FORM 6-K
Table of Contents

 
 
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant To Rule 13a-16 or 15d-16
of the
Securities Exchange Act of 1934
For the month of
March 2006
Companhia Vale do Rio Doce
Avenida Graça Aranha, No. 26
20005-900 Rio de Janeiro, RJ, Brazil
(Address of principal executive office)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
(Check One) Form 20-F þ Form 40-F o
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
(Check One) Yes o No þ
(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82___.)
 
 

 


Table of Contents

Table of Contents
BRGAAP Press Release
BRGAAP Financial Pages
         
A- Financial Statements
     
1-Balance Sheet
     
2-Statement of Income
     
3-Statement of Changes in Stockholders’ Equity
     
4-Statement of Changes in Financial Position
     
5-Statement of Cash Flows
     
6-Statement of Value Added
     
7-Notes to the Financial Statements at December 31, 2005 and 2004
     
7.1- Operations
     
7.2- Presentation of Financial Statements
     
7.3- Accounting Pronouncements Recently-issued by Comissão de Valores Mobiliários
     
7.4- Principles and Practices of Consolidation
     
7.5- Significant Accounting Policies
     
7.6- Independent Auditors Policy
     
7.7- Major Acquisitions and Divestments
     
7.8- Cash and Cash Equivalents
     
7.9- Accounts Receivable
     
7.10- Inventories
     
7.11- Related Parties
     
7.12- Taxes to recover or offset
     
7.13- Deferred Income Tax and Social Contribution
     
7.14- Investments — Consolidated and Parent Company
     
7.16- Loans and Financing
     
7.17- Contingent Liabilities
     
7.18- Environmental and Site Reclamation and Restoration Costs
     
7.19- Pension Plan — Valia
     
7.20- Paid-up Capital
     


Table of Contents

         
7.21- American Depositary Receipts (ADR) Program
     
7.22- Treasury Stock
     
7.23- Remuneration of Stockholders
     
7.24- Financial Results
     
7.25- Financial Instruments — Derivatives
     
7.26- Administrative and Other Operating Expenses
     
7.27- Concessions and Leases
     
7.28- Effects on the Statements if Price-Level Restatement were Applied (unaudited)
     
7.29- Insurance
     
7.30- Profit Sharing Plan
     
7.31- Subsequent Events
     
8- Attachment I — Statement of Investments in Subsidiaries and Jointly-Controlled Companies
     
9- Report of the Independent Accountants
     
10- Opinion of the Fiscal Council on the Annual Report and Financial Statements at December 31, 2005
     
11- Opinion of the Board of Directors on the Annual Report and Financial Statements at December 31, 2005
     
B – Additional Information
     
12 - Management’s Discussion and Analysis of the Operating Results for the Year Ended December 31, 2005 and Supplemental Information
     
12.1- Comments on Consolidated Operating Results
     
12.1.1- Gross Revenue
     
12.1.2 – Cost of Products and Services
     
12.1.3 – Selling expenses
     
12.1.4 – Administrative expenses
     
12.1.5 – Research and development
     
12.1.6 – Other operating expenses
     
12.1.7 - Net Financial Results
     
12.1.8 - Income Tax and Social Contribution
     
12.1.9 - Cash generation
     
12.1.10 - Statement of Income by Segment
     
12.2- Comments on the Parent Company Results
     
12.2.1 - Gross Revenue
     
12.2.2 - Cost of Products and Services
     
12.2.3 - Gross Margin
     
12.2.4 - Results of Shareholdings by Business Area
     
12.2.5 – Selling expenses
     


Table of Contents

         
12.2.6 – Administrative expenses
     
12.2.7 – Research and development
     
12.2.8 – Other operating expenses
     
12.2.9 - Net Financial Results
     
12.2.9 - Income Tax and Social Contribution
     
12.3- Labor and Social Indicators
     
12.4 - Functional Currency
     
13- Board of Directors, Fiscal Council, Advisory Committees and Executive Officers
     
Equity Investee Information as of December 31, 2005
Signature Page


Table of Contents

BR GAAP

      
(COMPANHIA VALE DO RIO DOCE LETTERHEAD)




BOVESPA: VALE3, VALE5
NYSE: RIO, RIOPR
LATIBEX: XVALO, XVALP
CRUISING AT HIGH SPEED
Performance of CVRD in 2005
 
 
Rio de Janeiro, March 6, 2006 — Companhia Vale do Rio Doce (CVRD) has ended 2005 with record operational and financial results for the third year running.
Despite the strong cost pressures, due to the cyclical rise in input prices and the appreciation of the Brazilian Real against the US dollar, CVRD set several new performance records for the year. Production maximization — made possible by the conclusion of various projects, the fact that most of its units were operating at full capacity, as well as the productivity gains achieved, together with the high prices due to the excess global demand for ores and metals — all enabled CVRD to produce an excellent performance.


     www.cvrd.com.br
     rio@cvrd.com.br
     Investor Relations
         Department
     Roberto Castello Branco
         Alessandra Gadelha
             Barbara Geluda
             Daniela Tinoco
                Fabio Lima
             Pedro Gibbon
     Tel: (5521) 3814-4540
New records set in 2005
    Sales:
    iron ore and pellets, 252.189 million tons
 
    bauxite, 5.600 million tons
 
    alumina, 1.738 million tons
 
    primary aluminum, 498,000 tons
 
    kaolin, 1.218 million tons
    Railroad general cargo transported for clients, 28.4 billion net ton kilometers (ntk).
 
    Cargo handled for clients in CVRD ports, 30.5 million tons.
 
    Gross revenues of R$ 35.4 billion.
 
    Consolidated exports of US$ 7.021 billion, up 26.9% compared to 2004.
 
    Net exports (exports less imports) of US$ 6.339 billion, 37.3% higher than the figure reported in 2004. CVRD’s contribution to Brazil’s trade surplus continued to be extremely significant, being responsible for 14.1% of the record trade surplus of US$ 44.8 billion last year. This results consolidates CVRD as the largest Brazilian net exporter.
 
    Operating profit, as measured by EBIT (earnings before interest and tax) of R$ 14.5 billion.
 
The financial and operational information contained in this press release, except where otherwise indicated, was consolidated in accordance with Brazilian generally accepted accounting principles (Brazilian GAAP). According to the criteria of Brazilian GAAP, those companies in which CVRD has effective control, or shared control as defined by shareholders agreement, are included in the consolidated figures. In the instances where CVRD has effective control, the consolidation is carried out on a 100% basis and the difference between this amount and the percentage of CVRD’s equity stake in the subsidiary is discounted at the minority shareholding line. CVRD’s main subsidiaries are Caemi, Alunorte, Albras, RDM, RDME, RDMN, Urucum Mineração, Docenave, Ferrovia Centro-Atlântica (FCA), Rio Doce Europa, Itaco, CVRD Overseas and Rio Doce International Finance. For companies in which control is shared, the consolidated figures are proportional to the equity stake held by CVRD in each company. The main companies in which CVRD has shared control are MRN, Valesul, Kobrasco, Nibrasco, Hispanobras, Itabrasco, GIIC and Samarco and CSI.


(4Q05 GRAPHIC)

 


Table of Contents

BR GAAP

      
    EBIT margin of 42.8%.
 
    Cash generation, as measured by EBITDA (earnings before interest, tax, depreciation and amortization) of R$ 16.7 billion.
 
    Net earnings of R$ 10.4 billion, corresponding to R$ 9.07 per share.
 
    Return on equity (ROE) of 43.4%.
 
    Investments carried out in 2005 of US$ 4.2 billion 1 — US$ 2.6 billion on organic growth, US$ 757 million on maintaining existing operations and US$ 800 million on acquisitions.
CVRD has successfully continued to implement its long-term strategy, making the most of opportunities offered by the economic cycle to invest with the discipline required to grow in a profitable manner and generate significant value for its shareholders.
In the last five years, CVRD has invested US$ 10.5 billion, establishing itself as the private-sector company that most invest in Brazil, having commissioned 14 large projects in the areas of iron ore, pellets, manganese alloys, bauxite, alumina, copper, potash, electric power and logistics.
In 2006, CVRD plans to invest US$ 4.626 billion, 77% in organic growth.
At the moment, 24 projects are being implemented and there are several others under studies.
Due to its policy of investing with a high return, the total return of CVRD shareholders in the period 2001-2005 reached to an annual average of 41.7%.
Alongside the private benefits which remunerate the investment effort of its thousands of shareholders, this process produces a series of benefits for Brazilian society. Thus, in the period 2001-2005, direct jobs provided by CVRD grew at an average annual rate of 17.1% — CVRD will be offering 137,000 new jobs in 2006 — its net exports contributed with US$ 20 billion to the Brazil ´s trade surplus and it’s railroads transported 127 billion ntk for customers, making new businesses possible in agriculture and industry, as well as contributing to a veritable rebirth of the national railway equipment industry.
The projects developed by CVRD routinely contain initiatives dedicated to improving the degree of welfare in the communities where they are carried out, involving investment in physical infrastructure and education, in this way creating opportunities for social and economic mobility for local inhabitants.
One of the most serious challenges for a growing company is reconciling the financing of its investments with the shareholder dividends aspirations and at the same time preserving of a healthy balance sheet. CVRD has managed to simultaneously meet all these objectives.
In addition to significant investments, CVRD distributed R$ 11.4 billion in dividends and interest on shareholders equity in the period 2001-2005. The amount distributed in 2005, of R$ 3.1 billion, equivalent to R$ 2.68 per share, constituted another record achieved this year.
Debt leverage, as measured by the ratio of total debt to adjusted EBITDA, according to the generally accepted accounting principles in the United States (US GAAP), at the end 2005 reached the lowest level in the past few years, of 0.77.
 
1   Calculated according to generally accepted accounting principles in the United States (US GAAP) and based on the amounts paid out.


(4Q05 GRAPHIC)

 


Table of Contents

BR GAAP

      
CVRD’s financial soundness was duly recognized by being granted “investment grade” status by the world’s three largest rating agencies.
The reduction in the cost of capital, influenced by this recognition, is very important to the extent that it helps CVRD invest significant funds, generating jobs, income and exports for Brazil.


                                         
SELECTED FINANCIAL INDICATORS  
R$ million  
    4Q04     3Q05     4Q05     2004     2005  
Gross operating revenues
    7,784       9,042       9,204       29,020       35,350  
Exports (US$ million)
    1,364       1,723       2,011       5,534       7,021  
EBIT
    2,533       3,765       3,659       10,306       14,556  
EBIT margin (%)
    34.3       42.8       41.0       37.4       42.8  
EBITDA
    3,003       4,318       4,200       12,249       16,701  
Net earnings
    1,527       2,712       2,637       6,460       10,443  
Net earnings per share (R$)
    1.33       2.36       2.29       5.61       9.07  
Annualized ROE (%)
    33.6       41.8       43.9       35.6       43.4  
Capex* (US$ million)
    685.7       917.0       1,851.8       1,956.0       4,160.5  

      
* acquisitions included
  BUSINESS OUTLOOK
With a solid outlook, the global economy is expanding at slightly more than 4% per year, with the developed countries — the US, the 15 of Europe, and Japan — growing at 3%, and the emerging market economies of Asia, Latin America and Eastern Europe at 6%.
The expansion is becoming more balanced between the different regions of the world, which until recently was believed to be possible only through considerable depreciation of the US dollar. However, this has been made possible by the restructuring of some important economies without requiring expansion of exchange rates volatility. The main implication of this re-balancing is reduction of the risk of a significant slowdown in the global economy as a result of an eventual recession the US economy.
The Japanese economy is returning to normality with the end of deflation and widespread over-capacity, and the significant decrease in non-performing bank loans. For the first time since 1996 bank credit is showing positive growth rates. Prices of commercial property have begun to rise after 14 years of decline, and industrial production is expanding firmly.
The behavior of GDP is becoming less dependent on exports, and the strong rise in the Nikkei-225, of 40% in 2005, translates investors’ optimism on the future of Japanese economy. The long restructuring process has enabled companies to capitalize, investing and hiring again, giving a new dynamic to domestic demand.
In Germany, the largest economy in Europe, corporate restructuring has contributed to an increase in productivity, profits and investments. In the short term this generates a negative impact on consumer spending, which tends to reverse as expansion of investments continues. The IFO business climate indicator rose to its highest level since 1994, with positive expectation on the part of both industry and retailers, the latter already anticipating future improvement in consumer spending.
As in Japan, the German economy is beginning to show less dependence on external demand, and, in 2006, for the first time in many years, domestic demand is likely to be the main source of growth of real GDP.


(4Q05 GRAPHIC)

 


Table of Contents

BR GAAP

      
In the US, the low growth of the economy in the fourth quarter of 2005, the weakest since the last quarter of 2002, was due to the effect of several shocks suffered over the July-September period of last year, which have now been absorbed, thus seen as a temporary volatility.
China grew 9.9% in 2005 and is expected to maintain the same rate of expansion this year. Domestic demand is strengthening with the expansion of public investments in infrastructure, which are being accelerated in the first year of the execution of the new five-year plan, and with the return of significant spending on real estate construction in medium-sized cities, characterizing a new cycle of investments.
In Brazil, the obtainment of several primary fiscal surpluses and the austerity in monetary policy contributed to promote a more stable environment, favoring economic growth. Besides that, higher exports and the good liquidity in the global financial markets contributed to generate significant improvement in the balance of payments, reducing its vulnerability. Consequently, a better performance of the economy is expected for 2006.
The world’s industrial production indicators point to a solid and more balanced expansion in the coming quarters. In particular, the performance of orders and the relation between this variable and inventories are behaving in a very stable manner.
Thus the global scenario provides grounds for continuation of strong demand for mining and metals.
Reasonably large imbalances persist between global demand and supply for iron ore and alumina which, in spite of the additional capacity being put into operation in the coming months and the projects currently in progress, are not likely to be eliminated in the short-term.
It is estimated that the seaborne iron ore market reached 675 million tons in 2005, with China importing 275 million tons, representing an increase of 32% over 2004. In January 2006 China’s seasonally adjusted imports were another all time record, which demonstrates continuity of the demand pressure in the iron ore market.
In one more production record, CVRD produced 240.4 million tons of iron ore in 2005. In 2006 the Company expects to increase its iron ore production to 264 million tons, to meet expansion in demand from its clients.
The spot iron ore market continues to be highly active and with prices higher than those for long-term contracts, reflecting the global excess of demand. Purchasers in this market have to face difficulties such as lower quality, price volatility and uncertain shipment frequencies, which harm their competitiveness and make their cash flows unstable.
The growth of the global fleet of capesize vessels, and the expansion of capacity of ports in countries such as Brazil, Australia and China, have caused a decline in the prices of freight in the spot market. This reduction, which — comparing the April 2005 peak with today’s prices — is as much as US$ 15 per ton for the Brazil-China route, results in an important fall in the cost of iron ore for the steelmakers who contract maritime freight in this market.
In the alumina spot market, prices are now over US$ 600/ton, about 25% of the prices quoted for aluminum on the London Metal Exchange, reflecting increase in global scarcity. Stage 4 of Alunorte, CVRD ´s alumina refinery, started up at the end of January this year, and Stage 5 will begin operating in March, thus adding


(4Q05 GRAPHIC)

 


Table of Contents

      
1.9 million tons/year to present capacity. In 2005, CVRD produced 2.6 million tons.
Simultaneously to the expansion of demand there are several types of limitations — much higher costs and supply restrictions of equipment and engineering services, greater relative scarcity of mineral reserves of good quality and substantial size, the need for logistics infrastructure, and the delay in obtaining environmental licenses — all these raise difficulties and a more lagged response of supply to increases in prices of ores and metals.
Systematic operation at full capacity increases the probability of production downtime. Given the restrictions on the supply of replacement parts and inventories at a historically low level, the impact of production problems on prices tends to be magnified. This has been important, for example, in the copper market, imposing an upward bias on prices.
Particularly for metals, the growing flow of financial resources into investment funds in commodities, resulting from the allocation of part of the pension funds money to this class of assets, has now begun to constitute a new source of demand, pressuring prices.
Influenced by profound cuts in global production in the second half of 2005, the manganese alloys prices are now recovering slightly, especially high carbon manganese ferro alloys (FeHcMn), in which we saw relatively higher cuts in production between 2004 and 2005. CVRD has kept about one-third of its alloys production capacity idle.
The Brazilian agricultural crop is forecast to be 9.3% larger this year than last year, when it was harmed by drought in the southern region of the country. This reversal will have a positive impact on the performance of CVRD ´s sales of potash and logistics services.
  RELEVANT EVENTS
    Absorption of the shares of Caemi
On January 26, 2006, the Board of Directors of CVRD approved the merger of all the preferred shares of Caemi Mineração e Metalurgia S.A. (Caemi) outstanding into CVRD. Non-controlling shareholders of Caemi will receive 0.04115 preferred PNA shares issued by CVRD for each preferred share they hold in Caemi. The exchange ratio reflects the performance of the prices of the preferred shares of CVRD and Caemi on the São Paulo Stock Exchange (Bovespa) during the 90 days period ending on January 23, 2006.
The necessary steps for carrying out the merger are being taken, and expected to be concluded at the end of March.
CVRD is owner of 100% of the common shares and 40.06% of the preferred shares of Caemi, or 60.23% of its total capital. After the conclusion of the transaction CVRD will own all the shares of Caemi.
    Maintaining the focus on organic growth
On January 26, 2006 CVRD’s Board of Directors approved a capital expenditure budget in the amount of US$ 4.626 billion, the highest in its history. In 2006, US$ 3.558 billion will be invested in organic growth, made up of US$ 3.067 billion in greenfield and brownfield projects, and US$ 491 million in research and


(4Q05 GRAPHIC)

 


Table of Contents

BR GAAP

      
development. The remaining US$ 1.068 billion will be allocated to stay in business expenditures.
The ferrous minerals business will receive 46% of the total capital expenditure; 17% will be allocated to the aluminum business, 17% to the logistics services area, and 9% to non-ferrous minerals.
More details can be obtained on www.cvrd.com.br, Investor Relations section, under press releases.
    Minimum dividend for 2006 of US$ 1.3 billion
The Executive Board of CVRD will submit to the Board of Directors a proposal for payment of minimum dividend to shareholders of US$ 1.3 billion in 2006. Taking into account the issue of new CVRD preferred (PNA) shares to be carried out upon completion of the merger of the shares of Caemi, if this is approved by the Company’s shareholders, the dividend per outstanding share, common or preferred, will be US$ 1.069367781.
    Issue and repurchase of debt securities
In January 2006 CVRD issued US$ 1 billion in 10-year bonds with 6.25% annual coupon and yield to investors of 6.254% per year (CVRD 2016). The spread over US treasuries with similar maturity was 190 basis points (bp), contrasting with the spread of 288 bp on the issue of CVRD 2013, with 10-year tenor and coupon of 9.0% per year, in August 2003.
The CVRD 2016 bond received rating BBB from Standard & Poor’s and Baa3 from Moody’s.
In parallel to this issue, CVRD repurchased approximately US$ 176 million of the principal of the CVRD 2013.
The basis of these transactions was the focus of CVRD’s financial policy on minimization of cost of capital.
    Conclusion of the acquisition of Canico
In the last quarter of 2005 CVRD acquired 99.2% of Canico Resources Corp., for approximately US$ 800 million. In February 2006 the acquisition of all the shares of Canico was completed, and they were withdrawn from trading on the Toronto Stock Exchange.
Canico was the owner of the Onça Puma laterite nickel project in the Brazilian state of Pará, which will be developed by CVRD, simultaneously with the Vermelho nickel project.
    Ceará Steel project
In December 2005 CVRD announced that it will have a 9% stake in Ceará Steel, a steel project in the state of Ceará, Brazil, whose nominal capacity will be 1.5 million tons per year of steel slabs.
CVRD’s investment will be US$ 25 million, and the project has start-up planned for 2009. CVRD will supply 2.5 million tons of pellets annually to Ceará Steel, which will use it as raw material for 100% of the mill’s needs.


(BR GAAP LOGO)

 


Table of Contents

BR GAAP

      
The investment in the Ceará Steel project is part of CVRD’s strategy of promoting the consumption of iron ore through minority stakes in steel projects located in Brazil.
    First shipment of coal
In January the first shipment of Yongcheng anthracite coal, of 40,000 tons, arrived in Brazil from Henan Longyu Energy Resources Co. Ltd., joint venture between CVRD and Chinese companies, located in China.
This event is an important milestone in CVRD’s strategy to become a player in the global coal market.
    Sale of stake in Nova Era Silicon
In February, CVRD sold its entire stake in Nova Era Silicon (NES), 49% of the total capital, to JFE Steel Corporation, for US$ 14 million.
This divestment is consistent with CVRD’s strategic guideline for the manganese business, of focusing on manganese ore and manganese ferro alloys production through wholly owned subsidiaries.
    Sale of stake in the Foz do Chapecó hydroelectric power plant
Also in February, CVRD sold its 40% stake in the consortium formed to build and operate the Foz do Chapecó hydroelectric power plant, for R$ 9 million.
    A NEW PLATEAU OF REVENUES
In 2005, CVRD’s gross revenues exceeded the R$ 35 billion barrier, totaling R$ 35.350 billion, the highest in CVRD’s history, and 21.8% higher than that obtained in 2004.
The increase in the sales price of CVRD’s products contributed with R$ 10.691 billion to the rise in gross revenues, while the increase in volume sold was responsible for R$ 466 million.
On the other hand, the appreciation of the Brazilian Real in relation to the US dollar in 2005, of 20.2%, had a negative impact on CVRD’s gross revenue of R$ 4.827 billion. About 87% of CVRD’s gross revenues are denominated and/or indexed to the US dollar.
Sales of ferrous minerals accounted for 70.3% of CVRD’s total sales in 2005, while sales of products in the aluminum chain accounted for 10.9%, logistics services 9.3%, non-ferrous minerals 4.9% and steel products, 4.3%.
Revenues from sales to China grown from R$ 3.079 billion in 2004 to R$ 5.154 billion in 2005. However, CVRD continues to enjoy broad geographical diversification in its sales.
The Americas are the main sales destination, accounting for 37.1%, with the Brazilian market responsible for 22.8% of total revenues and the US, for 7.5%. This was followed by Asia, which in 2005 for the first time produced more steel than all the other regions in the world, with 29.2%, exceeding sales in Europe, which accounted for 27.3% of CVRD’s gross sales.
CVRD’s gross revenues in 4Q05 amounted to R$ 9.204 billion, 18.2% higher than that reported in 4Q04.


(BR GAAP LOGO)

 


Table of Contents

BR GAAP
                                                         
GROSS REVENUESBY PRODUCT  
                                                    R$ million  
    4Q04     3Q05     4Q05     2004     %     2005     %  
Iron ore and pellets
    4,111       6,087       6,343       15,548       53.6       23,368       66.1  
Iron ore
    2,954       4,463       4,404       11,030       38.0       16,693       47.2  
Pellets
    1,157       1,625       1,939       4,518       15.6       6,675       18.9  
Pelletizing plants operation services
    20       19       19       77       0.3       71       0.2  
Manganese and ferro-alloys
    594       275       272       2,083       7.2       1,488       4.2  
Copper concentrate
    324       215       294       592       2.0       937       2.7  
Potash
    98       111       92       362       1.2       359       1.0  
Kaolin
    113       99       114       468       1.6       428       1.2  
Aluminum
    1,090       956       933       4,056       14.0       3,857       10.9  
Logistics
    789       938       781       3,025       10.4       3,291       9.3  
Railroads
    550       694       575       2,126       7.3       2,405       6.8  
Ports
    118       142       111       450       1.6       490       1.4  
Shipping
    121       102       95       450       1.5       396       1.1  
Steel products
    623       340       338       2,731       9.4       1,509       4.3  
Others
    23       3       18       78       0.3       43       0.1  
Total
    7,784       9,043       9,204       29,020       100.0       35,350       100.0  
                                                         
GROSS REVENUESBY DESTINATION  
                                                    R$ million  
    4Q04     3Q05     4Q05     2004     %     2005     %  
Americas
    3,460       3,210       3,082       12,299       42.4       13,104       37.1  
Brazil
    1,826       2,132       1,855       6,930       23.9       8,075       22.8  
USA
    890       560       627       3,272       11.3       2,645       7.5  
Others
    744       518       600       2,097       7.2       2,384       6.7  
Asia
    2,024       2,785       3,143       7,378       25.4       10,307       29.2  
China
    842       1,430       1,759       3,079       10.6       5,154       14.6  
Japan
    651       795       810       2,529       8.7       3,043       8.6  
Others
    531       560       574       1,770       6.1       2,110       6.0  
Europe
    1,914       2,452       2,347       8,011       27.6       9,654       27.3  
Rest of the World
    386       596       632       1,332       4.6       2,286       6.5  
Total
    7,784       9,043       9,204       29,020       100.0       35,351       100.0  

      
    COST PRESSURES AND THE EFFORTS TO OVERCOME THEM
In 2005, CVRD’s cost of goods sold (COGS) amounted to R$ 16.311 billion, an increase of 15.5%, or R$ 2.188 billion, compared to 2004.
In 4Q05, CVRD’s COGS totaled R$ 4.407 billion, up 14.9% on 4Q04.
CVRD, as in the case of other mining and metals companies, is suffering from a general cost pressures arising from the economic cycle — manifested by the increase in the price of equipment, spare parts, steel, energy, raw materials and services.
Expenditure on outsourced services, the principal item in COGS, which contributed R$ 3.406 billion to the cost of goods sold, was up by R$ 932 million compared to the previous year, mainly due to higher expenditure on railfreight as a result of both the growth in the volume transported, as well as the increase in tariffs. Also impacting this line was higher expenditure on the waste removal, as well as maintenance services.


(BR GAAP LOGO)

 


Table of Contents

BR GAAP

      
Outsourced services contributed R$ 255 million to the raise in COGS between 4Q04 and 4Q05.
Expenditure on material increased by R$ 780 million, amounting to R$ 3.105 billion, being substantially influenced by the higher prices of spare parts, such as conveyor belts and tires.
In 4Q05, this item amounted to R$ 777 million, compared to R$ 674 million in 4Q04.
As a consequence of the amplification in CVRD’s asset base, which had increased from R$ 15.7 billion at the end of 2002, to R$ 31.7 billion at the end 2005, the cost of depreciation and exhaustion for the year amounted to R$ 1.468 billion, up R$ 277 million in relation to 2004.
The cost of depreciation and exhaustion in 4Q05 was R$ 393 million.
Expenditure on fuel oil, gas and electric power, of R$ 3.241 billion, was R$ 391 million higher than that observed in 2004. This rise in expenditure was due to the expansion of CVRD activities, as well as the price increases seen in these inputs. The average price of fuel oil for CVRD was up 21.2%, contributing significantly to this rise in expenditure.
In 2005, CVRD’s electric power consumption increased by 5.3%, totaling 17.619 GWh, of which 38% was spent on the production of aluminum, and 8.9% on ferro-alloy operations.
In 4Q05, fuel oil, gas and electricity expenses were R$ 881 million, R$ 59 higher than the amount spent in 4Q04.
Expenditure on the purchase of products was down R$ 281 million, dropping from R$ 2.520 billion in 2004, to R$ 2.239 billion in 2005, principally due to the sale of CVRD’s stake in CST, concluded at the end of 2004. The effect of the appreciation in the Brazilian Real against the US dollar on purchases carried out by companies located outside Brazil also had a favorable effect, reducing the value of these purchases in Brazilian Reais.
In 4Q05, costs in this area amounted to R$ 594 million.
In 2005, operational expenses totaled R$ 3.126 billion, in line with the amount seen in 2004, of R$ 3.115 billion. In 4Q05, CVRD’s operational expenses totaled R$ 850 million.
Sales expenses of R$ 340 million, were R$ 72 million less than in 2004. Administrative expenses, of R$ 1.280 billion, saw an increase of 13.8% on the previous year, basically due to higher expenditure on publicity and advertising, the hiring of consultancy services and the 6.5% salary increase for employees in July 2005.
In 4Q05, sales expenses totaled R$ 54 million, while administrative expenses amounted to R$ 382 million.
Expenditure on research and development (R&D) increased by 52.7% compared to 2004, amounting to R$ 672 million. This increase was due to the execution of a strategy of focusing on organic growth, which necessarily implies increasing investment in mineral exploration and feasibility studies for the development of mineral deposits in various countries.
Investment in R&D is essential for the sustaining of CVRD’s profitable growth over the long term. In the context of a global and multi-commodity program,


(BR GAAP LOGO)

 


Table of Contents

BR GAAP

      
investments have been carried out in 11 countries, covering all the world’s continents in a diversified mineral portfolio, involving coal, copper, nickel, manganese, potash, phosphates, bauxite and iron ore.
Expenditure on research and development in 4Q05 was R$ 209 million, R$ 25 million higher than that in 4Q04.
Other operational expenses amounted to R$ 834 million, down R$ 304 million in relation to the previous year. This reduction was basically because of the provisions for ICMS losses, as well as the end of the amortization of the goodwill involved in the acquisition of Samitri in 2000, which contributed R$ 183 million in 2004. In 4Q05, these expenses were R$ 205 million.
In energy, CVRD has stakes in five hydroelectric power plants under operation, and the take from these — 1,278 GWh in 2005 — makes a reduction in its costs possible. In 2005, the economy reached via energy self-generation as opposed to acquiring energy through long-term contracts is estimated at R$ 110 million. Purchases of electricity have been made in auctions, obtaining in 2005 prices per MWh in average R$ 29 lower than those on long-term contracts. Such alternatives clearly has limitations, but contributes to reduction of the average cost of this input.
In the refining of bauxite into alumina, a co-generation electricity plant is due to come on stream in the middle of this year, which will have a direct impact on electricity cost, expected to reduce them by approximately R$ 66 million from 2007 onwards.
In addition, various studies are currently ongoing, aiming to restructure CVRD’s energy matrix and to adopt energy conservation measures, with the purpose of minimizing costs.
Demurrage expenses — the fines paid for delays in ship loading at CVRD’s maritime terminals - amounted to R$ 48 million in 4Q05 and R$ 186 million in 2005, down by 60.0% on 4Q04, and 24.1% on 2004, respectively, despite the increase in shipping volumes.
The procedures put into practice for the optimizing of iron ore shipping logistics have already started to show the first positive results. For example, in December CVRD obtained a dispatch bonus at the Ponta da Madeira maritime terminal, for the loading of ships ahead of the time limit stipulated.
Demurrage costs are tending to converge to a level that is considerably lower than that seen in the last two years. For 2006, it is expected that the demurrage cost per ton shipped from CVRD’s maritime terminals will be US$ 0.22 per ton, which would represent less than half the fines paid in 2004, of US$ 0.45 per ton.
CVRD’s programs of excellence, which include the maintenance and operation of its mines and the carrying out of investment projects, will have the consequence of reducing costs and achieving productivity gains over the next few years.
In 2005, CVRD’s gross margin amounted to 52.0%, 330 basis points (bp) higher than that reported in 2004, of 48.7%.
The margin obtained in 4Q05 amounted to 50.6%, compared to 48.0% in 4Q04.


(BR GAAP LOGO)

 


Table of Contents

                                                         
COGS BREAKDOWN  
                                                    R$ million  
    4Q04     3Q05     4Q05     2004     %     2005     %  
Personnel
    374       377       419       1,412       10.0       1,451       8.9  
Material
    674       821       777       2,325       16.5       3,105       19.0  
Fuel oil and gases
    441       458       519       1,597       11.3       1,829       11.2  
Outsourced services
    738       862       992       2,474       17.5       3,406       20.9  
Electric energy
    381       361       362       1,253       8.9       1,412       8.7  
Acquisition of products
    558       482       594       2,520       17.8       2,239       13.7  
Depreciation and exhaustion
    306       366       393       1,191       8.4       1,468       9.0  
Goodwill amortization
    96       95       95       384       2.7       382       2.3  
Others
    269       286       256       967       6.8       1,019       6.2  
Total
    3,837       4,108       4,407       14,123       100.0       16,311       100.0  

      
    OPERATING PROFIT: A NEW RECORD
CVRD’s excellent operational performance in 2005 was evidenced by the obtaining of a record operating profit, of R$ 14.556 billion, R$ 4.250 billion higher than that achieved in 2004. EBIT in 2005 was basically influenced by the increase of R$ 6.449 billion in net revenues, partially offset by a raise of R$ 2.188 billion in COGS.
CVRD’s EBIT in 4Q05 amounted to R$ 3.659 billion, 44.5% above that reported in 4Q04.
EBIT margin in 2005 was 42.8%, 540 bp higher than that reported in 2004, of 37.4%.
In 4Q05, EBIT margin was 41.0%, compared to 34.3% in the same quarter in 2004.
    CASH GENERATION RECORD
Cash generation, as measured by EBITDA, in 2005 amounted to R$ 16.701 billion, constituting a new record for CVRD, being R$ 4.452 billion higher than the previous year. EBITDA reported in 2005 was 3.3 times that reported in 2001, of R$ 5.128 billion, attesting to the enlargement in the dimensions of CVRD’s activities.
The raise seen in EBITDA between 2004 and 2005 was basically the result of a higher EBIT, R$ 4.250 billion, and the increased depreciation of R$ 300 million. In 2005, CVRD received dividends from non-consolidated companies of R$ 151 million, compared to R$ 66 million in 2004.
Ferrous mineral operations accounted for 81.3% of EBITDA in 2005, products in the aluminum chain, 8.7%, logistic services, 7.3%, non-ferrous mineral operations, 2.6%, steel, 1.8% and others, represented by expenditure on research and development, negative in 1.6%.
In 4Q05, EBITDA was R$ 4.200 billion, compared to R$ 3.003 billion in 4Q04.


(BR GAAP LOGO)

 


Table of Contents

BR GAAP
QUARTERLY EBITDA
                                         
    R$ million  
    4Q04     3Q05     4Q05     2004     2005  
Net operating revenues
    7,384       8,805       8,916       27,544       33,993  
COGS
    (3,837 )     (4,108 )     (4,407 )     (14,123 )     (16,311 )
SG&A
    (459 )     (423 )     (436 )     (1,537 )     (1,621 )
Research and development
    (184 )     (220 )     (209 )     (440 )     (672 )
Other operational expenses
    (371 )     (289 )     (205 )     (1,138 )     (834 )
EBIT
    2,533       3,765       3,659       10,306       14,556  
 
                                       
Adjustment for non-cash items
                      183       -  
Depreciation, amortization & exhaustion
    440       495       538       1,694       1,994  
Dividends received
    30       59       3       66       151  
EBITDA
    3,003       4,318       4,200       12,249       16,701  

      
(GRAPHIC)  FINANCIAL RESULT
In 2005, CVRD’s net financial result amounted to a negative R$1.276 billion, representing an improvement of R$724 million on that obtained in 2004. This improvement was due to the favorable movement of three components within this account: financial revenues, finance expenses and monetary variation.
Financial expenses amounted to R$1.579 billion, while financial revenues totaled R$339 million. The net result in monetary variation in 2005 was a loss of R$36 million.
In 4Q05, CVRD’s net finance result amounted to a negative R$764 million, compared to a negative R$271 million in the same quarter a year earlier. Financial expenses totaled R$527 million, financial revenues, R$103 million and monetary variation, a negative R$340 million.
(GRAPHIC)  EQUITY INCOME RESULT
CVRD’s equity income result increased by R$113 million, rising from R$156 million in 2004 to R$269 million in 2005. The main contributions to this result were from the steel sector — an increase of R$70 million — and the stake in Henan Longyu Energy Resources Ltd, the Chinese producer of anthracite coal, R$23 million.
In 4Q05, CVRD’s equity income result was R$105 million.
(GRAPHIC)  RECORD NET EARNINGS: R$10.4 BILLION
In 2005, CVRD’s net earnings amounted to R$10.443 billion, corresponding to R$9.07 per share. Compared to the net earnings in 2004, of R$6.460 billion, CVRD’s results were up 61.7% in 2005.
In addition to its substantial size, being the largest profit achieved in CVRD’s history, it is also worth pointing out the high earnings quality. This is because CVRD is investing record amounts, while at the same time enlarging its base for future profitability.


(FOURTH QUARTER GRAPHIC)

 


Table of Contents

BR GAAP

      
In 2005, CVRD received R$298 million from the sale of Caemi’s stake in QCM, while in 2004, CVRD got R$551 million from the sale of its stake in CST.
The provisions made for the payment of income tax and social contribution, totaling R$2.368 billion in 2005, compared to R$1.810 billion in 2004.
In the final quarter of 2005, CVRD reported net earnings of R$2.637 billion, compared to R$1.527 billion in the same quarter a year earlier. CVRD made a provision of R$153 million for the payment of income tax and social contribution in the quarter.
(GRAPHIC)     CONCILIATING CAPEX, DIVIDENDS AND FINANCIAL STRENGHT
One of the greatest challenges for a company that is growing is to conciliate financing of capital expenditure, distribution of dividends and maintenance of a level of financial health that will ensure good risk perception by the capital markets.
CVRD’s strong cash generation has enabled it to finance its growth initiatives, allowing the projects to be assessed and approved in accordance with their merit. At the same time, it has been possible to make a good distribution of dividends to shareholders. In the last five years investments and dividends paid totaled approximately US$15 billion. Simultaneously there was a strengthening of the balance sheet.
Breaking paradigms, CVRD obtained the Investment Grade rating in 2005 from three of the most respected rating agencies in the world: Standard & Poor’s (BBB), Moody’s (Baa3) and Dominion (BBB low).
Leverage and interest coverage indicators improved considerably in 2005, evidencing CVRD’s financial strenght.
Total debt, according to the generally accepted accounting principles in the United States (US GAAP), on December 31, 2005 was US$5.010 billion, an increase of US$922 million from the debt of US$4.088 billion at December 31, 2004.
Gross debt/adjusted EBITDA fell from 1.10x on December 31, 2004 to 0.77x on December 31, 2005. Total debt/enterprise value fell from 11.8% to 10.1%. Interest coverage, measured by adjusted EBITDA/interest paid, increased, from 12.41x at the end of 2004 to 25.95x at the end of 2005.
Net debt at the end of 2005 was US$3.969 billion, with a cash position of US$1.041 billion. Besides its cash holding, CVRD has the potential for additional liquidity provided by committed bank credit lines in the amount of US$750 million.
The average debt maturity on December 31, 2005 was 7.89 years, compared to 6.83 years at the end of 2004. 60% of the debt was at floating rates and 40% at fixed rates. Because prices of aluminum and copper both vary in the same direction as the Libor rate, there is a natural hedge against oscillations in floating interest rates.
The Company’s debt management policy aims to reduce its refinancing costs and risks. In this context, the development of liquid markets for its bonds and maintaining of a dynamic posture in relation to management of liabilities are very important.


(FOURTH QUARTER GRAPHIC)

 


Table of Contents

BR GAAP

      
In October 2005 CVRD again issued bonds, due in 2034 and 8.25% annual coupon, totaling US$300 million. This increased the amount maturing in that year to US$800 million, providing good liquidity conditions for investors, helping to increase the bonds’ attractiveness.
In January 2006 the CVRD 2016 bond was issued, with 10-year tenor, 6.250% annual coupon and yield to investors of 6.254% per year, for a total of US$1.0 billion, its cost already reflecting the improvement of risk perception expressed by the award of Investment Grade rating. Since its issuance, CVRD 2016 has risen in value, with the yield to maturity converging gradually towards 6.0%.
Over the period from 4Q04 to the beginning of 2006, CVRD repurchased debt with higher interest rates and lower duration in the amount of US$600 million. For example, more recently, and simultaneously with the issue of CVRD 2016, the Company bought US$176 million of the CVRD 2013 bond, with coupon of 9.000% per year.


DEBT INDICATORS
                         
    US$ million  
    4Q04     3Q05     4Q05  
Gross debt
    4,088       3,942       5,010  
Net debt
    2,839       2,707       3,969  
Gross debt / adjusted LTM EBITDA (x)
    1.10       0.68       0.77  
Adjusted LTM EBITDA / LTM interest expenses (x)
    12.41       21.03       25.95  
Gross debt / EV (x)
    0.12       0.08       0.10  

      
Enterprise Value = capitalização de mercado + dívida líquida
(GRAPHIC)  BUSINESS PERFORMANCE
Ferrous minerals
The strong growth in global demand for iron ore and pellets, together with CVRD’s expansion of its production — due to the conclusion of a number of projects and productivity gains achieved — has enabled CVRD to obtain a series of successive sales volume records. Total shipments of these products in 2005 of 252.189 million tons, up 8.9% on 2004, thus constituted another new record.
Sales in 4Q05, of 67.611 million tons, set a new quarterly record.
In 2005, sales of iron ore amounted to 213.338 million tons, up 11.9% compared to 2004. Pellet sales, of 38.851 million tons, were in line with sales in 2004.
Compared to 2004, CVRD increased its purchases of iron ore from small mining companies located in the so-called Iron Quadrangle, in the state of Minas Gerais, by 3.2%, acquiring 16.430 million tons to complement its production and meet the growing demand from its clients.
In 2005, China bought 56.530 million tons of iron ore from CVRD, 22.4% of total sales volume. Japan absorbed 25.250 million tons, representing 10.0% of sales, Germany acquired 24.555 million tons representing 9.7%, followed by France with 4.7%, South Korea with 4.2% and Italy with 3.9%. Sales to the steel industry and pig iron producers in Brazil amounted to 45.644 million tons, 18.1% of total shipments.
Shipments made in 4Q05 constituted another quarterly record, when 67.611 million tons, being 56.007 million tons of iron ore and 11.604 million tons of pellets. Sales of pellets in 4Q05 increased by 32.3% compared to 3Q05, when only 8.774 million


(FOURTH QUARTER GRAPHIC)

 


Table of Contents

BR GAAP

      
tons were sold, due to issues associated with hurricane Katrina and the rescheduling of shipments.
In contrast to those for other metals and mining products, the market for ferro-manganese alloys is seeing an excess of supply, due to the exaggerated response by producers encouraged by the rise in prices which resulted in production expansion of 18.6% in 2004. Thus, 2005 was characterized by a reduction in alloy prices, begun in the last quarter, and by cuts in production, implemented since 2Q05. Manganese ore, whose main use is in the manufacture of alloys, suffered from the negative effect of price movements, by a time-lag of approximately six months.
In 2005, 907,000 tons of manganese was sold, 9.2% down on that sold in 2004, of 999,000 tons. Sales of ferro-alloys totaled 547,000 tons, in line with the previous year.
In 4Q05, manganese sales amounted to 244,000 tons, down 24.5% on the same period in 2004, which saw a quarterly sales record of 320,000 tons. At the end of 2004 demand for manganese benefited from the significant expansion in alloy production. In 4Q05, sales of ferro-alloys amounted to 124,000 tons.
Revenues from ferrous minerals — iron ore, pellets, manganese and ferro-alloys — in 2005 was R$24.856 billion, up 41.0% compared to 2004, when revenues was R$17.631 billion.
Gross revenues generated by iron ore shipments totaled R$16.693 billion, while revenues from pellet sales amounted to R$6.675 billion. Revenues in 2005, corresponding to 66.1% of the total reported by CVRD, were 50.2% higher than those reported in 2004, basically due to the increase in the price of products sold. Revenues obtained through the pelletization services provided by the pellet plants located in the port of Tubarão, amounted to R$71 million.
Gross revenues generated by the sales of manganese amounted to R$214 million, 20.2% higher than the figure in the previous year, of R$178 million. Gross revenues from the sale of ferro-alloys amounted to R$1.274 billion, 33.1% lower than the revenues obtained in 2004, due to the drop in the price of this product. Shipments of manganese and ferro-alloys accounted for 4.2% of CVRD’s total gross revenues in 2005.
Operating profit from the area of ferrous minerals division — iron ore, pellets, manganese ore and ferro-alloys — amounted to R$12.548 billion, 81.5% higher than the EBIT reported in the previous year, of R$6.914 billion, mainly due to iron ore and pellet price increases in 2005 which more than compensated for the increased costs arising from metals and mining price cycle. In addition, 2004 saw the amortization of the goodwill associated with the acquisition of Samitri.
EBITDA generated from ferrous minerals business amounted to R$13.582 billion, or 81.3% of CVRD’s total cash generation in 2005, up 70.9% on the amount reported in 2004, of R$7.947 billion.


SALES VOLUME — IRON ORE AND PELLETS
                                                         
    thousand tons  
    4Q04     3Q05     4Q05     2004     %     2005     %  
Iron ore
    51,165       55,203       56,007       190,651       82.9       213,338       84.6  
Pellets
    10,230       8,774       11,604       39,230       17.1       38,851       15.4  
Total
    61,395       63,977       67,611       229,881       100.0       252,189       100.0  
(FOURTH QUARTER GRAPHIC)

 


Table of Contents

BR GAAP
VOLUME SOLD BY DESTINATION — IRON ORE AND PELLETS
                                                         
    million tons  
    4Q04     3Q05     4Q05     2004     %     2005     %  
Asia
    23.5       26.0       30.7       85.4       37.1       101.9       40.4  
China
    13.3       14.9       17.9       43.8       19.0       56.6       22.4  
Japan
    5.3       6.2       6.6       21.4       9.3       25.2       10.0  
South Korea
    2.6       2.9       4.0       10.7       4.6       10.7       4.2  
Emerging Asia (ex-China)
    2.4       2.0       2.2       9.5       4.2       9.4       3.7  
Europe
    19.2       19.4       17.5       73.2       31.9       75.5       29.9  
Germany
    6.9       6.3       5.8       25.3       11.0       24.6       9.7  
France
    3.0       3.0       3.3       12.0       5.2       11.9       4.7  
Italy
    2.2       3.1       1.1       9.3       4.1       9.8       3.9  
Others
    7.1       7.0       7.3       26.7       11.6       29.2       11.6  
Brazil
    11.4       11.6       11.4       43.2       18.8       45.6       18.1  
USA
    1.2       0.9       1.7       4.8       2.1       5.0       2.0  
RoW
    6.1       6.1       6.3       23.2       10.1       24.2       9.6  
Total
    61.4       64.0       67.6       229.9       100.0       252.2       100.0  

      
Aluminum
The strong growth in Chinese consumption of alumina, resulting in the importing of 7 million tons in 2005, contributed to increasing the imbalance between global demand and supply, causing spot prices to continue their upward trend. The prices of primary aluminum, which did not accompany the upward cycle in metal prices so sharply, fluctuated substantially during the year, falling to a level of US$1,700 per ton in July, but finally reaching their highest level in the last 16 years in December, of approximately US$2,300 per ton.
In 2005, CVRD sold 5.600 million tons of bauxite, a record volume, up 3.2% compared to previous year. In 4Q05, bauxite sales totaled 1.544 million tons.
Alumina sales in 2005 amounted to 1.738 million tons, up 3.6% on the previous year. Alumina sales in 4Q05 totaled 403,000 tons.
As most of CVRD’s sales are associated with long-term contracts, the price increases in the market are not entirely reflected in its average sales price. Nonetheless, as new contracts are entered into, so the higher alumina prices will reflect a higher percentage of the aluminum price quoted on the London Metal Exchange — LME.
Sales of primary aluminum in 2005 amounted to 498,000 tons, compared to 477,000 tons in 2004. This was possible due to the implementation of operational improvements at the Barcarena plant, which enabled production capacity to be expanded. Primary aluminum shipments in 4Q05 totaled 131,000 tons.
Gross revenues from the sale of products in the aluminum chain totaled R$3.857 billion, 10.9% of CVRD’s total revenues in 2005, but down 4.9% on the revenues from this source obtained in 2004, of R$4.056 billion, due to the appreciation in the Brazilian Real against the US dollar.
Operating profit generated from products in the aluminum chain totaled R$1.225 billion, 30.1% lower than that obtained in 2004, of R$1.753 billion, basically due to the increase in costs and expenses which were impacted by the appreciation in the Brazilian Real against the US dollar, the price of electric power and price increases in various inputs, such as caustic soda, calcining oil, and coke.
EBITDA was R$1.446 billion, 8.7% of CVRD’s total EBITDA in 2005, but this figure was 26.4% lower that the EBITDA obtained in 2004, of R$1.965 billion.


(FOURTH QUARTER GRAPHIC)

 


Table of Contents

BR GAAP

      
Non-ferrous minerals
Global demand for potash experienced a growth slowdown in the second half of 2005, due to a reduction in consumption in some Asian countries as well as in Brazil, due to harvest problems. In the case of Brazil, a strong recovery is predicted in grain harvests in 2006, particularly for soybean, which is likely to provoke a recovery in demand for CVRD’s potash products.
The conclusion of the production capacity expansion project at Taquari-Vassouras to 850,000 tons will enable sales to be increased in 2006.
Potash sales totaled 640,000 tons in 2005, up 10,000 tons on the previous year. Gross revenues from potash sales amounted to R$359 million.
In 4Q05, CVRD sold 176,000 tons of potash, up 6.7% on 4Q04.
In 2005, kaolin shipments shipments totaled 1.218 million tons, in line with the volume sold in the previous year. Gross revenues from kaolin sales amounted to R$428 million, down 8.5% on that obtained in 2004, basically due to the appreciation in the Brazilian Real.
In the 4Q05, kaolin sales amounted to 355,000 tons, compared to 311,000 tons 4Q04.
In the first full year of operation of the Sossego mine, CVRD sold 398,000 tons of copper concentrate, compared to 269,000 tons in 2004, when the mine operated for seven months. Gross revenues totaled R$937 million, also reflecting the increase in copper prices seen in 2005.
In 4Q05, sales of copper concentrate amounted to 112,000 tons, compared to 139,000 tons in 4Q04. The reduction seen between these two quarters was because of operational problems to do with copper extraction and processing.
In 2005, gross revenues from the sale of non-ferrous minerals — copper, potash and kaolin — was R$1.725 billion, accounting for 4.9% of CVRD total gross revenues.
The relatively small size of CVRD’s non-ferrous mineral operations imposes a certain volatility on its operating results, given its sensitivity to fluctuations in product prices and inputs, as well as the Brasilian Real/US dollar exchange rate.
EBIT generated by non-ferrous mineral operations totaled R$273 million, 21.3% higher than that seen in 2004, basically because of the operation of the Sossego copper mine for twelve months in 2005, compared to just seven months in 2004.
EBITDA amounted to R$427 million, accounting for 2.6% of CVRD’s total cash generation in 2005.


SALES VOLUME — ORES AND METALS
                                         
    thousand tons  
    4Q04     3Q05     4Q05     2004     2005  
Manganese
    320       271       244       999       907  
Ferro alloys
    112       136       124       542       547  
Copper concentrate
    139       96       112       269       398  
Potash
    165       197       176       630       640  
Kaolin
    311       280       355       1,207       1,218  
Bauxite
    1,529       1,422       1,544       5,429       5,600  
Alumina
    366       504       403       1,678       1,738  
Aluminum
    119       122       131       477       498  
(FOURTH QUARTER GRAPHIC)

 


Table of Contents

BR GAAP

 
 
Logistics services
In 2005, CVRD’s railroads — Carajas (EFC), Vitoria a Minas (EFVM) and Centro-Atlantica (FCA) — transported 28.379 billion ntk of general cargo, in line with the previous year, when 28.214 billion ntk were transported. The main cargoes transported were inputs and products for the steel industry, 44.2% of the total; agricultural products, 37.8%, and building materials and forestry products, 8.0%.
In 4Q05, CVRD’s railroads transported 6.373 billion ntks.
The interruption in the rapid growth in railroad transport seen in the last few years — an average of 8% between 2001 and 2004 — was caused by the 3.9% drop in Brazilian steel production in 2005, the shrinkage in the agricultural harvest and the change in the profile of freight transported, with a reduction in the handling of petrochemical products. Even so, CVRD increased its market share in the transport of soybean for export, from 16% to 18%, and from 7% to 9% in the transport of fertilizers. The handling of petrochemicals is being replaced by containers, having seen the start of, for example, the transport of electronic goods.
Security in the railroad operation is a very important issue in CVRD business strategy. In this sense, the number of accidents at CVRD railroads — EFVM, EFC and FCA — has been continuously decreasing.
                         
ACCIDENTS ON RAILROADS  
    Accidents per million of trains km  
    EFC     EFVM     FCA  
2001
    12       34       86  
2002
    9       23       68  
2003
    11       20       61  
2004
    5       13       45  
2005
    5       9       29  
CVRD’s ports and maritime terminals handled 30.530 million tons, an increase of 6.4% on 2004. In 2005 the ninth grain warehouse entered into service at Terminal de Produtores Diversos (TPD), in the port of Tubarão and the fourth silo at the Ponta da Madeira maritime terminal. The amount shipped by CVRD’s ports and maritime terminals in the 4Q05 was 7.622 million tons.
Logistics services generated gross revenues of R$ 3.291 billion, 9.3% of CVRD’s total gross revenues, 8.8% higher than that obtained in 2004, of R$ 3.025 billion. General cargo carried by CVRD railroads contributed with revenues of R$ 2.405 billion, port services, R$ 490 million and coastal shipping and port support services, R$ 396 million.
EBIT from logistics services, of R$ 665 million, was in line with that seen in the previous year, of R$ 630 million.
EBITDA generated by logistics services amounted to R$ 1.217 billion, 7.3% of CVRD’s total for 2005, in line with 2004, figure of R$ 1.234 billion.


                                         
LOGISTICS SERVICES  
    4Q04     3Q05     4Q05     2004     2005  
Railroads (million ntk)
    6,806       8,242       6,373       28,214       28,379  
Ports (thousand tons)
    6,910       8,315       7,622       28,697       30,530  
(4q05 GRAPHIC)

 


Table of Contents

BR GAAP

 
Steel
Revenues generated by CVRD’s equity stakes in the steel industry in 2005 amounted to R$ 1.509 billion, 4.3% of CVRD’s gross revenues, lower than that obtained in 2004 due to the sale of CVRD’s stake in CST. EBIT amounted to R$ 117 million and EBITDA, R$ 298 million.


                                                         
EBITDA BY BUSINESS AREA  
    R$ million  
    4Q04     3Q05     4Q05     2004     %     2005     %  
Ferrous minerals
    2,062       3,671       3,528       7,947       64.9       13,582       81.3  
Non- ferrous minerals
    82       84       157       309       2.5       427       2.6  
Logistics
    277       340       221       1,234       10.1       1,217       7.3  
Aluminum
    520       305       339       1,965       16.0       1,446       8.7  
Steel
    62       68       46       794       6.5       298       1.8  
Others
          (151 )     (91 )           0.0       (270 )     -1.6  
Total
    3,003       4,318       4,200       12,249       100.0       16,701       100.0  

 
  CONFERENCE CALL AND WEBCAST
CVRD will hold its conference call and webcast on Wednesday, March 08, at 12:00 pm Rio de Janeiro time, 10:00 am Eastern Standard Time and 3:00 pm UK time. Instructions for participation are on the website www.cvrd.com.br, Investor Relations section. A recording of the call and webcast will be available on the website for 90 days following March 08.
  SELECTED FINANCIAL INDICATORS FOR THE MAIN NON-CONSOLIDATED COMPANIES
Selected financial indicators for the principal non-consolidated companies are available in CVRD’s quarterly financial statements, on its website www.cvrd.com.br, in the Investor Relations section.


(4q05 GRAPHIC)

 


Table of Contents

BR GAAP
                                         
FINANCIAL STATEMENTS  
    R$ million  
    4Q04     3Q05     4Q05     2004     2005  
Gross operating revenues
    7,784       9,042       9,204       29,020       35,350  
Taxes
    (400 )     (237 )     (288 )     (1,476 )     (1,357 )
Net operating revenues
    7,384       8,805       8,916       27,544       33,993  
Cost of goods sold
    (3,837 )     (4,108 )     (4,407 )     (14,123 )     (16,311 )
Gross profit
    3,547       4,697       4,509       13,421       17,682  
Gross margin (%)
    48.0 %     53.3 %     50.6 %     48.7 %     52.0 %
Operational expenses
    (1,014 )     (932 )     (850 )     (3,115 )     (3,126 )
Sales
    (97 )     (91 )     (54 )     (412 )     (340 )
Administrative
    (362 )     (333 )     (382 )     (1,125 )     (1,280 )
Research and development
    (184 )     (220 )     (209 )     (440 )     (672 )
Other operational expenses
    (371 )     (289 )     (205 )     (955 )     (834 )
Samitri
                      (183 )      
Operating profit before result from shareholdings
    2,533       3,765       3,659       10,306       14,556  
Result from shareholdings
    137       14       105       156       270  
Equity income
    192       84       136       408       497  
Goodwill amortization
    (57 )     (57 )     (51 )     (252 )     (223 )
Others
    1       (13 )     20             (5 )
Financial result
    (271 )     (319 )     (764 )     (2,000 )     (1,276 )
Financial expenses
    (563 )     (510 )     (527 )     (1,866 )     (1,579 )
Financial revenues
    109       65       103       297       339  
Monetary variation
    183       125       (340 )     (431 )     (36 )
Operating profit
    2,399       3,459       3,000       8,462       13,549  
Result of discontinued operations
    85       298             551       298  
Income tax and social contribution
    2,483       3,757       3,000       9,013       13,847  
Earnings before income tax and social contribution
    (761 )     (764 )     (153 )     (1,810 )     (2,368 )
Minority interest
    (195 )     (281 )     (210 )     (743 )     (1,036 )
Net earnings
    1,527       2,712       2,637       6,460       10,443  
                         
BALANCE SHEET  
    R$ million  
    12/31/04     09/30/05     12/31/05  
Asset
                       
Current
    11,832       12,172       12,571  
Long term
    3,818       4,279       4,235  
Fixed
    27,831       32,285       36.788  
Total
    43,481       48,736       53,594  
Liabilities
                       
Current
    9,326       7,248       11,667  
Long term
    13,944       12,730       14,915  
Others
    2,041       2,784       2,960  
Shareholders’ equity
    18,170       25,974       24,052  
Paid-up capital
    7,300       14,000       14,000  
Reserves
    10,869       11,974       10,052  
Total
    43,481       48,736       53,594  
(4q05 GRAPHIC)

 


Table of Contents

BR GAAP
                                         
CASH FLOW  
    R$ million  
    4Q04     3Q05     4Q05     2004     2005  
Cash flows from operating activities:
                                       
Net income
    1,527       2,711       2,637       6,460       10,443  
Adjustments to reconcile net income with cash provided by operating activities:
                                       
Result from shareholdings
    (136 )     (13 )     (105 )     (156 )     (269 )
Depreciation, depletion and amortization
    (85 )     (298 )           (551 )     (298 )
Deferred income tax and social contribution
    356       400       446       1,406       1,615  
Result from sale of investment
    1,141       (283 )     (201 )     873       (545 )
Financial expenses and foreign exchange and monetary net variation
    (342 )     (420 )     437       (144 )     (919 )
Minority interest
    195       281       211       743       1,036  
Impairment of property, plant and equipment
    1       1       46       17       123  
Goodwill amortization in the COGS
    96       95       92       384       379  
Non-recurring item — Goodwill for Samitri
                      183        
Net unrealized derivative losses
    173       169       252       368       416  
Dividends/interest attributed to stockholders received
    30       59       4       66       151  
Others
    154       37       (21 )     247       (7 )
Decrease (increase) in assets:
                                       
Accounts receivable
    116       735       (376 )     (503 )     (1,005 )
Inventories
    (164 )     (69 )     (21 )     (699 )     (228 )
Advanced pay to energy suppliers
    (147 )     (139 )     (142 )     (259 )     (468 )
Others
    (114 )     (731 )     327       (462 )     (931 )
Increase (decrease) in liabilities:
                                       
Suppliers and contractors
    941       (291 )     365       787       401  
Payroll and related charges
    55       55       93       137       84  
Taxes and Contributions
    (422 )     1,265       (980 )     678       591  
Others
    (795 )     (350 )     216       453       (102 )
Net cash provided by operating activities
    2,581       3,214       3,280       10,028       10,468  
Cash flow from investing activities:
                                       
Loans and advances receivable
    (17 )     89       66       81       123  
Guarantees and deposits
    (66 )     (84 )     (43 )     (256 )     (217 )
Additions to investments
    (184 )     (31 )     (24 )     (289 )     (273 )
Additions to property, plant and equipment
    (2,256 )     (2,464 )     (3,099 )     (6,014 )     (9,245 )
Net cash for acquisition and investrment on subsidiaries
                (1,621 )           (1,621 )
Proceeds from disposals of investments/property, plant and equipment
    472       301       37       1,736       348  
Net cash used in investing activities
    (2,051 )     (2,190 )     (4,683 )     (4,742 )     (10,884 )
Cash flows from financing activities:
                                       
Short-term debt, net issuances (repayments)
    (263 )     (435 )     (145 )     (203 )     111  
Long-term debt
    606       26       3,406       3,669       4,500  
Financial institutions
    (1,639 )     (370 )     (334 )     (4,693 )     (2,319 )
Interest attributed to stockholders
    (1,480 )           (1,810 )     (2,271 )     (3,090 )
Net cash used in financing activities
    (2,774 )     (779 )     1,117       (3,498 )     (798 )
Increase (decrease) in cash and cash equivalents
    (2,244 )     245       (286 )     1,788       (1,214 )
Cash and equivalents, beginning of period
    6,161       2,744       2,989       2,129       3,917  
Cash and equivalents, end of period
    3,917       2,989       2,703       3,917       2,703  
Cash paid during the period for:
                                       
Interest on short-term debt
    (14 )     (10 )     (18 )     (52 )     (49 )
Interest on long-term debt
    (199 )     (196 )     (135 )     (913 )     (686 )
Paid income tax and social contribution
    (171 )     (469 )     (173 )     (318 )     (1,231 )
Non-cash transactions:
                                       
Additions to property, plant and equipment — interest capitalization
    138       120       (123 )     123       372  
Income tax and social contribution paid with credits
          (64 )     (315 )     (311 )     (483 )
(4q05 GRAPHIC)

 


Table of Contents

BR GAAP

 
 
“This communication may include declarations which represent the expectations of the Company’s Management about future results or events. All such declarations, when based on future expectations and not on historical facts, involve various risks and uncertainties. The Company cannot guarantee that such declarations turn out to be correct. Such risks and uncertainties include factors relative to the Brazilian economy and capital markets, which are volatile and may be affected by developments in other countries; factors relative to the iron ore business and its dependence on the steel industry, which is cyclical in nature; and factors relative to the high degree of competitiveness in industries in which CVRD operates. To obtain additional information on factors which could cause results to be different from those estimated by the Company, please consult the reports filed with the Comissão de Valores Mobiliários (CVM — Brazilian stock exchange regulatory authority) and the U.S. Securities and Exchange Commission — SEC, including the most recent Annual Report — CVRD Form 20F.”


(4q05 GRAPHIC)

 


Table of Contents

(CVRD LOGO)
CONTENTS
       
    3  
    3  
    4  
    5  
    6  
    7  
    8  
    9  
    9  
    9  
    9  
    9  
    9  
    10  
    10  
    10  
    11  
    11  
    12  
    13  
    13  
    15  
    18  
    19  
    20  
    21  
    24  
    24  
    24  
    25  
    26  
    27  
    29  
    30  
    31  
    32  
    32  
    32  
    34  
    35  
    36  
    37  
    38  
         
    CVRD    

1


Table of Contents

(CVRD LOGO)
         
    38  
    38  
    38  
       
    40  
    40  
    40  
    40  
    40  
    40  
    40  
    42  
    44  
    44  
    44  
    44  
    44  
    44  
    45  
    45  
    45  
    45  
    45  
    46  
    47  
    48  
         
    CVRD    

2


Table of Contents

(CVRD LOGO)
A— Financial Statements
(A free translation of the original in Portuguese relating to the Financial Statements prepared in accordance with the requirements of Accounting Practices Generally Accepted in Brazil)
1— Balance Sheet
                                         
December 31   In millions of reais  
            Consolidated     Parent Company  
    Notes     2005     2004     2005     2004  
Assets
                                       
Current assets
                                       
Cash and cash equivalents
    7.8       2,703       3,917       131       306  
Accounts receivable from customers
    7.9       4,183       3,076       2,038       1,850  
Related parties
    7.11       134       73       778       589  
Inventories
    7.10       3,235       2,894       1,127       870  
Taxes to recover or offset
    7.12       986       801       492       414  
Deferred income tax and social contribution
    7.13       428       428       334       347  
Other
          902       643       306       253  
 
                               
 
            12,571       11,832       5,206       4,629  
 
                               
Non-current assets
                                       
Long-term receivables
                                       
Related parties
    7.11       6       109       459       587  
Loans and financing
          143       150       107       106  
Deferred income tax and social contribution
    7.13       1,043       1,058       421       523  
Judicial deposits
    7.17       1,667       1,680       1,030       1,147  
Taxes to recover or offset
    7.12       313       185       170       98  
Asset for sale
          54       111              
Advances to energy suppliers
    7.5 (f)     727       259              
Provision for derivatives
    7.25       2       9       2       9  
Other
          280       257       8       28  
 
                               
 
            4,235       3,818       2,197       2,498  
 
                               
Investments
    7.14       2,814       2,830       17,834       12,975  
Property, plant and equipment
    7.15       33,768       24,798       20,761       15,246  
Deferred charges
          206       203              
 
                               
 
            36,788       27,831       38,595       28,221  
 
                               
 
            53,594       43,481       45,998       35,348  
 
                               
Liabilities and stockholders’ equity
                                       
Current liabilities
                                       
Short-term debt
    7.16       517       515              
Current portion of long-term debt
    7.16       2,940       2,526       882       670  
Payable to suppliers and contractors
          2,684       1,972       1,768       1,516  
Related parties
    7.11       81       106       3,609       2,043  
Payroll and related charges
          542       399       424       288  
Pension Plan — Valia
    7.19       70       91       70       91  
Proposed dividends and interest on stockholders’ equity
    7.23       2,907       1,557       2,750       1,279  
Taxes and contributions
          909       1,286       68       527  
Other
          1,017       874       490       379  
 
                               
 
            11,667       9,326       10,061       6,793  
 
                               
Non-current liabilities
                                       
Long-term liabilities
                                       
Long-term debt
    7.16       9,066       9,045       2,146       2,911  
Related parties
    7.11       3       41       5,701       3,784  
Provisions for contingencies
    7.17       3,183       2,604       2,503       1,953  
Pension Plan — Valia
    7.19       563       570       563       570  
Provision for environmental liabilities
    7.18       549       354       336       255  
Provisions for derivatives
    7.25       610       441       63       64  
Other
          941       889       573       848  
 
                               
 
            14,915       13,944       11,885       10,385  
 
                               
Deferred income
          9       10              
 
                               
Minority interest
          2,951       2,031              
 
                               
Stockholders’ equity
                                       
Paid-up capital
    7.20       14,000       7,300       14,000       7,300  
Revenue reserves
          10,052       10,870       10,052       10,870  
 
                               
 
            24,052       18,170       24,052       18,170  
 
                               
 
            53,594       43,481       45,998       35,348  
 
                               
The additional information, notes and attachment I are an integral part of the financial statements.
         
    CVRD    

3


Table of Contents

(CVRD LOGO)
(A free translation of the original in Portuguese relating to the Financial Statements prepared in accordance with the requirements of Accounting Practices Generally Accepted in Brazil)
2— Statement of Income
                                                                 
Years ended December 31   In millions of reais  
                  Consolidated     Parent Company  
            (Unaudited)     Quarter     Accumulated     Accumulated  
    Notes     4Q/05     3Q/05     4Q/04     2005     2004     2005     2004  
 
    12.1.1                                                          
Operating revenues
                                                               
Sales of ore and metals
  and 12.2.1                                                        
Iron ore and pellets
            6,362       6,107       4,131       23,438       15,626       14,921       11,198  
Manganese and ferroalloys
            272       275       594       1,488       2,084              
Copper
            294       214       324       937       592       773       592  
Potash
            92       111       98       359       362       359       362  
Kaolin
            114       98       113       428       468              
 
                                                 
 
            7,134       6,805       5,260       26,650       19,132       16,053       12,152  
Transport services
            781       938       789       3,291       3,025       1,801       1,556  
Sales of aluminum-related products
            933       956       1,090       3,857       4,055       189       26  
Sales of steel products
            338       340       623       1,509       2,731              
Other products and services
            18       3       22       43       77       55       51  
 
                                                 
 
            9,204       9,042       7,784       35,350       29,020       18,098       13,785  
Value Added taxes
            (288 )     (237 )     (400 )     (1,357 )     (1,476 )     (1,004 )     (697 )
 
                                                 
Net operating revenues
            8,916       8,805       7,384       33,993       27,544       17,094       13,088  
 
                                                 
 
 
    12.1.2                                                          
Cost of products and services
                                                               
Ores and metals
  and 12.2.2     (2,945 )     (2,616 )     (2,350 )     (10,585 )     (8,528 )     (8,833 )     (6,640 )
Transport services
            (535 )     (511 )     (498 )     (1,977 )     (1,805 )     (637 )     (479 )
Aluminum-related products
            (626 )     (642 )     (571 )     (2,361 )     (2,013 )     (111 )     (16 )
Steel products
            (295 )     (333 )     (411 )     (1,364 )     (1,738 )            
Other products and services
            (6 )     (6 )     (7 )     (24 )     (39 )     (22 )     (12 )
 
                                                 
 
            (4,407 )     (4,108 )     (3,837 )     (16,311 )     (14,123 )     (9,603 )     (7,147 )
 
                                                 
Gross profit
            4,509       4,697       3,547       17,682       13,421       7,491       5,941  
 
                                                               
Gross margin
            50.6 %     53.3 %     48.0 %     52.0 %     48.7 %     43.8 %     45.4 %
 
                                                               
Operating expenses
                                                               
 
Selling
            (54 )     (90 )     (97 )     (340 )     (412 )     (3 )     (25 )
Administrative
            (382 )     (333 )     (362 )     (1,280 )     (1,125 )     (685 )     (531 )
Research and development
            (209 )     (221 )     (184 )     (672 )     (440 )     (415 )     (349 )
Other operating expenses
            (205 )     (288 )     (371 )     (834 )     (955 )     (235 )     (548 )
Non-recurring item — Samitri’s Goodwill amortization
                                    (183 )           (183 )
 
                                                 
 
            (850 )     (932 )     (1,014 )     (3,126 )     (3,115 )     (1,338 )     (1,636 )
 
                                                 
 
Operating profit before financial results and results of equity investments
            3,659       3,765       2,533       14,556       10,306       6,153       4,305  
Results of equity investments
    7.14       105       14       136       269       156       5,466       3,251  
Gain on investments accounted for by the equity method
            136       84       192       498       408       6,875       3,947  
Amortization of goodwill
            (51 )     (57 )     (57 )     (223 )     (252 )     (223 )     (252 )
Provision for losses
                                          (308 )     (79 )
Exchange variation in stockholders ´equity of companies abroad
            20       (13 )     1       (6 )           (878 )     (365 )
 
Financial results, net
    7.24       (764 )     (320 )     (271 )     (1,276 )     (2,000 )     81       (752 )
 
Sale of assets
                  298       85       298       551             541  
 
                                                 
 
Income before income tax and social contribution
            3,000       3,757       2,483       13,847       9,013       11,700       7,345  
 
Income tax and social contribution
    7.13       (153 )     (764 )     (761 )     (2,368 )     (1,810 )     (1,257 )     (885 )
 
                                                 
 
Income before minority interests
            2,847       2,993       1,722       11,479       7,203       10,443       6,460  
 
Minority interests
            (210 )     (281 )     (195 )     (1,036 )     (743 )            
 
                                                 
 
Net income for the year
            2,637       2,712       1,527       10,443       6,460       10,443       6,460  
 
                                                 
 
Number of shares outstanding at the end of the year (in thousands)
            1,151,520       1,151,520       1,151,520       1,151,520       1,151,520       1,151,520       1,151,520  
 
                                                 
 
Net earnings per share outstanding at the end of the year (R$)
            2.29       2.36       1.33       9.07       5.61       9.07       5.61  
 
                                                 
         
    CVRD    

4


Table of Contents

(CVRD LOGO)
(A free translation of the original in Portuguese relating to the Financial Statements prepared in accordance with the requirements of Accounting Practices Generally Accepted in Brazil)
3- Statement of Changes in Stockholders’ Equity
                                                                                 
Years ended December 31   In millions of reais  
                    Revenue reserves              
            Paid-up     Expansion/             Unrealized             Fiscal     Treasury     Retained        
    Notes     capital     Investments     Depletion     income     Legal     incentives     stock     earnings     Total  
December 31, 2003
            6,300       6,039       1,004       557       1,081       90       (131 )           14,940  
 
                                                             
 
Capitalization of reserves
            1,000       (910 )                       (90 )                  
Realization of reserves
                              (211 )                       211        
Net income for the year
                                                      6,460       6,460  
Interim interest on stockholders’ equity
                                                      (1,671 )     (1,671 )
Interim dividends
                                                      (280 )     (280 )
Additional remuneration proposed
                                                      (1,279 )     (1,279 )
Appropriation to revenue reserves
                  3,077                   323       41             (3,441 )      
 
                                                             
 
            7,300       8,206       1,004       346       1,404       41       (131 )           18,170  
 
                                                             
December 31, 2004
                                                                               
Net income for the year
                                                      10,443       10,443  
Capitalization of reserves
            6,700       (5,129 )     (1,004 )           (526 )     (41 )                  
Realization of reserves
                              (109 )                       109        
Appropriations:
                                                                               
Interim interest on stockholders’ equity
    7.23                                                 (783 )     (783 )
Interim dividends
    7.23                                                 (1,028 )     (1,028 )
Additional remuneration proposed
    7.23                                                 (2,750 )     (2,750 )
Appropriation to revenue reserves
    7.23             5,386                   522       83             (5,991 )      
 
                                                             
December 31, 2005
            14,000       8,463             237       1,400       83       (131 )           24,052  
 
                                                             
The notes and attachment I are an integral part of the financial statements.
         
    CVRD    

5


Table of Contents

(CVRD LOGO)
(A free translation of the original in Portuguese relating to the financial statements prepared in accordance with the requirements of Brazilian Corporate Law)
4- Statement of Changes in Financial Position
                                 
Years ended December 31   In millions of reais  
    Consolidated     Parent Company  
    2005     2004     2005     2004  
Funds were provided by:
                               
Net income for the year
    10,443       6,460       10,443       6,460  
Expenses (income) not affecting working capital:
                               
Result of equity investments
    (269 )     (156 )     (5,466 )     (3,251 )
Dividends/interest on stockholders’ equity
    151       66       1,441       974  
Depreciation, amortization and depletion
    1,615       1,406       869       704  
Deferred income tax and social contribution
    (442 )     324       102       218  
Disposal of investments
    298       1,701             1,267  
Result on sale of assets
    (298 )     (551 )           (541 )
Net monetary and exchange rate variations on long-term assets and liabilities
    (1,035 )     (554 )     (586 )     145  
Disposal of property, plant and equipment
    123       17       20       5  
Amortization of goodwill in the cost of products sold
    379       384       379       384  
Non recurring item — goodwill of Samitri
          183             183  
Net unrealized derivative losses
    416       368       31       22  
Minority interests
    1,036       743              
Others
    706       503       729       317  
 
                       
 
Total funds from operations
    13,123       10,894       7,962       6,887  
 
Loans to related parties, transferred to current assets
    234       43       138       162  
Loans and financing obtained
    4,489       3,664       813       1,106  
Loans from related parties
    11       36       3,392       798  
Others
    444       793       89       136  
 
                       
 
Total funds provided
    18,301       15,430       12,394       9,089  
 
                       
 
                               
Funds were used for:
                               
Long-term debt transferred to current liabilities
    3,187       3,785       2,180       1,902  
Related parties
    13       62       283       79  
Additions to permanent assets
    9,048       5,891       6,366       3,774  
Capital subscription in subsidiary and affiliated companies
    1,893       289       1,219       798  
Dividends/interest on stockholders’ equity
    4,561       3,230       4,561       3,230  
Guarantees and deposits
    217       256       107       163  
Advances to energy suppliers
    468       259              
Others
    516       164       369       68  
 
                       
 
Total funds used
    19,903       13,936       15,085       10,014  
 
                       
Increase (decrease) in working capital
    (1,602 )     1,494       (2,691 )     (925 )
 
                       
 
                               
Changes in working capital are as follows:
                               
 
                               
Current assets:
                               
At the end of the year
    12,571       11,832       5,206       4,629  
At the beginning of the year
    11,832       8,709       4,629       4,009  
 
                       
 
    739       3,123       577       620  
 
                       
 
                               
Current liabilities:
                               
At the end of the year
    11,667       9,326       10,061       6,793  
At the beginning of the year
    9,326       7,697       6,793       5,248  
 
                       
 
    2,341       1,629       3,268       1,545  
 
                       
Increase (decrease) in working capital
    (1,602 )     1,494       (2,691 )     (925 )
 
                       
The notes and attachment I are an integral part of the financial statements.
         
    CVRD    

6


Table of Contents

(CVRD LOGO)
(A free translation of the original in Portuguese relating to the Financial Statements prepared in accordance with the requirements of Accounting Practices Generally Accepted in Brazil)
5- Statement of Cash Flows
                                                         
Years ended December 31   In millions of reais  
    Consolidated     Parent Company  
    (Unaudited)     Quarter     Accumulated     Accumulated  
    4Q/05     3Q/05     4Q/04     2005     2004     2005     2004  
Cash flows from operating activities:
                                                       
Net income for the year
    2,637       2,712       1,527       10,443       6,460       10,443       6,460  
Adjustments to reconcile net income for the year with cash provided by operating activities:
                                                       
Results of equity investments
    (105 )     (14 )     (136 )     (269 )     (156 )     (5,466 )     (3,251 )
Sale of assets
          (298 )     (85 )     (298 )     (551 )           (541 )
Depreciation, amortization and depletion
    446       400       356       1,615       1,406       869       704  
Deferred income tax and social contribution
    (201 )     (283 )     1,141       (545 )     873       114       269  
Financial expenses and monetary and exchange rate variations on assets and liabilities, net
    437       (420 )     (342 )     (919 )     (144 )     (542 )     106  
Minority interest
    210       281       195       1,036       743              
Disposal of property, plant and equipment
    46       1       1       123       17       20       5  
Amortization of goodwill in the cost of products sold
    92       95       96       379       384       379       384  
Non recurring item — goodwill of Samitri
                            183             183  
Net losses on derivatives
    252       169       174       416       368       31       22  
Dividends/interest on stockholders’ equity received
    4       59       30       151       66       1,554       716  
Others
    (20 )     37       154       (6 )     247       7       (22 )
 
                                         
 
    3,798       2,739       3,111       12,126       9,896       7,409       5,035  
 
                                         
Decrease (increase) in assets:
                                                       
Accounts receivable
    (376 )     735       116       (1,005 )     (503 )     (188 )     (663 )
Inventories
    (21 )     (69 )     (164 )     (228 )     (699 )     (193 )     (317 )
Advances to energy suppliers
    (142 )     (139 )     (147 )     (468 )     (259 )            
Others
    327       (731 )     (114 )     (931 )     (462 )     (488 )     8  
 
                                         
 
    (212 )     (204 )     (309 )     (2,632 )     (1,923 )     (869 )     (972 )
 
                                         
Increase (decrease) in liabilities:
                                                       
Suppliers and contractors
    365       (291 )     941       401       787       252       705  
Payroll and related charges and others
    93       55       55       84       137       77       66  
Taxes and contributions
    (980 )     1,265       (422 )     591       678       277       673  
Others
    216       (350 )     (795 )     (102 )     453       (65 )     213  
 
                                         
 
    (306 )     679       (221 )     974       2,055       541       1,657  
 
                                         
Net cash provided by operating activities
    3,280       3,214       2,581       10,468       10,028       7,081       5,720  
 
                                         
 
Cash flows from investing activities:
                                                       
Loans and advances receivable
    66       88       (17 )     123       81       (202 )     318  
Guarantees and deposits
    (43 )     (84 )     (66 )     (217 )     (256 )     (107 )     (163 )
Additions to investments
    (23 )     (31 )     (184 )     (272 )     (289 )     (1,219 )     (798 )
Additions to property, plant and equipment
    (3,099 )     (2,464 )     (2,256 )     (9,245 )     (6,014 )     (6,461 )     (3,810 )
Net cash used in acquisitions and increase of funds to subsidiaries
    (1,621 )                 (1,621 )                  
Proceeds from disposal of property, plant and equipment/investments
    37       301       472       348       1,736       49       1,268  
 
                                         
Net cash used in financing activities
    (4,683 )     (2,190 )     (2,051 )     (10,884 )     (4,742 )     (7,940 )     (3,185 )
 
                                         
 
Cash flows from financing activities:
                                                       
Short-term debt
    (145 )     (435 )     (263 )     111       (203 )     784       (308 )
Long-term debt
    3,406       26       606       4,500       3,669       4,205       2,380  
Repayments:
                                                       
Related parties
                                  (266 )     (475 )
Financial institutions
    (334 )     (370 )     (1,639 )     (2,319 )     (4,693 )     (949 )     (1,897 )
Interest on stockholders’ equity payed to stockholders
    (1,810 )           (1,478 )     (3,090 )     (2,271 )     (3,090 )     (2,271 )
 
                                         
Net cash used in financing activities
    1,117       (779 )     (2,774 )     (798 )     (3,498 )     684       (2,571 )
 
                                         
Increase (decrease) in cash and cash equivalents
    (286 )     245       (2,244 )     (1,214 )     1,788       (175 )     (36 )
Cash and cash equivalents, beginning of the year
    2,989       2,744       6,161       3,917       2,129       306       342  
 
                                         
Cash and cash equivalents, end of the year
    2,703       2,989       3,917       2,703       3,917       131       306  
 
                                         
Cash paid during the year for:
                                                       
Short-term interest
    (18 )     (10 )     (14 )     (49 )     (52 )     (11 )     (5 )
Long-term interest
    (135 )     (196 )     (199 )     (686 )     (913 )     (284 )     (340 )
Income tax and social contribution
    (173 )     (469 )     (171 )     (1,231 )     (318 )     (892 )      
Non-cash transactions:
                                                       
Additions to property, plant and equipment — interest capitalization
    (123 )     120       138       372       123       96       35  
Transfer of advance for future capital increase to investments
                                  (1,009 )      
Compensated income tax and social contribution
    (315 )     (64 )           (483 )     (311 )     (261 )      
The notes and attachment I are an integral part of the financial statements.
         
    CVRD    

7


Table of Contents

(CVRD LOGO)
(A free translation of the original in Portuguese relating to the Financial Statements prepared in accordance with the requirements of Accounting Practices Generally Accepted in Brazil)
6— STATEMENT OF VALUE ADDED
                                                                 
Years ended December 31   In millions of reais  
    Consolidated     Parent Company  
    2005     %     2004     %     2005     %     2004     %  
Generation of Value Added
                                                               
 
Gross revenue
    35,350       100       29,020       100       18,098       100       13,785       100  
 
Less: Acquisition of products
    (2,239 )     (6 )     (2,755 )     (9 )     (1,897 )     (10 )     (1,368 )     (11 )
Outsourced services
    (3,784 )     (11 )     (4,156 )     (14 )     (2,356 )     (13 )     (2,005 )     (15 )
Materials
    (3,125 )     (9 )     (2,497 )     (9 )     (1,891 )     (10 )     (1,453 )     (12 )
Fuel oil and gas
    (1,829 )     (5 )     (1,698 )     (6 )     (868 )     (5 )     (848 )     (6 )
Research and development, selling and administrative
    (1,142 )     (3 )     (764 )     (3 )     (491 )     (3 )     (432 )     (3 )
Other operating expenses
    (2,822 )     (8 )     (2,207 )     (8 )     (706 )     (4 )     (782 )     (6 )
 
                                               
 
Gross Value Added
    20,409       58       14,943       51       9,889       55       6,897       47  
 
Depreciation, amortization and depletion
    (1,994 )     (6 )     (1,694 )     (6 )     (1,248 )     (7 )     (1,007 )     (7 )
 
                                               
 
Net Value Added
    18,415       52       13,249       45       8,641       48       5,890       40  
 
                                                               
Received from third parties
                                                               
 
Financial revenue (a)
    (319 )     (1 )     347       1       175       1       102       1  
Results of equity investments
    269       1       156       1       5,466       30       3,251       24  
Results on sale of assets
    298       1       551       2                   541       4  
 
                                               
 
Total Value Added
    18,663       53       14,303       49       14,282       79       9,784       69  
 
                                               
 
                                                               
Distribution of Value Added
                                                               
 
Employees
    1,884       10       1,885       13       1,054       7       901       9  
Government
    4,510       24       2,862       20       2,792       19       1,653       17  
Third parties’ capital (interest and monetary and exchange variances, net) (b)
    790       4       2,353       16       (7 )           770       8  
Stockholders’ remuneration
    4,561       24       3,230       23       5,221       37       3,230       33  
Minority interests
    1,036       6       743       5                          
Retained earnings
    5,882       32       3,230       23       5,222       37       3,230       33  
 
                                               
 
Total Value added distributed
    18,663       100       14,303       100       14,282       100       9,784       100  
 
                                               
The notes and attachment I are an integral part of the financial statements.
 
(a)   Includes monetary and exchange rate variation losses from assets;
 
(b)   Includes monetary and exchange rate variations gains from liabilities.
         
    CVRD    

8


Table of Contents

(CVRD LOGO)
(A free translation of the original in Portuguese relating to the Financial Statements prepared in accordance with the requirements of Accounting, Practices Generally Accepted in Brazil)
7— Notes to the Financial Statements at December 31, 2005 and 2004
Expressed In millions of reais
7.1— Operations
Companhia Vale do Rio Doce is a publicly traded corporation whose predominant activities are mining, processing and sale of iron ore, pellets, copper and potash, as well as logistic services, power generation and mineral research and development. In addition, through its direct and indirect subsidiaries and jointly-controlled companies, CVRD operates in iron ore and pellets, manganese and ferroalloys, kaolin, steel, aluminum-related products and logistics.
7.2— Presentation of Financial Statements
The financial statements have been prepared in conformity with accounting practices adopted in Brazil, based on corporate legislation, as well as the rules and guidelines issued by the Comissão de Valores Mobiliários — CVM (Brazilian Securities Commission) and Instituto dos Auditores Independentes do Brasil — IBRACON (Brazilian Independent Auditors Institute). The quarter financial information to 12/31/05, 09/30/05 and 12/31/04 are unaudited but reviewed by the auditors in accordance to specific rules applied to a review of quarterly information.
7.3— Accounting Pronouncements Recently-issued by Comissão de Valores Mobiliários
(a)   On October 3rd , 2005 CVM issued Deliberation Nº 488, which approved IBRACON Pronouncement NPC 27 on the presentation and disclosure of Financial Statements, whose effectiveness was extended to years ending after 12/31/2005 through Deliberation Nº 496 dated 01/03/06; and
 
(b)   On the same date CVM issued Deliberation Nº 489, which approved IBRACON Pronouncement NPC 22 on provisions, liabilities, contingent liabilities and contingent assets.
 
    CVRD has followed substantially the instructions referred to in the Deliberations and does not expect any significant change when they are finally implemented.
7.4— Principles and Practices of Consolidation
(a)   The consolidated financial statements show the balances of assets and liabilities on December 31, 2005 and 2004 and the operations of the Parent Company, its direct and indirect subsidiaries and its jointly-controlled companies for the years then ended;
 
(b)   Intercompany balances and the Parent Company’s investments in its direct and indirect subsidiaries and jointly-controlled companies were eliminated in the consolidation. Minority interests are shown separately on the balance sheet and statement of income;
 
(c)   In the case of investments in companies in which the control is shared with other stockholders, the components of assets and liabilities and revenues and expenses are included in the consolidated financial statements in proportion to the participation of the Parent Company in the capital of each investee; and
 
(d)   The principal figures of the subsidiaries and jointly-controlled companies included in the consolidation are presented in Attachment I.
7.5- Significant Accounting Policies
(a)   The Company adopts the accrual basis of accounting;
 
(b)   Assets and liabilities that are realizable or due more than twelve months after the financial statements date are classified as non-current;
 
(c)   Marketable securities, classified as cash and cash equivalents are represented by less than 90 days applications and are stated at cost plus accrued income earned to the financial statements date;
 
(d)   Inventories are stated at average purchase or production cost, and imports in transit at the cost of each item, not exceeding market or realizable value;
 
(e)   Assets and liabilities in foreign currencies are translated at exchange rates in effect at the financial statements date, and those in local currency, when applicable, are restated based on contractual indices;
         
    CVRD    

9


Table of Contents

(CVRD LOGO)
(f)   Amounts given in advance to Centrais Elétricas do Norte do Brasil S.A. — Eletronorte due to long term contract to supply of energy, are classified as “Advances to energy suppliers”, in long-term receivables;
 
(g)   Investments in subsidiaries, jointly-controlled companies and affiliated companies are accounted for by the equity method, based on the stockholders’ equity of the investees, and when applicable increased/decreased by goodwill and negative goodwill to be amortized and provision for losses. Other investments are recorded at cost, less provision for losses when applicable. At consolidated the exchange rate effect over stockholders equity from investees abroad are classified as monetary and exchange rate variation included as financial result, net;
 
(h)   Property, plant and equipment, including interest incurred during the construction period of large-scale projects, are recorded at historical cost (increased by monetary restatement up to 1995) and depreciated on the straight-line method, based on the useful lives of the assets. Depletion of mineral reserves is based on the ratio between effective production and estimated capacity;
 
(i)   Research and development costs are incurred as operational expenses until the proof of its economical feasibility to exploit commercially a mine. After this proof, the costs are capitalized as part of the costs of building and constructing of mine;
 
(j)   During the development of a mine, stripping costs registered are capitalized as part of the depreciable cost of building and developing the mine. Post-production stripping costs are recorded as cost of sales;
 
(k)   Pre-operating costs except for financial charges capitalized as mentioned in (h) above, are deferred and amortized over a period of 10 years. The deferred charges (consolidated) refer basically to copper projects and expansion of Alunorte and Albras;
 
(l)   CVRD follows the accounting practices laid down by to Deliberation CVM 371/00 related to the recognition of liabilities and results from actuarial valuation of employees’ pension plan; and
 
(m)   The financial statements of the Parent Company reflect the Board of Directors’ proposal for appropriation of the net income for the year, for the approval of the Annual General Meeting.
7.6- Independent Auditors Policy
The policy concerning independent accountants in relation to non-audit services is based on the maintenance of their independence. According to best practices of corporate governance, all services rendered by independent auditors are pre-approved by the Fiscal Council. During 2005, the amount of non-audit services paid was less than 5% compared to the total fees paid to independent auditors.
7.7- Major Acquisitions and Divestments
(a)   In November and December 2005, CVRD acquired 93.0% and 6.2% of the voting capital of Canico Resource Corp. (Canico) for R$ 1,656 and R$ 112, respectively. Canico is a Public Traded Canadian based junior company, whose principal asset is the participation in Mineração Onça Puma, a pre-operational mineral exploitation company focused on the development of the nickel laterite project.
 
    In February, 2006, CVRD concluded the acquisition of the outstanding common shares of Canico, acquiring the remaining voting capital of Canico, 0.8% of its total capital for R$ 14. CVRD owns 100% of Canico and will dilist it;
 
(b)   In July 2005, CVRD subsidiary Caemi sold the remaining QCM preferred shares to Dofasco Inc. (Dofasco) for R$ 298. The accounting value of the investment had previously been completely written-off and therefore all proceeds were recorded as gain; and
 
(c)   In 2004, CVRD sold the total participation in Companhia Siderúrgica de Tubarão (CST), accounting for a gain of R$ 541.
7.8- Cash and Cash Equivalents
                                 
    Consolidated     Parent Company  
    2005     2004     2005     2004  
Cash and bank accounts
    586       416       10       90  
Marketable securities linked to the interbank deposit certificate rate
    785       1,156       121       216  
Time deposits / overnight investments
    1,332       2,313              
Fixed-yield bond investments (funds)
          25              
Others
          7              
 
                       
 
    2,703       3,917       131       306  
 
                       
         
    CVRD    

10


Table of Contents

(CVRD LOGO)
7.9— Accounts Receivable
                                 
    Consolidated     Parent Company  
    2005     2004     2005     2004  
Domestic
    745       587       736       568  
Export
    3,574       2,622       1,382       1,367  
 
                       
 
    4,319       3,209       2,118       1,935  
Allowance for doubtful accounts
    (101 )     (101 )     (49 )     (55 )
Allowance for ore weight credits
    (35 )     (32 )     (31 )     (30 )
 
                       
 
    4,183       3,076       2,038       1,850  
 
                       
No individual client was responsible for more than 10% of total revenues.
7.10— Inventories
                                 
    Consolidated     Parent Company  
    2005     2004     2005     2004  
Finished products
                               
. Iron ore and pellets
    820       592       413       363  
. Manganese and ferroalloys
    378       389              
. Aluminum
    185       232              
. Steel products
    81       93              
. Copper
    6       7       6       7  
. Others
    47       71       5       5  
 
                       
 
    1,517       1,384       424       375  
 
Spare parts and maintenance supplies
    1,718       1,510       703       495  
 
 
                       
 
    3,235       2,894       1,127       870  
 
                       
         
    CVRD    

11


Table of Contents

(CVRD LOGO)
7.11— Related Parties
Derived from sales and purchases of products and services or from loans under normal market conditions, with maturities up to the year 2013, as follows:
                                                                 
    Consolidated  
    Assets     Liabilities  
    2005     2004     2005     2004  
            Related             Related             Related             Related  
            party -             party -             party -             party -  
    Customers     assets     Customers     assets     Suppliers     liabilities     Suppliers     liabilities  
Nibrasco
    54             37             70       25       21       17  
Hispanobras
    27       15       32             36       12       39       11  
Itabrasco
    27       12       32             16       3       34       3  
Kobrasco
    38       1       25       30       16       15       8       16  
Gulf Industrial Investment Co. — GIIC
    11             14             27                    
Usiminas
    33             21                                
Samarco Mineração S.A
    2             2                                
MRS Logistica
          83       4       26       4       14       4       42  
Baovale Mineração S.A
                            21             18        
Ferroban
                1       102                         22  
Mineração Rio do Norte
          15                   47             32        
Minas da Serra Geral
          3                   9       1              
FVRD
                      6                   1       11  
Nova Era Silicon
          4             4                          
Others
    14       7       27       14       8       4       3       12  
 
                                               
Total
    206       140       195       182       254       84       160       147  
 
                                               
 
                                                               
Registered as:
                                                               
Short-term
    206       134       195       73       254       81       160       106  
Long-term
          6             109             3             41  
 
                                               
 
    206       140       195       182       254       84       160       147  
 
                                               
The principal results arising from commercial and financial transactions carried out by the Parent Company with related parties, classified in the statement of income as revenue and costs of sales and services and financial income and expenses, are as follows:
                                 
    Consolidated  
            Income     Expense / Cost  
    2005     2004     2005     2004  
Baovale Mineração S.A.
                15       14  
California Steel Industries, Inc.
    4       35              
Companhia Siderúrgica de Tubarão — CST
          579              
Gulf Industrial Investment Co.-GIIC
    163       91       3       2  
Companhia Hispano-Brasileira de Pelotização — HISPANOBRÁS
    182       146       347       151  
Companhia Italo-Brasileira de Pelotização — ITABRASCO
    168       125       151       39  
Companhia Coreano-Brasileira de Pelotização — KOBRASCO
    184       135       274       104  
Companhia Nipo-Brasileira de Pelotização — NIBRASCO
    299       218       572       221  
Mineração Rio do Norte S.A.
          1       243       267  
MRS Logística S.A.
    6             657       525  
Samarco Mineração S.A.
    52       24              
Valesul Alumínio S.A.
    66       9              
Usinas Siderúrgicas de Minas Gerais — USIMINAS
    617       394              
Others
    21       1       10       1  
 
                       
 
    1,762       1,758       2,272       1,324  
 
                       
         
    CVRD    

12


Table of Contents

(CVRD LOGO)
7.12— Taxes to recover or offset
                                 
    Consolidated     Parent Company  
    2005     2004     2005     2004  
Withholding income tax on marketable securities and stockholders’ equity received
    64       68       22       36  
Value-added tax
    672       491       481       359  
PIS and COFINS
    230       180       4       90  
IR anticipated
    290       54       127       5  
Others
    43       193       28       22  
 
                       
 
    1,299       986       662       512  
 
                       
Current
    986       801       492       414  
 
                               
Non-Current
    313       185       170       98  
 
                       
 
    1,299       986       662       512  
 
                       
7.13— 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:
                                 
    Net Deferred  
    Consolidated     Parent Company  
    2005     2004     2005     2004  
Tax loss carryforward
    469       558              
 
                       
Temporary differences:
                               
 
. Pension Plan — Valia
    215       247       215       247  
. Contingent liabilities
    677       593       593       536  
. Provision for losses on assets
    131       166       131       156  
. Others
    (21 )     (78 )     (184 )     (69 )
 
                       
 
    1,002       928       755       870  
 
                       
Total
    1,471       1,486       755       870  
 
                       
Short-term
    428       428       334       347  
 
Long-term
    1,043       1,058       421       523  
 
                       
 
    1,471       1,486       755       870  
 
                       
         
    CVRD    

13


Table of Contents

(CVRD LOGO)
The amounts reported as income tax and social contribution, which affected the results for the year, are as follows:
                                                         
    Consolidated     Parent Company  
    (Unaudited) Quarter     Accumulated     Accumulated  
    4Q/05     3Q/05     4Q/04     2005     2004     2005     2004  
Income before income tax and social contribution
    3,000       3,757       2,483       13,847       9,013       11,700       7,345  
Equity in results
    (136 )     (84 )     (192 )     (498 )     (408 )     (6,875 )     (3,947 )
Exchange rate variation on stockholders’ equity
    (20 )     13       (1 )     6             878       365  
Non-deductible goodwill and provision for losses
    49       55       55       213       220       531       220  
Results on sale of assets
          (298 )     (85 )     (298 )     (551 )           (541 )
 
                                         
 
    2,893       3,443       2,260       13,270       8,274       6,234       3,442  
Income tax and social contribution at combined tax rates
    34 %     34 %     34 %     34 %     34 %     34 %     34 %
 
                                         
Federal income tax and social contribution at statutory rates
    (984 )     (1,171 )     (768 )     (4,512 )     (2,813 )     (2,120 )     (1,170 )
Adjustments to net income which modify the effect on the results for the year:
                                                       
. Income tax benefit from interest on stockholders’ equity
    150       116       151       701       577       701       568  
. Fiscal incentives
    5       134       25       250       152       110       41  
. Interest on stockholders’ equity received
                                  (11 )     (48 )
. Results of overseas companies not taxed (bilateral international agreements)
    833       105       175       1,239       464              
. Amortizated negative goodwill — taxed
                (99 )           (99 )           (99 )
. Temporary difference due to capital loss non-deductible
                (176 )           (176 )           (176 )
. Reduced incentive aliquot
    28       38       (7 )     116       62              
. Reversal of provision for losses
                105             105              
. Others
    (185 )     14       (167 )     (162 )     (82 )     63       (1 )
 
                                         
Income tax and social contribution
    (153 )     (764 )     (761 )     (2,368 )     (1,810 )     (1,257 )     (885 )
 
                                         
The deferred assets and liabilities for income tax and social contribution arising from tax losses, negative social contribution bases and temporary differences are recognized from an accounting standpoint considering an analysis of likely future results, based on economic and financial projections prepared based on internal assumptions and macroeconomic, commercial and fiscal scenarios which could change in the future.
These temporary differences will be realized upon the occurrence of the corresponding taxable events, expected to be as follows:
                 
    Net amount of credits  
Years   Consolidated     Parent company  
2006
    428       334  
2007
    289       135  
2008
    268       135  
2009
    130       4  
2010
    124       22  
2011
    77       23  
2012
    76       23  
2013
    23       23  
2014
    23       23  
2015
    33       33  
 
           
 
    1,471       755  
 
           
In addition to the credits recorded, the Company has a lawsuit claiming an additional 51.8% monetary restatement for tax purposes applied to the months of January and February 1989 (“Plano Verão” monetary plan). A favorable ruling has already been obtained for compensation of credits corresponding to 42.7% instead of the 51.8% requested (however, not yet utilized). The amount of these credits covered by the ruling totals approximately R$ 309 and the accounting effects have not yet been recognized in the financial statements.
The company has also a lawsuit claiming the application of PIS and COFINS over other revenues during the effectiveness of article 3º of Law 9718/98 had validity. In November 2005, the Supreme Court (STF) considered not constitutional the referred prevision of the law. The recoverable value in case CVRD wins the case is R$ 458, not yet recognized in the financial statements.
There is no direct relation between the net income of the Company and the income tax and social contribution. Therefore, the projection for the use of tax credits should not be taken as an indication of the company future net income.
The Company has certain tax incentives related to iron ore and manganese operations in Carajás, bauxite in Oriximiná, potash in Rosario do Catete, alumina and aluminum operations in Barcarena and kaolin operations in Ipixuna and Mazagão. The incentives related to iron ore comprise full income tax exemption on defined production levels up to 2005 and for manganese partial exemption up to 2013. The incentive relating to alumina and potash comprise full income tax exemption on defined production levels which expire in 2009 and 2013, respectively,
         
    CVRD    

14


Table of Contents

(CVRD LOGO)
while the partial exemption incentives related to aluminum and kaolin expire in 2013 and bauxite in 2008. An amount equal to the tax saving must be appropriated to a reserve account within stockholders’ equity and may not be distributed to the stockholders.
7.14— Investments — Consolidated and Parent Company
CONSOLIDATED
                                                         
                    Equity Results  
    Investments     (Unaudited) Quarter     Accumulated  
    2005     2004     4Q/05     3Q/05     4Q/04     2005     2004  
Investments in affiliated companies
                                                       
Usinas Siderúrgicas de Minas Gerais S.A. — USIMINAS (a) and (b)
    1,017       759       88       74       171       402       332  
Shandong Yankuang International Company Ltd.
    50       28                                
Henan Longyu Resources Co. Ltd.
    225             23                   23        
Goodwill of consolidated companies
    1,418       1,997       (51 )     (57 )     (57 )     (223 )     (252 )
Others
    7       8       17       (11 )                  
Investments at cost
                                                       
SIDERAR Sociedad Anonima Industrial Y Comercial (a)
    35       40                                
Quadrem International Holdings Ltd.
    11       12                                
Others
    51       (14 )     28       8       22       67       76  
 
                                         
 
    2,814       2,830       105       14       136       269       156  
 
                                         
 
(a)   Interest at market price — Usiminas R$ 1,324 and Siderar R$ 332;
 
(b)   Dividends received from Usiminas in 2005, R$ 144.
         
    CVRD    

15


Table of Contents

(CVRD LOGO)
PARENT COMPANY
                                                                 
            Adjusted     Adjusted net                             Results of equity     Dividends  
    Partici-     stockholders’     income (loss) for             Investments             investments     received  
    tion %     equity     the year     31/12/05     31/12/04     31/12/05     31/12/04     2005  
Iron ore and pellets
                                                               
Caemi Mineração e Metalurgia S.A. (e, g)
    60.23       2,882       1,759       1,415       654       1,005       333        
Goodwill of Caemi
                      1,005       1,147       (142 )     (142 )      
KOBRASCO
    50.00       188       121       94       34       61       31        
HISPANOBRÁS
    50.89       112       136       57       58       69       22       48  
ITABRASCO
    50.90       102       108       52       46       55       14       23  
NIBRASCO
    51.00       269       181       137       82       92       39       45  
CVRD Overseas Ltd. (a)
    100.00       646       660       646       621       660       235        
Gulf Industrial Investment Co. — GIIC (a)
    50.00       289       315       144       120       157       42        
ITACO/ RDE (a)
    100.00       5,102       2,176       5,102       2,282       2,176       210        
Minas da Serra Geral S.A. — MSG (g)
    50.00       99       (9 )     50       47       (4 )     (8 )      
Samarco Mineração S.A. (g)
    50.00       887       1,229       443       285       615       350       522  
Companhia Portuária da Baía de Sepetiba
    100.00       248       83       248       223       83       63       58  
Others
                      281       248       30       40        
Incorporated companies (c)
                      379       757                    
Goodwill of other companies
                      35       19       (10 )     (10 )     30  
 
                                                     
 
                            10,088       6,623       4,847       1,219       726  
Manganese and ferroalloys
                                                               
Rio Doce Manganèse Europe — RDME (a)
    100.00       204       (76 )     204       280       (76 )     92        
Rio Doce Manganês S.A. (g)
    100.00       634       58       634       867       58       321       296  
Goodwill of Rio Doce Manganês
                            71       (71 )     (75 )      
Urucum Mineração S.A. (g)
    100.00       47       20       47       46       20       15       39  
Others
                      36       112       (54 )     142       22  
 
                                                     
 
                            921       1,376       (123 )     495       357  
Non-ferrous
                                                               
Cadam S. A. (g)
    37.03       343       (28 )     127             (10 )            
Pará Pigmentos S.A. (g)
    49.41       111       (9 )     55       60       (5 )     25        
Ferro-Gusa Carajás (g)
    77.97       123       (14 )     96       107       (11 )            
Salobo Metais S.A. (f, g)
    100.00       262             262       233                    
Advanced for capital increase — Salobo Metais
                      12       26                    
Others
                      (1 )     (3 )     (2 )     (31 )     1  
 
                                                     
 
                            551       423       (28 )     (6 )     1  
Logistics
                                                               
Ferrovia Centro-Atlântica S.A. (g)
    100.00       (121 )     (160 )     (121 )     39       (160 )     (95 )      
Advanced for capital increase — Ferrovia Centro-Atlântica S.A.
                      1,525       531                    
MRS Logística S.A. (b,g)
    29.35       629       410       185       121       120       72       9  
DOCENAVE (g)
    100.00       322       86       322       242       86       92       6  
TVV — Terminal de Vila Velha S.A. (g)
    99.89       80       20       80       71       20       16       11  
CPP Participações
    100.00       (14 )     2       (14 )     (16 )     2       (1 )      
Goodwill of CPP Participações
                                        (23 )      
Others
                      (14 )     (11 )     (1 )            
 
                                                     
 
                            1,963       977       67       61       26  
Steel
                                                               
California Steel Industries, Inc — CSI (a)
    50.00       749       59       374       411       29       95        
CST (d)
                                        325        
Rio Doce Limited (a)
    100.00       312             312       313                    
USIMINAS (e)
    11.46       8,870       3,505       1,017       759       402       332       144  
Others
                      46             (5 )            
 
                                                     
 
                            1,749       1,483       426       752       144  
Aluminum
                                                               
ALBRAS — Alumínio Brasileiro S.A.
    51.00       1,131       178       577       549       91       226       103  
ALUNORTE — Alumina do Norte do Brasil S.A.
    57.03       2,084       334       1,188       934       190       244       14  
Itabira Rio Doce (ITACO) (a)
                                  130       28        
Mineração Rio do Norte S.A. (g)
    40.00       932       425       373       348       170       191       143  
Valesul Alumínio S.A. (g)
    54.51       254       2       139       149       1       41       20  
 
                                                     
 
                            2,277       1,980       582       730       280  
Others
                                                               
DOCEPAR S.A. (g)
    100.00       43       5       43       39       5       13        
Quadrem International Holdings Ltd
    9.00                   11       12       (1 )     (1 )      
Florestas Rio Doce S.A.
    100.00       54       (12 )     54       78       (12 )     2       13  
Henan Longyu Energy Resources Co. Ltd (a)
    25.00       899       120       225             30       2        
Tethys Mining LLC (a)
    100.00       (3 )     (15 )     (3 )           (15 )            
Compagnie Miniere Trois Riviere — CMTR (a,g)
    100.00       4       (48 )     4             (48 )            
Compañia Minera Andino-Brasileira Ltd-CMAB (a)
    100.00             (4 )                 (4 )     (17 )      
Compañia Minera Latino Americana — CMLA (a)
    100.00             (45 )           (3 )     (45 )     (14 )      
Rio Doce South Africa (a)
    100.00       6       (54 )     6             (54 )            
Rio Doce Moçambique (a)
    100.00       5       (14 )     5             (14 )            
Rio Doce Argentina (a)
    100.00       7       (2 )     7             (2 )            
Gevale-Indústria Mineira Ltda. (a,g)
    51.00       3       (9 )     1             (5 )            
Rio Doce Austrália Pty Ltd. (a)
    100.00       5       (15 )     5             (15 )            
CVRD Holdings GMBh (a)
    100.00       (103 )     (103 )     (103 )           (103 )            
Shandong Yankuang International Coking Co. Ltd. (a)
    25.00       201       (17 )     50             (4 )            
Others
                      (35 )     (28 )     (18 )     15       7  
Advances for capital increase — other companies
                      15       15                    
 
                                                     
 
                            285       113       (305 )           20  
 
                                                     
 
                            17,834       12,975       5,466       3,251       1,554  
 
                                                     
 
(a)   The net equity of companies located abroad is converted into local currency at rates in effect on the financial statements date. The equity method comprises the difference due to the exchange rate variations as well as participation in results;
 
(b)   CVRD’s interest in MRS Logística S.A is held directly and indirectly through Caemi Mineração e Metalurgia S.A:
 
(c)   Merged companies (Ferteco, Socoimex e Samitri) — amortization of goodwill recorded in the cost of products sold of the Parent Company;
 
(d)   Companies sold;
 
(e)   Investments in companies that were listed on stock exchanges in 2005. The market value of these investments does not necessarily reflect the value that could be realized from selling a representative group of shares:
 
(f)   Companies in pre-operating phase;
 
(g)   Audited by our independent auditors.
         
    CVRD    

16


Table of Contents

(CVRD LOGO)
7.15- Property, Plant and Equipment
(a)   By type of asset:
                                                                         
                            Consolidated                     Parent Company  
                            2005     2004                     2005     2004  
    Average                                                          
    deprecia-             Accumulated                             Accumulated              
    tion rates     Cost     depreciation     Net     Net     Cost     depreciation     Net     Net  
Buildings
    2.82 %     2,929       (1,148 )     1,781       1,981       1,942       (729 )     1,213       1,068  
Installations
    3.69 %     13,734       (4,563 )     9,171       7,029       7,695       (3,008 )     4,687       3,492  
Equipment
    9.52 %     6,557       (3,042 )     3,515       2,652       2,454       (927 )     1,527       759  
Information Technology Equipment
    20.00 %     1,118       (436 )     682       177       936       (311 )     625       138  
Railroads
    3.87 %     7,646       (3,170 )     4,476       3,359       7,799       (3,182 )     4,617       3,216  
Mineral rights (*)
    1.84 %     1,995       (849 )     1,146       986       1,323       (175 )     1,148       908  
Others
    14.50 %     3,865       (1,982 )     1,883       1,170       1,760       (748 )     1,012       703  
 
                                                       
 
            37,844       (15,190 )     22,654       17,354       23,909       (9,080 )     14,829       10,284  
Construction in progress
          11,114             11,114       7,444       5,932             5,932       4,962  
 
                                                       
Total
            48,958       (15,190 )     33,768       24,798       29,841       (9,080 )     20,761       15,246  
 
                                                       
 
(*)   Calculated as a function of the volume of ore extracted in relation to the proven and probable reserves.
(b)   By business area:
                                 
                            Consolidated  
                    2005     2004  
            Accumulated              
    Cost     depreciation     Net     Net  
Ferrous
                               
 
                               
Iron Ore
    19,946       (8,690 )     11,256       8,262  
Pelletizing
    2,827       (1,382 )     1,445       1,247  
Manganese and ferroalloys
    1,121       (566 )     555       486  
Energy
    908       (70 )     838       491  
Construction in Progress
    4,983             4,983       4,254  
 
                       
 
    29,785       (10,708 )     19,077       14,740  
 
                       
Non — Ferrous
                               
 
                               
Potash
    398       (102 )     296       89  
Gold
    6       (2 )     4       5  
Copper
    1,712       (237 )     1,475       1,350  
Kaolin
    740       (303 )     437       385  
Research and development
    100       (63 )     37       33  
Construction in Progress
    1,328             1,328       1,581  
 
                       
 
    4,284       (707 )     3,577       3,443  
 
                       
Logistics
                               
 
                               
Maritime
    19       (10 )     9       9  
Ports
    939       (350 )     589       428  
Railroad
    1,966       (413 )     1,553       958  
Construction in Progress
    232             232       277  
 
                       
 
    3,156       (773 )     2,383       1,672  
 
                       
Holdings
                               
 
                               
Aluminum
    5,366       (2,337 )     3,029       3,181  
Steel
    840       (392 )     448       305  
Others
    4             4       4  
Construction in Progress
    3,963             3,963       935  
 
                       
 
    10,173       (2,729 )     7,444       4,425  
 
                       
Corporate Center
                               
 
                               
Corporate
    952       (273 )     679       122  
Construction in Progress
    608             608       396  
 
                       
 
    1,560       (273 )     1,287       518  
 
                       
Total
    48,958       (15,190 )     33,768       24,798  
 
                       
         
    CVRD    

17


Table of Contents

(CVRD LOGO)
7.16- Loans and Financing
Short — Term
                 
            Consolidated  
    2005     2004  
Trade finance
    354       254  
Working capital
    163       261  
 
           
 
    517       515  
 
           
Long — Term
                                                                 
                    Consolidated                     Parent Company  
    Current liabilities     Long-term liabilities     Current liabilities     Long-term liabilities  
    2005     2004     2005     2004     2005     2004     2005     2004  
Foreign operations
                                                               
 
                                                               
Loans and financing in:
                                                               
U.S. dollars
    2,013       1,345       4,040       3,233       775       545       1,903       2,669  
Other currencies
    8       11       36       65       8       11       36       57  
Notes in U.S. dollars
    101       93       2,836       2,628                          
Export securitization
    191       146       805       1,130                          
Perpetual notes
                176       174                          
Accrued charges
    74       213                   46       34              
 
                                               
 
    2,387       1,808       7,893       7,230       829       590       1,939       2,726  
 
                                               
 
                                                               
Local operations
                                                               
 
                                                               
Indexed by TJLP, TR and IGP-M
    175       168       290       392       46       20       187       39  
Basket of currencies
    4       21       20       111       4       11             1  
Loans in U.S. dollars
    318       471       531       996       1       48       20       144  
Non-convertible debentures
    1             330       311       1                   1  
Accrued charges
    55       58       2       5       1       1              
 
                                               
 
    553       718       1,173       1,815       53       80       207       185  
 
                                               
 
    2,940       2,526       9,066       9,045       882       670       2,146       2,911  
 
                                               
(a)   Foreign currency loans and financing were converted into reais at exchange rates effective on the financial statements date, being US$ 1.00 = R$ 2.3407 in 2005 (R$ 2.6544 in 2004) and ¥ 1.00 = R$ 0.019833 in 2005 (R$ 0.025935 in 2004);
 
(b)   At December 31, 2005, our consolidated debt was secured as follows:
    Loans guaranteed by the Federal Government, to which we gave counter-guarantees of R$ 317;
 
    Securitization program of R$ 1,007;
 
    Property, plant and equipment of R$ 287;
 
    Others assets R$ 765.
(c)   Amortization of principal and financing charges incurred on long-term loans and financing obtained abroad and domestically mature as follows, as of 2005:
                                 
    Consolidated     Parent Company  
2007
    844       9 %     460       21 %
2008
    1,172       13 %     460       21 %
2009
    1,084       12 %     402       19 %
2010 onward
    5,460       60 %     824       39 %
No due date (perpetual notes and debentures)
    506       6 %            
 
    9,066       100 %     2,146       100 %
(d)   Long-term foreign and domestic loans and financing are subject to annual interest rates (plus exchange rate and monetary variation) in 2005 as follows:
         
    CVRD    

18


Table of Contents

(CVRD LOGO)
                                 
    Consolidated     Parent Company  
Long-term
                               
Up to 3%
    184       2 %     1        
3.1 to 5%
    4,427       37 %     1,436       47 %
5.1 to 7%
    2,782       23 %     965       32 %
7.1 to 9%
    4,067       34 %     575       19 %
9.1 to 11%
    56       0 %     51       2 %
Over 11%
    293       2 %           0 %
Variable (perpetual notes)
    197       2 %           0 %
 
                       
 
    12,006       100 %     3,028       100 %
 
                       
(e)   On October 5, 2005, the subsidiary Vale Overseas Limited launched a US$ 300 million notes issue maturing in 2034. The notes carry a coupon of 7.65% p.a. The notes form a single series with the US$ 500 million notes issued on January 2004 and 8.25% coupon.
7.17- Contingent Liabilities
At the financial statements dates the contingent liabilities of the Company were:
(a)   Provisions for contingencies and judicial deposits (booked under long-term liabilities and long-term assets, respectively), considered by management and its legal counsel as sufficient to cover losses from any type of lawsuit, were as follows:
                                                                 
                            Consolidated                     Parent Company  
                            Provisions for                     Provisions for  
    Judicial deposits     contingencies     Judicial deposits     contingencies  
    2005     2004     2005     2004     2005     2004     2005     2004  
Tax contingencies
    1,064       1,175       2,054       1,435       576       750       1,686       1,001  
Labor and social security claims
    338       293       549       606       249       227       423       501  
Civil claims
    257       197       508       547       190       156       364       434  
Other
    8       15       72       16       15       14       30       17  
 
                                               
Total
    1,667       1,680       3,183       2,604       1,030       1,147       2,503       1,953  
 
                                               
    The Company is party to labor, civil, tax and other suits and has been contesting these matters both administratively and in court. When applicable, these are backed by judicial deposits. Provisions for losses are estimated and restated monetarily by management based on the opinions of the legal department and outside counsel.
 
    Tax contingencies relate principally to a legal action taken by the Company claiming aspects of legislation of tax income and PIS and COFINS and other actions relating to value-added tax (ICMS).
 
    Labor-related actions principally comprise employee claims in connection with disputes about the amount of indemnities paid upon dismissal and the one-third extra holiday pay.
 
    Civil actions principally relate to claims made against the Company by contractors in connection with losses alleged to have been incurred as a result of various past government economic plans.
 
    In addition to the contingencies for which we have made provisions we have possible losses totaling R$ 2,466 (R$ 1,643 parent company) at December 31, 2005, based on the advice of our legal counsel, no provision is maintained.
 
(b)   Guarantees given to jointly-controlled companies are as follows:
                                                 
    Amount of guarantee                            
                    Denominated             Final     Counter  
Affiliate or Joint Venture   2005     2004     currency     Purpose   maturity     guarantees  
SAMARCO
    11       17     US$   Debt guarantee IFC     2008     None
VALESUL
    1       1     R$   Debt guarantee BNDES     2007     None
The Company does not expect such guarantees to be executed and therefore no provisions for losses have been made. CVRD does not charge Valesul for granting these guarantees.
         
    CVRD    

19


Table of Contents

(CVRD LOGO)
(c)   Upon privatization of the Company in 1997, the Brazilian government stipulated the issuance of non-convertible debentures (Debentures) to the stockholders of record, including the federal government. The maturity dates of these Debentures were established to guarantee that pre-privatization stockholders, including the federal government, would share any future benefits from mineral resources held by the Company and its subsidiary and affiliated companies that were not evaluated at the time of setting the minimum price of CVRD shares at the privatization auction occurred on 1997.
 
    A total of 388,559,056 Debentures were issued at a par value of R$ 0.01 (one cent), whose value is to be restated in accordance with the variation in the General Market Price Index (IGP-M), as set forth in the Issue Deed.
 
    On October 4, 2002, the Comissão de Valores Mobiliários — CVM (Brazilian Securities Commission) approved the Company’s registration request, for public trading of the Debentures. As from October 28, 2002, the Debentures can be traded on the secondary market.
 
    The debenture holders are entitled to receive semi-annual payments equivalent to a percentage of the net revenue deriving from determined mineral resources owned in May 1997 and included in the Issue Deed.
 
    According to the Debenture Issue Deed, the amount of the premium must include interest up to the month prior to that of effective payment, plus 1% in the month in which the funds are made available to the debenture holder. Pursuant to this Deed, the payment date shall take place each semester in March and September.
 
    Based on estimates of the operational start-up of copper projects, CVRD began calculating the premium referring to these minerals rights. Considering the iron ore sale, the Company estimates that the threshold for payment will be reached in approximately 2030 and 2020 for the Southern and Northern systems, respectively. Regarding other minerals, such as bauxite and nickel, the forecast for exploitation is for the second half of the decade, and according to the criteria established in the Deed, payment will be due on the net sales revenue in the fourth year after the date of first commercialization. The obligation to make payments to the debenture holders will cease when the pertinent mineral resources are exhausted.
 
    In 2005 we made available payment related to debentures in the amount of R$ 12.
 
(d)   CVRD is compromised by a contract of take-or-pay to buy approximately 33,733 thousand metric tons of bauxite from Mineração Rio do Norte S. A. – MRN by a price calculated on the quoted aluminum London Metal Exchange – LME.
 
    Based on the market price of US$ 23.01 (R$ 53.86) per metric ton, in December 31, 2005, this represents an amount of R$ 1,817 million, as follows:
         
2006
    339  
2007
    339  
2008
    339  
2009
    339  
2010
    339  
2011 onward
    122  
 
     
 
    1,817  
 
     
7.18- 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. In 2005, the provision for environmental liabilities amounted to R$ 526 (R$ 354 in 2004), which was accounted for in “Provision for environmental liabilities” in long-term liabilities. The Company adopts the concepts of the Accounting for Asset Retirement Obligations, as follows:
 
  Costs for mine closure are recorded as part of the cost of these assets and a corresponding provision is made for such future expenditure;
 
  The estimated costs are accounted for at the present value of the obligations, discounted using a risk free rate; and
 
  The estimated costs are reviewed annually and changes in the present value are adjusted in the recorded values of the assets and liabilities.
         
    CVRD    

20


Table of Contents

(CVRD LOGO)
7.19- Pension Plan — Valia
The Fundação Vale do Rio Doce de Seguridade Social — Valia is a private non-profit supplementary social security entity, legally separate from CVRD, founded in 1973 to provide supplementary social security benefits to the employees of the Company, its subsidiaries, affiliated companies and others that participate or may in the future participate in plans administered by the Foundation.
The Company and several of its subsidiaries and affiliated companies are sponsors of Valia, in the following benefit plans:
(a)   Benefit Plan
 
    Defined Benefit Plan — “BD”
 
    This is a pure defined benefit plan, now being phased out, instituted in 1973 upon establishment of Valia. This plan has been closed to new members and is maintained only for existing retired participants and their beneficiaries and a few residual active participants.
 
    Mixed-Benefit Plan — “Vale Mais”
 
    This is a mixed plan, which provides programmable retirement income benefits of the defined contribution type, independent of government social security. It also includes a deferred severance benefit (vesting), as well as risk benefits: retirement for disability, death benefits and sick-leave assistance. This new plan has more modern, transparent and flexible rules that make it more attractive for employees and more economical for the sponsors. “Vale Mais” was established in May 2000 and nearly 98.7% of the active employees migrated to this new plan.
 
    The contributions of the sponsors are as follows:
    Ordinary contribution — Destined to accumulate the resources necessary to grant income benefits, sponsor contributions match participant contributions, up to 9% of their participation salaries, which may not exceed ten “plan reference units” (R$ 1,810.41 in December 2005).
 
    Extraordinary contribution — This can be made at any time, at the discretion of the sponsors.
 
    Normal contribution — To fund the risk plan and administrative expenses, fixed by the actuary based on actuarial appraisals.
 
    Special contribution — Destined to cover any special commitment that may arise.
The results of the actuarial evaluation are as follows:
Fair value of assets development
                 
    2005     2004  
Fair value of assets at the beginning of the year
    5,516       4,728  
Actual return on assets
    1,289       1,078  
Contribution from sponsor
    54       45  
Benefits paid in the year
    (353 )     (335 )
 
           
Fair value of assets at the end of the year
    6,506       5,516  
 
           
 
               
Evolution of present value of obligation
                 
    2005     2004  
Present value of obligations at the beginning of the year
    3,983       4,131  
Cost of current service
    5       4  
Cost of interest
    510       484  
Benefits paid in the year
    (353 )     (335 )
Hypotheses change
    25       (357 )
Loss on liabilities
    4       56  
 
           
Present value of obligations at the end of the year
    4,174       3,983  
 
           
         
    CVRD    

21


Table of Contents

(CVRD LOGO)
Conciliation of assets and liabilities recognized in the balance sheet
                 
    2005     2004  
Present value of totally or partially covered actuarial obligations
    (4,174 )     (3,983 )
Fair value of assets
    6,506       5,516  
Net gains not recognized on the balance sheet
    (1,795 )     (1,297 )
 
           
Actuarial assets/liabilities to be recorded in the balance sheet
    (*)     537       (*)     236  
 
           
 
(*)   The Company has not recorded the actuarial asset on its balance sheet, since there is no clear evidence as to its realization, as established by item 4.9 of NPC 26.
(b)   Investment target and composition of plan assets
The fair asset value of these plans is R$ 6,506 and R$ 6,516 at the end of 2005 and 2004, respectively. The assets allocations for the Company pension plan at the end of 2005 and 2004 and the target allocation for 2006, by asset category are as follows:
                         
            Percentage of plan assets at December  
                    31,  
    Target allocation for              
Asset category   2006     2005     2004  
    (unaudited)                  
Equity securities
    27 %     30 %     29 %
Real state
    6 %     5 %     6 %
Loans
    4 %     4 %     3 %
Fixed income
    63 %     61 %     62 %
Total
    100 %     100 %     100 %
The fixed income allocation target of 63% was established in order to match the asset with the benefit payments. The proposal for 2006 is to re-establish the investments in inflation-indexed funds up to 35%. The remaining investments in fixed income will be used for the payment of short-term plan benefits.
The target of 27% for equity securities reflects the expected appreciation of the Brazilian stock markets as well as the Brazilian interest rates.
(c)   Actuarial liability
 
    Complementary Value and Health Insurance Plan
 
    Refers to the responsibility CVRD has to complement the retirements, pensions and health assistance related to the incentive to the disconnecting of some employees occurred between 1987 e 1989.
 
    The results of the actuarial evaluation of this liability are as follows:
 
    Change of fair value of assets (*)
                 
    Complementary Plan  
    2005     2004  
Fair value of assets at the beginning of the year
    76       58  
Actual return on assets
    26       7  
Contribution from sponsor
    102       64  
Benefits paid in the year
    (58 )     (53 )
 
           
Fair value of assets at the end of the year
    146       76  
 
           
 
(*)   Does not apply to fair value of assets to health plan.
         
    CVRD  

22


Table of Contents

(CVRD LOGO)
Change in the present value of obligations
                                 
            Health Plan     Complementary Value Plan  
    2005     2004     2005     2004  
Present value of obligations at the beginning of the year
    174       152       582       507  
Cost of interest
    23       19       74       65  
Benefits paid in the year
    (12 )     (10 )     (58 )     (53 )
Hipoteses change
                      6  
Loss on liabilities
    (2 )     13       (14 )     57  
 
                       
Present value of obligations at the end of the year
    183       174       584       582  
 
                       
Reconciliation of assets and liabilities recognized on the balance sheet
                                 
            Health Plan     Complementary Value Plan  
    2005     2004     2005     2004  
Present value of totally or partially covered actuarial obligations
    (183 )     (174 )     (584 )     (582 )
Fair value of assets
                146       76  
Net (gains) loss not recognized on the balance sheet
    11       13       (23 )     6  
 
                       
Actuarial assets and liabilities accrued in the balance sheet
    (172 )     (161 )     (461 )     (500 )
 
                       
Costs incurred in the income statement
                                 
            Health Plan     Complementary Value Plan  
    2005     2004     2005     2004  
Cost of interest
    23       19       74       65  
Real interest of assets
                (11 )     (7 )
 
                       
Total of costs, net
    23       19       63       58  
 
                       
(d)   Sponsor contributions
                 
    2005     2004  
Mixed benefit plan — “Vale Mais” — income
    (23 )     (19 )
Mixed benefit plan — “Vale Mais” — risk and proportional benefit
    (54 )     (45 )
Complementary value (*)
    (102 )     (64 )
Healt insurance plan for retired employee (*)
    (12 )     (10 )
 
           
Total contributions
    (191 )     (138 )
 
           
 
(*) Refers to actuarial liability
(e)   Actuarial and economic hypotheses
 
    All calculation includes future projections in relation to certain parameters, for example: salaries, interest, inflation, benefits from social security, mortality, invalidity and others. No actuarial results can be analyzed without knowledge of the scenarios utilized in the evaluation.
 
    The actuarial economic hypotheses were considering the long-term to their maturity, and must be analyzed from this point of view. They not necessarily are realizable in the short-term.
 
    The evaluation was based on the following economic hypotheses:
                 
    2005     2004  
Economic assumptions
               
 
               
- Discount rate
  13.4% p.a. (nominal)   13.4% p.a. (nominal)
- Expected return on plan assets
  13.4% p.a. (nominal)   13.4% p.a. (nominal)
- Nominal growth index of medical costs
    9.2% p.a.     9.2% p.a.
- Future salary increases
  8.15% p.a. until 47 years   6.91% until 47 years
- Growth in social security benefits and limits
    5.0% p.a.     5.0% p.a.
- Inflation
    5.0% p.a.     5.0% p.a.
All assumptions were revised during 2005.
         
    CVRD  

23


Table of Contents

(CVRD LOGO)
7.20- Paid-up Capital
At the Ordinary General Meeting of 04/27/05, the Company’s capital was increased to R$ 14 billion through capitalization of part of the expansion reserve in the amount of R$ 6,700.
On August 18, 2004 the Extraordinary General Stockholders ´ Meeting approved the forward stock split. E ach share, common and preferred, is represented by three shares. After the split the Company’s capital comprises 1,165,677,165, of which 749,949,429 common shares and 415,727,736 class “A” preferred shares.
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 or 3% of the book net equity value of the share, whichever is greater.
On December 31, 2005 the Company’s capital is held as follows:
                                                 
                                    Number of shares  
Stockholders   Commom     %     Preferred     %     Total     %  
Valepar S.A.
    392,147,133       52                   392,147,133       34  
 
                                               
Brazilian Government (National Treasury / BNDES/ INSS / FPS)
    14,178             15,226,023       4       15,240,201       1  
 
                                               
American Depositary Receipts — ADRs
    196,433,872       26       190,162,779       46       386,596,651       34  
 
                                               
FMP — FGTS
    37,881,084       5                   37,881,084       3  
 
                                               
BNDESPar
    50,289,430       7       364,333             50,653,763       4  
 
                                               
Foreign — institutional investors
    18,010,853       2       66,808,192       16       84,819,045       7  
 
                                               
Brazil — institutional investors
    25,071,898       4       71,196,249       17       96,268,147       8  
 
                                               
Brazil — retail investors
    15,955,471       2       71,958,702       17       87,914,173       8  
 
                                               
Treasury stock in Brazil
    14,145,510       2       11,458             14,156,968       1  
 
                                   
 
                                               
Total
    749,949,429       100       415,727,736       100       1,165,677,165       100  
 
                                   
The members of the Board of Directors and Executive Board together own 43,761 common shares and 261,187 preferred shares.
7.21- American Depositary Receipts (ADR) Program
On June 2000, the Company obtained a registration from the United States Securities and Exchange Commission (SEC), for its preferred shares to be traded on the New York Stock Exchange (NYSE). On March 21, 2002, in connection with the sale of shares held by the BNDES and Brazilian Government, the common shares began to be traded on the NYSE. Each ADR represents 1 (one) preferred Class “A” or common share, traded under the codes “RIOPR” and “RIO”, respectively.
Since 09/07/04 each ADR was also split in 3 (three). In this way the proportion of 1 (one) ADR to each common or preferred share was maintained.
7.22- Treasury Stock
The Board of Directors, under the terms of Subparagraph XV of Article 13 of the Bylaws and based on Article 30 of Law 6404/76 and CVM Instructions 10 of 02/14/80 and 268 of 11/13/97, approved the acquisition by the Company of its own shares to be held in treasury for later sale or cancellation.
In 2005, the Company had acquired 14,145,510 common shares and 11,458 preferred shares, which are held in treasury in the amount of R$ 131. In 2005, 493 preferred shares were in treasury and were changed for Samitri ´s shares, a merged company. The 14,145,510 common shares guarantee a loan of the subsidiary Alunorte.
                                                         
            Shares                                
                                            Average  
Class           Quantity             Unit acquisition cost     quoted market price  
    2005     2004     Average     Low     High     2005     2004  
Preferred
    11,458       11,951       17.12       4.67       17.47       70.97       47.93  
Common
    14,145,510       14,145,510       9.27       6.69       17.36       82.35       56.13  
 
                                                   
 
    14,156,968       14,157,461                                          
 
                                                   
         
    CVRD    

24


Table of Contents

(CVRD LOGO)
7.23- Remuneration of Stockholders
Briefly, the total remuneration paid stockholders’ in 2005 was as follows:
                         
Deliberation   Payment     Fiscal year     R$  
04/14/2005 — Interest on stockholders’ equity
    4/30/2005       2004       (c)1,279  
04/14/2005 — Interest on stockholders’ equity
    4/30/2005       2005       1  
10/13/2005 — Interest on stockholders’ equity
    10/29/2005       2005       782  
10/13/2005 — Dividends
    10/29/2005       2005       1,028  
 
                     
Total paid in 2005
                    (b)3,090  
 
                     
Complementary remuneration for 2005 proposed
                    (a)2,750  
 
                     
Remunerations fiscal year 2005 (a + b - c)
                    4,561  
 
                     
The remuneration to stockholders proposed for 2005 was calculated as follows:
         
Net income for the year
    10,443  
Fiscal incentive reserve
    (83 )
Legal reserve
    (522 )
Realization of unrealized income reserve
    109  
 
     
Adjusted net income
    9,947  
 
     
Mandatory dividend amount — 25% (R$2.15 per outstanding share)
    2,487  
 
     
Statutory dividend on preferred shares (3% of net equity, R$0.61 per outstanding share)
    253  
 
     
Statutory dividend on preferred shares (6% of paid-up capital, R$0.72 per outstanding share)
    300  
 
     
Dividends/ Interest on stockholders ´equity (R$3.96 per outstanding share)
    4,561  
 
     
Pursuant to Ruling No. 207/96 of the Brazilian Securities Commission (CVM), the Company decided, as required by tax regulations, to account for interest on stockholders’ equity under the heading of “Financial expenses” and to reverse the same amount in a specific account. This, however, does not appear in the financial statements because it had no effect on the final net income, except for the tax impact recorded as “Income tax and social contribution”.
         
Proposed Appropriations of the Net Income for the Year
       
Funds provided:
       
Net income for the year
    10,443  
Realization of unrealized income reserve (*)
    109  
 
     
 
    10,552  
 
     
Funds used:
       
 
       
Legal reserve (5%)
    522  
Expansion/investment reserve
    5,386  
Fiscal incentives reserve
    83  
Interim interest on stockholders’ equity
    783  
Interim dividends
    1,028  
Additional remuneration proposed
    2,750  
 
     
 
    10,552  
 
     
 
(*)   The realization is based on the dividends received, write-off or disposal of investments and depreciation, write-off and disposal of property, plant and equipment.
         
    CVRD    

25


Table of Contents

(CVRD LOGO)
7.24- Financial Results
Consolidated
                                                                         
          ( Unaudited )     Quarter
                    4Q/05                     3Q/05                     4Q/04  
            Monetary and                     Monetary and                     Monetary and        
            exchange rate                     exchange rate                     exchange rate        
    Financial     variation on             Financial     variation on             Financial     variation on        
    expenses     liabilities     Total     expenses     liabilities     Total     expenses     liabilities     Total  
Foreign debt
    12       (714 )     (702 )     (153 )     388       235       (190 )     323       133  
Local debt
    (25 )     (75 )     (100 )     (19 )     130       111       (55 )     121       66  
Related parties
    (3 )           (3 )     (6 )     1       (5 )     (3 )     370       367  
 
                                                     
 
    (16 )     (789 )     (805 )     (178 )     519       341       (248 )     814       566  
Labor, tax and civil contingencies
    (23 )     (27 )     (50 )     (65 )     31       (34 )     (31 )     (28 )     (59 )
Derivatives, net of gain/losses (interest and currencies)
    4             4       3       1       4       10       5       15  
Derivatives, net of gain/losses (gold, aluminum and alumina)
    (257 )     (30 )     (287 )     (173 )     13       (160 )     (27 )     9       (18 )
CPMF
    (48 )           (48 )     (35 )           (35 )     (38 )           (38 )
Others
    (187 )     159       (28 )     (62 )     (95 )     (157 )     (229 )     1,243       1,014  
 
                                                     
 
    (527 )     (687 )     (1,214 )     (510 )     469       (41 )     (563 )     2,043       1,480  
 
                                                     
                                                                         
            Monetary and                     Monetary and                     Monetary and        
            exchange rate                     exchange rate                     exchange rate        
    Financial     variation on             Financial     variation on             Financial     variation on        
    income     assets     Total     income     assets     Total     income     assets     Total  
Related parties
    (6 )     4       (2 )     1       (13 )     (12 )     20       (511 )     (491 )
Marketable securities
    70       237       307       60       (104 )     (44 )     70       (268 )     (198 )
Others
    39       106       145       4       (227 )     (223 )     19       (1,081 )     (1,062 )
 
                                                     
 
    103       347       450       65       (344 )     (279 )     109       (1,860 )     (1,751 )
 
                                                     
Financial income (expenses), net
    (424 )     (340 )     (764 )     (445 )     125       (320 )     (454 )     183       (271 )
 
                                                     
                                                 
                                            Accumulated for  
                    2005                     2004  
            Monetary and                     Monetary and        
            exchange rate                     exchange rate        
    Financial     variation on             Financial     variation on        
    expenses     liabilities     Total     expenses     liabilities     Total  
Foreign debt
    (323 )     445       122       (675 )     299       (376 )
Local debt
    (162 )     279       117       (228 )     113       (115 )
Related parties
    (20 )     1       (19 )     (55 )     464       409  
 
                                   
 
    (505 )     725       220       (958 )     876       (82 )
Labor, tax and civil contingencies
    (152 )     (39 )     (191 )     (114 )     (119 )     (233 )
Derivatives, net of gain/losses (interest and currencies)
    6       3       9       2       3       5  
Derivatives, net of gain/losses (gold, aluminum and alumina)
    (423 )     22       (401 )     (213 )     10       (203 )
CPMF
    (152 )           (152 )     (120 )           (120 )
Others
    (354 )     (96 )     (450 )     (463 )     800       337  
 
                                   
 
    (1,580 )     615       (965 )     (1,866 )     1,570       (296 )
 
                                   
                                                 
            Monetary and                     Monetary and        
            exchange rate                     exchange rate        
    Financial     variation on             Financial     variation on        
    income     assets     Total     income     assets     Total  
Related parties
    9       (1 )     8       64       (757 )     (693 )
Marketable securities
    225       (83 )     142       159       (262 )     (103 )
Others
    105       (566 )     (461 )     74       (982 )     (908 )
 
                                   
 
    339       (650 )     (311 )     297       (2,001 )     (1,704 )
 
                                   
Financial income (expenses), net
    (1,241 )     (35 )     (1,276 )     (1,569 )     (431 )     (2,000 )
 
                                   
         
    CVRD    

26


Table of Contents

(CVRD LOGO)
Parent Company
                                                 
                                            Accumulated for  
                    2005                     2004  
            Monetary and                     Monetary and        
            exchange rate                     exchange rate        
    Financial     variation on             Financial     variation on        
    expenses     liabilities     Total     expenses     liabilities     Total  
Foreign debt
    (59 )     145       86       (116 )     148       32  
Local debt
    (18 )     64       46       (22 )     26       4  
Related parties
    (223 )     396       173       (208 )     335       127  
 
                                   
 
    (300 )     605       305       (346 )     509       163  
Labor, tax and civil contingencies
    (141 )     (36 )     (177 )     (113 )     (119 )     (232 )
Derivatives, net of gain/losses (interest and currencies)
    (4 )           (4 )     3       2       5  
Derivatives, net of gain/losses (gold)
    (27 )     4       (23 )     (25 )     9       (16 )
CPMF
    (89 )           (89 )     (70 )           (70 )
Others
    (114 )     181       67       (216 )     (287 )     (503 )
 
                                   
 
    (675 )     754       79       (767 )     114       (653 )
 
                                   
                                                 
            Monetary and                     Monetary and        
    Financial     exchange rate             Financial     exchange rate        
    income     variation on assets     Total     income     variation on assets     Total  
Related parties
    51       (131 )     (80 )     62       (256 )     (194 )
Marketable securities
    51       13       64       19       57       76  
Others
    37       (19 )     18       21       (2 )     19  
 
                                   
 
    139       (137 )     2       102       (201 )     (99 )
 
                                   
Financial income (expenses), net
    (536 )     617       81       (665 )     (87 )     (752 )
 
                                   
7.25- Financial Instruments — Derivatives
The main market risks the Company faces are related to interest rates, exchange rates and commodities prices. CVRD has a policy of managing risks through the use of derivative instruments.
The Company’s risk management follows policies and guidelines reviewed and approved by the Company ‘s executive management (Board of Directors and Executive Board). These policies and guidelines prohibit speculative trading and short selling and require diversification of transactions and counterparties. The policy of the Company is to settle all contracts financially without physical delivery of the products. The credit limits and creditworthiness of counterparties are also reviewed periodically and are defined according to the rules approved by the Company’s management. The results of hedging are recognized monthly in the financial results.
Interest Rate Risk
Interest rate risk derives from floating-rate debt, mainly from trade finance operations. The portion of floating-rate debt denominated in foreign currency is mainly subject to fluctuations in the LIBOR — London Interbank Offered Rate. The portion of floating-rate debt expressed in reais refers basically to the Brazilian long-term interest rate TJLP, established by the Brazilian Central Bank. Since May 1998, CVRD has been using derivatives to limit its exposure to fluctuations in the LIBOR.
The interest rate derivatives portfolio consists mainly of instruments contracted to limit exposure to interest rate fluctuations, establishing upper and lower limits. Some operations are subject to knockout provisions which, if triggered, eliminate the protection contracted.
Exchange Rate Risk
Exchange rate risk arises from foreign currency debts. On the other hand, a substantial part of the Company’s revenues are denominated or indexed in U.S. dollars, while the majority of costs are in reais. This provides a natural hedge against possible devaluation of the Brazilian currency. Events of this nature have an immediate negative impact on foreign currency debt, offset by the positive effect on future cash flows.
The Company adopts a strategy of monitoring market fluctuations and, if necessary, carrying out derivatives operations to cover risks related to these variations.
The portion of debt denominated in euros and yens (main components of basket of currencies) is protected by derivatives to cover risks of exchange rate movements of these currencies.
         
    CVRD    

27


Table of Contents

(CVRD LOGO)
Commodities Price Risk
The prices of iron ore, the Company’s main product, are set in annual negotiations between producers and consumers and are notably stable over time. The Company does not enter into derivatives operations to hedge iron ore price exposure.
The Company uses hedge instruments to manage its exposure to changes in the price of gold, aluminum and alumina. These derivatives operations allow establishment of a minimum profit level for future output. The Company actively manages its open positions, with the results reported monthly to senior management to allow adjustment of targets and strategies in response to market conditions.
The unrealized gain or loss represents the present value of payable or receivable if all operations had been settled on the dates disclosed, as follows:
                                                 
    Consolidated  
    (Unaudited) 4Q/05  
    Interest                                
    rates (libor)     Currencies     Gold     Aluminium     Alumina     Total  
Gains / (losses) unrealized on 09/30/05
    (15 )     2       (81 )     (221 )     (67 )     (382 )
Financial settlement
    2             9       23       24       58  
Financial expenses, net
    5             (30 )     (150 )     (77 )     (252 )
Monetary variations, net
    (1 )           (5 )     (20 )     (6 )     (32 )
 
                                   
Gains / (losses) unrealized on 12/30/05
    (9 )     2       (107 )     (368 )     (126 )     (608 )
 
                                   
                                                 
    (Unaudited) 3Q/05  
    Interest                                
    rates (libor)     Currencies     Gold     Aluminium     Alumina     Total  
Gains / (losses) unrealized on 06/30/05
    (21 )     4       (70 )     (127 )     (51 )     (265 )
Financial settlement
    2       (1 )     6       15       16       38  
Financial expenses, net
    3       (1 )     (21 )     (116 )     (35 )     (170 )
Monetary variations, net
    1             4       7       3       15  
 
                                   
Gains / (losses) unrealized on 09/30/05
    (15 )     2       (81 )     (221 )     (67 )     (382 )
 
                                   
                                                 
    (Unaudited) 4Q/04  
    Interest                                
    rates (libor)     Currencies     Gold     Aluminium     Alumina     Total  
Gains/ (losses) unrealized on 09/30/04
    (89 )     4       (91 )     (186 )     (106 )     (468 )
Financial settlement
    34             6                   40  
Financial expenses, net
    4       5       (21 )     34       (41 )     (19 )
Monetary variations, net
    6             9                   15  
 
                                   
Gains / (losses) unrealized on 12/31/04
    (45 )     9       (97 )     (152 )     (147 )     (432 )
 
                                   
                                                 
    2005  
    Interest                                
    rates (libor)     Currencies     Gold     Aluminium     Alumina     Total  
Gains / (losses) unrealized on 12/31/04
    (45 )     9       (97 )     (152 )     (147 )     (432 )
Financial settlement
    21       (2 )     27       88       82       216  
Financial expenses, net
    11       (5 )     (44 )     (305 )     (73 )     (416 )
Monetary variations, net
    4             7       1       12       24  
 
                                   
Gains / (losses) unrealized on 12/31/05
    (9 )     2       (107 )     (368 )     (126 )     (608 )
 
                                   
                                                 
    2004  
    Interest                                
    rates (libor)     Currencies     Gold     Aluminium     Alumina     Total  
Gains / (losses) unrealized on 12/31/03
    (136 )     16       (92 )     (59 )     (52 )     (323 )
Financial settlement
    86       (7 )     10                   89  
Financial expenses, net
    1       1       (25 )     (93 )     (95 )     (211 )
Monetary variations, net
    4       (1 )     10                   13  
 
                                   
Gains / (losses) unrealized on 12/31/04
    (45 )     9       (97 )     (152 )     (147 )     (432 )
 
                                   
             
 
  CVRD        

28


Table of Contents

(CVRD LOGO)
                                 
    Controladora  
    2005  
    Interest rates                    
    (libor)     Currencies     Gold     Total  
Gains / (losses) unrealized on 12/31/04
    (9 )     9       (55 )     (55 )
Financial settlement
    8       (2 )     15       21  
Financial expenses, net
    1       (5 )     (27 )     (31 )
Monetary variations, net
                4       4  
 
                       
Gains / (losses) unrealized on 12/31/05
          2       (63 )     (61 )
 
                       
                                 
    2004  
    Interest rates                    
    (libor)     Currencies     Gold     Total  
Gains / (losses) unrealized on 12/31/03
    (136 )     16       (92 )     (212 )
Financial settlement
    122       (7 )     53       168  
Financial expenses, net
    2       1       (25 )     (22 )
Monetary variations, net
    3       (1 )     9       11  
 
                       
Gains / (losses) unrealized on 12/31/04
    (9 )     9       (55 )     (55 )
 
                       
Final maturity dates for the above instruments are as follows:
     
Gold
   Dec 2008
Interest rates (LIBOR)
   Oct 2007
Currencies
   Dec 2011
Alumina
   Dec 2008
Aluminum
   Dec 2008
7.26- Administrative and Other Operating Expenses
                                                         
    (Unaudited)     Quarter     Consolidated     Parent Company  
Administrative   4Q/05     3Q/05     4Q/04     2005     2004     2005     2004  
Personnel
    115       138       135       460       434       263       202  
Services of technical consulting, groundwork and stand-by
    99       89       34       335       229       94       104  
Advertising and publicity
    44       24       32       113       68       112       61  
Depreciation
    49       33       31       141       116       68       39  
Travel expenses
    14       10       19       48       39       41       25  
Rents and taxes
    16       6       52       56       86       31       31  
Community aborigine
    4       4             17             17        
Others
    41       29       59       110       153       59       69  
 
                                         
Total
    382       333       362       1,280       1,125       685       531  
 
                                         
                                                         
    (Unaudited)     Quarter     Consolidated     Parent Company  
    4Q/05     3Q/05     4Q/04     2005     2004     2005     2004  
Other operating expenses (income)
                                                       
Provisions for contingencies
    97       117       124       275       277       86       166  
Provision for loss on ICMS credits
    23       16       26       40       130             90  
Provision for profit sharing
    70       53       41       230       196       180       176  
Donations
    34       10       7       76       34       66       27  
Others
    (19 )     92       173       213       318       (97 )     89  
 
                                         
Total
    205       288       371       834       955       235       548  
 
                                         
             
 
  CVRD        

29


Table of Contents

(CVRD LOGO)
7.27- Concessions and Leases
(a)   Railroad — Companies
 
    The Company and some of its group companies entered into agreements with the Brazilian government, through the Ministry of Transport, for concession, exploitation and development of public rail cargo transport services and for lease of the assets destined for rendering these services.
 
    The concessions periods are, by railroad:
         
    End of  
Railroad   concession period  
Vitória-Minas (direct) (*)
  June 2027
Carajás (direct) (*)
  June 2027
Malha Centro-Leste (indirect via FCA)
  August 2026
Malha Sudoeste (indirect via MRS)
  December 2026
 
(*)   Concessions with no disbursement
The concessions will expire upon one of the following events: termination of the contractual term, cancellation, forfeiture, rescission, annulment and bankruptcy or extinction of the concessionaire.
Concessions and leasing from controlled companies are accounting treated as operating leasing and present the following characteristics:
                 
    FCA   MRS
1) Total installments
    112       83  
2) Frequency of payment
  Quarterly     Quarterly  
3) Update index
  IGP-DI FGV     IGP-DI FGV  
4) Total installment paid
    30       34  
5) Installment current value
               
Concession
  $ 1     $ 2  
Leasing
  $ 28     $ 40  
(b)   Ports
 
    The Company owns specialized port terminals as listed below:
                 
Terminal (*)   Localization     End of concession period  
Tubarão Terminal
  Vitória - ES     2020  
Praia Mole Terminal
  Vitória - ES     2020  
Various Products Terminal
  Vitória - ES     2020  
Vila Velha Terminal
  Vila Velha - ES     2023  
Paul Quay
  Vila Velha - ES     2005  
Liquid Bulk Terminal
  Vitória - ES     2020  
Ponta da Madeira Maritime Terminal — Pier I
  São Luís - MA     2018  
Ponta da Madeira Maritime Terminal — Pier II
  São Luís - MA     2010  
Ponta da Madeira Maritime Terminal — Pier III
  São Luís - MA     2018  
Inácio Barbosa Maritime Terminal
  Aracaju - SE     2012  
 
(*)   Concessions with no disbursement
             
 
  CVRD        

30


Table of Contents

(CVRD LOGO)
(c)   Hydroelectric Projects
 
    The Company develops projects of electricity generation with the objective of self-supply. The projects in which the Company has investments are:
                 
Project   Start-up of operations     % Participation
Funil
  In operation     51.00  
Candonga
  In operation     50.00  
Igarapava
  In operation     38.15  
Porto Estrela
  In operation     33.33  
Aimorés
  In operation     51.00  
Capim Branco I
  February 2006     48.42  
Capim Branco II
    2007     48.42    
Estreito
    2009     30.00    
Foz do Chapecó (*)
        40.00    
 
(*)   In 02/10/06 CVRD celebrated with Furnas Centrais Elétricas (Furnas) a contract to sell the interest of 40% in the consortium to build and operate the hydroelectric plant Foz do Chapecó for R$ 9.
7.28- Effects on the Statements if Price-Level Restatement were Applied (unaudited)
The main difference between the financial statements prepared according to statutory accounting practices and those according to the price-level restatement method is due to the recognition, in the latter, of the net monetary restatement of permanent assets and stockholders’ equity.
The Balance Sheet and the Statement of Income by monetary restatement, at December 31, 2005 price levels (indexed by the IGP-M of Fundação Getúlio Vargas) is as follows:
BALANCE SHEET

Years ended December 31
                                 
    Consolidated     Parent Company  
    2005     2004     2005     2004  
Assets
                               
Current assets
    12,424       11,974       5,304       4,784  
Non-Current
                               
Long — Term Receivable
    3,626       3,331       1,481       1,886  
Investments
    7,136       7,153       34,493       29,510  
Property, plant and equipment
    53,261       43,925       28,461       22,852  
Deferred charges
    1,467       1,462              
 
                       
 
    61,864       52,540       62,954       52,362  
 
                       
 
    77,914       67,845       69,739       59,032  
 
                       
Liabilities and stockholders’ equity
                               
Current liabilities
    11,667       9,437       10,061       6,875  
Non — Current
                               
Long-term liabilities
    17,066       16,287       13,457       12,101  
Deferred income
    9       10              
Minority interests
    2,951       2,055              
Stockholders’ equity
                               
Paid-up capital
    14,113       7,502       14,113       7,502  
Capital reserves
    5,989       5,783       5,989       5,783  
Revenue reserves
    26,119       26,771       26,119       26,771  
 
                       
 
    46,221       40,056       46,221       40,056  
 
                       
 
    77,914       67,845       69,739       59,032  
 
                       
             
 
  CVRD        

31


Table of Contents

(CVRD LOGO)
STATEMENT OF INCOME

Years ended December 31
                                 
    Consolidated     Parent Company  
    2005     2004     2005     2004  
Operating revenues
    35,385       31,360       18,114       14,891  
Value Added taxes
    (1,359 )     (1,595 )     (1,005 )     (752 )
 
                       
Net operating revenues
    34,026       29,765       17,109       14,139  
Cost of products and services
    (16,328 )     (15,262 )     (9,611 )     (7,722 )
 
                       
Gross profit
    17,698       14,503       7,498       6,417  
Gross margin
    52.0 %     48.7 %     43.8 %     45.4 %
Operating expenses, net
    (4,404 )     (4,401 )     (1,213 )     (1,662 )
 
                       
Operating profit before financial results and results of equity investments
    13,294       10,102       6,285       4,755  
Results of equity investments
    270       169       5,510       3,927  
 
                       
Operating profit
    13,564       10,271       11,795       8,682  
Results on sale of assets
    298       595             367  
 
                       
Income before income tax and social contribution
    13,862       10,866       11,795       9,049  
Income tax and social contribution
    (2,371 )     (2,490 )     (1,340 )     (1,476 )
 
                       
Income before minority interest
    11,491       8,376       10,455       7,573  
Minority interest
    (1,036 )     (803 )            
 
                       
Net income for the year
    10,455       7,573       10,455       7,573  
 
                       
7.29- Insurance
Operational Risks
CVRD has an extensive risk management program that provides coverage and protection for all its assets as well as against possible losses from production interruptions, through All Risks policy. This program includes on-site inspection and training carried out by the various risk committees constituted by the Company, its subsidiaries and associated companies. The Company tries to harmonize risks in all areas and provide single and uniform treatment, and also seeking coverage in the domestic and international markets at levels compatible with an enterprise the size of CVRD.
Insurance
In order to provide the best instruments for more efficient risk management and to seek alternatives due to the crisis in the international insurance market, CVRD in 2002 established a captive reinsurer. This entity was created for the purpose of improving risk management and to provide a more efficient instrument for negotiation and market penetration, serving exclusively to underwrite the risks of the companies of the Group, in Brazil and abroad. Besides this, intensified action by the risk committees is being undertaken to accomplish technical recommendation from insurance and reinsurance market during annual inspections and are aligned with the group investments.
7.30- Profit Sharing Plan
The employee profit sharing plan is linked to financial-economic results as measured by indicators such as operational cash flow and by the meeting of performance targets for each unit and individual performance.
7.31- Subsequent Events
CVRD issues US$ 1.0 billion of 10-year notes
On January, 2006 CVRD ´s wholly owned Finance subsidiary Vale Overseas Limited issued US$ 1 billion 10-year 6.250% notes, payable semi-annually due 2016, at a price of 99.97 % of the principal amount.
CVRD ´s tender offer
On January 2006 CVRD ´s wholly owned Finance subsidiary Vale Overseas Limited concluded a tender offer US$ 300 million 9.000% Guaranteed Notes due 2013.
             
 
  CVRD        

32


Table of Contents

(CVRD LOGO)
Merger of Caemi
On January, 2006, shareholders of Valepar S.A. (Valepar), the controlling shareholder of CVRD, to be issued by CVRD, approved a proposal of CVRD senior management to exchange all outstanding preferred shares of Caemi. The Board of Directors ratified the proposal. All 1,558,963,806 of outstanding Caemi preferred shares (according to Article 4, paragraph 2 of 6.404/76) will be changed to preferred shares to be issued by CVRD.
Each non-controlling Caemi shareholder will receive 0.04115 preferred shares of CVRD for each Caemi preferred share. This exchange ratio reflects the stock market price behavior of both shares over the last 90 days.
CVRD currently owns 100% of Caemi’s common shares and 40.06% of Caemi’s preferred shares, for a total of 60.23% of its total capital. After the completion of the stock merger, CVRD will own all Caemi shares.
Capex Budget
On January, 2006, the Board of Directors of CVRD approved the capex budget for 2006 in the amount of R$ 11.8 billion (US$ 4.6 billion).
             
 
  CVRD        

33


Table of Contents

(CVRD LOGO)
8- Attachment I — Statement of Investments in Subsidiaries and Jointly-Controlled Companies
                                                                                                                 
Year ended December 31, 2005   Millions of reais  
                    Accounting Information  
    Participation (%)     Assets     Liabilities and stockholder’s equity     Statement of income
                    Non-current assets             Non-current liabilities                                        
                                    Investments,             Long-term,                                                
                                    property plant             deferred                     Cost of                          
                                    and equipment             income and     Adjusted             products     Operating     Non-           Adjusted net  
                    Current             and deferred             minority     stockholder’s     Net     and     income     operating     Income     income  
    Total     Voting     Assets     Long-term     charges     Current     interest     equity     revenues     services     (expenses)     result     tax and     (loss)  
Subsidiaries (a)
                                                                                                               
Amazon Iron Ore Overseas Co. Ltd.
    100.00       100.00             7       2,756       12       1,050       1,701                   1,126                   1,126  
ALBRAS — Aluminio Brasileiro S.A.
    51.00       51.00       636       1,096       1,071       923       748       1,131       1,954       (1,376 )     (394 )     (6 )           178  
ALUNORTE — Alumina do Norte do Brasil S.A.
    57.03       61.74       485       159       3,208       439       1,329       2,084       1,469       (1,007 )     (65 )     (1 )     (62 )     334  
Brasilux S .A .
    100.00       100.00       3       35       1       15             24                   (3 )                 (3 )
Caemi Mineração e Metalurgia S.A.(b)
    60.23       100.00       2,551       96       1,790       705       850       2,882       4,346       (1,814 )     (414 )     121       (480 )     1,759  
Compañia Minera Andino-brasileira Ltd — CMAB
    100.00       100.00                                                       (4 )                 (4 )
Compañia Minera Latino Americana — CMLA
    100.00       100.00       1                   1                               (45 )                 (45 )
Companhia Paulista de Ferro Ligas
    100.00       100.00       40       155       4       119       79       1                   (25 )     (2 )     (7 )     (34 )
Companhia Portuária Baia de Sepetiba
    100.00       100.00       93       6       164       15             248       178       (66 )     12             (41 )     83  
Compagnie Miniere Trois Riviere — CMTR
    100.00       100.00       8                   4             4                   (48 )                 (48 )
CVRD Holdings GMBh
    100.00       100.00                   1,769       1,872             (103 )                 (103 )                 (103 )
CVRD Overseas Ltd.
    100.00       100.00       774       805       803       1,689       47       646       2,824       (2,111 )     (53 )                 660  
Docepar S.A.
    100.00       100.00       13       312             19       263       43                   6             (1 )     5  
Ferrovia Centro — Atlântica S.A.
    100.00       100.00       325       141       1,403       337       1,653       (121 )     671       (729 )     (102 )                 (160 )
Ferro Gusa Carajás S.A.
    77.97       77.97       58             257       191       1       123                   (14 )                 (14 )
Florestas Rio Doce S.A.
    100.00       100.00       54       36       4       12       28       54                   (13 )     (1 )     2       (12 )
Gevale-Ind Mineira Ltda.
    51.00       51.00       3                               3                   (9 )                 (9 )
Itabira Rio Doce Company Limited — ITACO
    100.00       100.00       5,846       6,592       4,083       4,727       4,907       6,887       13,861       (10,732 )     996       1       2       4,128  
Mineração Tacumã Ltda.
    100.00       100.00                   1,424       16       1,525       (117 )                 (142 )                 (142 )
Navegação Vale do Rio Doce S.A. — DOCENAVE
    100.00       100.00       272       32       719       95       606       322       86       (32 )     55             (23 )     86  
Rio Doce Austrália Pty Ltd
    100.00       100.00       5                               5                   (15 )                 (15 )
Rio Doce Argentina
    100.00       100.00       7                               7                   (2 )                 (2 )
Rio Doce Limited
    100.00       100.00       160       319       375       165       1       688       437       (463 )     78             (3 )     49  
Rio Doce International Finance Ltd.
    100.00       100.00       1,806       2,243       1       483       453       3,114                   55                   55  
Rio Doce Manganèse Europe — RDME
    100.00       100.00       286             74       154       2       204       474       (442 )     (103 )     (2 )     (3 )     (76 )
Rio Doce Manganése Norway AS
    100.00       100.00       57             68       39       23       63       88       (78 )     (50 )                 (40 )
Rio Doce Manganês S.A.
    100.00       100.00       562       157       419       303       201       634       907       (613 )     (187 )     (6 )     (43 )     58  
Rio Doce Moçambique
    100.00       100.00       5                               5                   (14 )                 (14 )
Rio Doce South Africa
    100.00       100.00       6                               6                   (54 )                 (54 )
Salobo Metais S.A.
    100.00       100.00       3             838       1       578       262                                      
Thetys Mining LLC
    100.00       100.00                         3             (3 )                 (15 )                 (15 )
TVV — Terminal de Vila Velha S.A.
    100.00       100.00       41       6       57       18       6       80       108       (77 )     (1 )           (10 )     20  
Urucum Mineração S.A.
    100.00       99.89       84       18       73       40       88       47       173       (82 )     (54 )     (1 )     (16 )     20  
Jointly-controlled companies (a)
                                                                                                               
California Steel Industries, Inc.
    50.00       50.00       961       6       566       433       351       749       3,018       (2,734 )     (133 )           (92 )     59  
Companhia Coreano-Brasileira de Pelotização — KOBRASCO
    50.00       50.00       135       52       225       139       85       188       756       (528 )     (25 )     (2 )     (80 )     121  
Companhia Hispano-Brasileira de Pelotização — HISPA NOBRÁS
    50.89       51.00       230       46       75       188       51       112       725       (492 )     (23 )           (74 )     136  
Companhia Ítalo-Brasileira de Pelotização — ITABRASCO
    50.90       51.00       197       56       72       154       69       102       664       (464 )     (28 )           (64 )     108  
Companhia Nipo-Brasileira de Pelotização — NIBRASCO
    51.00       51.11       349       71       122       242       31       269       1,207       (875 )     (49 )           (102 )     181  
Gulf Industrial Investment Co.-GIIC
    50.00       50.00       288             126       113       12       289       934       (520 )     (99 )                 315  
Minas da Serra Geral S.A. — MSG
    50.00       50.00       26       11       93       6       25       99       19       (12 )     (17 )     1             (9 )
Mineração Rio do Norte S.A.
    40.00       40.00       174       420       988       541       109       932       990       (501 )     3       (15 )     (52 )     425  
MRS Logistica S.A.
    29.35       29.35       624       284       1,121       912       488       629       1,717       (934 )     (145 )     (29 )     (199 )     (410 )
Samarco Mineração S.A.
    50.00       50.00       566       112       1,250       841       200       887       2,449       (805 )     (153 )     (8 )     (254 )     1,229  
Valosul Aluminio S.A.
    54.51       54.51       146       00       125       47       33       254       493       (458 )     (13 )     2       (22 )     2  
Baovale Mineração
    50.00       50.00       42             54       1             95       29       (3 )     (17 )           (3 )     4  
Nova Era Silicon S.A.
    49.00       49.00       27       15       47       30       37       22       100       (85 )     (22 )           (3 )     (10 )
     Notes:
(a)   The amounts above correspond to totals presented in the financial statements of these companies on December 31, 2005 adjusted and unaudited; and
(b)   The financial statements of Caemi are consolidated and include R$ 178 of minority interests and capital gains of R$ 298 due to selling of QCM, adjusted as non — operating result.
       Additional information of the main investees companies available on the CVRD website, www.cvrd.com.br, investors relations.
             
 
  CVRD        

34


Table of Contents

(CVRD LOGO)
9- Report of the Independent Accountants
(A free translation of the original opinion in Portuguese expressed on Financial Statements prepared in
accordance with the accounting principles prescribed by Brazilian Corporate Law)
To the Board of Directors and Stockholders of
Companhia Vale do Rio Doce
Rio de Janeiro – RJ
1- We have audited the accompanying balance sheets of Companhia Vale do Rio Doce, holding company and consolidated, as of December 31, 2005 and 2004, and the related statements of income, changes in stockholders’ equity, and changes in financial position for the years then ended, prepared under the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The audits of the financial statements for the years ended December 31, 2005 and 2004 of certain subsidiaries, jointly-owned and associated companies, mentioned in note 7.14, accounted for by the equity method, were carried out by other independent auditors and our opinion, in regard to these investments as of December 31, 2005 in the amount of R$7,386 million and as of December 31, 2004, in the amount of R$6,749 million and the earnings therefrom for the years ended December 31, 2005 and 2004 in the amounts of R$4,058 million and R$2,231 million, respectively, is based solely on the reports of these other auditors.
2- Our audits were conducted in accordance with auditing standards generally accepted in Brazil and included: (a) planning of the audit, considering the materiality of the amounts presented, the volume of transactions and the Company’s and its investees 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 evaluation of the accounting practices followed and significant estimates made by management, as well as the presentation of the financial statements taken as whole.
3- In our opinion, based on our audits and on the reports of the other auditors, the financial statements referred to in paragraph 1 present fairly, in all material respects, the financial position of Companhia Vale do Rio Doce, holding company and consolidated, as of December 31, 2005 and 2004, 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- Our audits were conducted for the purpose of forming an opinion on the basic financial statements referred to in the paragraph 1, taken as a whole. The statements of cash flows (holding company and consolidated) and value added (holding company and consolidated) are presented for purposes of additional information and are not a required part of the basic financial statements. This information has been subjected to the auditing procedures described in paragraph 2 and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole.
Rio de Janeiro, March 6, 2006
     
DELOITTE TOUCHE TOHMATSU
  Marcelo Cavalcanti Almeida
Independent Auditors
  Accountant
             
 
  CVRD        

35


Table of Contents

(CVRD LOGO)
10- Opinion of the Fiscal Council on the Annual Report and Financial Statements at December 31, 2005
The Fiscal Council of Companhia Vale do Rio Doce, in carrying out its legal and statutory duties, after examining the Company’s Annual Report, Balance Sheet, Statement of Income, Statement of Changes in Stockholders’ Equity, Statement of Changes in Financial Position and the respective Notes to the Financial Statements relative to the fiscal year ended December 31, 2005, and based on the opinion of the independent accountants, is of the opinion that the mentioned information, examined in light of applicable corporate legislation, which does not require information to be stated in currency of constant purchasing power, should be approved by the Annual Stockholders’ General Meeting.
March 6 st, 2006
     
Marcelo Amaral Moraes
  Aníbal Moreira dos Santos
Chairman
   
 
   
Joaquim Vieira Ferreira Levy
  José Bernardo de Medeiros Neto
             
 
  CVRD        

36


Table of Contents

(CVRD LOGO)
11- Opinion of the Board of Directors on the Annual Report and Financial Statements at December 31, 2005
The Board of Directors of Companhia Vale do Rio Doce, having examined the Annual Report, Balance Sheet and other Financial Statements of the Company relative to the fiscal year ended December 31, 2005, unanimously approved said proposal.
In view of this, the Board is of the opinion that the mentioned documents should be approved by the Annual Stockholders’ General Meeting.
March 6st, 2006
     
Sérgio Ricardo Silva Rosa
  Mário da Silveira Teixeira Júnior
Chairman
  Member
 
   
Arlindo Magno de Oliveira
  Oscar Augusto de Camargo Filho
Member
  Member
 
   
Erik Person
  Eduardo Fernando Jardim Pinto
Member
  Member
 
   
Jaques Wagner
  Francisco Augusto da Costa e Silva
Member
  Member
 
   
Hiroshi Tada
  Jorge Luiz Pacheco
Member
  Member
 
   
Renato da Cruz Gomes
   
Member
   
             
 
  CVRD        

37


Table of Contents

(CVRD LOGO)
B – Additional Information
12   - Management’s Discussion and Analysis of the Operating Results for the Year Ended December 31, 2005 and Supplemental Information
According to corporate governance best practices and with the objective of increasing the transparency of operations, CVRD presents additional information which was reviewed by independent auditors.
As a result of the analysis some general aspects must be considered, as follows:
About 87% of the consolidated gross revenue and 28% of consolidated total cost for 2005 are linked to the U.S. dollar. Consequently, fluctuations in the exchange rate variation between the two currencies have a significant impact on the operating results.
Approximately 86% of consolidated short-term and long-term loans for 2005 are denominated in U.S. dollars. As a result, exchange rate fluctuations have a significant impact on the financial expenses and income.
The average Dollar rate fell 16.8% between periods (R$ 2.4341 in 2005 against R$ 2.9257 in 2004), partially offset by price increases, and the end rate fell 11.8% (R$ 2.3407 in 2005 against R$ 2.6544 in 2004).
In 2005, iron ore prices increased by 71.5% and pellets prices increased by 86.4%.
The consolidated Trade Balance was:
                                         
    Consolidated (in US$ million)  
    Quarter (Unaudited)     Accumulated  
    4Q/05     3Q/05     4Q/04     2005     2004  
Exports
    2,011       1,723       1,364       7,021       5,534  
Imports
    (173 )     (134 )     (252 )     (682 )     (916 )
 
                             
 
    1,838       1,589       1,112       6,339       4,618  
 
                             
12.1- Comments on Consolidated Operating Results
12.1.1- Gross Revenue
Sales volume and revenues by products and services:
                                                                                                 
    In thousands of metric tons      
    (except railroad transportation)     In millions of reais  
    Quarter     Accumulated     (Unaudited)     Quarter     Accumulated  
    4Q/05     3Q/05     4Q/04     2005     2004     D%     4Q/05     3Q/05     4Q/04     2005     2004     D%  
Iron ore
    56,007       55,203       51,165       213,338       190,651       12       4,404       4,463       2,954       16,693       11,030       51  
Pellets (*)
    11,604       8,774       10,230       38,851       39,230       (1 )     1,958       1,644       1,177       6,745       4,596       47  
 
                                                                           
 
    67,611       63,977       61,395       252,189       229,881       10       6,362       6,107       4,131       23,438       15,626       50  
 
                                                                           
 
                                                                                               
Manganese
    244       271       320       907       999       (9 )     40       49       47       214       178       20  
Ferroalloys
    124       136       112       547       542       1       232       226       547       1,274       1,906       (33 )
 
                                                                                     
 
                                                    272       275       594       1,488       2,084       (29 )
 
                                                                                     
 
                                                                                               
Copper
    112       96       139       398       269       48       294       214       324       937       592       58  
Potash
    176       197       165       640       630       2       92       111       98       359       362       (1 )
Kaolin
    355       280       311       1,218       1,207       1       114       98       113       428       468       (9 )
 
                                                                                     
 
                                                    500       423       535       1,724       1,422       21  
 
                                                                                     
 
                                                                                               
Railroad transportation (millions of TKU) (**)
    8,705       10,468       9,371       37,525       38,271       (2 )     575       694       550       2,405       2,125       13  
Port services
    7,622       8,315       6,910       30,530       28,697       6       111       142       118       490       450       9  
Maritime transportation
                                        95       102       121       396       450       (12 )
 
                                                                                     
 
                                                    781       938       789       3,291       3,025       9  
 
                                                                                     
 
                                                                                               
Aluminum
    131       122       119       498       477       4       571       537       606       2,300       2,439       (6 )
Alumina
    403       504       366       1,738       1,678       4       268       333       411       1,199       1,315       (9 )
Bauxite
    1,544       1,422       1,529       5,600       5,429       3       94       86       73       358       301       19  
 
                                                                                     
 
                                                    933       956       1,090       3,857       4,055       (5 )
 
                                                                                     
 
                                                                                               
Steel
                                        338       340       623       1,509       2,731       (45 )
Other products and services
                                        18       3       22       43       77       (44 )
 
                                                                                     
 
                                                    9,204       9,042       7,784       35,350       29,020       22  
 
                                                                                     
 
(*)   Includes revenues derived from services provided to pelletizing join ventures in the amounts of R$ 19, R$ 19, R$ 20, R$ 71 and R$ 77 referring to the 4Q/05, 3Q/05, 4Q/04, 2005 and 2004, respectively.
 
(**)   The company carried through its railroad system 6,373, 8,242, 6,806, 28,379 and 28,214 million of TKUs of general cargo and 2,332, 2,226, 2,565, 9,146 and 10,057 million of TKUs of iron ore for third parties in 4Q/05, 3Q/05, 4Q/04, 2005 and 2004, respectively.
             
 
  CVRD        

38


Table of Contents

(CVRD LOGO)
The 22% gross revenue increase, from R$ 29,020 to R$ 35,350 was due to:
  Reference price increase of 71.5% to iron ore and 86.4% to pellets;
 
  Increase of copper prices;
 
  Increase of railroad and port services prices; and
 
  Increase of iron ore and copper volumes sold (copper started its operations in June, 2004 compared with a whole year of trading in 2005).
The above effects were partially offset by:
  The devaluation of the average dollar compared with the real was 17%;
 
  CST sale in the second half of 2004; and
 
  Decrease in ferroalloys prices (due to increase of offer began by the end of 2004) and the decline of manganese volume sold.
Gross Consolidated Revenue by Segment
                                                                                                                         
                            Holdings     (Unaudited)     Quarter     Acumulated  
            Non —                                                                                
    Ferrous     Ferrous                                                                                
    Minerals     Minerals     Logistics     Aluminum     Steel     4Q/05     %     3Q/05     %     4Q/04     %     2005     %     2004     %  
External market
                                                                                                                       
Americas, except United States
    471             16       113             600       7       518       6       744       10       2,385       7       2,096       7  
United States
    187       9             93       338       627       7       560       6       890       11       2,647       7       3,272       11  
Germany
    588       95                         683       7       734       8       574       7       2,774       8       2,168       7  
France
    286       14                         300       3       277       3       280       4       1,156       3       1,169       4  
England
    151                   4             155       2       124       1       103       1       590       2       293       1  
Europe, except for Germany, France and England
    705       168       11       325             1,209       13       1,316       15       957       12       5,132       15       4,382       15  
Middle East/Africa/Oceania
    569       1             62             632       7       596       7       386       5       2,285       6       1,333       5  
China
    1,692       32       8       27             1,759       19       1,430       16       842       11       5,154       15       3,079       11  
South Korea
    308       8                         316       3       322       4       291       4       1,015       3       890       3  
Japan
    552       25             233             810       9       795       9       651       8       3,044       9       2,528       9  
Ásia, other than China, South Korea and Japan
    221       36             1             258       3       238       3       240       3       1,095       3       880       3  
 
                                                                                         
 
    5,730       388       35       858       338       7,349       80       6,910       78       5,958       76       27,277       78       22,090       76  
Brazil
    930       113       732       80             1,855       20       2,132       22       1,826       24       8,073       22       6,930       24  
 
                                                                                         
 
                                                                                                                       
Total
    6,660       501       767       938       338       9,204       100       9,042       100       7,784       100       35,350       100       29,020       100  
 
                                                                                         
                                                                                                         
    Denominated in     (Unaudited)     Quarter     Accumulated  
    R$     US$     4Q/05     %     3Q/05     %     4Q/04     %     2005     %     2004     %     D%  
Personnel
    395       24       419       10       377       9       374       10       1,451       9       1,412       10       3  
Material
    641       136       777       18       821       20       674       17       3,105       19       2,325       16       34  
Oil and gas
    430       89       519       12       458       11       441       11       1,829       11       1,597       11       15  
Outsourced services
    770       222       992       23       862       21       738       19       3,406       21       2,474       18       38  
Energy
    353       9       362       8       361       9       381       10       1,412       9       1,253       9       13  
Raw Material
    7       587       594       13       482       12       558       15       2,239       14       2,520       18       (11 )
Depreciation and depletion
    379       14       393       9       366       9       306       8       1,468       9       1,191       8       23  
Amortization of goodwill
    95             95       2       95       2       96       3       382       2       384       3       (1 )
Others
    110       146       256       5       286       7       269       7       1,019       6       967       7       5  
 
                                                                             
Total
    3,180       1,227       4,407       100       4,108       100       3,837       100       16,311       100       14,123       100       15  
 
                                                                             
 
    72 %     28 %                                                                                        
 
                                                                                                   
The 15% increase (R$ 2,188) in the cost of products and services (R$ 16,311 in 2005 against R$ 14,123 in 2004) is due to increase in sales volumes and changes in the prices of materials, oil, energy and services which comprise production cost during the period.
             
 
  CVRD        

39


Table of Contents

(CVRD LOGO)
12.1.3 — Selling expenses
Selling expenses decreased by 17.5%, from R$ 412 in 2004 to R$ 340 in 2005, basically due to sale of CST in the second half of 2004 and less commission on sales.
12.1.4 — Administrative expenses
Administrative expenses increased by 13.8%, from R$ 1,125 in 2004 to R$ 1,280 in 2005, basically due to personnel agreements and expenses with technical consulting services and groundwork.
12.1.5 — Research and development
Research and development increased by 52.7%, from R$ 440 in 2004 to R$ 672 in 2005, reflecting 0 expansion plan to diversify production and expansion of production to attend world demand.
12.1.6 — Other operating expenses
Other operating expenses decreased by R$ 116, from R$ 955 in 2004 to R$ 834 in 2005, basically due to less need of provision for loss with ICMS credits.
12.1.7 — Net Financial Results
The net financial result had an impact of R$ 724 (expense of R$ 1,276 in 2005 compared to expense of R$ 2,000 in 2004) due to exchange rate variation effect of the Real against the dollar over the foreign debt, the reduction of financial expenses due to decrease of average debt and amount increase of revenues due to increase of rates over marketable securities abroad.
12.1.8 — Income Tax and Social Contribution
Income tax and social contribution reflect an expense of R$ 2,368 in 2005 compared with an expense of R$ 1,810 in 2004, mainly caused by increase of taxable income.
12.1.9 — Cash generation
The operating cash generation measured by EBITDA (earnings before financial results, results of equity investments, interest, income tax and depreciation, amortization and depletion more dividends received) was R$ 16,701 in 2005, against R$ 12,249 in 2004, an increase of 36,3%.
EBITDA
                                         
    (Unaudited)     Quarter     Accumulated  
    4Q/05     3Q/05     4Q/04     2005     2004  
Net operating revenue
    8,916       8,805       7,384       33,993       27,544  
Cost of products and services
    (4,407 )     (4,108 )     (3,837 )     (16,311 )     (14,123 )
Operating expenses
    (850 )     (932 )     (1,014 )     (3,126 )     (3,115 )
 
                             
Operating profit
    3,659       3,765       2,533       14,556       10,306  
Depreciation/amortization of goodwill
    538       495       440       1,994       1,694  
 
                             
 
    4,197       4,260       2,973       16,550       12,000  
Dividends received
    3       58       30       151       66  
Non-recurring item — amortization of goodwill Samitri
                            183  
 
                             
EBITDA
    4,200       4,318       3,003       16,701       12,249  
 
                             
Current liabilities
                                       
Current portion of long-term debt — unrelated parties
    2,940       1,628       2,526       2,940       2,526  
Short-term debt
    517       708       515       517       515  
Related parties
    81       69       106       81       106  
 
                             
 
    3,538       2,405       3,147       3,538       3,147  
 
                             
Long-term liabilities
                                       
Long-term debt — unrelated parties
    9,066       7,146       9,045       9,066       9,045  
Related parties
    3       3       41       3       41  
 
                             
 
    9,069       7,149       9,086       9,069       9,086  
 
                             
Gross debt
    12,607       9,554       12,233       12,607       12,233  
 
                             
 
Interest paid
    153       206       213       735       965  
Stockholders’ equity
    24,052       25,974       18,170       24,052       18,170  
EBITDA (LTM)/Interest paid (LTM)
    22.72       19.51       12.69       22.72       12.69  
EBITDA Margin (LTM)
    49 %     47 %     44 %     49 %     44 %
EBIT Margin (LTM)
    43 %     43 %     38 %     43 %     38 %
Gross debt/EBITDA (LTM)
    0.75       0.62       1.00       0.75       1.00  
Gross debt/Equity Capitalization
    34       27       40       34       40  
         
    CVRD    

40


Table of Contents

(CVRD LOGO)
Consolidated EBITDA by Segment
                                                                                 
    (Unaudited)     Quarter     Accumulated  
Segments   4Q/05     % of total     3Q/05     % of total     4Q/04     % of total     2005     % of total     2004     % of total  
Ferrous minerals
    3,528       82 %     3,671       83 %     2,062       69 %     13,582       81 %     7,947       65 %
 
Non-ferrous minerals
    157       4 %     84       2 %     82       3 %     428       3 %     309       3 %
 
Logistics
    221       5 %     340       6 %     277       9 %     1,217       7 %     1,234       10 %
 
Holdings
                                                                               
 
Aluminum
    339       8 %     305       7 %     520       17 %     1,446       9 %     1,965       16 %
 
Steel
    46       1 %     68       2 %     62       2 %     298       2 %     794       6 %
 
Others
    (91 )     0 %     (150 )     0 %           0 %     (270 )     -2 %           0 %
 
                                                           
 
 
    4,200       100 %     4,318       100 %     3,003       100 %     16,701       100 %     12,249       100 %
 
                                                           
Segment and geographical information
The business areas of the Company are, at present, organized as:
Ferrous — 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 — comprises the production of non-ferrous minerals.
Logistics — comprises transportation systems as they pertain to the operation of ships, ports and railroads for third-party cargos.
Holdings — divided into the following sub-groups:
Aluminum — comprises aluminum trading activities, alumina refining and investments in joint ventures and affiliates engaged in bauxite mining and aluminum metal smelting.
Steel — comprises investments in joint ventures and affiliates engaged in steel.
Others — comprises investments in joint ventures and affiliates engaged in other businesses.
         
    CVRD    

41


Table of Contents

(CVRD LOGO)
12.1.10 — Statement of Income by Segment
Years ended December 31
                                                                 
    In millions of Reais  
    2005  
                            Holdings              
            Non-                                              
    Ferrous     ferrous                                     Corporate        
    minerals     minerals     Logistics     Aluminium     Steel     Others     curter     Total  
Operating revenues
                                                               
Sales of ore and metals
                                                               
Iron ore and pellets
    23,438                                           23,438  
Manganese and ferroalloys
    1,488                                           1,488  
Copper
          937                                     937  
Potash
          359                                     359  
Kaolin
          428                                     428  
 
                                               
 
    24,926       1,724                                     26,650  
Transport services
                3,291                               3,291  
Sales of aluminum-related products
                      3,857                         3,857  
Sales os steel products
                            1,509                   1,509  
Other products and services
    33       1             9                         43  
 
                                               
 
    24,959       1,725       3,291       3,866       1,509                   35,350  
 
Vale Added taxes
    (701 )     (62 )     (494 )     (100 )                       (1,357 )
 
                                               
 
Net operational revenues
    24,258       1,663       2,797       3,766       1,509                   33,993  
 
                                               
 
Cost of products and services
                                                               
Ores and metals
    (9,531 )     (1,054 )                                   (10,585 )
Transport services
                (1,977 )                             (1,977 )
Aluminum-related products
                      (2,361 )                       (2,361 )
Steel products
                            (1,364 )                 (1,364 )
Other products and services
    (21 )     (2 )           (1 )                       (24 )
 
                                               
 
    (9,552 )     (1,056 )     (1,977 )     (2,362 )     (1,364 )                 (16,311 )
 
                                               
Gross profit
    14,706       607       820       1,404       145                   17,682  
 
                                                               
Gross margin
    60.6 %     36.5 %     29.3 %     37.3 %     9.6 %                 52.0 %
 
                                                               
Operational expenses
                                                               
Selling
    (242 )     (53 )     (12 )     (27 )     (6 )                 (340 )
Administrative
    (990 )     (46 )     (81 )     (141 )     (20 )     (2 )           (1,280 )
Research and development
    (210 )     (184 )     (10 )     (14 )           (254 )           (672 )
Other operating expenses
    (716 )     (51 )     (52 )     3       (2 )     (16 )           (834 )
 
                                               
 
    (2,158 )     (334 )     (155 )     (179 )     (28 )     (272 )           (3,126 )
 
                                               
Operating profit (loss) before financial results and result of equity investments
    12,548       273       665       1,225       117       (272 )           14,556  
Results of equity investments
                                                               
Gain on investments accounted by the equity method
    94                         397       1             492  
Amortization of goodwill
    (223 )                                         (223 )
Provision for losses
                                               
 
                                               
 
    (129 )                       397       1             269  
 
Financial result
                                                               
Financial expenses, net
                                        (1,240 )     (1,240 )
Monetary and exchange rate variation, net
                                        (36 )     (36 )
 
                                               
 
                                        (1,276 )     (1,276 )
 
                                               
Operating profit (loss)
    12,419       273       665       1,225       514       (271 )     (1,276 )     13,549  
Results on sale of assets
                                  298             298  
 
                                               
Income (loss) before income tax and social contribution
    12,419       273       665       1,225       514       27       (1,276 )     13,847  
Income tax and social contribution
    (2,136 )     (3 )     (98 )     (95 )     (46 )     10             (2,368 )
 
                                               
Income (loss) before minority interests
    10,283       270       567       1,130       468       37       (1,276 )     11,479  
Minority interests
    (619 )           (121 )     (230 )           (66 )           (1,036 )
 
                                               
Income (loss) for the year
    9,664       270       446       900       468       (29 )     (1,276 )     10,443  
 
                                               
         
    CVRD    

42


Table of Contents

(CVRD LOGO)
                                                                 
    In millions of Reais  
    2004  
                            Holdings              
            Non-                                              
    Ferrous     ferrous                                     Corporate        
    minerals     minerals     Logistics     Aluminium     Steel     Others     curter     Total  
Operating revenues
                                                               
Sales of ore and metals
                                                               
Iron ore and pellets
    15,626                                           15,626  
Manganese and ferroalloys
    2,084                                           2,084  
Copper
          592                                     592  
Potash
          362                                     362  
Kaolin
          468                                     468  
 
                                               
 
    17,710       1,422                                     19,132  
Transport services
                3,025                               3,025  
Sales of aluminum-related products
                      4,055                         4,055  
Sales os steel products
                            2,731                   2,731  
Other products and services
    68       1             8                         77  
 
                                               
 
    17,778       1,423       3,025       4,063       2,731                   29,020  
Vale Added taxes
    (738 )     (77 )     (462 )     (112 )     (87 )                 (1,476 )
 
                                               
Net operational revenues
    17,040       1,346       2,563       3,951       2,644                   27,544  
 
                                               
Cost of products and services
                                                               
Ores and metals
    (7,873 )     (655 )                                   (8,528 )
Transport services
                (1,805 )                             (1,805 )
Aluminum-related products
                      (2,013 )                       (2,013 )
Steel products
                            (1,738 )                 (1,738 )
Other products and services
    (33 )     (6 )                                   (39 )
 
                                               
 
    (7,906 )     (661 )     (1,805 )     (2,013 )     (1,738 )                 (14,123 )
 
                                               
Gross profit
    9,134       685       758       1,938       906                   13,421  
 
                                                               
Gross margin
    53.6 %     50.9 %     29.6 %     49.1 %     34.3 %     0.0 %     0.0 %     48.7 %
 
                                                               
Operational expenses
                                                               
Selling
    (192 )     (97 )     (40 )     (45 )     (38 )                 (412 )
Administrative
    (865 )     (11 )     (59 )     (132 )     (56 )     (2 )           (1,125 )
Research and development
    (133 )     (303 )     (4 )                             (440 )
Item não recorrente — amortização de ágio Samitri
    (183 )                                         (183 )
Other operating expenses
    (847 )     (49 )     (25 )     (8 )     (27 )     1             (955 )
 
                                               
 
    (2,220 )     (460 )     (128 )     (185 )     (121 )     (1 )           (3,115 )
 
                                               
Operating profit (loss) before financial results and result of equity investments
    6,914       225       630       1,753       785       (1 )           10,306  
Results of equity investments
                                                               
Gain on investments accounted by the equity method
    76                         332                   408  
Amortization of goodwill
    (229 )           (23 )                             (252 )
Provision for losses
                                               
 
                                               
 
    (153 )           (23 )           332                   156  
 
                                                               
Financial result
                                                               
Financial expenses, net
                                        (1,556 )     (1,556 )
Monetary and exchange rate variation, net
                                        (444 )     (444 )
 
                                               
 
                                        (2,000 )     (2,000 )
 
                                               
Operating profit (loss)
    6,761       225       607       1,753       1,117       (1 )     (2,000 )     8,462  
Results on sale of assets
    (6 )           21       (5 )     541                   551  
 
                                               
Income (loss) before income tax and social contribution
    6,755       225       628       1,748       1,658       (1 )     (2,000 )     9,013  
Income tax and social contribution
    (1,532 )     (22 )     (68 )     (127 )     (51 )     (10 )           (1,810 )
 
                                               
Income (loss) before minority interests
    5,223       203       560       1,621       1,607       (11 )     (2,000 )     7,203  
Minority interests
    (297 )     (26 )     (22 )     (398 )                       (743 )
 
                                               
Income (loss) for the year
    4,926       177       538       1,223       1,607       (11 )     (2,000 )     6,460  
 
                                               
         
    CVRD    

43


Table of Contents

(CVRD LOGO)
12.2 — Comments on the Parent Company Results
12.2.1 — Gross Revenue
The 31% increase in gross revenue (R$ 18,098 in 2005 against R$ 13,785 in 2004) is the result of the 10% increase in sales of iron ore and pellets and 7% increase in volume of port services and also for the increase of prices of both items. Additionally the revenues of the period include the sale of copper began in June 2004. This effect was compensated in part by the average appreciation the real against the United States Dollar by 17% incident in revenues of the Company.
12.2.2 — Cost of Products and Services
Cost of products and services sold in 2005 was R$ 9,603 in 2005 against R$ 7,147 in 2004 representing a 34.4% increase. The main factors are the start of the trading of copper (since 2004), higher volumes sold of products in general, contracts readjustments and the increase of assets reflecting increase of expenses related to depreciation.
12.2.3 — Gross Margin
The gross margin was reduced by 1.6% (43.8% in 2005 against 45.4% in 2004) mainly due to exchange rate variation loss from revenues, as described above, and the increase of unit cost for production of iron ore, copper and potash during 2005.
12.2.4 — Results of Shareholdings by Business Area
The numbers below do not necessarily reflect the individual results of each company, but rather the amounts effectively applicable to the business area.
                         
    Accumulated  
Business Area   2005     2004     D%    
Ferrous Minerals
                       
• Iron ore
    4,560       1,168       290  
• Pellets
    1,063       498       113  
• Manganese and ferroalloys
    30       572       (95 )
Non-Ferrous Minerals
    (28 )     (4 )     600  
 
Logistics
    231       166       39  
 
Holdings
                       
 
• Steel
    480       802       (40 )
 
• Aluminum
    582       728       (20 )
 
Others
    (43 )     17       353  
 
                   
 
Gain on investments accounted for by the equity method
    6,875       3,947       74  
 
                   
 
Provision for losses
    (308 )     (79 )     (290 )
 
Amortization of goodwill
    (223 )     (252 )     12  
 
Exchange variation in Stockholders’ Equity of companies abroad
    (878 )     (365 )     141  
 
                   
 
Results of equity investments
    5,466       3,251       68  
 
                   
Results of equity investments are strongly affected by the exchange rate variation over debt, which had a positive impact due to the appreciation of the Real against the Dollar in the year of 2005 of 11.8% in comparison with an 8.1% during the year of 2004. This effect is partially offset by the negative exchange rate variation from investments abroad.
Operationally, volumes and average selling prices increased in all businesses areas, except for ferroalloys, for which quantities and average sales price services were reduced. The decrease in steel is mainly due to the sale of CST and in the aluminum area, is due to higher production costs of bauxite and energy.
The negative result of equity in others refers to expenses with subsidiaries of mineral extraction in Africa, South America and Oceania.
12.2.5 — Selling expenses
Selling expenses decreased by 88.0%, from R$ 25 in 2004 to R$ 3 in 2005, basically due to less commission on sales.
         
    CVRD    

44


Table of Contents

(CVRD LOGO)
12.2.6 — Administrative expenses
Administrative expenses increased by 29.0%, from R$ 531 in 2004 to R$ 685 in 2005, basically due to personnel agreement and expenses with technical consulting services and groundwork.
12.2.7 — Research and development
Research and development increased by 18.9%, from R$ 349 in 2004 to R$ 415 in 2005, reflecting CVRD expansion plan to diversify production and expansion of production to attend world demand.
12.2.8 — Other operating expenses
Other operating expenses decreased by R$ 313, from R$ 548 in 2004 to R$ 235 in 2005, basically due to diminish of need of provision for loss with ICMS credits and contingences.
12.2.9 — Net Financial Results
The net financial result on 2005 had an impact of R$ 833 (income of R$ 81 on 2005 compared to expense of R$ 752 on 2004) due to exchange rate variation effect of the Real against the dollar over the foreign debt.
12.2.9 — Income Tax and Social Contribution
Income tax and social contribution reflect an expense of R$ 1,257 on 2005 compared with an expense of R$ 885 on 2004, mainly caused by increase of taxable income.
         
    CVRD    

45


Table of Contents

(CVRD LOGO)
12.3 — Labor and Social Indicators
                                 
Years ended December 31   In millions of reais  
    Consolidated (unaudited)     Parent Company  
    2005     2004     2005     2004  
Basis for computation     35,350       29,020       18,098       13,785  
Gross revenues
    35,350       29,020       18,098       13,785  
Operating profit — before financial results and results of equity investments
    14,556       10,306       6,153       4,305  
Gross payroll
    1,217       1,195       695       585  
                                                                                                 
    2005     2004     2005     2004  
            %of             %of             %of             %of  
            Gross     Operating             Gross     Operating             Gross     Operating             Gross     Operating  
    Amount     payroll     profit     Amount     payroll     profit     Amount     payroll     profit     Amount     payroll     profit  
Labor indicators
                                                                                               
 
Food
    122       10       1       106       9       1       72       10       1       58       10       1  
Compulsory social charges
    460       38       3       416       35       4       287       41       5       244       42       6  
Private pension plan
    102       8       1       91       8       1       85       12       1       73       12       2  
Health
    91       7       1       77       6       1       54       8       1       40       7       1  
Education
    113       9       1       66       6       1       70       10       1       40       7       1  
Profit sharing
    235       19       2       252       21       2       180       26       4       176       30       4  
Other benefits
    160       13             117       11       1       77       12       1       69       13       2  
 
                                                                       
Total — Labor indicators
    1,283       104       9       1,125       96       11       825       119       14       700       121       17  
 
                                                                       
                                                                                                 
    2005     2004     2005     2004  
            %of             %of             %of             %of  
            Operating     Gross             Operating     Gross             Operating     Gross             Operating     Gross  
    Amount     profit     revenues     Amount     profit     revenues     Amount     profit     revenues     Amount     profit     revenues  
Social indicators
                                                                                               
Taxes
    4,219       29       12       2,124       21       7       2,593       42       14       1,366       32       10  
Social investments
    108                   81       1             77       1       1       54       1       1  
Social projects and actions
    90                   62       1             59       1       1       35       1       1  
Indigenous communities
    18                   19                   18                   19              
Environmental expenditures
    197       1             166       1             129       2       1       107       2       1  
Operational
    175       1             128       1             108       2       1       69       2       1  
On outside programs and/or projects
    22                   38                   21                   38              
 
                                                                       
Total — Social indicators
    4,524       30       12       2,371       23       7       2,799       45       16       1,527       35       12  
 
                                                                       
 
 
Headcount   2005     2004     2005     2004  
No. of employees at end of year
    38,828       36,176       21,882       18,457  
No. of new hires during year
    6,910       5,275       4,424       3,060  
The Consolidated amounts relate to the percentage of participation of Parent Company in the companies.
         
    CVRD    

46


Table of Contents

(CVRD LOGO)
12.4 — Functional Currency
On October, 2005, The “Conselho Federal de Contabilidade – CFC” – Federal Accounting Council issued resolution CFC Nº 1,052/05, which approves rule NBC T 7 – Conversion of Foreign Currency in Financial Statements, and in line with international pronouncements and practices, established the functional currency and report currency concept and gives instruction that monetary effects calculated through financial statements conversion of companies with different functional currency from the parent company must be registered in a specific account in stockholders ´ equity.
The applying of the rule would bring the following impacts on the results of year 2005:
                         
    2005  
    CVRD     Adjustments     With Adjustments  
    Consolidated     (*) NBC T 7     NBC T 7  
Net operating revenues
    33,993             33,993  
Costs of products and services
    (16.311 )           (16.311 )
 
                 
Gross profit
    17,682             17,682  
Operating expenses
    (3.126 )           (3.126 )
 
                 
Operating profit
    14,556             14,556  
Results of equity investments
    269       4       273  
Financial results
    (1.276 )     48       (1.228 )
Sale of assets
    298             298  
 
                 
Income before income tax and social contribution
    13,847       52       13,899  
Income tax and social contribution
    (2.368 )           (2.368 )
 
                 
Income before minority interests
    11,479       52       11,531  
Minority interests
    (1.036 )           (1.036 )
 
                 
Net income for the year
    10,443       52       10,495  
 
                 
 
(*)   Adjustment to result against stockholders ´ equity account of the exchange rate variation due to conversion of entities abroad which functional currency other than Real.
         
    CVRD    

47


Table of Contents

(CVRD LOGO)
13— Board of Directors, Fiscal Council, Advisory Committees and Executive Officers
     
Board of Directors
  Fiscal Council
 
   
Sérgio Ricardo Silva Rosa
  Marcelo Amaral Moraes
Chairman
  Chairman
 
   
Arlindo Magno de Oliveira
  Anibal Moreira dos Santos
 
   
Eduardo Fernando Jardim Pinto
  Joaquim Vieira Ferreira Levy
 
   
Erik Persson
  José Bernardo de Medeiros Neto
 
   
Francisco Augusto da Costa e Silva
   
 
  Executive Officers
Hiroshi Tada
   
 
  Roger Agnelli
Jaques Wagner
  Chief Executive Officer
 
   
Mário da Silveira Teixeira Júnior
  Murilo de Oliveira Ferreira
 
  Executive Officer for Equity Holdings and
Oscar Augusto de Camargo Filho
  Business Development
 
   
Jorge Luiz Pacheco
  José Carlos Martins
 
  Executive Officer for Ferrous Minerals
Renato da Cruz Gomes
   
 
  Carla Grasso
 
  Executive Officer for Human Resources and
Advisory Committees of the
  Corporate Services
Board of Directors
   
 
  José Lancaster
Controlling Committee
  Executive Officer for Non-Ferrous Minerals
Antonio José de Figueiredo Ferreira
   
Inácio Clemente da Silva
  Fábio de Oliveira Barbosa
Paulo Roberto Ferreira de Medeiros
  Chief Financial Officer
 
   
Executive Development Committee
  Gabriel Stoliar
Arlindo Magno de Oliveira
  Executive Officer for Planning
João Moisés de Oliveira
   
Olga Nietta Loffredi
  Guilherme Rodolfo Laager
Oscar Augusto de Camargo Filho
  Executive Officer for Logistics
 
   
Strategic Committee
   
Roger Agnelli
   
Gabriel Stoliar
   
Cézar Manoel de Medeiros
   
José Roberto Mendonça de Barros
   
Luciano Coutinho
  Otto de Souza Marques Junior
 
Finance Committee
  Chief Officer of Control Department
Roger Agnelli
   
Fábio de Oliveira Barbosa
   
Rômulo de Mello Dias
  Marcus Vinícius Dias Severini
Wanderlei Viçoso Fagundes
  Chief Accountant
Ivan Luiz Modesto Schara
  CRC-RJ 093892/O-3
 
   
Governance and Ethics Committee
   
Renato da Cruz Gomes
   
Ricardo Simonsen
   
Ricardo Carvalho Giambroni
   
         
    CVRD    

48


Table of Contents

Equity Investee Information — 12/31/2005
CAEMI (Adjusted and Unaudited)
                                                                                     
        2005   2004
Information       1Q   2Q   3Q   4Q   Total     1Q     2Q     3Q     4Q     Total
 
IRON ORE
                                                                                   
Quantity sold — external market
  MT (thousands)     9,560       9,949       10,737       9,174       39,420       7,855       7,407       9,311       9,446       34,019  
Quantity sold — internal market
  MT (thousands)     1,946       2,388       2,673       2,570       9,577       1,941       2,851       2,525       2,349       9,666  
         
Quantity sold — total
  MT (thousands)     11,506       12,337       13,410       11,744       48,997       9,796       10,258       11,836       11,795       43,685  
         
 
                                                                                   
Average sales price — external market
  US$     22.49       39.40       38.69       36.52       34.44       18.95       22.68       21.63       22.50       21.48  
Average sales price — internal market
  US$     17.91       32.29       26.63       27.20       26.42       14.14       14.62       15.33       17.62       15.44  
Average sales price — total
  US$     21.71       38.02       36.30       34.69       32.92       18.00       20.44       20.28       21.53       20.14  
 
                                                                                   
REFRACTORY BAUXITE
                                                                                   
Quantity sold — external market
  MT (thousands)                                   19                         19  
Quantity sold — internal market
  MT (thousands)                                   1                         1  
         
Quantity sold — total
  MT (thousands)                                   20                         20  
         
 
                                                                                   
Average sales price — external market
  US$                                   148.20                         148.20  
Average sales price — internal market
  US$                                   158.00                         158.00  
Average sales price — total
  US$                                   148.67                         148.67  
 
                                                                                   
KAOLIN
                                                                                   
Quantity sold — external market
  MT (thousands)     253       267       253       321       1,094       169       175       170       156       670  
Quantity sold — internal market
  MT (thousands)     29       29       32       34       124       18       18       20       18       74  
         
Quantity sold — total
  MT (thousands)     282       296       285       355       1,218       187       193       190       174       744  
         
 
                                                                                   
Average sales price — external market
  US$     167.32       175.04       175.68       165.27       170.54       153.64       161.84       161.44       164.46       160.28  
Average sales price — internal market
  US$     197.76       202.59       212.12       249.42       216.76       210.17       184.56       200.15       235.06       207.29  
Average sales price — total
  US$     170.45       177.74       178.81       173.07       174.94       159.08       163.94       165.51       171.86       164.96  
 
                                                                                   
TRANSPORTATION SERVICES (*)
                                                                                   
Quantity sold — internal market
  MT (thousands)     25,190       27,196       28,059       27,841       108,286       21,819       24,314       25,632       26,333       98,098  
         
Quantity sold — total
  MT (thousands)     25,190       27,196       28,059       27,841       108,286       21,819       24,314       25,632       26,333       98,098  
         
 
                                                                                   
Average sales price — internal market
  US$     6.75       6.93       8.15       8.62       7.64       5.29       5.05       5.36       5.65       5.35  
Average sales price — total
  US$     6.75       6.93       8.15       8.62       7.64       5.29       5.05       5.36       5.65       5.35  
 
                                                                                   
Long-term indebtedness, gross
  US$     302       252       242       223       223       265       241       254       254       254  
Short-term indebtedness, gross
  US$     24       16       5                   18       13       9       6       6  
         
Total indebtedness, gross
  US$     326       268       247       223       223       283       254       263       260       260  
         
 
                                                                                   
Stockholders’ equity
  R$     1,462       1,942       2,367       2,882       2,882       1,093       1,265       1,440       1,300       1,300  
         
Net operating revenues
  R$     792       1,443       1,272       1,120       4,627       600       708       792       798       2,898  
Cost of products
  R$     (426 )     (469 )     (493 )     (509 )     (1,897 )     (330 )     (304 )     (369 )     (356 )     (1,359 )
Other expenses/revenues
  R$     (96 )     (97 )     (104 )     (122 )     (419 )     (58 )     (73 )     (72 )     (135 )     (338 )
Depreciation, amortization and depletion
  R$     79       76       87       93       335       45       46       47       60       199  
         
EBITDA
  R$     349       953       762       582       2,646       257       377       398       367       1,399  
Depreciation, amortization and depletion
  R$     (79 )     (76 )     (87 )     (93 )     (335 )     (45 )     (46 )     (47 )     (60 )     (199 )
         
EBIT
  R$     270       877       675       489       2,311       212       331       351       307       1,201  
Sale of assets
  R$                 298             298                                
Result of equity investments
  R$     7       30       (27 )     8       18       5       1       (5 )     (9 )     (8 )
Net financial results
  R$     7       (99 )     (58 )     52       (98 )     (20 )     (19 )     (41 )     (42 )     (122 )
         
Income before income tax and social contribution
  R$     284       808       888       549       2,529       197       313       305       256       1,071  
Income tax and social contribution
  R$     (93 )     (256 )     (232 )     46       (535 )     (67 )     (108 )     (99 )     (78 )     (352 )
Minority interest
  R$     (29 )     (77 )     (55 )     (74 )     (235 )     (21 )     (34 )     (30 )     (27 )     (112 )
         
Net income
  R$     162       475       601       521       1,759       109       171       176       151       607  
         

 


Table of Contents

Aluminum Area — Albras (Adjusted and Unaudited)
                                                                                     
        2005   2004
Information       1Q   2Q   3Q   4Q   Total   1Q   2Q   3Q   4Q   Total
 
Quantity sold — external market
  MT (thousand)     104       106       106       110       426       94       115       96       108       413  
Quantity sold — internal market
  MT (thousand)     5       4       6       6       21       3       4       5       5       17  
         
Quantity sold — total
  MT (thousand)     109       110       112       116       447       97       119       101       113       430  
         
 
                                                                                   
Average sales price — external market
  US$     1,787.71       1,819.42       1,754.44       1,844.43       1,801.97       1,565.46       1,626.62       1,644.42       1,728.79       1,643.55  
Average sales price — internal market
  US$     1,860.15       1,874.87       1,588.67       1,310.50       1,628.35       1,618.11       1,660.01       1,700.23       1,787.36       1,701.90  
Average sales price — total
  US$     1,790.92       1,821.74       1,745.56       1,816.81       1,793.81       1,567.28       1,627.72       1,647.09       1,731.32       1,645.86  
 
                                                                                   
Long-term indebtedness, gross
  US$     172       152       132       237       237       319       264       244       202       202  
Short-term indebtedness, gross
  US$     23       142       190       172       172                                
         
Total indebtedness, gross
  US$     195       294       322       409       409       319       264       244       202       202  
         
 
                                                                                   
Stockholders’ equity
  R$     1,169       1,308       1,288       1,131       1,131       835       1,028       1,143       1,076       1,076  
         
 
                                                                                   
Net operating revenues
  R$     521       496       457       480       1,954       442       587       494       542       2,066  
Cost of products
  R$     (353 )     (348 )     (333 )     (342 )     (1,376 )     (258 )     (346 )     (289 )     (392 )     (1,285 )
Other expenses/revenues
  R$     (29 )     (20 )     (28 )     (30 )     (107 )     (30 )     (26 )     (17 )     (39 )     (112 )
Depreciation, amortization and depletion
  R$     15       17       17       20       69       16       16       17       17       66  
         
EBITDA
  R$     154       145       113       128       540       170       231       206       128       735  
Depreciation, amortization and depletion
  R$     (15 )     (17 )     (17 )     (20 )     (69 )     (16 )     (16 )     (17 )     (17 )     (66 )
         
EBIT
  R$     139       128       96       108       471       154       215       189       111       669  
Impairment
  R$                                   (5 )     1             (1 )     (5 )
Net financial results
  R$     (24 )     51       (92 )     (229 )     (294 )     (101 )     (49 )     (59 )     31       (178 )
         
Income before income tax and social contribution
  R$     115       179       4       (121 )     177       48       167       130       141       486  
Income tax and social contribution
  R$     (23 )     (40 )     (24 )     88       1       (53 )     27       (15 )     (2 )     (43 )
         
Net income (loss)
  R$     92       139       (20 )     (33 )     178       (5 )     194       115       139       443  
         

 


Table of Contents

Aluminum Area — Alunorte (Adjusted and Unaudited)
                                                                                     
        2005     2004
Information       1Q     2Q     3Q     4Q     Total   1Q     2Q     3Q     4Q     Total
 
Quantity sold — external market
  MT (thousand)     395       366       404       393       1,558       439       343       487       414       1,683  
Quantity sold — internal market
  MT (thousand)     263       249       271       246       1,029       231       212       216       218       877  
         
Quantity sold — total
  MT (thousand)     658       615       675       639       2,587       670       555       703       632       2,560  
         
 
                                                                                   
Average sales price — external market
  US$     244.47       249.98       239.25       261.44       248.69       204.29       234.99       225.85       230.49       223.23  
Average sales price — internal market
  US$     231.66       234.08       204.17       219.59       222.12       207.14       210.68       206.77       221.70       211.52  
Average sales price — total
  US$     239.35       241.38       225.17       245.33       237.61       205.30       225.71       222.76       227.46       219.99  
 
                                                                                   
Long-term indebtedness, gross
  US$     464       454       546       582       582       361       351       334       402       402  
Short-term indebtedness, gross
  US$     33             34       1       1       90       64       58       9       9  
         
Total indebtedness, gross
  US$     497       454       580       583       583       451       415       392       411       412  
         
 
                                                                                   
Stockholders’ equity
  R$     1,728       2,042       2,096       2,084       2,084       970       1,244       1,432       1,637       1,637  
         
 
                                                                                   
Net operating revenues
  R$     407       351       357       354       1,469       385       375       448       386       1,594  
Cost of products
  R$     (238 )     (236 )     (270 )     (263 )     (1,007 )     (238 )     (207 )     (280 )     (231 )     (956 )
Other expenses/revenues
  R$     (19 )     (14 )     (1 )     (12 )     (46 )     (12 )     (11 )     (12 )     (17 )     (52 )
Depreciation, amortization and depletion
  R$     23       22       21       23       89       19       20       22       23       83  
         
EBITDA
  R$     173       123       107       102       505       154       177       178       161       670  
Depreciation, amortization and depletion
  R$     (23 )     (22 )     (21 )     (23 )     (89 )     (19 )     (20 )     (22 )     (23 )     (83 )
         
EBIT
  R$     150       101       86       79       416       135       157       156       138       586  
Net financial results
  R$     (22 )     138       (7 )     (129 )     (20 )     (87 )     (80 )     34       (29 )     (162 )
         
Income before income tax and social contribution
  R$     128       239       79       (50 )     396       48       77       190       109       424  
Income tax and social contribution
  R$     (12 )     (40 )     (24 )     14       (62 )     (11 )     52       (3 )     (35 )     3  
         
Net income
  R$     116       199       55       (36 )     334       37       129       187       74       427  
         

 


Table of Contents

Aluminum Area — MRN (Adjusted and Unaudited)
                                                                                     
        2005   2004
Information       1Q     2Q     3Q     4Q     Total   1Q     2Q     3Q     4Q     Total
 
Quantity sold — external market
  MT (thousand)     1,426       1,461       1,433       1,509       5,829       1,106       1,157       1,699       1,715       5,677  
Quantity sold — internal market
  MT (thousand)     2,431       2,972       3,165       3,398       11,966       2,198       2,834       2,728       3,016       10,776  
         
Quantity sold — total
  MT (thousand)     3,857       4,433       4,598       4,907       17,795       3,304       3,991       4,427       4,731       16,453  
         
 
                                                                                   
Average sales price — external market
  US$     26.01       26.61       27.23       27.67       26.89       22.00       22.70       23.89       25.10       23.64  
Average sales price — internal market
  US$     22.27       22.78       23.31       23.69       23.07       18.84       19.43       20.45       21.49       20.14  
Average sales price — total
  US$     24.14       24.70       25.27       24.91       24.78       19.90       20.38       21.77       22.80       21.35  
 
                                                                                   
Long-term indebtedness, gross
  US$     26       17       7       5       5       40       60       53       40       40  
Short-term indebtedness, gross
  US$     189       238       216       170       170       192       171       149       150       150  
         
Total indebtedness, gross
  US$     215       255       223       175       175       232       231       202       190       190  
         
 
                                                                                   
Stockholders’ equity
  R$     849       794       905       932       932       777       729       880       870       870  
         
Net operating revenues
  R$     225       240       260       265       990       178       242       262       265       947  
Cost of products
  R$     (98 )     (118 )     (140 )     (146 )     (502 )     (75 )     (98 )     (105 )     (116 )     (394 )
Other expenses/revenues
  R$     (6 )     (7 )     (4 )     (11 )     (28 )     (3 )     (2 )     (11 )     (9 )     (25 )
Depreciation, amortization and depletion
  R$     26       26       27       33       112       25       26       26       26       103  
         
EBITDA
  R$     147       141       143       141       572       125       168       172       166       631  
Depreciation, amortization and depletion
  R$     (26 )     (26 )     (27 )     (33 )     (112 )     (25 )     (26 )     (26 )     (26 )     (103 )
         
EBIT
  R$     121       115       116       108       460       100       142       146       140       528  
Net financial results
  R$     (6 )     21       8       (7 )     16       (6 )     (23 )     18       8       (3 )
         
Income before income tax and social contribution
  R$     115       136       124       101       476       94       119       164       148       525  
Income tax and social contribution
  R$     (12 )     (12 )     (13 )     (14 )     (51 )     (11 )     (12 )     (13 )     (13 )     (48 )
         
Net income
  R$     103       124       111       87       425       83       107       151       135       476  
         

 


Table of Contents

Aluminum Area — Valesul (Adjusted and Unaudited)
                                                                                     
        2005     2004
Information       1Q     2Q     3Q     4Q     Total   1Q     2Q     3Q     4Q     Total
 
Quantity sold — external market
  MT (thousand)     12       12       8       11       43       15       15       12       12       54  
Quantity sold — external market
  MT (thousand)     11       12       12       16       51       10       10       12       12       44  
         
Quantity sold — external market
  MT (thousand)     23       24       20       27       94       25       25       24       24       98  
         
 
                                                                                   
Quantity sold — external market
  US$     1,927.69       2,030.87       1,999.47       2,119.86       2,019.00       1,676.30       1,802.97       1,782.17       1,846.29       1,772.79  
Quantity sold — external market
  US$     2,578.41       2,674.31       2,565.35       2,833.68       2,677.99       2,240.26       2,214.30       2,330.97       2,435.48       2,312.34  
Quantity sold — external market
  US$     2,494.08       2,216.68       2,339.00       2,542.86       2,404.27       1,903.80       1,969.71       2,063.19       2,137.55       2,016.89  
 
                                                                                   
Long-term indebtedness, gross
  US$                                   1                          
Short-term indebtedness, gross
  US$     1                               1       1       1              
         
Total indebtedness, gross
  US$                                   2       1       1             -  
         
 
                                                                                   
Stockholders’ equity
  R$     287       274       266       254       254       273       254       273       273       273  
         
 
                                                                                   
Net operating revenues
  R$     128       126       107       133       494       128       146       135       132       541  
Cost of products
  R$     (111 )     (115 )     (108 )     (124 )     (458 )     (102 )     (113 )     (112 )     (104 )     (431 )
Other expenses/revenues
  R$           3       (3 )     (13 )     (13 )     (3 )     (7 )     1       (6 )     (15 )
Depreciation, amortization and depletion
  R$     4       4       3       4       15       4       4       4       4       16  
         
EBITDA
  R$     21       18       (1 )           38       27       30       28       26       111  
Depreciation, amortization and depletion
  R$     (4 )     (4 )     (3 )     (4 )     (15 )     (4 )     (4 )     (4 )     (4 )     (16 )
         
EBIT
  R$     17       14       (4 )     (4 )     23       23       26       24       22       95  
Net financial results
  R$     3       (2 )                 1       1       1       2       1       5  
         
Income before income tax and social contribution
  R$     20       12       (4 )     (4 )     24       24       27       26       23       100  
Income tax and social contribution
  R$     (7 )     (6 )     (4 )     (5 )     (22 )     (6 )     (6 )     (6 )     (6 )     (24 )
         
Net income
  R$     13       6       (8 )     (9 )     2       18       21       20       17       76  
         

 


Table of Contents

Pellets Area – Hispanobras (Adjusted and Unaudited)
                                                                                     
        2005   2004
Information       1Q     2Q     3Q     4Q     Total   1Q     2Q     3Q     4Q     Total
 
Quantity sold — external market
  MT (thousand)     500       459       320       331       1,610       425       99       246       442       1,212  
Quantity sold — internal market
  MT (thousand)     620       550       730       685       2,585       460       790       795       675       2,720  
         
Quantity sold — total
  MT (thousand)     1,120       1,009       1,050       1,016       4,195       885       889       1,041       1,117       3,932  
         
 
                                                                                   
Average sales price — external market
  US$     38.46       69.35       72.19       71.87       60.84       32.48       57.40       38.57       39.18       38.20  
Average sales price — internal market
  US$     38.43       50.85       74.00       73.14       60.32       31.18       42.37       37.67       38.62       38.17  
Average sales price — total
  US$     38.45       59.27       73.45       72.73       60.52       31.83       44.04       37.88       38.84       38.18  
         
Stockholders’ equity
  R$     125       189       147       112       112       95       113       120       115       115  
         
 
                                                                                   
Net operating revenues
  R$     114       265       178       168       725       82       121       119       120       443  
Cost of products
  R$     (93 )     (152 )     (121 )     (126 )     (492 )     (81 )     (97 )     (96 )     (91 )     (365 )
Other expenses/income
  R$     (4 )     (2 )     (2 )     (7 )     (15 )     3       6       (4 )     (7 )     (2 )
Depreciation, amortization and depletion
  R$     1       1       1       1       4       3       1       1       1       6  
         
EBITDA
  R$     18       112       56       36       222       7       32       20       23       82  
Depreciation, amortization and depletion
  R$     (1 )     (1 )     (1 )     (1 )     (4 )     (3 )     (1 )     (1 )     (1 )     (6 )
         
EBIT
  R$     17       111       55       35       218       4       31       19       22       76  
Net financial results
  R$           (9 )     (2 )     3       (8 )     (1 )     1       (5 )     (2 )     (7 )
         
Income before income tax and social contribution
  R$     17       102       53       38       210       3       32       14       20       69  
Income tax and social contribution
  R$     (7 )     (35 )     (18 )     (14 )     (74 )     (1 )     (11 )     (5 )     (8 )     (25 )
         
Net income
  R$     10       67       35       24       136       2       21       9       12       44  
         

 


Table of Contents

     
Pellets Area – Itabrasco (Adjusted and Unaudited)
                                                                                     
        2005     2004  
Information       1Q     2Q     3Q     4Q     Total     1Q     2Q     3Q     4Q     Total  
 
Quantity sold — external market
  MT (thousand)     769       730       670       688       2,857       762       903       486       674       2,825  
Quantity sold — internal market
  MT (thousand)     176       230       340       189       935             105       260       407       772  
         
Quantity sold — total
  MT (thousand)     945       960       1,010       877       3,792       762       1,008       746       1,081       3,597  
         
 
                                                                                   
Average sales price — external market
  US$     39.14       71.97       73.16       73.70       63.83       32.84       43.39       39.02       39.15       38.78  
Average sales price — internal market
  US$     39.40       73.27       73.78       73.57       67.14             38.29       39.33       39.28       39.16  
Average sales price — total
  US$     39.18       72.29       73.37       73.67       64.65       32.84       42.86       39.13       39.20       38.86  
 
                                                                                   
Short-term indebtedness, gross
  US$     4       9                         1       8       1              
         
Total indebtedness, gross
  US$     4       9                         1       8       1              
         
Stockholders’ equity
  R$     94       157       133       102       102       66       79       84       89       89  
         
 
                                                                                   
Net operating revenues
  R$     99       246       172       147       664       72       132       87       117       408  
Cost of products
  R$     (84 )     (145 )     (123 )     (112 )     (464 )     (70 )     (111 )     (72 )     (101 )     (354 )
Other expenses/revenues
  R$     (6 )     (3 )     (7 )     (4 )     (20 )           4       (4 )     (7 )     (7 )
Depreciation, amortization and depletion
  R$                 2       1       3             1       1             2  
         
EBITDA
  R$     9       98       44       32       183       2       26       12       9       49  
Depreciation, amortization and depletion
  R$                 (2 )     (1 )     (3 )           (1 )     (1 )           (2 )
         
EBIT
  R$     9       98       42       31       180       2       25       11       9       47  
Result of equity investiments
  R$                                                            
Net financial results
  R$     (1 )     (1 )     (6 )           (8 )           (1 )     (2 )     1       (2 )
         
Income before income tax and social contribution
  R$     8       97       36       31       172       2       24       9       10       45  
Income tax and social contribution
  R$     (4 )     (33 )     (15 )     (12 )     (64 )     (1 )     (9 )     (4 )     (4 )     (18 )
         
Net income
  R$     4       64       21       19       108       1       15       5       6       27  
         

 


Table of Contents

Pellets Area – Kobrasco (Adjusted and Unaudited)
                                                                                     
        2005     2004  
Information       1Q     2Q     3Q     4Q     Total     1Q     2Q     3Q     4Q     Total  
 
Quantity sold — external market
  MT (thousand)     597       980       782       829       3,188       617       437       852       549       2,455  
Quantity sold — internal market
  MT (thousand)     662       329       400       310       1,701       623       460       320       544       1,947  
         
Quantity sold — internal market — Others
  MT (thousand)     1,259       1,309       1,182       1,139       4,889       1,240       897       1,172       1,093       4,402  
         
 
                                                                                   
Average sales price — external market
  US$   38.08       71.48       75.54       73.27       66.69       34.27       38.04       37.94       38.20       37.09  
Average sales price — internal market
  US$   39.32       73.80       71.98       72.85       59.78       33.26       39.59       38.96       39.36       37.40  
Average sales price — total
  US$     38.73       72.26       74.34       73.16       64.34       33.76       38.84       38.22       38.77       37.24  
 
                                                                                   
Long-term indebtedness, gross
  US$   87       70       49       27       27       97       92       87       83       83  
         
Total indebtedness, gross
  US$     87       70       49       27       27       97       92       87       83       83  
         
 
                                                                                   
Stockholders’ equity
  R$     78       144       164       188       188       15       15       44       67       67  
         
Net operating revenues
  R$     130       230       208       187       755       122       106       135       118       481  
Cost of products
  R$     (98 )     (152 )     (143 )     (136 )     (529 )     (106 )     (92 )     (107 )     (96 )     (401 )
Other expenses/revenues
  R$     (9 )           (27 )     (7 )     (43 )     2       8       (5 )     (3 )     2  
Depreciation, amortization and depletion
  R$     2       2       2       2       8       2       2       2       2       8  
         
EBITDA
  R$     25       80       40       46       191       20       24       25       21       90  
Depreciation, amortization and depletion
  R$     (2 )     (2 )     (2 )     (2 )     (8 )     (2 )     (2 )     (2 )     (2 )     (8 )
         
EBIT
  R$     23       78       38       44       183       18       22       23       19       82  
Net financial results
  R$     (3 )     23       3       (5 )     18       (4 )     (21 )     21       17       13  
         
Income before income tax and social contribution
  R$     20       101       41       39       201       14       1       44       36       95  
Income tax and social contribution
  R$     (9 )     (35 )     (22 )     (14 )     (80 )     (6 )           (16 )     (13 )     (34 )
         
Net income
  R$     11       66       19       25       121       9       1       28       23       61  
         

 


Table of Contents

Pellets Area – Nibrasco (Adjusted and Unaudited)
                                                                                     
        2005     2004  
Information       1Q     2Q     3Q     4Q     Total     1Q     2Q     3Q     4Q     Total  
 
Quantity sold — external market
  MT (thousand)     675       627       827       807       2,936       563       803       776       833       2,975  
Quantity sold — internal market — CVRD
  MT (thousand)     996       1,149       1,000       1,289       4,434       1,327       903       899       779       3,908  
Quantity sold — internal market — Others
  MT (thousand)     35       34       35       34       138       33       33       31       30       127  
         
Quantity sold — total
  MT (thousand)     1,706       1,810       1,862       2,130       7,508       1,923       1,739       1,706       1,642       7,010  
         
Average sales price — external market
  US$     37.13       64.94       86.42       80.36       68.84       31.45       34.49       40.37       36.40       35.98  
Average sales price — internal market
  US$     37.77       68.70       106.16       70.54       70.74       31.51       35.96       37.51       37.40       35.09  
Average sales price — total
  US$     37.51       67.39       97.22       73.13       69.63       31.49       33.23       38.84       36.90       34.98  
 
                                                                                   
Long-term indebtedness, gross
  US$     4       4       4       3       3                   3       4       4  
Short-term indebtedness, gross
  US$                                   1                          
         
Total indebtedness, gross
  US$     4       4       4       3       3       1             3       4       4  
         
 
                                                                                   
Stockholders’ equity
  R$     174       154       204       269       269       116       129       143       161       161  
         
Net operating revenues
  R$     185       326       313       383       1,207       188       202       217       186       793  
Cost of products
  R$     (156 )     (238 )     (210 )     (271 )     (875 )     (171 )     (173 )     (183 )     (143 )     (670 )
Other expenses/revenues
  R$     (4 )     (4 )     (17 )     (12 )     (37 )     7       12       (6 )     (22 )     (9 )
Depreciation, amortization and depletion
  R$     1       2       2       2       7       2       2       1       1       6  
         
EBITDA
  R$     26       86       88       102       302       26       43       29       22       120  
Depreciation, amortization and depletion
  R$     (1 )     (2 )     (2 )     (2 )     (7 )     (2 )     (2 )     (1 )     (1 )     (6 )
         
EBIT
  R$     25       84       86       100       295       24       41       28       21       114  
Net financial results
  R$     (1 )     (3 )     (8 )           (12 )                 (4 )     8       4  
         
Income (loss) before income tax and social contribution
  R$     24       81       78       100       283       24       41       24       29       118  
Income tax and social contribution
  R$     (11 )     (28 )     (29 )     (34 )     (102 )     (9 )     (13 )     (9 )     (11 )     (42 )
         
Net income (loss)
  R$     13       53       49       66       181       15       28       15       18       76  
         

 


Table of Contents

Pellets Area – Samarco (Adjusted and Unaudited)
                                                                                     
        2005     2004  
Information       1Q     2Q     3Q     4Q     Total     1Q     2Q     3Q     4Q     Total  
 
Quantity sold — pellets
  MT (thousand)     3,297       3,024       3,666       4,089       14,076       3,462       3,177       3,264       3,918       13,821  
Quantity sold — iron ore
  MT (thousand)     239       431       407       330       1,407       497       471       688       367       2,023  
 
                                                                                   
Average sales price — pellets
  US$   43.88       76.50       80.98       79.60       70.93       39.31       39.11       38.89       40.62       39.54  
Average sales price — iron ore
  US$   31.04       32.18       38.68       37.23       35.05       16.88       19.66       21.78       21.28       19.99  
 
                                                                                   
Long-term indebtedness, gross
  US$   52       42       41       39       39       21       46       42       58       58  
Short-term indebtedness, gross
  US$   156       140       156       299       299       174       153       139       141       141  
         
Total indebtedness, gross
  US$     208       182       197       338       338       195       199       181       199       199  
         
 
                                                                                   
Stockholders’ equity
  R$     767       935       960       887       887       626       558       662       569       569  
         
Net operating revenues
  R$     411       612       697       730       2,450       373       404       424       480       1,681  
Cost of products
  R$     (168 )     (176 )     (209 )     (252 )     (805 )     (165 )     (154 )     (173 )     (217 )     (709 )
Other expenses
  R$     (28 )     (74 )     (19 )     (14 )     (135 )     (31 )     (46 )     (42 )     (55 )     (174 )
Depreciation, amortization and depletion
  R$     11       12       15       9       47       11       12       13       12       48  
         
EBITDA (*)
  R$     226       374       484       473       1,557       188       216       222       220       846  
Depreciation, amortization and depletion
  R$     (11 )     (12 )     (15 )     (9 )     (47 )     (11 )     (12 )     (13 )     (12 )     (48 )
         
EBIT
        215       362       469       464       1,510       177       204       209       208       798  
Result of equity investments
  R$     7       9       10       (6 )     20       11       (5 )     20       (1 )     25  
Net financial results
  R$     13             (46 )     (14 )     (47 )     (5 )     (54 )     41       2       (15 )
         
Income before income tax and social contribution
  R$     235       371       433       444       1,483       183       145       270       209       808  
Income tax and social contribution
  R$     (37 )     (60 )     (75 )     (82 )     (254 )     (31 )     (18 )     (58 )           (108 )
         
Net income
  R$     198       311       358       362       1,229       152       127       212       209       700  
         

 


Table of Contents

Pellets Area – GIIC (Adjusted and Unaudited)
                                                                                     
        2005     2004  
Information       1Q     2Q     3Q     4Q     Total     1Q     2Q     3Q     4Q     Total  
 
Quantity sold — external market
  MT(thousands)     710       1,058       893       932       3,593       906       683       1,003       1,092       3,684  
 
                                                                                   
Average sales price — external market
  US$     88.06       118.15       109.34       108.11       107.41       52.68       58.27       55.78       54.82       55.19  
 
                                                                                   
Long-term indebtedness, gross
  US$     10       10       5       5       5       20       20       25       25       25  
         
Total indebtedness, gross
  US$     10       10       5       5       5       20       20       25       25       25  
         
 
                                                                                   
Stockholders’ equity
  R$     303       328       282       289       289       221       240       245       240       240  
         
 
Net operating revenues
  R$     167       321       220       226       934       138       121       167       185       611  
Cost of products
  R$     (102 )     (156 )     (133 )     (129 )     (520 )     (104 )     (102 )     (131 )     (137 )     (474 )
Other expenses
  R$     (3 )     (46 )     (23 )     (16 )     (88 )     (11 )     (9 )     (10 )     (16 )     (46 )
Depreciation, amortization and depletion
  R$     2       2       2       2       8       2       2       2       2       8  
         
EBITDA
  R$     64       121       66       83       334       25       12       28       34       99  
Depreciation, amortization and depletion
  R$     (2 )     (2 )     (2 )     (2 )     (8 )     (2 )     (2 )     (2 )     (2 )     (8 )
         
EBIT
  R$     62       119       64       81       326       23       10       26       32       91  
Gain/loss in translation of currency
  R$           (16 )     4       15       3             2       (4 )     (6 )     (7 )
Net financial results
  R$                 (15 )     1       (14 )                             (1 )
         
Net income
  R$     62       103       53       97       315       23       12       22       26       83  
         

 


Table of Contents

Manganese and Ferrolloys Area – RDM (Adjusted and Unaudited)
                                                                                     
        2005     2004  
Information       1Q     2Q     3Q     4Q     Total     1Q     2Q     3Q     4Q     Total  
 
Quantity sold — external market — ferroalloys
  MT (thousand)     34       57       50       32       173       37       31       39       38       145  
Quantity sold — internal market — ferroalloys
  MT (thousand)     36       41       33       35       145       45       47       40       42       174  
         
Quantity sold — total
  MT (thousand)     70       98       83       67       318       82       78       79       80       319  
         
 
                                                                                   
Quantity sold — external market — manganese
  MT (thousand)     355       312       419       334       1,420       213       350       465       421       1,449  
Quantity sold — internal market — manganese
  MT (thousand)     69       68       76       46       259       72       72       61       78       283  
         
Quantity sold — total
  MT (thousand)     424       380       495       380       1,679       285       422       526       499       1,732  
         
 
                                                                                   
Average sales price — external market — ferroalloys
  US$     1,477.75       799.63       599.86       586.00       835.65       713.01       1,006.84       1,151.05       1,229.41       1,028.98  
Average sales price — internal market — ferroalloys
  US$     1,010.90       1,385.38       717.24       738.97       984.32       700.76       1,038.88       1,484.10       1,496.32       1,164.20  
Average sales price — total
  US$     1,237.52       1,049.97       646.53       665.91       905.04       706.34       1,026.72       1,316.89       1,366.98       1,101.56  
 
                                                                                   
Average sales price — external market — manganese
  US$     71.67       79.40       78.23       75.24       76.14       44.98       48.51       56.12       72.01       57.26  
Average sales price — internal market — manganese
  US$     72.19       72.64       76.16       82.54       75.31       45.15       55.80       54.94       53.41       52.25  
Average sales price — total
  US$     72.10       73.80       77.91       76.12       75.11       45.02       49.76       55.98       69.10       56.44  
 
                                                                                   
Long-term indebtedness, gross
  US$     8       48       50       90       90       12       11       12       11       11  
Short-term indebtedness, gross
  US$     34                               40       34       33       31       31  
         
Total indebtedness, gross
  US$     42       48       50       90       90       52       45       45       42       42  
         
 
                                                                                   
Stockholders’ equity
  R$     684       709       705       634       634       658       751       879       867       867  
         
Net operating revenues
  R$     279       275       216       137       907       179       265       350       356       1,150  
Cost of products
  R$     (145 )     (182 )     (156 )     (130 )     (613 )     (111 )     (110 )     (137 )     (167 )     (525 )
Other expenses/revenues
  R$     (13 )     (34 )     (57 )     (66 )     (170 )     (26 )     (23 )     (38 )     (73 )     (160 )
Depreciation, amortization and depletion
  R$     6       7       6       5       24       6       5       7       6       24  
         
EBITDA
  R$     127       66       9       (54 )     148       48       137       182       122       488  
Depreciation, amortization and depletion
  R$     (6 )     (7 )     (6 )     (5 )     (24 )     (6 )     (5 )     (7 )     (6 )     (24 )
         
EBIT
  R$     121       59       3       (59 )     124       42       132       175       116       464  
Impairment
  R$     2       (2 )                                         (7 )     (6 )
Net financial results
  R$     1       (26 )     (7 )     8       (24 )     3       5       (15 )     (13 )     (20 )
         
Income (loss) before income tax and social contribution
  R$     124       31       (4 )     (51 )     100       45       137       160       96       438  
Income tax and social contribution
  R$     (31 )     (7 )           (4 )     (42 )     (6 )     (43 )     (42 )     (24 )     (115 )
         
Net income (loss)
  R$     93       24       (4 )     (55 )     58       39       94       118       72       323  
         

 


Table of Contents

Manganese and Ferrolloys Area – Urucum (Adjusted and Unaudited)
                                                                                     
        2005     2004  
Information       1Q     2Q     3Q     4Q     Total     1Q     2Q     3Q     4Q     Total  
 
Quantity sold — external market — iron ore
  MT (thousand)     222       263       279       198       962       127       106       254       172       659  
Quantity sold — internal market — iron ore
  MT (thousand)     1             4       17       22             3             46       49  
         
Quantity sold — total
  MT (thousand)     223       263       283       215       984       127       109       254       218       708  
         
 
                                                                                   
Quantity sold — external market — manganese
  MT (thousand)     26       50       7       38       121       22       4       39       56       121  
Quantity sold — internal market — manganese
  MT (thousand)     64       48       48       36       196       50       62       52       50       214  
         
Quantity sold — total
  MT (thousand)     90       98       55       74       317       72       66       91       106       335  
         
 
                                                                                   
Quantity sold — external market — ferroalloys
  MT (thousand)     5       4       2       2       13       4       4       4       3       15  
Quantity sold — internal market — ferroalloys
  MT (thousand)                 2       4       6       1                         1  
         
Quantity sold — total
  MT (thousand)     5       4       4       6       19       5       4       4       3       16  
         
 
                                                                                   
Average sales price — external market — iron ore
  US$     17.89       32.72       34.19       32.09       29.59       15.05       19.09       19.18       18.45       18.18  
Average sales price — internal market — iron ore
  US$     2.63             23.25       22.53       21.76             2.28             37.13       35.00  
Average sales price — total
  US$     17.85       32.72       34.04       31.33       29.43       15.05       18.63       19.18       22.39       19.34  
 
                                                                                   
Average sales price — external market — manganese
  US$     115.85       98.34       124.86       67.37       93.91       49.84       54.87       45.72       45.33       46.59  
Average sales price — internal market — manganese
  US$     72.57       114.52       107.81       111.19       98.57       44.19       47.69       55.82       68.27       53.66  
Average sales price — total
  US$     85.16       106.27       109.98       88.69       96.82       45.92       48.10       51.53       56.10       51.09  
 
                                                                                   
Average sales price — external market — ferroalloys
  US$     918.43       775.24       942.00       798.00       859.47       564.53       863.73       1,285.47       1,227.89       969.24  
Average sales price — internal market — ferroalloys
  US$                 210.00       622.86       485.24       394.48                         394.48  
Average sales price — total
  US$     918.43       775.24       576.00       681.24       741.29       546.44       863.73       1,285.47       1,227.89       938.29  
 
                                                                                   
Long-term indebtedness, gross
  US$     12       17       19       23       23             3       1       8       8  
Short-term indebtedness, gross
  US$                                   4       1       1              
         
Total indebtedness, gross
  US$     12       17       19       23       23       4       4       2       8       8  
         
 
Stockholders’ equity
  R$     46       54       60       47       47       61       44       54       46       46  
         
Net operating revenues
  R$     41       50       42       39       172       21       24       40       39       124  
Cost of products
  R$     (18 )     (19 )     (17 )     (28 )     (82 )     (11 )     (11 )     (15 )     (19 )     (56 )
Other expenses/revenues
  R$     (5 )     (11 )     (9 )     (13 )     (38 )     (4 )     (3 )     (7 )     (22 )     (36 )
Depreciation, amortization and depletion
  R$     1       1       1       1       4       1       1       1       1       4  
         
EBITDA
  R$     19       21       17       (1 )     56       7       11       19       (1 )     36  
Depreciation, amortization and depletion
  R$     (1 )     (1 )     (1 )     (1 )     (4 )     (1 )     (1 )     (1 )     (1 )     (4 )
         
EBIT
  R$     18       20       16       (2 )     52       6       10       18       (2 )     32  
Impairment
  R$           (1 )           (3 )     (4 )     (1 )                 (1 )     (2 )
Net financial results
  R$     (1 )     (7 )     (5 )           (13 )                 (2 )     (2 )     (4 )
         
Income before income tax and social contribution
  R$     17       12       11       (5 )     35       5       10       16       (5 )     26  
Income tax and social contribution
  R$     (6 )     (4 )     (5 )           (15 )     (2 )     (3 )     (6 )           (11 )
         
Net income
  R$     11       8       6       (5 )     20       3       7       10       (5 )     15  
         

 


Table of Contents

Manganese and Ferrolloys Area – RDME (Adjusted and Unaudited)
                                                                                     
        2005     2004  
Information       1Q     2Q     3Q     4Q     Total     1Q     2Q     3Q     4Q     Total  
 
Quantity sold — external market — Sinter
  MT (thousands)     47       27       11       25       110       66       86       88       38       278  
 
                                                                                   
Quantity sold — external market — Manganese
  MT (thousands)     45       6       28       77       156       55       33       68       15       171  
 
                                                                                   
Quantity sold — external market — Ferroalloys
  MT (thousands)     50       51       38       31       170       64       41       47       41       193  
 
                                                                                   
Average sales price — external market — Sinter
  US$   134.00       155.00       157.00       120.52       138.39       103.70       108.70       95.68       118.63       104.75  
 
                                                                                   
Average sales price — external market — Manganese
  US$   122.00       139.00       147.93       99.97       116.43       73.22       78.16       100.35       83.18       85.84  
 
                                                                                   
Average sales price — external market — Ferroalloys
  US$   1,049.00       739.00       571.87       574.13       762.75       588.12       954.98       1,213.38       1,295.42       968.57  
 
                                                                                   
Long-term indebtedness, gross
  US$   3       2       2                   3       3       3       3       3  
Short-term indebtedness, gross
  US$           1             4       4                                
         
Total indebtedness, gross
  US$     3       3       2       4       4       3       3       3       3       3  
         
Stockholders’ equity
  R$     281       231       212       204       204       194       207       246       280       280  
         
 
                                                                                   
Net operating revenues
  R$     181       127       87       79       474       147       165       209       167       688  
Cost of products
  R$     (152 )     (121 )     (88 )     (82 )     (443 )     (134 )     (156 )     (134 )     (115 )     (539 )
Other expenses/revenues
  R$     (7 )     (7 )     (6 )     (14 )     (34 )     (3 )     (9 )     (24 )     (3 )     (39 )
Depreciation, amortization and depletion
  R$     3       3       3       3       12       3       3       5       5       16  
         
EBITDA
  R$     25       2       (4 )     (14 )     9       13       3       56       54       126  
Depreciation, amortization and depletion
  R$     (3 )     (3 )     (3 )     (3 )     (12 )     (3 )     (3 )     (5 )     (5 )     (16 )
         
EBIT
  R$     22       (1 )     (7 )     (17 )     (3 )     10             51       49       110  
Gain/loss in translation of currency
  R$     (12 )     (17 )     (18 )     8       (39 )           (1 )     (1 )     (5 )     (7 )
Net financial results
  R$                 (30 )     (1 )     (31 )     2                         2  
         
Income before income tax and social contribution
  R$     10       (18 )     (55 )     (10 )     (73 )     12       (1 )     50       44       105  
Income tax and social contribution
  R$     (8 )           2       3       (3 )                       (13 )     (13 )
         
Net income
  R$     2       (18 )     (53 )     (7 )     (76 )     12       (1 )     50       31       92  
         

 


Table of Contents

Steel Area – CSI (Adjusted and Unaudited)
                                                                                     
        2005     2004  
Information       1Q     2Q     3Q     4Q     Total     1Q     2Q     3Q     4Q     Total  
 
Quantity sold — total
  MT (thousand)     448       428       459       479       1,814       566       530       558       452       2,106  
 
                                                                                   
Average sales price — total
  US$     746.28       709.09       627.27       627.43       676.01       419.00       539.53       694.15       748.56       592.97  
 
                                                                                   
         
Stockholders’ equity
  R$     777       762       683       749       749       629       754       785       822       822  
         
 
                                                                                   
Net operating revenues
  R$     906       756       680       677       3,019       675       879       1,158       945       3,657  
Cost of products
  R$     (776 )     (703 )     (666 )     (589 )     (2,734 )     (654 )     (712 )     (854 )     (770 )     (2,990 )
Other expenses/revenues
  R$     (19 )     (7 )     (11 )     (1 )     (38 )                 (2 )           (2 )
Depreciation, amortization and depletion
  R$     18       15       17       15       65       20       18       19       17       74  
         
EBITDA
  R$     129       61       20       102       312       41       185       321       192       739  
Depreciation, amortization and depletion
  R$     (18 )     (15 )     (17 )     (15 )     (65 )     (20 )     (18 )     (19 )     (17 )     (74 )
         
EBIT
  R$     111       46       3       87       247       21       167       302       175       665  
Result of equity investments
  R$                                     4       3       (17 )     2       (8 )
Gain/loss in translation currency
  R$     8       (110 )     (45 )     49       (98 )           3       (13 )     (20 )     (30 )
Net financial results
  R$     (9 )     (7 )     (7 )     26       3       (15 )     (34 )     (52 )     (14 )     (115 )
         
Income (loss) before income tax and social contribution
  R$     110       (71 )     (49 )     162       152       10       139       220       143       512  
Income tax and social contribution
  R$     (44 )     (15 )     3       (37 )     (93 )     (4 )     (56 )     (96 )     (66 )     (222 )
         
Net income (loss)
  R$     66       (86 )     (46 )     125       59       6       83       124       77       290  
         

 


Table of Contents

Logistics Area – Docenave (Adjusted and Unaudited)
                                                                                     
        2005     2004  
Information       1Q     2Q     3Q     4Q     Total     1Q     2Q     3Q     4Q     Total  
 
Maritime transport — external market
                                                                                   
.Bulk transportation
  MT (thousands)     889       881       777       812       3,359       1,426       1,430       1,047       1,228       5,131  
.General cargo (Containers-TEUS)
  TEUS     9,888       8,845       8,907       6,663       34,303       7,444       8,674       10,194       10,991       37,303  
.Ports services
  Operations     556       804       991       416       2,767       698       623       617       819       2,757  
 
                                                                                   
Maritime transport — internal market
                                                                                   
.Bulk transportation
  MT (thousands)     345       291       330             966       129       495       573       411       1,608  
.General cargo (Containers-TEUS)
  TEUS     13,826       12,964       14,288       18,432       59,510       14,532       15,916       15,895       15,064       61,407  
.Ports services
  Operations     1,126       968       899       1,512       4,505       912       986       1,135       926       3,959  
 
                                                                                   
Average sales price — external market
                                                                                   
.Bulk transportation
  US$     15.55       11.25       14.89       16.85       14.58       10.83       11.83       16.47       16.21       13.55  
.General cargo (Containers-TEUS)
  US$     616.40       753.31       713.37       1,048.33       760.78       569.99       585.77       605.55       778.73       644.88  
.Ports services
  US$     3,453.24       3,075.23       3,112.53       5,921.07       3,592.40       3,005.73       3,321.03       3,414.91       3,063.49       3,185.71  
 
                                                                                   
Average sales price — internal market
                                                                                   
.Bulk transportation
  US$     9.88       7.56       7.00             8.20       3.81       8.37       7.23       11.68       8.44  
.General cargo (Containers-TEUS)
  US$     817.37       865.17       893.48       794.24       838.89       594.62       619.63       681.54       628.98       632.03  
.Ports services
  US$     3,449.38       3,931.46       4,362.93       2,996.97       3,583.43       3,003.29       3,294.12       3,376.21       3,019.44       3,186.41  
Long-term indebtedness, gross
  US$                                   1       1       1       1       1  
Short-term indebtedness, gross
  US$     1       1       1                   1       1       1       1       1  
         
Total indebtedness, gross
  US$     1       1       1                   2       2       2       2       2  
         
Stockholders’ equity
  R$     266       268       284       322       322       259       298       319       242       242  
         
Net operating revenues
  R$     104       86       90       90       370       96       118       131       130       475  
Cost of products
  R$     (64 )     (53 )     (57 )     (66 )     (240 )     (77 )     (79 )     (91 )     (97 )     (344 )
Other expenses/revenues
  R$     (4 )     (1 )     (5 )     (5 )     (15 )     (8 )     (6 )     (5 )     (17 )     (36 )
Depreciation
  R$     3       2       2       3       10             3       2       1       6  
         
EBITDA
  R$     39       34       30       22       125       11       36       37       17       101  
Depreciation
  R$     (3 )     (2 )     (2 )     (3 )     (10 )           (3 )     (2 )     (1 )     (6 )
         
EBIT
  R$     36       32       28       19       115       11       33       35       16       95  
Minority Interests
  R$                                                              
Write-down of assets
  R$     1       (33 )     (9 )     11       (30 )                              
Impairment
  R$                                                            
Net financial results
  R$     4       11       6       12       33       13       14       (7 )     (9 )     11  
         
Income (loss) before income tax and social contribution
  R$     41       10       25       42       118       24       47       28       7       106  
Income tax and social contribution
  R$     (11 )     (8 )     (9 )     (4 )     (32 )     (4 )     (1 )     (7 )     (2 )     (14 )
         
Net income (loss)
  R$     30       2       16       38       86       20       46       21       5       92  
         

 


Table of Contents

Logistics Area – FCA (Adjusted and Unaudited)
                                                                                     
        2005     2004  
Information       1Q     2Q     3Q     4Q     Total     1Q     2Q     3Q     4Q     Total  
 
Quantity sold — internal market
  MT (thousands)     6,103       7,416       7,616       6,425       27,560       5,807       6,943       6,931       7,086       26,767  
 
                                                                                   
Average sales price — internal market
  R$     26.20       30.09       31.18       29.26       29.34       22.77       24.95       26.19       24.99       24.81  
 
                                                                                   
Long-term indebtedness, gross
  US$     127       136       133                   111       107       109       134       134  
Short-term indebtedness, gross
  US$                                   18       18       18              
         
Total indebtedness, gross
  US$     127       136       133                   129       125       127       134       134  
         
 
                                                                                   
Stockholders’ equity
  R$     24       40       (37 )     (121 )     (121 )     108       82       73       39       39  
         
Net operating revenues
  R$     131       187       198       154       670       113       143       152       145       553  
Cost of products
  R$     (147 )     (176 )     (192 )     (213 )     (728 )     (130 )     (132 )     (150 )     (159 )     (572 )
Other expenses/revenues
  R$           (16 )     (53 )     (32 )     (101 )     4       (13 )     (13 )     (22 )     (44 )
Depreciation, amortization and depletion
  R$     13       15       18       23       69       10       9       12       14       45  
         
EBITDA
  R$     (3 )     10       (29 )     (68 )     (90 )     (4 )     7       1       (22 )     (18 )
Depreciation, amortization and depletion
  R$     (13 )     (15 )     (18 )     (23 )     (69 )     (10 )     (9 )     (12 )     (14 )     (45 )
         
EBIT
  R$     (16 )     (5 )     (47 )     (91 )     (159 )     (14 )     (2 )     (11 )     (36 )     (63 )
Net financial results
  R$     1       21       (29 )     6       (1 )     (12 )     (24 )     3       1       (32 )
         
Income before income tax and social contribution
  R$     (15 )     16       (76 )     (85 )     (160 )     (26 )     (26 )     (8 )     (35 )     (95 )
Income tax and social contribution
  R$                                                            
         
Net income (loss)
  R$     (15 )     16       (76 )     (85 )     (160 )     (26 )     (26 )     (8 )     (35 )     (95 )
         


Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
    COMPANHIA VALE DO RIO DOCE
 
                (Registrant)
 
       
Date: March 10, 2006
  By:   /s/ Fabio de Oliveira Barbosa
 
       
 
      Fabio de Oliveira Barbosa
 
      Chief Financial Officer