivalents on hand and cash flow from operating activities. In 2002, we generated a net increase in cash and cash equivalents, excluding the effect of exchange rate changes, of US$ 615 million compared to no net change in 2001 and a net decrease of US$ 135 million in 2000. Exchange rate changes decreased our cash and cash equivalents by US$ 641 million in 2002, US$ 94 million in 2001 and US$ 107 in 2000. At December 31, 2002, we had cash and cash equivalents of US$ 1,091 million. Operating activities provided net cash flows of US$ 2,102 million in 2002, US$ 1,518 million in 2001 and US$ 1,424 million in 2000. The amount in 2002 includes $1,031 million in non-cash expenses relating to foreign exchange and monetary losses. In addition
      to the above sources of liquidity, we believe we are well-positioned to
      raise additional capital in the debt markets to the extent needed. We are
      among the most highly rated Brazilian corporate borrowers, which we believe
      enhances our ability to access the debt markets.


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Uses of Funds

Budgeted Capital Expenditures


We have budgeted a total of US$ 1,708 million for capital expenditures in 2003, an amount that exceeds our total capital expenditures in the two previous years combined. The following table sets forth our capital expenditures budget for 2003. These amounts include expenditures on new construction projects as well as expenditures for maintenance and exploration.


|                                 |       |       | 2003
      Budgeted Expenditures |     
|-------------------------------- | ----- | ----- | -------------------------------- | ----
|                                 |       |       |                                  |     
|                                 |       |       | (In
      millions of US$)       |     
|Ferrous
      minerals           | US$   | 563.3 | (1)                              | 33.0
|Logistics                        |       | 281.9 |                                  | 16.5
|Non-ferrous
      minerals       |       | 352.2 | (1)                              | 20.6
|Aluminum-related                 |       | 236.4 |                                  | 13.8
|Energy                           |       | 72.6  |                                  | 4.2 
|Metallic
      and semi-finished |       | 29.0  |                                  | 1.7 
|Corporate
      areas            |       | 105.4 |                                  | 6.2 
|Other                            |       | 67.5  |                                  | 4.0 
|                                 |       |       |                                  |     
|                                 | Total | US$   | 1,708.3                          |     
|                                 |       |       |                                  |     

|                                                                                                                                                                                                                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)
        Under the Mineral Risk Contract, BNDES will pay an aggregate
      of approximately US$ 25.7 million of the 2003 ferrous minerals and non-ferrous
      minerals capital expenditures which are included in this budget.See Item 4. Lines of Business  Mining  Current Copper Prospects
       Mineral Risk Contract.

Budgeted
    capital expenditures in the ferrous minerals, logistics, non-ferrous minerals,
    aluminum-related, energy and corporate areas include the following:


| |  | Our ferrous
      minerals projects for 2003 are designed to increase our iron ore production
      capacity and logistical capabilities for the delivery of iron ore and pellets,
      and include US$ 69.8 million to expand three mines in the Southern System
      and US$ 45 million to expand mines in the Northern System. In addition,
      to improve our logistical capabilities, we have budgeted US$ 16.4 million
      in 2003 for the construction of Pier III at the port of Ponta da Madeira,
      which is expected to increase the ports capacity from its current
      56 million tons to 70 million tons. Part of the remainder of the capital
      expenditures for ferrous minerals relates to maintenance, refurbishment
      and modernization activities.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Our total capital expenditure
      budget for 2003 also includes an aggregate of US$ 72 million for exploration
      activities related to ferrous minerals, bauxite, copper, gold and nickel.
      BNDES, under the Mineral Risk Contract, will participate with approximately
      US$ 25.7 million. See note 15(e) to our financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Our non-ferrous mineral
      projects for 2003 include the Sossego copper project, for which we have
      budgeted US$ 253.1 million for 2003, the completion of which is expected
      for the first half of 2004. We have also budgeted US$ 29.4 million for expanding
      the capacity of the Taquari Vassouras potash mine from 600,000 to 850,000
      tons per year.                                                                                                                                                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Budgeted
      logistics capital expenditures for 2003 are focused primarily on the purchase
      of wagons and locomotives for the transport of general cargo, principally
      of agricultural products, fuel, steel products and building materials.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | In the aluminum-related
      businesses, our principal budgeted capital expenditures relate to the development
      of bauxite mines of MVC in Paragominas (US$ 70.0 million) and expansion
      of Alunortes production capacity (US$ 153.9 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | In the energy
      business, we plan to continue to invest in our power generation projects.
      In 2003, US$ 15.2 million, US$ 16.7 million and US$ 18.5 million have been
      budgeted for our share of the construction costs of the Candonga, Aimores
      and Estreito power plants, respectively. Candonga is                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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| |   | expected
      to begin operations in November 2003, while Aimores is expected to come
      on stream in December.                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                      
| |  | Our principal
      corporate center capital expenditures relate to information technology initiatives,
      including the implementation of enterprise resource planning software for
      US$ 36.8 million and new hardware for US$ 29.5 million.

Dividends Dividends paid totaled US$
    602 million in 2002, US$ 1,066 million in 2001 and US$ 246 million in 2000.
    Our board of directors has approved a proposal to distribute in 2003 a minimum
    dividend (in the form of dividends and/or interest on shareholders equity)
    of US$ 400 million. This amount will be paid in two equal installments, on
    April 30 and October 31, 2003, respectively. Contractual cash obligations The following table summarizes our contractual cash obligations at December 31, 2002.


|                                 |                                            | Payments
      due by Period (In millions of US$) |                
|-------------------------------- | ------------------------------------------ | ------------------------------------------------- | ---------------
|                                
|                                 |                                            |                                                   |                
|Total                            | year                                       | 1-3
      years                                   | 3-5
      years
|                                 |                                            |                                                   |                
|Long-term
      debt obligations | US$                                        | 3,076                                             |                
|                                 |                                            |                                                   |                
|                                 | Total
        contractual cash obligations | US$                                               | 3,076          
|                                 |                                            |                                                   |                

In July 2002, we entered into a US$ 100 million Export Prepayment Agreement with a final maturity of July 2006. The lender under this agreement has the right to demand payment of the entire amount outstanding in July 2004, subject to compliance with certain notice provisions.


Debt

At December 31, 2002, our aggregate
    outstanding debt was US$ 3,331 million, consisting of short-term debt of US$
    965 million, including US$ 717 million of current portion of long-term debt,
    US$ 64 million in loans from joint ventures and affiliated companies and long-term
    debt (excluding current portion) of US$ 2,366 million outstanding, including
    US$ 7 million in loans from related parties. Our short-term debt consists
    primarily of U.S. dollar-denominated trade financing, documented mainly in
    the form of export prepayments and export sales advances with Brazilian and
    foreign financial institutions. At December 31, 2002, approximately US$ 465
    million of our debt was secured by liens on some of our assets. We describe
    the average interest rates on our long-term debt in note 12 to our financial
    statements.


| | Our
      major categories of indebtedness are as follows:
| | ----------------------------------------------------------
| |                                                           
| |                                                          
| |                                                           
| |                                                          
| |                                                           
| |                                                          

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| |  | Perpetual
      notes (US$ 63 million at December 31, 2002).We
      have issued perpetual notes that are exchangeable for 48 billion preferred
      shares of MRN. Interest is payable on the notes in an amount equal to dividends
      paid on the underlying preferred shares relating to periods beginning with
      the 2000 fiscal year.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                   
| |  | Local
      debt (US$ 396 million at December 31, 2002).We
      have a series of Brazilian loans, principally from BNDES, most of which
      are indexed to U.S. dollars, and the remainder of which are linked to baskets
      of currencies or floating rates in Brazil.                                                                     

Some of our
    long-term debt instruments contain financial covenants. Our principal covenants
    require us to maintain certain ratios, such as debt to equity, net debt to
    EBITDA and interest coverage. We were in full compliance with our financial
    covenants as of December 31, 2002, and we believe that our existing covenants
    will not significantly restrict our ability to borrow additional funds as
    needed to meet our capital requirements. We believe we will be able to operate
    within the terms of our financial covenants for the foreseeable future. None
    of these covenants directly restricts our ability to pay dividends on equity
    securities at the parent company level. We use derivative
    instruments to manage our exposure to interest rate fluctuations. SeeItem
    11. Quantitative and Qualitative Disclosures About Market Risk.


Off-Balance Sheet Arrangements

At December 31, 2002, our
    off-balance sheet arrangements consisted solely of guarantees. At December
    31, 2002, we had extended guarantees for borrowings obtained by affiliates
    and joint ventures in the amount of US$ 516 million, of which US$ 405 million
    is denominated in U.S. dollars and the remaining US$ 111 million is denominated
    in local currency. We expect no losses to arise as a result of these guarantees.
    We have made no charges for extending these guarantees, except in the case
    of Albras and Samarco. The following table summarizes our guarantees on behalf
    of affiliates and joint ventures at December 31, 2002.


|                                 |      | Amount
      of |          |            |  |      |  |                        
|-------------------------------- | ---- | --------------- | -------- | ---------- |  | ---- |  | -----------------------
|Guarantee                        |      |                 |         
|(In
      millions of            |      | Final           | Counter-
|Affiliate
      or Joint Venture | US$) | Currency        | Maturity | guarantees
|                                 |      |                 |          |            |  |      |  |                        
|Albras                           |      | 302             |          | US$        |  | 2007 |  | None                   
|                                 |      | 44              |          | R$         |  | 2010 |  | None                   
|FCA                              |      | 51              |          | US$        |  | 2009 |  | None                   
|                                 |      | 62              |          | R$         |  | 2012 |  | None                   
|Kobrasco                         |      | 13              |          | US$        |  | 2003 |  | None                   
|Nibrasco                         |      | 6               |          | US$        |  | 2004 |  | Collateral
      Pledge
|Samarco                          |      | 14              |          | US$        |  | 2020 |  | None                   
|Sepetiba
      Tecon             |      | 19              |          | US$        |  | 2005 |  | None                   
|                                 |      | 4               |          | R$         |  | 2012 |  | None                   
|Valesul                          |      | 1               |          | R$         |  | 2006 |  | None                   

We do not have (i) any retained
    or contingent interests in assets transferred to an unconsolidated entity
    or similar arrangements; (ii) any obligations under derivative instruments
    that are indexed to our common shares and classified in stockholders
    equity; or (iii) any obligations arising out of a variable interest in an
    unconsolidated entity.


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Item 6. Directors, Senior Management and Employees

BOARD OF DIRECTORS

Overview

OurConselho de Administração,or board of directors, sets general guidelines and policies for our business and monitors the implementation of those guidelines and policies by our executive officers. The board of directors holds regularly scheduled meetings on a monthly basis and holds additional meetings when called by its chairman, vice-chairman or any two directors. Decisions of the board of directors require a quorum of a majority of the directors and are taken by majority vote. Under the Brazilian Corporation Law, the board of directors must have at least three members. Each director and his or her respective alternate are elected at a general shareholders meeting and are subject to removal at any time. Our by-laws state that the board of directors must consist of eleven members. Our current employees have the right to appoint one director and an alternate. Under the Brazilian Corporation Law, members of the board of directors must be shareholders of CVRD. Members of the board of directors are elected for two-year terms and can be re-elected. Each alternate director serves on behalf of a specific board member. In the absence of the director for whom an alternate director is acting, that alternate director may attend and vote at meetings of the board of directors. Nine of our
    current directors and nine of our current alternate directors were appointed
    to their positions directly by Valepar, our principal shareholder, pursuant
    to Valepars shareholders agreement and the provisions of the Brazilian
    Corporation Law. For a description of the procedures under which our directors
    are appointed, seeItem
    10. Additional InformationMemorandum and Articles of IncorporationCommon
    Shares and Preferred SharesGeneral.These appointments were approved at our annual shareholders meeting
    held in April 2003. For a description of Valepars shareholders
    agreement, seeItem
    7. Major Shareholders and Related Party TransactionsMajor ShareholdersPrincipal
    Shareholder.


Directors of CVRD

The table below lists the current members of the board of directors. All of our directors were elected in 2003, and their terms will expire in 2005.


|                                              | Year     |     |               |  |   
|--------------------------------------------- | -------- | --- | ------------- |  | --
|First                                         |          |    
|Elected                                       | Position | Age
|                                              |          |     |               |  |   
|Sérgio
      Ricardo Silva Rosa(1)            | 2003     |     | Chairman      |  | 44
|João
      Moisés de Oliveira(1)              | 2000     |     | Director      |  | 58
|Erik
      Persson(1)                         | 2001     |     | Director      |  | 49
|Ricardo
      Carvalho Giambroni(1)           | 2001     |     | Director      |  | 46
|Arlindo
      Magno de Oliveira(1)            | 2003     |     | Director      |  | 51
|Luiz
      Alexandre Bandeira de Mello(1)     | 2003     |     | Director      |  | 55
|Renato
      da Cruz Gomes(1)                 | 2001     |     | Director      |  | 50
|Mário
      da Silveira Teixeira Júnior(1)    | 2003     |     | Vice-Chairman |  | 57
|Rômulo
      de Mello Dias(1)                 | 2001     |     | Director      |  | 41
|Claudio
      Bernardo Guimarães de Moraes(3) | 2003     |     | Director      |  | 41
|Francisco
      Valadares Póvoa(2)            | 1997     |     | Director      |  | 53

|   
|---
|(1)
|(2)
|(3)

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The table below lists the alternate members of the board of directors. One additional alternate director remains to be appointed by Valepar.

|                                          | Year
      First
      Elected |  | Position |  | Age
|----------------------------------------- | ------------------------------ |  | -------- |  | ---
|                                          |                                |  |          |  |    
|Ivan
      Luiz Modesto Schara(1)         | 2003                           |  | Director |  | 36 
|Gerardo
      Xavier Santiago(1)          | 2003                           |  | Director |  | 43 
|Octávio
      Mauro Muniz Freire Alves(1) | 2001                           |  | Director |  | 42 
|Jorge
      Luiz Pacheco(1)               | 2003                           |  | Director |  | 48 
|Alcio
      Ferreira Passos(1)            | 2003                           |  | Director |  | 56 
|Luiz
      Carlos de Freitas(1)           | 2003                           |  | Director |  | 50 
|Vacant                                    |                               |  |         |  |   
|Luiz
      Maurício Leuzinger(1)          | 2003                           |  | Director |  | 61 
|Marcelo
      Amaral Moraes(1)            | 2003                           |  | Director |  | 35 
|Ana
      Marta Horta Veloso(3)           | 2003                           |  | Director |  | 34 
|Otto
      de Souza Marques Júnior(2)     | 1997                           |  | Director |  | 56 

|   
|---
|(1)
|(2)
|(3)

We have summarized
    below the business experience, areas of expertise, and principal outside business
    interests of our current directors:


Sérgio Ricardo
    Silva Rosa.Mr. Rosa joined
    our board of directors in April 2003 and was designated as Chairman in May
    2003. Mr. Rosa is currently the chief executive officer of PREVI - Caixa de
    Previdência dos Funcionários do Banco do Brasil, or Previ, where
    he has been an executive officer since 2000. He is also a director of Valepar
    S.A., or Valepar, and an executive officer of Litel Participações
    S.A., or Litel. Prior to joining Previ, Mr. Rosa served as President of the
    Confederação Nacional dos Bancários from June 1994 to
    May 2000. From January 1995 to December 1996, Mr. Rosa was a legislator of
    the municipality of São Paulo. Mr. Rosa has been a director of Brasil
    Telecon Participações since December 2000, and of Sauípe
    S.A. since May 2001. João Moisés
    de Oliveira. Mr.
    Oliveira joined our board of directors in 2000. Mr. Oliveira has been an executive
    officer at Bradespar S.A. since 2000. He is also an executive officer of Eletron
    S.A. From 1962 to 2000, he worked at Banco Bradesco S.A. and at several companies
    in which Banco Bradesco S.A. has a direct or indirect ownership interest.
    He has servedas
    an executive officer of several companies in which Banco Bradesco or Bradespar
    has or had a direct or indirect ownership interest, including Companhia Siderúgica
    Belgo Mineira, CSN and São Paulo Alpargatas S.A. Erik Persson.
    Mr. Persson joined our board of directors in April 2001. Mr. Persson has been
    a planning officer at Previ since June 2000, and has worked at Previ since
    1977. Mr. Persson has also served as a director of Valepar and Litel since
    April 2001, and has held a position as director of SEEB Porto Alegre and FEEB
    Rio Grande do Sul since 1990. Ricardo Carvalho Giambroni.
    Mr. Giambroni joined our board of directors in April 2001. In March 2003,
    he was nominated CEO of Litela Participações S.A., or Litela,
    and in April 2003, director of Valepar. Mr. Giambroni is a manager of the
    equity division at Previ. From June 1999 to December 2002, he has been an
    executive officer of Litel. From June 1997 to April 2001, he was a director
    of Paranapanema Group and, from April 2001 to December 2002, of Valepar. Arlindo Magno de Oliveira.
    Mr. Magno joined our board of directors in April 2003. Since 1996, he has
    served in a variety of positions at Previ, including among others: member
    of theconselho
    fiscal, customer
    service manager, officer for deliberations and executive officer for planning.
    From April to October 2002, Mr. Magno was the executive officer in charge
    of finance and management at CEDAE  Companhia Estadual de Água
    e Esgoto. He has also actedas a director of
    several companies, including Companhia de Eletricidade do Estado da Bahia
     COELBA, Companhia Energética do Rio Grande do


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Norte  COSERN,
  CPFL Energia S.A., CPFL Geração de Energia S.A. and ENERCAN 
  Campos Novos Energia S.A.


Luiz Alexandre Bandeira de Mello. Mr. Bandeira de Mello joined our board of directors in April 2003. He has been an officer of Investvale since December 1994, and an employee of CVRD since 1972, when he first began work at CVRDs pelletizing complex in Tubarão. Mr. Bandeira de Mello acted as the superintendent officer for a pelletizing complex from 1991 to 1997 and as executive officer of our Hispanobrás, Itabrasco, Nibrasco and Kobrasco affiliates from 1991 to 2000, and as CEO of our pelletizing affiliate Gulf Industrial Investment Co. from October 2000 through January 2003. From 1993 to 1997, Mr. Bandeira de Mello was a member of the board of trustees (conselho de curadores) of
Fundação Vale do Rio Doce de Seguridade Social (Valia). Renato da Cruz Gomes. Mr. Gomes joined our board of directors in April 2001. Mr. Gomes has been an executive officer of Bradespar S.A. since 2000. He is also a director of Bradesplan S.A. and Eletron S.A. From 1976 through 2000, Mr. Gomes held a variety of positions within BNDES and participated on the boards of directors of many companies, namely Elebra Eletrônica, Globo Cabo, Aracruz, Iochpe, Bahia Sul and Latasa. He was also a member of the consulting board of Factor Sinergia  Fundo de Investimento de Valores Mobiliários em Ações and the investments committee of Bradesco Templeton Value and Liquidity Fund. Mr. Gomes has been an executive officer of Valepar sinceApril 25,
2001. Mário da Silveira
    Teixeira Júnior.
    Mr. Teixeira joined our board of directors in April 2003 as vice-chairman.
    Mr. Teixeira has worked at Banco Bradesco S.A. since 1971, serving in a variety
    of positions in several companies in which Banco Bradesco holds a direct or
    indirect ownership interest, including Fundação Bradesco. Currently,
    he is a director of Banco Bradesco S.A., Fundação Instituto
    de Moléstias do Aparelho Digestivo e da Nutrição, CPFL
    Geração de Energia S.A., Valepar, Companhia Paulista de Força
    e Luz - CPFL and CPFL Energia S.A., BES Investimento do Brasil S.A. - Banco
    de Investimento, Banco Espírito Santo de Investimento, S.A. He is president
    of VBC Participações S.A. He also served as a director of many
    companies, including Bradespar S.A., Companhia de Energia Semesa, COFAP 
    Companhia Fabricadora de Peças, and CSN. He was also a member of the
    consulting board andconselho
    fiscalof Newtechnos
    Catalisadores Automotivos Ltda., vice-president of ANBID - Associação
    Nacional dos Bancos de Investimento and director of ABRASCA  Associação
    das Companhias Abertas. Rômulo de Mello
    Dias. Mr. Dias
    joined our board of directors in April 2001. Since 2000, he has been business
    development officer and investor relations officer of Bradespar. He is also
    a director of Net Serviços de Telecomunicações S.A. From
    1980 to 2000, he occupied a variety of positions in several companies, among
    others, Banco do Brasil S.A., Previ, Citibank and Albion Alliance. Claudio Bernardo Guimarães
    de Moraes. Mr.
    Moraes joined our board of directors in April 2003. From
    1984 until the present, he has served in a variety of positions at BNDES.
    From April 2002 to April 2003, Mr. Moraes was a member of our conselho
    fiscal. Francisco Valadares Póvoa.Mr. Póvoa
    joined our board of directors in May 1997. He is also a director of Valepar
    and CSI and a member of Valias board of trustees. He is also the
    CEO of Investvale. Until March 2001, he was also a director of CSN and was
    previously an alternate director of CSN. Mr. Póvoa joined us as a mining
    engineer in 1972 and has held a variety of positions within the CVRD Group.


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Directors of Vale Overseas

Vale Overseas directors
    are as follows:


|                           | Position |  | Age | 
|-------------------------- | -------- |  | --- | 
|                           |         
|Gabriel
      Stoliar      | Director |  | 49  | 
|Tito
      Botelho Martins | Director |  | 40  | 

Mr. Stoliar also serves as
    Vale Overseas principal executive officer and Mr. Martins also serves
    as Vale Overseas principal financial and accounting officer. Mr. Stoliars
    experience is summarized below under  Executive Officers.


Tito Botelho Martins.Since August 1999, Mr. Martins has been our corporate finance officer. Currently, Mr. Martins is also a director of Vale Overseas Limited, Caemi, Samarco, GIIC, FCA and chairman of the board of trustees of VALIA. He started to work at CVRD in 1985 as a trainee and held various positions in different departments of CVRDs financial division. In December 2002, he was also appointed as financial officer of FCA. Mr. Martins has a degree in economics from the Universidade Federal de Minas Gerais (UFMG), and obtained an MBA from IEAD/UFRJ.


The business address of the directors is Avenida Graça Aranha, 26, 17th floor, 20030-900 Rio de Janeiro, RJ, Brazil.


EXECUTIVE OFFICERS

Overview

The executive officers are our legal representatives and are responsible for day-to-day operations and the implementation of the general policies and guidelines set forth by the board of directors. Our by-laws provide for a minimum of three and a maximum of nine executive officers. The board of directors appoints executive officers for two-year terms and may remove them at any time. According to the Brazilian Corporation Law, executive officers must be Brazilian residents. The executive officers hold regularly scheduled meetings on a bi-weekly basis and hold additional meetings when called by any executive officer. On December 27, 2002, our
    general shareholders meeting approved an amendment to our by-laws to
    increase the number of the executive officers. As a result, we now have one
    CEO (chief executive officer) and up to eight executive officers, each responsible
    for business areas that the board of directors assigns to them.


Executive Officers

The table below lists our current executive officers. The term of each of our executive officers expires in 2005.


|                                 | Year
      of |     |                                                                      |  |    | 
|-------------------------------- | ------------- | --- | -------------------------------------------------------------------- |  | -- | 
|Appointment                      | Position      | Age
|                                 |               |    
|Roger Agnelli                    | 2002          |     | Chief
      Executive Officer                                        |  | 44 | 
|Armando
      de Oliveira Santos | 2002          |     | Executive
      Officer (Ferrous Minerals)                           |  | 53 | 
|Antonio
      Miguel Marques     | 2002          |     | Executive
      Officer (Holdings and Business Development)          |  | 46 | 
|Guilherme
      Rodolfo Laager   | 2002          |     | Executive
      Officer (Logistics)                                  |  | 46 | 
|Fabio de
      Oliveira Barbosa  | 2002          |     | Executive Officer (Finance,
      Accounting and Investor Relations) |  | 42 | 
|Gabriel
      Stoliar            | 2002          |     | Executive
      Officer (Planning and Control)                       |  | 49 | 
|Diego Hernández                  | 2002          |     | Executive Officer (Non-Ferrous
      Minerals)                       |  | 54 | 
|Carla Grasso                     | 2002          |     | Executive
      Officer (Human Resources and Corporate Services)     |  | 41 | 

We have summarized below the experience, areas of expertise, and principal outside business interests of our current executive officers.


Roger Agnelli. Mr. Agnelli was appointed as our CEO
       in July 2001. He made his career with the Bradesco group from 1981 through

    2001, where he served as executive officer of Banco Bradesco, from 1998 through
       2000. He also served as CEO of Bradespar S.A., from March 2000 to July
      2001.
    During that time, he served as chairman of our board of directors and also
       served as a director of several major Brazilian companies, such as Companhia

    Paulista de Força e Luz, CSN, Latas de Alumínio S.A. 
    LATASA, VBC Energia S.A., Brasmotor S.A., Mahle Metal Leve S.A., Rio Grande
     Energia S.A. and Serra da Mesa Energia S.A. He was also a director of UGB

    Participações S.A. and vice-president of the National Investment
     Banks Association (Associação Nacional dos Bancos de Investimento).
    Currently, Mr. Agnelli is a director of Asea Brown Boveri (ABB) and chairs
     the Business Cooperation Committee (CCE  Comitê de Cooperação
      Empresarial) at the Getúlio Vargas Foundation (FGV). He also
      is  a member of the Economic and Social Development Council, advisory organ
      to
    the presidency of Brazil. He holds a degree in Economics from the Armando
    Álvares Penteado Foundation, São Paulo.


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Armando de Oliveira Santos.Mr. Santos was appointed as an executive officer of our ferrous minerals area in October 2001. Currently, Mr. Santos is also a director of Caemi, CPFL, Samarco and Sibra. Since 1970, Mr. Santos has held many different positions within the CVRD Group, including trainee at the railway division, assistant to the CEO and marketing manager and executive officer at Rio Doce America, Inc., or RDA, sales manager of the Far East area, coordinator for planning and sales promotion, general manager and director of Rio Doce International S.A., or RDI, general sales manager and executive officer of the iron ore division, commercial officer and executive officer of RDA and director of CSI. Mr. Santos has a degree in civil engineering from the Universidade Federal do Espírito Santo (UFES). Antonio Miguel Marques.Mr. Marques was appointed as an executive officer of our holdings and business development area in October 2001. Currently, Mr. Marques is CEO of Aluvale and director of Caemi, CST, Fosfértil, MRN, Alunorte, Albras, Valesul and Usiminas, and CEO of Vale do Rio Doce Energia S.A. Prior to that, Mr. Marques has held various positions at Caraíba Metais S.A. Indústria e Comércio, DuPont do Brasil S.A., Billiton Metais S.A., Paranapanema Group and Votarantim Group. Mr. Marques has a degree in engineering from the Universidade Federal de Ouro Preto. He received his postgraduate degree in Mineral Treatment at the Universidade Federal de Minas Gerais (UFMG) and obtained an MBA from COPPEAD, at the Universidade Federal do Rio de Janeiro (UFRJ). Guilherme Rodolfo Laager.Mr. Laager was appointed as an executive officer of our logistics area in September 2001. Mr. Laager served as logistics, supplying and technological information director for AMBEV, Companhia de Bebidas das Américas from 1989 until August 2000. From 1982 until 1988, Mr. Laager worked for Andersen Consulting and, from 1979 until 1981, for IESA, International de Engenharia S.A. Mr. Laager has a degree in civil engineering from the Universidade Federal do Rio de Janeiro (UFRJ) and obtained an MBA in business administration from COPPEAD, also at UFRJ. Fabio de Oliveira Barbosa.
    Mr. Barbosa was appointed as our chief financial officer in May 2002. He is
    also an officer of Docepar S.A. Prior to that, Mr. Barbosa served as a member
    of our board of directors from April 2000 to March 2002. Previously, he served
    as chairman of the board of directors of BANESPA  Banco do Estado de
    São Paulo S.A., and also served as a board member of the following
    companies: Banco do Brasil S.A., Caixa Econômica Federal, CST and TELESPTelecomunicações
    de São Paulo. Prior to joining us, Mr. Barbosa has served as secretary
    of the National Treasury Secretariat at the Ministry of Finance since July
    1999, after serving as assistant secretary in the previous four years. From
    1992 to 1995, he served as adviser to the Executive Board of the World Bank,
    in Washington D.C. From 1990 to 1992, he was Deputy and Head of the Fiscal
    Policy Unit at the Ministry of Economy and Finance. From 1988 to 1990, he
    was economic advisor and head of the Economic Analysis Unit, both at the Ministry
    of Planning. Prior to that time, Mr. Barbosa held a variety of positions at
    the Ministry of Industry and Commerce, the Paraná State Development
    Institute, the Ministry of Labor and the Institute for Applied Economic Research. Gabriel Stoliar.
       Since October 2001, Mr. Stoliar has served as the chief planning and control

    officer of CVRD. In September 1997, he was originally appointed as an executive
       officer of the Corporate Center and Investor Relations area. In 1994,
      he was
    appointed director of BNDESPAR. In 1991, Mr. Stoliar assumed the position
       of superintendent of the operational division responsible for the areas
      of
    mining, metallurgy, chemicals, petrochemicals, pulp and paper of BNDESPAR.
       He was appointed by BNDESPAR in 1988 as manager of operations in the area

    of capital, electronic and consumer goods. In 1982, he was promoted to manager
       of BNDES for the project area of FINSOCIAL. In 1978, he was hired by BNDES

    as an analyst in the area of pulp, paper and petrochemicals. Mr. Stoliar
      began  his career as a business organization consultant at the Institute
      of Economic
    and Management Development of the Federation of Industries of Rio de Janeiro.
       Mr. Stoliar obtained an engineering degree from Universidade Federal do
      Rio
    de Janeiro (UFRJ), a post graduate degree in production engineering and an
       MBA from PDG/EXE-SDE in Rio de Janeiro.


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Diego Hernández.Mr. Hernández has been appointed executive officer of the non-ferrous
     minerals area in 2002. A Chilean mining engineer, Mr. Hernández obtained
      his degree from École des Mines de Paris  France in 1973.
      In  December 2001, he joined CVRD to look after the non-ferrous minerals
      area. From 1996
    to 2001, Mr. Hernández was executive president and CEO of Cia. Minera
     Doña Ines de Collahuasi, the US$ 1.8 billion Copper Megaproject in
     northern  Chile. From 1988 to 1996, he worked for Anglo American Group in
     Chile as CEO
    at Mantos Blancos Copper Company, Development Manager  Manto Verde
    and  Santa Barbara Copper Projects  and CEO of Cia. Minera Tres Cruces.
    From  1985 to 1988, Mr. Hernández worked for Rio Tinto in Brazil at
    Morro  do Ouro Gold Project. Prior to that, he held various positions at
    mining operations
    and engineering companies in Chile and Brazil. Through 2000 to 2001, Mr.
    Hernández
    was President of Consejo Minero (Chilean Chambers of Mines). Carla Grasso.Ms.
    Grasso was appointed as an executive officer of the human resources and corporate
    services area in October 2001. Prior to joining us, Ms. Grasso served as the
    economic assistant to the President of Brazil. She has also been deputy coordinator
    of fiscal policy at the Ministry of the Economy and has held a variety of
    positions at the Ministry of Social Security. In 1997, she was appointed as
    an executive officer of Fundação Vale de Rio Doce de Habitação
    e Desenvolvimento Social. Ms. Grasso has both a degree in Economics and a
    master in Economics from Universidade de Brasilia (UNB).


FISCAL
  COUNCIL

Under the Brazilian
  Corporation Law, we may appoint aconselho
  fiscal,
  a fiscal council, as a corporate body independent of our management and external
  auditors. The primary responsibility of the fiscal council is to review managements
  activities and the financial statements, and report its findings to the shareholders.
  We have established a permanent fiscal council, which may have from three to
  five members. On April 16, 2003, the shareholders appointed the current members
  and their respective alternates. Holders of preferred class A shares, including
  the golden share, may elect one member of the fiscal council and the respective
  alternate. Non-controlling holders of common shares comprising at least 10%
  of the common shares outstanding may also elect one member of the fiscal council
  and the respective alternate. The terms of the members of the fiscal council
  expire at the next ordinary annual shareholders meeting following their
  election. The table below lists the current members of the fiscal council.


|                                      | First
      Year of
      Appointment
|------------------------------------- | -------------------------------------
|                                      |                                      
|Joaquim Vieira Ferreira
      Levy(1) | 2003                                 
|Wilson Risolia Rodrigues(2)           | 2003                                 
|Luiz Octavio Nunes West(3)            | 1998                                 
|Vicente Barcelos(3)                   | 2001                                 
|Pedro Carlos de Mello(3)              | 2002                                 

|   
|---
|   
|(1)
|(2)
|(3)

The table below
  lists the alternate members of the fiscalcouncil.


|                                        | First
      Year of
      Appointment
|--------------------------------------- | -------------------------------------
|                                        |                                      
|Tarcísio José
      Massote de Godoy(1) | 2003                                 
|Marcelo Bragagnolo Bonini(2)            | 2003                                 
|Ricardo Wiering de Barros(3)            | 2003                                 
|Helder Zenóbio(3)                       | 2003                                 
|Aldo Bastos Alfano(3)                   | 2003                                 

|   
|---
|   
|(1)
|(2)
|(3)

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ADVISORY
  COMMITTEES

Our bylaws establish five
    technical and advisory committees to the board of directors, as follows: Executive
    Development, Strategic, Finance, Audit and Governance and Ethics. Some committee
    members are not members of the board of directors.


| |  | The
      Executive Development Committeeis
      responsible for reporting on general human resources policies; recommending
      compensation levels for our executive officers; and establishing guidelines
      for evaluating the performance of our executive officers. The members of
      the executive development committee are: Francisco Valadares Póvoa,
      João Moisés de Oliveira, Arlindo Magno de Oliveira and Olga
      Loffredi.                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | The
      Strategic Committeeis
      responsible for reviewing and making recommendations to the board of directors
      concerning the strategic guidelines and strategic plan submitted annually
      to the board by our executive officers; the companys annual and multi-annual
      investment budgets; investment and/or divestiture opportunities submitted
      by executive officers, and mergers and acquisitions. The members of the
      strategic committee are: Roger Agnelli, Gabriel Stoliar, Samir Zraick, José
      Roberto Mendonça de Barros and Cláudio Roberto Frischtak.                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | The
      Finance Committeeis
      responsible for reviewing and making recommendations to the board of directors
      concerning: the financial policies and the internal financial control systems
      of the company, compatibility between the level of distributions to shareholders
      and the parameters established in the annual budget; and consistency with
      the general policy on dividends and the capital structure of the company.
      The members of the finance committee are: Roger Agnelli, Fabio de Oliveira
      Barbosa, Rômulo de Mello Dias and Luiz Carlos Siqueira Aguiar.                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | The
      Audit Committeeis
      responsible for recommending the appointment of the independent auditors
      and the employee responsible for internal auditing of the company to the
      board of directors; reporting on the policies and the companys annual
      auditing plan submitted by the employee responsible for internal auditing,
      and on its execution; tracking the results of the companys internal
      auditing, and identifying, prioritizing, and submitting actions to be accompanied
      by the executive officers; and analyzing the annual report, as well as the
      financial statements of the company and making recommendations to the board
      of directors. The members of the audit committee are: Marcos Fábio
      Coutinho, Antonio José Figueiredo Ferreira and Ricardo Wiering de
      Barros.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | The Governance and
      Ethics Committeeis
      responsible for evaluating our corporate governance practices and the workings
      of the board of directors, and recommending improvements to the code of
      ethics and our system of management in order to avoid conflicts of interests
      between the company and its shareholders or administrators; issuing reports
      on policies relating to corporate responsibility, such as the environment,
      health, safety and social responsibility of the company submitted by the
      executive officers; and issuing reports on potential conflicts of interest
      between the company and its shareholders or administrators. The members
      of the governance and ethics committee are: Renato da Cruz Gomes, Ricardo
      Carvalho Giambroni and Ricardo Simonsen.           

COMPENSATION
  OF DIRECTORS, EXECUTIVE OFFICERSAND FISCAL
  COUNCIL MEMBERS

General

Under our by-laws,
  our shareholders are responsible for establishing the aggregate compensation
  we pay to the members of our board of directors and our executive officers.
  Our shareholders determine this annual aggregate compensation at the general
  shareholders meeting each year. In order to establish aggregate director
  and officer compensation, we believe that our shareholders usually take into
  account various factors which range from age, experience and skills of our directors
  and officers to the recent performance of our operations. Once aggregate compensation
  is established, the members of our board of directors are then responsible for
  distributing such


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aggregate compensation individually in compliance with our by-laws. The executive development committee of our board of directors makes recommendations to the board concerning the annual aggregate compensation.

For the year
  ended December 31, 2002, we paid approximately R$8.2 million in aggregate (including
  benefits in kind granted) to the members of our board of directors and to the
  executive officers for services in all capacities. For the year ended December
  31, 2002, none of our board members and executive officers had any financial
  or other interests in transactions involving us which was not in the ordinary
  course of business. The total number
  of common shares owned by our directors and executive officers as of May 30,
  2003, was 10,547. The total number of preferred shares owned by our directors
  and executive officers as of May 30, 2003, was 402. None of our directors or
  executive officers beneficially owns one percent or more of any class of our
  shares.


Incentive Plans

In addition to fixed compensation,
    our executive officers are also eligible for bonuses and long-term incentive
    payments of preferred stock. Each executive officer may receive a bonus based
    on his or her individual performance and our performance during the fiscal
    year. The board of directors determines and the shareholders meeting
    approves the total annual amount of compensation. Long-term incentive payments
    of preferred stock are then based on a portion of the bonus received. The
    long-term incentive vests over a three-year period and is paid only after
    the end of three years of service. After the stock is paid in respect of a
    long term incentive payment, it remains subject to a further holding period
    during which it may not be sold, but the executive officer will be entitled
    to dividends paid during the holding period.


Fiscal Council

During 2002,
  the monthly amount we paid to the members of the fiscal council was the higher
  of (1) R$4,200 or (2) the equivalent of 10% of the amount paid on average to
  an executive officer, excluding benefits. We paid an aggregate of US$ 57,000
  to members of the fiscal council in 2002. In addition, the members of the fiscal
  council are reimbursed for travel expenses related to the performance of their
  functions.


EMPLOYEES

General

The table below
  sets forth the number of our employees by category as of the dates indicated.


|                                                   | At
      December 31, | 
|-------------------------------------------------- | --------------------- | 
|                                                   |                       | 
|                                                   | 2000                  | 
|                                                   |                       | 
|Ferrous
      Minerals                             | 4,948                 | 
|Logistics                                          | 4,525                 | 
|Non-Ferrous
      Minerals                         | 1,066                 | 
|Aluminum,
      Steel and Fertilizers and Business |                       | 
|Development                                        |                      | 
|Administrative                                     | 903                   | 
|                                                   |                       | 
|Total                                              | 11,442                | 
|                                                   |                       | 

Wages and Benefits

We establish
  our annual wage and benefits programs in July of each year following negotiations
  with our unions. In July 2002, our final proposals to our unions included a
  7% salary increase, additions to the list of available medications, provisions
  for college materials for employees and annual bonus amounts. The provisions
  of our collective bargaining agreements with our unions also apply to our non-union
  employees. We have not suffered any material economic loss as a result of labor
  strikes or stoppages.


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Since 1973, we have sponsored
    a defined benefit pension plan, known as the old plan, covering substantially
    all employees, with benefits based on years of service, salary and social
    security benefits. This plan was funded by monthly contributions we and our
    employees made, calculated based on periodic actuarial appraisals and administered
    by Valia. Sponsored by CVRD, Valia is a closed, nonprofit, complementary social
    security plan with financial and administrative autonomy. With 27 sponsoring
    companies and over 45 thousand participants (active, retired and pensioners),
    its overall profitability reached 23.62% in 2002, with a surplus of US$ 29
    million, making for an accrued surplus of US$ 83 million. In May 2000, we implemented a new pension plan, which is primarily a defined contribution plan with a defined benefit feature relative to service prior to May 2000, known as the new plan, and offered our active employees the opportunity to transfer to the new plan. Over 98% of our active employees opted to transfer to the new plan. The old plan will continue in existence, covering almost exclusively retired participants and their beneficiaries. All employees and their dependants
    are entitled to supplementary medical assistance, which offers coverage for
    outpatient and in-hospital treatment, dental care and prescription drug costs.
    Beneficiaries have free choice of care providers, with part of expenses being
    reimbursed. Other important fringe benefits offered to employees are an annual
    amount for school materials, group life insurance, funeral assistance and
    reimbursement of nursery school costs for employees children up to the
    age of three years.


Equity Ownership

Our employees have an equity stake in our business through Investvale, an association of our current and retired employees. During 2002, Investvale contributed all of its shares to in us in exchange for an interest in Valepar S.A., our principal shareholder. At December 31, 2002, Investvale owned 11,120,369 common shares, representing approximately 8.5% of the total capital of Valepar. Our by-laws authorize us to establish stock option plans, but to date we have not done so.


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Item 7. Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS

Overview

The table below sets forth
    certain information regarding beneficial ownership of our common and preferred
    shares as of May 30, 2003, by each person  we know to be the beneficial
    owner of more than 5% of any class of our outstanding capital stock, and
    by all
    directors
    and executive officers as a group.


|                                                  | Shares
      Owned |  | Percent
      of Class |  
|------------------------------------------------- | ------------------ |  | ---------------------- | -
|                                                  |                    |  |                        |  
|Common
      Shares                               |                    |  |                        |  
|Valepar
      S.A(1)                              | 130,715,711        |  | 52.3                   | %
|Litel
      Participações S.A.(2)                 | 130,715,711        |  | 52.3                   | %
|Previ(3)                                          | 130,715,711        |  | 52.3                   | %
|Bradespar
      S.A.(4)                           | 130,715,711        |  | 52.3                   | %
|BNDESPAR(5)                                       | 17,667,640         |  | 7.1                    | %
|Directors
      and executive officers as a group | 10,547             |  | *                      |  
|                                                  |                    |  |                        |  
|Preferred
      Shares(6)                         |                    |  |                        |  
|Directors
      and executive officers as a group | 402                |  | *                      |  
|                                                  |                    |  |                        |  
|Golden
      Share                                |                    |  |                        |  
|Brazilian
      government                        | 1                  |  | 100.0                  | %
|                                                  |                    |  |                        |  

---

|(1) | See the
      table below for more information on Valepars shareholders.                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Represents
      shares owned by Valepar, which may be viewed as beneficially owned by Litel
      Participações S.A. under the rules of the Securities and Exchange
      Commission. In general, a person who has or shares voting power or investment
      power with respect to securities is treated as a beneficial owner of those
      securities. It does not necessarily imply that the named person has the
      economic or other benefits of ownership.               
|(3) | Represents
      shares owned by Valepar, which may be viewed as beneficially owned by Previ
      through its equity interest in Litel Participações S.A and
      Litela Participações S.A.                                                                                                                                                                                                                                                                                        
|(4) | Represents shares owned
        by Valepar, which may be viewed as beneficially owned by
      Bradespar S.A., directly and through its equity interests in Eletron S.A.,
         Bradesplan Participações S.A. and Millenium Security Holdings
          Corp. Bradespar S.A. is controlled by a control group consisting

      of Cidade de DeusCia Comercial Participações, Fundação
       Bradesco, NCF Participações S.A. and Nova Cidade de Deus Participações
        S.A.
|(5) | Excludes
      common shares owned directly by Valepar, in which BNDESPAR has an ownership
      interest.                                                                                                                                                                                                                                                                                                                                                                           
|(6) | The Brazilian
      government (National Treasury) owns 5,075,341 preferred shares representing
      3.7% of the outstanding preferred shares, and BNDESPAR owns 1,401,978 preferred
      shares representing 1% of the outstanding preferred shares.                                                                                                                                                                                                                              
|(*) | Represents
      less than 1% of the outstanding shares of the class.                                                                                                                                                                                                                                                                                                                                                                                                                

The tables below set forth
    information as of May 31, 2003 regarding Valepar S.A. share ownership and
    as of May 23, 2003 regarding Litel Participações S.A. share ownership.


|                                            | Shares
        Owned |  | Percent
        of TotalShares Owned |  
|------------------------------------------- | -------------------- |  | ------------------------------------ | -
|                                            |                      |  |                                      |  
|Valepar S.A.                                |                      |  |                                      |  
|Litel
      Participações S.A(1)            | 69,258,590           |  | 52.98                                | %
|Litela
      Participações S.A.(2)          | 6,643,814            |  | 5.08                                 |  
|Eletron
      S.A.(3)                       | 21,875,000           |  | 16.74                                |  
|Bradespar
      S.A.(3)                     | 721,275              |  | 0.55                                 |  
|Bradesplan
      Participações S.A.(3)      | 14,298,346           |  | 10.94                                |  
|Millennium
      Security Holdings Corp.(3) | 5,543,686            |  | 4.24                                 |  
|BNDESPAR                                    | 1,254,631            |  | 0.96                                 |  
|Investvale(4)                               | 11,120,369           |  | 8.51                                 |  
|                                            |                      |  |                                      |  
|Total                                       | 130,715,711          |  | 100.00                               | %
|                                            |                      |  |                                      |  
|                                            |                      |  |                                      |  
|                                            |                      |  |                                      |  

---

|(1) | Litel
      owns 16,594,824 preferred Class B shares of Valepar, which represents 71.41%
      of this class of shares.
|--- | -----------------------------------------------------------------------------------------------------------------------
|(2) | Litela
      owns 6,643,814 preferred Class B shares of Valepar, which represents 28.59%
      of this class of shares.
|(3) | Eletron,
      Bradesplan and Millennium are affiliated companies of Bradespar S.A.                                    
|(4) | Investvale
      is an investment club owned by our employees.                                                         

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|Litel Participações
      S.A.                    |             |  |        |  
|------------------------------------------------- | ----------- |  | ------ | -
|BB
      Carteira Ativa 0(1)                      | 202,753,508 |  | 73.59  | %
|BB
      Carteira Ativa II(1)                     | 53,388,022  |  | 19.38  |  
|BB
      Renda Fixa IV(1)                         | 19,371,990  |  | 7.03   |  
|Others                                            | 822         |  |       |  
|Directors
      and Executive Officers as a group | 7           |  |       |  
|                                                  |             |  |        |  
|Total                                             | 275,514,349 |  | 100.00 | %
|                                                  |             |  |        |  

---

|(1) | Each
      of BB Carteira Ativa 0, BB Carteira Ativa II and BB Renda Fixa IV is a Brazilian
      investment fund. BB Carteira Ativa 0 is 100% owned by Previ. BB Carteira
      Ativa II is 59.36% owned by Funcef, 35.8% owned by Petros and 4.84% owned
      by Fundação Cesp. BB Renda Fixa IV is 100% owned by Previ.
      Each of Previ, Petros, Funcef and Fundação Cesp is a Brazilian
      pension fund.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In March 2003, Bradespar
    announced an agreement with Mitsui under which Mitsui will acquire 15% of
    the outstanding common shares of Valepar. Under the agreement, Bradespar will
    sell all of the shares representing this 15% stake unless Litel and Litela
    exercise an option to take part in the transaction by selling shares equal
    to 5% of Valepars common shares. In the event Litel and Litela exercise
    this right, Bradespar will sell shares amounting to 10% of Valepars
    common shares. This agreement is subject to certain conditions.


Our Privatization

General

In 1997 we were privatized
      by the Brazilian government, which transferred voting control to Valepar.
      As part of the privatization process, the National Treasury and BNDES,
      the
    government-owned development bank, together retained 32% of our common shares
      and 4% of our preferred shares. On March 20, 2002, as the final step of
      the
    privatization process, the Brazilian government and BNDES each sold 39,393,919
      shares, in the form of common shares or American depositary
    shares, which together represented 32.1% of our outstanding common shares.
      Following this offering, BNDESPAR, a wholly-owned subsidiary of BNDES,
      retained
    common shares representing approximately 4.8% of our outstanding common shares.
      The Brazilian government now owns outstanding preferred shares, and a golden
      share in us, which gives it veto powers over certain actions that we could
      propose to take, and BNDES owns 5,727 of our common shares. For a detailed
    description of the veto powers granted to the Brazilian government by virtue
      of its ownership of the golden share, see Item
    10. Additional Information  Common and Preferred Shares  General.


Shareholder Debentures

At the time of the first stage of our privatization in 1997, we issued debentures to our shareholders. The terms of the debentures, which are described below, were established to ensure that our pre-privatization shareholders, including the Brazilian government, would participate alongside us in potential future financial benefits that we derive from exploiting certain mineral resources that were not taken into account in determining the minimum purchase price of our shares in the privatization. A total of 388,559,056 debentures were issued at a par value of R$ 0.01 (one cent ofreal), whose value is to be restated in accordance with the variation in the IGP-M as set forth in the Issue Deed. At the time of the privatization, the debentures were distributed, on a one-for-one basis, as a payment for the redemption of the preferred class B shares, which had previously been issued as a bonus to the holders of our common shares and preferred Class A shares through a capital increase. The debentures are not redeemable or convertible. Since October 28, 2002, the debentures have been authorized for trading in the secondary market of the SND - Sistema Nacional de Debêntures (the National Debenture System). Under Central Bank of Brazil regulations, pre-privatization foreign shareholders that held their shares through our ADR program, and institutional investors that held their shares through Annex V of Central Bank of Brazil Rule 1.289/87 (Annex V), were not allowed to hold or receive the debentures or any financial benefits relating to the debentures. We sought approval from the Central Bank of Brazil to (i) allow the depositary to hold the debentures on behalf of the ADR holders and the institutional investors, and transfer any financial benefits relating to the debentures as soon as they begin to trade; and (ii) contribute these debentures to a Brazilian investment fund to be created by the depositary, which stocks would be distributed to the ADR holders. The Central Bank of Brazil rejected our request. Following the CVMs October 2002 decision allowing public trading of the debentures, we renewed our request, but we
cannot assure you that the Central Bank of Brazil will approve it. Unless the Central


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Bank of Brazil approves our request, the debentures will not have any value for any foreign shareholder or Annex V institutional investors.

Under the debentures, holders
    have the right to receive semi-annual payments equal to an agreed percentage
    of our net revenues (revenues less value added tax, transport fee and insurance
    expenses related to the trading of the products) from certain identified mineral
    resources that we owned at the time of the privatization, to the extent that
    we exceed defined thresholds of sales volume relating to certain mineral resources,
    and from the sale of mineral rights that we owned at that time. Our obligation
    to make payments to the holders will cease when the relevant mineral resources
    are exhausted. See note 15(f) to our consolidated financial statements for
    a description of the terms of the debentures. In June 2002, gold sales from our Fazenda Brasileiro mine reached the 26 ton threshold set forth for gold under the Deed for the shareholders debentures. However, because the amount of the associated premium was determined to be only approximately R$2 million, or less than R$ 0.01 per debenture, we have not yet made any payments under the debentures.


Principal Shareholder

Our principal shareholder is Valepar. The shareholders of Valepar have entered into a shareholders agreement, ending in 2017. This agreement:


| |  | grants rights
      of first refusal on any transfer of Valepar shares and preemptive rights
      on any new issue of Valepar shares;                                                                      
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                             
| |  | prohibits
      the direct acquisition of CVRD shares by Valepars shareholders unless
      authorized by the other shareholders;                                                                          
| |   |                                                                                                                                                                                                             
| |  | prohibits
      encumbrances on Valepar shares (other than in connection with financing
      our acquisition);                                                                                             
| |   |                                                                                                                                                                                                             
| |  | requires
      each party generally to retain control of its special purpose company holding
      its interest in shares of Valepar, unless the rights of first refusal mentioned
      above are observed;
| |   |                                                                                                                                                                                                             
| |  | allocates
      Valepars and our board seats; and                                                                                                                                                          
| |   |                                                                                                                                                                                                             
| |  | establishes
      super-majority voting requirements for certain significant actions
      relating to Valepar or to us.                                                                                    

Golden Share

The Brazilian government holds one golden share, which gives the Brazilian government veto rights over certain changes, including:


| |  | our name,                                                                  
| | - | ---------------------------------------------------------------------------
| |   |                                                                            
| |  | the headquarters
      of our head office,                                 
| |   |                                                                            
| |  | our corporate
      purpose as regards the working of mineral deposits, and
| |   |                                                                            
| |  | our continued
      operation of integrated iron ore mining systems.       

For a more detailed description of the golden share, seeItem 10. Additional InformationCommon Shares and Preferred Shares.Since our privatization, the Brazilian government has not exercised its veto rights.


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American Depositary Shares

As of April 30, 2003, American depositary shares represented 23.5% of our common shares and 49.2% of our preferred shares.


RELATED PARTY TRANSACTIONS

At December 31, 2002, we had extended guarantees for borrowings obtained
by affiliates and joint ventures in the amount of US$ 516 million of which US$ 405 million is denominated in U.S. dollars
and the remaining US$ 111 million in Brazilian currency. See note 15(a) to our consolidated financial statements. We have commercial relationships
    in the ordinary course of our business with a number of companies that are
    affiliated with Previ and Bradespar S.A., which may be deemed to beneficially
    own the shares owned by Valepar, our principal shareholder. The most significant
    of these is our relatinship with CST, in which both we and Previ hold an interest.
    In 2002, CST accounted for approximately 3.8% of our total sales, 4% of our
    iron ore and pellet sales, 4% of our manganese and ferro alloys sales and
    8.7% of our logistics sales. All of our sales to CST are made on arms
    length terms. For information regarding investments in affiliated companies and joint ventures and for information regarding transactions with major related parties, see notes 10 and 17 to our consolidated financial statements.


Item
  8.   Financial Information

LEGAL PROCEEDINGS

We and our subsidiaries are defendants in numerous legal actions in the normal course of business, including civil, administrative, tax, social security and labor proceedings. We have set aside or deposited in court amounts to cover estimated contingency losses due to adverse legal judgments. Based on the advice of legal counsel, we believe that the provision made against contingent losses is sufficient to cover probable losses in connection with such actions. We are currently involved in 23 proceedings before theConselho Administrativo de Defesa Econômica, or CADE, which is the primary Brazilian antitrust regulator. Most of these proceedings involve post-transaction review of acquisition or joint venture transactions, which is required for nearly all of our acquisitions and joint ventures. The remaining are administrative proceedings alleging that we have engaged in illegal anticompetitive conduct in connection with our logistics and aluminum-related businesses. We intend to defend these claims vigorously. If CADE were to determine that undue concentration exists in any of our industries, it could impose measures to safeguard competition, which could include requirements that we divest operations or respect price restrictions. If CADE
were to find that we have engaged in anticompetitive conduct, it could order us to cease the conduct and / or to pay fines. The Caemi transaction is also being reviewed by the European Commission. Numerous lawsuits challenging the legality of our privatization are pending, including a number of class action lawsuits. Recently, the lower courts issued favorable decisions in these lawsuits. We do not believe that, individually or in the aggregate, these actions will adversely affect the course of the privatization process or otherwise have a material adverse effect on us. We are a defendant in a public civil action seeking to annul the concession agreement through which we and certain other defendants operate the Praia Mole port terminal. The case, which was first filed in 1998, is still in its initial stages and we believe that the claim is without merit. We are currently a defendant in two separate actions brought by the municipality of Itabira, in the state of Minas Gerais. It alleges that our Itabira iron ore mining operations have caused environmental and social damages. In one of the actions, filed in August 1996, the municipality of Itabira alleges that our Itabira iron ore mining operations have caused environmental and social damages and claims damages with respect to the degradation of the site of one of our mines, as well as the immediate restoration of the affected ecological complex and the performance of compensatory environmental programs in the region. The damages sought, as adjusted from the date of the claim, amount to approximately US$ 633 million. We believe that this amount is significantly higher than the amount we would actually be responsible for in the event that we were found liable. We have requested the annulment of this action as it represents no actual
controversy. In fact, on June 5, 2000, the local environmental authorities granted an


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operating license
    to our Itabira iron ore mining operations. This license sets forth conditions
    regarding the environmental restoration of the degraded site and the performance
    of compensatory environmental programs. We intend to continue to comply with
    these conditions. In the other action, the municipality of Itabira is claiming
    the right to be reimbursed for expenses it has incurred in connection with
    public services rendered as a consequence of our mining activities. The damages
    sought, as adjusted from the date of the claim, amount to approximately US$
    633 million. We believe that this action is without merit. We are vigorously
    defending both pending actions.

We are obligated to indemnify the seller from which we purchased our interest in Caemi against certain liabilities in connection with the transaction. In a pending arbitration, other former shareholders of Caemi who also sold their shares in the transaction have alleged that the seller should have closed the transaction earlier, and that certain actions by the seller resulted in a lower sale price for their shares. The former shareholders have requested damages of US$ 74 million plus interest (both compensatory and late-payment interest) plus an unspecified amount of moral damages. Hearings in the arbitration were held in May 2003, and the parties expect that post-hearings briefing will be completed by August 2003. We are unable to predict the outcome of the arbitration or the timing of its resolution.


DIVIDENDS AND INTEREST ON SHAREHOLDERS EQUITY

Under the Brazilian Corporation Law, shareholders are generally entitled to receive an annual mandatory dividend set forth in the companys by-laws, which may not be lower than 25% of adjusted net income for the relevant year, calculated in accordance with the Brazilian Corporation Law. For a discussion on dividend distribution provisions in our by-laws, seeItem 10. Additional Information. Since our privatization
      in 1997, and following a recommendation from Valepar, our principal shareholder,
      we have distributed a dividend equal to at least 50% of the amount of net
    income for distribution with respect to each fiscal year. We may make distributions either in the form of dividends or in the form of interest on shareholders equity. Dividends with respect to the American depositary shares, and to non-resident holders of common shares, will not be subject to Brazilian withholding tax, except for dividends declared based on profits generated prior to December 31, 1995. These dividends will be subject to Brazilian withholding tax at varying rates. Distributions of interest on shareholders equity to shareholders, including holders of American depositary receipts, are currently subject to
Brazilian withholding tax of 15%. We are required to hold an
    annual shareholders meeting by April 30 of each year at which an annual
    dividend may be declared. Additionally, our board of directors may declare
    interim dividends. Under the Brazilian Corporation Law, dividends are generally
    required to be paid to the holder of record on a dividend declaration date
    within 60 days following the date the dividend was declared, unless a shareholders
    resolution sets forth another date of payment, which, in either case, must
    occur prior to the end of the fiscal year in which the dividend was declared.
    A shareholder has a three-year period from the dividend payment date to claim
    dividends (or payments of interest on shareholders equity) in respect
    of its shares, after which we will have no liability for such payments. Since
    1997, all cash distributions we have made have been in the form of interest
    on shareholders equity. SeeItem 10. Additional InformationCommon Shares and Preferred SharesPayments
    on Shareholders' Equity. In November 2002, our board
    of directors approved a new dividend policy. Under the policy, the board will
    determine by January 31 of each year a minimum value per share, expressed
    in U.S. dollars, that will be distributed in that year to our shareholders.
    The dividend will be paid in reais, equivalent to the value announced
    in U.S. dollars, in two semi-annual installments, in the form of dividends
    and/or interest on shareholders equity. This minimum value will be established
    as a function of our expected performance in the year of distribution. The
    two semi-annual installments will be paid in the months of April and October.
    The Executive Board can also propose to the board of directors, depending
    on our actual performance, a further payment to shareholders of an additional
    amount per share over and above the minimum payout value initially established.
    The payment of any additional dividend will occur on the same dates fixed
    for the payment of the minimum dividend. For 2003, the board of directors
    has approved a minimum dividend of US$ 1.04 per share. We make cash distributions on the common shares and preferred class A shares underlying the American depositary shares in Brazilian currency to the custodian on behalf of the depositary. The custodian then converts such proceeds into U.S. dollars and causes such U.S. dollars to be delivered to the depositary for distribution to holders of American depositary receipts. For more information on Brazilian tax policies regarding dividend distributions, seeItem 10. Additional
InformationTaxationBrazilian Tax Considerations.


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The table below sets forth the cash distributions we paid to holders of common shares and preferred shares for the periods indicated. We have calculated U.S. dollar conversions using the commercial market rate in effect on the date of payment. We stated amounts gross of any applicable withholding tax.


|Year |  | Payment
      Date |  | Reaisper
      Share atPayment
      Date |  | U.S.
      Dollars
      per Share atPayment Date | 
|---- |  | ------------------ |  | ----------------------------------------- |  | ------------------------------------------------- | 
|     |  |                    |  |                                           |  |                                                   | 
|1998 |  | May 8              |  | 1.08                                      |  | 0.88                                              | 
|     |  | August 31          |  | 0.75                                      |  | 0.64                                              | 
|1999 |  | January
      15   |  | 0.65                                      |  | 0.44                                              | 
|     |  | March 31           |  | 0.50                                      |  | 0.29                                              | 
|     |  | August 20          |  | 1.11                                      |  | 0.57                                              | 
|2000 |  | March 1            |  | 1.17                                      |  | 0.66                                              | 
|2001 |  | February
      20  |  | 3.33                                      |  | 1.66                                              | 
|2001 |  | December
      10  |  | 2.305                                     |  | 0.98                                              | 
|2002 |  | April 30           |  | 2.305                                     |  | 0.98                                              | 
|2002 |  | December
      10  |  | 2.68                                      |  | 0.71                                              | 
|2003 |  | April 30           |  | 1.62                                      |  | 0.52                                              | 

Item 9. The Offer and Listing

PRICE HISTORY OF STOCK

The table
      below sets forth trading information for our preferred and common American
      depositary shares, as reported by the New York Stock Exchange (and for periods
      prior to June 2000, reported by the National Quotations Bureau, Inc.), and
      our preferred shares and our common shares, as reported by the BOVESPA,
      for the periods indicated.


|                    |  | Reaisper
      CommonShare |  | Reaisper
      PreferredClass
      A Share |  | U.S.
      Dollars perPreferred
      AmericanDepositary
      Share |  | U.S.
      Dollars per
      Common American
      Depositary Share | 
|------------------- |  | -------------------------- |  | ------------------------------------------- |  | -------------------------------------------------------------------- |  | ------------------------------------------------------------------- | 
|                    |  |                            |  |                                             |  |                                                                      |  |                                                                     | 
|                    |  | High                       |  | Low                                         |  | High                                                                 |  | Low                                                                 | 
|                    |  |                            |  |                                             |  |                                                                      |  |                                                                     | 
|1998                |  | 27.00                      |  | 10.00                                       |  | 29.10                                                                |  | 13.00                                                               | 
|1999                |  | 42.00                      |  | 9.80                                        |  | 50.00                                                                |  | 13.80                                                               | 
|2000                |  | 52.40                      |  | 33.00                                       |  | 59.00                                                                |  | 38.82                                                               | 
|2001                |  | 55.00                      |  | 42.70                                       |  | 58.70                                                                |  | 44.00                                                               | 
|2002                |  | 109.00                     |  | 50.00                                       |  | 102.20                                                               |  | 50.90                                                               | 
|1Q01                |  | 51.00                      |  | 42.70                                       |  | 53.60                                                                |  | 44.00                                                               | 
|2Q01                |  | 54.00                      |  | 46.50                                       |  | 58.60                                                                |  | 49.05                                                               | 
|3Q01                |  | 55.00                      |  | 46.40                                       |  | 55.00                                                                |  | 45.50                                                               | 
|4Q02                |  | 54.00                      |  | 47.00                                       |  | 58.70                                                                |  | 49.60                                                               | 
|1Q02                |  | 65.70                      |  | 50.00                                       |  | 64.20                                                                |  | 50.90                                                               | 
|2Q02                |  | 78.10                      |  | 61.50                                       |  | 75.90                                                                |  | 59.80                                                               | 
|3Q02                |  | 89.50                      |  | 71.50                                       |  | 84.20                                                                |  | 65.50                                                               | 
|4Q02                |  | 109.00                     |  | 84.30                                       |  | 102.20                                                               |  | 79.98                                                               | 
|1Q03                |  | 105.01                     |  | 91.00                                       |  | 100.00                                                               |  | 87.50                                                               | 
|December
      2002 |  | 109.00                     |  | 99.50                                       |  | 102.20                                                               |  | 94.00                                                               | 
|January
      2003  |  | 102.00                     |  | 92.20                                       |  | 97.00                                                                |  | 87.71                                                               | 
|February
      2003 |  | 105.01                     |  | 97.36                                       |  | 100.00                                                               |  | 93.06                                                               | 
|March
      2003    |  | 104.00                     |  | 91.00                                       |  | 98.29                                                                |  | 87.50                                                               | 
|April
      2003    |  | 91.99                      |  | 80.90                                       |  | 88.01                                                                |  | 77.45                                                               | 
|May
      2003      |  | 89.29                      |  | 81.80                                       |  | 84.49                                                                |  | 77.96                                                               | 
|June
      2003(1)  |  | 88.89                      |  | 83.50                                       |  | 82.40                                                                |  | 79.20                                                               | 
|                    |  |                            |  |                                             |  |                                                                      |  |                                                                     | 

---

TRADING
  MARKETS

Our publicly
    traded share capital consists of common shares and preferred shares, each
    without par value. Our common shares and our preferred shares are publicly
    traded in Brazil on BOVESPA, under the ticker symbols VALE3, and VALE5, respectively.
    Our common shares and preferred shares also trade on the LATIBEX, under the
    ticker symbols XVALO and XVALP, respectively. The LATIBEX is an electronic
    market created in 1999 by the Madrid stock exchange in order to enable trading
    of Latin American equity securities in euro denomination.


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Our common American
  depositary shares, each representing one common share, have traded on the New
  York Stock Exchange since March 2002, under the ticker symbol RIO. Our preferred
  American depositary shares, each representing one preferred share, have traded
  on the New York Stock Exchange since June 2000, under the ticker symbol RIOPR.
  Prior to June 20, 2000, the preferred and common American depositary shares
  traded in the over-the-counter market. JPMorgan Chase Bank serves as the depositary
  for both the common and the preferred American depositary shares. At April 30,
  2003, there were 126,947,030 American depositary shares outstanding, representing
  49.2% of our preferred shares, 23.5% of our common shares or 32.7% of our total
  share capital.


Item 10. Additional Information

MEMORANDUM AND ARTICLES OF ASSOCIATION

Company Objects and Purposes

Our corporate purpose is defined
    by our by-laws to include:


| |  | the exploitation of mineral deposits in Brazil
      and abroad by means of extraction, processing, industrialization, transportation,
      shipment and commerce of mineral assets;                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | the building and operation of railways and
      the exploitation of own or third party rail traffic;                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | the building and operation of own or third
      party maritime terminals, and the exploitation of nautical activities for
      the provision of support within the harbor;                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | the provision of logistics services integrated
      with cargo transport, comprising generation, storage, transshipment, distribution
      and delivery within the context of a multimodal transport system;                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | the production, processing, transport, industrialization
      and commerce of all and any source and form of energy, also involving activities
      of production, generation, transmission, distribution and commerce of its
      products, derivatives and subproducts;                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | the carrying-on, in Brazil or abroad, of
      other activities that may be of direct or indirect consequence for the achievement
      of its corporate purpose, including research, industrialization, purchase
      and sale, importation and exportation, the exploitation, industrialization
      and commerce of forest resources and the provision of services of any kind
      whatsoever; and
| |   |                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | constituting or participating in any fashion
      in other companies, consortia or associations directly or indirectly related
      to its business purpose.                                                                                                                                                                                                                                           

Directors Powers

Under the Brazilian
  Corporation Law, if a director or an executive officer has a conflict of interest
  with the company in connection with any proposed transaction, the director or
  executive officer may not vote in any decision of the board of directors or
  of the board of executive officers regarding such transaction and must disclose
  the nature and extent of the conflicting interest for transcription in the minutes
  of the meeting. In any case, a director or an executive officer may not transact
  any business with the company, including any borrowings, except on reasonable
  or fair terms and conditions that are identical to the terms and conditions
  prevailing in the market or offered by third parties. Under our by-laws, shareholders
  set the aggregate compensation payable to directors and executive officers.
  The board of directors allocates the compensation among its members and the
  executive officers. SeeItem
  6. Directors, Management and EmployeesCompensation.Our
  by-laws do not establish any mandatory retirement age limits.


COMMON SHARES AND PREFERRED SHARES

Set forth below is certain
    information concerning our authorized and issued share capital and a brief
    summary of certain significant provisions of our by-laws and the Brazilian
    Corporation Law. This description does not


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purport to be complete and
  is qualified by reference to our by-laws (an English translation of which has
  been filed with the SEC) and to the Brazilian Corporation Law.

General Our by-laws
  authorize the issuance of  up to 300 million common shares and up to
     600 million preferred class A shares, in each case based solely on the approval
  of the board of directors without any additional shareholder approval. Each common
  share entitles the holder thereof to one vote at meetings of our shareholders.
  Holders of common shares are not entitled to any preference relating to our
  dividends or other distributions. Holders of preferred
  class A shares and the golden share are generally entitled to the same voting
  rights as holders of common shares, except with respect to the election of members
  of the board of directors, and are entitled to a minimum annual non-cumulative
  preferential dividend of (i) at least 3% of the book value per share, calculated
  in accordance with the financial statements which serve as reference for the
  payment of dividends, or (ii) 6% of their pro rata share of our paid-in capital,
  whichever is higher. Non-controlling shareholders holding common shares representing
  at least 15% of our voting capital and preferred shares representing at least
  10% of our total share capital have the right to appoint each one member and
  an alternate to our board of directors. If no group of common or preferred shareholders
  meets the thresholds described above, shareholders holding preferred or common
  shares representing at least 10% of our total share capital are entitled to
  combine their holdings to appoint one member and an alternate to our board of
  directors. Holders of preferred class A shares and the golden share may elect
  one member of the permanent fiscal council and the respective alternate. Non-controlling
  holders of common shares comprising at least 10% of the common shares outstanding
  may also elect one member of the fiscal council and an alternate. The Brazilian government holds
    one golden share in us. The golden share is a preferred share that entitles
    its holder to the same rights (including with respect to voting and dividend
    preference) as holders of preferred class A shares. In addition, the holder
    of the golden share is entitled to veto any proposed action relating to the
    following matters:


| | (1) | a
      change in our name;                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                     
| | (2) | a
      change in the location of our head office;                                                                                  
| |     |                                                                                                                                     
| | (3) | a
      change in our corporate purpose as regards the working of mineral deposits;                                                 
| |     |                                                                                                                                     
| | (4) | any
      liquidation of our company;                                                                                               
| |     |                                                                                                                                     
| | (5) | any disposal
      or winding up of activities of any one or more of the following stages of our iron ore mining integrated systems:
| |     |                                                                                                                                     
| |     | (a)
        mineral deposits, ore deposits, mines;                                                                                  
| |     | (b)railways; or                                                                                                                     
| |     | (c)ports
      and or maritime terminals;                                                                                           
| |     |                                                                                                                                     
| | (6) | any
      change in the by-laws relating to the rights accorded to the classes of
      capital stock issued by us; and             
| |     |                                                                                                                                     
| | (7) | any
      change in the by-laws relating to the rights accorded the golden share.                                                   

Calculation of Distributable Amount At each annual
    shareholders meeting, the board of directors is required to recommend,
    based on the executive officers proposal, how to allocate our earnings
    for the preceding fiscal year. For purposes of the Brazilian Corporation Law,
    a companys net income after income taxes and social contribution taxes
    for such fiscal year, net


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of any accumulated losses from
  prior fiscal years and amounts allocated to employees and managements
  participation in earnings represents its net profits for such fiscal
  year. In accordance with the Brazilian Corporation Law, an amount equal to our
  net profits, as further reduced by amounts allocated to the legal
  reserve, to the contingency reserve or to the unrealized income reserve established
  by us in compliance with applicable law (discussed below) and increased by reversals
  of reserves constituted in prior years, will be available for distribution to
  shareholders in any particular year. Such amount, the adjusted net profits,
  is herein referred to as the distributable amount. We may also establish discretionary
  reserves, reserves for investment projects and fiscal investment reserves, as
  discussed below.

Legal Reserve.Under the Brazilian Corporation Law, we are required to maintain a legal reserve to which we must allocate 5% of our net profits for each fiscal year until the amount of the reserve equals 20% of our paid-in capital. Net losses, if any, may be charged against the legal reserve. Discretionary Reserves.
    Under the Brazilian Corporation Law, a company may also provide for discretionary
    allocations of net profits to the extent set forth in its by-laws.
    Our by-laws provide for one discretionary depletion reserve which may be taken
    into account in allocating net profits for any fiscal year. We currently maintain
    a tax incentive depletion reserve established in respect of certain mining
    operations. Appropriations to the tax incentive depletion reserve are deductible
    for tax purposes. The discretionary depletion reserve has not been used since
    1996, when the related tax incentive expired. For more details, see note 13
    to our consolidated financial statements. There are no limits on the size
    or amount of proceeds that may be retained in the discretionary depletion
    reserve. However, the sum of the legal reserve, the depletion reserve and
    the reserve for investment projects may not exceed the amount of our paid-in
    capital. Contingency Reserve.Under the Brazilian Corporation Law, a portion of our net profits may also be discretionally allocated to a contingency reserve for an anticipated loss that is deemed probable in future years. Any amount so allocated in a prior year must be either reversed in the fiscal year in which the loss was anticipated if such loss does not in fact occur or charged off in the event that the anticipated loss occurs. We have never allocated an amount to the contingency reserve. Reserve for Investment
    Projects.Under
    the Brazilian Corporation Law, we may allocate a portion of our net
    profits for discretionary appropriations for plant expansion and other
    capital investment projects, the amount of which is based on a capital budget
    previously presented by management and approved by shareholders. Under Law
    10,313, capital budgets with a duration longer than one year must be reviewed
    at each annual shareholders meeting. After completion of the relevant
    capital projects, we may retain the appropriation until shareholders vote
    to transfer all or a portion of the reserve to capital or retained earnings. Unrealized Income Reserve.As of March 1,
    2002, under Law 10,313, which amended the Brazilian Corporation Law, the amount
    by which the mandatory dividend exceeds the realized portion of
    net profits for any particular year may be allocated to the unrealized income
    reserve. The realized portion of net profits is the amount by
    which net profits exceed the sum of (i) our net positive results,
    if any, from the equity method of accounting for earnings and losses of our
    subsidiaries and certain affiliates, and (ii) the profits, gains or return
    obtained on transactions completed after the end of the following fiscal year. Tax Incentive Investment
    Reserve. Under
    the Brazilian tax laws, a portion of net profits may also be allocated
    to a general tax incentive investment reserve in amounts corresponding
    to reductions in our income tax generated by credits for particular government-approved
    investments. The Brazilian Corporation Law provides that all discretionary allocations of net profits, including discretionary reserves, the contingency reserve, the unrealized income reserve and the reserve for investment projects, are subject to approval by the shareholders voting at the annual meeting and can be transferred to capital or used for the payment of dividends in subsequent years. The fiscal incentive investment reserve and legal reserve are also subject to approval by the shareholders voting at the annual meeting and may be transferred to capital but are not available for the payment of dividends in subsequent years. Our calculation
  of net profits and allocations to reserves for any fiscal year are
  determined on the basis of financial statements prepared in accordance with
  the Brazilian Corporation Law. Our consolidated financial


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statements
  have been prepared in accordance with U.S. GAAP and, although our allocations
  to reserves and dividends will be reflected in these financial statements, investors
  will not be able to calculate such allocations or required dividend amounts
  from our consolidated financial statements.

Mandatory Dividend Our by-laws
  prescribe that we must distribute to our shareholders in the form of dividends
  or interest on shareholders equity an annual amount equal to not less
  than 25% of the distributable amount, referred to as the mandatory dividend,
  unless the board of directors advises our shareholders at our general shareholders
  meeting that payment of the mandatory dividend for the preceding year is inadvisable
  in light of our financial condition. The fiscal council must review any such determination
  and report it to the shareholders. In addition to the mandatory dividend, our board of
  directors may recommend to the shareholders payment of dividends from other funds
  legally available therefore. Any payment of interim dividends will be netted against
  the amount of the mandatory dividend for that fiscal year. The shareholders must also
  approve the recommendation of the board of directors with respect to any required
  distribution. The amount of the mandatory dividend is subject to the size of the
  legal reserve, the contingency reserve, and the unrealized income reserve. The amount of
  the mandatory dividend is not subject to the size of the discretionary depletion reserve.
  SeeCalculation of
Distributable Amount. To date,
our board of directors has never determined that payment of the mandatory dividend was
inadvisable. Since our privatization
      in 1997, and following a recommendation from Valepar, our principal shareholder,
      we have distributed a dividend equal to at least 50% of the amount of net
    income for distribution with respect to each fiscal year. In November
  2002, our board of directors approved a new dividend policy. See
  Item 8. Financial Information  Dividends and Interest on Shareholders
  Equity. Dividend Preference of Preferred Shares Pursuant
      to our by-laws, holders of preferred class A shares and the golden share
      are entitled to a minimum annual non-cumulative preferential dividend equal
      to (i) at least 3% of the book value per share, calculated in accordance
      with the financial statements which serve as reference for the payment of
      dividends, or (ii) 6% of their pro rata share of our paid-in capital, whichever
      is higher. To the extent that we declare dividends in any particular year
      in amounts which exceed the preferential dividends on preferred shares,
      and after holders of common shares have received distributions equivalent,
      on a per share basis, to the preferential dividends on preferred shares,
      holders of common shares and preferred shares shall receive the same additional
      dividend amount per share. Since the first step of our privatization in
      1997, we have had sufficient distributable amounts to be able to distribute
      equal amounts to both common and preferred shareholders. Other Matters Relating to Preferred Shares Our by-laws
  do not provide for the conversion of preferred shares into common shares. In
  addition, the preferred shares do not have any preference upon our liquidation
  and there are no redemption provisions associated with the preferred shares. Payments on Shareholders Equity Pursuant to
  a change in Brazilian tax law effective January 1, 1996, Brazilian companies
  are permitted to pay limited additional amounts to holders of equity securities
  and treat such payments as an expense for Brazilian income tax purposes. In
  accordance with Law No. 9,249 dated December 26, 1995, our by-laws provide for
  the distribution of interest on shareholders equity as an alternative
  form of payment to shareholders. The interest rate applied is limited to the
  Brazilian long-term interest rate, or TJLP, for the applicable period. The deduction
  of the amount of interest paid cannot exceed the greater of (1) 50% of net income
  (after the deduction of the provision of social contribution on net profits
  and before the deduction of the provision of the corporate income tax) before


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taking into account any such distribution
for the period in respect of which the payment is made or (2) 50% of the sum of retained
earnings and profit reserves. Any payment of interest on shareholders equity to
shareholders is subject to Brazilian withholding income tax at the
rate of 15%, except for a beneficiary located in a tax haven
jurisdiction (i.e. a country that does not impose income tax or that imposes it at a maximum rate lower than 20%), in which case the rate is 25%. Under our by-laws, the amount paid to shareholders as interest on shareholders equity (net of any withholding tax) may be included as part of any mandatory dividend. Under the Brazilian Corporation Law,
we are obligated to distribute to shareholders an amount sufficient to ensure that the net amount
received, after payment by us of applicable Brazilian withholding taxes in respect of the
distribution of interest on shareholders equity, is at least equal to the mandatory dividend.

Voting Rights Each common share entitles the holder thereof to one vote at meetings of our shareholders. Holders of preferred shares are entitled to the same voting rights as holders of common shares except that they may not vote on the election of members of the board of directors, except in the event of dividend arrearages, as described below. One of the members of the permanent fiscal council and his or her alternate are elected by majority vote of the holders of preferred shares. Holders of preferred shares and common shares may, in certain circumstances, combine their respective holdings to elect members of our board of directors. The golden share entitles the holder thereof to the same voting rights as holders of preferred shares. The golden share also confers certain other significant voting rights in respect of particular actions, as described under 
General. The Brazilian
  Corporation Law provides that non-voting or restricted-voting shares, such as
  the preferred shares, acquire unrestricted voting rights beginning when a company
  has failed for three consecutive fiscal years (or for any shorter period set
  forth in a companys constituent documents) to pay any fixed or minimum
  dividend to which such shares are entitled and continuing until payment thereof
  is made. Our by-laws do not set forth any such shorter period. Any change in
  the preferences or advantages of our preferred class A shares, or the creation
  of a class of shares having priority over the preferred class A shares, would
  require the approval of holders of a majority of the outstanding preferred class
  A shares, voting as a class at a special meeting. Shareholders Meetings A general shareholders meeting convenes each year to decide all matters relating to our corporate purposes and to pass such resolutions as they deem necessary for our protection and well-being. Pursuant to
    the Brazilian Corporation Law, shareholders voting at a general shareholders
    meeting have the power, among other powers, to:


| |  | amend the
      by-laws;                                                                                                                                                                                                                                                                          
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                   
| |  | elect or
      dismiss members of the board of directors and members of the fiscal council
      at any time;                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                   
| |  | receive annual reports
      by management and accept or reject managements financial statements
      and recommendations including the allocation of net profits and the distributable
      amount for payment of the mandatory dividend and allocation to the various
      reserve accounts;
| |   |                                                                                                                                                                                                                                                                                                   
| |  | authorize
      the issuance of debentures;                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                   
| |  | suspend
      the rights of a shareholder in default of obligations established by law
      or by the by-laws;                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                   
| |  | accept or
      reject the valuation of assets contributed by a shareholder in consideration
      for issuance of capital stock;                                                                                                                                                                 

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| |  | pass resolutions
      to reorganize our legal form, to merge, consolidate or split us, to dissolve
      and liquidate us, to elect and dismiss our liquidators and to examine their
      accounts; and    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                              
| |  | authorize
      management to file for bankruptcy or to request a concordata,
      a procedure involving protection from creditors similar in nature to reorganization
      under the U.S. Bankruptcy Code.

All shareholders meetings,
    including the annual shareholders meeting, are convened by publishing,
    no fewer than fifteen days prior to the scheduled meeting date and no fewer
    than three times, a notice in the Diário Oficial do Estado do Rio
    de Janeiro and in a newspaper with general circulation in the city where
    we have our registered office, which is Rio de Janeiro. Our shareholders have
    previously designated Jornal do Commercio for this purpose. Also, as
    our shares are traded on BOVESPA, we must publish a notice in a São
    Paulo based newspaper. Such notice must contain the agenda for the meeting
    and, in the case of an amendment to our by-laws, an indication of the subject
    matter. In addition, under our by-laws, the holder of the golden share is
    entitled to a minimum of 15 days prior formal notice to its legal representative
    of any general shareholders meeting to consider any proposed action
    subject to the veto rights accorded to the golden share. See Common
    Shares and Preferred SharesGeneral. A shareholders meeting may be held if shareholders representing at least one-quarter of the voting capital are present. If no such quorum is present, notice must again be given in the same manner as described above except for the 8 days prior notice, and a meeting may then be convened without any specific quorum requirement, subject to the minimum quorum and voting requirements for certain matters, as discussed below. A shareholder without a right to vote may attend a general shareholders meeting and take part in the discussion of matters submitted for consideration. Except as otherwise provided
    by law, resolutions of a shareholders meeting are passed by a simple
    majority vote, abstentions not being taken into account. Under the Brazilian
    Corporation Law, the approval of shareholders representing at least one-half
    of the issued and outstanding voting shares is required for the types of action
    described below, as well as, in the case of clause (a) and clause (b), a majority
    of issued and outstanding shares of the affected class: (a)
      creating a new class
        of preferred shares or disproportionately increasing an existing class
        of preferred shares relative to the other classes of shares, other than
        to the extent permitted by the by-laws;(b)
      changing a priority,
        preference, right, privilege or condition of redemption or amortization
        of any class of preferred shares or creating any class of non-voting preferred
        shares that has a priority, preference, right, condition or redemption
        or amortization superior to an existing class of shares, such as the preferred
        shares;(c)
      reducing the mandatory
        dividend;(d)
      changing the corporate
        purposes;(e)
      merging us with another
        company or consolidating or splitting us;(f)
      dissolving or liquidating
        us;(g)
      participating in a
        centralized group of companies as defined under the Brazilian Corporation
        Law; and(h)
      canceling any ongoing
        liquidation of us. Whenever the shares of any
    class of capital stock are entitled to vote, each share is entitled to one
    vote. Annual shareholders meetings must be held by April 30 of each
    year. Shareholders meetings are called, convened and presided over by
    the Chairman or by the Vice-Chairman of our board of directors. A shareholder
    may be represented at a general shareholders meeting by an attorney-in-fact
    appointed not more than one year before the meeting, who must be a shareholder,
    a company officer or a lawyer. For a public company, such as us, the attorney-in-fact
    may also be a financial institution.


Redemption Rights

Our common shares and preferred shares are not redeemable, except that a dissenting shareholder is entitled under the Brazilian Corporation Law to obtain redemption upon a decision made at a shareholders meeting by shareholders representing at least 50% of the voting shares:


| |  | (1) | to
      create a new class of preferred shares or to disproportionately increase
      an existing class of preferred shares relative to the other classes of shares
      (unless such actions are provided for or authorized by the bylaws);     
| |  | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |     |                                                                                                                                                                                                                                                     
| |  | (2) | to
      modify a preference, privilege or condition of redemption or amortization
      conferred on one or more classes of preferred shares, or to create a new
      class with greater privileges than the existing classes of preferred shares;

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| | (3) | to
      reduce the mandatory distribution of dividends;                                                                                                                                                                                                                                                      
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                               
| | (4) | to
      change our corporate purposes;                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                               
| | (5) | to
      merge us with another company or consolidate us;                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                               
| | (6) | to
      transfer all of our shares to another company in order to make us a wholly-owned
      subsidiary of such company, an incorporação
      de ações;                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                               
| | (7) | to
      approve the acquisition of control of another company at a price which exceeds
      certain limits set forth in the Brazilian Corporation Law;                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                               
| | (8) | to
      approve our participation in a centralized group of companies as defined
      under the Brazilian Corporation Law; or                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                               
| | (9) | in the event
      that the entity resulting from (a) a merger, (b) an incorporação
      de açõesas
      described in clause (6) above or (c) a spin-off that we conduct fails to
      become a listed company within 120 days of the general shareholders
      meeting at which such decision was taken.

Only holders of shares adversely affected by the changes mentioned in items (1) and (2) above may require us to redeem their shares. The right of redemption mentioned in items (5), (6) and (8) above may only be exercised if our shares do not satisfy certain tests of liquidity at the time of the shareholder resolution. The right of redemption lapses 30 days after publication of the minutes of the relevant general shareholders meeting, unless,
in the case of items (1) and (2) above, the resolution is subject to confirmation by the preferred shareholders (which must be made at a special meeting to be held within one year), in which case the 30 day term is counted from the publication of the minutes of the special meeting. We would be entitled to reconsider any action giving rise to redemption rights within 10 days following the expiration of such rights if the redemption of shares of dissenting shareholders would jeopardize our financial stability. Law No. 9,457 dated May 5, 1997, which amended the Brazilian Corporation Law, contains provisions which, among other provisions, restrict redemption rights in certain cases and allow companies to redeem their shares at
their economic value, subject to certain requirements. Our by-laws currently do not provide that our capital stock will be redeemable at its economic value and, consequently, any redemption pursuant to the Brazilian Corporation Law would be made at no less than the book value per share, determined on the basis of the last balance sheet approved by the shareholders; provided that if
the general shareholders meeting giving rise to redemption rights occurred more than 60 days after the date of the last approved balance sheet, a shareholder would be entitled to demand that his or her shares be valued on the basis of a new balance sheet dated within 60 days of such general shareholders meeting.


Preemptive Rights

Each of our shareholders has a general preemptive right to subscribe for shares in any capital increase, in proportion to his or her shareholding. A minimum period of 30 days following the publication of notice of a capital increase is allowed for the exercise of the right and the right is negotiable. Under our by-laws, our board of directors may decide not to extend preemptive rights to our shareholders or, under Law 10,303, to reduce the 30-day period for the exercise of preemptive rights, in each case with respect to any issuance of shares, debentures convertible into shares and warrants in the context of a public offering, subject to the limit on the number of shares that may be issued with the approval of the board without any additional shareholder approval. In the event of a capital increase which would maintain or increase the proportion of capital represented by preferred shares, holders of preferred American depositary receipts
will have preemptive rights to subscribe only to newly issued preferred shares. In the event of a capital increase which would reduce the proportion of capital represented by preferred shares, shareholders will have preemptive rights to subscribe for preferred shares, in proportion to their shareholdings, and for common shares only to the extent necessary to prevent dilution of their overall interest in us. In the event of a capital increase which would maintain or increase the proportion of capital represented by common shares, shareholders will have preemptive rights to subscribe only to newly issued common shares. In the event of a capital increase which would reduce the proportion of capital represented by common shares, holders of common shares will have preemptive rights to subscribe for preferred shares only to the extent necessary to prevent dilution of their overall interest in us.


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Form and Transfer

Our preferred shares and common shares are in book-entry form registered in the name of each shareholder or its nominee. The transfer of such shares is made under the Brazilian Corporation Law which provides that a transfer of shares is effected by our transfer agent, Banco Bradesco S.A., upon presentation of valid share transfer instructions to us by a transferor or its representative. When preferred shares or common shares are acquired or sold on a Brazilian stock exchange, the transfer is effected on the records of our transfer agent by a representative of a brokerage firm or the stock exchanges clearing system. Transfers of shares by a foreign investor are made in the same way and are executed by the investors local agent, who is also responsible for updating the information relating to the foreign investment furnished to the Central Bank. BOVESPA operates a central clearing system through Companhia Brasileira de Liquidação e Custódia, or CBLC. A holder of our shares may participate in this system and all shares elected to be put into the system will be deposited in custody with CBLC (through a Brazilian institution that is duly authorized to operate by the Central Bank and maintains a clearing account with CBLC). The fact that such shares are subject to custody with the relevant stock exchange will be reflected in our registry of shareholders. Each participating shareholder will, in turn, be registered in the register of our beneficial shareholders that is maintained by CBLC and will be treated in the same way as registered shareholders.


MATERIAL CONTRACTS

For information
      concerning our material contracts, see Item
      4. Information on the Companyand
      Item
      5. Operating and Financial Review and Prospects.


EXCHANGE CONTROLS AND OTHER LIMITATIONS
AFFECTING SECURITY HOLDERS

There are no restrictions on ownership of our capital stock by individuals or legal entities domiciled outside Brazil. However, the right to convert dividend payments and proceeds from the sale of preferred class A shares or common shares into foreign currency and to remit such amounts outside Brazil is subject to restrictions under foreign investment legislation which generally requires, among other things, that the relevant investment be registered with the Central Bank. These restrictions on the remittance of foreign capital abroad could hinder or prevent the custodian for the preferred class A shares or common shares represented by American depositary shares, or holders who have exchanged American depositary shares for preferred class A shares or common shares, from converting dividends, distributions or the proceeds from any sale of preferred class A shares or common shares, as the case may be, into U.S. dollars and remitting such U.S.

dollars abroad. Delays in, or refusal to grant any required government approval for conversions of Brazilian currency payments and remittances abroad of amounts owed to holders of American depositary shares could adversely affect holders of American depositary receipts. Under Resolution No. 2,689, foreign investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain requirements are fulfilled. In accordance with Resolution No. 2,689, the definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad. Under Resolution No. 2,689, a foreign investor must:


| |  | appoint
      at least one representative in Brazil, with powers to perform actions relating
      to its investment,
| | - | ---------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                      
| |  | complete
      the appropriate foreign investor registration form,                                                   
| |   |                                                                                                                      
| |  | register
      as a foreign investor with the CVM, and                                                               
| |   |                                                                                                                      
| |  | register
      its foreign investment with the Central Bank.                                                         

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Securities
  and other financial assets held by foreign investors pursuant to Resolution
  No. 2,689 must be registered or maintained in deposit accounts or under the
  custody of an entity duly licensed by the Central Bank or the CVM. In addition
  securities trading is restricted to transactions carried out on stock exchanges
  or through organized over-the-counter markets licensed by the CVM, except for
  subscription, bonification, conversion of debentures into shares, securities
  indexes, purchase and sale of investment funds quotas and, if permitted by the
  CVM, going private transactions, canceling or suspension of trading. Moreover,
  the offshore transfer or assignment of the securities or other financial assets
  held by foreign investors pursuant to Resolution No. 2,689 are prohibited, except
  for transfers resulting from a corporate reorganization, or occurring upon the
  death of an investor by operation of law or will. Resolution No. 1,927 of the
    National Monetary Council, which is the restated and amended Annex V to Resolution
    No. 1,289, which we call the Annex V Regulations, provides for the issuance
    of depositary receipts in foreign markets in respect of shares of Brazilian
    issuers. It provides that the proceeds from the sale of American depositary
    shares by holders of American depositary receipts outside Brazil are free
    of Brazilian foreign investment controls and holders of American depositary
    shares who are not resident in a tax haven jurisdiction (i.e. a country
    or location that does not impose taxes on income or where the maximum income
    tax rate is lower than 20%, or where the legislation imposes restrictions
    on disclosure of the shareholding composition or the ownership of the investment)
    will be entitled to favorable tax treatment. An electronic registration
    has been issued by the custodian in the name of JPMorgan Chase Bank, the depositary,
    with respect to the American depositary shares. Pursuant to this electronic
    registration, the custodian and the depositary are able to convert dividends
    and other distributions with respect to the preferred class A shares or common
    shares represented by American depositary shares into foreign currency and
    to remit the proceeds outside Brazil. If a holder exchanges American depositary
    shares for preferred class A shares or common shares, the holder may continue
    to rely on the custodians electronic registration for only five business
    days after the exchange. After that, the holder must seek to obtain its own
    electronic registration with the Central Bank under Law No. 4,131 or Resolution
    No. 2,689. Thereafter, unless the holder has registered its investment with
    the Central Bank, such holder may not convert into foreign currency and remit
    outside Brazil the proceeds from the disposition of, or distributions with
    respect to, such preferred class A shares or common shares. A holder that
    obtains an electronic registration generally will be subject to less favorable
    Brazilian tax treatment than a holder of American depositary shares. See Item
    10. Additional InformationTaxationBrazilian Tax Considerations. There are two principal foreign exchange markets in
Brazil (which have operated under identical operational limits and had identical rates since February 1999):


| |  | the commercial
        rate exchange market, and
| | - | ------------------------------------------------
| |   |                                                 
| |  | the floating
        rate exchange market.      

Most trade
    and financial foreign-exchange transactions, including transactions relating
    to the purchase or sale of shares or the payment of dividends or interest
    with respect to shares, are carried out on the commercial market. Only a Brazilian
    bank authorized to buy and sell currency in the commercial market may effect
    purchases of foreign currencies in that market. In both markets, rates are
    freely negotiated, but may be strongly influenced by Central Bank intervention.
    See Item
    3. Key InformationExchange Rates. Under Brazilian
    law, whenever there is a serious imbalance in Brazils balance of payments
    or reasons to foresee a serious imbalance, the Brazilian government may impose
    temporary restrictions on the remittance to foreign investors of the proceeds
    of their investments in Brazil, and on the conversion of Brazilian currency
    into foreign currencies. Such restrictions may hinder or prevent the custodian
    or holders who have exchanged American depositary shares for underlying preferred
    class A shares or common shares from converting distributions or the proceeds
    from any sale of such shares, as the case may be, into U.S. dollars and remitting
    such U.S. dollars abroad.


TAXATION

The following
    summary contains a description of the principal Brazilian and U.S. federal
    income tax consequences of the ownership and disposition of preferred class
    A shares, common shares or American depositary


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shares. You should know that it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a holder of preferred class A shares, common shares or American depositary shares.

Holders of preferred
  class A shares, common shares, or American depositary shares should consult
  their own tax advisors to discuss the tax consequences of the purchase, ownership
  and disposition of preferred class A shares, common shares or American depositary
  shares, including, in particular, the effect of any state, local or other national
  tax laws. Although there
  is at present no income tax treaty between Brazil and the United States, the
  tax authorities of the two countries have had discussions that may result in
  such a treaty. We cannot predict whether or when such a treaty will enter into
  force or how it will affect the U.S. holders, as defined below, of preferred
  class A shares, common shares, or American depositary shares.


Brazilian Tax Considerations

The following
  discussion summarizes the principal Brazilian tax consequences of the acquisition,
  ownership and disposition of American depositary shares by a holder not deemed
  to be domiciled in Brazil for purposes of Brazilian taxation and, by a holder
  of preferred class A shares or common shares, who has registered his/her investment
  in preferred class A shares or common shares with the Central Bank as a U.S.
  dollar investment (in each case, a non-Brazilian holder). It is based on the
  tax laws of Brazil and regulations thereunder in effect on the date hereof,
  which are subject to change (possibly with retroactive effect). This discussion
  does not specifically address all of the Brazilian tax considerations applicable
  to any particular non-Brazilian holder. Therefore, each non-Brazilian holder
  should consult his or her own tax advisor concerning the Brazilian tax consequences
  of an investment in preferred class A shares, common shares, or American depositary
  shares. Taxation of Dividends.Dividends, including
    dividends paid in kind, paid by us from profits of periods beginning on or
    after January 1, 1996 (1) to the depositary in respect of the preferred class
    A shares or common shares underlying the American depositary shares or (2)
    to a non-Brazilian holder in respect of preferred class A shares or common
    shares will generally not be subject to Brazilian withholding income tax.
    Dividends paid from profits generated before January 1, 1996 may be subject
    to Brazilian withholding income tax at varying rates depending on the year
    the profits were generated, except in the case of stock dividends, which are
    not subject to withholding income tax in Brazil unless we redeem the stock
    within five years from such distribution or the non-Brazilian holder sells
    the stock in Brazil within this five-year period. Distributions
    of Interest of Shareholders Equity.
    Since January 1, 1996, Brazilian corporations may attribute interest on shareholders
    equity as an alternative form of making dividend distributions, which they
    may pay in cash. They base the calculation on shareholders equity as
    stated in the statutory accounting records. The interest rate applied may
    not exceed the TJLP as determined by the Brazilian Central Bank from time
    to time (12% per annum for the three-month period starting April 2003). Also,
    the amount paid may not be higher, for tax purposes, than the greater of (1)
    50% of net income (after the deduction of the provision of social contribution
    on net profits but before taking into account such payment of interest and
    the provision of corporate income tax) for the relevant period or (2) 50%
    of the sum of retained earnings and profit reserves as of the beginning of
    the year in respect of which the payment is made. The amount
    of interest attributed to shareholders is deductible for corporate income
    tax and social contribution on net profit purposes. Therefore, the benefit
    to us, as opposed to making a dividend payment, is a reduction in our corporate
    taxes charge equivalent to 34% of such amount. Subject to certain limitations,
    income tax is withheld from the shareholders on interest payments at the rate
    of 15%, except if the beneficiary is exempt from tax in Brazil, which payments
    are free of Brazilian tax, and except if the beneficiary is located in a tax
    haven jurisdiction, in which case the applicable rate is 25%. As defined by
    Brazilian law, a tax haven jurisdiction is a country or a location that does
    not impose taxes on income or where the maximum income tax rate is lower than
    20%, or where the legislation imposes restrictions on the disclosure of the shareholding
    composition or the ownership of the investment. Taxation
    of Gains.For
    purposes of Brazilian taxation, two types of non-Brazilian holders should
    be considered: (1) non-Brazilian holders that are not resident or domiciled
    in tax haven jurisdictions, which are registered before the Central Bank and
    the CVM to invest in Brazil in accordance with Resolution 2,689 or are holders
    of American


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depositary shares; and (2) other non-Brazilian holders, which include any and all non-residents in Brazil who invest in the country through any other means and all type of investors that are located in a tax haven jurisdiction. The investors identified in item (1) are subject to a favorable tax treatment, as described below.

Gains realized outside Brazil by a non-Brazilian holder on the sale or disposition of American depositary shares to another non-Brazilian holder are not subject to Brazilian tax. The deposit of preferred class A shares or common shares in exchange for American depositary shares is not subject to Brazilian income tax if the preferred class A shares or common shares are registered under Resolution 2,689 and the respective holder is not located in a tax haven jurisdiction. If the preferred class A shares or common shares are not registered or if they are registered but the respective holder is located in a tax haven jurisdiction, the deposit of preferred class A shares or common shares in exchange for American depositary shares may be subject to Brazilian capital gains tax at the rate of 15%. The withdrawal of preferred class A shares or common shares in exchange for American depositary shares is not subject to Brazilian income tax. On receipt of the underlying preferred class A shares or common shares, a non-Brazilian holder, registered under Resolution 2,689 may register the U.S. dollar value of such shares with the
Central Bank as described below under Registered Capital. If such non-Brazilian holder does not qualify under Resolution 2,689, it will be subject to the less favorable tax treatment described above in respect of exchanges of preferred class A shares or common shares. Gains realized outside Brazil by a non-Brazilian holder on the sale or disposition of preferred class A shares or common shares to another non-Brazilian holder are not subject to Brazilian tax. Non-Brazilian holders are subject to income tax imposed at a rate of 15% on gains realized on sales or dispositions of preferred class A shares or common shares that occur in Brazil or with a resident of Brazil, other than on the Brazilian stock, future
and commodities exchange, in which case the income tax is imposed at a rate of 20%. With reference to proceeds of a redemption or of a liquidating distribution with respect to the preferred class A shares or common shares, the difference between the amount received and the amount of foreign currency registered with the Central Bank, translated into reaisat the commercial market
rate on the date of the redemption or liquidation distribution, will be also subject to income tax at a rate of 15%, once such transactions are treated as a sale or disposition carried out outside of the Brazilian stock, future and commodities exchange. Gains realized arising from transactions on a Brazilian stock, future and commodities exchange, by an investor under Resolution 2,689 and not located in a tax haven jurisdiction are exempt from income tax. The preferential treatment under Resolution 2,689 is no longer applicable if the non-Brazilian holder of class A shares or common shares is resident in a tax haven jurisdiction. As a consequence, gains realized on transactions performed by such holder on the Brazilian stock, futures and commodities exchange are subject to income tax at a rate of 20%. Non-Brazilian holders are subject to income tax imposed at a rate of 20% on gains realized on sales or dispositions of preferred class A shares or common shares that occur on a Brazilian stock, future and commodities exchange unless such sale or disposition is made by a non-Brazilian holder who is not resident in a tax haven jurisdiction and (1) such sale is made within five business days of the withdrawal of such common shares in exchange for American depositary shares and the proceeds thereof are remitted abroad within such five-day period, or (2) such sale is made under Resolution 2,689 by a registered non-Brazilian holder who obtains registration with the Brazilian securities commission, in which cases the non-Brazilian holder is exempt from income tax. The gain realized as a result of a transaction on a Brazilian stock, future and commodities exchange is the difference between the amount in Brazilian currency realized on the sale or disposition and the acquisition cost, without any correction for inflation, of the shares sold. The gain realized as a result of a transaction that does not occur on a Brazilian stock, future and commodities exchange will be calculated based on the foreign currency amount registered with the Central Bank. It is possible that the current preferential treatment for holders of American depositary receipts and non-Brazilian holders of preferred class A shares and common shares under Resolution 2,689 will not continue in the future. Any exercise of preemptive rights relating to the preferred class A shares or common shares will not be subject to Brazilian taxation. Any gain on the sale or assignment of preemptive rights relating to the preferred class A shares or common shares by the depositary that occurs abroad among non-residents will not be subject to Brazilian taxation. In case such sale or assignment is made to a Brazilian party, any gain on the transaction will be subject to


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Brazilian income taxation according to the same rules applicable to the sale or disposition of preferred class A shares or common shares, unless such sale or assignment is performed within the Brazilian stock, future and commodities exchanges and by an investor under Resolution 2,689 who is not a resident in a tax haven jurisdiction, in which the gains are exempt from income tax.

Other Brazilian Taxes.There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of preferred class A shares or common shares or American depositary shares by a non-Brazilian holder, except for gift and inheritance taxes which are levied by some states of Brazil on gifts made or inheritances bestowed by individuals or entities not resident or domiciled in Brazil or in the relevant State to individuals or entities resident or domiciled within such state in Brazil. There are no Brazilian stamp, issue, registration, or similar taxes or duties payable by holders of preferred class A shares or common shares or American depositary shares. A financial transaction tax (the IOF tax) may be imposed on a variety of foreign transactions, including the conversion of Brazilian currency into foreign currency (e.g.,for purposes of paying dividends and interest) or vice-versa (the IOF/Câmbio). The IOF /Câmbio is currently 0% with some specific exceptions, but the Minister of Finance has the legal power to increase the rate to a maximum of 25%.Any such increase will be applicable only prospectively. IOF tax may also be levied on transactions involving bonds or securities (the IOF/Títulos) even if the transactions are effected on the Brazilian stock, futures or commodities exchange. The rate of the IOF/Títulos with respect to preferred class A shares or common shares or American depositary shares is currently 0%. The Minister of Finance, however, has the legal power to increase the rate to a maximum of 1.5% per day. Any such increase will be applicable only prospectively. In addition to the IOF tax, the temporary contribution on financial transactions (the CPMF tax) will be imposed through December 2004 on all fund transfers in connection with financial transactions in Brazil. The CPMF tax will be levied at a rate of 0.38% in 2003 and a rate of 0.08% in 2004. The Brazilian government is considering, however, converting the CPMF tax into a permanent tax. Registered Capital.The
    amount of an investment in preferred class A shares or common shares held
    by a non-Brazilian resident holder who obtains registration under Resolution
    2,689, or by the depositary representing such holder, is eligible for registration
    with the Central Bank; such registration (the amount so registered is referred
    to as Registered Capital) allows the remittance outside Brazil of foreign
    currency, converted at the commercial market rate, acquired with the proceeds
    of distributions on, and amounts realized with respect to disposition of,
    such preferred class A shares or common shares. The registered capital for each preferred class A share or common share purchased in the form of an American depositary share, or purchased in Brazil, and deposited with the depositary in exchange for an American depositary share, will be equal to its purchase price (in U.S. dollars) to the purchaser. The registered capital for a preferred class A share or common share that is withdrawn upon surrender of an American depositary share will be the U.S. dollar equivalent of:


| | (1) | the average
      price of a preferred class A share or common share on the Brazilian stock,
      future and commodities exchange on which the greatest number of such shares
      was sold on the day of withdrawal, or                                                                                                         
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | if no preferred
      class A shares or common shares were sold on that day, the average price
      on the Brazilian stock, future and commodities exchange on which the greatest
      number of preferred class A shares or common shares were sold in the fifteen
      trading sessions immediately preceding such withdrawal.

The U.S. dollar
    value of the preferred class A shares or common shares is determined on the
    basis of the average commercial market rates quoted by the Central Bank on
    such date (or, if the average price of preferred class A shares or common
    shares is determined under clause (2) of the preceding sentence, the average
    of such average


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quoted rates on the same fifteen dates used to determine the average price of the preferred class A shares or common shares).

A non-Brazilian resident holder of preferred class A shares or common shares may experience delays in completing such registration which may delay remittances abroad. Such a delay may adversely affect the amount, in U.S. dollars, received by the non-Brazilian holder.


U.S. Federal Income Tax Considerations

This discussion only applies to U.S. holders, as defined below, who hold their preferred class A shares or common shares or American depositary shares as capital assets. This discussion does not describe all of the tax consequences that may be relevant in light of a holders particular circumstances or to holders subject to special rules, such as:


| |  | certain
      financial institutions,                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                          
| |  | insurance
      companies,                                                                                                                                               
| |   |                                                                                                                                                                          
| |  | dealers
      or traders in securities or foreign currencies,                                                                                                            
| |   |                                                                                                                                                                          
| |  | persons
      holding preferred class A shares, common shares or American depositary shares
      as part of hedge, straddle, conversion or other integrated transaction,
| |   |                                                                                                                                                                          
| |  | holders
      whose functional currency is not the U.S. dollar,                                                                                                          
| |   |                                                                                                                                                                          
| |  | partnerships
      or other entities classified as partnerships for U.S. federal income tax
      purposes,                                                              
| |   |                                                                                                                                                                          
| |  | persons
      subject to the alternative minimum tax, or                                                                                                                 
| |   |                                                                                                                                                                          
| |  | persons
      owning, actually or constructively, 10% or more of our voting shares.                                                                                      

This discussion is based on the Internal Revenue Code of 1986, as amended to the date hereof, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, changes to any of which may affect the tax consequences described herein. Holders should consult their tax advisors with regard to the application of the United States federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction. This discussion is also based, in part, on representations of the depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms. As used herein,
    the term United States holder means a beneficial owner of preferred
    class A shares, common shares, or American depositary shares that is for U.S.
    federal income tax purposes:


| |  | a citizen
      or resident alien individual of the United States,                                                                  
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                     
| |  | a corporation
      created or organized in or under the laws of the United States or of any
      political subdivision thereof, or
| |   |                                                                                                                                     
| |  | an estate
      or trust the income of which is subject to United States federal income
      taxation regardless of its source.    

The term United
  States holder also includes certain former citizens of the United States.


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In general, for U.S. federal income tax purposes, holders of American depositary receipts evidencing American depositary shares will be treated as the beneficial owners of the preferred class A shares or common shares represented by those American depositary shares. Deposits and withdrawals of preferred class A shares or common shares by holders in exchange for American depositary shares will not result in the realization of gain or loss for U.S. federal income tax purposes. Taxation of Dividends.Subject to the discussion under Passive Foreign Investment Company Rulesbelow, distributions paid on American depositary shares, preferred class A shares or common shares, including distributions paid in the form of payments of interest on capital for Brazilian tax purposes, out of our current or accumulated earnings and profits, as determined for U.S. federal tax purposes, before reduction for any Brazilian income tax withheld by us, will be taxable to you as foreign source dividend income and will not be eligible for the dividends-received deduction allowed to corporations. You will be required to include dividends paid in reaisin income in an amount equal to their U.S. dollar value calculated by reference to an exchange rate in effect on the date such items are received. If you hold American depositary shares, you will be considered to receive a dividend when the dividend is received by the depositary. Under new rules applicable to dividends received after 2002 and before 2009, an individual United States holder generally will be subject to U.S. taxation at a maximum rate of 15%. The reduced rate does not apply to dividends paid in respect of certain short-term (less than 60 days) or hedged positions. You should consult your own tax adviser regarding the implications of these new rules in light of your own particular circumstances. Subject to generally applicable
    limitations and restrictions, you will be entitled to a credit against your
    United States federal income tax liability, or a deduction in computing your
    U.S. federal taxable income, for Brazilian income taxes withheld by us. You
    must satisfy minimum holding period requirements to be eligible to claim a
    foreign tax credit for Brazilian taxes withheld on dividends. The limitation
    on foreign taxes eligible for credit is calculated separately for specific
    classes of income. For this purpose dividends paid by us on our shares will
    generally constitute passive income. Taxation of Capital Gains.Subject to the discussion under Passive Foreign Investment Company Rulesbelow, upon a sale or exchange of preferred class A shares, common shares or American depositary shares, you will recognize a capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount realized on the sale or exchange and your adjusted tax basis in the preferred class A shares, common shares or American depositary shares. The net amount of long-term capital gain recognized by an individual United States holder after May 5, 2003 and before January 1, 2009 generally is subject to taxation at a maximum rate of 15 percent. The net long-term capital gain
recognized by an individual United States holder before May 6, 2003 or after December 31, 2008 generally is subject to taxation at a maximum rate of 20%. This gain or loss will be long-term capital gain or loss if your holding period in the American depositary shares exceeds one year. Any gain or loss will be U.S. source gain or loss for U.S. foreign tax credit purposes. Consequently, if a Brazilian withholding tax is imposed on the sale or disposition of American depositary shares, preferred class A shares or common shares, and you do not receive significant foreign source income from other sources you may not be able to derive effective U.S. foreign tax credit benefits in respect of such Brazilian withholding tax. You should consult your own tax advisor regarding the application of the foreign tax credit rules to your investment in, and disposition of, American depositary shares, preferred class A shares or common shares. If a Brazilian tax is withheld on the sale or disposition of shares, the amount realized by a U.S. holder will include the gross amount of the proceeds of such sale or disposition before deduction of the Brazilian tax. See Brazilian Tax ConsiderationsTaxation of Gains. Passive Foreign Investment
    Company Rules We believe that
    we will not be considered a passive foreign investment company for U.S. federal
    income tax purposes. Passive foreign investment company status depends on
    a foreign company not earning more than a permitted amount of gross income
    that is considered passive income and not holding more than a
    permitted percentage of assets, determined by value, that produce or are held
    to produce passive income. For these purposes, a


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company is treated as earning and holding its pro rata share of the income and assets of any corporation in which it owns, directly or indirectly, 25% of the stock, by value. Since this test depends on the composition of a companys income and assets, and market value of those assets, from time to time, and it is unclear whether certain of our income and assets would be associated with commodities transactions that would not be considered qualified active sales, there can be no assurance that we will not be considered a passive foreign investment company for any taxable year. If we were treated as a passive foreign investment company for any taxable year during which a U.S. holder held an American depositary share, preferred Class A share or common share, certain adverse consequences could apply to the U.S. holder.

If we are treated as a passive foreign investment company for any taxable year and a U.S. holder does not make the mark to market election described below, gain recognized by such U.S. holder on a sale or other disposition of the American depositary shares or preferred Class A shares or common shares would be allocated ratably over the U.S. holders holding period for the American depositary shares, preferred Class A shares or common shares. The amounts allocated to the taxable year of the sale or other exchange and to any year before we became a passive foreign investment company would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, and an interest charge would be imposed on the amount allocated to such taxable year. Further, any distribution in respect of American
depositary shares, preferred Class A shares or common shares in excess of 125 percent of the average of the annual distributions on American depositary shares or common shares received by the U.S. holder during the preceding three years or the U.S. holders holding period, whichever is shorter, would be subject to taxation and an interest charge in the manner described above. If we are treated as a passive foreign investment company and the preferred Class A shares or common shares or American depositary shares are regularly traded on a qualified exchange, a U.S. holder may make a mark-to market election. A qualified exchange includes a foreign exchange that is regulated by a governmental authority in which the exchange is located and with respect to which certain other requirements are met. The IRS has not yet identified specific foreign exchanges that are qualified for this purpose. The New York Stock Exchange, on which the American depositary shares are expected to be traded, is a qualified exchange for U.S. federal income tax purposes. A U.S. holder that makes the election generally will include each year as ordinary income the excess, if any, of the fair market value of the American depositary shares, preferred Class A shares or common shares at the end of the taxable year over their adjusted basis, and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of the American depositary shares, preferred Class A shares or common shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The basis of a U.S. holder that makes the election in the American depositary shares, preferred Class A shares or common shares will be adjusted to reflect any such income or loss amounts. Any gain recognized on the sale or other disposition of American depositary shares, preferred Class A shares or common shares will be treated
as ordinary income. If a U.S. holder owns shares or American depositary shares, preferred Class A shares or common shares during a year in which we are considered a passive foreign investment company, the U.S. holder must file Internal Revenue Service Form 8621. Prospective U.S. holders are urged to consult their tax advisers concerning the consequences to them if we were considered to be a passive foreign investment company. Information Reporting and Backup Withholding Information returns may be filed with the Internal Revenue Service in connection with distributions on the preferred class A shares, common shares or American depositary shares and the proceeds from their sale or other disposition. You may be subject to United States backup withholding tax on these payments if you fail to provide your taxpayer identification number or comply with certain certification procedures or otherwise establish an exemption from backup withholding.


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The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is furnished to the Internal Revenue Service.


DOCUMENTS ON DISPLAY

We are subject to the information
    requirements of the Securities Exchange Act of 1934, as amended, and accordingly
    file reports and other information with the SEC. Reports and other information
    filed by us with the SEC may be inspected and copied at the public reference
    facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington,
    D.C. 20549. You may obtain copies of these materials by mail from the Public
    Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549,
    at prescribed rates. You may inspect these reports and other information at
    the offices of the New York Stock Exchange, 11 Wall Street, New York, New
    York 10005, on which our American depositary shares are listed. Our SEC filings
    are also available to the public from the SECs website athttp://www.sec.gov,
    and at the offices of the New York Stock Exchange. For further information
    on obtaining copies of our public filings at the New York Stock Exchange,
    you should call (212) 656-5060. We also file financial statements
    and other periodic reports with the CVM.


Item 11. Quantitative and Qualitative Disclosures About Market Risk

The principal market risks we face are interest rate risk, exchange rate risk and commodity price risk. We manage some of these risks through the use of derivative instruments. Our policy has been to settle all derivatives contracts in cash without physical delivery of product. Our risk management activities follow policies and guidelines reviewed and approved by our board of directors. These policies and guidelines generally prohibit speculative trading and short selling and require diversification of transactions and counter-parties. We monitor and evaluate our overall position daily in order to evaluate financial results and impact on our cash flow. We also periodically review the credit limits and creditworthiness of our hedging counter-parties. We report the results of our hedging activities to senior management on a monthly basis. As of January 1, 2001 we have adopted SFAS 133  Accounting for Derivative Financial Instruments and Hedging Activities, as amended by SFAS 137 and SFAS 138, and we recognize all derivatives on our balance sheet at fair value. Accordingly we recognized an initial transition adjustment of $12 million as a charge in our statement of income relative to net unrealized losses on contracts open as of December 31, 2000. Subsequently to January 1, 2001 all derivatives have been adjusted to fair market value at each balance sheet date and the gain or loss included in current earnings. The asset (liability) balances at December 31, 2002 and 2001 and the movement in fair value of derivative financial instruments is as follows:


|                                                               | Gold |   | Interest
      rates
      (LIBOR) |   | Currencies |   | Alumina |  | Total |  
|-------------------------------------------------------------- | ---- | - | ---------------------------------- | - | ---------- | - | ------- |  | ----- | -
|                                                               |      |   |                                    |   |            |   |         |  |       |  
|Initial
      unrealized gains and (losses) at January 1, 2001 | 9    |   | (8                                 | ) | (4         | ) |        |  | (3    | )
|Change in
      the period                                     | 2    |   | (36                                | ) | (4         | ) |        |  | (38   | )
|Gains and
      (losses) realized in the period                | (4   | ) | 8                                  |   | 4          |   |        |  | 8     |  
|                                                               |      |   |                                    |   |            |   |         |  |       |  
|Unrealized
      gains and (losses) at December 31, 2001       | 7    |   | (36                                | ) | (4         | ) |        |  | (33   | )
|                                                               |      |   |                                    |   |            |   |         |  |       |  
|Gain recognized
      upon consolidation of Alunorte           |     |   |                                   |   |           |   | 2       |  | 2     |  
|Financial
      settlement                                     | (2   | ) | 24                                 |   | 3          |   | 1       |  | 26    |  
|Losses in
      the period                                     | (22  | ) | (68                                | ) | (2         | ) |        |  | (92   | )
|Effect of
      exchange rate changes                          | 2    |   | 20                                 |   | 2          |   |        |  | 24    |  
|                                                               |      |   |                                    |   |            |   |         |  |       |  
|Unrealized
      gains and (losses) at December 31, 2002       | (15  | ) | (60                                | ) | (1         | ) | 3       |  | (73   | )
|                                                               |      |   |                                    |   |            |   |         |  |       |  

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INTEREST RATE AND EXCHANGE RATE RISK

The table
      below sets forth our floating and fixed rate long-term debt, categorized
      by local and foreign currency, and as a percentage of our total long-term
      debt portfolio at the dates indicated, including loans from both related
      and unrelated parties, as reflected in our consolidated financial statements.


|                                   | At
      December 31,                          |      
|---------------------------------- | ---------------------------------------------- | -----
|                                   |                                                |      
|                                   | 2001                                           |      
|                                   |                                                |      
|                                   | (in
      millions of US$, except percentages) |      
|Floating
      rate debt:          |                                                |      
|Real-denominated                   | US$                                            | 116  
|Foreign
      currency denominated |                                                | 1,234
|Fixed rate
      debt:             |                                                |      
|Real-denominated                   |                                                | 4    
|Foreign
      currency denominated |                                                | 816  
|                                   |                                                |      
|                                   |                                                |      
|Total                              | US$                                            | 2,170
|                                   |                                                |      

The table below provides information about our debt obligations as of December 31, 2002, which are sensitive to changes in interest rates and exchange rates. The table presents the principal cash flows and related weighted-average interest rates of these obligations by expected maturity date. Weighted-average variable interest rates are based on the applicable reference rate (LIBOR or TJLP) at December 31, 2002. The debt obligations actual cash flows are denominated in U.S. dollars or Brazilianreais,as indicated.


|                         | 2004                       |  | 2005    |  | 2006    |  | 2007          |  | to 2013 |  | Total         |  | Fair
        Value
      Cash
        Flow at
      December
        31,
      2002 |  | Fair
        Value
      Accounting
      December
      31,
        2002 | 
|------------------------ | -------------------------- |  | ------- |  | ------- |  | ------------- |  | ------- |  | ------------- |  | ----------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------- | 
|                         |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|                         | (in
      millions of US$) | 
|                         |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|U.S. dollar-denominated: |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|Fixed rate               |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|Bonds
      over 7%      | US$
      313              |  | US$    |  | US$    |  | US$
      304 |  | US$    |  | US$
      617 |  | US$
      617                                                                       |  | US$
      620                                                             | 
|Loan
      up to 7%      | 1                          |  | 1       |  | 2       |  | 1             |  |        |  | 5             |  | 5                                                                                   |  | 32                                                                        | 
|Loan
      over 7%       | 41                         |  | 52      |  | 50      |  | 41            |  | 123     |  | 308           |  | 308                                                                                 |  | 308                                                                       | 
|                         |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|                         | 355                        |  | 53      |  | 52      |  | 346           |  | 123     |  | 929           |  | 929                                                                                 |  | 960                                                                       | 
|Floating rate            |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|Loan
      up to 7%      | 426                        |  | 261     |  | 214     |  | 73            |  | 92      |  | 1,066         |  | 1,066                                                                               |  | 1,280                                                                     | 
|Loan
      over 7%       | 4                          |  | 3       |  | 3       |  | 2             |  | 2       |  | 14            |  | 14                                                                                  |  | 13                                                                        | 
|                         |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|                         | 430                        |  | 264     |  | 217     |  | 75            |  | 94      |  | 1,080         |  | 1,080                                                                               |  | 1,293                                                                     | 
|                         |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|Subtotal                 | 785                        |  | 317     |  | 269     |  | 421           |  | 217     |  | 2,009         |  | 2,009                                                                               |  | 2,253                                                                     | 
|                         |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|Real-denominated:        |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|Floating rate            |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|Loan
      over 7%       | 27                         |  | 16      |  | 11      |  | 3             |  | 68      |  | 125           |  | 125                                                                                 |  | 126                                                                       | 
|                         |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|Subtotal                 | 27                         |  | 16      |  | 11      |  | 3             |  | 68      |  | 125           |  | 125                                                                                 |  | 126                                                                       | 
|                         |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 
|Total                    | US$ 812                    |  | US$ 333 |  | US$ 280 |  | US$ 424       |  | US$ 285 |  | US$ 2,134     |  | US$ 2,134                                                                           |  | US$ 2,379                                                                 | 
|                         |                            |  |         |  |         |  |               |  |         |  |               |  |                                                                                     |  |                                                                           | 

Interest Rate Risk

We are exposed to interest rate risk in our floating-rate debt. Our floating-rate debt consists principally of U.S. dollar borrowings related to trade finance. In general, our foreign currency floating rate debt is principally subject to changes in the London Interbank Offered Rate, or LIBOR. Our floating rate debt denominated inreaisis principally subject to changes in the TJLP, as fixed by the Central Bank. We enter into interest rate derivative transactions primarily to hedge against interest rate fluctuations on our LIBOR-based debt. We generally do not hedge our TJLP-based debt. Our interest rate derivatives portfolio generally consists of option trades which aim to cap our exposure to interest rate fluctuations. A cap is the


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maximum rate we will be required to pay on the notional amount of the debt. Conversely, a floor is the minimum rate we will be required to pay on the notional amount of the debt. Certain caps are subject to knock-out provisions which, if triggered, eliminate the protection provided by the cap.

The table below sets forth certain information with respect to our interest rate derivatives portfolio at December 31, 2001 and 2002:




|      |                  |                   | At
      December 31, 2001                        |                  | At
      December 31, 2002 |            |     |    
|----- | ---------------- | ----------------- | ------------------------------------------------- | ---------------- | -------------------------- | ---------- | --- | ---
|      |                  |                  
|      | Notional         |                   |                                                   |                  |                            | Unrealized |     |    
|Value | Rate
      Range | gain
      (loss) | Value                                             | Rate
      Range | gain
      (loss)          | maturity  
|      |                  |                   |                                                   |                  |                            |            |     |    
|      |                  |                   | (In
        millions of US $, except rate ranges) |                 
|Cap   | US$              | 1,375             |                                                   | 5-8              | %                          | US$        | 2   |    
|Floor |                  | 1,000             |                                                   | 5-6.5            | %                          |            | (28 | )  
|Swap  |                  | 125               |                                                   | 5.5-7.5          | %                          |            | (10 | )  
|      |                  |                   |                                                   |                  |                            |            |     |    
|      | Total            |                   |                                                   |                  |                            |            | US$ | (36
|      |                  |                   |                                                   |                  |                            |            |     |    

The unrealized loss in the amount of US$ 36 million and US$ 60 million represents the amount payable if all transactions had been settled on December 31, 2001 and 2002, respectively.


Exchange Rate Risk

We are exposed to exchange rate risk associated with our foreign currency denominated debt. On the other hand, a substantial proportion of our revenues are denominated in, or automatically indexed to, the U.S. dollar, while the majority of our costs are expressed inreais.This provides a natural hedge against any devaluation of the Brazilianrealagainst the U.S. dollar. When devaluation occurs, the immediate negative impact on foreign currency denominated debt is offset over time by the positive effect of devaluation on future cash flows. In light of this framework, we generally do not use derivative instruments to manage the currency
exposure on our long-term dollar denominated debt. However, we do monitor market fluctuations using derivatives to protect against specific risks from the exchange rate variation. From time to time we enter
    into foreign exchange derivative swap transactions seeking to change the characteristics
    of ourreal-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 years
    ended December 31, 2002 and 2001 our use of such instruments was not significant. On the other hand, a portion of our indebtedness is also denominated in euros
and in Japanese yen, and we use derivative instruments to protect ourselves against specific risks associated with exchange rate
movements in these foreign currencies. The table below sets forth certain information with respect to our exchange
rate derivatives portfolio at December 31, 2001 and 2002. These derivatives are structured forwards that we have purchased,
which will require us to purchase foreign currencies as specified below:


|               | At
        December 31, 2001 |                   | At
        December 31, 2002                      |                   |                     |         
|-------------- | ---------------------------- | ----------------- | ------------------------------------------------- | ----------------- | ------------------- | --------
|               |                             
|               | Notional                     |                   |                                                   |                   |                     |         
|Value          | Price
      Range            | Gain
      (Loss) | Value                                             | Price
      Range | Gain
      (Loss)   | Maturity
|               |                              |                   |                                                   |                   |                     |         
|               |                              |                   | (In
        millions of US $, except yen amounts) |                  
|Yen purchased  | US$                          | 5                 |                                                   | ¥                 | 70-110              |         
|               |                              |                   |                                                   |                   | Per
      US$       |         
|Euro purchased |                              | 8                 |                                                   |                   | US$
      1.10-1.30 |         
|               |                              |                   |                                                   |                   | Per
      US$       |         
|               |                              |                   |                                                   |                   |                     |         
|Total          |                              |                   |                                                   |                   |                     |         
|               |                              |                   |                                                   |                   |                     |         

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The unrealized losses in the amounts of US$ 4 million and US$ 1 million represent the amounts payable if all transactions had been settled on December 31, 2001 and December 31, 2002, respectively.


COMMODITY
  PRICE RISK

| | We
      are also exposed to various market risks relating to the volatility of world
      market prices for:
| | --------------------------------------------------------------------------------------------------------------
| |                                                                                                               
| |                                                                                                              
| |                                                                                                               
| |                                                                                                              
| |                                                                                                               
| |                                                                                                              
| |                                                                                                               
| |                                                                                                              

We do not enter into derivatives transactions to hedge our iron ore, manganese or ferroalloys exposure. SeeItem 5. Operating and Financial Review and Prospects. To manage the risk associated with fluctuations in aluminum prices, our affiliates Albras and Alunorte engage in hedging transactions involving put and call options, as well as forward contracts. These derivative instruments allow Albras and Alunorte to establish minimum average profits for their future aluminum production in excess of their expected production costs and therefore ensure stable cash generation. However, they also have the effect of reducing potential gains from price increases in the spot market for aluminum. The table below sets forth certain information with respect to Albrass derivatives portfolio at December 31, 2001 and 2002. We have a 51% voting capital interest and a 51% total capital interest in Albras.


|                  | At
        December 31, 2001 |  | At
        December 31, 2002 |                      
|----------------- | ---------------------------- |  | ---------------------------- | ---------------------
|                  | NotionalValue                |  | Price
        Range          |                      
|                  |                              |  |                              |                      
|                  | (Tons
        ofaluminum)    |  |                              | (US$
        per ton)
|Puts purchased    | 80,000                       |  | US$                          | 1,400-1,600          
|Forwards sold     | 57,000                       |  |                              | 1,400-1,600          
|Calls sold        | 56,000                       |  |                              | 1,600-1,800          
|Other instruments | 132,000                      |  |                              |                      
|                  |                              |  |                              |                      
|Total             |                              |  |                              |                      
|                  |                              |  |                              |                      

The table below sets forth certain information with respect to Alunortes derivatives portfolio at December 31, 2001 and 2002. We have a 62.1% voting capital interest and a 57.0% total capital interest in Alunorte. We consolidate Alunortes operations in our financial statements.


|                  | At
        December 31, 2001 |  | At
        December 31, 2002 |                      
|----------------- | ---------------------------- |  | ---------------------------- | ---------------------
|                  | NotionalValue                |  | Price
        Range          |                      
|                  |                              |  |                              |                      
|                  | (Tons
        ofaluminum)    |  |                              | (US$
        per ton)
|Puts purchased    | 15,000                       |  | US$                          | 1,400-1,600          
|Forwards sold     | 26,000                       |  |                              | 1,400-1,600          
|Calls sold        | 23,000                       |  |                              | 1,600-1,800          
|Other instruments | 74,000                       |  |                              |                      
|                  |                              |  |                              |                      
|Total             |                              |  |                              |                      
|                  |                              |  |                              |                      

To manage the risk associated with fluctuations in gold prices, we enter into derivative instruments which allow us to establish a minimum profit level for future gold production. However, they may also have the effect of eliminating potential gains on certain price increases in the spot market for gold.


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The table below sets forth certain information with respect to our gold derivatives portfolio at December 31, 2001 and 2002.


|                  | At
        December 31, 2001 |  | At
        December 31, 2002 |                      
|----------------- | ---------------------------- |  | ---------------------------- | ---------------------
|                  | Quantity                     |  |                              | Price
        Range  
|                  | (oz.)                        |  |                              | (US$
        per oz.)
|Puts purchased    | 422,000                      |  | US$                          | 270-340              
|Calls sold        | 718,000                      |  |                              | 308-366              
|Other instruments | 25,000                       |  |                              |                      
|                  |                              |  |                              |                      
|Total             |                              |  |                              |                      
|                  |                              |  |                              |                      

The unrealized gain in the amount of US$ 7 million represents the amount receivable if all transactions had been settled on December 31, 2001. The unrealized loss in the amount of US$ 15 million represents the amount payable if all transactions had been settled on December 31, 2002.


Item 12.  Description of Securities Other than Equity Securities

Not applicable.


PART
  II

Item
  13.  Defaults, Dividend Arrearages and Delinquencies

None.


Item
  14.  Material Modifications to the Rights of Security Holders and
  Use of Proceeds

None.


Item
  15.  Controls and Procedures

Within the 90 days prior to the date of this report,
the Company carried out an evaluation under the supervision and with the participation of the Companys management,
including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Vale Overseas
carried out a similar evaluation that relied primarily on the Companys evaluation of its controls. There are inherent
limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the
circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures
can only provide reasonable assurance of achieving their control
objectives. Based upon and as of the date of the Companys evaluation, the Chief Executive
Officer and Chief Financial Officer of each of the Company and Vale Overseas concluded that the
disclosure controls and procedures are effective in all material respects to ensure that information
required to be disclosed in the reports the Company or Vale Overseas, as
applicable, files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required. There were no significant
    changes in the Companys or Vale Overseas internal controls or
    in other factors that could significantly affect these controls subsequent
    to the date of their evaluation.


Item
  16.  [Reserved]

PART
  III

Item
  17.  Financial Statements

The Registrant has responded toItem 18in lieu of responding to this Item.


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Item
  18.   Financial Statements

Reference is made to pages
    F-1 through F-51 and B-1 through B-24.


Item
  19.   Exhibits

|Exhibit |                                                                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                     
|        |                                                                                                                                                                     
|1.1     | By-Laws of Companhia Vale
      do Rio Doce (English translation)                                                                                                   
|        |                                                                                                                                                                     
|1.2     | Memorandum & Articles
      of Association of Vale Overseas Limited                                                                                                 
|        |                                                                                                                                                                     
|8       | List of Subsidiaries                                                                                                                                                
|        |                                                                                                                                                                     
|10.01   | Certification of Chief
      Executive Officer and Chief Financial Officer of CVRD, pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002                 
|        |                                                                                                                                                                     
|10.02   | Certification of Principal
      Executive Officer and Principal Financial Officer of Vale Overseas, pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002
|        |                                                                                                                                                                     

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SIGNATURES

The registrant
  hereby certifies that it meets all of the requirements for filing on Form 20-F
  and that it has duly caused and authorized the undersigned to sign this annual
  report on its behalf.


| | COMPANHIA
      VALE DO RIO DOCE
| | --------------------------------
| |                                 
| | By:                             
| |                                 
| |                                 
| |                                 
| | By:                             
| |                                 
| |                                 
| |                                 
| | VALE
      OVERSEAS LIMITED     
| |                                 
| | By:                             
| |                                 
| |                                 
| |                                 
| | By:                             
| |                                 
| |                                 





Date: June 30, 2003

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CERTIFICATIONS

I, Roger Agnelli,
  certify that: 1.   I
  have reviewed this annual report on Form 20-F of Companhia Vale Do Rio Doce; 2.   Based
  on my knowledge, this annual report does not contain any untrue statement of
  a material fact or omit to state a material fact necessary to make the statements
  made, in light of the circumstances under which such statements were made, not
  misleading with respect to the period covered by this annual report; 3.   Based
  on my knowledge, the financial statements, and other financial information included
  in this annual report, fairly present in all material respects the financial
  condition, results of operations and cash flows of the registrant as of, and
  for, the periods presented in this annual report; 4.   The
  registrants other certifying officers and I are responsible for establishing
  and maintaining disclosure controls and procedures (as defined in Exchange Act
  Rules 13a-14 and 15d-14) for the registrant and have:


| | a) | Designed
      such disclosure controls and procedures to ensure that material information
      relating to the registrant, including its consolidated subsidiaries, is
      made known to us by others within those entities, particularly during the
      period in which this annual report is being prepared;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                     
| | b) | Evaluated
      the effectiveness of the registrants disclosure controls and procedures
      as of a date within 90 days prior to the filing date of this annual report
      (the Evaluation Date); and                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                     
| | c) | Presented
      in this annual report our conclusions about the effectiveness of the disclosure
      controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                    

5.   The
  registrants other certifying officers and I have disclosed, based on our
  most recent evaluation, to the registrants auditors and the audit committee
  of registrants board of directors (or persons performing the equivalent
  function):


| | a) | All significant
      deficiencies in the design or operation of internal controls which could
      adversely affect the registrants ability to record, process, summarize
      and report financial data and have identified for the registrants
      auditors any material weaknesses in internal controls; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                       
| | b) | Any fraud,
      whether or not material, that involves management or other employees who
      have a significant role in the registrants internal controls; and                                                                                                                                                    

6.   The
  registrants other certifying officers and I have indicated in this annual
  report whether or not there were significant changes in internal controls or
  in other factors that could significantly affect internal controls subsequent
  to the date of our most recent evaluation, including any corrective actions
  with regard to significant deficiencies and material weaknesses.






Date: June 30, 2003


| | /s/
      Roger Agnelli | 
| | ----------------------- | 
| | Name:                   | 
| | Title:                  | 



113

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Back to Contents

I, Fabio de Oliveira Barbosa,
    certify that: 1.   I have
    reviewed this annual report on Form 20-F of Companhia Vale Do Rio Doce; 2.   Based
    on my knowledge, this annual report does not contain any untrue statement
    of a material fact or omit to state a material fact necessary to make the
    statements made, in light of the circumstances under which such statements
    were made, not misleading with respect to the period covered by this annual
    report; 3.   Based
    on my knowledge, the financial statements, and other financial information
    included in this annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the registrant
    as of, and for, the periods presented in this annual report; 4.   The registrants
    other certifying officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
    and 15d-14) for the registrant and have:


| | a) | Designed such disclosure
      controls and procedures to ensure that material information relating to
      the registrant, including its consolidated subsidiaries, is made known to
      us by others within those entities, particularly during the period in which
      this annual report is being prepared;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                     
| | b) | Evaluated the effectiveness
      of the registrants disclosure controls and procedures as of a date
      within 90 days prior to the filing date of this annual report (the Evaluation
      Date); and                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                     
| | c) | Presented in this annual
      report our conclusions about the effectiveness of the disclosure controls
      and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                    

5.   The registrants
    other certifying officers and I have disclosed, based on our most recent evaluation,
    to the registrants auditors and the audit committee of registrants
    board of directors (or persons performing the equivalent function):


| | a) | All significant deficiencies
      in the design or operation of internal controls which could adversely affect
      the registrants ability to record, process, summarize and report financial
      data and have identified for the registrants auditors any material
      weaknesses in internal controls; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                       
| | b) | Any fraud, whether or
      not material, that involves management or other employees who have a significant
      role in the registrants internal controls; and                                                                                                                                                    

6.   The registrants
    other certifying officers and I have indicated in this annual report whether
    or not there were significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions with regard to
    significant deficiencies and material weaknesses.  Date: June 30, 2003 /s/ Fabio de Oliveira
        BarbosaName:     Fabio
        de Oliveira BarbosaTitle:       Chief
        Financial Officer


114

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Back to Contents

I, Gabriel Stoliar, certify
    that: 1.   I have
    reviewed this annual report on Form 20-F of Vale Overseas Limited; 2.   Based
    on my knowledge, this annual report does not contain any untrue statement
    of a material fact or omit to state a material fact necessary to make the
    statements made, in light of the circumstances under which such statements
    were made, not misleading with respect to the period covered by this annual
    report; 3.   Based
    on my knowledge, the financial statements, and other financial information
    included in this annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the registrant
    as of, and for, the periods presented in this annual report; 4.   The registrants
    other certifying officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
    and 15d-14) for the registrant and have:


| | a) | Designed such disclosure
      controls and procedures to ensure that material information relating to
      the registrant, including its consolidated subsidiaries, is made known to
      us by others within those entities, particularly during the period in which
      this annual report is being prepared;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                     
| | b) | Evaluated the effectiveness
      of the registrants disclosure controls and procedures as of a date
      within 90 days prior to the filing date of this annual report (the Evaluation
      Date); and                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                     
| | c) | Presented in this annual
      report our conclusions about the effectiveness of the disclosure controls
      and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                    

5.   The registrants
    other certifying officers and I have disclosed, based on our most recent evaluation,
    to the registrants auditors and the audit committee of registrants
    board of directors (or persons performing the equivalent function):


| | a) | All significant deficiencies
      in the design or operation of internal controls which could adversely affect
      the registrants ability to record, process, summarize and report financial
      data and have identified for the registrants auditors any material
      weaknesses in internal controls; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                       
| | b) | Any fraud, whether or
      not material, that involves management or other employees who have a significant
      role in the registrants internal controls; and                                                                                                                                                    

6.   The registrants
    other certifying officers and I have indicated in this annual report whether
    or not there were significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions with regard to
    significant deficiencies and material weaknesses.  Date: June 30, 2003


| | /s/ Gabriel Stoliar                                       
| | ----------------------------------------------------------
| | Name:    Gabriel
      Stoliar                            
| | Title:      Director
      and Principal Executive Officer

115

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Back to Contents

I, Tito Botelho Martins,
    certify that: 1.   I have
    reviewed this annual report on Form 20-F of Vale Overseas Limited; 2.   Based
    on my knowledge, this annual report does not contain any untrue statement
    of a material fact or omit to state a material fact necessary to make the
    statements made, in light of the circumstances under which such statements
    were made, not misleading with respect to the period covered by this annual
    report; 3. Based on my knowledge,
    the financial statements, and other financial information included in this
    annual report, fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of, and for, the
    periods presented in this annual report; 4. The registrants
    other certifying officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
    and 15d-14) for the registrant and have:


| | a) | Designed such disclosure
      controls and procedures to ensure that material information relating to
      the registrant, including its consolidated subsidiaries, is made known to
      us by others within those entities, particularly during the period in which
      this annual report is being prepared;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                     
| | b) | Evaluated the effectiveness
      of the registrants disclosure controls and procedures as of a date
      within 90 days prior to the filing date of this annual report (the Evaluation
      Date); and                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                     
| | c) | Presented in this annual
      report our conclusions about the effectiveness of the disclosure controls
      and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                    

5. The registrants
    other certifying officers and I have disclosed, based on our most recent evaluation,
    to the registrants auditors and the audit committee of registrants
    board of directors (or persons performing the equivalent function):


| | a) | All significant deficiencies
      in the design or operation of internal controls which could adversely affect
      the registrants ability to record, process, summarize and report financial
      data and have identified for the registrants auditors any material
      weaknesses in internal controls; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                       
| | b) | Any fraud, whether or
      not material, that involves management or other employees who have a significant
      role in the registrants internal controls; and                                                                                                                                                    

6. The registrants
    other certifying officers and I have indicated in this annual report whether
    or not there were significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions with regard to
    significant deficiencies and material weaknesses.  Date: June 30, 2003


| | /s/ Tito Botelho Martins                                  
| | ----------------------------------------------------------
| | Name:    Tito
      Botelho Martins                       
| | Title:      Director
      and Principal Financial Officer

116

---



INDEX TO CONSOLIDATED FINANCIAL
  STATEMENTS

|                                                                                                                                                                 |  | Page
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                                 |  |     
|Companhia Vale do Rio Doce Financial Statements                                                                                                                  |  |     
|                                                                                                                                                                 |  |     
|Report of PricewaterhouseCoopers Auditores
      Independentes                                                                                                   |  | F-2 
|                                                                                                                                                                 |  |     
|Consolidated Balance Sheets as of December
      31, 2002 and 2001                                                                                               |  | F-3 
|                                                                                                                                                                 |  |     
|Consolidated
        Statements of Income for the three years ended December 31, 2002, 2001
        and 2000                                                     |  | F-5 
|                                                                                                                                                                 |  |     
|Consolidated
        Statements of Cash Flows for the three years ended December 31, 2002,
        2001 and 2000                                                 |  | F-6 
|                                                                                                                                                                 |  |     
|Consolidated
        Statements of Changes in Stockholders Equity for the three years
        ended December 31, 2002, 2001 and 2000                            |  | F-7 
|                                                                                                                                                                 |  |     
|Notes to the Consolidated Financial Statements                                                                                                                   |  | F-8 
|                                                                                                                                                                 |  |     
|Vale Overseas Financial Statements                                                                                                                               |  |     
|                                                                                                                                                                 |  |     
|Report of PricewaterhouseCoopers Auditores Independentes                                                                                                         |  | F-45
|                                                                                                                                                                 |  |     
|Balance sheets as of December 31, 2002 and 2001                                                                                                                  |  | F-46
|                                                                                                                                                                 |  |     
|Statement of Income and Changes in Accumulated Loss for the year ended
        December 31, 2002                                                                 |  | F-47
|                                                                                                                                                                 |  |     
|Statement of Cash Flows for the year ended December 31, 2002                                                                                                     |  | F-48
|                                                                                                                                                                 |  |     
|Notes to the Financial Statements                                                                                                                                |  | F-49
|                                                                                                                                                                 |  |     
|Index
          to Audit Reports from Independent Accountants listed in Note 20 to
          the Consolidated Financial Statements of Companhia Vale do Rio Doce |  | B-1 



---



REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion, based upon our audits and the reports of other auditors, the accompanying consolidated balance sheets and the related consolidated statements of income, of cash flows and of changes in stockholders equity,
present fairly, in all material respects, the financial position of Companhia Vale do Rio Doce and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period
ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Companys management; our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain affiliates, the investments in which total US$343 million and US$441 million at December 31, 2002 and 2001, respectively, and equity in earnings of US$60 million, US$53 million and US$213 million for 2002, 2001 and 2000, respectively. Also, we did not audit the financial statements of certain majority-owned subsidiaries as at and for the years ended December 31, 2002, 2001 and 2000, which statements
reflect total assets of US$969 million and US$500 million at December 31, 2002 and 2001, respectively, and total revenues of US$426 million, US$407 million and US$480 million for 2002, 2001 and 2000, respectively. The financial statements of these
affiliates and subsidiaries were audited by other auditors whose reports thereon have been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts for these affiliates and subsidiaries, is based solely on the reports
of the other auditors. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers
Auditores Independentes

Rio de Janeiro, Brazil
February 21, 2003

F - 2

---



Consolidated Balance Sheets
Expressed in millions of United States dollars

|                                                                                                                                         | As of December 31 | 
|---------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | 
|                                                                                                                                         |                   | 
|                                                                                                                                         | 2002              | 
|                                                                                                                                         |                   | 
|Assets                                                                                                                                   |                   | 
|                                                                                                                                         |                   | 
|Current assets                                                                                                                           |                   | 
|Cash and cash equivalents                                                                                                                | 1,091             | 
|Accounts receivable                                                                                                                      |                   | 
|Related parties                                                                                                                          | 121               | 
|Unrelated parties                                                                                                                        | 539               | 
|Loans and advances to related parties                                                                                                    | 49                | 
|Inventories                                                                                                                              | 292               | 
|Deferred income tax                                                                                                                      | 211               | 
|Others                                                                                                                                   | 286               | 
|                                                                                                                                         |                   | 
|                                                                                                                                         | 2,589             | 
|                                                                                                                                         |                   | 
|                                                                                                                                         |                   | 
|Property, plant and equipment, net                                                                                                       | 3,297             | 
|                                                                                                                                         |                   | 
|Investments
         in affiliated companies and joint ventures and other investments and
    provision for losses on equity investments | 732               | 
|Other assets                                                                                                                             |                   | 
|Goodwill on acquisition of consolidated subsidiaries                                                                                     | 412               | 
|Loans and advances                                                                                                                       |                   | 
|Related parties                                                                                                                          | 89                | 
|Unrelated parties                                                                                                                        | 73                | 
|Prepaid pension cost                                                                                                                     | 79                | 
|Deferred income tax                                                                                                                      | 358               | 
|Judicial deposits                                                                                                                        | 239               | 
|Unrealized gain on derivative instruments                                                                                                | 3                 | 
|Others                                                                                                                                   | 84                | 
|                                                                                                                                         |                   | 
|                                                                                                                                         |                   | 
|                                                                                                                                         | 1,337             | 
|                                                                                                                                         |                   | 
|TOTAL                                                                                                                                    | 7,955             | 
|                                                                                                                                         |                   | 

F - 3

---



|Consolidated Balance Sheets Expressed in millions of United States dollars | (Continued)
|-------------------------------------------------------------------------- | -----------

|                                                                         |                   |  
|------------------------------------------------------------------------ | ----------------- | -
|                                                                         | As of December 31 |  
|                                                                         |                   |  
|                                                                         | 2002              |  
|                                                                         |                   |  
|Liabilities and stockholders equity                                     |                   |  
|Current liabilities                                                      |                   |  
|Suppliers                                                                | 325               |  
|Payroll and related charges                                              | 76                |  
|Interest attributed to stockholders                                      | 3                 |  
|Current portion of long-term debt                                        |                   |  
|Related parties                                                          |                  |  
|Unrelated parties                                                        | 717               |  
|Short-term debt                                                          | 184               |  
|Loans from related parties                                               | 64                |  
|Others                                                                   | 139               |  
|                                                                         |                   |  
|                                                                         | 1,508             |  
|                                                                         |                   |  
|Long-term liabilities                                                    |                   |  
|Employees post-retirement benefits                                       | 141               |  
|Long-term debt                                                           |                   |  
|Related parties                                                          |                  |  
|Unrelated parties                                                        | 2,359             |  
|Loans from related parties                                               | 7                 |  
|Provisions for contingencies (Note 15)                                   | 428               |  
|Unrealized loss on derivative instruments                                | 76                |  
|Others                                                                   | 122               |  
|                                                                         |                   |  
|                                                                         | 3,133             |  
|                                                                         |                   |  
|Minority interests                                                       | 27                |  
|                                                                         |                   |  
|                                                                         |                   |  
|Stockholders equity                                                     |                   |  
|Preferred class A stock - 600,000,000                                    |                   |  
|no-par-value shares authorized and 138,575,913 issued                    | 904               |  
|Common stock - 300,000,000 no-par-value                                  |                   |  
|shares authorized and 249,983,143 issued                                 | 1,630             |  
|Treasury stock - 4,481 (2001 - 91) preferred and 4,715,170 common shares | (88               | )
|Additional paid-in capital                                               | 498               |  
|Other cumulative comprehensive income                                    | (5,175            | )
|Appropriated retained earnings                                           | 2,230             |  
|Unappropriated retained earnings                                         | 3,288             |  
|                                                                         |                   |  
|                                                                         | 3,287             |  
|                                                                         |                   |  
|TOTAL                                                                    | 7,955             |  
|                                                                         |                   |  

See notes to consolidated financial statements.

F - 4

---



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

|                                                                               | Year ended December 31 |  
|------------------------------------------------------------------------------ | ---------------------- | -
|                                                                               |                        |  
|                                                                               | 2002                   |  
|                                                                               |                        |  
|Operating revenues, net of discounts, returns
      and allowances             |                        |  
|Sales of
      ores and metals                                                 |                        |  
|Iron ore and pellets                                                           | 2,820                  |  
|Gold                                                                           | 103                    |  
|Manganese and ferroalloys                                                      | 283                    |  
|Potash                                                                         | 91                     |  
|Others                                                                         | 45                     |  
|                                                                               |                        |  
|                                                                               | 3,342                  |  
|Revenues from logistic services                                                | 458                    |  
|Aluminum products                                                              | 462                    |  
|Other products and services                                                    | 20                     |  
|                                                                               |                        |  
|                                                                               | 4,282                  |  
|Value-added tax                                                                | (159                   | )
|                                                                               |                        |  
|Net operating revenues                                                         | 4,123                  |  
|                                                                               |                        |  
|Operating costs and expenses                                                   |                        |  
|Cost of ores and metals sold                                                   | (1,579                 | )
|Cost of logistic services                                                      | (252                   | )
|Cost of aluminum products                                                      | (412                   | )
|Others                                                                         | (20                    | )
|                                                                               |                        |  
|                                                                               | (2,263                 | )
|Selling, general and administrative expenses                                   | (224                   | )
|Research and development                                                       | (50                    | )
|Employee profit sharing plan                                                   | (38                    | )
|Others                                                                         | (119                   | )
|                                                                               |                        |  
|                                                                               | (2,694                 | )
|                                                                               |                        |  
|Operating income                                                               | 1,429                  |  
|                                                                               |                        |  
|Non-operating income (expenses)                                                |                        |  
|Financial income                                                               | 127                    |  
|Financial expenses                                                             | (375                   | )
|Foreign exchange and monetary losses, net                                      | (580                   | )
|Gain on sale of investments                                                    |                       |  
|                                                                               |                        |  
|                                                                               | (828                   | )
|                                                                               |                        |  
|Income before income taxes, equity results and minority interests              | 601                    |  
|                                                                               |                        |  
|Income taxes                                                                   |                        |  
|Current                                                                        | (12                    | )
|Deferred                                                                       | 161                    |  
|                                                                               |                        |  
|                                                                               | 149                    |  
|                                                                               |                        |  
|Equity in results of affiliates and joint ventures and change in provision for |                        |  
|losses on equity investments                                                   | (87                    | )
|Minority interests                                                             | 17                     |  
|                                                                               |                        |  
|Net income                                                                     | 680                    |  
|                                                                               |                        |  
|Basic earnings per Common and Preferred Class A Share                          | 1.77                   |  
|                                                                               |                        |  
|Weighted average number of shares outstanding (thousands of shares)            |                        |  
|Common shares                                                                  | 249,864                |  
|Preferred Class A shares                                                       | 135,042                |  

See notes to consolidated financial statements.

F - 5

---



Consolidated Statements of Cash Flows
Expressed in millions of United States dollars

|                                                                                                                  | Year ended December
      31 |  
|----------------------------------------------------------------------------------------------------------------- | ---------------------------- | -
|                                                                                                                  |                              |  
|                                                                                                                  | 2002                         |  
|                                                                                                                  |                              |  
|Cash flows from operating activities:                                                                             |                              |  
|Net income                                                                                                        | 680                          |  
|Adjustments to reconcile
      net income with cash provided by operating activities:                             |                              |  
|Depreciation,
      depletion and amortization                                                                    | 214                          |  
|Dividends
      received                                                                                          | 91                           |  
|Equity
      in results of affiliates and joint ventures and change in provision for
      losses                 |                              |  
|on
      equity investments                                                                                       | 87                           |  
|Deferred
      income taxes                                                                                       | (161                         | )
|Provisions
      for contingencies                                                                                | 53                           |  
|Loss
      on disposals of property, plant and equipment                                                          | 62                           |  
|Gain
      on sale of investments                                                                                 |                             |  
|Pension
      plan                                                                                                | 11                           |  
|Foreign
      exchange and monetary losses                                                                        | 1,031                        |  
|Net
      unrealized derivative losses                                                                            | 66                           |  
|Others                                                                                                            | 46                           |  
|Decrease (increase)
      in assets:                                                                              |                              |  
|Accounts
      receivable                                                                                         | (123                         | )
|Inventories                                                                                                       | (69                          | )
|Others                                                                                                            | (105                         | )
|Increase (decrease)
      in liabilities:                                                                         |                              |  
|Suppliers                                                                                                         | 102                          |  
|Payroll
      and related charges                                                                                 | 23                           |  
|Others                                                                                                            | 94                           |  
|                                                                                                                  |                              |  
|Net cash provided
      by operating activities                                                                   | 2,102                        |  
|                                                                                                                  |                              |  
|Cash flows from investing activities:                                                                             |                              |  
|Loans and advances
      receivable                                                                               |                              |  
|Related
      parties                                                                                             |                              |  
|Additions                                                                                                         | (101                         | )
|Repayments                                                                                                        | 75                           |  
|Others                                                                                                            | 20                           |  
|Guarantees and deposits                                                                                           | (78                          | )
|Additions to investments                                                                                          | (1                           | )
|Additions to property,
      plant and equipment                                                                  | (766                         | )
|Proceeds from disposals
      of property, plant and equipment                                                    | 7                            |  
|Proceeds from disposal
      of investments                                                                       |                             |  
|Net cash used to acquire
      subsidiaries                                                                       | (45                          | )
|                                                                                                                  |                              |  
|Net cash used in investing
      activities                                                                       | (889                         | )
|                                                                                                                  |                              |  
|Cash flows from financing activities:                                                                             |                              |  
|Short-term debt, net
      issuances                                                                              | (345                         | )
|Loans                                                                                                             |                              |  
|Related
      parties                                                                                             |                              |  
|Additions                                                                                                         | 54                           |  
|Repayments                                                                                                        | (75                          | )
|Perpetual notes                                                                                                   |                             |  
|Long-term debt                                                                                                    |                              |  
|Related
      parties                                                                                             | 17                           |  
|Others                                                                                                            | 698                          |  
|Repayments of long-term
      debt                                                                                |                              |  
|Related
      parties                                                                                             | (15                          | )
|Others                                                                                                            | (330                         | )
|Interest attributed
      to stockholders                                                                         | (602                         | )
|Treasury stock                                                                                                    |                             |  
|                                                                                                                  |                              |  
|Net cash used in financing
      activities                                                                       | (598                         | )
|                                                                                                                  |                              |  
|Increase (decrease)
      in cash and cash equivalents                                                            | 615                          |  
|Effect of exchange
      rate changes on cash and cash equivalents                                                | (641                         | )
|Cash and cash equivalents,
      beginning of period                                                              | 1,117                        |  
|                                                                                                                  |                              |  
|Cash and cash equivalents,
      end of period                                                                    | 1,091                        |  
|                                                                                                                  |                              |  
|Cash paid during the
      period for:                                                                            |                              |  
|Interest
        on short-term debt                                                                               | (46                          | )
|Interest
        on long-term debt, net of interest capitalized of $ 15 in 2002, $11 in
        2001, $12 in 2000 | (142                         | )
|Income
        tax                                                                                                | (12                          | )
|Non-cash transactions                                                                                             |                              |  
|Special
        pension plan contribution in shares of CSN                                                        |                             |  
|Exchange
        of loans receivable for investments                                                              | 55                           |  

See notes to consolidated financial statements.

F - 6

---



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

|                                                                                     |             |   | Year ended December 31 |  
|------------------------------------------------------------------------------------ | ----------- | - | ---------------------- | -
|                                                                                     |             |   |                        |  
|                                                                                     | Shares      |   | 2002                   |  
|                                                                                     |             |   |                        |  
|Preferred class A stock (including one special
      share)                          |             |   |                        |  
|Balance January 1                                                                    | 138,575,913 |   | 820                    |  
|Transfer from appropriated retained earnings                                         |            |   | 84                     |  
|                                                                                     |             |   |                        |  
|Balance December 31                                                                  | 138,575,913 |   | 904                    |  
|                                                                                     |             |   |                        |  
|Common stock                                                                         |             |   |                        |  
|Balance January 1                                                                    | 249,983,143 |   | 1,479                  |  
|Transfer from appropriated retained earnings                                         |            |   | 151                    |  
|                                                                                     |             |   |                        |  
|Balance December 31                                                                  | 249,983,143 |   | 1,630                  |  
|                                                                                     |             |   |                        |  
|Treasury stock                                                                       |             |   |                        |  
|Balance January 1                                                                    | (3,666,611  | ) | (88                    | )
|Acquisitions in 2001                                                                 | (1,048,650  | ) |                       |  
|Acquisitions in 2002                                                                 | (4,390      | ) |                       |  
|                                                                                     |             |   |                        |  
|Balance December 31                                                                  | (4,719,651  | ) | (88                    | )
|                                                                                     |             |   |                        |  
|Additional paid-in capital                                                           |             |   |                        |  
|Balance January 1 and December 31                                                    |             |   | 498                    |  
|                                                                                     |             |   |                        |  
|Other cumulative comprehensive income                                                |             |   |                        |  
|Amountsnot
       recognized as net periodic pension cost                            |             |   |                        |  
|Balance January 1                                                                    |             |   |                       |  
|Excess
       of additional minimum liability                                        |             |   |                       |  
|Tax effect on above                                                                  |             |   |                       |  
|                                                                                     |             |   |                        |  
|Balance December 31                                                                  |             |   |                       |  
|                                                                                     |             |   |                        |  
|Cumulative translation adjustments                                                   |             |   |                        |  
|Balance January 1                                                                    |             |   | (3,475                 | )
|Change in the year                                                                   |             |   | (1,710                 | )
|                                                                                     |             |   |                        |  
|Balance December 31                                                                  |             |   | (5,185                 | )
|                                                                                     |             |   |                        |  
|Unrealized gain on available-for-sale security                                       |             |   |                        |  
|Balance January 1                                                                    |             |   |                       |  
|Change in the year                                                                   |             |   |                       |  
|                                                                                     |             |   |                        |  
|Balance December 31                                                                  |             |   |                       |  
|                                                                                     |             |   |                        |  
|Adjustments relating to investments in affiliates                                    |             |   |                        |  
|Balance January 1                                                                    |             |   | 10                     |  
|Change in the year                                                                   |             |   |                       |  
|                                                                                     |             |   |                        |  
|Balance December 31                                                                  |             |   | 10                     |  
|                                                                                     |             |   |                        |  
|Total other cumulative comprehensive income                                          |             |   | (5,175                 | )
|                                                                                     |             |   |                        |  
|Appropriated retained earnings                                                       |             |   |                        |  
|Balance January 1                                                                    |             |   | 3,212                  |  
|Transfer to retained earnings                                                        |             |   | (747                   | )
|Transfer to capital stock                                                            |             |   | (235                   | )
|                                                                                     |             |   |                        |  
|Balance December 31                                                                  |             |   | 2,230                  |  
|                                                                                     |             |   |                        |  
|Retained earnings                                                                    |             |   |                        |  
|Balance January 1                                                                    |             |   | 2,184                  |  
|Net income                                                                           |             |   | 680                    |  
|Interest
       attributed to stockholders                                           |             |   |                        |  
|Preferred class A stock
   ($0.84, $1.99 and $1.70 per share in 2002, 2001 and 2000) |             |   | (117                   | )
|Common stock ($0.84, $1.99 and $1.70
       per share in 2002, 2001 and 2000)        |             |   | (206                   | )
|Appropriation from reserves                                                          |             |   | 747                    |  
|                                                                                     |             |   |                        |  
|Balance December 31                                                                  |             |   | 3,288                  |  
|                                                                                     |             |   |                        |  
|Total stockholders equity                                                           | 383,839,405 |   | 3,287                  |  
|                                                                                     |             |   |                        |  
|Comprehensive income is comprised as follows:                                        |             |   |                        |  
|Net income                                                                           |             |   | 680                    |  
|Amounts not recognized as net periodic pension cost                                  |             |   |                       |  
|Cumulative
       translationadjustments                                             |             |   | (1,710                 | )
|Unrealized gain on available-for-sale security                                       |             |   |                       |  
|Adjustments relating to investments in affiliates                                    |             |   |                       |  
|                                                                                     |             |   |                        |  
|Total comprehensive income (loss)                                                    |             |   | (1,030                 | )
|                                                                                     |             |   |                        |  

See notes to consolidated financial statements.

F - 7

---



Notes to the Consolidated Financial Statements
Expressed in millions of United States dollars, unless otherwise
stated


|  |                               
|- | ------------------------------
|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. We disposed of most of our investments in pulp and paper during 2001. Further details of our
operations and those of our joint ventures and affiliates are described in Note 16. The main operating subsidiaries we consolidate during the three years ended December 31, 2002 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                   |  | 85          |  | 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, Manganese and Ferroalloys
| | Alumina do Norte do Brasil S.A - Alunorte (as from June,2002) |  | 57          |  | Brazil        |  | Aluminum                           
| | Salobo Metais S.A. (as from June, 2002)                       |  | 100         |  | Brazil        |  | Copper                             
| | Mineração Serra do Sossego S.A (as from December, 2001)       |  | 100         |  | Brazil        |  | Copper                             



|2 | Summary of significant accounting policies
|- | ------------------------------------------

In preparing the consolidated
    financial information, we are required to use estimates to account for certain
    assets, liabilities, revenues and expenses. Our consolidated financial information
    therefore includes 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.


|(a) | Basis of presentation
|--- | ---------------------

We have prepared the consolidated financial
statements in accordance with accounting principles generally accepted in the
United States of America (US GAAP), which differ in certain
respects from the Brazilian
accounting principles that we use in preparing our statutory financial information. The U.S. dollar amounts for the period presented have been remeasured (translated)
from the Brazilian currency amounts in accordance with the criteria set forth in
Statement of Financial Accounting Standards 52  Foreign Currency
Translation ( SFAS 52). Prior to July 1, 1997, Brazil was considered under SFAS 52 to have a highly inflationary economy and accordingly, up to June 30, 1997, we adopted the U.S. dollar as both our functional currency and reporting currency. As from July 1, 1997, we concluded
    that the Brazilian economy had ceased to be highly inflationary and changed
    our functional currency from the reporting currency (U.S. dollars) to the
    local currency (Brazilian reais), for Brazilian operations and extensions
    thereof. Accordingly, we translated the U.S. dollar amounts of non-monetary
    assets and liabilities into reais at the current exchange rate, and those
    amounts became the new accounting bases for such assets and liabilities. We have remeasured all assets and liabilities
    into U.S. dollars at the current exchange rate at each


F - 8

---



balance sheet date (R$3.5333 and R$2.3204 to US$1.00
    at December 31, 2002 and 2001, respectively), and all accounts in the statements
    of income (including amounts relative to local currency indexation and exchange
    variances on assets and liabilities denominated in foreign currency) at the
    average rates prevailing during the period. The translation gain or loss resulting
    from this remeasurement process is included in the cumulative translation
    adjustments account in stockholders equity. The net exchange transaction loss included in our statement of income
was $515, $410 and $115 in 2002, 2001 and 2000, respectively, included within the
line Foreign exchange and monetary losses, net.


|(b) | 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 less amortized goodwill 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 10). 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.


|(c) | Business combinations
|--- | ---------------------

We adopt the procedures determined by SFAS 141  Business Combinations to recognize acquisitions of interests in other companies. The method of accounting used in our business combination transactions is
the purchase method, which requires that acquirers reasonably determine the fair value of the identifiable assets and liabilities of acquired companies, individually, in order to determine the goodwill paid in the purchase to be
recognized as an intangible asset. On the acquisition of assets which include the rights to mine reserves of natural resources, the establishment of values for these assets includes the placing of fair values on purchased reserves, which are
classified in the balance sheet as property, plant and equipment. Goodwill was amortized in a systematic manner over the periods estimated to be benefited through December 31, 2001. As required by SFAS 142 - Goodwill and Other Intangible Assets from January 1, 2002 goodwill resulting
from the acquisitions is not amortized, but is tested for impairment at least annually and reduced to fair value to the extent any such impairment is identified.


|(d) | Inventories
|--- | -----------

Inventories are stated at the average cost of purchase or production, lower than replacement or realizable values.  We record allowances for slow-moving or obsolete inventories when considered appropriate, reflecting our
periodic assessment of recoverability. A write-down of inventory utilizing the allowance establishes a new cost basis for the related inventory. Finished goods inventories include all related materials, labor and direct production expenditures, and exclude general and administrative expenses.


|(e) | Property, plant and equipment
|--- | -----------------------------

Property, plant and equipment are recorded at cost, including interest cost incurred during the construction of major new facilities. We compute depreciation on the straight-line basis at rates which take into
consideration the useful lives of the items, such as: from 2% to 20% for the railroads, 5% for ships, 3% for buildings, from 2% to 5% for installations and from 5% to 20% for mining and other equipment. Expenditures for maintenance and repairs are
charged to operating costs and expenses as incurred. We capitalize the costs of developing major new
    ore bodies or expanding the capacity of operating mines and amortize these
    to operations on the unit-of-production method based on the total probable
    and proven quantity of ore to be recovered. Exploration costs are expensed
    until viability of mining activities is established; subsequently such costs
    are capitalized together with further exploration costs. We capitalize mine
    development costs as from the time we actually begin such development.


F - 9

---





|(f) | Available-for-sale equity securities
|--- | ------------------------------------

Equity securities classified as available-for-sale are recorded in accordance with SFAS 115 Accounting for Certain Investments in Debt and Equity Securities. Accordingly, we exclude unrealized
holding gains and losses, net of taxes, if applicable, from income and recognize them as a separate component of stockholders equity
until realized.


|(g) | Revenues and expenses
|--- | ---------------------

Revenues are recognized when title has transferred to the customer or services are rendered. Expenses and costs are recognized on the accrual basis. Revenue from exported products is recognized when such products are
loaded on board the ship.  Revenue from products sold in the domestic market is recognized when delivery is made to the customer. Revenue from transportation services, other than shipping operations, is recognized when the service order has been
fulfilled. Shipping operations are recorded on the completed voyage basis and net revenue, costs and expenses of voyages not completed at period-end are deferred. Anticipated losses on voyages are provided when probable and can be reasonably
estimated.


|(h) | Environmental and site reclamation and restoration
    costs
|--- | ------------------------------------------------------------

Expenditures relating to ongoing compliance with environmental regulations are charged against earnings or capitalized as appropriate.  These ongoing programs are designed to
minimize the environmental impact of our activities.  With respect to our two major iron ore mines at Itabira and Carajás, which have extensive remaining reserves, liabilities for final site reclamation and restoration costs will be recorded
when the respective reclamation and restoration strategies can be reasonably determined and the related costs can be reasonably estimated.


|(i) | Compensated absences
|--- | --------------------

We fully accrue the future employees compensation
    liability for vacations vested during the year.


|(j) | Income taxes
|--- | ------------

In accordance with SFAS 109 - Accounting for Income Taxes, the deferred tax effects of temporary differences have been recognized in the consolidated financial statements. A valuation allowance is made when we
believe that it is more likely than not that tax assets will not be fully recoverable in the future.


|(k) | Statement of cash flows
|--- | -----------------------

Cash flows relating to overnight financing and investment are reported net.  Short-term investments that have a ready market and maturity to us, when purchased, of 90 days or less are considered cash equivalents.


|(l) | Earnings per share
|--- | ------------------

Earnings per share are computed by dividing net income by the weighted average number of common and preferred shares outstanding during the period.


|(m) | Interest attributed to stockholders
|--- | -----------------------------------

As from January 1, 1996 Brazilian corporations
    are permitted to attribute interest on stockholders equity. The calculation is based on the stockholders equity
    amounts as stated in the statutory accounting records and the interest rate
    applied may not exceed the long-term interest rate (TJLP) determined by the
    Brazilian Central Bank. Also, such interest may not exceed 50% of net income
    for the year nor 50% of retained earnings plus revenue reserves. The amount of interest attributed to stockholders is deductible for income tax purposes. Accordingly, the benefit to us, as opposed to making a dividend payment, is a reduction in our income tax charge equivalent to the
statutory tax rate applied to such amount. Income tax is withheld from the stockholders relative to interest at the rate of 15%, except for interest due to the Brazilian Government which is exempt from tax withholdings. We have opted to pay such tax-deductible interest
    to our stockholders and have therefore accrued the amounts due as of December
    31, 2002, 2001 and 2000, with a direct charge to stockholders equity. Under Brazilian law interest attributable to stockholders
    is considered as part of the annual minimum dividend (See Note 13). Accordingly
    such distributions are treated as dividends for accounting purposes.


F - 10

---






|n) | Derivatives and hedging activities
|-- | ----------------------------------

As of January 1, 2001 we adopted SFAS 133 - Accounting
    for Derivative Financial Instruments and Hedging Activities, as amended
    by SFAS 137 and SFAS 138. Those standards require that we recognize all derivative
    financial instruments as either assets or liabilities on our balance sheet
    and measure such instruments at fair value. Changes in the fair value of derivatives
    are recorded in each period in current earnings or in other comprehensive
    income, in the latter case depending on whether a transaction is designated
    as an effective hedge. The transition adjustment relating to the fair
    value of derivatives existing as of December 31, 2000 is recorded as a charge
    of $8 in our statement of income for the year ended December 31, 2001. In
    view of the immateriality of this effect of a change in accounting principle
    the corresponding amount was included with other non-operating expenses. Certain
    of our affiliated companies and joint ventures also recorded similar charges,
    of which our portion of $4 is included in the caption Equity in results
    of affiliates and joint ventures in the statement of income. Further information about our derivatives and hedging activities is
included in Note 19.


|(o) | Comprehensive income
|--- | --------------------

We have disclosed comprehensive income as part of
    the Statement of Changes in Stockholders Equity, in compliance with SFAS 130  Reporting Comprehensive Income.


|(p) | Recently-issued accounting pronouncements
|--- | -----------------------------------------

In June 2001 and August 2001, respectively, the
    FASB issued SFAS 143 - Accounting for Asset Retirement Obligations
    and SFAS 144 - Accounting for the Impairment or Disposal of Long-Lived
    Assets. SFAS 143 is effective for us as from January 1, 2003 and we
    are still studying the potential effects that adoption may have on our financial
    statements. In June 2002, 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 believe that the adoption
    of SFAS 146, will not have significant impact on our financial position or results of operations. 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
    statements. 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 at December 31, 2002 are disclosed in Note
    15. We are studying the effect that adoption of the accounting requirements
    of FIN 45 will have on our financial statements.


|(q) | Reclassification
|--- | ----------------

Certain reclassifications have been made to the financial statements for 2001 and 2000 to make them comparable with the 2002 presentation.


F - 11

---



|3              | Our privatization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|               | In May 1997, we were
       privatized by the Brazilian Government, which transferred voting control
       to Valepar S.A. (Valepar). The Brazilian Government has retained
       certain rights with respect to our future decisions and those of Valepar
       and has also caused us to enter into agreements which may affect our activities
    and results of operations in the future. These rights and agreements are:                                                                                                                                                                                                                                                                     
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|              
|               | In addition to the
      preferred special share mentioned above, the National Treasury and the Banco
      Nacional de Desenvolvimento Econômico e Social  BNDES, the
  Government-owned development bank, together held 32% of our common shares and 4% of
      our preferred shares, which in aggregate represented 22% of our total capital
      at December 31, 2001. These common shares were sold through a public offering
      in Brazil and abroad which was completed on March 27, 2002.                                                                                                                                                                                                 
|              
|4              | Major acquisitions and disposals
    during the years presented                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|              
|               | We made the following acquisitions
       during the periods presented. Pro forma information with respect to results
       of operations is not presented since the effects are not considered material
       to an understanding of our consolidated financial statements, except with
       respect to our acquisition of the control of Alunorte in June 2002 (see
    Note 4 (h)).                                                                                                                                                                                                                                                                                                              
|              
|(a)            | On May 11, 2000, we acquired the
       entire capital of Mineração SOCOIMEX S.A., a non-public
       company whose main activity is production and commercialization of iron
       ore, for the total price of $55, being an initial cash payment of $47
       and two further cash payments of $3 and $5, in 2001 and 2002, respectively.
       The increment of the fair value over the book value of SOCOIMEX at the
       date of purchase was entirely attributable to its mineral reserves, which
       are included in the property, plant and equipment. In August 2000 SOCOIMEX
    was merged into CVRD.                                                                               
|              
|(b)            | On May 30, 2000, we became the
       controlling shareholder of S.A. Mineração Trindade  SAMITRI,
       through the acquisition of 79.27% of the voting capital and 63.06% of
       the total capital for $520 in cash. At the date of the purchase, SAMITRI
       was a publicly listed Brazilian iron ore mining company, which also owned
       a 51% interest in the voting capital of SAMARCO
Mineração S.A., a large iron ore pellets producer (see Note 10).
On June 29, 2000, we sold 1% of the voting capital of SAMARCO to BHP Brasil Ltda.
(BHP), a subsidiary of The Broken Hill Proprietary Company Limited of Australia,
for $8,
to equalize our shareholdings in the joint venture.
|              
|F
        - 12

---



|(c) | The assets and liabilities acquired as a result
    of the above transactions and corresponding goodwill were as follows:
|--- | -------------------------------------------------------------------------------------------------------------------------

| |                                       |                |   |                           |  
| | ------------------------------------- | -------------- | - | ------------------------- | -
| |                                       |                |   | Consolidated Subsidiaries |  
| |                                       |                |   |                           |  
| |                                       | Unconsolidated |   |                           |  
| |                                       | joint venture  |   |                           |  
| |                                       | SAMARCO        |   | SAMITRI                   |  
| |                                       |                |   |                           |  
| | Fair value of assets                  | 1,006          |   | 293                       |  
| | Fair value of liabilities             | (450           | ) | (144                      | )
| |                                       |                |   |                           |  
| | Net assets at fair value              | 556            |   | 149                       |  
| |                                       |                |   |                           |  
| | Interest acquired                     | 50.00          | % | 63.06                     | %
| |                                       |                |   |                           |  
| | Fair value of net assets acquired     | 278            |   | 94                        |  
| | Attributable to minority stockholders |                |   |                           |  
| | of SAMITRI (36.94%)                   | (103           | ) |                          |  
| | Tax benefits                          | 31             |   |                          |  
| |                                       |                |   |                           |  
| | Effective interest acquired           | 206            |   | 94                        |  
| |                                       |                |   |                           |  
| | Purchase price                        | 252            |   | 268                       |  
| |                                       |                |   |                           |  
| | Goodwill                              | 46             |   | 174                       |  
| |                                       |                |   |                           |  

The main assets for which fair values differ
    from book values are inventories and property, plant and equipment. We determined
    the fair values of inventories based on the current replacement costs for
    raw materials and the estimated selling prices for finished goods, net of
    disposal costs and a selling margin. The fair values of property, plant and
    equipment were determined based on current replacement costs for similar capacity
    and the estimated market value of purchased reserves. Deferred taxes were
    recorded for the differences between fair values and tax bases. For SAMARCO, SAMITRI and SOCOIMEX inventories were valued at $36, $38 and $9, respectively, property, plant and equipment were valued at $830, $161 and $58, respectively, and the deferred tax liability was $60, $49 and
$15, respectively. We had adopted a policy to amortize the goodwill on the SAMITRI and SAMARCO purchases on the straight-line basis over a period of 6 years, starting on the date of acquisition. However, as explained in Note 2 (c), upon
adoption of SFAS 142 on January 1, 2002 such straight-line amortization ceased.


|(d) | On September 22, 2000 we increased our ownership of SAMITRI, via public tender to 99.25% of the voting capital and 99.19% of the total capital. The cash cost of this purchase was $180 and resulted in additional goodwill of $27, all attributed to SAMARCO.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(e) | In October 2000, we acquired 50% of Gulf Industrial Investment Company (GIIC), a pelletizing company located in Bahrain, for $91, including goodwill of $20, now totally
amortized.

|    |                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(f) | On April 27, 2001 we acquired 100% of Ferteco Mineração S.A. - FERTECO, a non-public company whose main activity is production and commercialization of iron ore and pellets, for $523 in cash.

The assets and liabilities acquired and corresponding goodwill were as follows:


| | Fair value of assets      | 401  |  
| | ------------------------- | ---- | -
| | Fair value of liabilities | (251 | )
| |                           |      |  
| | Net assets at fair value  | 150  |  
| | Purchase price            | 523  |  
| |                           |      |  
| | Goodwill                  | 373  |  
| |                           |      |  

For FERTECO inventories were valued at $57, property, plant and equipment were valued at $178, and the deferred tax liability was $24.

F - 13

---



|(g) | In December 2001, acting through our wholly-owned
        foreign subsidiary Itabira Rio Doce Company Ltd. - ITACO,
        we
acquired 659,375,000 common shares of Caemi Mineração e Metalurgia
S.A. (Caemi), corresponding to 16.82% of its total capital
    and 50% of its voting capital from Cayman Iron Ore Investment Co., Ltd.,
    a wholly-owned subsidiary of Mitsui & Co., Ltd. (MITSUI) for US$ 279. Caemi is a
    Brazilian company headquartered in Rio de Janeiro, which operates in the
    iron ore, kaolin, refractory bauxite and railroad sectors and is accounted
    for as an equity
investee.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

This acquisition was approved by the European Commission subject to the commitment for Caemi to sell its equity investment in Quebec Cartier Mining Company (QCM), a Canadian producer of iron ore and pellets. CVRD and Mitsui, each of which holds 50% of Caemis common shares, entered into a shareholder agreement requiring both shareholders to approve all major decisions affecting Caemi. The estimated net assets and corresponding goodwill were as follows:


| |                                             | December 31, 2001 |  
| | ------------------------------------------- | ----------------- | -
| |                                             |                   |  
| | Estimated fair value of assets              | 1,127             |  
| | Estimated fair value of liabilities         | (734              | )
| |                                             |                   |  
| | Net assets at fair value                    | 393               |  
| |                                             |                   |  
| | Interest in total capital acquired          | 16.82             | %
| | Estimated fair value of net assets acquired | 66                |  
| | Purchase price                              | 279               |  
| |                                             |                   |  
| | Goodwill                                    | 213               |  
| |                                             |                   |  

|    |                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(h) | On June 27, 2002 we acquired a further 12.62%
        of the capital of ALUNORTE for $42, increasing our participation to 57.03%
        (represented by 62.09% of total common stock and 19.05% of total preferred
    stock). ALUNORTE has been consolidated as from this date.

Unaudited pro forma information with respect to the effect on our consolidated statement of income, reflecting the consolidation of ALUNORTE as if control has been acquired as at January 1, 2001 is as follows:


| |                                                      | 2002         |   | 2001        |  
| | ---------------------------------------------------- | ------------ | - | ----------- | -
| |                                                      |              |   |             |  
| |                                                      |              |   | Pre-        |  
| |                                                      | CVRD         |   | acquisition |  
| |                                                      | Consolidated |   | ALUNORTE    |  
| |                                                      |              |   |             |  
| | Net operating revenues                               | 4,123        |   | 138         |  
| | Operating costs and expenses                         | (2,694       | ) | (151        | )
| |                                                      |              |   |             |  
| | Operating income                                     | 1,429        |   | (13         | )
| | Non-operating income (expenses)                      | (828         | ) | (38         | )
| |                                                      |              |   |             |  
| | Income before income taxes, equity results           |              |   |             |  
| | and minority interests                               | 601          |   | (51         | )
| | Income taxes                                         | 149          |   |            |  
| | Equity in results of affiliates and joint ventures   | (28          | ) | 23          |  
| | Change in provision for losses on equity investments | (59          | ) |            |  
| | Minority interests                                   | 17           |   | 28          |  
| |                                                      |              |   |             |  
| | Net income                                           | 680          |   |            |  
| |                                                      |              |   |             |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | On January 14, 2000 we sold 20.81% of the capital
        of Alumina do Norte do Brasil S.A.- ALUNORTE and a beneficial interest
        in 8% of the capital of Mineração Rio do Norte S.A. - MRN
        owned by us for an aggregate of $164, resulting in a gain of $54. The
        total consideration of $164 was received in cash; however, $120 was received
        through the issue and sale of Perpetual Notes with a fair value of $55
        and this fair value continues to be reported as a liability and periodically
        adjusted based on an early termination formula reflecting the underlying
    profitability of MRN.                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(j) | On March 9, 2001 we transferred our 10.33%
        interest in Companhia Siderúrgica Nacional - CSN to VALIA, as
        a special pension plan contribution, for $249 (fair market value determined
        based on the weighted average price of the last thirty trading sessions
        at the São Paulo stock exchange in the period ended on March 9,
        2001). This transfer resulted in a gain of $107. We have provided VALIA
        with a guarantee that we will make additional contributions to the pension
        plan if the market value of the CSN shares falls below threshold levels
        prior to the sale thereof by VALIA. At December 31, 2002 we have provided
    $1 in respect of this commitment.

F - 14

---



|(k) | On April 27, 2001 we concluded the sale of
          our 32.00% interest in Bahia Sul Celulose S.A. - BSC for $318, received
    in cash on May 7, 2001. This operation resulted in a gain of $170.                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                             
|(l) | On June 6, 2001 we concluded the sale of our
          51.48% interest in Celulose Nipo-Brasileira S.A. - CENIBRA for $671,
          received in cash on September 14, 2001. This operation resulted in a
    gain of $507.
|    |                                                                                                                                                                                                                             
|5   | 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: 
|    |                                                                                                                                                                                                                             

| |                     | Year ended December 31 - % | 
| | ------------------- | -------------------------- | 
| |                     |                            | 
| |                     | 2002                       | 
| |                     |                            | 
| | Federal income tax  | 25                         | 
| | Social contribution | 9                          | 
| |                     |                            | 
| | Composite tax rate  | 34                         | 
| |                     |                            | 

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


| |                                                                                       | Year ended December
          31 |  
| | ------------------------------------------------------------------------------------- | -------------------------------- | -
| |                                                                                       |                                  |  
| |                                                                                       | 2002                             |  
| |                                                                                       |                                  |  
| | Income before income taxes, equity results
        and minority interests             | 601                              |  
| |                                                                                       |                                  |  
| | Federal income tax and social contribution
        expense at statutory enacted rates | (204                             | )
| | Adjustments to derive effective tax rate:                                             |                                  |  
| | Tax benefit on interest attributed
        to stockholders                            | 99                               |  
| | Exempt foreign income                                                                 | 196                              |  
| | Tax deductible goodwill in
        business combination                               | 20                               |  
| | Tax effect related to provision
        for losses and write-downs                    | 29                               |  
| | Tax incentives                                                                        | 4                                |  
| | Valuation allowance                                                                   | (12                              | )
| | Other non-taxable gains                                                               | 17                               |  
| |                                                                                       |                                  |  
| | Federal income tax and contribution benefit
        in consolidated                   |                                  |  
| | statements of income                                                                  | 149                              |  
| |                                                                                       |                                  |  

We have certain tax incentives relative to our iron ore and manganese operations in Carajás and others from gold and potash operations. The incentives comprise full income tax exemption on defined production levels
up to 2005 and partial exemption up to 2013.  An amount equal to the tax saving must be appropriated to a reserve account within stockholders equity (Note 13) and may not be distributed in the form of cash dividends.


F - 15

---





|  | The major components of the deferred tax accounts
    in the balance sheet are as follows:
|- | ------------------------------------------------------------------------------------------
|  |                                                                                           
|  |                                                                                           
|  |                                                                                           
|  |                                                                                           
|  |                                                                                           
|  | Net current deferred tax assets                                                           
|  | Accrued expenses deductible only when disbursed                                           
|  |                                                                                           
|  |                                                                                           
|  |                                                                                           
|  | Long-term deferred tax assets and liabilities                                             
|  | Assets                                                                                    
|  | Deferred tax relative to temporary differences                                            
|  | Tax deductible goodwill in business combinations                                          
|  | Related to provision for losses and write-downs of investments                            
|  | Additional retirement benefits provision                                                  
|  | Tax loss carryforwards                                                                    
|  | Other temporary differences (in 2002 including $94 of Alunorte)                           
|  |                                                                                           
|  |                                                                                           
|  |                                                                                           
|  | Liabilities                                                                               
|  | Inflationary income                                                                       
|  | Prepaid retirement benefit                                                                
|  | Fair value adjustments in business combinations                                           
|  |                                                                                           
|  |                                                                                           
|  |                                                                                           
|  | Valuation allowance                                                                       
|  | Beginning balance                                                                         
|  | Translation adjustments                                                                   
|  | Additions (in 2002 including $92 of Alunorte)                                             
|  | Reversals                                                                                 
|  |                                                                                           
|  | Ending balance                                                                            
|  |                                                                                           
|  | Net long-term deferred tax assets                                                         
|  |                                                                                           
|  |                                                                                           
|6 | Cash and cash equivalents                                                                 
|  |                                                                                           

| |                                   | As of December 31 | 
| | --------------------------------- | ----------------- | 
| |                                   |                   | 
| |                                   | 2002              | 
| |                                   |                   | 
| | Cash                              | 51                | 
| | Deposits in local currency        | 220               | 
| | Deposits in United States dollars | 820               | 
| |                                   |                   | 
| |                                   | 1,091             | 
| |                                   |                   | 

|7 | Accounts receivable              |                   |  
|- | -------------------------------- | ----------------- | -
|  |                                  |                   |  
|  |                                  | As of December 31 |  
|  |                                  |                   |  
|  |                                  | 2002              |  
|  |                                  |                   |  
|  | Customers                        |                   |  
|  | Domestic                         | 189               |  
|  | Export, all denominated in       |                   |  
|  | United States
      dollars      | 503               |  
|  |                                  |                   |  
|  |                                  | 692               |  
|  | Allowance for doubtful accounts  | (26               | )
|  | Allowance for ore weight credits | (6                | )
|  | Total                            | 660               |  
|  |                                  |                   |  
|  |                                  |                   |  

Accounts receivable from customers in the steel industry amount to 18.4%
and 28.3% of domestic receivables (export receivables  95.1% and 91.5%) at December 31, 2002
and 2001, respectively. No single customer accounted for more than 10% of total revenues
in any of the years presented.


F - 16

---



|8 | Inventories                          |                   | 
|- | ------------------------------------ | ----------------- | 
|  |                                      |                   | 
|  |                                      | As of December 31 | 
|  |                                      |                   | 
|  |                                      | 2002              | 
|  |                                      |                   | 
|  | Finished products                    |                   | 
|  | Iron ore                             | 86                | 
|  | Gold                                 | 2                 | 
|  | Manganese                            | 24                | 
|  | Ferroalloys                          | 27                | 
|  | Alumina                              | 15                | 
|  | Others                               | 10                | 
|  | Spare parts and maintenance supplies | 128               | 
|  |                                      | 292               | 
|  |                                      |                   | 

F - 17

---



|9  | Property, plant and equipment 
|-- | ------------------------------
|   |                               
|a) | Per business area:            
|   |                               
|   |                               
|   |                               
|   |                               
|   |                               
|   |                               
|   |                               
|   | Ferrous                       
|   | Ferrous - Southern System     
|   | Mining                        
|   | Railroads                     
|   | Marine terminals              
|   |                               
|   |                               
|   | Ferrous - Northern System     
|   | Mining                        
|   | Railroads                     
|   | Marine terminals              
|   |                               
|   |                               
|   | Pelletizing                   
|   | Ferroalloys                   
|   | Energy                        
|   | Construction
      in progress
|   |                               
|   |                               
|   |                               
|   | Non-Ferrous                   
|   | Potash                        
|   | Gold                          
|   | Kaolin                        
|   | Research
      and projects   
|   | Construction
      in progress
|   |                               
|   |                               
|   |                               
|   | Logistics                     
|   | General
      cargo           
|   | Maritime
      transportation 
|   | Construction
      in progress
|   |                               
|   |                               
|   |                               
|   | Holdings                      
|   | Aluminum                      
|   | Others                        
|   | Construction
      in progress
|   |                               
|   |                               
|   |                               
|   | Corporate Center              
|   | Corporate                     
|   | Construction
      in progress
|   |                               
|   |                               
|   |                               
|   | Total                         
|   |                               
|   |                               
|b) | Per type of assets:           
|   |                               

| |                                                                                                                                                                                                                                                                                                                           | As of December
      31, 2002 |  | As of December
      31, 2001 | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- |  | ----------------------------- | 
| |                                                                                                                                                                                                                                                                                                                           |                               |  |                               | 
| |                                                                                                                                                                                                                                                                                                                           |                               |  | Accumulated                   | 
| |                                                                                                                                                                                                                                                                                                                           | Cost                          |  | depreciation                  | 
| |                                                                                                                                                                                                                                                                                                                           |                               |  |                               | 
| | Land and buildings                                                                                                                                                                                                                                                                                                        | 489                           |  | 188                           | 
| | Installations                                                                                                                                                                                                                                                                                                             | 1,448                         |  | 590                           | 
| | Equipment                                                                                                                                                                                                                                                                                                                 | 391                           |  | 196                           | 
| | Ships                                                                                                                                                                                                                                                                                                                     | 8                             |  | 5                             | 
| | Railroads                                                                                                                                                                                                                                                                                                                 | 1,258                         |  | 568                           | 
| | Mine development costs                                                                                                                                                                                                                                                                                                    | 193                           |  | 53                            | 
| | Others                                                                                                                                                                                                                                                                                                                    | 376                           |  | 196                           | 
| |                                                                                                                                                                                                                                                                                                                           |                               |  |                               | 
| |                                                                                                                                                                                                                                                                                                                           | 4,163                         |  | 1,796                         | 
| | Construction in progress                                                                                                                                                                                                                                                                                                  | 930                           |  |                              | 
| |                                                                                                                                                                                                                                                                                                                           |                               |  |                               | 
| | Total                                                                                                                                                                                                                                                                                                                     | 5,093                         |  | 1,796                         | 
| |                                                                                                                                                                                                                                                                                                                           |                               |  |                               | 
| |                                                                                                                                                                                                                                                                                                                           |                               |  |                               | 
| | Losses on
        disposals of property, plant and equipment totaled $62, $79 and $47 in
        2002, 2001 and 2000, respectively. Disposals mainly relate to impairment
        of gold mines, sales of ships and trucks, locomotives and
        other equipment which were replaced in the normal course of business.

F - 18

---



|    |                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | In 2002 we sold certain forestry
      assets of our subsidiary Florestas Rio Doce S.A. for $59 and recorded a
      gain on this sale of $49.                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                               
|(c) | Hydroelectric projects                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                               
|    | We participate in several jointly-owned
      hydroelectric plants, already in operation or under construction. We have
      an undivided interest in these plants and are responsible for our proportionate
      share of the costs of construction and operation and are entitled to our
      proportionate share of the energy produced.
|    |                                                                                                                                                                                                                                                                                                                                               
|    | The situation of these projects
      at December 31, 2002 is as follows:                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                               
|    | Project                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                               
|    | Igarapava                                                                                                                                                                                                                                                                                                                                     
|    | Porto Estrela                                                                                                                                                                                                                                                                                                                                 
|    | Funil                                                                                                                                                                                                                                                                                                                                         
|    | Candonga                                                                                                                                                                                                                                                                                                                                      
|    | Aimorés                                                                                                                                                                                                                                                                                                                                       
|    | Capim Branco I                                                                                                                                                                                                                                                                                                                                
|    | Capim Branco II                                                                                                                                                                                                                                                                                                                               
|    | Foz do Chapecó                                                                                                                                                                                                                                                                                                                                
|    | Santa Isabel                                                                                                                                                                                                                                                                                                                                  
|    | Estreito                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                               
|    | Income and expenses relating to
      operating plants are not material.                                                                                                                                                                                                                                                                      



F - 19

---





|10 | Investments                                                     |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|-- | --------------------------------------------------------------- | ----------------------- |  | ----------- |  | ------------------ |  | ------ | - | ---- |  | ----- | - | ---- | - | ---- | -
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   |                                                                 | As of December
      31 | 
|   |                                                                 |                         | 
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   |                                                                 | 2002                    |  | Investments |  | Equity Adjustments | 
|   |                                                                 |                         |  |             |  |                    | 
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   |                                                                 |                         |  |             |  |                    |  | (1)Net |   |      |  |       |   |      |   |      |  
|   |                                                                 |                         |  |             |  |                    |  | income |   |      |  |       |   |      |   |      |  
|   |                                                                 | Participation in        |  | (1)Net      |  | (loss) for         |  |        |   |      |  |       |   |      |   |      |  
|   |                                                                 | capital (%)             |  | equity      |  | the year           |  | 2002   |   | 2001 |  | 2002  |   | 2001 |   | 2000 |  
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Investments in affiliated companies and joint
      ventures    | voting                  |  | total       |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Steel                                                           |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Usinas Siderúrgicas de Minas Gerais S.A
      - USIMINAS (2)    | 22.99                   |  | 11.46       |  |                   |  | (131   | ) |     |  | 32    |   | (15  | ) |     |  
|   | Companhia Siderúrgica Nacional - CSN
      (3)                  |                        |  |            |  |                   |  |       |   |     |  |      |   |      |   | 9    |  
|   | Companhia Siderúrgica de Tubarão
      - CST (4)                | 20.51                   |  | 22.85       |  | 118                |  | 84     |   | 27   |  | 18    |   | 19   |   | (1   | )
|   | California Steel Industries Inc. - CSI                          | 50.00                   |  | 50.00       |  | 213                |  | 37     |   | 107  |  | 98    |   | 19   |   | (3   | )
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Paper and pulp                                                  |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Celulose Nipo-Brasileira S.A. - CENIBRA (3)                     |                        |  |            |  |                   |  |       |   |     |  |      |   |     |   | 9    |  
|   | Bahia-Sul Celulose
      S.A - BSC (3)                          |                        |  |            |  |                   |  |       |   |     |  |      |   |     |   | 2    |  
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Aluminum and bauxite                                            |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Mineração Rio do Norte S.A. -
      MRN                         | 40.00                   |  | 40.00       |  | 405                |  | 94     |   | 162  |  | 154   |   | 38   |   | 32   |  
|   | Valesul Alumínio
      S.A. - VALESUL                           | 54.51                   |  | 54.51       |  | 72                 |  | 25     |   | 39   |  | 51    |   | 14   |   | 11   |  
|   | Alumina do Norte do Brasil S.A. - ALUNORTE (6)                  | 62.09                   |  | 57.03       |  |                   |  | (51    | ) |     |  | 89    |   | (23  | ) | (6   | )
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Iron ore and pellets                                            |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Caemi Mineração e Metalurgia S.A.
      (7)                     | 50.00                   |  | 16.85       |  | 457                |  | (83    | ) | 77   |  | 289   |   | (100 | ) |     |  
|   | Companhia Nipo-Brasileira
      de Pelotização - NIBRASCO       | 51.11                   |  | 51.00       |  | 23                 |  | 7      |   | 12   |  | 16    |   | 4    |   | (2   | )
|   | Companhia Hispano-Brasileira de Pelotização
      - HISPANOBRÁS | 51.00                   |  | 50.89       |  | 27                 |  | 10     |   | 14   |  | 18    |   | 5    |   | 5    |  
|   | Companhia Coreano-Brasileira de Pelotização
      - KOBRASCO    | 50.00                   |  | 50.00       |  |                   |  | (31    | ) |     |  | 2     |   | (2   | ) | (8   | )
|   | Companhia Ítalo-Brasileira de Pelotização
      - ITABRASCO     | 51.00                   |  | 50.90       |  | 17                 |  | 9      |   | 9    |  | 13    |   | 5    |   | 4    |  
|   | Gulf Industrial Investment Company - GIIC                       | 50.00                   |  | 50.00       |  | 73                 |  | 10     |   | 37   |  | 38    |   | 5    |   | (17  | )
|   | SAMARCO Mineração S.A.                                          | 50.00                   |  | 50.00       |  | 307                |  | 56     |   | 184  |  | 258   |   | 28   |   | 11   |  
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Others                                                          |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Fertilizantes Fosfatados S.A. - FOSFERTIL (5)                   | 10.96                   |  | 11.12       |  | 227                |  | 73     |   | 25   |  | 29    |   | 8    |   | 5    |  
|   | Salobo Metais S.A
      (6)                                     | 100.00                  |  | 100.00      |  |                   |  |       |   |     |  | 22    |   |     |   |     |  
|   | Ferrovia Centro-Atlântica S.A - FCA                             | 20.00                   |  | 45.65       |  |                   |  |       |   |     |  |      |   |     |   | (95  | )
|   | Others (8)                                                      |                        |  |            |  |                   |  |       |   | 35   |  | 84    |   | (33  | ) | (5   | )
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   |                                                                 |                         |  |             |  |                    |  |        |   | 728  |  | 1,211 |   | (28  | ) | (49  | )
|   | Investments at cost                                             |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | SIDERAR (market value $30 in 2002 - $11 in 2001)                | 4.85                    |  | 4.85        |  |                   |  |       |   | 30   |  | 15    |   |     |   |     |  
|   | Unrealized holding gains on equity security                     |                        |  |            |  |                   |  |       |   |     |  | (4    | ) |     |   |     |  
|   | Others                                                          |                        |  |            |  |                   |  |       |   | 1    |  | 5     |   |     |   |     |  
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   |                                                                 |                         |  |             |  |                    |  |        |   | 759  |  | 1,227 |   | (28  | ) | (49  | )
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Change in provision for losses on equity
      investments:     |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Alumínio Brasileiro S.A. - ALBRAS                               |                         |  |             |  |                    |  |        |   |      |  |       |   | 10   |   | 4    |  
|   | Companhia Ferroviária do Nordeste                               |                         |  |             |  |                    |  |        |   |      |  |       |   | (3   | ) | (8   | )
|   | Companhia Coreano-Brasileira de Pelotização
      - KOBRASCO    |                         |  |             |  |                    |  |        |   |      |  |       |   | (14  | ) |     |  
|   | Ferroban - Ferrovias Bandeirantes S.A.                          |                         |  |             |  |                    |  |        |   |      |  |       |   | (1   | ) |     |  
|   | Ferrovia Centro-Atlântica S.A. - FCA                            |                         |  |             |  |                    |  |        |   |      |  |       |   | (42  | ) |     |  
|   | MRS Logística
      S.A                                         |                         |  |             |  |                    |  |        |   |      |  |       |   | (7   | ) |     |  
|   | CSN Aceros                                                      |                         |  |             |  |                    |  |        |   |      |  |       |   | (2   | ) |     |  
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   | (59  | ) | (4   | )
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  
|   | Total                                                           |                         |  |             |  |                    |  |        |   |      |  |       |   | (87  | ) | (53  | )
|   |                                                                 |                         |  |             |  |                    |  |        |   |      |  |       |   |      |   |      |  

| | (1) | Based on US GAAP financial information.                                                                                                                                                          
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Value based on quoted market price at December 31, 2002 is $ 46 compared to net book value of $ 0.                                                                                               
| | (3) | Investments sold in 2001.                                                                                                                                                                        
| | (4) | Value based on quoted market price at December 31, 2002 is $ 130 compared to net book value of $ 27.                                                                                             
| | (5) | Value based on quoted market price at December 31, 2002 is $ 33 compared to net book value of $ 25.                                                                                              
| | (6) | Alunorte and Salobo Metais S.A. are consolidated at December 31, 2002, after acquisition of control.                                                                                             
| | (7) | Value based on quoted market price at December 31, 2002 is $ 97 compared to net book value of $ 77, equity adjustment for 2002 also includes $ 86 of goodwill write-off as at September 30,
2002.
| | (8) | Includes losses of MRS Logística in 2002 and related equity adjustments of $ 20.                                                                                                                 

F - 20

---



Goodwill included in the above investments is as follows:


| |                                                  | As of December 31 | 
| | ------------------------------------------------ | ----------------- | 
| |                                                  |                   | 
| | Investee                                         | 2002              | 
| |                                                  |                   | 
| | Alumina do Norte do Brasil S.A.
      - ALUNORTE |                  | 
| | SAMARCO Mineração
      S.A                      | 30                | 
| | Caemi Mineração e
      Metalurgia S.A           |                  | 
| |                                                  |                   | 
| |                                                  | 30                | 
| |                                                  |                   | 

Based on our revised expectation for profitability and other economic facts,
we fully amortized the remaining goodwill relative to FCA and GIIC in 2001. The goodwill relative
to Caemi was written-off in September 2002
because the quoted market value for this investment was lower than our acquisition cost over the
whole nine-month period to that date. Information with respect to other major affiliates financial position and results of operations is as follows:


| |                        | ALUNORTE                  |   | ALBRAS                  |   | MRN   |  
| | ---------------------- | ------------------------- | - | ----------------------- | - | ----- | -
| |                        |                           |   |                         |   |       |  
| |                        |                           |   | As of December
      31 |  
| |                        |                           |   |                         |  
| |                        | June
      30,
      2002 |   | 2001                    |   | 2002  |  
| |                        |                           |   |                         |   |       |  
| | Balance Sheet          |                           |   |                         |   |       |  
| | Current assets         | 85                        |   | 159                     |   | 158   |  
| | Noncurrent assets      | 497                       |   | 509                     |   | 370   |  
| | Current liabilities    | (84                       | ) | (95                     | ) | (197  | )
| | Noncurrent liabilities | (413                      | ) | (431                    | ) | (333  | )
| |                        |                           |   |                         |   |       |  
| | Stockholders equity   | 85                        |   | 142                     |   | (2    | )
| |                        |                           |   |                         |   |       |  
| | Our participation      | 57.58                     | % | 45.58                   | % | 51.00 | %
| |                        |                           |   |                         |   |       |  
| | Investments            | 49                        |   | 65                      |   | (1    | )
| |                        |                           |   |                         |   |       |  

| |                                         |                              |   |        |   |       |   |       |   |       |   |       |   |       |  
| | --------------------------------------- | ---------------------------- | - | ------ | - | ----- | - | ----- | - | ----- | - | ----- | - | ----- | -
| |                                         | Year ended December
      31 |  
| |                                         |                              |  
| |                                         | ALUNORTE                     |   | ALBRAS |   | MRN   |  
| |                                         |                              |   |        |   |       |  
| |                                         | 2002(*)                      |   | 2001   |   | 2000  |   | 2002  |   | 2001  |   | 2000  |   | 2002  |  
| |                                         |                              |   |        |   |       |   |       |   |       |   |       |   |       |  
| | Statement of Operations                 |                              |   |        |   |       |   |       |   |       |   |       |   |       |  
| | Net sales                               | 138                          |   | 294    |   | 322   |   | 529   |   | 472   |   | 551   |   | 173   |  
| | Costs and expenses                      | (189                         | ) | (302   | ) | (327  | ) | (561  | ) | (429  | ) | (452  | ) | (68   | )
| | Income (loss) before income
      taxes | (51                          | ) | (8     | ) | (5    | ) | (32   | ) | 43    |   | 99    |   | 105   |  
| | Income taxes                            |                             |   | (5     | ) | 28    |   | 52    |   | (35   | ) | 30    |   | (11   | )
| |                                         |                              |   |        |   |       |   |       |   |       |   |       |   |       |  
| | Net income (loss)                       | (51                          | ) | (13    | ) | 23    |   | 20    |   | 8     |   | 129   |   | 94    |  
| |                                         |                              |   |        |   |       |   |       |   |       |   |       |   |       |  
| | Our participation                       | 44.96                        | % | 45.58  | % | 49.29 | % | 51.00 | % | 51.00 | % | 51.00 | % | 40.00 | %
| | Participation in results                | (23                          | ) | (6     | ) | 11    |   | 10    |   | 4     |   | 66    |   | 38    |  
| | Change in provision for losses          |                             |   |       |   |      |   | (10   | ) | (4    | ) | (66   | ) |      |  
| |                                         |                              |   |        |   |       |   |       |   |       |   |       |   |       |  
| | Equity adjustments                      | (23                          | ) | (6     | ) | 11    |   |      |   |      |   |      |   | 38    |  
| |                                         |                              |   |        |   |       |   |       |   |       |   |       |   |       |  
| | (*) Six months ended June 30.           |                              |   |        |   |       |   |       |   |       |   |       |   |       |  

The financial position and results of operations of our affiliates in the
steel sector are no longer significant to our consolidated financial statements. The provision for losses on equity investments of $27 and $9 at December 31,
2002 and 2001, respectively, relates to our investments in affiliates which have reported negative
stockholders equity in their financial
statements 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.
The provision is comprised as follows:


F - 21

---



| |                                | Cia           |   |           |   |             |   |        |   |        |   |       |  
| | ------------------------------ | ------------- | - | --------- | - | ----------- | - | ------ | - | ------ | - | ----- | -
| |                                | Coreano-      |   | Ferrovia  |   | Cia         |   |        |   |        |   |       |  
| |                                | Brasileira de |   | Centro-   |   | Ferroviária |   |        |   |        |   |       |  
| |                                | Pelotização   |   | Atlântica |   | do Nordeste |   | ALBRAS |   | Others |   | TOTAL |  
| |                                |               |   |           |   |             |   |        |   |        |   |       |  
| | Provision at January 1, 2001   |              |   |          |   | (6          | ) | (15    | ) |       |   | (21   | )
| | Change in provision - results  |              |   |          |   | (8          | ) | 4      |   |       |   | (4    | )
| |                                |               |   |           |   |             |   |        |   |        |   |       |  
| |                                |              |   |          |   | (14         | ) | (11    | ) |       |   | (25   | )
| | Payment of capital             |              |   |          |   | 10          |   |       |   |       |   | 10    |  
| | Translation adjustment         |              |   |          |   | 2           |   | 4      |   |       |   | 6     |  
| |                                |               |   |           |   |             |   |        |   |        |   |       |  
| | Provision at December 31, 2001 |              |   |          |   | (2          | ) | (7     | ) |       |   | (9    | )
| | Additional loss provision      | (14           | ) | (42       | ) | (3          | ) | 10     |   | (10    | ) | (59   | )
| |                                |               |   |           |   |             |   |        |   |        |   |       |  
| |                                | (14           | ) | (42       | ) | (5          | ) | 3      |   | (10    | ) | (68   | )
| | Payment of capital             |              |   | 42        |   | 5           |   |       |   |       |   | 47    |  
| | Translation adjustment         | (2            | ) |          |   |            |   | (4     | ) |       |   | (6    | )
| |                                |               |   |           |   |             |   |        |   |        |   |       |  
| | Provision at December 31, 2002 | (16           | ) |          |   |            |   | (1     | ) | (10    | ) | (27   | )
| |                                |               |   |           |   |             |   |        |   |        |   |       |  

Our participation in ALUNORTE (45.58% at December 31, 2001) changed several times during the periods presented, but we did not consolidate the financial statements of this investee due to the expected temporary nature of
our increased holding (until we acquired control in June 2002). Movements on the investment account and related provision up to June 2002 are as follows:


| |                                                           |                 |  | ALUNORTE       |   |            |   |          |   |     |  
| | --------------------------------------------------------- | --------------- |  | -------------- | - | ---------- | - | -------- | - | --- | -
| |                                                           | Total shares of |  | shares owned   |   |            |   |          |   |     |  
| |                                                           | ALUNORTE        |  | by CVRD        |   |            |   |          |   |     |  
| |                                                           | (in thousands)  |  | (in thousands) |   | Investment |   | Goodwill |   | Net |  
| |                                                           |                 |  |                |   |            |   |          |   |     |  
| | Balance December 31, 1999                                 | 598,184         |  | 443,033        |   | 27         |   | 78       |   | 105 |  
| | Sale of participation in January 2000                     | 598,184         |  | (124,491       | ) | (7         | ) | (48      | ) | (55 | )
| | Changes in participation-subscriptions by other           |                 |  |                |   |            |   |          |   |     |  
| | shareholders                                              |                |  |               |   | 19         |   |         |   | 19  |  
| | Capital call                                              | 673,494         |  | 13,437         |   | 5          |   |         |   | 5   |  
| | Participation in 2000 net income                          |                |  |               |   | 11         |   |         |   | 11  |  
| | Translation adjustment                                    |                |  |               |   | (5         | ) |         |   | (5  | )
| |                                                           |                 |  |                |   |            |   |          |   |     |  
| | Balance December 31, 2000                                 | 673,494         |  | 331,979        |   | 50         |   | 30       |   | 80  |  
| | Capital Call                                              | 885,410         |  | 71,542         |   | 20         |   |         |   | 20  |  
| | Changes in participation-subscriptions by other           |                 |  |                |   |            |   |          |   |     |  
| | shareholders                                              |                |  |               |   | 6          |   |         |   | 6   |  
| | Participation in 2001 net income                          |                |  |               |   | (6         | ) |         |   | (6  | )
| | Goodwill amortized                                        |                |  |               |   |           |   | (1       | ) | (1  | )
| | Translation adjustment                                    |                |  |               |   | (5         | ) | (5       | ) | (10 | )
| |                                                           |                 |  |                |   |            |   |          |   |     |  
| | Balance December 31, 2001                                 | 885,410         |  | 403,521        |   | 65         |   | 24       |   | 89  |  
| |                                                           |                 |  |                |   |            |   |          |   |     |  
| | Capital Call                                              | 933,817         |  | 16,342         |   | 9          |   |         |   | 9   |  
| | Purchase of additional participation                      | 933,817         |  | 117,876        |   | 11         |   | 24       |   | 35  |  
| | Changes in participation-subscriptions by other           |                 |  |                |   |            |   |          |   |     |  
| | shareholders                                              |                |  |               |   | 9          |   |         |   | 9   |  
| | Participation in 2002 net income (to June 30,
      2002) |                |  |               |   | (32        | ) |         |   | (32 | )
| | Translation adjustment                                    |                |  |               |   | (13        | ) | (4       | ) | (17 | )
| |                                                           |                 |  |                |   |            |   |          |   |     |  
| | Balance June 30, 2002                                     | 933,817         |  | 537,739        |   | 49         |   | 44       |   | 93  |  
| |                                                           |                 |  |                |   |            |   |          |   |     |  

F - 22

---



On January 14, 2000 we entered into a structured transaction with an
unrelated party to sell both 20.81% of the capital of ALUNORTE and a beneficial interest in 8%
of the capital of MRN owned by us for a total of $164,
resulting in a net gain to us of $54, recorded in other operating income,
as follows:


| | Book value of 124,491 thousand shares of ALUNORTE sold | (7  | )
| | ------------------------------------------------------ | --- | -
| | Goodwill amortized                                     | (48 | )
| | Book value of beneficial interest in 8% of MRN         |    |  
| |                                                        |     |  
| |                                                        | (55 | )
| | Cash received by us                                    |     |  
| | On transfer of ALUNORTE shares                         | 44  |  
| | On issue and sale of Perpetual Notes                   | 120 |  
| | Fair value of Perpetual Notes                          | (55 | )
| |                                                        |     |  
| | Gain recognized on the transaction                     | 54  |  
| |                                                        |     |  

The Perpetual Notes are exchangeable for 48 billion preferred shares of the affiliate MRN (initially equivalent to 8% of the total number of shares of MRN owned by us). Interest is payable on the Notes in an amount equal to
dividends paid on the underlying preferred shares, relative to periods starting as from the 2000 fiscal year. The Notes may be redeemed at our option or the Noteholders at any time by transfer of the underlying preferred shares to the Noteholders,
providing the preemptive rights of the existing shareholders of MRN have been waived or have expired. Redemption by transfer of the underlying net assets of MRN is compulsory if certain events occur, including the liquidation or merger of MRN or the
transfer of MRNs asset and liabilities to a consortium formed by its shareholders to take over the operations of MRN. In the event of early termination the Notes may be redeemed, at the option the Noteholders, in lieu of transfer of the
shares, for a cash sum equal to $48 plus the net present value of average annual earnings declared and paid by MRN for the three years immediately preceding such termination multiplied by 20 and discounted by 10% per year. This latter amount
represents a fair value at December 31, 2002 of $63.


|11 | Short-term debt
|-- | ---------------

Our short-term borrowings are principally
    from commercial banks and include import and export financing denominated
in United States dollars, as follows:


| |                                                                                                                              | As of December 31 | 
| | ---------------------------------------------------------------------------------------------------------------------------- | ----------------- | 
| |                                                                                                                              |                   | 
| |                                                                                                                              | 2002              | 
| |                                                                                                                              |                   | 
| | Export                                                                                                                       | 163               | 
| | Import                                                                                                                       |                  | 
| | Working Capital                                                                                                              | 21                | 
| |                                                                                                                              |                   | 
| |                                                                                                                              | 184               | 
| |                                                                                                                              |                   | 
| |                                                                                                                              |                   | 
| | Average annual interest rates on short-term borrowings
    were 3.97%, 4.96% and 8.18% in 2002, 2001 and 2000, respectively.



F - 23

---



|12 | Long-term debt                                                    |                         |  |                       |  |       | 
|-- | ----------------------------------------------------------------- | ----------------------- |  | --------------------- |  | ----- | 
|   |                                                                   |                         |  |                       |  |       | 
|   |                                                                   | As
      of December 31 | 
|   |                                                                   |                         | 
|   |                                                                   | Current liabilities     |  | Long-Term liabilities | 
|   |                                                                   |                         |  |                       | 
|   |                                                                   | 2002                    |  | 2001                  |  | 2002  | 
|   |                                                                   |                         |  |                       |  |       | 
|   | Foreign debt                                                      |                         |  |                       |  |       | 
|   | Loans and financing contracted in the following
      currencies: |                         |  |                       |  |       | 
|   | United
      States dollars                                       | 431                     |  | 192                   |  | 1,034 | 
|   | Japanese
      Yen                                                | 1                       |  | 8                     |  | 29    | 
|   | Others                                                            | 1                       |  | 2                     |  | 1     | 
|   | Fixed Rate Notes - US$ denominated                                | 200                     |  |                      |  | 600   | 
|   | Export Securitization - US$ denominated                           | 25                      |  |                      |  | 275   | 
|   | Perpetual notes                                                   |                        |  |                      |  | 63    | 
|   | Accrued charges                                                   | 20                      |  | 25                    |  |      | 
|   |                                                                   |                         |  |                       |  |       | 
|   |                                                                   | 678                     |  | 227                   |  | 2,002 | 
|   |                                                                   |                         |  |                       |  |       | 
|   |                                                                   |                         |  |                       |  |       | 
|   | Local debt                                                        |                         |  |                       |  |       | 
|   | Indexed
        by Long-Term Interest Rate - TJLP                 | 8                       |  | 28                    |  | 22    | 
|   | Indexed
        by General Price Index-Market (IGPM)              | 14                      |  | 21                    |  | 85    | 
|   | Basket
        of currencies                                      | 13                      |  | 15                    |  | 32    | 
|   | Shareholders
        revenue interests (Note 3)                   |                        |  |                      |  | 3     | 
|   | Indexed
        by U.S. dollars                                   | 1                       |  | 4                     |  | 215   | 
|   | Accrued
        charges                                           | 3                       |  | 1                     |  |      | 
|   |                                                                   |                         |  |                       |  |       | 
|   |                                                                   | 39                      |  | 69                    |  | 357   | 
|   |                                                                   |                         |  |                       |  |       | 
|   | Total                                                             | 717                     |  | 296                   |  | 2,359 | 
|   |                                                                   |                         |  |                       |  |       | 

| |                                                                                   
| | ----------------------------------------------------------------------------------
| | The long-term portion at December 31, 2002 becomes
    due in the following years:
| |                                                                                   
| | 2004                                                                              
| | 2005                                                                              
| | 2006                                                                              
| | 2007                                                                              
| | 2008 and thereafter                                                               
| | No due date (Perpetual notes and shareholders revenue interest)                   
| |                                                                                   
| |                                                                                   
| |                                                                                   

| |                                                                                   |       | 
| | --------------------------------------------------------------------------------- | ----- | 
| | At December 31, 2002 annual interest rates on
    long-term debt were as follows:
| |                                                                                   |       | 
| | Up to 7%                                                                          | 1,682 | 
| | 7.1% to 9%                                                                        | 753   | 
| | 9.1% to 11%                                                                       | 517   | 
| | Over 11%                                                                          | 61    | 
| | Variable (Perpetual notes)                                                        | 63    | 
| |                                                                                   |       | 
| |                                                                                   | 3,076 | 
| |                                                                                   |       | 

F - 24

---



The indexes applied to debt and respective percentage variations in each year were as follows:


| |                                                 | 2002  |  | 2001  |  | 2000 | 
| | ----------------------------------------------- | ----- |  | ----- |  | ---- | 
| |                                                 |       |  |       |  |      | 
| | TJLP - Long-Term Interest Rate (effective rate) | 3.71  |  | 3.34  |  | 4.56 | 
| | IGP-M - General Price Index - Market            | 25.31 |  | 10.40 |  | 9.95 | 
| | United States Dollar                            | 52.27 |  | 18.70 |  | 9.30 | 

Long-term debt at December 31, 2002 is guaranteed or secured as follows:


| |                                                                           | Amount of | 
| | ------------------------------------------------------------------------- | --------- | 
| |                                                                           | debt      | 
| |                                                                           |           | 
| | Federal Government guarantee originated prior
      to 1997 (for which we |           | 
| | have provided counter-guarantees)                                         | 295       | 
| | Third party guarantees                                                    | 28        | 
| | Export receivables (securitization)                                       | 125       | 
| | Ships                                                                     | 2         | 

On March 8, 2002 our wholly-owned subsidiary, Vale Overseas Limited, issued $300 of 8.625% Enhanced Guaranteed Notes due March 8, 2007, unconditionally guaranteed by us.


|13 | Stockholders equity
|-- | --------------------

Each holder of common and preferred class A stock is entitled to one vote for each share on all matters that come before a stockholders meeting, except for the election of the Board of Directors, which is restricted to
the holders of common stock. As described in Note 3, the Brazilian Government holds a preferred special
share which confers on it permanent veto rights over certain matters. As of December 31, 2002, we had acquired 4,719,651 shares to be held in
treasury for subsequent disposal or cancellation at an average weighted unit cost of R$27.80
(minimum cost of R$20.07 and maximum of R$52.09). Both common and preferred stockholders are entitled to receive a dividend of at least 25% of annual net income, upon approval at the annual stockholders meeting. In the case of preferred stockholders, this dividend
cannot be less than 6% of the preferred capital as stated in the statutory accounting records or, if greater, 3% of the book equity value per share. With respect to each of 2002, 2001 and 2000 we distributed dividends to preferred stockholders in
excess of this limit. Interest attributed to stockholders as from January 1, 1996 is considered
part of the minimum dividend. Brazilian law permits the payment of cash dividends only from retained earnings as stated in the statutory accounting records and such payments are made in Reais. At December 31, 2002, we had no undistributed retained
earnings. In addition, appropriated retained earnings at December 31, 2002 includes $1,705, related
to the unrealized income and expansion reserves, which could be freely transferred to retained earnings and paid as dividends, if approved by the
stockholders. No withholding tax is payable on distribution of profits earned as from
January 1, 1996, except for distributions in the form of interest attributed to stockholders as
explained in Note 2 (m).


F - 25

---



| | Brazilian laws
        and our By-laws require that certain appropriations be made from retained
        earnings to reserve accounts on an annual basis, all determined in accordance
        with amounts stated in the statutory accounting records, as detailed below:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                           
| | Appropriated retained earnings                                                                                                                                                                                                                                            
| | Unrealized
      income reserve                                                                                                                                                                                                                                           
| | Balance
      January 1                                                                                                                                                                                                                                                   
| | Transfer
      to retained earnings                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                           
| | Balance
      December 31                                                                                                                                                                                                                                                 
| | Expansion
      reserve                                                                                                                                                                                                                                                   
| | Balance
      January 1                                                                                                                                                                                                                                                   
| | Transfer
      to capital stock                                                                                                                                                                                                                                           
| | Transfer
      from (to) retained earnings                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                           
| | Balance
      December 31                                                                                                                                                                                                                                                 
| | Legal reserve                                                                                                                                                                                                                                                             
| | Balance
      January 1                                                                                                                                                                                                                                                   
| | Transfer
      from (to) retained earnings                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                           
| | Balance
      December 31                                                                                                                                                                                                                                                 
| | Fiscal incentive
      depletion reserve                                                                                                                                                                                                                                  
| | Balance
      January 1                                                                                                                                                                                                                                                   
| | Transfer
      to capital stock                                                                                                                                                                                                                                           
| | Transfer
      to retained earnings                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                           
| | Balance
      December 31                                                                                                                                                                                                                                                 
| | Fiscal incentive
      investment reserve                                                                                                                                                                                                                                 
| | Balance
      January 1                                                                                                                                                                                                                                                   
| | Transfer
      to capital stock                                                                                                                                                                                                                                           
| | Transfer
      from retained earnings                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                           
| | Balance
      December 31                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                           
| | Total appropriated retained
      earnings                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                           

|       | The purpose and basis of appropriation
    to such reserves is described below:
|------ | -------------------------------------------------------------------------------
|       |                                                                                
|       |                                                                               
|       |                                                                                
|       |                                                                               
|       |                                                                                
|       |                                                                               
|       |                                                                                
|       |                                                                               
|       |                                                                                
|       |                                                                               
|      
|F - 26

---





|14 | Pension plans
|-- | -------------

Since 1973 we have sponsored a defined benefit
    pension plan (the Old Plan) covering substantially all employees, with benefits based on years of service, salary and social security benefits. This plan is
administered by Fundação Vale do Rio Doce de Seguridade Social  VALIA
and was funded by monthly contributions made by us and our employees, calculated
based on periodic actuarial appraisals. In May 2000, we implemented a new pension plan, which is primarily a defined contribution plan with a defined benefit feature relative to service prior to May 2000 (the New Plan), and offered our active
employees the opportunity of transferring to the New Plan. Over 98% of our active employees opted to transfer to the New Plan. The Old Plan will continue in existence, covering almost exclusively retired participants and their beneficiaries. The following information details the status of the defined benefit elements of our plans in accordance with SFAS 132 - Employers Disclosure about Pensions and Other Post-retirement Benefits:


|(a) | Change in benefit
      obligation      |                         |   |       |  
|--- | --------------------------------------- | ----------------------- | - | ----- | -
|    |                                         |                         |   |       |  
|    |                                         | As of December
      31 |  
|    |                                         |                         |  
|    |                                         | 2002                    |   | 2001  |  
|    |                                         |                         |   |       |  
|    | Benefit obligation at beginning of year | 1,388                   |   | 1,596 |  
|    | Service cost                            | 2                       |   | 2     |  
|    | Interest cost                           | 120                     |   | 180   |  
|    | Benefits paid                           | (94                     | ) | (88   | )
|    | Effect of exchange rate changes         | (288                    | ) | (354  | )
|    | Actuarial loss                          | 180                     |   | 52    |  
|    |                                         |                         |   |       |  
|    | Benefit obligation at end of year       | 1,308                   |   | 1,388 |  
|    |                                         |                         |   |       |  
|    |                                         |                         |   |       |  
|(b) | Change in plan assets                   |                         |   |       |  
|    |                                         |                         |   |       |  

| |                                                               | As of December 31 |  
| | ------------------------------------------------------------- | ----------------- | -
| |                                                               |                   |  
| |                                                               | 2002              |  
| |                                                               |                   |  
| | Fair value of plan assets at beginning of year                | 1,374             |  
| | Actual return on plan assets                                  | 277               |  
| | Employer contributions (including special contribution in CSN |                   |  
| | shares of $249 in 2001)                                       | 12                |  
| | Benefits paid                                                 | (94               | )
| | Effect of exchange rate changes                               | (284              | )
| |                                                               |                   |  
| | Fair value of plan assets at end of year                      | 1,285             |  
| |                                                               |                   |  

Plan assets at December 31, 2002 include $102 of portfolio investments in our own shares ($83 at December 31, 2001) and $8 of shares of related parties ($12 at December 31, 2001), as well as $387 of Federal Government
Securities ($551 at December 31, 2001).


F - 27

---



|(c) | Accrued pension cost liability (prepaid pension
      cost)        |                        |   |      |  
|--- | ------------------------------------------------------------------ | ---------------------- | - | ---- | -
|    |                                                                    |                        |   |      |  
|    |                                                                    | As ofDecember
      31 |  
|    |                                                                    |                        |  
|    |                                                                    | 2002                   |   | 2001 |  
|    |                                                                    |                        |   |      |  
|    | Funded status, excess of benefit obligation
      over plan assets | 23                     |   | 14   |  
|    | Unrecognized net transitory obligation                             | (65                    | ) | (94  | )
|    | Unrecognized net actuarial loss                                    | (37                    | ) | (19  | )
|    |                                                                    |                        |   |      |  
|    | Accrued pension cost liability (prepaid pension
      cost)        | (79                    | ) | (99  | )
|    |                                                                    |                        |   |      |  
|    |                                                                    |                        |   |      |  
|(d) | Assumptions used in each period
      (expressed in nominal terms)
|    |                                                                    |                        |   |      |  

| |                                                     | 2002       |  | 2001       | 
| | --------------------------------------------------- | ---------- |  | ---------- | 
| |                                                     |            |  |            | 
| | Discount rate                                       | 11.30% p.a |  | 11.30% p.a | 
| | Expected return on plan assets                      | 11.30% p.a |  | 11.30% p.a | 
| | Rate of compensation increase - up to 47 years      | 6.91% p.a  |  | 6.82% p.a. | 
| |                                                     |            |  |            | 
| | Net pension cost includes the following components:
| |                                                     |            |  |            | 

| |                                                  | Year ended December 31 |  
| | ------------------------------------------------ | ---------------------- | -
| |                                                  |                        |  
| |                                                  | 2002                   |  
| |                                                  |                        |  
| | Service cost - benefits earned during the period | 2                      |  
| | Interest cost on projected benefit obligation    | 120                    |  
| | Actual return on assets                          | (277                   | )
| | Amortization of initial transitory obligation    | 9                      |  
| | Net deferral                                     | 157                    |  
| |                                                  |                        |  
| |                                                  | 11                     |  
| | Employee contributions                           |                       |  
| |                                                  |                        |  
| | Net periodic pension cost                        | 11                     |  
| |                                                  |                        |  

In addition to benefits provided under our pension plan, accruals have been made relative to supplementary benefits extended in previous periods as part of early-retirement programs.  Such accruals included in long-term
liabilities totaled $141 and $173, at December 31, 2002 and 2001, respectively, plus $23 and $28 in current liabilities. The cost recognized in the years 2002, 2001 and 2000 relative to the defined contribution element of the New Plan was $5, $5 and $3, respectively.


F - 28

---





|15  | Commitments and contingencies                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                    
|(a) | At December 31, 2002, we had extended guarantees
          for borrowings obtained by affiliates and joint ventures in the amount
          of $516, of which $405 is denominated in United States dollars and the
    remaining $111 in local currency, as follow:
|    |                                                                                                                                                                                                                                                                    

| |                            |  | Amount
      ofguarantee |  | Denominate
      dcurrency |  |                |  | Finalmaturity |  | Counterguarantees
| | -------------------------- |  | ------------------------ |  | -------------------------- |  | -------------- |  | ------------- |  | -----------------
| | Affiliate or Joint Venture |  |                          |  | Purpose                    |  |               
| |                            |  |                          |  |                            |  |                |  |               |  |                  
| | ALBRAS                     |  | 302                      |  | US$                        |  | Debt guarantee |  | 2007          |  | None             
| |                            |  | 44                       |  | R$                         |  | Debt guarantee |  | 2010          |  | None             
| | FCA                        |  | 51                       |  | US$                        |  | Debt guarantee |  | 2009          |  | None             
| |                            |  | 62                       |  | R$                         |  | Debt guarantee |  | 2012          |  | None             
| | KOBRASCO                   |  | 13                       |  | US$                        |  | Debt guarantee |  | 2003          |  | None             
| | SEPETIBA TECON             |  | 19                       |  | US$                        |  | Debt guarantee |  | 2005          |  | None             
| |                            |  | 4                        |  | R$                         |  | Debt guarantee |  | 2012          |  | None             
| | SAMARCO                    |  | 14                       |  | US$                        |  | Debt guarantee |  | 2020          |  | None             
| | VALESUL                    |  | 1                        |  | R$                         |  | Debt guarantee |  | 2006          |  | None             
| |                            |  |                          |  |                            |  |                |  |               |  | Collateral       
| | NIBRASCO                   |  | 6                        |  | US$                        |  | Debt guarantee |  | 2004          |  | Pledge           

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:


| |                       | As
      of December 31 | 
| | --------------------- | ----------------------- | 
| |                       |                         | 
| |                       |                         | 
| |                       |                         | 
| |                       | Provision for           | 
| |                       | contingencies           | 
| |                       |                         | 
| | Labor claims          | 109                     | 
| | Civil claims          | 95                      | 
| | Tax - related actions | 220                     | 
| | Others                | 4                       | 
| |                       |                         | 
| | Long-term             | 428                     | 
| |                       |                         | 

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. Our judicial deposits are made as
    required by the courts for us to be able to enter or continue a legal


F - 29

---



action. When judgment is favorable
    to us, we receive the deposits back; when unfavorable, the deposits are delivered
    to the prevailing party. Contingencies settled in the years
    December 31, 2002, 2001 and 2000 aggregated $178, $6 and, $36 respectively,
    and additional provisions aggregated $264, $79 and $101 in these years, 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 statements with respect to these two actions.                                                                                                                                                                                                                                                                                                                                                                                   
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(d) | We are committed under a take-or-pay agreement
          to take delivery of approximately 207,660 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 $1,348.00 per metric ton
          at December 31, 2002, represents an annual commitment of $279. Actual
    take from Albras was $257, $220 and $242 in 2002, 2001 and 2000, 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. Under certain circumstances, this period may be 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 December 31, 2002, each of us and BNDES had remaining commitments
to contribute an additional $54 toward 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 for
our contribution of existing development and ownership rights in the Carajás region through a
finders fee production royalty on 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, which
are described below, 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.                                                          
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In preparation for the issuance of the debentures,
          we issued series B preferred shares on a one-for-one basis to all holders
          of our common shares and series A preferred shares. We then exchanged
          all of the series B shares for the debentures at par value. The debentures
          are not redeemable or convertible, and do not trade on a stapled basis
          or otherwise with our common or preferred shares. During 2002 we registered
          the debentures with the CVM in order to permit trading.

F - 30

---



Under Brazilian Central Bank regulations,
    pre-privatization shareholders that held their shares through our preferred
    share American Depositary Receipt, or ADR, program and institutional investors that
    held their shares through rule 1,298/87 of Brazilian Central Bank
    were not permitted to receive the debentures or any financial benefits relating
    to the debentures. We sought approval from the Central Bank to distribute
    the debentures to these investors, but the Central Bank rejected our request.
    We intend to renew our request to the Central Bank, but we cannot be sure
    that we will succeed. Therefore, unless the Central Bank approves our request,
    the debentures will not have any value for ADR holders and foreign investors
    through annex V. Under the terms of the debentures,
    holders will have the right to receive semi-annual payments equal to an agreed
    percentage of our net revenues (revenues less value added tax) from certain
    identified mineral resources that we owned as of May 1997, to the extent that
    we exceed defined threshold production volumes of these resources, and from
    the sale of mineral rights that we owned as of May 1997. Our obligation to
    make payments to the holders will cease when the relevant mineral resources
    are exhausted at which time we are required to repay the original par value
    plus accrued interest. Based on current production levels, and estimates for
    new projects, we expect to start payments referring to copper resources in
    2004, to iron ore resources in approximately 2020 for the Northern System
    and 2030 for the Southern System, and payments related to other mineral resources
    in the end of this decade. The table below summarizes the amounts we will be required to pay under the debentures based on the net revenues we earn from the identified mineral resources and the sale of mineral
rights.


| | Area                                            | Mineral                                     | Required Payments by CVRD                                                                                                         
| | ----------------------------------------------- | ------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------
|
| | Southern System                                 | Iron ore                                    | 1.8% of net revenue, after total sales from
      May 1997 exceeds 1.7 billion tons.                                              
| |                                                 |                                             |                                                                                                                                   
| | Northern System                                 | Iron ore                                    | 1.8% of net revenue, after total sales from
      May 1997 exceeds 1.2 billion tons.                                              
| |                                                 |                                             |                                                                                                                                   
| | Pojuca, Andorinhas, Liberdade and Sossego       | Gold and copper                             | 2.5% of net revenue from the
      beginning of commercialization corresponding to our ownership interest at
      April 15, 1997.
| |                                                 |                                             |                                                                                                                                   
| | Igarapé Bahia and Alemão                        | Gold and copper                             | 2.5% of net revenue, after total sales from
      May 1997 exceeds 70 tons of gold.                                               
| |                                                 |                                             |                                                                                                                                   
| | Fazenda Brasileiro                              | Gold                                        | 2.5% of net revenue after total sales from May
      1997 exceeds 26 tons.                                                        
| |                                                 |                                             |                                                                                                                                   
| | Other areas, excluding Carajás/ Serra
    Leste | Gold                                        | 2.5% of net revenue.                                                                                                              
| |                                                 |                                             |                                                                                                                                   
| | Other areas owned as of May 1997                | Other minerals                              | 1% of net revenue, 4 years after
      the beginning of the commercialization.                                                    
| |                                                 |                                             |                                                                                                                                   
| | All areas                                       | Sale of mineral rights owned as of May 1997 | 1% of the sales price.                                                                                                            

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(g) | At December 31, 2002 we have provided $15 for
          environmental liabilities. Such provisions relate to site restoration
          at mines already closed or which are expected to be closed in the next
    two years.                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | We use various judgments and assumptions when
          measuring our environmental liabilities. 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.

F - 31

---



|16 | 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 cargoes. Holdings  divided into the following sub-groups:


| |  | Pulp and paper - up to 2001 comprises our forestation activities and investments in joint ventures and affiliates engaged in the manufacture of pulp and paper products. In 2001 we disposed of most of our
investments in pulp and paper and no longer consider this as a major business activity.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                    
| |  | Aluminum - comprises aluminum trading
       activities and investments in subsidiaries, joint ventures and affiliates
       engaged in bauxite mining,
alumina refining 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.                                                                                                                                                                                               

In 2002 we started to allocate our Corporate Center costs to segments. Information for 2001 and 2000 has been reclassified to reflect this same treatment on a comparative basis. 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.


F - 32

---



Consolidated net income and principal assets are reconciled as follows:


|                                                                                           |                                                                                                                 | 2002    |  
|------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------- | ------- | -
|                                                                                           |                                                                                                                 |         |  
|                                                                                           |                                                                                                                 |         |  
|                                                                                           |                                                                                                                 |         |  
|                                                                                           |                                                                                                                 |         |  
|                                                                                           |                                                                                                                 | Ferrous |  
|                                                                                           |                                                                                                                 |         |  
|                                                                                           | RESULTS                                                                                                         |         |  
|                                                                                           | Revenues - Export                                                                                               | 4,200   |  
|                                                                                           | Revenues - Domestic                                                                                             | 996     |  
|                                                                                           | Cost and expenses                                                                                               | (3,773  | )
|                                                                                           | Depreciation, depletion and
      amortization                                                                  | (170    | )
|                                                                                           | Pension plan                                                                                                    | (9      | )
|                                                                                           |                                                                                                                 |         |  
|                                                                                           | Operating profit                                                                                                | 1,244   |  
|                                                                                           | Interest revenue                                                                                                | 193     |  
|                                                                                           | Interest expense                                                                                                | (433    | )
|                                                                                           | Foreign exchange and monetary
      losses, net                                                                 | (442    | )
|                                                                                           | Equity                                                                                                          | (65     | )
|                                                                                           | Income taxes                                                                                                    | 145     |  
|                                                                                           | Minority interests                                                                                              | 2       |  
|                                                                                           |                                                                                                                 |         |  
|                                                                                           | Net income                                                                                                      | 644     |  
|                                                                                           |                                                                                                                 |         |  
|                                                                                           |                                                                                                                 |         |  
|                                                                                           | Sales classified by geographic
      destination:                                                               |         |  
|                                                                                           | Export market                                                                                                   |         |  
|                                                                                           | Latin America                                                                                                   | 392     |  
|                                                                                           | United States                                                                                                   | 340     |  
|                                                                                           | Europe                                                                                                          | 1,799   |  
|                                                                                           | Middle East                                                                                                     | 239     |  
|                                                                                           | Japan                                                                                                           | 488     |  
|                                                                                           | Asia, other than Japan                                                                                          | 942     |  
|                                                                                           |                                                                                                                 |         |  
|                                                                                           |                                                                                                                 | 4,200   |  
|                                                                                           | Domestic market                                                                                                 | 996     |  
|                                                                                           |                                                                                                                 |         |  
|                                                                                           |                                                                                                                 | 5,196   |  
|                                                                                           |                                                                                                                 |         |  
|                                                                                           | Assets :                                                                                                        |         |  
|                                                                                           | Property, plant and equipment,
      net                                                                        | 2,346   |  
|                                                                                           | Capital expenditures                                                                                            | 524     |  
|                                                                                           | Investments in affiliated companies
      and joint ventures and other investments, net of provision for losses | 395     |  
|                                                                                           |                                                                                                                 |         |  
|                                                                                           | Capital employed                                                                                                | 2,364   |  
|                                                                                           |                                                                                                                 |         |  
|(1) Control of ALUNORTE was acquired
      in June 2002 and it was consolidated from then. |                                                                                                                 |         |  

F - 33

---



Operating profit by
      product  after eliminations


|            | 2002   | 
|----------- | ------ | 
|            |        | 
|            |        | 
|            |        | 
|            |        | 
|            | Export | 
|            |        | 
|Ferrous     |        | 
|Iron ore    | 1,642  | 
|Pellets     | 530    | 
|Manganese   | 24     | 
|Ferroalloys | 176    | 
|            |        | 
|            | 2,372  | 
|Non ferrous |        | 
|Gold        | 103    | 
|Potash      |       | 
|Kaolin      | 40     | 
|            |        | 
|            | 143    | 
|Aluminum    |        | 
|Alumina     | 85     | 
|Aluminum    | 279    | 
|Bauxite     | 23     | 
|            |        | 
|            | 387    | 
|Logistics   |        | 
|Railroads   |       | 
|Ports       |       | 
|Ships       | 26     | 
|            |        | 
|            | 26     | 
|Others      |       | 
|            |        | 
|            | 2,928  | 
|            |        | 

(1) Cost and expenses include contingency provisions of $53.

F - 34

---



|                                                                 | 2001    |  
|---------------------------------------------------------------- | ------- | -
|                                                                 |         |  
|                                                                 |         |  
|                                                                 |         |  
|                                                                 |         |  
|                                                                 | Ferrous |  
|                                                                 |         |  
|                                                                 |         |  
|RESULTS                                                          |         |  
|Revenues - Export                                                | 3,558   |  
|Revenues - Domestic                                              | 1,083   |  
|Cost and expenses                                                | (3,632  | )
|Depreciation, depletion and amortization                         | (167    | )
|Pension plan                                                     | (27     | )
|                                                                 |         |  
|Operating profit                                                 | 815     |  
|Interest revenue                                                 | 169     |  
|Interest expense                                                 | (368    | )
|Foreign exchange and monetary losses, net                        | (396    | )
|Gains on sale of investments                                     |        |  
|Equity and provision for losses                                  | (3      | )
|Minority interests                                               | 2       |  
|Income taxes                                                     | 220     |  
|                                                                 |         |  
|Net income                                                       | 439     |  
|                                                                 |         |  
|                                                                 |         |  
|Sales classified by geographic destination:                      |         |  
|Export market                                                    |         |  
|Latin America                                                    | 238     |  
|United States                                                    | 247     |  
|Europe                                                           | 1,469   |  
|Middle East                                                      | 216     |  
|Japan                                                            | 525     |  
|Asia, other than Japan                                           | 863     |  
|                                                                 |         |  
|                                                                 | 3,558   |  
|Domestic market                                                  | 1,083   |  
|                                                                 |         |  
|                                                                 | 4,641   |  
|                                                                 |         |  
|Assets :                                                         |         |  
|Property, plant and equipment, net                               | 3,171   |  
|Capital expenditures                                             | 508     |  
|Investments in affiliated companies and joint
      ventures and |         |  
|other investments, net of provision for losses                   | 673     |  
|                                                                 |         |  
|Capital employed                                                 | 2,976   |  

F - 35

---



Operating profit by product - after eliminations

|              | 2001   | 
|------------- | ------ | 
|              |        | 
|              |        | 
|              |        | 
|              |        | 
|              |        | 
|              | Export | 
|              |        | 
|Ferrous       |        | 
|Iron ore      | 1.529  | 
|Pellets       | 474    | 
|Manganese     | 50     | 
|Ferroalloys   | 131    | 
|Other ferrous |       | 
|              |        | 
|              | 2.184  | 
|Non ferrous   |        | 
|Gold          | 139    | 
|Potash        |       | 
|Kaolin        | 34     | 
|              |        | 
|              | 173    | 
|Aluminum      |        | 
|Alumina       | 32     | 
|Aluminum      | 230    | 
|Bauxite       | 21     | 
|              |        | 
|              | 283    | 
|Logistics     |        | 
|Railroads     |       | 
|Ports         |       | 
|Ships         | 105    | 
|              |        | 
|              | 105    | 
|Others        | 49     | 
|              |        | 
|              | 2.794  | 
|              |        | 

(1) Cost and expenses include contingency provisions of $79 and sundry provisions of $25.

F - 36

---



|                                                                                                                | 2000    |  
|--------------------------------------------------------------------------------------------------------------- | ------- | -
|                                                                                                                |         |  
|                                                                                                                |         |  
|                                                                                                                |         |  
|                                                                                                                |         |  
|                                                                                                                | Ferrous |  
|                                                                                                                |         |  
|RESULTS                                                                                                         |         |  
|Revenues - Export                                                                                               | 2,850   |  
|Revenues - Domestic                                                                                             | 1,000   |  
|Cost and expenses                                                                                               | (2,891  | )
|Depreciation, depletion and amortization                                                                        | (121    | )
|Pension plan                                                                                                    | (33     | )
|                                                                                                                |         |  
|Operating profit                                                                                                | 805     |  
|Interest revenue                                                                                                | 225     |  
|Interest expense                                                                                                | (321    | )
|Foreign exchange and monetary losses, net                                                                       | (242    | )
|Gains on sale of investments                                                                                    |        |  
|Equity and provision for losses                                                                                 | 45      |  
|Minority interests                                                                                              | 1       |  
|Income taxes                                                                                                    | 87      |  
|                                                                                                                |         |  
|Net income                                                                                                      | 600     |  
|                                                                                                                |         |  
|                                                                                                                |         |  
|Sales classified by geographic destination:                                                                     |         |  
|Export market                                                                                                   |         |  
|Latin America                                                                                                   | 224     |  
|United States                                                                                                   | 252     |  
|Europe                                                                                                          | 969     |  
|Middle East                                                                                                     | 209     |  
|Japan                                                                                                           | 544     |  
|Asia, other than Japan                                                                                          | 652     |  
|                                                                                                                |         |  
|                                                                                                                | 2,850   |  
|Domestic market                                                                                                 | 1,000   |  
|                                                                                                                |         |  
|                                                                                                                | 3,850   |  
|                                                                                                                |         |  
|Assets :                                                                                                        |         |  
|Property, plant and equipment, net                                                                              | 3,107   |  
|Capital expenditures                                                                                            | 383     |  
|Investments in affiliated companies
      and joint ventures and other investments, net of provision for losses | 519     |  
|                                                                                                                |         |  
|Capital employed                                                                                                | 3,058   |  

F - 37

---



Operating profit by product - after eliminations

|            | 2000   | 
|----------- | ------ | 
|            |        | 
|            |        | 
|            |        | 
|            |        | 
|            |        | 
|            | Export | 
|            |        | 
|Ferrous     |        | 
|Iron ore    | 1,143  | 
|Pellets     | 436    | 
|Manganese   | 20     | 
|Ferroalloys | 158    | 
|            |        | 
|            | 1,757  | 
|Non ferrous |        | 
|Gold        | 156    | 
|Potash      |       | 
|Kaolin      | 37     | 
|            |        | 
|            | 193    | 
|Aluminum    |        | 
|Alumina     | 54     | 
|Aluminum    | 278    | 
|Bauxite     | 18     | 
|            |        | 
|            | 350    | 
|Logistics   |        | 
|Railroads   |       | 
|Ports       |       | 
|Ships       | 181    | 
|            |        | 
|            | 181    | 
|Others      | 165    | 
|            |        | 
|            | 2,646  | 
|            |        | 

(1) Cost and expenses include contingencies provisions of $101 and sundry provisions of $40.

F - 38

---



|17 | Related party transactions
|-- | --------------------------

Transactions with major related parties (including
    agencies of the Brazilian Federal Government) resulted in the following balances:


| |                                         | As
      of December 31 | 
| | --------------------------------------- | ----------------------- | 
| |                                         |                         | 
| |                                         | 2002                    | 
| |                                         |                         | 
| |                                         | Assets                  | 
| |                                         |                         | 
| | AFFILIATED COMPANIES AND JOINT VENTURES |                         | 
| | FCA                                     | 70                      | 
| | HISPANOBRAS                             | 18                      | 
| | ITABRASCO                               | 19                      | 
| | NIBRASCO                                | 26                      | 
| | KOBRASCO                                | 40                      | 
| | CST                                     | 23                      | 
| | USIMINAS                                | 5                       | 
| | ALBRAS                                  | 10                      | 
| | ALUNORTE(1)                             |                        | 
| | Salobo Metais S.A(1)                    |                        | 
| | Others                                  | 48                      | 
| |                                         |                         | 
| | BRAZILIAN FEDERAL GOVERNMENT (2)        |                         | 
| | Banco do Brasil S.A.                    |                        | 
| | Rede Ferroviária Federal
      S.A      |                        | 
| | BNDES                                   |                        | 
| |                                         |                         | 
| |                                         | 259                     | 
| |                                         |                         | 
| | Current                                 | 170                     | 
| |                                         |                         | 
| | Long-term                               | 89                      | 
| |                                         |                         | 

|    |                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Alunorte and Salobo Metais S.A. are consolidated
    at December 31, 2002, after acquisition of control during 2002.                       
|    |                                                                                                                                            
|(2) | The Brazilian Federal Government ceased to
          be a related party upon the sale of its shares in May 2002 as mentioned
    in Note 3.

F - 39

---



These balances are included in the following balance sheet classifications:


| |                                               | As
          of December 31 | 
| | --------------------------------------------- | --------------------------- | 
| |                                               |                             | 
| |                                               | 2002                        | 
| |                                               |                             | 
| |                                               | Assets                      | 
| |                                               |                             | 
| | Current assets                                |                             | 
| | Cash and cash equivalents                     |                            | 
| | Accounts receivable                           | 121                         | 
| | Loans and advances to related
        parties | 49                          | 
| | Others                                        |                            | 
| |                                               |                             | 
| | Other assets                                  |                             | 
| | Loans and advances to related
        parties | 89                          | 
| | Others                                        |                            | 
| |                                               |                             | 
| | Current liabilities                           |                             | 
| | Suppliers                                     |                            | 
| | Current portion of long-term
        debt     |                            | 
| |                                               |                             | 
| | Loans from related parties                    |                            | 
| | Others                                        |                            | 
| |                                               |                             | 
| | Long-term liabilities                         |                             | 
| | Long-term debt                                |                            | 
| | Others                                        |                            | 
| |                                               |                             | 
| |                                               | 259                         | 
| |                                               |                             | 

The principal amounts of business and financial operations carried out with major related parties are as follows:


| |                                            | Year ended December 31 | 
| | ------------------------------------------ | ---------------------- | 
| |                                            |                        | 
| |                                            | 2002                   | 
| |                                            |                        | 
| |                                            | Income                 | 
| |                                            |                        | 
| | AFFILIATED COMPANIES AND JOINT VENTURES    |                        | 
| | CST                                        | 152                    | 
| | NIBRASCO                                   | 146                    | 
| | ALUNORTE (to June 2002)                    | 6                      | 
| | SIDERAR                                    | 35                     | 
| | ITABRASCO                                  | 74                     | 
| | HISPANOBRAS                                | 77                     | 
| | KOBRASCO                                   | 84                     | 
| | CENIBRA (to May 2001)                      |                       | 
| | USIMINAS                                   | 76                     | 
| | ALBRAS                                     | 73                     | 
| | VALESUL                                    | 7                      | 
| | MRN                                        |                       | 
| | Others                                     | 79                     | 
| | BRAZILIAN FEDERAL GOVERNMENT (to May 2002) |                        | 
| | Banco do Brasil S.A                        | 3                      | 
| | Petróleo Brasileiro S.A. - PETROBRAS       |                       | 
| | Centrais Elétricas Brasileiras S.A         |                       | 
| | BNDES                                      |                       | 
| |                                            |                        | 
| |                                            | 812                    | 
| |                                            |                        | 

F - 40

---



These amounts are included in the following statement of income classifications:


| |                                      |        |  |         |  |        |  | Year ended December
      31 | 
| | ------------------------------------ | ------ |  | ------- |  | ------ |  | ---------------------------- | 
| |                                      |        |  |         |  |        |  |                              | 
| |                                      |        |  | 2002    |  |        |  | 2001                         | 
| |                                      |        |  |         |  |        |  |                              | 
| |                                      | Income |  | Expense |  | Income |  | Expense                      | 
| |                                      |        |  |         |  |        |  |                              | 
| |                                      |        |  |         |  |        |  |                              | 
| | Sales / Cost of iron ore and pellets | 599    |  | 380     |  | 518    |  | 349                          | 
| | Revenues from logistic services      | 66     |  |        |  | 85     |  |                             | 
| | Sales / Cost of aluminum products    | 74     |  | 314     |  |       |  | 254                          | 
| | Financial income/expenses            | 15     |  | 18      |  | 180    |  | 59                           | 
| | Others                               | 58     |  | 32      |  | 52     |  | 128                          | 
| |                                      |        |  |         |  |        |  |                              | 
| |                                      | 812    |  | 744     |  | 835    |  | 790                          | 
| |                                      |        |  |         |  |        |  |                              | 

|   |                                    
|-- | -----------------------------------
|18 | Fair value of financial instruments

The carrying amount of our current financial instruments generally approximates fair market value because of the short-term maturity or frequent repricing of these instruments. The market value of long-term investments, where available, is disclosed in Note 10 to these financial statements. Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, the fair market value of long-term debt at December 31, 2002 and 2001 is estimated as follows:


| |                   | As of December 31 | 
| | ----------------- | ----------------- | 
| |                   |                   | 
| |                   | 2002              | 
| |                   |                   | 
| | Fair market value | 2,379             | 
| | Carrying value    | 2,359             | 

Fair market value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. Changes in assumptions could significantly affect the
estimates.


|19 | 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. As from January 1, 2001 we adopted SFAS 133 - "Accounting for Derivative Financial Instruments and Hedging Activities", as amended by SFAS 137 and SFAS 138, and began to recognize all derivatives on our balance sheet at
fair value. Accordingly we recognized an initial transition adjustment of $12 as a charge in our statement of income relative to net unrealized losses on contracts open as of December 31, 2000. Subsequently to January 1, 2001 all derivatives have
been adjusted to fair market value at each balance sheet date and the change included in current earnings.


F - 41


---



The asset (liability) balances at December 31, 2002 and 2001 and the movement in fair value of derivative financial instruments is as follows:


| |                                                                |      |   | Interestrates (libor) |            |    |         |   |       |     |  
| | -------------------------------------------------------------- | ---- | - | --------------------- | ---------- | -- | ------- | - | ----- | --- | -
| |                                                                | Gold |   |                       | Currencies |    | Alumina |   | Total |    
| |                                                                |      |   |                       |            |    |         |   |       |     |  
| | Initial unrealized gains and (losses) at January
      1, 2001 | 9    |   | (8                    | )          | (4 | )       |  |       | (3  | )
| | Change in the period                                           | 2    |   | (36                   | )          | (4 | )       |  |       | (38 | )
| | Gains and (losses) realized in the period                      | (4   | ) | 8                     |            | 4  |         |  |       | 8   |  
| |                                                                |      |   |                       |            |    |         |   |       |     |  
| | Unrealized gains and (losses) at December
      31, 2001       | 7    |   | (36                   | )          | (4 | )       |  |       | (33 | )
| |                                                                |      |   |                       |            |    |         |   |       |     |  
| | Gain recognized upon consolidation of Alunorte                 |     |   |                      |            |   |         | 2 |       | 2   |  
| | Financial settlement                                           | (2   | ) | 24                    |            | 3  |         | 1 |       | 26  |  
| | Losses in the period                                           | (22  | ) | (68                   | )          | (2 | )       |  |       | (92 | )
| | Effect of exchange rate changes                                | 2    |   | 20                    |            | 2  |         |  |       | 24  |  
| |                                                                |      |   |                       |            |    |         |   |       |     |  
| | Unrealized gains and (losses) at December
      31, 2002       | (15  | ) | (60                   | )          | (1 | )       | 3 |       | (73 | )
| |                                                                |      |   |                       |            |    |         |   |       |     |  

Realized and unrealized gains and 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. Final maturity dates for the above instruments are as follows:


| | Gold                   | December 2006 | 
| | ---------------------- | ------------- | 
| | Interest rates (libor) | May 2007      | 
| | Currencies             | May 2005      | 

|    |                                     
|--- | ------------------------------------
|(a) | Interest Rate and Exchange Rate Risk

Interest rate risks mainly relate to that part
of the 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, a substantial proportion of our revenues are denominated in,
or automatically indexed to, the U.S. dollar, while the
majority of 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 effect included in financial income or expense.
During the years ended December 31, 2002 and 2001 our use of such instruments was not
significant.


F - 42

---



|(b) | Commodity Price Risk
|--- | --------------------

We also use derivative instruments to manage exposure to changing gold prices. Derivatives allow the fixing of an average minimum profit level for future gold production. However, they may also have the effect of
eliminating potential gains on certain price increases in the spot market for gold. 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 derivatives, our policy has been to settle all contracts through cash payments or receipts, without physical delivery of product. Our affiliate Albras manages the risk of fluctuating aluminum prices using derivatives, allowing an average minimum profit level for future production and ensuring stable cash generation. However, they may also have the
effect of eliminating potential gains on certain price increases in the spot market for aluminum. We account for Albras using the equity method.


|20 | Information about independent accountants
|-- | -----------------------------------------

Our consolidated financial statements are audited by PricewaterhouseCoopers Auditores Independentes. The financial statements of certain of our subsidiaries and affiliates have been audited by independent accountants other
than PricewaterhouseCoopers Auditores Independentes and, as mentioned in their report, PricewaterhouseCoopers Auditores Independentes has relied on such audits when expressing their opinion on our consolidated financial statements. The following entities prepare financial statements in US GAAP which are audited in accordance with auditing standards generally accept in the United States of America:


| |                                                                 |  | Auditors |  | Years Audited    |  | City                |  | State |  | Country
| | --------------------------------------------------------------- |  | -------- |  | ---------------- |  | ------------------- |  | ----- |  | -------
| |                                                                 |  |          |  |                  |  |                     |  |       |  |        
| | Alumínio Brasileiro S.A. - ALBRAS                               |  | DTT      |  | 2002, 2001, 2000 |  | RJ                  |  | RJ    |  | Brazil 
| | Alumina do Norte do Brasil S.A. - ALUNORTE                      |  | DTT      |  | 2002, 2001, 2000 |  | RJ                  |  | RJ    |  | Brazil 
| | Vale do Rio Doce Alumínio S.A. - ALUVALE                        |  | DTT      |  | 2002, 2001, 2000 |  | RJ                  |  | RJ    |  | Brazil 
| | Bahia Sul Celulose S.A. (1)                                     |  | KPMG     |  | 2000             |  | SP                  |  | SP    |  | Brazil 
| | California Steel Industries, Inc.                               |  | KPMG LLP |  | 2002, 2001, 2000 |  | Orange
      County |  | CA    |  | USA    
| | Celulose Nipo-Brasileira S.A. - CENIBRA (1)                     |  | DTT      |  | 2000             |  | BH                  |  | MG    |  | Brazil 
| | Navegação Vale do Rio Doce S.A.
      - DOCENAVE                |  | DTT      |  | 2002, 2001, 2000 |  | RJ                  |  | RJ    |  | Brazil 
| | DOCEPAR S.A.                                                    |  | DTT      |  | 2001, 2000       |  | RJ                  |  | RJ    |  | Brazil 
| | Companhia Hispano-Brasileira de Pelotização
      - HISPANOBRAS |  | AA       |  | 2001, 2000       |  | Vitória             |  | ES    |  | Brazil 
| | Companhia Hispano-Brasileira de Pelotização
      - HISPANOBRAS |  | DTT      |  | 2002             |  | Vitória             |  | ES    |  | Brazil 
| | Companhia Ítalo-Brasileira de Pelotização
      - ITABRASCO     |  | AA       |  | 2001, 2000       |  | Vitória             |  | ES    |  | Brazil 
| | Companhia Ìtalo-Brasileira de Pelotização
      - ITABRASCO     |  | DTT      |  | 2002             |  | Vitória             |  | ES    |  | Brazil 
| | Companhia Coreano Brasileira de Pelotização
      - KOBRASCO    |  | DTT      |  | 2002, 2001, 2000 |  | RJ                  |  | RJ    |  | Brazil 
| | Mineração Rio do Norte S.A.                                     |  | AA       |  | 2001, 2000       |  | RJ                  |  | RJ    |  | Brazil 
| | Mineração Rio do Norte S.A.                                     |  | DTT      |  | 2002             |  | RJ                  |  | RJ    |  | Brazil 
| | Companhia Nipo-Brasileira de Pelotização
      - NIBRASCO       |  | DTT      |  | 2002, 2001, 2000 |  | RJ                  |  | RJ    |  | Brazil 
| | Valesul Alumínio S.A.                                           |  | KPMG     |  | 2002, 2001, 2000 |  | RJ                  |  | RJ    |  | Brazil 
| | Companhia Siderúrgica Nacional (1)                              |  | AA       |  | 2000             |  | RJ                  |  | RJ    |  | Brazil 
| | SIBRA Eletrosiderúrgica Brasileira S.A.                         |  | DTT      |  | 2002, 2001, 2000 |  | Salvador            |  | BA    |  | Brazil 

(1) Investments sold in 2001 In addition to the above the following entities
    prepare financial statements in Brazilian GAAP which are audited in accordance
    with auditing standards generally accepted in Brazil. PricewaterhouseCoopers Auditores Independentes
    relies on such audits but is responsible for reviewing the US GAAP translation
    and, if applicable, US GAAP adjustments.






F - 43

---






| |                          |  | Auditors |  | Years Audited    |  | City |  | State |  | Country
| | ------------------------ |  | -------- |  | ---------------- |  | ---- |  | ----- |  | -------
| |                          |  |          |  |                  |  |      |  |       |  |        
| | Terminal Vila Velha S.A. |  | DTT      |  | 2002, 2001, 2000 |  | RJ   |  | RJ    |  | Brazil 
| | Nova Era Silicon S.A.    |  | DTT      |  | 2002, 2001, 2000 |  | BH   |  | MG    |  | Brazil 

AA - Arthur Andersen S/C (ceased business in 2002)
    
    DTT - Deloitte Touche Tohmatsu 
    RJ - Rio de Janeiro MG - Minas Gerais 
    BH - Belo Horizonte 
    SP - São Paulo 
    ES - Espírito Santo 
    BA - Bahia


F - 44

---





Report of Independent Accountants

To the Board of Directors
  and Stockholders of Vale Overseas Limited

In our opinion, the accompanying
  balance sheets and the related statements of income and changes in accumulated
  loss and of cash flows, present fairly, in all material respects, the financial
  position of Vale Overseas Limited (the Company) at December 31,
  2002 and 2001, and the results of its operations and its cash flows for the
  year ended December 31, 2002, in conformity with accounting principles generally
  accepted in the United States of America. These financial statements are the
  responsibility of the Companys management; our responsibility is to express
  an opinion on these financial statements based on our audits. We conducted our
  audits of these statements in accordance with auditing standards generally accepted
  in the United States of America which require that we plan and perform the audit
  to obtain reasonable assurance about whether the financial statements are free
  of material misstatement. An audit includes examining, on a test basis, evidence
  supporting the amounts and disclosures in the financial statements, assessing
  the accounting principles used and significant estimates made by management,
  and evaluating the overall financial statement presentation. We believe that
  our audits provide a reasonable basis for the opinion expressed above.





PricewaterhouseCoopers
  Auditores Independentes

Rio de Janeiro, Brazil
  February 6, 2003

F - 45

---



Vale Overseas Limited Balance Sheets as of December 31 Expressed in thousands of United States dollars

|                                                          | 2002    |   | 2001
|--------------------------------------------------------- | ------- | - | ----
|                                                          |         |   |     
|Assets                                                    |         |   |     
|                                                          |         |   |     
|Current assets                                            |         |   |     
|Cash and cash equivalents                                 | 1       |   | 1   
|Advances to related parties                               |         |   |     
|Rio
      Doce International Finance Ltd                  | 678     |   |     
|Loans and advances to
      related parties               |         |   |     
|Itabira
      Rio Doce Ltd. - ITACO                       | 8,122   |   |    
|Deferred costs related
      to long term debt            | 981     |   |    
|                                                          |         |   |     
|                                                          | 9,782   |   | 1   
|                                                          |         |   |     
|Other assets                                              |         |   |     
|Loans to related parties                                  |         |   |     
|Itabira
      Rio Doce Ltd. - ITACO                       | 300,000 |   |    
|Deferred costs related
      to long term debt            | 3,173   |   |    
|                                                          |         |   |     
|                                                          | 303,173 |   |    
|                                                          |         |   |     
|TOTAL                                                     | 312,955 |   | 1   
|                                                          |         |   |     
|                                                          |         |   |     
|Liabilities and stockholders equity                      |         |   |     
|                                                          |         |   |     
|Current liabilities                                       |         |   |     
|Advances from related parties                             |         |   |     
|Rio
      Doce International Finance Ltd                  | 680     |   |    
|CVRD
      Overseas                                       | 2       |   |     
|Interest on long-term
      debt                          | 8,122   |   |    
|Deferred income related
      to loans to related parties | 981     |   |    
|                                                          |         |   |     
|                                                          | 9,785   |   |    
|                                                          |         |   |     
|Long-term liabilities                                     |         |   |     
|Long-term debt                                            | 300,000 |   |    
|Deferred income related
      to loans to related parties | 3,173   |   |    
|                                                          |         |   |     
|                                                          | 303,173 |   |    
|                                                          |         |   |     
|Stockholders equity                                      |         |   |     
|                                                          |         |   |     
|Paid-in
        capital                                   | 1       |   | 1   
|Retained
        earnings                                 | (4      | ) |    
|                                                          |         |   |     
|                                                          | (3      | ) | 1   
|                                                          |         |   |     
|TOTAL                                                     | 312,955 |   | 1   
|                                                          |         |   |     

See notes to financial statements

F - 46

---



Vale Overseas Limited Statement of Income and Changes in Accumulated
  Loss
  For the year ended December 31
  Expressed in thousands of United States dollars
  (except number of shares and for share amounts)

|                                                           | 2002    |  
|---------------------------------------------------------- | ------- | -
|                                                           |         |  
|                                                           |         |  
|Interest income                                            | 21,811  |  
|Interest expense                                           | (21,813 | )
|General and administrative                                 | (2      | )
|                                                           |         |  
|Net loss                                                   | (4      | )
|                                                           |         |  
|                                                           |         |  
|Accumulated loss                                           |         |  
|Beginning of year                                          |        |  
|Net loss                                                   | (4      | )
|                                                           |         |  
|End of year                                                | (4      | )
|                                                           |         |  
|                                                           |         |  
|                                                           |         |  
|                                                           |         |  
|Basic loss per share                                       | (0.00   | )
|Weighted average number of common shares
      outstanding | 1,000   |  

See notes to financial statements

F - 47

---





Vale Overseas Limited 
  Statement of Cash Flows For the year ended December 31 Expressed in thousands of United States dollars

|                                                         | 2002     |  
|-------------------------------------------------------- | -------- | -
|                                                         |          |  
|Cash flows from operating activities:                    |          |  
|Net loss                                                 | (4       | )
|Decrease (increase) in assets:                           |          |  
|Advances to related parties                              | (8,800   | )
|Deferred costs related
      to long term debt           | (4,154   | )
|Loans to related parties                                 | (295,773 | )
|Increase (decrease) in liabilities:                      |          |  
|Advances from related
      parties                      | 682      |  
|Interest on long-term
      debt                         | 8,122    |  
|Deferred costs related
      to loans to related parties | (73      | )
|Long-term debt                                           | 300,000  |  
|                                                         |          |  
|Net cash provided by operating activities                |         |  
|                                                         |          |  
|                                                         |          |  
|                                                         |          |  
|                                                         |          |  
|                                                         |          |  
|Increase in cash and
      cash equivalents              |         |  
|Cash and cash equivalents,
      beginning of year       | 1        |  
|                                                         |          |  
|Cash and cash equivalents,
      end of year             | 1        |  
|                                                         |          |  

See notes to financial statements

F - 48

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Vale Overseas LimitedNotes to the Financial Statements(Expressed in thousands of U.S. dollars, unless
  otherwise stated)

|1   | The Company and its operations                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Vale
        Overseas Limited (the Company), located in the Cayman Islands,
        was constituted in April, 2001 as a special-purpose wholly owned subsidiary
        of Companhia Vale do Rio Doce (CVRD) and operates principally as a finance
        company.                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2   | Summary of significant accounting
      policies                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The
        financial statements have been prepared in accordance with accounting
        principles generally accepted in the United States of America (US
        GAAP). In preparing the financial statements, the use of estimates
        is required to account for certain assets, liabilities and transactions;
        actual results may vary from the estimates. Significant accounting practices
        are described below:
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(a) | Income and expenses                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Income and expenses are
      recognized on the accrual basis.                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b) | Income tax                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Companys operations
      are exempt of taxes in the Cayman Islands.                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(c) | Statement of cash flows                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Short-term
        investments that have a ready market and maturity to the Company, when
        purchased, of 90 days or less are considered cash equivalents.                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(d) | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Basic
        loss per share are computed by dividing net loss by the weighted average
        number of shares outstanding during the year.                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3   | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Cash
        and cash equivalents were all denominated in U.S. dollars and were represented
        by short-term bank deposits.                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4   | Long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Long-term
        debt consists of 8.625% enhanced guaranteed notes due March 8, 2007, unconditionally
        guaranteed by CVRD.                                                                                                                                                                                                                                                                                                         

F - 49



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|         
|---------
|         
|         
|         
|         
|5        
|         
|         
|         
|6        
|         
|         
|         
|**    ***
|         
|         
|         
|         
|         
|         

F - 50

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INDEX TO AUDIT REPORTS FROM
      INDEPENDENT ACCOUNTANTS LISTED IN NOTE 20 TO THE
  CONSOLIDATED FINANCIAL STATEMENTS OF COMPANHIA VALE DO RIO DOCE

|Report of Deloitte Touche Tohmatsu
      dated January 17, 2003 with respect to the financial statements of Albras
      for the three years ended December 31, 2002                                                |  | B-2 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 17, 2003 with respect to the financial statements of Alunorte
      for the three years ended December 31, 2002                                              |  | B-3 
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 17, 2003 with respect to the financial statements of Aluvale
      for the three years ended December 31, 2002                                               |  | B-4 
|                                                                                                                                                                                                                    |  |     
|Report of KPMG Auditores Independentes
        dated February 6, 2001 with respect to the financial statements of Bahia
        Sul
        Celulose
        S.A.
      for the three years ended December 31, 2000 |  | B-5 
|                                                                                                                                                                                                                    |  |     
|Report of KPMG LLP dated January
      17, 2003 with respect to the financial statements of CSI for the three years
      ended December 31, 2002                                                                   |  | B-6 
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 25, 2002 with respect to the financial statements of Cenibra
      for the two years ended December 31, 2001                                                 |  | B-7 
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 22, 2003 with respect to the financial statements of Docenave
      for the three years ended December 31, 2002                                              |  | B-8 
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 25, 2002 with respect to the financial statements of Docepar
      for the two years ended December 31, 2001                                                 |  | B-9 
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 16, 2003 with respect to the financial statements of Hispanobras
      for the year ended December 31, 2002                                                  |  | B-10
|                                                                                                                                                                                                                    |  |     
|Report of Arthur Andersen S/C
      dated January 24, 2002 with respect to the financial statements of Hispanobras
      for the three years ended December 31, 2001                                                |  | B-11
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 16, 2003 with respect to the financial statements of Itabrasco
      for the year ended December 31, 2002                                                    |  | B-12
|                                                                                                                                                                                                                    |  |     
|Report of Arthur Andersen S/C
      dated January 24, 2002 with respect to the financial statements of Itabrasco
      for the three years ended December 31, 2001                                                  |  | B-13
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 17, 2003 with respect to the financial statements of Kobrasco
      for the three years ended December 31, 2002                                              |  | B-14
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 15, 2003 with respect to the financial statements of MRN for
      the year ended December 31, 2002                                                          |  | B-15
|                                                                                                                                                                                                                    |  |     
|Report of Arthur Andersen S/C
      dated January 25, 2002 with respect to the financial statements of MRN for
      the two years ended December 31, 2001                                                          |  | B-16
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 17, 2003 with respect to the financial statements of Nibrasco
      for the three years ended December 31, 2002                                              |  | B-17
|                                                                                                                                                                                                                    |  |     
|Report of KPMG Auditores Independentes
      dated January 7, 2003 with respect to the financial statements of Valesul
      for the three years ended December 31, 2002                                            |  | B-18
|                                                                                                                                                                                                                    |  |     
|Report of Arthur Andersen S/C
      dated February 19, 2001 with respect to the financial statements of CSN
      for the two years ended December 31, 2000                                                         |  | B-19
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 20, 2003 with respect to the financial statements of Sibra
      for the three years ended December 31, 2002                                                 |  | B-20
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 17, 2003 with respect to the financial statements of TVV for
      the two years ended December 31, 2002                                                     |  | B-21
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu dated January
      30, 2002 with respect to the financial statements of TVV for the two years
      ended December 31, 2001                                                     |  | B-22
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu
      dated January 17, 2003 with respect to the financial statements of Nova
      Era Silicon S.A. for the two years ended December 31, 2002                                   |  | B-23
|                                                                                                                                                                                                                    |  |     
|Report of Deloitte Touche Tohmatsu dated January 25, 2002
      with respect to the financial statements of Nova Era Silicon S.A. for the
      two years ended December 31, 2001                                   |  | B-24
|                                                                                                                                                                                                                    |  |     

B-1

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INDEPENDENT ACCOUNTANTS REPORT

To the Directors and Stockholders
  ofALBRAS  Alumínio Brasileiro
  S.A.Barcarena  PA

We have audited the accompanying balance
  sheets of ALBRAS  Alumínio Brasileiro S.A. as of December 31, 2002
  and 2001, and the related statements of operations, changes in stockholders
  equity (deficit) and cash flows for the three-year period ended December 31,
  2002 (all expressed in United States dollars). These financial statements are
  the responsibility of the Companys management. Our responsibility is
  to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance
  with auditing standards generally accepted in the United States of America.
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements. An audit also includes assessing
  the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, the accompanying financial
  statements referred to above present fairly, in all material respects, the financial
  position of ALBRAS  Alumínio Brasileiro S.A. as of December 31,
  2002 and 2001, and the results of its operations and its cash flows for the
  three-year period ended December 31, 2002, in conformity with accounting principles
  generally accepted in the United States of America.

|/s/ Deloitte Touche Tohmatsu
|----------------------------
|                            
|                            
|January 17, 2003            

B-2

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INDEPENDENT ACCOUNTANTS REPORT

To the Directors and Shareholders
  ALUNORTE  Alumina do Norte do Brasil S.A.
  Bacarena  PA

We have audited the accompanying balance
  sheets of ALUNORTE  Alumina do Norte do Brasil S.A. as of December 31,
  2002 and 2001, and the related statements of operations, changes in stockholders
  equity and cash flows for the three-year period ended December 31, 2002 (all
  expressed in United States dollars). These financial statements are the responsibility
  of the Companys management. Our responsibility is to express an opinion
  on these financial statements based on our audits.

We conducted our audits in accordance
  with auditing standards generally accepted in the United States of America.
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements. An audit also includes assessing
  the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, the accompanying financial
  statements referred to above present fairly, in all material respects, the financial
  position of Alunorte  Alumina do Norte do Brasil S.A. as of December 31,
  2002 and 2001, and the results of its operations and its cash flows for the
  three-year period ended December 31, 2002, in conformity with accounting principles
  generally accepted in the United States of America.

|/s/ Deloitte Touche Tohmatsu
|----------------------------
|                            
|                            
|January 17, 2003            

B-3

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INDEPENDENT ACCOUNTANTS REPORT

To the Board of Directors and Stockholders
  of
  Vale do Rio Doce Alumínio S.A.  ALUVALE

We have audited the accompanying balance
  sheets of Vale do Rio Doce Alumínio S.A.  ALUVALE as of December
  31, 2002 and 2001, and the related statements of operations, cash flows and
  changes in stockholders equity for each of the three-years in the period
  ended December 31, 2002 (all expressed in United States dollars). These financial
  statements are the responsibility of the Companys management. Our responsibility
  is to express an opinion on these financial statements based on our audits.
  We did not audit the financial statements of the Valesul Alumínio S.A.
  as of December 31, 2002, 2001 and 2000 and Mineraçâo Rio do Norte
  S.A. as of December 31, 2001 and 2000, the Companys investment in which
  are accounted for by use of the equity method. The Companys equity of
  US$39,131,000 and US$204,951,000 in the aforementioned affiliated companies
  net assets at December 31, 2002 and 2001, respectively, and of US$13,815,000,
  US$43,569,000 and US$47,861,000 in the companies net income for the years
  ended December 31, 2002, 2001 and 2000, respectively, are included in the accompanying
  financial statements. The financial statements of the above mentioned affiliated
  companies were audited by other auditors whose reports have been furnished to
  us, and our opinion, insofar as it relates to the amounts included for such
  companies is based solely on the reports of such other auditors.

We conducted our audits in accordance
  with auditing standards generally accepted in the United States of America.
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements. An audit also includes assessing
  the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits and the reports of other auditors provide a reasonable basis
  for our opinion.

In our opinion, based on our audits
  and the reports of other auditors, the accompanying financial statements referred
  to above present fairly, in all material respects, the financial position of
  Vale do Rio Doce Alumínio S.A.  ALUVALE as of December 31, 2002
  and 2001 and the results of its operations and its cash flows for each of the
  three-years in the period ended December 31, 2002 in conformity with accounting
  principles generally accepted in the United States of America.

|/s/ Deloitte Touche Tohmatsu
|----------------------------
|                            
|                            
|January 17, 2003            

B-4

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INDEPENDENT AUDITORS REPORT

The Board of Directors and Shareholders
  ofBahia Sul Celulose S.A.

We have audited the accompanying consolidated
  balance sheets of Bahia Sul Celulose S.A. and subsidiaries as of December 31,
  2000 and 1999, and the related consolidated statements of income, shareholders
  equity and comprehensive income (loss), and cash flows for each of the years
  in the three-year period ended December 31, 2000. These consolidated financial
  statements are the responsibility of the Companys management. Our responsibility
  is to express an opinion on these consolidated financial statements based on
  our audits.

We conducted our audits in accordance
  with auditing standards generally accepted in the United States of America.
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements. An audit also includes assessing
  the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
  statements referred to above present fairly, in all material respects, the financial
  position of Bahia Sul Celulose S.A. and subsidiaries as of December 31, 2000
  and 1999, and the results of their operations and their cash flows for each
  of the years in the three-year period ended December 31, 2000, in conformity
  with accounting principles generally accepted in the United States of America.

|/s/ KPMG Auditores Independentes        
|----------------------------------------
|                                        
|                                        
|São Paulo, Brazil
      February 6, 2001

B-5

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INDEPENDENT AUDITORS REPORT

The Board of DirectorsCalifornia Steel Industries, Inc.:

We have audited the accompanying consolidated
  balance sheets of California Steel Industries, Inc. and subsidiary as of December
  31, 2002 and 2001 and the related consolidated statements of operations, stockholders
  equity, and cash flows for each of the years in the three-year period ended
  December 31, 2002. These consolidated financial statements are the responsibility
  of the Companys management. Our responsibility is to express an opinion
  on these consolidated financial statements based on our audits.

We conducted our audits in accordance
  with auditing standards generally accepted in the United States of America.
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements. An audit also includes assessing
  the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
  statements referred to above present fairly, in all material respects, the financial
  position of California Steel Industries, Inc. and subsidiary as of December
  31, 2002 and 2001 and the results of their operations and their cash flows for
  each of the years in the three-year period ended December 31, 2002 in conformity
  with accounting principles generally accepted in the United States of America.

|/s/ KPMG LLP                                    
|------------------------------------------------
|                                                
|                                                
|Orange County, California
      January 17, 2003

B-6

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INDEPENDENT AUDITORS OPINION

To the Shareholders and Directors
  ofCelulose Nipo-Brasileira S.A.  CENIBRABelo Orient/MG

We have audited the accompanying consolidated
  balance sheets of Celulose Nipo-Brasileira S.A.  CENIBRA as of December
  31, 2001 and 2000 and the related statements of operations, changes in stockholders
  equity and of cash flows for the years then ended (all expressed in United States
  dollars). These consolidated financial statements are the responsibility of
  the Companys management. Our responsibility is to express an opinion on
  these financial statements based on our audits.

We conducted our audits in accordance
  with auditing standards generally accepted in the United States of America.
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements. An audit also includes assessing
  the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
  statements referred to above present fairly, in all material respects, the financial
  position of Celulose Nipo-Brasileira S.A.  CENIBRA and its subsidiaries
  as of December 31, 2001 and 2000, the results of their operations and their
  cash flows for the years then ended, in conformity with accounting principles
  generally accepted in United States of America.

|/s/ Deloitte Touche Tohmatsu
|----------------------------
|                            
|                            
|January 25, 2002            

B-7

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INDEPENDENT ACCOUNTANTS REPORT

To
  The Board of Directors and Stockholders of
  Navegação vale do Rio Doce S.A.  DOCENAVE
  Rio de Janeiro  RJ
  Brazil

We have audited the accompanying consolidated
  balance sheets of Navegação Vale do Rio Doce S.A.  DOCENAVE
  and subsidiaries as of December 31, 2002 and 2001, and the related consolidated
  statements of operations and changes in stockholders equity and comprehensive
  loss for the three-year period ended December 31, 2002 (all expressed in United
  States dollars). These consolidated financial statements are the responsibility
  of the Companys management. Our responsibility is to express an opinion
  on these financial statements based on our audits. We did not audit the financial
  statements of the affiliated company, Wilsea Shipping, Inc., the Companys
  investment in which is accounted for by use of the equity method until March
  31, 2002, date on which the affiliated company was closed and liquidated. The
  Companys equity of US$647,000 in the aforementioned affiliated companys
  net assets at December 31, 2001, and net loss of US$3,000 and US$610,000 and
  net income of US$13,984,000 in that companys net income (loss) for the
  period ended March 31, 2002 and for the years ended December 31, 2001 and 2000,
  respectively, are included in the accompanying financial statements. The financial
  statements of the above mentioned affiliated company were audited by other auditors
  whose reports have been furnished to us, and our opinion, insofar as it relates
  to the amounts included for such company, is based solely on the reports of
  such other auditors.

We conducted our audits in accordance
  with standards generally accepted in the United States of America. Those standards
  require that we plan and perform the audit to obtain reasonable assurance about
  whether the financial statements are free of material misstatement. An audit
  includes examining, on a test basis, evidence supporting the amounts and disclosures
  in the financial statements. An audit also includes assessing the accounting
  principles used and significant estimates made by management, as well as evaluating
  the overall financial statement presentation. We believe that our audits provide
  a reasonable basis for our opinion.

The accompanying financial statements
  have been prepared solely to enable the Parent Company to prepare its consolidated
  financial statements and not to report on the Navegação Vale do
  Rio Doce S.A.  DOCENAVE as a separate entity.

The statements of cash flows for the
  year ended December 31, 2002 and 2001 and the notes to the financial statements
  have not been presented; which we have believe are required to be presented
  in conformity with accounting principles generally accepted in the United States
  of America.

In our opinion, based on our audits
  and the report of other auditors, with the exception of the matter described
  in the preceding paragraph, the accompanying financial statements referred to
  above presented fairly, in all material respects, the financial position of
  VALE DO RIO DOCE NAVEGÃÇAO S.A.  DOCENAVE as of December 31, 2002 and
  2001, and the results of its operation for the three-year period ended December
  31, 2002, in conformity with accounting principles generally accepted in the
  United States of America.

|/s/ Deloitte Touche Tohmatsu
|----------------------------
|                            
|                            
|January 22, 2003            

B-8

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INDEPENDENT AUDITORS OPINION

To
  The Board of Directors and Stockholders of
  DOCEPAR S.A.
  Rio de Janeiro  RJ
  Brazil

We have audited the accompanying balance
  sheets of DOCEPAR S.A. as of December 31, 2001 and 2000 and the related statements
  of operations, cash flows and changes in stockholders deficiency for
  the years then ended (all expressed in United States dollars). These financial
  statements are the responsibility of the Companys management. Our responsibility
  is to express an opinion on these financial statements based on our audits.
  We did not audit the financial statements of the affiliated company, Companhia
  Siderúrgica Nacional, the Companys investment which was sold during
  the year 2000 and was accounted for by use of the equity method. The Companys
  gain related to the aforementioned affiliated company was US$4,189,000 and US$3,328,000
  for the year ended December 31, 2000 and 1999, respectively. The financial statements
  of the above-mentioned affiliated company were audited by other auditors whose
  report has been furnished to us, and our opinion, insofar as it relates to the
  amounts included for such company, is based solely on the reports of such other
  auditors.

We conducted our audits in accordance
  with auditing standards generally accepted in the United States of America.
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements. An audit also includes assessing
  the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits and the report of the other auditors provide a reasonable basis
  for our opinion.

In our opinion, based on our audits
  and the report of the other accountants, the accompanying financial statements
  referred to above present fairly, in all material respects, the financial position
  of DOCEPAR S.A. as of December 31, 2001 and 2000 and the results of its operations
  and its cash flows for the years then ended, in conformity with accounting principles
  generally accepted in the United States of America.

|/s/ Deloitte Touche Tohmatsu
|----------------------------
|                            
|                            
|January 25, 2002            

B-9

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INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders
  of
  Companhia Hispano-Brasileira de Pelotização  HISPANOBRAS:Vitória  Brazil

| | 1. | We have audited the accompanying balance
      sheets of Companhia Hispano-Brasileira de Pelotização 
      HISPANOBRAS, as of December 31, 2002, and the related statements of income
      and other comprehensive losses, changes in stockholders equity, and
      cash flows for the year then ended. These financial statements are the responsibility
      of the Companys management. Our responsibility is to express an opinion
      on these financial statements based on our audits.                                                                                                                                                                                                                  
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 2. | We conducted our audit in accordance with
      auditing standards generally accepted in the United States of America. Those
      standards require that we plan and perform the audit to obtain reasonable
      assurance about whether the financial statements are free of material misstatement.
      An audit includes examining, on a test basis, evidence supporting the amounts
      and disclosures in the financial statements. An audit also includes assessing
      the accounting principles used and significant estimates made by management,
      as well as evaluating the overall financial statement presentation. We believe
      that our audit provides a reasonable basis for our opinion.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 3. | In our opinion, the financial statements
      present fairly, in all material respects, the financial position of Companhia
      Hispano-Brasileira de Pelotização  HISPANOBRAS as of
      December 31, 2002, and the results of its operations and its cash flows
      for the year then ended in conformity with accounting principles generally
      accepted in the United States of America.                                                                                                                                                                                                                                                                                                                 

|/s/ Deloitte Touche Tohmatsu
|----------------------------
|                            
|                            
|January 16, 2003            

B-10

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
  This report is a copy of the previously issued report and Arthur Andersen
  S/C has not reissued the report.

To the Stockholders of
  Companhia Hispano-Brasileira de
  Pelotização  HISPANOBRÁS:

(1) We have audited the accompanying
  balance sheets of COMPANHIA HISPANO-BRASILEIRA DE PELOTIZAÇÃO  HISPANOBRAS
  (a Brazilian corporation and a subsidiary of Companhia Vale do Rio Doce), translated
  into U.S. dollars, as of December 31, 2001 and 2000, and the related translated
  statements of income, changes in stockholders equity and cash flows for
  the years ended December 31, 2001, 2000 and 1999. These financial statements
  are the responsibility of the Companys management. Our responsibility
  is to express an opinion on these financial statements based on our audits.

(2) We conducted our audits in accordance
  with generally accepted auditing standards in the United States of America.
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements. An audit also includes assessing
  the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

(3) These translated financial statements
  have been prepared as the basis for application of the equity method by its
  stockholders and, accordingly, they translate the assets, liabilities, stockholders
  equity and revenues and expenses of Companhia Hispano-Brasileira de Pelotização
   Hispanobrás for that purpose, as explained in Note 2.

(4) In our opinion financial statements
  referred to in paragraph 1 present fairly, in all material respects, and for
  the purpose described in the preceding paragraph, the financial position of
  Companhia Hispano-Brasileira de Pelotização  Hispanobrás
  as of December 31, 2001 and 2000, and the results of its operations, the changes
  in its stockholders equity and its cash flows for the years ended December
  31,2001, 2000 and 1999, in conformity with generally accepted accounting
  principles in the United States of America.

|Rio de Janeiro, Brazil,
|-----------------------
|                       
|/s/ Arthur Andersen S/C
|                       
|                       
|January 24, 2002       

B-11

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INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders
  ofCompanhia Ítalo-Brasileira de Pelotização
   ITABRASCOVitória  Brazil

We have audited the accompanying balance
  sheets of Companhia Ítalo-Brasileira de Pelotização  ITABRASCO,
  as of December 31, 2002, and the related statements of income and other comprehensive
  losses, changes in stockholders equity, and cash flows for the year then
  ended. These financial statements are the responsibility of the Companys
  management. Our responsibility is to express an opinion on these financial statements
  based on our audits.

We conducted our audit in accordance
  with auditing standards generally accepted in the United States of America.
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements. An audit also includes assessing
  the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements
  present fairly, in all material respects, the financial position of Companhia
  Ítalo-Brasileira de Pelotização  ITABRASCO as of December
  31, 2002, and the results of its operations and its cash flows for the year
  then ended in conformity with accounting principles generally accepted in the
  United States of America.

|/s/ Deloitte Touche Tohmatsu
|----------------------------
|                            
|                            
|January 16, 2003            

B-12

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

This report is a copy of the
  previously issued report and Arthur Andersen S/C has not reissued the report.

To the Stockholders of

Companhia Italo-Brasileira de
  Pelotização  ITABRASCO:

(1) We have audited the accompanying
  balance sheets of COMPANHIA ITALO-BRASILEIRA DE PELOTIZAÇAO  ITABRASCO
  (a Brazilian corporation and a subsidiary of Companhia Vale do Rio Doce), translated
  into US dollars, as of December 31, 2001 and 2000, and the related translated
  statements of income, changes in stockholders equity and cash flows for
  the years ended December 31, 2001, 2000 and 1999. These financial statements
  are the responsibility of the Companys management. Our responsibility
  is to express an opinion on these financial statements based on our audits.

(2) We conducted our audits in accordance
  with generally accepted auditing standards in the United States of America.
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit includes examining, on a test basis,evidence supporting
  the amounts and disclosures in the financial statements. An audit also includes
  assessing the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

(3) These translated financial statements
  have been prepared as the basis for application of the equity method by its
  stockholders and, accordingly, they translate the assets, liabilities, stockholders
  equity and revenues and expenses of Companhia Italo-Brasileira de Pelotização
   Itabrasco for that purpose, as explained in Note 2.

(4) In our opinion, the financial
  statements referred to in paragraph 1 present fairly, in all material respects,
  and for the purpose described in the preceding paragraph, the financial position
  of Companhia Italo-Brasileira de Pelotização  Itabrasco
  as of December 31, 2001 and 2000, and the results of its operations, the changes
  in its stockholders equity and its cash flows for the years ended December
  31, 2001, 2000 and 1999, in conformity with generally accepted accounting principles
  in the United States of America.

|Rio de Janeiro, Brazil,
|-----------------------
|                       
|/s/ Arthur Andersen S/C
|                       
|                       
|January 24, 2002       

B-13

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INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders
  ofCompanhia Coreano-Brasileira de Pelotização
   KOBRASCOVitória, Brazil

|1. | We have audited the accompanying
      consolidated balance sheets of Companhia CoreanoBrasileira de Pelotização
       KOBRASCO as of December 31, 2002 and 2001, and the related consolidated
      statements of income and other comprehensive losses, changes in stockholders
      equity and cash flows for the three-year period ended December 31, 2002
      (all expressed in United States dollars). These financial statements are
      the responsibility of the Companys management. Our responsibility
      is to express an opinion on these financial statements based on our audits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2. | We conducted our audits in accordance
      with auditing standards generally accepted in the United States of America.
      Those standards require that we plan and perform the audit to obtain reasonable
      assurance about whether the financial statements are free of material misstatement.
      An audit includes examining, on a test basis, evidence supporting the amounts
      and disclosures in the financial statements. An audit also includes assessing
      the accounting principles used and significant estimates made by management,
      as well as evaluating the overall financial statement presentation. We believe
      that our audits provide a reasonable basis for our opinion.                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3. | In our report dated January
      18, 2002, we expressed an opinion that the 2001 financial statements did
      not present fairly the financial position, results of operations, and cash
      flows in conformity with accounting principles generally accepted in the
      United States of America, because the Company did not record an allowance
      for losses in the amount of US$24,758 thousand as of December 31, 2001,
      in respect of recoverable value added tax (ICMS) credits raised from purchase
      of raw materials and other supplies since such realization is uncertain.
      As described in note 15 to the consolidated financial statements, the Company
      has recorded the allowance and has restated its 2001 financial statements
      to conform with accounting principles generally accepted in the United States
      of America. Accordingly, our present opinion on the restated 2001 financial
      statements, as expressed herein, is different from that expressed in our
      prior report on the previously issued 2001 financial statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4. | In our opinion, the accompanying
      consolidated financial statements referred to above present fairly, in all
      material respects, the financial position of Companhia CoreanoBrasileira
      de Pelotização  KOBRASCO as of December 31, 2002 and
      2001, and the consolidated results of its operations and cash flows for
      the three-year period ended December 31, 2002, in conformity with accounting
      principles generally accepted in the United States of America.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|January 17, 2003            
|----------------------------
|                            
|/s/ Deloitte Touche Tohmatsu
|                            

B-14

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INDEPENDENT AUDITORS REPORT

To the Stockholders and Board of Directors
  of
  Mineração Rio do Norte S.A.
  Oriximiná  PA

|(1) | We have audited the accompanying
      balance sheet of Mineração Rio do Norte S.A. (a Brazilian
      corporation), as of December 31, 2002, and the related statements of income,
      changes in stockholders equity and cash flows for the year then ended.
      These financial statements are the responsibility of the Companys
      management. Our responsibility is to express an opinion on these financial
      statements based on our audit.                                                                                                                                                                                                                                                       
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) | We conducted our audit in accordance
      with auditing standards generally accepted in the United States of America.
      Those standards require that we plan and perform the audit to obtain reasonable
      assurance about whether the financial statements are free of material misstatement.
      An audit includes examining, on a test basis, evidence supporting the amounts
      and disclosures in the financial statements. An audit also includes assessing
      the accounting principles used and significant estimates made by management,
      as well as evaluating the overall financial statement presentation. We believe
      that our audit provide a reasonable basis for our opinion.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(3) | In our opinion, the financial
      statements referred to in paragraph (1) present fairly, in all material
      respects, the financial position of Mineração Rio do Norte
      S.A. as of December 31, 2002, and the results of its operations, changes
      in its stockholders equity and its cash flows for the year then ended
      in conformity with accounting principles generally accepted in the United
      States of America.                                                                                                                                                                                                                                                                      

|/s/ Deloitte Touche Tohmatsu                   
|-----------------------------------------------
|                                               
|                                               
|Rio de Janeiro, Brazil,
      January 15, 2003.

B-15

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The report is a copy of the
  previously issued report and Arthur Andersen S/C has not reissued the report.

To the Stockholders and Board of Directors of
  Mineração Rio do Norte S.A.:
  (1) We have audited the accompanying balance sheets of MINERAÇÃO RIO
  DO NORTE S.A. (a Brazilian corporation), translated into US dollars, as of December
  31, 2001 and 2000, and the related translated statements of income, changes
  in stockholders equity and cash flows for the years then ended. These
  financial statements are the responsibility of the Companys management.
  Our responsibility is to express an opinion on these financial statements based
  on our audits. 
  (2) We did not audit the financial statements of the associated company Alunorte
   Alumina do Norte do Brasil S.A. as of December 31, 2001 and 2000. This
  investment represents 4% of the total assets (3% in 2000) and -1% of the net
  income (7% in 2000). Those statements were audited by other auditors whose report
  has been furnished to us, and our opinion, insofar as it relates to the amounts
  included for that entity, is based solely on the report of the other auditors.
  (3) We conducted our audits in accordance with generally accepted auditing standards
  in the United States. Those standards require that we plan and perform the audit
  to obtain reasonable assurance about whether the financial statements are free
  of material misstatement. An audit includes examining, on a test basis, evidence
  supporting the amounts and disclosures in the financial statements. An audit
  also includes assessing the accounting principles used and significant estimates
  made by management, as well as evaluating the overall financial statement presentation.
  We believe that our audits and the report of other auditors provide a reasonable
  basis for our opinion.
  (4) These translated financial statements have been prepared as the basis for
  application of the equity method by the Companys stockholders and, accordingly,
  they translate the assets, liabilities, stockholders equity and revenues
  and expenses of Mineração Rio do Norte S.A. for that purpose,
  as explained in Note 2.
  (5) In our opinion, based on our audits and on the report of other auditors,
  as mentioned in paragraph (2), the financial statements referred to in paragraph
  (1) present fairly, in all material respects, and for the purpose described
  in the preceding paragraph, the financial position of Mineração
  Rio do Norte S.A. as of December 31, 2001 and 2000, and the results of its operations,
  the changes in its stockholders equity and its cash flows for the years
  then ended, in conformity with generally accepted accounting principles in the
  United States.

|/s/ Arthur Andersen S/C                        
|-----------------------------------------------
|                                               
|                                               
|Rio de Janeiro, Brazil,
      January 25, 2002.

B-16

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INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders
  of
  Companhia Nipo-Brasileira de Pelotização  NIBRASCOVitória  Brazil

|1. | We have audited the accompanying
      balance sheets of Companhia Nipo-Brasileira de Pelotização
       NIBRASCO as of December 31, 2002 and 2001, and the related statements
      of income and other comprehensive losses, changes in stockholders
      equity and cash flows for the three-year period ended December 31,
      2002 (all expressed in United States dollars). These financial statements
      are the responsibility of the Companys management. Our responsibility
      is to express an opinion on these financial statements based on our audits.                                                                                                                                         
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2. | We conducted our audits in accordance
      with auditing standards generally accepted in the United States of America.
      Those standards require that we plan and perform the audit to obtain reasonable
      assurance about whether the financial statements are free of material misstatement.
      An audit includes examining, on a test basis, evidence supporting the amounts
      and disclosures in the financial statements. An audit also includes assessing
      the accounting principles used and significant estimates made by management,
      as well as evaluating the overall financial statement presentation. We believe
      that our audits provide a reasonable basis for our opinion.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3. | In our opinion, the accompanying
      financial statements referred to above present fairly, in all material respects,
      the financial position of Companhia Nipo-Brasileira de Pelotização
       NIBRASCO as of December 31, 2002 and 2001, and the results of
      its operations and its cash flows for the three-year period ended December 31,
      2002, in conformity with accounting principles generally accepted in the
      United States of America.                                                                                                                                                                                                                                               

|/s/ Deloitte Touche Tohmatsu
|----------------------------
|                            
|                            
|January 17, 2003            

B-17

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INDEPENDENT AUDITORS REPORT

The Board of Directors ofValesul Alumínio S.A.

We have audited the accompanying balance
  sheets of Valesul Alumínio S.A. (the Company) as of December 31, 2002
  and 2001, and the related statements of income, changes in stockholders
  equity and comprehensive income/loss and cash flows for each of the years in
  the three-year period ended December 31, 2002. These financial statements are
  the responsibility of the Companys management. Our responsibility is
  to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance
  with auditing standards generally accepted in Brazil and in the United States
  of America. Those standards require that we plan and perform the audit to obtain
  reasonable assurance about whether the financial statements are free of material
  misstatement. An audit includes examining, on a test basis, evidence supporting
  the amounts and disclosures in the financial statements. An audit also includes
  assessing the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements
  referred to above present fairly, in all material respects, the financial position
  of Valesul Alumínio S.A. as of December 31, 2002 and 2001, and the results
  of its operations and its cash flows for each of the years in the three-year
  period ended December 31, 2002, in conformity with generally accepted accounting
  principles in the United States of America.

As more fully described in Notes 7
  and 10 to the financial statements, the Company has adjusted its property, plant
  and equipment and deferred income taxes accounting balances as a result of corrections
  of errors. Consequently, the Companys financial statements for 2000 referred
  to above have been restated to conform with these adjustments.

|January 7, 2003                 
|--------------------------------
|                                
|Rio de Janeiro, Brazil          
|                                
|/s/ KPMG Auditores Independentes
|                                

B-18

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

This report is a copy of the
  previously issued report and Arthur Andersen S/C has not reissued the report.

To the Board of Directors and Stockholders
  of
  Companhia Siderúrgica Nacional

|1. | We have audited the accompanying consolidated
      balance sheets of COMPANHIA SIDERÚRGICA NACIONAL (a Brazilian corporation)
      and its subsidiaries (the Company) as of December 31, 2000
      and 1999, and the related consolidated statements of operations, changes
      in stockholders equity and cash flows for the years then ended. These
      financial statements are the responsibility of the Companys management.
      Our responsibility is to express an opinion on these financial statements
      based on our audits.                                                                                                                                                       
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|2. | The financial statements of the affiliate
      CVRD  Companhia Vale do Rio Doce as of December 31, 2000 and 1999
      were audited by other auditors. As of December 31, 2000 this asset represents
      14% of the total assets and 28% of the net income (15% and 21% respectively
      as of December 31, 1999). Our opinion on such asset is based solely on the
      report of other auditors.                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|3. | We conducted our audits in accordance with
      generally accepted auditing standards in the United States. Those standards
      require that we plan and perform the audit to obtain reasonable assurance
      about whether the financial statements are free of material misstatement.
      An audit includes examining, on a test basis, evidence supporting the amounts
      and disclosures in the financial statements. An audit also includes assessing
      the accounting principles used and significant estimates made by management,
      as well as evaluating the overall financial statement presentation. We believe
      that our audits provide a reasonable basis for our opinion.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4. | In our opinion, based on our audits and the
      report of other auditors for the years ended December 31, 2000 and 1999
      as mentioned in paragraph (2) above, the consolidated financial statements
      referred to in paragraph (1) present fairly, in all material respects, the
      financial position of Companhia Siderúrgica Nacional and subsidiaries
      as of December 31, 2000 and 1999, and the results of their operations
      and cash flows for the years then ended in conformity with generally accepted
      accounting principles in the United States.                                                                                                                     

|/s/ Arthur Andersen S/C                                                                                                      | 
|---------------------------------------------------------------------------------------------------------------------------- | 
|                                                                                                                             | 
|                                                                                                                             | 
|Rio de Janeiro, Brazil,
      February 19, 2001 (except for Notes 7, 9 and 21, as to which the date is
      June 19, 2001).

B-19

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INDEPENDENT AUDITORS REPORT

To the Shareholders, Administrative
  Council and Directors of
  SIBRA ELETROSIDERÚRGICA BRASILEIRA S.A.Simões Filho  BA

|1. | We have audited the accompanying consolidated
          balance sheets of SIBRA  ELETROSIDERÚRGICA BRASILEIRA S.A.
          and Subsidiaries, as of December 31, 2002 and 2001, and the related
          consolidated statements of operations, changes in shareholders equity
      and comprehensive income (loss) and cash flows consolidated for the three
      years ended in the period December 31, 2002. These financial statements
      are the responsibility of the Companys management. Our responsibility
      is to express an opinion on these financial statements based, on our audits.                                                                                                         
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2. | We conducted our audits in accordance with
      auditing standards generally accepted in the United States of America. Those
      standards require that we plan and perform the audit to obtain reasonable
      assurance about whether the financial statements are free of material misstatement.
      An audit includes examining, on a test basis, evidence supporting the amounts
      and disclosures in the financial statements. An audit also includes assessing
      the accounting principles used and significant estimates made by management,
      as well as evaluating the overall financial statement presentation. We believe
      that our audits provide a reasonable basis for our opinion.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3. | In our opinion, such consolidated financial
          statements present fairly, in all material respects, the financial
          position
      of SIBRA  ELETROSIDERÚRGICA BRASILEIRA S.A. and Subsidiaries
      at December 31, 2002 and 2001, and the results of their operations and
      their
      cash flows for the three years ended in the period December 31, 2002, in
      conformity with accounting principles generally accepted in the United
      States
      of America                                                                                                                                                                                                                       

|/s/ Deloitte Touche Tohmatsu                                                  
|------------------------------------------------------------------------------
|                                                                              
|                                                                              
|DELOITTE TOUCHE TOHMATSU
      Auditores Independentes
      Salvador  Brazil
|                                                                              
|January 20, 2003                                                              

B-20

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(Convenience Translation into English
  from the Original Previously Issued in Portuguese)

INDEPENDENT AUDITORS OPINION

To theStockholders and Board of Directors of
  TVV  Terminal de Vila Velha S.A.Vitória  ES

|1. | We have audited the balance sheets of TVV
       Terminal de Vila Velha S.A. as of December 31, 2002 and 2001, and
      the related statements of operations, changes in stockholders equity
      and changes in financial position for the years then ended. These financial
      statements are the responsibility of the Companys management. Our
      responsibility is to express an opinion on these financial statements based
      on our audits.                                                                                                                                                                      
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | We conducted our audits in accordance with
      auditing standards generally accepted in Brazil, which included: (a) planning
      the audit, considering the materiality of the balances, the volume of transactions
      and the Companys accounting and internal control systems; (b) examining,
      on a test basis, the evidence supporting the amounts and disclosures in
      the financial statements; and (c) the assessment of the accounting principles
      used and of the significant estimates made by the Companys management,
      as well as the presentation of the financial statements taken as a whole.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | In our opinion, the financial statements
      referred to the first paragraph present fairly, in all material respects,
      the financial position of TVV Terminal de Vila Velha S.A. as of December
      31, 2002 and 2001, and the results of its operations, the changes in its
      stockholders equity and the changes in its financial position for
      the years then ended, in conformity with accounting practices adopted in
      Brazil.                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4. | The translation into English has been made
      solely for the convenience of readers outside Brazil.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|/s/ Deloitte Touche Tohmatsu    
|--------------------------------
|                                
|                                
|Rio de Janeiro, January 17, 2003
|                                

B-21

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  INDEPENDENT AUDITORS OPINION
  To the Stockholders and Board of
    Directors of
    TVV  Terminal de Vila Velha S.A.
  Vitória  ES
  We have audited the balance sheets
    of TVV  Terminal de Vila Velha S.A. as of December 31, 2001 and 2000,
    and the related statements of operations, changes in stockholders equity
    and changes in financial position for the years then ended (all expressed
    in Brazilian Reais). These financial statements are the responsibility of
    the Companys management. Our responsibility is to express an opinion
    on these financial statements based on our audits.
  We conducted our audits in accordance
    with auditing standards generally accepted in Brazil, which included: (a)
    planning the audit, considering the materiality of the balances, the volume
    of transactions and the Companys accounting and internal control systems;
    (b) examining, on a test basis, the evidence supporting the amounts and disclosures
    in the financial statements; and (c) the assessment of the accounting principles
    used and of the significant estimates made by the Companys management,
    as well as the presentation of the financial statements taken as a whole.
  In our opinion, the financial statements
    referred to in the first paragraph present fairly, in all material respects,
    the financial position of TVV Terminal de Vila Velha S.A. as of December
    31, 2001 and 2000, and the results of its operations, the changes in its stockholders
    equity and the changes in its financial position for the years then ended,
    in conformity with Brazilian corporate law.
  The translation of the financial
    statements into English have been made solely for the convenience of readers
    outside of Brazil.
  /s/ Deloitte Touche TohmatsuVitória, January 30, 2002
  
  B-22


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INDEPENDENT AUDITORS REPORT

To the Management and Shareholders
  of
  Nova Era Silicon S.A.Belo Horizonte  MG

|1. | We have audited the accompanying
      balance sheets, expressed in Brazilian Reais of Nova Era Silicon S.A. as
      of December 31, 2002 and 2001, and the related statements of income,
      changes in shareholders equity, and changes in financial position
      for the years then ended. These financial statements are the responsibility
      of the Companys management. Our responsibility is to express an opinion
      on these financial statements based on our audits.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|2. | Except for the matter mentioned
      in paragraph 3, we conducted our audits in accordance with generally
      accepted auditing standards in Brazil which included: (a) planning
      of the engagement, considering the materiality of the balances, the volume
      of transactions, and the accounting and internal control system of the Company,
      (b) examination, on a test basis, of the evidence and records supporting
      the amounts and disclosures in the financial statements, and (c) evaluation
      of the accounting practices used and significant estimates adopted by management
      of the company, as well as the overall financial statement presentation.                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3. | Through December 31, 2001, the
      Company calculated depletion on certain of its forests, which net balance
      was R$3,257,000 as of December 31, 2001, at the annual linear rate
      of 10% (straight line method). Brazilian accounting practices require that
      forest depletion be calculated based on the volume of extracted wood in
      proportion to the total forest potential, applied to the total formation
      cost. The effects of this departure from accounting practices could not
      be estimated as of December 31, 2001. In 2002, the Company took a forest
      inventory and recorded the adjustment corresponding to the volume of wood
      extracted in prior years, in the amount of R$2,212,000, in the retained
      earnings account, in shareholders equity. It was not possible to
      estimate the specific effects related to the year ended December 31,
      2001.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4. | As of December 31, 1999,
      the Company elected to adopt Resolution n° 294, issued by the Brazilian
      Securities Commission  CVM, and recorded deferred charges, the net
      loss on exchange variations for the three-month period ended March 31,
      1999. As required by Brazilian accounting practices, exchange losses should
      be charged to expense in the period in which they were incurred. Accordingly,
      net income for the year ended December 31, 2002 is understated by R$2,066,000
      (R$2,066,000 in 2001) and permanent assets and shareholders equity
      are overstated by R$2,066,000, only as of December 31, 2001.                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|5. | In our opinion, the balance
      sheet as of December 31, 2002 presents fairly, in all material respects,
      the financial position of Nova Era Silicon S.A. as of December 31, 2002.
      In our opinion, except for the effects of the deferral of exchange losses
      mentioned in paragraph 4 above, the statements of income, changes in
      shareholders equity and changes in financial position for the year
      ended December 31, 2002, present fairly, in all material respects, the results
      of its operations, the changes in shareholders equity, and the changes
      in its financial position for the year then ended in accordance with accounting
      practices established by Brazilian corporate law.                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|6. | In our opinion, except for the
      effects, not measured, of the matter mentioned in paragraph 3 and for
      the effects of the matter mentioned in paragraph 4, the financial statements
      referred in the first paragraph present fairly, in all material respects,
      the financial position of Nova Era Silicon S.A. as of December 31,
      2001, and the results of its operations, the changes in its stockholders
      equity and the changes in its financial position for the year then ended
      in accordance with accounting practices established by Brazilian corporate
      law.                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|7. | The translation of the financial
      statements into English has been made solely for the convenience of readers
      outside Brazil.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|/s/ Deloitte Touche Tohmatsu
|----------------------------
|                            
|                            
|January 17, 2003            

B-23

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Back to Contents

INDEPENDENT AUDITORS REPORT

To the Management and Shareholders
  of
  Nova Era Silicon S.A.Belo Horizonte  MG

|1. | We have audited the accompanying
      balance sheets of Nova Era Silicon S.A. as of December 31, 2001 and
      2000, and the related statements of income, changes in stockholders
      equity, and changes in financial position for the years then ended. These
      financial statements are the responsibility of the Companys management.
      Our responsibility is to express an opinion on these financial statements
      based on our audits.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Except for the matter mentioned
      in the third paragraph, we conducted our audits in accordance with generally
      accepted auditing standards in Brazil, which included: (a) planning
      of the engagement, considering the materiality of the balances, the volume
      of transactions, and the accounting and internal control system of the Company;
      (b) examination, on a test basis, of the evidence and records supporting
      the amounts and disclosures in the financial statements; and (c) evaluation
      of the accounting practices used and significant estimates adopted by management
      of the company, as well as the overall financial statement presentation.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | The Company has calculated the
      depletion of some of its forests, whose net balance as of December 31, 2001
      was R$3.257 thousand (R$3.760 thousand at 2000), at a 10% annual rate (straight
      line method). As required by accounting principles, depletion of forests
      should be calculated based on the volume of timber that has been extracted
      in proportion to total potential volume, applied to total cost. We are unable
      to measure the effects arising from the adoption of such a procedure as
      of December 31, 2001 and 2000.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | As of December 31, 1999,
      the Company elected to adopt Resolution n 294, issued by the Brazilian Securities
      and Exchange Commission  CVM, and recorded in its deferred assets
      the net loss on exchange variation for the three-month period ended March 31,
      1999. As required by accounting principles, exchange variation should be
      charged to expenses in the period in which they were incurred. Consequently,
      permanent assets and stockholders equity as of December 31, 2001 were
      overstated by R$2.066 thousand (R$4.218 thousand in 2000), and net income
      for the year then ended was understated by R$2.062 thousand (R$2.062 thousand
      in 2000), related to the respective amortization.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | In our opinion, except for the
      effects, if any, of the matter mentioned in the third paragraph and for
      the effects of the matter mentioned in the fourth paragraph, the financial
      statements referred to in the first paragraph fairly present fairly, in
      all material respects, the financial position of Nova Era Silicon S.A. as
      of December 31, 2001 and 2000, and the results of its operations, the changes
      in its stockholders equity and the changes in its financial position
      for the years then ended, in conformity with accounting principles established
      by Brazilian corporate law.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The translation of the financial
      statements into English have been made solely for the convenience of readers
      outside of Brazil.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------

|                             | 
|---------------------------- | 
|/s/ Deloitte Touche Tohmatsu
|                            
|                            
|January 25, 2002            



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