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After completion of the projects the company may

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Unformatted text preview: wise payable in the acquisition of capital stock of companies undertaking specified governmentapproved projects. The amount so applied is credited to non-operating income and subsequently appropriated from retained earnings to this reserve. The legal reserve results from appropriations from retained earnings of 5% of annual net income recorded in the statutory accounting records. Such appropriations are required until the balance reaches 20% of the balance of capital stock, based on the statutory accounting records. At December 31, 2000, such capital stock was R$ 1,855 million and the balance in the legal reserve was R$ 113 million. The fiscal incentive and legal reserves may be used to increase capital and to absorb losses, but are not available for distribution as cash dividends. 14 Pension plans The Company sponsors a retirement plan covering substantially all of its employees. Prior to May 1, 1992, the program (“Plan 1”) consisted of a final-pay, defined-benefit pension plan with benefits based on years of service and salary so as to complement the government social security benefits. As of May 1,...
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