Companhia
Vale do Rio Doce
1st Half Information
1999
Quarterly Information filed with the Comissão de Valores
Mobiliários - CVM (Brazilian Securities Commission) on
August 04, 1999.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE OPERATING IN JUNE 30, 1999
COMPARED WITH JUNE 30, 1998
1
(Expressed in thousands of Reais)
GENERAL ASPECTS
Due to the diversified nature of its operations, the Company's management believes that the following factors should be
taken into consideration in order to permit an adequate analysis:
(a)
The prices for the products and services of the Company and its subsidiaries and jointly controlled companies are
determined by world market prices, or are considerably influenced thereby. Prices of iron ore and pellets are agreed
on an annual basis and set for the following twelve months. Prices of aluminum, gold and pulp have historically
fluctuated widely, due to supply and demand conditions, thus considerably influencing the results of the Company
and its subsidiaries and jointly controlled companies. This price volatility should continue over the next few years, in
line with global economic cycles;
(b)
About 65% of the Company’s revenue at 06/30/99 is derived from exports and a part of the internal market sales
denominated in U.S. dollars, while the costs are in great part incurred in Reais. Consequently, fluctuations in the
exchange rate between the two currencies have a significant impact on the operating cash flows of the Company;
(c)
Approximately 98% of the short-term and long-term loans of the Company at 06/30/99 are denominated in
U.S. dollars. As a result, exchange rate fluctuations have a significant impact on the financial expenses of the
Company;
(d)
The variations of the main currencies and indices in 1999 and 1998 in terms of percentages in relation to the Real,
which impacted the results of the Company and its subsidiaries, jointly controlled companies and affiliated
companies, were as follows:
-
06/30/99
46.40
36.05
(9.31)
8.28
3.35
U.S. dollar
Japanese Yen
Gold
IGPM
TJLP
Parity US$ x Yen
06/30/98
3.63
(2.82)
2.10
1.98
2.33


121.31
139.09
RESULTS
The results of the Company for the period were R$ 608,779, (R$ 323,099 for the first quarter and R$ 285,680 for the
second quarter) representing growth of 16.4% compared to R$ 523,155 in 1998, increasing the income per outstanding
share to R$ 1.58 in 1999 against R$ 1.35 in 1998. The net income for the second quarter was R$ 285,680 in 1999, a growth
of 3.8% compared to R$ 275,311 for the same period of 1998.
SHAREHOLDER REMUNERATION
The Board of Directors, at an ordinary meeting held 08/04/99, decided to accept the recommendation of the Executive
Board to pay interest on stockholders’ equity in the amount of R$ 1.11 per share (common and ordinary), in a total amount
of R$ 427,239 (representing 70.1% of the net income for the semester), an increase of 47% over the remuneration paid to
shareholders in the same period of the previous year.
Payment will commence on 08/20/99, and will be net of 15% withholding tax, pursuant to Law No. 9,249/95.
2
COFINS AND PIS
The Company maintains in its long-term liabilities a contingency provision deemed sufficient by its legal advisors to cover
any extra expense that could arise due to the recent interpretation by the Supremo Tribunal Federal (Federal Supreme
Court) regarding the constitutionality of the incidence of taxes other than ICMS (VAT) on the revenues from mining
activities.
EFFECTS OF DEFERRAL OF EXCHANGE-RATE VARIATION
CVM (Brazilian Securities Exchange Commission) Ruling No. 294/99 permits the deferment, to be amortized over a
maximum four years, of the negative net result caused by exchange-rate variation adjustments on the balances of obligations
and credits occurring in the quarter ended 03/31/99. The amortization of this deferral will be complemented based on the
future settlement of the liabilities in foreign currency.
At 03/31/99 CVRD (Parent Company) presented a positive net result derived from exchange-rate variation adjustments and
therefore there was no deferral.
However, some of the Company’s subsidiaries and jointly controlled companies, mainly in the aluminum and pulp and
paper areas, presented negative net results and made deferrals, which are reflected in the equity adjustments.
CAPITAL EXPENDITURES
The Company’s capital expenditure in the first semester of 1999 was R$ 201,867, representing 23.5% of the budget
approved for 1999. This amount is 15.8% lower than the previous year, which totaled R$ 239,935.
GROSS MARGIN
The improvement of the gross margin from 46.6% to 52.7% was due to an increase of 18.7% in operating revenue (from
R$ 1,703,278 to R$ 2,022,382), while the cost of products and services grew 5.7% (from R$ 882,003 to R$ 932,071).
The devaluation of the Real against the US Dollar had a positive influence on the Company’s revenues from products and
services. On the other hand, the fall in prices had a negative impact on gross margin, as did the decrease in iron ore and
pellet, gold and potash sales and transportation and port services for the first semester.
The increase in cost of products and services is due in great part to higher spending on acquisition of pellets, due to the
devaluation of the real against the dollar.
3
QUANTITIES SOLD IN THE FIRST SEMESTER OF 1999 COMPARED WITH THOSE OF THE FIRST
SEMESTER OF 1998 (IN THOUSANDS OF METRIC TONS EXCEPT FOR GOLD)
Southern Northern
System
System
External market
Iron ore
Pellets
1999
1998
Total
Total
%
8,771
6,553
15,324
19,776
19,776
28,547
6,553
35,100
32,501
7,512
40,013
(12.2)
(12.8)
(12.3)
4,407
3,827
646
8,880
902
902
5,309
3,827
646
9,782
7,532
4,400
370
12,302
(29.5)
(13.0)
74.6
(20.5)
17,005
7,199
24,204
20,678
20,678
37,683
7,199
44,882
44,433
7,882
52,315
(15.2)
(8.7)
(14.2)
Railroad transportation
27,772
2,000
29,772
33,520
(11.2)
Port services
18,246
791
19,037
22,031
(13.6)
7,389
8,069
(8.4)
Manganese
416
372
11.8
Potash
238
262
(9.2)
Internal market
Iron ore sold to steel companies
Iron ore sold to pelletizing affiliates
Pellets
Total
Iron ore
Pellets
Gold (kg)
4
The gross revenue was composed of the following, per product:
06/30/99
06/30/98
%
Iron ore
989,796
820,426
20.6
Pellets
410,342
344,298
19.2
Gold
116,302
88,599
31.3
Railroad and port services
405,753
372,377
9.0
Other products and services
100,189
77,578
29.1
2,022,382
1,703,278
18.7
06/30/99
06/30/98
Railroad and port
services
20%
Iron ore
49%
Railroad and port
services
22%
Iron ore
48%
Gold
6%
Pellets
20%
Gold
5%
Others
5%
Pellets
20%
R$ 2,022,382
The cost of products and services was composed of the following:
R$1,703,278
Personnel
Material
Outsourced services
Acquisition of products and tolling
Depreciation and depletion
Others
06/30/99
Others
5%
Others
5%
06/30/99
06/30/98
%
209,292
203,221
163,317
183,735
122,809
49,697
206,503
201,618
164,831
140,170
119,247
49,634
1.4
0.8
(0.9)
31.1
3.0
0.1
932,071
882,003
5.7
06/30/98
Personnel
22%
Others
5%
Depreciation
13%
Personnel
23%
Depreciation
14%
Outsourced
services
18%
Outsourced
services
19%
Acquisition of
products and
tolling
20%
Acquisition of
products and
tolling
16%
Material
22%
R$ 932,071
R$ 882,003
5
Material
23%
GAIN (LOSS) ON INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
The result of investments accounted for by the equity method in the period varied from a gain of R$ 78,571 in 1998 to
R$ 142,621 in 1999, mainly due to the exchange rate gain on investments abroad. It should be pointed out that the balance
of exchange rate variation deferred by affiliated companies at 06/30/99 was R$ 474,000.
Business Area
06/30/99
06/30/98
167,790
51,357
Ferrous
. Iron Ore and Pellets
. Manganese and Ferro-Alloys
955
Non-Ferrous
(6,207)
(12,438)
(5,616)
54,884
8,753
26,015
44,722
. Pulp and Paper
(27,901)
(15,920)
. Aluminum
(68,478)
(806)
. Fertilizers
1,794
2,288
142,621
78,571
Logistics
Shareholding interests
. Steel
The figures broken down by area do not necessarily represent the individual results by company, but rather the amounts
applicable to the business area. The individual results, therefore, are segregated by activity, and possible effects that can be
compensated among the companies have not been considered.
FERROUS
IRON ORE AND PELLETS

NIBRASCO – An equity result R$ 3,742 lower, due to the provision of R$ 3,000 for PIS.

HISPANOBRÁS – An equity result R$ 2,925 higher, in function of the effects of exchange rate variation on assets
indexed in US dollars. In operational terms there was a gross increase in US dollar sales, reduced in part by a 8.2% lower
sales volume (1,744 thousand tons in 1999 against 1,900 thousand tons in 1998).

ITABRASCO – An improved equity result of R$ 5,479 due to the exchange rate effects on assets
indexed in US dollars. In operational terms, the gross profit rose due to sales in dollars, offset in part by a 2.8% fall in
sales volume (1,550 thousand tons in 1999 versus 1,594 thousand tons in 1998).

RDIF – Improved equity result of R$ 117,197 due to exchange rate variation.
MANGANESE AND FERRO-ALLOYS

SEAS – Better equity result of R$ 2,938 due to exchange rate variation, partially offset by a fall in the gross
income.

URUCUM – A R$ 1,881 lower equity result due basically to the provision of R$ 3,000 for PIS and COFINS on
mineral sales.
NON-FERROUS

PARÁ PIGMENTOS – A R$ 5,572 lower equity result due to amortization in the first semester of 1999 of
deferred exchange rate effects that occurred with the devaluation of the real against the US dollar, offset in part by a
45.3% increase in sales volume (93 thousand tons in 1999 against 64 thousand tons in 1998).
6
LOGISTICS

DOCENAVE – A better equity result of R$ 64,800 in function of the exchange rate variation on assets
indexed in US dollars, reduced partly by a 26.2% decrease in average freight rates (US$ 5.22 per ton in 1999 against US$
7.07 per ton in 1998) and by appropriations in 1999 of expenses for ship drydocking in the amount of US$ 7,984.

FCA – A reduction of R$ 4,118 in the equity result due to the effects of exchange rate variation on the company’s
debt, because it did not defer any exchange rate losses.

CFN – A negative equity result of R$ 6,741 was recorded in 1999. In 1998 this was recorded only starting in July.

FERROBAN – A negative equity result of R$ 8.814 was recorded in 1999. In 1998 the company was
in the pre-operating phase.
SHAREHOLDING INTERESTS
STEEL MAKING



USIMINAS – Recorded an equity result of R$ 23,140 in 1999. This result was due to higher prices as well as to
the recording of tax credits derived from its incorporation by COSIPA. Up to June 1998 the company’s results were
recorded by the cost method.
CSI – Improved equity result of R$ 82,093, due to exchange rate variation.
CST – A R$ 104,210 reduction in equity result due to the effects of exchange rate variation on its debt, as the
company did not defer exchange rate losses, and because of a 39% fall in the sales price for steel slabs to the foreign
market, offset partially by an increase in volume sold of 29.4% (1.7 million tons in 1998 against 2.2 million in 1999).
. CSN – A R$ 10,031 reduction in the equity result du to the effects of exchange rate variation on the company’s debt.
PULP AND PAPER

BAHIA SUL – Lower equity result of R$ 4,054 due to exchange rate variation recorded in the semester. Although
the company decided on deferment, the effect of this result was still substantially above that in the same semester of 1998.
This negative impact was partly offset by a 26.8% increase in sales volume (293 thousand tons in 1999 against 231
thousand tons in 1998) and by a 27% increase in the average unit price in reais.

CENIBRA – A R$ 4,961 reduction in the equity result due to exchange rate variation recorded in the semester.
Although the company decided on deferment, the effect of this result was still substantially above that in the same
semester of 1998. This effect was partly offset by an 11.9% higher sales volume (404 thousand tons in 1999 against 361
thousand tons in 1998) and by the exchange rate gain on export sales, despite a 4.3% fall in the average unit sales
price in US dollars (US$ 378.58 in 1999 versus US$ 395.63 in 1998).
ALUMINUM

ALBRAS – Reduction of R$ 27,757 in the equity result. Despite higher sales volume of 6.7% (176,699 tons in
1999 against 165,653 tons in 1998) and 36.3% higher net sales income (R$ 362,627 in 1999 against R$ 265,984 in 1998)
due to the effects of exchange rate variation on revenue, these were completely offset by exchange rate effects on the
company’s debt, which was only partially reduced by the decision to defer exchange rate variations in the amount of
R$ 228,894.

ALUNORTE – A R$ 40,760 decrease in the equity result, principally because of the effects of exchange rate
variation on the company’s debt, which was partly reduced by the decision to defer exchange rate effects in the
amount of R$ 199,941. In operational terms, sales volume rose 17.8% (744,273 tons in 1999 against 631,985 tons in
1998) and the growth in revenues of 47.5% (R$ 212,386 in 1999 versus R$ 144,039 in 1998) due to exchange rate
variation. Additionally, the change in shareholding from 53.61% in 1998 to 65.82% in 1999 represented a growth in the
negative equity result of R$ 10,093.

MRN – An increase of R$ 7,234 in the equity result, due to a 24.4% rise in the sales volume (5,197 thousand tons
in 1999 against 4,179 thousand tons in 1998) and the effect of exchange rate variation on revenues, partly reduced by a
fall in the average unit sales price of 14.4% (US$ 20.98 per ton in 1999 against US$ 24.50 per ton in 1998).
7

VALESUL – A reduction of R$ 2,856 in the equity result due the constitution an July 1999 of an extraordinary
contingency provision regarding INSS (Social Security) payments of R$ 3,500 and destination of cathodic residue of R$
2,250.

ALUVALE – A reduction of R$ 7,325 in the equity result (own operations) because of the exchange rate effects on
liabilities indexed in the US dollar, partially offset by a 34.2% increase in unit sales prices in reais (R$ 2,669.35 per ton in
1999 against R$ 1,989.07 per ton in 1998) and by a 9.1% increase in sales volume (24 thousand tons in 1999 versus 22
thousand tons in 1998).

ITACO – A reduction of R$ 5,876 in equity result mainly due to an increase in financial expenses in the semester.
OPERATING EXPENSES (INCOME)
The net operating expenses increased R$ 307,524 (R$ 550,298 in 1999 against R$ 242,774 in 1998), due to the reduction in
net financial result in R$ 327,485 (a gain of R$ 33,567 in 1998 against a loss of R$ 293,918 in 1999), mainly due to
exchange-rate variation accounted for on the net debt of the Company.
CASH FLOW
Generation of cash flow totaled R$ 1,229,739 in the first semester of 1999, or 62.4% of the net sales revenue, against R$
724,523 during the same period in 1998 (43.9% of net sales revenue).
We point out that this cash flow generation included an extraordinary gain of R$ 358,149 from exchange rate hedge
operations in the first quarter of 1999.
INCOME TAX AND SOCIAL CONTRIBUTION
Income tax and social contribution decreased R$ 57,712. It is worth mentioning the constitution of R$ 157,674 on 06/30/99
(R$ 95,587 on 06/30/98) relative to the income tax and social contribution benefit from paying interest on stockholders’
equity (see Note 8).
EXCHANGE RATE EXPOSURE
On 12/31/98 the Company had a negative net balance of R$ 163,000 linked to the US dollar. With the settlement of a
significant part of the exchange rate hedge operations, CVRD had as of 06/30/99 an amount of R$ 1,174,000 exposed in US
dollars (see Note 22).
8
quadrosi.xls (BALANCE)
9
quadrosI.xls (RESULT)
10
quadrosI.xls (EQUITY)
11
quadrosi.xls (CASH FLOW)
12
(A free translation of the original notes in Portuguese to
the financial statements prepared in accordance with the
requirements of Brazilian Corporate Law)
COMPANHIA VALE DO RIO DOCE
NOTES TO THE FINANCIAL STATEMENTS
AT JUNE 30, 1999
(expressed in thousand of Reais)
(1)
OPERATIONS
Companhia Vale do Rio Doce - CVRD is a publicly traded corporation whose predominant activities are mining, processing
and sale of iron ore, pellets, gold, manganese and potash, as well as port and railroad transportation services. In addition,
through its direct, and indirect subsidiaries and jointly controlled companies, CVRD operates in transoceanic and coastal
shipping, forestation, geological studies and technological research services, steelmaking, and the production of aluminum
and pulp and paper products.
(2)
PRESENTATION OF FINANCIAL STATEMENTS
The financial statements have been prepared according to the accounting principles provided for in Brazilian corporate
legislation as well as the rules and guidelines issued by the Comissão de Valores Mobiliários - CVM (Brazilian Securities
Commission) and the Instituto Brasileiro de Contadores - IBRACON (Brazilian Accounting Institute).
In order to provide better information to the market, the Company is also presenting Statements of Cash Flows, which appear
on page 12 as additional information.
(3)
SIGNIFICANT ACCOUNTING POLICIES
a) The accrual basis of accounting is adopted by the Company;
b) Assets and liabilities that are realizable or due more than twelve months after the quarterly balance sheet date are
classified as long-term;
c) Marketable securities are stated at cost plus accrued income earned through the quarterly balance sheet date;
d) Inventories are stated at average purchase or production cost, and imports in transit at the accumulated cost of each
item, not exceeding market or net realizable value;
e) Assets and liabilities in foreign currencies are shown at exchange rates in effect at the quarterly balance sheet date.
Those in local currency are restated based on contractual indexes;
f) Investments in subsidiaries, jointly controlled companies and affiliated companies are accounted for by the equity
method, based on the stockholders' equity in the investees. Other investments are recorded at cost, less provision for
unrealized losses when applicable, and
g) Property, plant and equipment (including interest incurred during the construction period of large-scale projects) are
depreciated on the straight-line basis, at rates that take into consideration the useful lives of the assets. Depletion of
mineral reserves is computed on the unit-of-production method.
13
(4)
CASH AND CASH EQUIVALENTS
Cas h and banks
G old inves tm ents (*)
F ixed and variable rate inves tm ents (*)
F ixed rate inves tm ents (fund)
O thers
(*)
(5)
06/30/99
03/31/99
5,695
31,122
1,379,331
231,347
151,850
1,799,345
3,925
209
1,213,735
121,290
137,412
1,476,571
For these investments the Company, in order to obtain more profitability, contracted swap operations with these
financial institutions, mainly related to exchange rate and currency variations.
ACCOUNTS RECEIVABLE FROM CUSTOMERS
The accounts receivable of the Company are composed as follows:
Customers
Domestic
Export
Allowance for doubtful accounts
Allowance for ore weight credits
(6)
06/30/99
03/31/99
234,116
680,398
914,514
230,529
595,245
825,774
(11,901)
(10,220)
892,393
(7,576)
(10,695)
807,503
TRANSACTIONS WITH RELATED PARTIES
Derived from sales and purchases of products and services or from loans, with maturities up to the year 2011, as follows:
06/30/99
Vale do Rio Doce Navegação S.A. - DOCENAVE
Vale do Rio Doce Alumínio S.A. - ALUVALE
Fundação Vale do Rio Doce de Seguridade Social - VALIA
ALUNORTE - Alumina do Norte do Brasil S.A.
Bahia Sul Celulose S.A.
Companhia Hispano-Brasileira de Pelotização - HISPANOBRÁS
Fundação Vale do Rio Doce de Habitação e Desenvolvimento Social - FVRD
Companhia Ítalo-Brasileira de Pelotização - ITABRASCO
Companhia Nipo-Brasileira de Pelotização - NIBRASCO
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
Celulose Nipo-Brasileira S.A. - CENIBRA
Rio Doce International Finance Ltd
Salobo Metais S.A.
Itabira Rio Doce Company Limited
ALBRAS - Alumínio Brasileiro S.A.
CELMAR S.A. - Indústria de Celulose e Papel
Pará Pigmentos S.A.
Others
Represented by:
Commercial balances (accounts receivable from customers
and due to suppliers) (*)
Short-term financial balances
Long-term financial balances
(*)
Assets
Liabilities
Assets
Liabilities
375
38,853
293
775,285
30,646
10,281
75,527
33,676
13,908
20,755
293,732
271,931
121,892
485,523
363
15,741
35,097
144,953
10,021
29,950
3,585
255
82
35,499
37,224
49,092
35,126
24,737
3
734,557
2
6,984
25,240
5,748
86,723
400
37,198
174
760,346
28,908
11,813
75,583
26,032
7,721
18,613
281,968
254,609
119,585
390,574
36,163
14,853
31,147
127,663
6,718
27,935
8,657
28
82
45,359
33,335
68,655
30,198
16,872
3
866,523
2
6,733
30,322
100,092
2,368,831
1,084,828
2,223,350
1,241,514
624,453
531,758
1,212,620
57,254
527,076
500,498
502,165
560,434
1,160,751
85,525
516,916
639,073
2,368,831
1,084,828
2,223,350
1,241,514
Included in “Accounts receivable from customers” and “Payable to suppliers and contractors.”
14
03/31/99
(7)
INVENTORIES
Finished products
. Iron ore and pellets
. Manganese
. Gold
. Others
Spare parts and maintenance supplies
(8)
06/30/99
03/31/99
112,215
20,776
18,099
5,152
156,242
148,154
113,226
23,148
18,747
954
156,075
139,556
304,396
295,631
DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION
Income of the Company is subject to the normal tax system. The balances of deferred assets and liabilities are presented as
follows:
Deferred assets
Deferred liabilities
06/30/99
03/31/99
06/30/99
03/31/99
-
38,980
-
-
80,639
86,616
157,674
-
32,155
83,867
68,849
11,539
74,636
-
4,113
15,497
45,350
26,637
3,972
15,904
45,756
25,708
324,929
310,026
91,597
91,340
33,311
44,842
-
-
Total
358,240
354,868
91,597
91,340
Current (*)
Long-term
288,891
69,349
358,240
283,581
71,287
354,868
91,597
91,597
91,340
91,340
Tax loss carryforwards
Temporary differences:
. Depreciation and residual value of Law 8,200 adjustments
. Labor provisions
. Non-deductible provisions
Income tax
Interest on stockholders' equity
Monetary variation
Inflationary profit
Revaluation reserves
Long-term sales
Withholding tax/social contribution to recover
(*)
Recorded as “Recoverable taxes” under current assets, which also includes R$ 97,712 (R$ 70,152 in 03/31/99) mainly
related to ICMS (VAT) and PIS (Social Integration Program)
In addition to the credits recorded, the Company has a lawsuit pending claiming elimination of the 51.83% monetary
restatement for tax purposes applied to the months of January and February 1989 (“Plano Verão” monetary plan). It has already
obtained an injunction for compensation of credits corresponding to the elimination of 42.72% instead of the 51.83% requested.
The amount of these credits covered by the injunction total approximately R$ 424,000, and the accounting effects have not yet
been recognized on the balance sheet.
15
The amounts reported as income tax and social contribution which affected income for the year are reconciled to the statutory
rates as follows:
06/30/99
Income before income tax and social contribution
(-) Equity in results of subsidiaries and affiliated companies
Income tax and social contribution at combined tax rates
633,371
(142,621)
490,750
605,459
(78,571)
526,888
33.00%
33.00%
(161,948)
(173,873)
(7,747)
-
(169,695)
(173,873)
157,674
(6,423)
(6,148)
(24,592)
95,587
(1,198)
(2,820)
(82,304)
Social contribution from May to December at statutory rate of 4%
Federal income tax and social contribution at statutory rates
Adjustements to net income which modify the result for the period:
. Income tax benefit from interest on stockholders' equity
. Income tax from interest on stockholders' equity received
. Others
Income tax and social contribution
(9)
06/30/98
STATEMENT OF INVESTMENTS IN SUBSIDIARIES, JOINTLY CONTROLLED AND AFFILIATED
COMPANIES AND OTHER INVESTMENTS
Participation
%
Stockholders'
equity adjusted
Equity
adjustments
Net income
(loss) for the
year adjusted
06/30/99
03/31/99
06/30/99
06/30/98
(9,974)
Investments
Subsidiaries
Vale do Rio Doce Alumínio S.A. - ALUVALE (c, d, k, j)
100.00
689,249
(71,837)
689,249
767,605
(71,838)
Vale do Rio Doce Navegação S.A. - DOCENAVE (c, j)
96.84
415,641
(1,107)
402,507
-
(1,071)
-
DOCEPAR S.A. (c, d, f, g, l)
96.84
593,226
68,073
574,480
1,082,446
65,922
21,689
Florestas Rio Doce S.A. (c)
99.85
156,737
(1,437)
156,502
155,794
(1,435)
(477)
Rio Doce International Finance Limited - RDIF (a, c)
99.80
454,580
152,758
453,671
424,004
152,452
35,255
Itabira Rio Doce Company Limited - ITACO (a, c)
99.99
325,700
104,729
325,667
270,996
104,719
27,089
Pará Pigmentos S.A. (c, d, i)
72.00
(3,916)
(27,734)
12,341
2,260
(11,648)
(6,076)
98,706
104,932
(7,601)
2,713,123
2,808,037
Others
229,500
(282)
67,224
Jointly controlled companies
Minas da Serra Geral S.A. - MSG (b, c)
51.00
48,028
(5,777)
24,495
32,828
(2,946)
1,600
Companhia Siderúrgica de Tubarão - CST (b, c, d, f, g)
22.85
3,732,699
(386,119)
704,225
712,651
(88,228)
15,982
Celulose Nipo-Brasileira S.A. - CENIBRA (b, c)
51.48
481,320
(13,848)
247,784
249,972
(7,130)
(2,169)
Bahia Sul Celulose S.A. (b, c, e, f)
29.33
1,142,511
(63,941)
306,102
310,824
(17,319)
(13,265)
Cia. Nipo-Brasileira de Pelotização - NIBRASCO (b, c)
51.00
132,173
5,583
67,408
69,437
2,847
6,589
Cia. Hispano-Brasileira de Pelotização - HISPANOBRÁS (b, c, j)
50.89
78,516
13,356
39,957
41,806
6,796
3,871
Cia. Ítalo-Brasileira de Pelotização - ITABRASCO (b, c)
50.90
67,976
16,014
34,600
36,068
8,152
2,673
Vale Usiminas Participações S.A. (b, c)
50.00
-
-
-
-
-
(4,166)
Others
85,768
88,453
(5,171)
1,510,339
1,542,039
(102,999)
(2,056)
9,059
Affiliated companies
Fertilizantes Fosfatados S.A. - FOSFERTIL (c, f)
10.96
420,718
16,362
46,111
43,639
1,794
2,288
Usinas Siderúrgicas de Minas Gerais S.A. - USIMINAS (c, d, f, h)
11.46
3,745,495
201,920
508,211
511,630
23,140
-
38,447
35,472
(8,814)
592,769
590,741
16,120
2,288
7,053
6,777
-
-
4,823,284
4,947,594
142,621
78,571
Others
Investments at cost
16
-
Notes:
(a)
Equity in companies located abroad is converted into local currency at rates in effect on the quarterly balance sheet date.
The calculation of the equity method adjustment comprises the difference due to exchange rate changes, as well as
participation in income;
(b)
Notwithstanding the stockholdings, the classification as a jointly controlled company results from the degree of control
exercised by the Company, which is shared with the other partners;
(c)
Companies whose quarterly financial statements were not examined by independent accountants;
(d)
The amounts of the investments in CST, Bahia Sul and in CSN and AÇOMINAS indirect by through DOCEPAR are net
of discounts of R$ 148,697, R$ 28,996, R$ 84,492 and R$ 11,928, respectively and the investments in USIMINAS,
VALESUL and ALUNORTE (indirect by through ALUVALE) and Pará Pigmentos include premiums of
R$ 78,977, R$ 4,201 and R$ 21,305 and R$ 15,161, respectively;
(e)
The consolidated participation represents 32.02% (Florestas Rio Doce S.A. owns 2.69% of the capital);
(f)
CST, FOSFERTIL, CSN (holding by DOCEPAR), USIMINAS and BAHIA SUL (preferred shares in the latter) are
listed on Brazilian stock exchanges. At 06/30/99 the market values of the Company's investments were R$ 391,447,
R$ 225,452, R$ 342,734, R$ 102,985 and R$ 64,237, respectively, although this does not necessarily reflect the
realizable value of a representative lot of shares. The other investments in subsidiaries, jointly controlled companies and
affiliated companies refer to companies that have no shares traded on stock exchanges;
(g)
During the semester the amounts of R$ 195,472 and R$ 228,021 were recorded in investments, referring to the
revaluation reserve for, respectively, CSN and CST;
(h)
On 06/30/98 the Company signed a “term for closing and settlement of the contract for purchase and sale of
debentures” with the Fundação Vale do Rio Doce de Seguridade Social - VALIA, by which it settled the credit it had
with VALIA in the amount of R$ 197,141 through receipt of 8,547,004 common shares of Usinas Siderúrgicas de
Minas Gerais S.A. - USIMINAS. As a consequence of this operation, the Company increased its interest in the
voting capital and the total capital of USIMINAS from, respectively, 15.48% and 7.74% to 23.14% and 11.57%,
with the investment being accounted for by the equity method as of 07/01/98;
(i)
In June 1999, CVRD purchased the 36% holding of CADAM - Caulim da Amazônia S.A. in Pará Pigmentos S.A.,
for an amount equivalent to US$ 25 million.
(j)
The equity result includes, besides participation in the results, effects recorded directly against the stockholders’
equity of the company.
(k)
Indirect holdings through ALUVALE:
Participation
%
Stockholders'
equity adjusted
Equity
adjustments
Net income
(loss) for the
year adjusted
06/30/99
03/31/99
06/30/99
06/30/98
(11,875)
Investments
ALBRAS - Alumínio Brasileiro S.A.
51.00
261,013
(77,710)
133,116
155,830
(39,632)
Mineração Rio do Norte S.A. - MRN (j)
40.00
613,552
38,827
245,421
247,369
15,531
8,297
ALUNORTE - Alumina do Norte do Brasil S.A. (d)
65.82
304,514
(67,972)
221,737
131,820
(44,739)
(13,647)
Valesul Alumínio S.A. (d)
54.51
158,823
6,850
90,775
89,470
3,734
6,590
Vale do Rio Doce Energia S.A.
10.00
20
(680)
2
-
(68)
-
(1,802)
143,116
(6,664)
661
767,605
(71,838)
(9,974)
Own operations
689,249
17
(l)
Indirect holdings through DOCEPAR:
Participation
%
Net income
(loss) for the
year adjusted
Stockholders'
equity adjusted
Equity
adjustments
Investments
06/30/99
03/31/99
06/30/99
06/30/98
22,791
Companhia Siderúrgica Nacional (d, f, g)
10.33
6,538,584
127,554
526,946
618,348
12,760
Aço Minas Gerais S.A. - AÇOMINAS (d)
3.16
1,768,904
(254,269)
42,203
53,312
(7,781)
(2,179)
Navedoce Serviços e Empreendimentos Lda.
100.00
-
-
-
272,508
69,716
22,660
Navegação Vale do Rio Doce S.A. - DOCENAVE
100.00
-
-
Own operations
-
131,071
5,999
(8)
5,331
7,207
(14,772)
(21,575)
574,480
1,082,446
65,922
21,689
From 01/01/99 DOCENAVE was restructured, transferring its operational assets directly related with its shipping
activities to its subsidiary Navegação Vale do Rio Doce S.A., becoming a holding company for the DOCENAVE group.
The company changed its name to DOCEPAR S.A. and the company name from Navegação Vale do Rio Doce S.A. to
Navegação Vale do Rio Doce S.A. – DOCENAVE.
At the Extraordinary Stockholders’ General Meeting held on 04/29/99, it was proposed and approved by the
stockholders of DOCEPAR S.A. dividend payment by ceding shares from DOCENAVE and, therefore, DOCEPAR
S.A. and DOCENAVE are direct controlled by CVRD.
(10)
(a)
PROPERTY, PLANT AND EQUIPMENT
By business area:
06/30/99
03/31/99
Cost
Accumulated
depreciation
Net
Cost
Accumulated
depreciation
Net
1,409,109
2,552,454
453,124
(646,750)
(860,673)
(212,525)
762,359
1,691,781
240,599
1,405,279
2,542,659
453,113
(634,469)
(852,788)
(209,440)
770,810
1,689,871
243,673
4,414,687
(1,719,948)
2,694,739
4,401,051
(1,696,697)
2,704,354
1,944,243
3,239,527
919,849
(1,188,922)
(2,032,939)
(589,260)
755,321
1,206,588
330,589
1,941,083
3,239,398
913,443
(1,180,317)
(2,025,584)
(585,594)
760,766
1,213,814
327,849
6,103,619
(3,811,121)
2,292,498
6,093,924
(3,791,495)
2,302,429
494,942
(398,813)
96,129
494,949
(397,568)
97,381
73,970
45,482
592,068
(18,185)
(28,374)
(236,709)
55,785
17,108
355,359
71,542
37,782
582,071
(16,998)
(23,663)
(225,728)
54,544
14,119
356,343
711,520
(283,268)
428,252
691,395
(266,389)
425,006
Energy
99,680
(1,329)
98,351
72,714
(606)
72,108
Corporate
56,909
(27,802)
29,107
65,146
(33,759)
31,387
11,881,357
(6,242,281)
5,639,076
11,819,179
(6,186,514)
5,632,665
521,417
523,664
6,160,493
12,342,843
Ferrous - Southern System
Mining
Railroads
Marine terminals
Ferrous - Northern System
Mining
Railroads
Marine terminals
Pelletizing
Non-Ferrous
Potash
Research and projects
Gold
Total in operation
Construction in progress
Total
521,417
12,402,774
(6,242,281)
18
(6,186,514)
523,664
6,156,329
(b)
By classification of asset:
06/30/99
Cos t
Land and buildings
Ins tallations / operational s ys tems
Equipment
Railroads
M ineral rights
Others
Total cos t
Cons truction in progres s
Total
Accumulated
depreciation
Net
03/31/99
Cos t
Accumulated
depreciation
Net
1,641,863
3,615,331
681,712
4,554,425
380,057
1,007,969
(588,363)
(2,288,035)
(405,628)
(2,440,863)
(98,696)
(420,696)
1,053,500
1,327,296
276,084
2,113,562
281,361
587,273
1,640,290
3,575,569
674,024
4,544,672
380,058
1,004,566
(581,106)
(2,268,128)
(401,697)
(2,430,400)
(94,649)
(410,534)
1,059,184
1,307,441
272,327
2,114,272
285,409
594,032
11,881,357
(6,242,281)
5,639,076
11,819,179
(6,186,514)
5,632,665
521,417
523,664
6,160,493
12,342,843
521,417
12,402,774
(6,242,281)
(6,186,514)
523,664
6,156,329
Depreciation, amortization and depletion of property, plant and equipment and deferred assets have been allocated to cost of
production and services and to administrative expenses as follows:
06/30/99
06/30/98
Cost of production and services
Administrative expenses
(11)
125,480
6,132
123,840
5,756
131,612
129,596
LOCAL AND FOREIGN LOANS AND FINANCING
Current Liabilities
FO REIGN O PERATIO NS
S hort-te rm de bt
Long-te rm de bt:
Loans and financing contracted in the following currencies,
maturing up to 2011:
U.S. dollars
Jap anese y en
Gold
Fixed-rate notes in U.S. dollars
Accrued charges
06/30/99
03/31/99
448,282
Long -Term Liabilities
06/30/99
03/31/99
386,092
-
-
435,012
16,070
6,050
47,227
504,359
402,336
15,934
12,615
39,095
469,980
1,056,866
7,925
884,750
1,949,541
1,060,211
7,858
861,000
1,929,069
723,600
708,900
-
-
3,181
-
2,800
857
102
17,870
5,506
-
18,583
5,443
-
3,181
3,759
23,376
24,026
1,679,422
1,568,731
1,972,917
1,953,095
LO CAL O PERATIO NS
S hort-te rm de bt
Long-te rm de bt:
Indexed by T JLP and IGP-M
Exp ort financing in U.S. dollars
Non-convertible bearer debentures
Accrued charges
Total
19
Notes:
(a)
Foreign currency loans and financing are recorded in local currency at the exchange rates in effect at the quarterly
balance sheet dates as follows:
06/30/99
03/30/99
US$
Iene
1.00 =
1.00 =
R$
R$
1.769500
0.014613
1.00 =
1.00 =
R$
R$
1.722000
0.014490
(b)
Of the total loans and financing, R$ 683,728 have federal government guarantees and R$ 114,356 have third-party
guarantees, all with full counter-guarantees.
(c)
The foreign and local long-term debt at 06/30/99 falls due in the following years:
Amount
2000
2001
2002
(d)
Amount
284,207
124,290
134,580
2003
2004
2005 onward
485,983
652,403
291,454
The local and foreign loans and financing of long-term debt are subject to annual interest rates, at 06/30/99, as follows:
Up to 7%
7.1 to 9%
9.1 to 11%
1,109,435
303,906
1,067,116
2,480,457
(e)
Based on borrowing rates currently available to the Company for bank loans with similar terms and average maturities,
the market value of long-term debt at 06/30/99 approximates fair market value;
(f)
Parent Company loans and financing, broken down by currencies/index:
06/30/99
Real
1%
03/31/99
Real
1%
Yen
1%
Dollar
98%
Yen
1%
Dollar
98%
20
(12)
CONTINGENT LIABILITIES
The contingent liabilities of the Company at the quarterly balance sheet date were:
(a)
Provisions for contingencies and respective judicial deposits presented in long-term liabilities, considered by
management as sufficient to cover contingent losses, were as follows:
06/30/99
Judicial
deposits(*)
Provisions for
contingencies
03/31/99
Judicial
deposits(*)
Provisions for
contingencies
Tax contingencies
Labor and civil claims
21,223
109,609
153,080 (**)
91,806
19,345
110,457
55,711
89,976
Total
130,832
244,886
129,802
145,687
44,482
-
46,067
-
86,350
244,886
83,735
145,687
130,832
244,886
129,802
145,687
Current
Long-term
(*)
Recorded as "Others" under current assets and "Guarantees and deposits" under long-term assets.
(**) The growth arises basically from income tax and social contribution for 1999 not paid due to an injunction obtained
relative to the elimination of monetary restatement for tax purposes applied to January and February 1989 ("Plano
Verão" monetary plan).
(b)
Guarantees given to subsidiary and jointly controlled companies (normally in proportion to the Company’s
percentage of participation) are as follows:
06/30/99
03/31/99
ALBRAS - Alumínio Brasileiro S.A.
657,133
647,876
DOCEPAR S.A.
125,228
138,783
Bahia Sul Celulose S.A.
266,703
242,661
ALUNORTE - Alumina do Norte do Brasil S.A.
210,442
209,840
Salobo Metais S.A.
104,460
103,919
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
127,096
126,100
CELMAR S.A. - Indústria de Celulose e Papel
Vale Usiminas Participações S.A.- VUPSA
Seamar Shipping Corporation
Pará Pigmentos S.A.
Others
85,165
90,480
155,632
84,330
81,126
80,311
131,344
79,625
76,657
84,827
2,020,986
1,888,752
06/30/99
03/31/99
1,525,567
487,538
7,881
2,020,986
1,371,934
502,290
14,528
1,888,752
The breakdown of guarantees by currency is:
U.S. Dollar
Real
French Franc
(c)
The Company has a total of R$ 73,565 pledged as guarantees in court proceedings.
21
(13)
LABOR PROVISION
This provision is the result of the Company's responsibility to provide supplementary pensions relating to the early retirement
programs of 1987 and 1989. Part of the amount is recorded in current liabilities as “Others”, R$ 34,186 (R$ 35,163 on
03/31/99), and part in long-term liabilities, R$ 209,999 (R$216,000 on 03/31/99). These liabilities were calculated by the
independent actuary for 06/30/99 and 03/31/99, respectively, and represent the current value of the benefit and pensions.
(14)
FINANCIAL INSTRUMENTS - DERIVATIVES
The Company has been actively managing its positions in derivative instruments, so as to avoid eventual cash impacts. In
view of the policies and practices established by the Company for operations with derivatives, management considers the
occurrence of non-measurable risk situations as unlikely. The operations carried out by the Company can be summarized as
follows:
(a)
Gold hedge
In connection with its gold mining activities, the Company has contracted financial operations involving derivatives,
with the objective of managing the risks associated with gold price fluctuations, to provide stable cash flows and
gross margins for the gold business. On 06/30/99, approximately 7 tons (220,606 oz.) were subject to such
operations, as follows:
Type
Gold Loan
Puts
Spot Deferred
Quantity (oz.)
Final maturity
Unrealized gain (loss)
July 1999
-
202,500
December 2004
4,013
5,000
July 1999
186
13,106 (*)
Total
220,606
Calls
938,000
4,199
December 2004
(8,256)
(4,057)
(*)
Recorded as current liabilities under loans and financing - Current liabilities - in the amount of R$ 6,050 (R$12,615
at 03/31/99). (Note 11)
The unrealized loss, in the amount of R$ 4,057 represents the amount payable if all transactions had been settled on
06/30/99.
The Company’s policy has been to settle all contracts through cash payments and/or receipts, without physical
delivery of the gold, except in the case of the Gold Loan.
(b)
Interest hedge (6-month Libor)
Since May 1998 the Company has been carrying out derivative operations seeking to hedge its exposure to the
6-month Libor rate, arising from its trade finance operations.
Type
Value (US$ Million)
Due date
Unrealized gain (loss)
Floor
650
May 2004
(12,939)
1,000
May 2004
12,795
Cap
(144)
The unrealized loss in the amount of R$ 144 represents the amount payable if all transactions had been settled on
06/30/99.
22
(c)
Currency hedge
During 1999 the Parent Company has carried out various “Swap” operations involving currency and the purchase of
bonds with yields in U.S. dollars, with the goal of reducing its exposure to debts indexed in dollars. At 06/30/99
these operations totaled R$ 55,172 (R$ 147,895 at 03/31/99).
(15)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments generally approximates fair market value because of the shortterm maturity or frequent repricing of these instruments.
The market values of investments are indicated in Note 9 (f).
Fair market value estimates are made at a specific point in time, based on relevant market information and information
about the financial instrument. These estimates are subjective in nature and as such cannot be precisely determined.
(16)
PENSION PLAN
The Fundação Vale do Rio Doce de Seguridade Social - VALIA is a nonprofit foundation created in 1973 for the purpose
of supplementing the social security benefits of employees of the Company and certain of its subsidiary and affiliated
companies. As sponsors, during the year these companies contributed a monthly amount equivalent to 17.9% of the payroll
for the employees participating in the plan, which together with the contributions of these employees and other
beneficiaries, provides funds to cover the plan's costs, calculated on an actuarial basis.
The supplementary plan adopted by VALIA, for capitalization of retirements and coverage of pensions, calls for the
formation of actuarial reserves corresponding to the present value of the benefits granted and to be granted for rights
acquired by its participants, in such a way that the Foundation can fulfill these obligations without using other resources.
Based on the calculations of its independent actuary, VALIA showed a technical deficit at 06/30/99 of approximately
R$ 94,192 (at 06/30/98 there was a technical deficit of R$ 42,599). This deficit arose from the increase in the value of the
Mathematical Reserve for Benefits Conceded.
It should be pointed out that VALIA has constituted a contingency provision in the amount of R$ 125,420 in response to the
Writ of Mandamus currently before the Federal Supreme Court challenging the constitutionality of the incidence of income
tax on receipt of dividends, interest and other capital gains. In case the decision is favorable, the referred provision would
be considered unnecessary and its reversal would result in a surplus of R$ 31,220.
In case the effects of Constitutional Amendment No. 20 (reformulating the Social Security rules as they apply to VALIA)
and of Provisional Measure No. 824 (which determines the readjustment factor for benefits granted under Social Security)
were considered, the mathematical reserve of benefits to pay would be reduced by about R$ 70,000, implying in turn an
equal reduction in the technical deficit.
Additionally, as registered in the CVRD Privatization Tender, divulged through a “Fato Relevante” (Relevant
Announcement) in the Diário Oficial da União (Official Gazette) of 04/11/97, the Company recognized its responsibility to
assume the necessary expense of reconstituting the mathematical reserves of VALIA in the amount of R$ 265,658, with
a value basis of July 1995, sustaining such possible deficits on prior balance sheets up to a limit of this amount.
(17)
ENVIRONMENTAL AND SITE RECLAMATION AND RESTORATION COSTS
Expenditures relating to ongoing compliance with environmental regulations are charged to production costs or capitalized
as incurred. The Company manages its environmental policies according to the specifications of ISO 14,001 and maintains
ongoing programs to minimize the environmental impact of its mining operations as well as to reduce the costs that will be
incurred upon termination of activities at each mine.
23
(18)
CAPITAL
The Parent Company's capital consists of 388,559,056 shares, of which 249,983,143 are common shares, 138,575,912 preferred
shares, and one special preferred share (“Golden Share”), all with no par value.
Preferred shares have the same rights as common shares, except for the right to elect the members of the Board of Directors.
They have priority to a minimum annual dividend of 6% on the portion of capital represented by this class of share.
The special “Golden Share” belongs to the Brazilian Government. This share gives it the right to a permanent veto of changes
in the Company’s name, headquarters location, nature as a mining enterprise, continuous operation of the integrated iron ore
systems, and other matters determined in the Bylaws.
(19)
TREASURY STOCK
The Board of Directors, under the terms of Item XV of Art. 13 of the Bylaws and based on Art. 30 of Law No. 6,404/76 and
CVM Rules 10, of 02/14/80, and 268, of 11/13/97, authorized the acquisition by the Company of its own preferred Class A
shares, to be held in treasury for subsequent disposal or cancellation.
At the close of the semester there were preferred shares 3,659,220, in treasury, at an average weighted unit acquisition cost
of R$ 20.03, with a minimum cost of R$ 14.02 and maximum of R$ 24.19, both in 1999 and 1998.
The market value of these shares at the close of the first semester of 1999 was R$ 35.03, at the average quoted price on
06/30/99 (R$ 25.26 at the average quoted price on 03/31/99).
(20)
FINANCIAL INCOME AND EXPENSES
The amounts included in the income statement are as follows:
06/30/99
06/30/98
FINANCIAL EXPENSES
Foreign debt
Local debt
Interest capitalization - construction in progress
Subsidiaries, affiliated companies and foundations
Others
Monetary restatement and exchange rate variation on labilities
FINANCIAL INCOME
Subsidiaries, affiliated companies and foundations
Marketable securities
Gold operations
Others
Monetary restatement and exchange rate variation on labilities
FINANCIAL INCOME, NET
(109,606)
(31,081)
7,000
(37,792)
(13,324)
(77,744)
(22,751)
11,440
(29,574)
(7,054)
(184,803)
(125,683)
(1,277,799)
(115,523)
49,328
85,003
3,154
18,245
30,125
145,958
11,164
6,949
155,730
194,196
1,012,954
80,577
(293,918)
24
33,567
(21)
CVRD IN THE YEAR 2000 (UNAUDITED)
CVRD first became aware of the so-called Millennium Bug at the start of the 1990’s, from an exclusive perspective of the
Company’s own information technology, when systems analysts first began to warn of the correct treatment of post-1999
dates.
CVRD’s Year 2000 Project, begun in April 1997, had the initial objective of implementing corporate-wide actions for
complete corrective measures. This project was based on an inventory of all installed systems and a detailed plan for their
conversion.
INVENTORY
2,600 items were inventoried, including:







Information systems;
Industrial automation systems;
Production equipment;
Infrastructure;
Telecommunications;
The Data Center;
Computer networks.
ANALYSIS OF RISK
CVRD has a structure of information and automation systems that integrates all processes along its value chain, from mines
to rail transport, ports and shipment of its products.
All administrative processes, such as supply, accounting, costs, budget, cash flow, accounts payable, accounts receivable,
contracts, human resources, payroll, benefits, taxes, billing and others are supported by systems that are integrated both
within the company and with outside entities such as banks and suppliers.
The possibility that this whole system could become unavailable could cause negative impacts on the productive process,
such as interruption of ore flow, late deliveries, internal or external logistics problems, or on cash flow, such as losing track
of revenues and credits, or even impacts on the Company’s image through incorrect or delayed financial statements, etc.
To give proper priority to enabling the Company’s information systems, including software, hardware and automation
systems, to deal with the Year 2000, a standard for risk analysis was established to map out the areas most critical to the
Company’s operations.
This risk-analysis process classified the systems according to two factors: the impact on business operations and the degree
of preparation to confront the Year 2000 problem. These factors were ranked as of high, medium and low impacts and
allocated to the axes of a matrix (Risk Matrix). The position of a system in a determined cell indicated its degree of risk.
COMMITMENT TO THIRD PARTIES
Third parties fall into two fundamental categories of relationship with the Company, and for each their criteria were
established to examine the potential problem:

Information technology suppliers, or IT aboard ships:
Specific treatment was given to each item in the inventory, analyzing the needs for conversion, upgrade, or the contracting
of products/services for complete harmonization of each component/system.
25

Suppliers of inputs/business partners, such as electric power, water, telecommunications, maritime transport, etc.
Contacts have been maintained (through correspondence and workshops) to collect information on the situation vis-à-vis
their Year 2000 projects, with the objective of assessing the risks and impacts, integrating corrective actions and
maintaining ongoing monitoring, mainly concerning critical monopolies such as of electricity and water.
CONTINGENCY PLANNING
The Company, turning its attentions to third parties (suppliers, customers, business partners), is conducting an analysis of
the guarantees for supply of inputs and services vital for its operations. The result of this analysis will guide the
contingency actions necessary to neutralize possible impacts on its productive process, cash flow and/or image.
The process of contingency planning requires careful assessment of all possible impacts and risks. Due to the nature of
such research (requests for costs and operational difficulties) and due to circumstances (lack of precise and complete
information), this work will have to be carried out gradually during the second semester of 1999, for the potential risks of
the organizations that interface with CVRD vary on a daily basis while these carry forward their corrective actions.
BUDGET
The overall budget for this project is estimated at US$ 4,000, of which US$ 2,500 corresponds to expenditures for
replacement of components and US$ 1,500 to conversion of information systems.
RESULTS
The final result has demonstrated that the Company’s information systems are ready for the Year 2000. Among the MissionCritical items, we can highlight:

The Information Park (Infrastructure and Systems), as described, is already compatible with the Year 2000.

There are some pending items, related to equipment and software to support the productive process. These represent
approximately 1% of the total of critical items inventoried. The solution includes the acquisition of new components
from suppliers that, due to late delivery, have not yet been installed. The estimated deadline in this respect is August
30 ,1999.
The complete report was forwarded to the CVM (Securities Commission) on 07/30/97 and is available on the CVRD
Homepage (http://www.cvrd.com.br).
26
(22)
EXCHANGE RATE EXPOSURE
In the middle of January 1999 the Brazilian Central Bank abandoned its previous policy of maintaining the exchange rate of
the real against the U.S. dollar within defined bands, allowing the real to float freely. As a consequence of this, by 06/30/99
the real had suffered nearly 32% devaluation against the dollar compared with the quotation of 12/31/98 (30% in the first
quarter and 2% in the second).
The table below shows the exchange rate exposure of the Company and its subsidiaries, jointly controlled and affiliated
companies:
06/30/99
A S S ETS
C UR R ENT
Cas h, banks and financ ial inves tm ents
O thers
LO NG-TER M A S S ETS
I NV ES TMENTS
TO TA L
PA R ENT
C O MPA NY
03/31/99
I n m illion s of R e ais
S UBS I D I A R I ES
JO I NTLY
C O NTR O LLED
A ND A FFI LI A TED
C O MPA NI ES (*)
06/30/99
03/31/99
61
1,289
151
1,222
53
431
59
411
1,350
1,373
484
470
903
847
66
75
1,044
3,297
1,016
3,236
33
583
39
584
1,651
412
1,533
444
1,454
176
1,041
175
2,063
1,977
1,630
1,216
1,947
461
2,408
4,471
1,927
601
2,528
4,505
1,853
3
1,856
3,486
1,837
3
1,840
3,056
(1,174)
(1,269)
(2,903)
(2,472)
(663)
(737)
(1,641)
(1,435)
LI A BI LI TI ES
C UR R ENT
S hort-term loans and financ ing
O thers
LO NG-TER M LI A BI LI TI ES
Loans and financ ing
O thers
TO TA L
Total Liabilitie s - R $
Total Liabilitie s - US $
( * ) proportional to the perc entage of partic ipation
About 65% of the Parent Company’s revenue is derived from exports, and some of the domestic sales are indexed to the
U.S. dollar, while the costs are in great part incurred in reais.
On 03/25/99 the federal government issued Provisional Measure No. 1818 and on 03/26/99 the Comissão de Valores
Mobiliários – CVM (Brazilian Securities Commission) issued Rule No. 294, both of which deal with the accounting
treatment of adjustments to assets and liabilities in foreign currency.
The referred rule, in Item VII, allows deferment, for amortization over a maximum of four years, of the negative net result
from exchange rate variations in balances of obligations and credits occurring during the quarter ended 03/31/99. The
amortization must be adjusted based on the future settlement of the obligations in foreign currency, which in practice will
result in a reduction in the maximum period for deferment.
27
The results of this rule on CVRD were, in summary:

CVRD had a net positive result from foreign exchange exposure, and thus there was no deferment.

The Company’s subsidiaries and jointly controlled companies deferred R$ 474,000 (R$ 590,000 at 03/31/99), arising
mainly from companies in the areas of aluminum, pulp and paper, and steel making, which had significant negative
results from exchange rate variation.

Amortization of R$ 474,000 will take place as follows: 1999 – R$ 116,000; 2000 – R$ 138,000; 2001 – R$ 125,000;
and 2002 – R$ 95,000.
28
OTHER INFORMATION THE COMPANY DEEMS RELEVANT
(1)
CAPITAL
SHAREHOLDING COMPOSITION - JUNE, 1999
Total Shares
388,559,056
Valepar
27%
Litel
Participações S.A.
Investvale
6%
3%
ADR
10%
Golden Share
(one share)
0%
Foreign
Investment Funds
13%
BNDESPar, FPS,
INSS
3%
Pension Funds
(BR)
6%
Brazilian
T reasury,
BNDES
22%
Public
10%
Common Shares
249,983,143
Preferred Shares
138,575,913
GOLDEN SHARE
Litel
Foreign
Investvale Participações S.A. Founds
4%
10%
2%
29%
Pension
Valepar S/A.
BNDESPar
5%
42%
(one share)
0%
ADR
Funds
11%
Foreign
Funds
3.3%
Pension Funds
3%
Public
3%
Brazilian
Treasury/
BNDES
31%
Public
23%
Brazilian
Treasury/
BNDES
4%
29
(2)
NET ACCUMULATED INCOME IN MILLIONS OF REAIS
1100
1 ,0 2 9
1000
900
777
800
700
756
609
600
523
455
500
400
323
252
248
300
200
80
100
0
1st Q .
2nd Q .
1997
(3)
3 rd Q .
1998
4 th Q .
1999
SHARE PERFORMANCE ON STOCK EXCHANGES
The following table shows the high and low closing sale prices for the Preferred Class A Shares and Common Shares on the
São Paulo Stock Exchange, and for the Preferred ADRs in the United States over-the-counter market. (1 ADR = 1 Preferred
Class A Share)
Preferred Class A
Shares
In Reais
In US$
Common Shares
ADRs
High
Low
High
Low
High
Low
28.00
23.80
18.00
19.50
18.10
23.00
16.80
13.00
26.50
21.98
13.00
14.00
19.00
21.98
12.70
10.00
24.68
20.64
23.65
16.18
17.25
20.64
12.00
11.37
33.50
39.30
13.80
25.00
20.80
28.00
9.80
18.19
17.50
23.25
10.86
14.00
1998
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1999
First Quarter
Second Quarter
30
(4)
CAPITAL EXPENDITURES
in thous ands of Reais
EXECUTED
ES TIMATED
UP TO 0 6 /9 9
FO R 1 9 9 9
5 7 ,3 8 8
2 5 1 ,8 4 2
Rep lacemen t/Refu rb is h men t/Imp ro v emen t
31,958
132,070
Geo lo g ical Res earch
14,337
45,415
T ech n o lo g ical Res earch Dev elo p men t
1,582
17,114
En v iro n men t
4,537
35,334
ln fo rmatics
4,974
21,909
Equity Inves tments
8 2 ,5 3 2
4 1 9 ,7 2 9
Direct Inves tments
6 1 ,9 4 7
1 8 6 ,0 1 5
2 0 1 ,8 6 7
8 5 7 ,5 8 6
O ng oing Capital Expenditures
Total Capital Expenditures
(5)
OPERATIONS FROM JANUARY TO JUNE
1999
(Million metric tons)
1998
VAR %
PRODUCTION/PURCHASE
IRON ORE
PELLETS
MANGANESE
POTASH
GOLD (thousand Kg)
46.3
7.2
0.5
0.3
7.4
52.4
7.6
0.6
0.3
9.2
(11.6)
(5.3)
(16.7)
(19.6)
RAILROAD OPERATIONS
71.6
74.8
(4.3)
PORT OPERATIONS
58.8
55.5
5.9
(6)
CHANGES IN PRICES
The following table sets forth the prices for the products of the Company and its subsidiary and jointly controlled
companies for the periods indicated:
Asia
Iron Ore
(US$/ton)
1998
March
June
September
December
15,34
15,78
15,78
15,78
Europe
Iron Ore
(US$/ton)
Gold
(US$/ounce)
17,75
17,75
17,75
17,75
301
296
294
288
31
Europe
Pulp- CIF
(US$/ton)
440
480
420
420
Aluminum
(US$/ton)
1.438,02
1.307,59
1.342,66
1.249,41
(7)
IRON ORE AND PELLET SALES (MAIN MARKETS)
JAN to DEC
(In Millions of metric tons)
JAN to JUN
JAN to JUN
1998
1998
1995
%
1996
%
1997
%
%
%
1999
%
1.9
2.7
1.1
2
3
1
2.3
3.3
1.4
2
3
1
2.4
2.4
2.0
2
2
2
2.3
3.1
2.2
2
3
2
1.2
1.7
1.6
2
3
3
0.6
1.1
0.9
1
3
2
5.7
6
7.0
6
6.8
6
7.6
7
4.5
8
2.6
6
10.5
3.4
4.3
2.5
1.9
3.3
10
3
4
2
2
3
9.6
2.1
4.4
2.3
1.8
3.7
9
2
4
2
2
4
10.8
2.8
5.8
2.3
3.9
4.7
11
3
6
2
4
5
9.4
3.0
6.1
2.4
3.6
5.7
9
3
6
2
4
6
4.8
1.4
3.3
1.4
2.0
2.7
9
3
6
3
4
5
3.9
1.1
2.6
0.8
2.2
2.3
9
2
6
2
5
5
25.9
24
23.9
23
30.3
31
30.2
30
15.6
30
12.9
29
17.5
7.7
1.8
2.3
8.4
17
7
2
2
8
18.2
7.9
2.0
1.7
7.5
18
8
2
2
7
18.8
7.4
2.2
1.9
7.4
18
7
2
2
7
17.3
7.1
1.6
0.9
6.8
17
7
2
1
7
9.0
4.2
0.7
0.5
3.4
17
8
1
1
7
7.9
4.2
0.8
0.7
3.9
18
9
2
1
9
37.7
36
37.3
37
37.7
36
33.7
34
17.8
34
17.5
39
2.0
2.6
2
2
1.8
2.2
2
2
2.1
3.1
2
3
1.2
3.2
1
3
0.6
1.5
1
3
0.6
1.5
1
3
4.6
4
4.0
4
5.2
5
4.4
4
2.1
4
2.1
4
73.9
70
72.2
70
80.0
78
75.9
75
40.0
76
35.1
78
15.6
16.3
15
15
15.4
15.6
15
15
13.8
8.1
14
8
15.0
8.6
15
10
7.5
4.8
14
10
6.0
3.8
13
9
31.9
30
31.0
30
21.9
22
23.6
25
12.3
24
9.8
22
105.8
100
103.2
100
101.9
100
99.5
100
52.3
100
44.9
100
FOREIGN MARKETS
AMERICAS
ARGENTINA
UNITED STATES
OTHERS
EUROPE
GERMANY
FRANCE
ITALY
UNITED KINGDOM
SPAIN
OTHERS
ASIA
JAPAN
KOREA
TAIWAN
PHILIPPINES
OTHERS
AFRICA/MID.EAST/OCEANIA
BAHRAIN
OTHERS
FOREIGN MARKETS - TOTAL
DOMESTIC MARKET
STEEL MILLS
AFFILIATED PELLETIZING COMPANIES
DOMESTIC MARKET - TOTAL
TOTAL
EXPORTS BY SYSTEM
(In Millions of metric tons)
JAN to DEC
NORTHERN SYSTEM
SOUTHERN SYSTEM
JAN to JUN
JAN to JUN
1995
%
1996
%
1997
%
1998
%
1998
%
1999
%
42.1
31.8
57
43
38.6
33.6
53
47
40.8
39.2
51
49
34.1
41.8
45
55
21.3
18.7
53
47
19.8
15.3
56
44
73.9
100
72.2
100
80.0
100
75.9
100
40.0
100
35.1
100
32
(8) INVESTMENTS
June/1999
Valepar
Companies of the CVRD Group
Shareholding Interest - Total Shares (%)
Companhia Vale do Rio Doce
27.14
Public
72.86
Energy
Ferrous
Iron Ore, Pellets,
Manganese and Alloys
Urucum Mineração S.A.
CVRD
100.00
Non Ferrous
Precious Metals, Basic Metals,
Industry Minerals and Docegeo
Docegeo
99.998
0.002
CVRD
Others
Min. Urucum Ltda
Urucum Min. SA 100.00
Minas da Serra Geral(**)
CVRD
51.00
Kawasaki
24.50
Grupo Japonês 24.50
Hispanobrás(**)
CVRD
50.89
Aceralia CS
49.11
CVRD
Ilva
Itabrasco(**)
50.90
49.10
Itabrasco Trading
Itabrasco
100.00
Nibrasco(**)
CVRD
51.00
Nippon Steel
25.39
Grupo Japonês 23.61
Kobrasco(**)
CVRD
50.00
POSCO
50.00
Kobrasco
International (*)
Kobrasco
100.00
CVRD
Docepar
Others
24 Mining
Companies
99.00
0.98
0.02
Pará Pigmentos(**)
CVRD
36.00
CADAM
36.00
Mitsubishi
18.00
IFC
10.00
PPSA Overseas (*)
Pará Pigmentos 100.00
Salobo Metais(**)
CVRD
50.00
Minorco Brasil 50.00
Mineração Sossego
Min. Andirá
50.00
Phelps Dodge 50.00
Brasil Kaolin
Company Ltd. (*)
Itabira Rio Doce
50.00
Cadam Overseas 50.00
NORPEL - Pelotização
do Norte S.A
CVRD
99.90
Min. Araguaia
0.10
CVRD
Usiminas
Vupsa(**)
50.00
50.00
Railroads
and Ports
TVV - Terminal de
Vila Velha S.A.
CVRD
99.99
Min.Tacumã
0.01
RDP Terminal (*)
Rio Doce Limited 50.00
AFI Pasha
50.00
Ferrovia
Centro Atlântica S.ª(**)
Min.Tacumã
10.44
Judori
12.05
Railtex
12.05
CSN
11.91
Ralph Partners I 16.55
Others
37.00
SL Serviços Logisticos
FCA
100.00
Others
0.00
Companhia
Ferroviária do Nordeste
Taquari
40.00
ABS
20.00
CSN
20.00
CVRD
20.00
Ferroban
Ferropasa
38.43
CVRD
18.31
Capmelissa
6.80
Dasaiev(LAIF)
6.80
Previ
6.63
Funcef
6.63
Others
16.40
Cia de Desenvolvimento
do Sudeste - CDSE
Bechtel
25.00
BNDESPAR
24.00
Serrana
12.80
Unibanco
12.80
CVRD
12.80
CSN
12.70
Seas (*)(**)
Itabira Rio Doce 100.00
Nova Era Silicon(**)
CVRD
49.00
Mitsubishi
25.50
Kawasaki
22.50
Mizushima
3.00
Logistics
Holdings
Bauxite, Alumina
and Aluminum
Shipping
CVRD
Public
Docepar
96.84
3.16
Docepar
Docenave
100.00
Docenave
Navedoce (*)
100.00
Navedoce
Seamar (*)
100.00
Wilsea (*)
Seamar
50.00
W. Wilhelmsen
50.00
Nippon Bulkcarriers (*)
Docepar
50.00
Mitsui
25.00
Nissho Iwai
25.00
Aluvale
CVRD
100.00
Aluvale
NAAC
Albras(**)
51.00
49.00
Aluvale
Billiton
Valesul(**)
54.51
45.49
Aluvale
MRN
NAAC
CBA
JAIC
Alunorte(**)
65.82
17.62
8.75
5.05
2.75
Min. Rio do Norte(**)
Aluvale
40.00
Billiton
14.80
Alcan
12.00
CBA
10.00
Alcoa
8.58
Reynolds
5.00
Norsk Hidro
5.00
Abalco
4.62
Min. Vera Cruz
Aluvale
36.00
Paraibuna
42.88
Fina Emp. Part.
21.12
Fertilizers
CVRD
Fertifós
Others
Subsidiary
Affiliated
Others/Holding
Fosfértil
10.96
51.47
37.56
Timber,
Pulp & Paper
Florestas Rio Doce
CVRD
99.85
Others
0.15
Bahia Sul Celulose(**)
CVRD
29.33
Floresta Rio Doce 2.69
Suzano
40.67
BNDESPar
21.38
Public
5.02
IFC (BIRD)
0.71
FINOR
0.19
CVRD
Nissho Iwai
CVRD
JBP
Celmar(**)
85.00
15.00
Cenibra(**)
51.48
48.52
Cenibra International
Serviços e Comércio(*)
Cenibra
100.00
Cenibra Trading (*)
Cenibra Internat. 100.00
Portocel - Terminal
Espec. de Barra do
Riacho S.A
Cenibra
49.00
Aracruz
51.00
Steel
CVRD
Acesita
Kawasaki
Others
CST(**)
22.85
37.29
7.91
31.95
California Steel (*)
Rio Doce Ltd.
50.00
Kawasaki
50.00
Usiminas
CVRD
11.46
Nippon Usiminas
9.45
Previ
8.02
CIU
4.95
Others
66.12
CSN(**)
Docepar
10.33
Grupo Bradesco
17.89
Vicunha
16.62
Previ
13.85
Clube Invest. CSN 7.90
Morgan (ADR)
8.37
CBS
6.86
Others
18.18
Açominas(**)
Docepar
3.48
CEA
23.22
Cia. Mineira
9.44
Agrop. S.Bonfim
17.56
Natsteel
15.13
Gerdau Particip.
15.11
Others
16.06
Siderar (*)
Itabira Rio Doce
4.85
Usiminas
5.32
Grupo Techint
52.98
ISA (empregados) 10.84
Others
26.01
Vale do Rio Doce
Energia S.A.
CVRD
90.00
Aluvale
10.00
Consórcio Igarapava
Usina Hidrelétrica
CVRD
38.15
Cia Mineira Metais 23.93
CSN
17.92
CEMIG
14.50
Min. Morro Velho
5.50
Consórcio Porto Estrela
Usina Hidrelétrica
CVRD
33.33
CEMIG
33.33
Coteminas
33.33
Consórcio Aimorés
Usina Hidrelétrica
CVRD
25.50
CEMIG
49.00
Coteminas
25.50
Subsidiaries
Abroad
CVRD
Rio Doce
International (*)
100.00
Rio Doce Asia (*)
Rio Doce
International
100.00
Rio Doce Europa
Serviços e Comércio (*)
CVRD
99.80
Seamar
0.10
Docenave
0.10
Rio Doce
International Finance (*)
Rio Doce Europa 100.00
Itabira International
Serviços e Comércio (*)
CVRD
98.98
Others
1.02
Itabira Rio Doce
Company Ltd. (*)
Itabira
International
100.00
CSN Aceros S.A.(*)
Itabira Rio Doce 62.50
CSN Panamá
37.50
Rio Doce America (*)
Itabira Rio Doce 100.00
(*) Companies with head offices abroad
(**) Holding linked to Shareholdres’ Agreement
33
Rio Doce Ltd. (*)
Rio Doce América 100.00
BOARD OF DIRECTORS
Benjamin Steinbruch
Chairman
Luiz Tarquínio Sardinha Ferro
Vice-Chairman
Carla Grasso
Director of Human Resources, Administration
and Informatics
Pedro de Abreu Mariani
Director of Legal Affairs
Daniel Valente Dantas
Otto de Souza Marques Jr
Director of Control of the Corporate Center
Edmilson Janny Martins Colombo
Francisco Valadares Póvoa
Executive Director of the Iron Ore Area and Acting
Executive Director of Logistics Area
Mozart Kraemer Litwinski
Humberto Eudes Vieira Diniz
Armando de Oliveira Santos Neto
Director of Commercialization
Jacks Rabinovich
Juarez Saliba de Avelar
Director of Iron Ore for the Southern System
Maria Silvia Bastos Marques
Thiers Manzano Barsotti
Director of Iron Ore for the Northern System
Paulo Eduardo Cabral Furtado
Ricardo Antunes Carneiro Neto
Director of Pelletization and Metallurgy
Elias David Nigri
Director of Logistics
AUDIT COMMITTEE
Aloísio da Costa Val
Eliseu Martins
Eraldo Soares Peçanha
Executive Director of the Shareholdings Area and
Acting Executive Director of the Non-Ferrous Area
Luiz Paulo Marinho Nunes
Antônio Carlos Varela
Director of Pulp and Paper
José Carlos Costa Garcia
Romeu do Nascimento Teixeira
José Francisco Martins Viveiros
Director of Basic Metals and Industrial Minerals
Hélcio Roberto Martins Guerra
Director of Precious Metals
CHIEF EXECUTIVE OFFICER
Jorio Dauster Magalhães e Silva
Executive Director of the Corporate Center and
Investor Relations
Gabriel Stoliar
Eduardo de Carvalho Duarte
Chief Accountant
CRC-RJ 57439
CPF 276.808.947/87
Inês Corrêa de Souza
Director of Finances
34