(a) Authorized capital

The Company is authorized to increase its capital up to a maximum of R$ 4,100,000, corresponding to 40,000,000,000 registered common shares, with no par value, upon resolution of the board of directors.


(b) Subscribed and paid-up capital

The subscribed and paid-up capital comprises 28,479,577,827 common nominative shares, without par value, distributed as follows:

	2005		2004
Shareholders	Number of shares	%	Number of shares	%
State of São Paulo Department of Finance	14,313,511,871	50.26	14,313,511,872	50.26
Companhia Brasileira de Liquidação e Custódia	7,708,472,937	27.06	8,070,467,685	28.33
The Bank of New York ADR Department (Equivalent to stock) (*)	6,430,069,500	22.58	6,068,470,750	21.31
Other	27,523,519	0.10	27,127,520	0.10
	28,479,577,827	100.00	28,479,577,827	100.00

(*) each ADR equals 250 shares.


(c) Dividends to Shareholders

Shareholders are entitled to minimum mandatory dividend of 25% of the adjusted net profit calculated in conformity with Brazilian Corporate Law.

Calculation of mandatory minimum dividends:

Net income for the year	865,647
(-) Legal reserve 5%	43,282
Net income	822,365
Mandatory minimum dividend	205,591

The Company declared interest on shareholders’ equity, in lieu of dividends, in the amount of R$ 324,461, net of withheld income tax in the amount of R$ 23,755. Interest on shareholders’ equity was calculated in conformity with with article 9 of Law No. 9.249/95, at the Long-Term Interest Rate (TJLP); this interest was originally recorded in “Financial expenses” for income and social contribution tax purposes and subsequently, for presentation purposes, was reflected directly in “Shareholders’ equity” in conformity with CVM Deliberation No. 207/96


(d) Capital reserve

Capital reserve comprises tax incentives and donations from government agencies and private entities.


(e) Profit reserves

(i) Allocation of net income

	2005	2004
1 – Profit for the year	865,647	513,028
(+) Revaluation reserve realization	89,449	104,500
(-) Interest on own capital	348,216	152,935
(-) Legal reserve 5%	43,282	25,651
Investment reserve	563,598	438,942

2 – Management will propose to transfer the balance of retained earnings in the amount of R$ 563,598 to the “Investment Reserve” account in order to meet the needs for investments out of own funds, as provided for in the Capital Budget.


(ii) Investment reserve

Investment reserve, specifically of the amount to be invested out of own funds, relating to the enlargement of the water supply and sewage systems.