**Exhibit 1**

 

**CEMIG**

 

**COMPANHIA ENERGÉTICA  DEMINAS  GERAIS  - CEMIG**

 

**BYLAWS**

 

**CHAPTER I**

 

**Name, constitution, objects, headoffice and duration**

 

**Article 1:**                                          Companhia Energética de Minas Gerais – Cemig,constituted on 22 May 1952 as a corporation with mixed private and publicsector stockholdings, is governed by these bylaws and by the applicablelegislation, and its objects are: to build, operate and carry out commercialtransactions with systems of generation, transmission, distribution and sale ofelectricity, and related services; to operate in the various fields of energy,from whatever source, with a view to economic and commercial operation; toprovide consultancy services within its field of operation to companies in andoutside Brazil; and to carry out activities directly or indirectly related toits objects.

 

§ 1                     The activities referred to in this article maybe carried out directly by Cemig or, upon decision by the Board of Directors,in accordance with State Laws 828 of 14 December, 1951, 8655 of 18 September,1984 and 15290 of 4 August, 2004 and with prior authorization by ANEEL, theBrazilian National Electricity Agency, through companies constituted by Cemigor companies in which it comes to have majority or minority stockholdings.

 

**Article 2:****                                         **The company shallhave its head office and management in Belo Horizonte, capital city of thestate of Minas Gerais, Brazil, and may open offices, representations and anyother establishments in or outside Brazil on authorization by the ExecutiveBoard.

 

**Article 3:**                                          The company shallhave indeterminate duration.

 

**CHAPTER II**

 

**Capital and shares**

 

**Article 4:**                                          The company’s capital is R$1,621,538,190.25(one billion, six hundred and twenty one million, five hundred and thirty eightthousand, one hundred and ninety Reais and twenty five centavos), representedby:

 

a)                            70,874,167,923 (seventy billion, eighthundred and seventy four million, one hundred and sixty seven thousand, ninehundred and twenty three) nominal common shares, each with par value of R$0.01;and

 

b)                           91,279,651,102 (ninety one billion, twohundred and seventy nine million, six hundred and fifty one thousand, onehundred and two) nominal preferred shares, each with par value of R$0.01.

 

§ 1                     The right to vote shall be reservedexclusively for the common shares, and each common share shall have the rightto one vote in decisions of the General Meeting of Stockholders.

 

**Article 5:****                                         **The preferred shares shall have right ofpreference in the event of reimbursement of shares and shall have the right toa minimum annual dividend of the greater of the following amounts:

 

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a)         10% (ten percent) of their par value; or

 

b)        3% (three percent) of the value of stockholders’ equity correspondingto the shares.

 

**Article 6:****                                        **The common shares and the preferred sharesshall have equal rights to distribution of bonuses.

 

§ 1                     Capitalization of monetary adjustment to thevalue of the registered capital shall require a decision by the General Meetingof Stockholders, but shall be obligatory when the limit specified in Section 297of Law 6404 of 15 December 1976 has been reached.

 

**Article 7:**                                          In the business years in which the companydoes not obtain sufficient profit to pay dividends to its stockholders, theState of Minas Gerais shall guarantee to the shares issued by the company up to5 August 2004 and held by individual persons a minimum dividend of 6% (sixpercent) per year, in accordance with Article 9 of State Law 828 of 14 December 1951,and State Law 15290 of 4 August 2004.

 

**Article 8:**                                          The State of Minas Gerais shall at all timesobligatorily be the owner of the majority of the shares carrying the right tovote, and the capital subscribed by it shall be paid in accordance with thelegislation from time to time in force. The capital subscribed by other individuals or legal entities shall bepaid as specified by the General Meeting of Stockholders which decides on thesubject.

 

§ 1                     The Executive Board may, in order to obey adecision by a General Meeting of Stockholders, suspend the services of transferand registry of shares, subject to the legislation from time to time in force.

 

§ 2                     The stockholders shall have the right ofpreference in subscription of increases of capital and in the issue of thecompany’s securities, in accordance with the applicable legislation. Thereshall, however, be no right of preference when the increase in the registeredcapital is paid with funds arising from tax incentive systems, subject to theterms of the sole paragraph of Section 172 of Law 6404 of 15 December 1976.

 

**CHAPTERIII**

 

**The General Meeting ofStockholders**

 

**Article 9:**                                          The General Meeting of Stockholders shall beheld, ordinarily, within the first 4 (four) months of the year, for thepurposes specified by law, and extraordinarily whenever necessary, and shall becalled with minimum advance notice of 15 (fifteen) days, and the terms of thesebylaws and the relevant legislation shall be obeyed in its convocation, openingand decisions.

 

§ 1                     The stockholder may be represented in GeneralMeetings of Stockholders in the manner specified in Section 126 of Law6404, as amended, by showing at the time of the meeting, or by previouslydepositing at the company’s head office, proof of ownership of the shares,issued by the depositary financial institution, accompanied by the proxy’sidentity document and a power of attorney with special powers.

 

**Article 10:**                                   The ordinary or extraordinary General Meetingof Stockholders shall be chaired by a stockholder elected by the GeneralMeeting from among those present, who shall choose one or more secretaries.

 

**CHAPTER IV**

 

**Management of the company**

 

**Article 11:****                                  **Management of the company shall be exercisedby a Board of Directors and an Executive Board.

 

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§ 1                     The structure and composition of the Board ofDirectors and the Executive Board of the company shall be identical in thesubsidiaries Cemig Distribuição S.A and Cemig Geração e Transmissão S.A., withthe following exceptions: only the subsidiary Cemig Distribuição S.A shall havea Chief Energy Distribution and Sales Officer and the respective Department,and only the subsidiary Cemig Geração e Transmissão S.A. shall have a ChiefEnergy Generation and Transmission Officer and the respective Department.

 

**Section I**

 

**The Board of Directors**

 

**Article 12:****                                  **The company’s Board of Directors shall bemade up of 14 (fourteen) members and an equal number of substitute members. Oneof the members shall be its Chairman and another its Vice-Chairman, all beingsubject to election and dismissal at any time by the General Meeting ofStockholders, for a period of office of 3 (three) years, and able to bereelected.

 

§ 1                     The substitute members shall substitute therespective members of the Board if the latter are absent or impeded fromexercising their functions and, in the event of a vacancy, shall do so until anew member is elected.

 

§ 2                     The global or individual amount of theremuneration of the Board of Directors shall be fixed by the General Meeting ofStockholders which elects that Board, in accordance with the legislation fromtime to time in force.

 

§ 3                     The minority holders of common shares, and theholders of preferred shares, each have the right to elect 1 (one) member of theBoard of Directors, in a separate vote, according to law.

 

§ 4                     The Boards of Directors of the subsidiariesCemig Distribuição S.A. and Cemig Geração e Transmissão S.A. shall,obligatorily, be composed of the members or substitute members elected to theBoard of Directors of the company.

 

**Article 13:****                                  **In the event of a vacancy on the Board ofDirectors, the first General Meeting of Stockholders shall elect a new member,for the period of office which was remaining to the previous member.

 

§ 1                     In this event, if the previous Board member waselected by a minority, the new member shall be elected by the same minority.

 

**Article 14:****                                  **The Board of Directors shall meet,ordinarily, every 2 (two) months and, extraordinarily, on convocation by itsChairman, or its Vice-Chairman, or one-third of its members, or when requestedby the Executive Board, and decisions taken shall be valid when the majority ofits members are present.

 

§ 1                     The meetings of the Board of Directors shall becalled by its Chairman or its Vice-Chairman, by written advice sent with 5(five) days’ notice, containing the agenda to be discussed. Meetings of theBoard of Directors called on the basis of urgency may be called by its Chairmanwithout being subject to the above-mentioned period provided the other membersof the Board are unequivocally aware of the convocation.

 

§ 2                     Decisions of the Board of Directors shall betaken by the majority of the votes of the board members present, and in theevent of equality of votes the Chairman shall have the casting vote.

 

**Articl 15:****                                        **The Chairman of the Board of Directors hasthe competency to grant leave to the Board’s members, and the other members ofthe Board have the competency to grant leave to the Chairman.

 

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**Article 16:****                                  **The Chairman and Vice-Chairman of the Boardof Directors shall be chosen by their peers, at the first meeting of the Boardof Directors that takes place after the election of its members, and theVice-Chairman shall take the place of the Chairman when the Chairman is absentor impeded from exercising his functions.

 

**Article 17:**                                   The Board of Directors shall have thefollowing attributions:

 

a)                            to fix the general orientation of the company’sbusiness;

 

b)                           to elect or dismiss the Executive Officers ofthe company, subject to these bylaws;

 

c)                            to decide, prior to the company entering intothem, on contracts between the company and any of its stockholders, orcompanies which are sole or joint controlling stockholders of any of itsstockholders;

 

d)                           to decide, upon proposal by the ExecutiveBoard, on disposal or placement of a charge on any of the company’s property,plant or equipment, and on the giving by the company of any guarantee to anythird parties of which the individual value is greater than or equal toR$5,000,000.00 (five million Reais);

 

e)                            to decide, upon proposal put forward by theExecutive Board, on loans, financings, acts or other legal transactions to beentered into by the company the amount of which is equal to or more thanR$5,000,000.00 (five million Reais), subject to subclause “g” of § 4 of Article 21below;

 

f)                              to call the General Meeting of Stockholders;

 

g)                           to monitor and inspect the management by theExecutive Board: the Board of Directors may, at any time, examine the books andpapers of the company, and request information on contracts agreed or in theprocess of being agreed, and on any other administrative facts or actions whichit deems to be of interest;

 

h)                           to give a prior opinion on the report ofmanagement and the accounts of the Executive Board of the company;

 

i)                               to choose, annually, and to dismiss, thecompany’s auditors, from among companies with international reputationauthorized by the Securities Commission (CVM) to audit listed companies;

 

j)                               to authorize, upon a proposal by theExecutive Board, the start of administrative proceedings for competitive bids,and proceedings for dispensation from and non-requirement of bids, and thecorresponding contracts, in amounts more than or equal to R$5,000,000.00 (fivemillion Reais);

 

k)                            to authorize, upon a proposal by theExecutive Officers, the initiation of legal actions and administrativeproceedings, and making of Court and extrajudicial settlements, when the amountis greater than or equal to R$5,000,000.00 (five million Reais);

 

l)                               to authorize the issue of securities, in thedomestic or external markets, for the raising of funds, in the form ofdebentures, promissory notes, medium-term notes and other instruments.

 

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§ 1                     The Board of Directors, through specificresolutions, may delegate the power to authorize agreement of contracts forsales of electricity or for provision of distribution or transmission servicesto the Executive Officers, in accordance with the legislation.

 

**Section II**

 

**The Executive Board**

 

**Article 18:****                                  **The Executive Board shall be made up of 7(seven) Executive Officers, who may be stockholders, elected by the Board ofDirectors, namely: the Chief Executive Officer, the Executive Vice-Chairman,the Chief Energy Distribution and Sales Officer, the Chief Financial andInvestor Relations Officer, the Chief Energy Generation and TransmissionOfficer, the Chief Corporate Management Officer, and the Chief Planning,Projects and Construction Officer.

 

§ 1                     The period of office of the Executive Officersshall be 3 (three) years, and re-election is permitted. The Executive Officersshall remain in their posts until their duly elected successors take office.

 

§ 2                     The global or individual amount of the remunerationof the Executive Board, including benefits of any type, shall be fixed by theGeneral Meeting of Stockholders, in accordance with the legislation currentlyin effect.

 

§ 3                     The Executive Officers shall exercise theirpositions as full-time occupations in the regime of exclusive dedication to theservice of the company.  They may at thesame time hold and exercise non-remunerated positions in the management of thecompany’s wholly-owned subsidiaries, other subsidiaries or affiliatedcompanies, at the option of the Board of Directors.  They shall, however, obligatorily exercisethe corresponding positions in the subsidiaries Cemig Distribuição S.A. andCemig Geração e Transmissão S.A.

 

§ 4                     Those Executive Officers who are notemployees shall have the right to an annual period of not more than 30 (thirty)days’ remunerated leave, which shall be granted by the Board of Directors. Thisleave may not be accumulated into the subsequent year, and its remunerationshall be augmented by one-third of the monthly remuneration currently ineffect. Payment in cash in compensation for a period of leave not taken is notpermitted.

 

**Article 19:****                                  **In the event of absence, leave, impediment,resignation or vacancy of the post of the Chief Executive Officer, this postshall be exercised by the Executive Vice-Chairman, for whatever period theabsence, leave or impediment may last, and, in the event of vacancy orresignation, until the post is filled by the Board of Directors.

 

§ 1                     If there is vacancy, resignation, leave or temporaryimpediment of any of the other members of the Executive Board, a meeting of theExecutive Board may by a majority vote attribute the exercise of the respectivefunctions to another Executive Officer, until the post is filled by the Boardof Directors, or for as long as the period of leave or impediment, as the casemay be, continues.

 

§ 2                     A Chief Executive Officer or a member of theExecutive Board elected in the way described in this article shall holdthe position for the time which remains of the period of office of theExecutive Officer who is substituted.

 

**Article 20:****                                  **The Executive Board shall meet, ordinarily,at least 2 (two) times per month and, extraordinarily, whenever called by theChief Executive Officer or by 2 (two) Executive Officers with prior notice ofat least 2 (two) days, but this notice shall not be necessary if all theExecutive Officers are present. Unless stated to the contrary in the Bylaws,the decisions of the Executive Board shall be taken by a vote of the majorityof its members, and in the event of a tie the Chief Executive Officer

 

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shall have a casting vote and the Board ofDirectors must be advised that the casting vote has been used.

 

**Article 21:****                                  **The Executive Board is responsible for thecurrent management of the company’s business, subject to the company’sMulti-year Strategic Plan and its Annual Budget, prepared and approved inaccordance with these Bylaws.

 

§ 1                     The company’s Multi-year and Strategic Planshall contain the plans and projections for a period of 5 (five) financialyears, and must be updated at least once a year, and shall deal with thefollowing subjects, among others:

 

a)                            the company’s activities and strategies,including any project for construction or expansion of generation, transmissionor distribution;

 

b)                           the new investments and business opportunities,including the company’s subsidiaries and affiliated companies;

 

c)                            the amounts to be invested or in any otherway contributed from the company’s own funds or funds of third parties;

 

d)                           the rates of return and profits to be obtainedor generated by the company.

 

§ 2                     Thecompany’s Annual Budget shall reflect the company’s Multi-year Strategic Planand must give details of operational revenue and expenses, costs andinvestments, cash flow, the amount to be allocated to the payment of dividends,investments of cash from the company’s own funds or funds of third parties, andother data which the Executive Board considers to be necessary.

 

§ 3                     The company’sMulti-year Strategic Plan and the Annual Budget shall be prepared and updatedannually, by the end of each business year, to be in effect in the followingbusiness year. Both shall be prepared in coordination with the Chief Financeand Investor Relations Officer and submitted to examination by the ExecutiveBoard.

 

§ 4                     The following decisions shall require a voteby the Executive Board:

 

a)                            approval of the plan of organization of the companyand issuance of the corresponding rules and any changes to them;

 

b)                           approval of the company’s Multi-year StrategicPlan, and updated and revised versions of it, including the timetables, amountand allocation of the investments that it specifies;

 

c)                            approval of both the company’s Annual Budget,which must reflect the company’s Multi-Year Strategic Plan in force at thattime, and also any investment or expense not provided for in the Annual Budgetas approved, in amounts lower than R$5,000,000.00 (five million Reais);

 

d)                           approval of disposal of, or placement of acharge on, any of the company’s property, plant or equipment, or of provisionby the company of guarantees to third parties, in amounts lower thanR$5,000,000.00 (five million Reais);

 

e)                            approval of contracts, loans, financings and otherlegal transactions to be entered into by the company the amounts of whichindividually or jointly are lower than R$5,000,000.00 (five million Reais);

 

f)                              exercise of the vote in the General Meetings ofaffiliated companies and subsidiaries, when they deal with matters included inthe company’s Multi-year Strategic Plan;

 

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g)                           approval of wholesale energy purchase and salecontracts – of which the Board of Directors must be informed at its firstsubsequent meeting;

 

h)                           authorization to initiate administrativetender proceedings and proceedings for exemption and non-requirement fortenders, and the corresponding contracts, in amounts greater than or equal toR$1,000,000.00 (one million Reais) and less than R$5,000,000.00 (five millionReais);

 

i)                               authorization to file legal actions and administrativeproceedings, and to enter into Court and extra-judicial settlements, foramounts less than R$5,000,000.00 (five million Reais);

 

j)                               authorization of provisions in the company’s accounts, ofany value, on proposal from the Chief Finance and Investor Relations Officer.

 

§ 5                     Actions necessary for the regular functioningof the company, agreement of contracts and other legal transactions shall betaken by the Chief Executive Officer, jointly with one Executive Officer, orwith a person holding a valid power of attorney.

 

§ 6                     Powers of attorney must be granted by theChief Executive Officer, jointly with an Executive Officer, except for thepower described in sub-clause “c” of Sub-item I of Article 22, for whichonly the signature of the Chief Executive Officer is required.

 

§ 7                     The Executive Board may, annually, delegateto one or more Executive Officers the competency to carry out the actionsdescribed in § 4 of this article, by resolution unanimously approved byits members.

 

**Article 22:****                                  **Subject to the provisions of the previousarticles, the following are the functions and powers attributed to theExecutive Board:

 

****I –********                      ********Tothe Chief Executive Officer:****

 

a)                            to oversee and direct the work of the company;

 

b)                           to execute the strategic actions of the companydefined in the company’s Multi-Year Strategic Plan;

 

c)                            to represent the company in the Courts,actively and passively;

 

d)                           to sign, jointly with one of the ExecutiveOfficers, documents which bind the company;

 

e)                            to present the annual report of the company’sbusiness to the Executive Board and to the Ordinary General Meeting ofStockholders;

 

f)                              to hire and dismiss the company’s personnel;

 

g)                           to conduct the activities of Internal Auditsand Institutional Relationships, and legal, communication and representationactivities, and the function of the company’s Ombudsman.

 

II –                   To the Executive Vice-Chairman:

 

a)                            to substitute the Chief Executive Officer if heis absent, on leave, impeded from exercising his functions, or has resigned orhis post is vacant;

 

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b)                           to set the policies and guidelines for theenvironment, technological development, alternative energy sources, technicalnorms and improvement of product service and quality;

 

c)                            to co-ordinate the company’s strategy foroperations in relation to the environment, technology and strategic technologymanagement;

 

d)                           to co-ordinate corporate programs for promotionand improvement of quality;

 

e)                            to promote the implementation of programs forthe company’s technological development;

 

f)                              to monitor performance of plans for compliancewith the guidelines for the environment, technology and the improvement ofquality.

 

III –               To the ChiefDistribution and Sales Officer:

 

a)                            to make continuous efforts for the quality ofsupply of energy to consumers that are directly linked to the company’s sub-transmissionand distribution systems;

 

b)                           to prepare the planning of the company’s high-and medium-voltage distribution system;

 

c)                            to plan and build distribution lines andnetworks;

 

d)                           to operate and maintain the company’selectricity sub-transmission and distribution systems, and the associatedsystems of supervision and long-distance control;

 

e)                            to formulate and implement the marketing planrelated to the activities of distribution and sales;

 

f)                              to carry out actions and programs withconsumers for improved use of electricity;

 

g)                           to prepare the projections for the market inwhich this Department operates;

 

h)                           to maintain commercial relationships with, andmake sales of electricity and services to, captive consumers;

 

i)                               to carry out environmental programs and actionswithin the scope of this Chief Officer’s Department.

 

IV –               To the Chief Finance and Investor Relations Officer:

 

a)                            to make available the financial resourcesnecessary for the operation and expansion of the company, in accordance withthe Annual Budget, conducting the processes of contracting of loans andfinancings, and related services;

 

b)                           to co-ordinate thepreparation and consolidation of the company’s Multi-year Strategic Plan andAnnual Budget;

 

c)                            to carry out the accounting of, and to control,the company’s economic-financial transactions;

 

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d)                           to determine the cost of the service and toestablish an insurance policy, as laid out in the company’s Multi-yearStrategic Plan;

 

e)                            to prepare short-, medium- and long-termfinancial programming in detail, as specified in the company’s Multi-yearStrategic Plan and Annual Budget;

 

f)                              to control the company’s registered capital,decide policy for its shares and suggest dividend policy;

 

g)                           to carry out research, studies and analysis ofthe Brazilian energy market for the purposes of taking action in theElectricity Sale Chamber (CCEE);

 

h)                           to plan and carry out electricity purchase andsale transactions in the wholesale market and with free consumers, and theoperations of management of the associated risks;

 

i)                               to carry out activities of purchase, sale andaccounting of electricity in the Electricity Sale Chamber (CCEE);

 

j)                               to represent the company in relations with theElectricity Sale Chamber (CCEE);

 

l)                               to establish prices for purchase and sale ofelectricity;

 

m)                         to co-ordinate the preparation and negotiationof the company’s electricity tariffs;

 

n)                           to analyze proposals and co-ordinate thedevelopment of the company’s new business outside the spheres of generation,transmission, distribution and sale, jointly with other areas involved;

 

o)                           to support the Departments of the otherExecutive Officers in the development of the company’s new business ingeneration, transmission, sub-transmission and distribution;

 

p)                           to evaluate and monitor the company’s holdingsin other companies;

 

q)                           to be responsible forthe provision of information to the investing public, to the SecuritiesCommission (CVM) and to the Brazilian and international stock exchanges orover-the-counter markets, and the corresponding regulation and inspectionentities, and to keep the company’s registrations with these institutionsupdated.

 

V –                   To the Chief EnergyGeneration and Transmission Officer:

 

a)                            to make continuous efforts on behalf of thequality of supply of electricity to consumers that are directly linked to thetransmission system;

 

b)                           to prepare the planning of the operation andmaintenance of generation and transmission;

 

c)                            to operate and maintain the systems ofgeneration and transmission and the associated systems of supervision andlong-distance control;

 

d)                           to carry out environmental programs and actionswithin the scope of this Chief Officer’s Department;

 

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e)                            to develop and conduct hydro-meteorologicalactivities of interest to the company;

 

f)                              to manage the transactions arising from theinter-linking of the company’s electricity system with those of othercompanies;

 

g)                           to represent the company in relations with theNational Electricity System Operator;

 

h)                           to manage the company’s central laboratoriesand workshops;

 

i)                               to ensure theavailability of the generation and transmission facilities and equipment.

 

VI –               To the Chief Corporate Management Officer:

 

a)                            to ensure the provision of appropriatepersonnel to the company;

 

b)                           to decide the company’s human resources policyand to orient and promote its application;

 

c)                            to orient and conduct activities related toorganizational studies and their documentation;

 

d)                           to decide, conduct and supervise the company’stelecommunications and information technology policy;

 

e)                            to project, put in place and maintain thecompany’s telecommunications and information technology systems;

 

f)                              to decide policies and rules on supportservices such as transport, administrative communication, security guards, andprovision of adequate quality in the workplace for the company’s personnel;

 

g)                           to provide the company with infrastructure andadministrative support resources and services;

 

h)                           to manage the process of contracting of worksand services for acquisition and disposal of materials and real estateproperty;

 

i)                               to effect quality control of the materialacquired and of the qualification of contracted service providers;

 

j)                               to administer and control the stock ofmaterial, the separation and recovery of used material, and to carry out salesof excess and unusable material, and scrap;

 

l)                               to carry out environmental programs and actionswithin the scope of this Chief Officer’s Department;

 

m)                         to authorize initiation of administrativetender proceedings and proceedings for exemption and non-requirement fortenders, and the corresponding contracts, in amounts up to R$1,000,000.00 (onemillion Reais).

 

VII –           To the Chief Planning, Projects and Construction Officer:

 

a)                            to prepare the planning of expansion of thegeneration, transmission and sub-transmission systems;

 

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b)                           to consolidate the planning of the company’selectricity system;

 

c)                            to consolidate the company’s program ofinvestments in generation, transmission, sub-transmission and distribution;

 

d)                           to represent the company in relations with theElectricity System Expansion Planning Co-ordination Committee;

 

e)                            to conduct negotiations for the development ofgeneration and transmission undertakings;

 

f)                              to promote the planning, construction andassembly of generation, transmission, sub-transmission and co-generationfacilities;

 

g)                           to promote the planning and construction ofbuildings;

 

h)                           to conduct evaluation studies and actions forobtaining of environmental licensing;

 

i)                               to conduct environmental programs and planswithin the scope of this Chief Officer’s Department.

 

**CHAPTER V**

 

**The AuditBoard**

 

**Article 23:****                                  **The company’s Audit Board shall functionpermanently and shall be made up of between 3 (three) and 5 (five) members andtheir respective substitute members, who shall be elected annually, on theoccasion of the Annual General Meeting, and may be re-elected.

 

§ 1                     The Audit Board shall elect its Chairman fromamong its members, and the Chairman shall call and chair the meetings.

 

**Article 24:****                                  **In the event of resignation of position,death or impediment, a member of the Audit Board shall be replaced by hisrespective substitute, until the new member is elected, and such member shallbe chosen by the same party that appointed the substitute.

 

**Article 25:****                                  **The responsibilities and powers of the AuditBoard are fixed by the Corporate Law.

 

**Article 26:****                                  **The remuneration of the members of the AuditBoard shall be fixed by the General Meeting of Stockholders which elects it, inaccordance with the legislation from time to time in force.

 

**CHAPTER VI**

 

**The business year**

 

**Article 27:**                                   The business year shall coincide with thecalendar year, closing on 31 December of each year, when the financialstatements shall be prepared, in accordance with the relevant legislation.Financial statements may be prepared for periods of six months or shorterperiods.

 

**Article 28**:                                    Before any profit share, the accumulatedlosses and the provision for income tax shall be deducted from the result forthe business year.

 

§ 1                     Allocation of the net profit ascertained ineach business year shall be as follows:

 

a)                            5% (fivepercent) for the legal reserve, up to the limit specified by law;

 

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b)                           50% (fifty percent) distributed as obligatorydividends to the stockholders of the company, subject to the other terms ofthese bylaws and the applicable legislation; and

 

c)                            The balance, after the retention specified ina capital expenditure and/or investment budget prepared by the management ofthe company, in obedience to the company’s Strategic Guidelines Plan and thedividend policy contained therein and duly approved, shall be applied in theconstitution of a profit reserve for the purpose of distribution ofextraordinary dividends, in accordance with Article 30 of these bylaws, upto the maximum limit specified by Article 199 of the Corporate Law.

 

**Article 29:**                                   The dividends shall be distributed in thefollowing order:

 

a)                            The annual minimum dividend guaranteed to thepreferred shares;

 

b)                           The dividend for the common shares, up to apercentage equal to that guaranteed to the preferred shares.

 

§ 1                     Once the dividends specified in lines “a” and “b”of the head paragraph of this article have been distributed, the preferredshares shall have equality of rights with the common shares in any distributionof additional dividends.

 

§ 2                     The Board of Directors may declare interimdividends, in the form of interest on equity, to be paid from retainedearnings, profit reserves or profits ascertained in six-monthly or interimfinancial statements.

 

§ 3                     The amounts paid or credited as interest on equity,in accordance with the relevant legislation, will be imputed to the amounts ofthe obligatory dividend or of the dividend payable under the bylaws to thepreferred shares, being for all purposes of law a part of the amount of thedividends distributed by the company.

 

**Article 30:**                                   Without prejudice to the obligatory dividend,every two years, starting from the business year of 2005, or with a shorterperiodicity if the company’s availability of cash so permits, the company shalluse the profit reserve provided for by line “c” of Article 28 of thesebylaws for the distribution of extraordinary dividends, up to the limit of cashavailable, as determined by the Board of Directors, in obedience to the company’sStrategic Guidelines Plan and the Dividend Policy contained therein.

 

§ 1                     It shall be the function of the Board ofDirectors of the company to approve the Strategic Guidelines Plan, and anyrevisions thereof.

 

§ 2                     The company’s Strategic Guidelines Plan shallcontain the long-term strategic planning, and the fundamental factors, targets,objectives and results, to be pursued and achieved by the company, and itsdividend policy, and on these shall be based the plans, projections,activities, strategies, investments and expenses to be incorporated in thecompany’s Multi-year Strategic Plan, and in its Annual Budget.

 

**Article 31:****                                  **The dividends declared, whether obligatory orextraordinary, shall be paid in 2 (two) equal installments, the first by 30 June andthe second by 30 December of each year, and the Executive Board shalldecide the location and processes of payment, subject to these periods.

 

§ 1                     Dividends not claimed within a period of 3(three) years from the date on which they are placed at the disposal of thestockholder shall revert to the benefit of the company.

 

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**CHAPTER VII**

 

**Responsibilitiesof the management officers**

 

**Article 32:****                                  **The management officers are responsible tothe company and third parties for the actions which they take in the exerciseof their functions, as specified by the law and by these bylaws.

 

**Article 33:****                                  **The company guarantees defense, when legallypossible, of members of the Board of Directors, the Audit Board and theExecutive Board in Court and administrative proceedings brought against them asindividuals by third parties, during or after their periods of office, foractions related to the exercise of their specific functions and which do notviolate legal provisions or the provisions of these bylaws.

 

§ 1                     The guarantee given in the head paragraph ofthis Article extends to employees who legally carry out actions bydelegation from the company’s management officers.

 

§ 2                     Any member of the Board of Directors or theAudit Board, or any Executive Officer or employee against whom a Court judgmentsubject to no further appeal is given must reimburse the company all the costs,expenses and losses caused to it.

 

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