We are required by Brazilian corporate law to hold an annual shareholders’ meeting by April 30 of each year at which an annual dividend may be declared. Additionally, interim dividends may be declared by the board of directors “ad referendum” of the shareholders’ meeting.

Pursuant to Brazilian corporate law, a corporation’s shareholders are entitled to receive as mandatory dividends, in each fiscal year, the amount of profit determined in its by-laws or, if no such determination has been made in the by-laws, 25% of the adjusted net profit of the fiscal year plus the realized portion of the amount previously allocated to the unrealized profits reserve, provided that such portion is not used to absorb losses.

Adjusted net profit of any fiscal year is an amount equal to the net profit for the relevant fiscal year, less (i) the amounts allocated to the legal reserve and to the contingency reserve; plus (ii) reversion of the contingency reserve. The payment of dividends so calculated may be limited to the realized portion of the net profits, provided that the unrealized portion is allocated to the unrealized profit reserve.

Dividends may be paid from net profits of the relevant fiscal year, accumulated profits and profit reserves. Furthermore, any net profits not allocated to profit reserves must be distributed as dividends.

Under Brazilian corporate law, dividends generally are required to be paid to the holder of record on such declaration date within 60 days following the date the dividend was declared, unless a shareholders’ resolution sets forth another payment date, which, in such case, must occur prior to the end of the fiscal year in which such dividend was declared. A shareholder has a three-year period from the dividend payment date to claim dividends in respect of its shares, after which the company has no liability for such payment. The company is not required to adjust the amount of the dividend for inflation for the period from the date of declaration to the payment date. Consequently, the amount, in real terms, of dividends paid to shareholders if not adjusted, may be substantially reduced due to inflation.

Our by-laws specify that a minimum of 25% of the adjusted net profit amount for each fiscal year must be distributed to shareholders as dividends. We refer to this amount as the mandatory dividend.

Brazilian corporate law permits us to suspend the mandatory dividend distribution if the board of directors reports to the annual shareholders’ meeting that the distribution would be incompatible with our financial condition at that time. The fiscal council, if installed, must give an opinion relating to any suspension of the mandatory dividend distribution. In addition, management must report the reasons of any such suspension to CVM. We must allocate net profits not distributed by us as a result of a suspension to a special reserve and, if not absorbed by subsequent losses, we must distribute these amounts as soon as our financial condition permits.