EXHIBIT 1.1  CORPORATE BYLAWS    CHAPTER I  NAME, REGISTERED OFFICES, DURATION AND OBJECT  ARTICLE ONE  Type and Name  The
company shall be a public limited company with the name of Portugal Telecom,
SGPS S.A.  ARTICLE TWO  Registered Offices  1.The companys registered
offices shall be in Avenida Fontes Pereira de Melo, number forty, Lisbon, and
its duration shall be unlimited.  2.By resolution of the Board
of Directors, the Company may establish and maintain, at any location within or
outside the national territory, agencies, delegations or any other form of
representation, as well as may it, with the authorization of the General
Meeting, to relocate its registered office to any location within the national
territory.  ARTICLE THREE  Object  1.The companys object is to
manage holdings in other companies as an indirect means of performing economic
activities, as defined by law.  2.The company may, without
restrictions, acquire or hold quotas or shares in any companies, as defined by
law, in addition to participating in complementary groupings of companies,
European Economic Interest Groupings, as well as forming or participating in
any other  1


forms
of temporary or permanent association between public or private companies
and/or entities.  CHAPTER II  SHARE CAPITAL, SHARES AND BONDS  ARTICLE FOUR  Share Capital  1.The share capital is twenty six million, eight
hundred ninety-five thousand, three hundred seventy five Euros, and it is fully
paid up.  2.The share capital is
represented by eight hundred and ninety six millions, five hundred and twelve
thousand and five hundred shares, with par value of three Euro cents each, with
the following distribution:  a)Eight hundred and ninety six
millions, five hundred and twelve thousand ordinary shares;  b)Five hundred class A shares.  3.The Board of Directors may,
with the favourable opinion of the Audit Committee, increase the share capital,
on one or more occasions, through capital contributions in cash up to Euro
15,000,000, after a resolution has been passed by the general meeting of
shareholders fixing the parameters to which such share capital increase or
increases shall be subject.  4.The general meetings
definition of the parameters pertaining to the increase in share capital to be
decided by the board of directors must specify:  a)the maximum amount of the
increase;  b)without prejudice to the
conditions of article 460 of the Commercial Companies Code, whether the
increase involves a suppression or limitation of preference rights;  c)the class or classes of
shares per issue comprising the increase in share capital and, in the event of
the issue of more than one class of shares, the respective proportion thereof,
without prejudice to the consequences of an incomplete subscription.  2


ARTICLE FIVE  Share Classes  1.The company, in addition to
its ordinary shares, has A shares, the majority of which shall be held by the
State or bodies belonging to the public sector and enjoy the privileges
resulting from the rules set out in articles fourteen, number two and
nineteen, number two of these articles of association.  2.The privileges referred to
in the preceding number shall, for all purposes, notably those set out in
article twenty four of the Commercial Companies Code, constitute special rights
to be attributed to the respective class of shares.  ARTICLE SIX  Types of Shares  The
companys shares shall be nominative and be recorded in book-entry form.  ARTICLE SEVEN  Preference Rights pertaining to Share Capital Increases  1.In the event of an increase
in share capital, based on the entry of fresh capital, current company
shareholders at the time of the resolution shall enjoy preference over non
shareholders in subscribing for new shares.  2.In the event of a fresh
issue of A shares, the preference right referred to in the preceding number
shall firstly be given to this class of shareholders, with other shareholders
only being given preference in respect of shares whose subscription rights have
not been taken up.  ARTICLE EIGHT  Preference Shares and Bonds  1.The company may issue voting
or non voting preference shares, redeemable or not, as defined by law.  2.The company may issue bonds
or other securities pursuant to the terms of the legislation in force and, in
addition, perform legally permitted operations in respect of the companys own
bonds or other securities issued by it.  3.The board of directors may
decide to issue bonds or other securities when the respective amount thereof
does not exceed the amount annually fixed for the purpose in question by the
general meeting and, in the event of the issue of convertible bonds, provided
that the implicit increase in share capital resulting from the price and
initial conversion fixed by the issue resolution is within the competence of
the board of directors, in conformity with the  3


terms
of number 3 of article 4 and provided that the parameters defined for the
purpose in question by the general meeting have been complied with.  4.The general meetings
definition of the parameters in respect of the board of directors issue of
convertible bonds must specify:  a)the maximum value of the
bonds to be issued in legal tender in Portugal or its counter value at the
exchange rate fixed in the issue resolution;  b)the maximum value of the
increase in potential share capital implicit in the issue at the initial
conversion price fixed by it;  c)without prejudice to the
conditions of article 460 of the Commercial Companies Code, whether the bonds
are issued with or without a suppression or limitation of preference rights;  d)the class or classes of
shares in respect of whose issue the conversion shall be made and in the event
of more than one class of shares, the respective proportion thereof.  ARTICLE NINE  Shareholders Performing a Competing Activity  1.Shareholders who/which are,
either directly or indirectly, engaged on an activity which competes with an
activity being performed by companies in a controlling/controlled relationship
with Portugal Telecom, SGPS, S.A. may not hold more than ten per cent of the
companys ordinary shares without firstly having received permission from the
general meeting.  2.A competing activity, for
the purpose of the dispositions of the preceding number, is understood to be
the provision of public telecommunications services or network capacity,
excluding in the case of the former, audiotext services, pursuant to the terms
of Portuguese law, either in Portugal or overseas, in addition to any other
activity of the same type and nature as that being performed by companies with
which Portugal Telecom, SGPS, S.A. is in a controlling/controlled relationship.  3.Entities which either directly,
or indirectly, have a holding of at least ten per cent of the share capital of
a company engaged on any of the activities referred to in the preceding  4


number
or in which an identical percentage is held by another entity, are considered
to be indirectly engaged on a competing activity.  4.The following ordinary
shares may be redeemed without the need for the consent of their respective
holders:  a)Those held without the prior
authorisation of the general meeting, by a shareholder who/which, pursuant to
the terms of the preceding numbers, is engaged on a competing activity, as
defined in the preceding numbers and when such shares, in conjunction with the
shares referred to in the following sub paragraph, exceed the amount of ten per
cent of the share capital;  b)Those held by entities whose
shares, pursuant to the terms of the Securities Market Code, would be
considered, in the case of a public take-over bid, as belonging to the
shareholders referred to in the preceding sub paragraph, whose proportion,
after the redemption referred to in this sub paragraph, exceeds the amount of
ten per cent of the share capital, with the redemption being proportional to
the number of shares held by each of the entities in question.  5.The shares referred to in
the preceding number may be redeemed at their nominal or respective market
value, if lower.  6.The board of directors shall
notify the respective shareholders that their shares shall be redeemed, within
a maximum period of thirty days from the resolution to redeem the shares
adopted at the general meeting.  7.Shareholders may suspend the
redemption process if, within a period of five days from the notification, they
have applied to the board of directors for permission to alienate the shares to
be redeemed, within a period of time of no more than thirty days, with the
aforementioned application implying the renunciation of their corresponding
voting and preference rights in the event of any increase in share capital up
until the effective date of sale.  8.The Board of Directors shall
promote the performance of the acts and the fulfillment of the formalities
legally required for the execution of the share capital reduction.  9.The consideration payable to
the holders of the redeemed shares shall be paid after they have certified that
the shares are no longer recorded in the respective book-entry securities
accounts and shall be paid in a lump sum or be deferred over a period of no
more than two years from the date of redemption.  10.When the redeemed shares are
registered, in legally acceptable cases, the consideration payable to their
respective holders shall be paid against the delivery of the respective  5


securities
pursuant to the conditions defined in the preceding number.  CHAPTER III  STATUTORY BODIES  SECTION I  General Dispositions  ARTICLE TEN  Corporate Bodies  The
Corporate Bodies are the General Meeting, the Board of Directors, the Audit
Committee and the Statutory Auditor.  ARTICLE ELEVEN  Terms of Office  1.Without prejudice to no. 3
of this article, members of the board of the General Meeting, the Board of
Directors and the Audit Committee as well the Statutory Auditor are elected for
a three year period by the General Meeting, and may be re-elected, once or
more, in accordance with the relevant legal limitations.  2.At the end of the respective
terms of office, the elected members of the board of the general meeting and
statutory bodies shall remain in office until new members have been appointed.  3.The Statutory Auditor is
elected by the General Meeting further to a proposal of the Audit Committee.  6


SECTION II  General Meeting  ARTICLE TWELVE  Obligations
of the Shareholders and information duties  1.Shareholders are obliged:  a)not to cast any votes which,
in statutory terms should not be counted, without indicating the existence of a
limitation on the counting thereof;  b)to notify the Board of
Directors of the occurrence of any of the situations foreseen in number two to
article nine and in number eleven to article thirteen;  c)to notify the board of
directors of the entering into and full contents of any shareholders
agreements which they may have entered into in respect of the company;  d)to provide to the Board of
Directors, in writing, and in a true, complete and self-explanatory manner,
allowing it to be sufficiently elucidated, all the information requested by
said Board on the situations foreseen in article nine, number four, paragraph
b) and article thirteen, number eleven.  2.The information referred to
in sub paragraphs b) and c) of the preceding number shall be provided within a
period of five working days from their respective occurrence, unless a general
meeting is held during the course of the referred to period, in which case it
should also be provided to the chairman of the board of the general meeting up
until the time of the meeting.  3.The information referred to
in sub paragraph d) of number one shall be provided within a period of time of
eight days prior to the holding of the first general meeting after the request
for information. Failure to comply with this duty within the referred to period
of time implies the shareholders acknowledgement of the facts alleged by the
board of directors in its request for information.  4.Except otherwise imposed by
a legal provision or a mandatory rule of a regulatory entity, when
information is requested by a shareholder duly qualified, in light of its
holding of shares corresponding to a minimum percentage of the share capital,
such information shall only be made available in the Companys registered
office.  7


ARTICLE THIRTEEN  Participation and Voting Rights  1.Only shareholders with
voting rights may attend general meetings.  2.The Shareholders intending
to participate on the General Meeting must evidence, up to five working days
prior to the respective meeting, that their shares have been registered into a
book entry securities account.  3.Holders of shares
represented by share certificates, in the legally permitted terms, when
intending to participate in the General Meetings shall have their shares
registered in their name in the Companys share registry, up to five working
days prior to date scheduled for the meeting, or evidence, up until the same
date, the respective deposit with a financial intermediary which may legally
replace such registry.  4.For the purposes of the conditions
of numbers two and three, shares shall remain inscribed or registered in the
shareholders name, at least up until the time of the closing of the general
meeting. However, should the general meeting be suspended, the share deposit
certificates that have been issued and the corresponding blocking of shares may
be cancelled, and the shares shall only be blocked and registered in the
shareholders names up to five working days prior to the resume of the General
Meeting, as set forth in numbers two and three above.  5.For the purposes of the
conditions of numbers two and three, the shares shall remain entered or
registered in the shareholders name, at least up until the time of the closing
of the general meeting.  6.To each 500 shares shall
correspond one vote, and Shareholders having less than such number of shares
may form a group so that, jointly and arranging to be represented by one of the
groups members, they make up the number of shares required to exercise voting
rights.  7.The exercise of vote by
correspondence or by electronic means may comprise all the matters included in
the call for the meeting, in the terms and conditions set forth therein.  8.The terms and conditions for
the exercise of vote by correspondence or by electronic means shall be defined
by the Chairman of the General Meeting in the respective call, so as to ensure
its authenticity, regularity, safety, trustfulness and confidentiality up until
the moment of the voting. In both cases, the authenticity of the vote shall be assured
before the Chairman of the General Meeting, as regards legal entities, by means
of a communication with a certified signature according to the law, or as
regards individuals,  8


by
means of a communication having enclosed a simple copy of the identity
document. In order to assure the confidentiality of the vote, the referred
communications shall beaddressedin a close envelope which
shall only be considered upon the counting of votes.  9.The votes issued by
correspondence or by electronic means are counted as negative votes in relation
to the proposals of resolution which may be presented after their issuance.  10.The attendance in a general
meeting of shareholders which may have exercised their respective voting rights
by correspondence or electronic means, or by their representative, determines
the revocation of the vote expressed by those means.  11.Votes cast by an ordinary
shareholder, either on his/its own account or using the services of a representative,
either in his/its own name or as the representative of another shareholder,
when exceeding ten per cent of the companys total voting stock, shall not be
counted.  12.For the purposes of this
article, shares which would be considered as belonging to a shareholder for the
purposes of a take-over bid, pursuant to the terms of the Securities Market
Code, shall be considered as belonging to the shareholder.  13.The limitation set forth in
number ten applies to all resolutions, including those requiring a qualified
majority.  14.In cases of the joint
ownership of shares, only the common representative or a representative
thereof, may participate in general meetings  15.The limits set out in the
preceding numbers apply to usufructs and collateral creditors of the shares.  16.Pursuant to ADR (American
Depository Receipts) or GDR (Global Depository Receipts) programmes involving
the companys shares, holders of ADRs or GDRs shall be considered as
shareholders, in accordance with the terms of the following number, and the
entity in whose name the shares have been entered as merely the representatives
thereof.  17.Pursuant to the terms of the
previous number:  a)The conditions of article
three hundred and eighty five of the Commercial Companies Code applying to the
representative, shall apply to the entity in whose name the shares used as the
basis for the issue of ADR or GDR programmes have been entered;  b)The legal or statutory
limitation established on the counting of votes shall refer to the votes cast
on behalf of each holder of ADR or GDR, who / which shall be subject to the
conditions foreseen in number eleven and as well as to those set forth in
article twelve.  9


18.The limitation on the
counting of the votes cast by one entity on behalf of another does not apply to
entities in whose name the shares of the company used as a basis for ADR or GDR
programmes have been entered.  19.For the purpose of
participating in and voting at a general meeting, holders of ADRs and GDRs must
comply with the terms of this article.  ARTICLE FOURTEEN  Majority Required for Resolutions  1.The general meeting shall
pass resolutions at the time of its first or subsequent convocation, on the
basis of the majority of votes cast without prejudice to the need for a
qualified majority in legally defined cases.  2.However, resolutions on the
election of the board of the General Meeting, the Chairman of the Audit
Committee and the Statutory Auditor, as well as resolutions on the matters
referred to in paragraphs c) to f) and i) to j) of the following article, shall
not be approved, at the time of the first or subsequent convocation, if opposed
by the majority of A share votes.  ARTICLE FIFTEEN  Competency of General Meeting  1.The general meeting is
specifically responsible for:  a)Electing the Board of the
General meeting, members of the Board of Directors and of the Audit Committee
as well as the Statutory Auditor;  b)Analyzing the report of the
Board of Directors, discussing and voting on the balance sheet, the accounts,
the opinion of the Audit Committee and additional documentation legally
required;  c)Deciding on the
appropriation of net income for the year;  d)Deciding on any alterations
to the articles of association and share capital increases, in addition to any
limit or suppression of preference rights and the fixing of the parameters for
the share capital increases to be decided by the board of directors pursuant to
the terms of article 4, numbers 3 and 4.  e)Deciding on the issue of
bonds or other securities and fixing the value of those which the board of
directors is entitled to authorise pursuant to the terms of article eight
number three in addition to the limitation or suppression of preference rights
in respect  10


of
the issue of bonds convertible into shares and the fixing of the parameters for
the issue of these types of bonds by the board of directors, pursuant to the
terms of article 8 numbers 3 and 4.  f)Deciding on the
authorisations referred to in articles two, number two and nine number one;  g)Deciding on the remuneration
of members of the statutory bodies, with the right to appoint a wages
commission for the purpose in question;  h)Deciding on the existence of
the companys justified interest in the provision of real and personal
guarantees in respect of the debts of other entities which are not in a
dominating/dominated or group relationship;  i)Approving the general
objectives and fundamental principles of the companys policies;  j)Defining the general
principles of the holdings policy in companies, pursuant to the terms of
article three, number two and deciding on its respective acquisitions and
alienations when, in accordance with the said principles, they should be
authorised in advance by the general meeting;  k)Dealing with any other
matters for which it has been convened.  2.Resolutions on any of the
issues referred to in sub paragraph i) of the preceding number shall be adopted
solely on the basis of proposals to be submitted by the board of directors or
by shareholders fulfilling the requirements set out in article seventeen.  ARTICLE SIXTEEN  Board of the General Meeting and Convocation Thereof  1.The board of the general
meeting shall comprise its respective chairman, a deputy chairman and a
secretary.  2.The general meeting shall be
convened and directed by the chairman of the board thereof or, in the event of
his absence or inability to be present, by the deputy chairman.  3.The convocation of the
General Meeting shall be made with the advance notice and in the form foreseen
in the law, expressly indicating the matters to be dealt with.  4.The General Meeting shall
take place in the Companys registered office, or at another location chosen by
the Chairman of the General Meeting under the legal terms, and can not take
place trough telematic means.  11


ARTICLE SEVENTEEN  General Meetings  The
General Meeting shall be held, at least, once per year, and whenever a request
for its convening is submitted to its Chairman by the Board of Directors, the
Audit Committee or by Shareholders representing, at least, five percent of the
share capital.  SECTION III  Board of Directors  ARTICLE EIGHTEEN  Board of Directors  1.The Board of Directors is
composed by a minimum of fifteen and a maximum of twenty five members.  2.The chairman shall have the
casting vote in board resolutions.  3.The chairman of the board of
directors shall be chosen by the general meeting in accordance with the terms
of these articles of association.  ARTICLE NINETEEN  Election of Directors  1.Directors shall be elected
by a majority of the votes cast.  2.The majority referred to in
the preceding number shall include the majority of A share votes for the
election of one third of the total number of directors, which shall include the
chairman of the board of directors.  3.One of the directors may be
chosen, in isolation, by the general meeting, pursuant to the terms of nos. six
and seven of article three hundred and ninety two of the Commercial Companies
Code.  ARTICLE TWENTY  Executive Committee  1.The board of directors may
delegate the running of the companys day to day affairs to an executive
committee comprising five or seven members.  2.Executive committee members
shall be chosen by the board of directors from among its members and shall
comprise at least one or two of the directors elected pursuant to the  12


terms
of no. two of article nineteen, depending on whether the executive committee
comprises five or seven members.  3.The board of directors shall
define the executive committees responsibilities in respect of the day to day
running of the companys affairs and shall delegate thereto, when necessary,
all of the competencies whose inclusion is not prohibited under the terms of
article four hundred and seven of the Commercial Companies Code.  4.The Chairman of the Executive
Committee shall:  a)Ensure that all the
information regarding the activity and the resolutions of the Executive
Committee is provided to the other members of the Board of Directors;  b)Ensure the compliance with
the delegation limits, the Companys strategy, and the duties of cooperation
with the Chairman of the Board of Directors.  5.The executive committee
shall, in principle, operate in conformity with the regulations defined in
articles twenty one, twenty two, twenty three and twenty four of the articles
of association for the board of directors, without prejudice to the adaptations
which the board of directors may decide to make in respect of such operation.  6.The board of directors may
authorise the executive committee to charge one or more of its members to deal
with certain tasks and delegate the performance of several of the powers which
have been delegated to it to one or more of its members.  7.The resolutions of the
Executive Committee shall be taken by majority of the expressed votes and the
Chairman has a casting vote.  ARTICLE TWENTY ONE  Competences of the Board of Directors and Surety of the Directors  1.The board of directors is
responsible namely for:  a)Managing the companys
affairs and performing all acts and operations in respect of the companys
corporate object which are not the specific responsibility of other statutory
bodies of the company;  b)Representing the company in
legal and non legal matters with the right to withdraw, come to terms and
confess in respect of any lawsuits, in addition to entering into arbitration
agreements;  c)Acquiring, selling, or in
any other manner, alienating or encumbering rights, notably when affecting the
companys holdings, moveable and immovable assets, without prejudice to the
conditions set out in article fifteen;  13


d)Establishing the companys
technical and administrative organisation and its internal operating rules;  e)Appointing legal or other
proxies with the powers considered expedient, including the power to
sub-delegate authority;  f)Electing the effective and
substitute Secretary of the Company;  g)Proceed, trough co-optation,
to the replacement of the Directors which have a definitive absence, being the
co-opted members in functions up to the end of the term to which the replaced
Directors had been elected to, without prejudice of the ratification in the
next General Meeting and of the foreseen in number three;  h)Performing the other
competencies attributed by the general meeting.  2.The absence of any Director
to more than half of the ordinary Board of Directors meetings, during a
financial year, either in a continuous or interpolated manner, without
justification accepted by the Board of Directors, shall be considered as a
definitive absence of such Director. Such definitive absence shall be declared
by the Board of Directors, and such Directors shall be replaced under the legal
and statutory terms.  3.When a director who is
definitively unavailable, is one of those elected on the basis of the
application of the rule contained in article, nineteen number two and
when, in respect of the cooption, they have not voted with the majority of the
members of the board of directors who, elected pursuant to the terms of the
said disposition remain in office, the respective replacement shall be made by
an election at a general meeting.  4.The board of directors may
particularly appoint one or more directors to deal with certain administrative
matters.  5.In the event of any delegating
of powers, at least one of the directors elected in accordance with the terms
of article nineteen, number two, shall be appointed, either solely or in
conjunction with another or other managing directors and shall, in this latter
case, be given the same powers as the others.  6.The responsibility of each
Director shall be necessarily secured by any of the mandatory forms legally
foreseen in accordance with the minimum impositions set forth by law.  ARTICLE TWENTY TWO  Relationship with the General Meeting  The
board of directors, in its management of the companys affairs, shall comply
with the  14


general
guidelines issued by the general meeting, pursuant to the terms and limitations
as defined by law.  ARTICLE TWENTY THREE  Competencies of the Chairman of the Board of Directors  1.The chairman of the board of
directors is specifically responsible for:  a)Representing the board in
legal and non legal matters;  b)Co-ordinating the activity
of the board of directors and apportioning tasks among members when recommended
on the basis of management expediency;  c)Convening and directing the
meetings of the board;  d)Ensuring that the
resolutions of the board of directors are properly complied with.  2.In the event of the Chairmans
absence or impairment and under the terms permitted by law, the Chairman shall
be replaced by the member of the Board of Directors indicated by him for the
purpose in question.  ARTICLE TWENTY FOUR  Resolutions  1.The Board of Directors
schedules its ordinary meetings dates or its frequency and shall meet in
extraordinary sessions whenever convened by its Chairman, or two Directors or
the Audit Committee.  2.The Board of Directors shall
not meet without the participation of the majority of its members in functions,
although its Chairman may, in cases of recognized urgency, permit such meeting
without the presence of such majority if it is assured by vote by
correspondence or by proxy, according to the terms established in following
number.  3.Without prejudice to the
conditions set out in the preceding number, postal and proxy votes are
permitted although a director may not represent more than one other director.  4.Board of directors
resolutions shall be adopted by a majority of the votes cast.  ARTICLE TWENTY FIVE  Minutes  1.The resolutions passed at
meetings of the board of directors, in addition to voting statements, shall be
recorded in minutes.  15


2.The minutes shall be signed
by all members of the board of directors participating in the meeting.  3.Participants at the meeting
may dictate a summary of their statements for inclusion in the minutes.  ARTICLE TWENTY SIX  Binding/Committing of Company  1.The company shall be
bound/committed:  a)By the signatures of two
members of the board of directors, one of whom shall be the chairman of the
board of directors, chairman of the executive committee or a director to whom
either has delegated such authority;  b)By the signature of a single
member of the board of directors to whom the powers for so doing have been
delegated;  c)By the signature of the
appointed proxies, subject to the scope and in accordance with the terms of the
corresponding mandate.  2.The signature of a sole
director shall be sufficient for the day to day running of the affairs of the
company.  3.Company bonds, when in
certificate form, shall bear the signatures of two directors, which signatures
may be replaced by a simple mechanical reproduction or a seal/stamp.  4.The board of directors may
decide, in accordance with the terms and subject to legal limitations, that
certain company documents be signed using mechanical processes or seals/stamps.  SECTION IVAudit Committee  ARTICLE TWENTY SEVEN  Membership  1.An Audit Committee,
consisting of three directors, one of them being its Chairman, all elected by
the General Meeting under the following paragraphs, is responsible for the
supervision of Companys activity.  16


2.The Members of the Audit
Committee will be elected by the General Meeting jointly with the other
directors, being individually identified as such in the lists proposed for the
Board of Directors membership as well as being expressly identified its Chairman.  3.The members of the Audit
Committee shall comply with the requirements on incompatibilities, independence
and expertise arising from the law and regulations as well as from other
relevant binding market rules, including those in force in the jurisdictions
where the Company has securities admitted to trading.  4.The absence of any of the
Audit Committees member is deemed as a definitive absence in the situation
referred to in number 2 to article twenty one, as applicable. Such definitive
absence shall be declared by the Audit Committee and the absent member will be
replaced in accordance with the law and the provisions of these Articles of
Association.  ARTICLE TWENTY EIGHT  Competences  1.In addition to the
competences established in law and in other provisions of this Articles of Association,
the Audit Committee has the following competences:  a)To verify the accuracy of
the financial statements and, in general, to supervise the quality and
integrity of the financial information included in the Companys financial
statements;  b)To supervise the process of
preparation and disclosure of financial information;  c)To analyze and issue its
opinion about the relevant matters related to accounting and audit issues and
to the impact on the financial statements of amendments to the accounting rules applicable
to the Company, as well as to its accounting policies;  d)To supervise the statutory
audit and the auditing to the Companys financial statements as well as to
supervise and evaluate the internal proceedings related to accounting and audit
matters;  e)To make a proposal to the
general meeting as regards the appointment of the Statutory Auditor;  f)To supervise the
independence of the Statutory Auditor, in particular in what concerns the
provision of additional services;  g)Direct and exclusive
responsibility to appoint, hire, retain or dismiss and to establish the
compensation of the Companys Independent Auditors, as well as to supervise
their  17


qualifications
and independence and to approve the audit services and/or non-audit services to
be rendered by said Independent Auditors or associated persons;  h)To resolve any disagreements
between the Executive Committee and the Independent Auditors referred to in
previous paragraph, with respect to financial information to be included in the
financial statements to be reported to the competent authorities as well as
with respect to the audit report process;  i)To supervise the quality,
integrity and effectiveness of the risk management system, the internal control
system, as well as the internal audit system, including the annual revision of
its adequacy and effectiveness, and, in general, to supervise the performance
of the functions discharged by the internal audit and the internal control
system of the Company;  j)To receive the
communications of irregularities, claims and/or complaints submitted by
shareholders, employees of the Company or third parties, as well as to
implement the proceedings for the receipt, retention and treatment of the above
referred irregularities, claims and/or complaints whenever concerning
accounting and auditing matters as well as related to internal controls as
regards those subject matters;  k)To give its opinion and
prior advice, within the scope of its competences foreseen in the law or in
these Articles of Association and whenever it deems convenient or necessary, in
regard to any reports, documentation or other information to be disclosed or
submitted by the Company to the competent authorities.  2.The Independent Auditors
referred in the previous number shall report to and be subject to the direct
and exclusive overseeing of the Audit Committee, who shall annually obtain and
review an audit report with the Independent Auditors.  ARTICLE TWENTY NINE  Resolutions  1.The Audit Committee shall
schedule its meetings, at least, once every two months of each financial year,
at the time and place determined by its Chairman, without prejudice of
additional meetings being convened by the Chairman or at request of the
majority of its members.  2.The Audit Committee shall
not meet without the attendance of the majority of its members, provided that
the Chairman may, in cases of recognized urgency or justified impossibility,
permit such meeting without the attendance of such majority if it is assured  18


by
vote by correspondence or by proxy, according to the terms established in
following number.  3.Voting rights can be exercised
by correspondence or proxy, provided however each member does not act on behalf
of more than one Audit Committee member.  4.The resolutions of the Audit
Committee shall be adopted by the majority of votes cast and its Chairman has a
casting vote.  5.The resolutions adopted
during the Audit Committees meetings, as well as its members voting
statements shall be recorded in minutes prepared for such purpose, which shall
be signed by all members of the Audit Committee participating in the meetings,
all having the prerogative of summarizing their interventions to be mentioned
in such minutes.  ARTICLE THIRTY  Funding  The
Companys annual budget shall establish the financial resources required for
the Audit Committee to pay the compensation or funding of the independent
auditor referred to in article twenty eight and of any advisors of the Audit
Committee as well as to cover the expenses required for the Audit Committee to
perform its powers and duties.  SECTION V  Statutory Auditor  ARTICLE THIRTY ONE  Appointment and Competences  1.A statutory auditor or a
statutory audit company, which may have a substitute, appointed by the General
Meeting, under proposal of the Audit Committee, is responsible for the
examining the Companys accounts.  2.The Statutory Auditor has
the competences established in law.  19


CHAPTER IV  APPROPRIATION OF NET INCOME  ARTICLE THIRTY TWO  Appropriation of Net Income  1.The duly approved annual net
income shall be appropriated as follows:  a)A percentage of not less
than five per cent shall be paid into a legal reserve until it reaches the
amount defined by law;  b)A percentage of not less
than forty per cent of the distributable profit shall be distributed among the
shareholders in the form of a dividend, without prejudice to the general
meetings having the right, on the basis of a qualified majority of two thirds
of the votes cast, to decide on a reduction of the dividend or not to proceed
with any distribution thereof;  c)the remainder to be
appropriated at the discretion of the general meeting.  2.The privilege attached to A
shares as a result of the conditions set out in article fourteen, number two is
only applicable in respect of the approval of the percentage of dividends when
higher than the minimum amount established in sub paragraph b) of the preceding
number.  3.Pursuant to the terms of and
within the legally established limits, shareholders are entitled to an advance
of profits for the year in progress.  CHAPTER V  DISSOLUTION AND LIQUIDATION  ARTICLE THIRTY THREE  Dissolution and Liquidation  1.The company shall be
dissolved in accordance with legally defined cases and terms.  2.The liquidation of the
company shall be governed by the dispositions defined by law and the
resolutions of the general meeting.  20


CHAPTER VI  FINAL, TRANSITORY CONDITIONS  ARTICLE THIRTY FOUR  Deposit Programme Contract  1.Entities which, pursuant to
the development of the conditions set out in article eight, number one of
Decree Law number forty four/ninety five of the twenty second of February may,
on account of the deposit programme contract agreed with the company, become
direct or indirect titleholders to the companys shares, shall not be
considered as being engaged on activities which compete with those of the
company owing to the mere circumstance of being engaged on analogous contracts
by third parties which are competing with the company.  2.The conditions of the
preceding number do not preclude the application of the conditions of articles
nine and twelve to the referred to depository entities when, pursuant to the
scope of the respective deposit programme contracts, the participants therein
are either directly or indirectly engaged on activities which compete with
those of the company and when the percentage number of shares in the company
held by them is higher than the percentage permitted under these articles of
association for the equivalent ownership of shares.  ARTICLE THIRTY FIVE  Board of Directors Resolutions  Board
of directors resolutions to increase share capital or issue bonds convertible
into shares may be based on parameters and on the suppression or limitation of
preference rights pursuant to a general meetings resolution adopted prior to
the public deed resulting in the inclusion of numbers 3 and 4 of article 4, the
alteration of number 3 and the inclusion of number 4 of article 8 and the
amendment of sub paragraphs d) and e) of number 1 of article 15 of these
articles of association, provided that such resolutions fulfil the requirements
set out in these projects, in addition to number 2 of article 14.  21