In November 2006, the Gerdau Group announced a new phase in its corporate governance, marked by the fourth succession in five generations. Jorge Gerdau Johannpeter, Frederico Gerdau Johannpeter and Carlos Petry now serve exclusively as members of the Board of Directors, having formerly also held the positions of executive president and senior executive vice presidents, respectively. This process began in 2000 and has already resulted in important structural changes in the organization, with emphasis on the creation of the Executive Committee in 2002.

The election of André Gerdau Johannpeter to the position of chief executive officer (CEO), and of Claudio Gerdau Johannpeter to that of chief operating officer (COO) consolidated the process, which was supported by internal actions and specialized international consultants. Additional members of the Executive Committee are Filipe Affonso Ferreira (vice president, Information Technology, and controller), Mario Longhi Filho (vice president, North America Business Operation), Osvaldo Burgos Schirmer (vice president, Finance and Investor Relations), Paulo Fernando Bins de Vasconcellos (vice president, Specialty Steel Business Operation), Ricardo Gehrke (vice president, Long Steel Brazil Business Operation) and Expedito Luz (vice president, general counsel and corporate secretary).

The new structure was defined by the scale, complexity and challenges facing the Gerdau Group in its global market operations. The best practices of the world’s large companies were also taken into account.

The Gerdau Group has a historical commitment to good corporate governance practices and to strengthening the stock markets, which is why it takes part in Level 1 of the São Paulo Stock Exchange (Bovespa) Differentiated Corporate Governance program (since 2001 in the case of Gerdau S.A. and 2003 for Metalúrgica Gerdau S.A.). Furthermore, the Group’s listed companies also have an information disclosure policy that defines the criteria guiding investor relations, including the announcement of relevant acts and facts. The aim is to maintain a fast and efficient flow of data while respecting rules of secrecy and confidentiality. This policy covers controlling shareholders, officers and managers, members of the Board of Directors and Board of Auditors and any organs or persons with technical or consultative functions which, as a result of their responsibilities, function or position, have access to information concerning the Group.

Shareholders Meeting

An ordinary general meeting takes place every year to make decisions on specific issues, such as the presentation of accounts by officers and the examination, discussion and approval of financial statements.

The ordinary general meeting also decides on the allocation of the fiscal year’s net profit and distribution of dividends, and elects Board of Director and Board of Auditor members. Extraordinary general meetings are called whenever there is the need to approve matters that are not covered by the ordinary general meeting.

Board of Directors

Comprises eight members – four representing the controlling shareholders, one the minority shareholders and three independent members. The Board of Directors oversees the implementation of the policies it determines, and its members are responsible for defining long-term strategies, selecting the corporate officers and appointing the members of the Executive Committee, as well as making decisions regarding issues relevant to the businesses and operations. The term for Board members is one year, with the possibility of reelection. The Board has eight to ten regular meetings per year, together with extraordinary meetings as required. Compensation for Board members is determined by the Shareholders Meeting.

Board of Auditors

The Boards of Auditors at Metalúrgica Gerdau S.A. and Gerdau S.A. each consist of three members – two nominated by controlling shareholders and one by minority shareholders. At Gerdau S.A., one member is a finance specialist and acts as an Audit Committee. This ensures compliance with the U.S. Sarbanes- Oxley Act and the adaptations to it recommended by the Brazilian Securities Commission. At both companies, the Boards of Auditors are in charge of monitoring and verifying the activities of officers and of providing opinions on administration reports, on proposals by members of the Board of Directors, as well as analyzing and offering opinions on accounting reports among other assignments. The term for members of the Audit Committee is one year, with the possibility of reelection by the Shareholders Meeting, which also determines compensation of Board of Auditors members.

Board of Directors committees

The corporate governance structure is complemented by the committees that support the Executive Committee: the Corporate Governance Committee, the Strategy Committee and the Compensation and Succession Committee. The Corporate Governance Committee is chiefly responsible for monitoring, refining and making recommendations to the Board of Directors regarding principles, guidelines and best practices for corporate governance, thereby fulfilling an important role in the evolution of relations between the Group and its various stakeholders, especially the financial and capital markets. The Strategy Committee is in charge of evaluating the political, economic and social scenarios and recommending strategic policies and appropriate investments to the Board of Directors. The Compensation and Succession Committee, created in 2002, has the function of revising and suggesting performance and compensation evaluation policies for the Group’s strategic executives, as well as identifying successors.

Officers and Executive Committee

The Gerdau Executive Committee (GEC) is in charge of managing the Group. The GEC coordinates and supervises the Business Operations and Functional Processes, according to policies defined by the Board of Directors. It consists of the chief executive officer (CEO), chief operating officer (COO) and five vice presidents. As of early 2007, the GEC president, André Gerdau Johannpeter, has become responsible for the general management of the business, presentation of plans to the Board of Directors and for leading the proposal and implementation of approved strategies. The main responsibility of the COO, Claudio Gerdau Johannpeter, is to coordinate the Group’s Business Operations – Long Steel Brazil, Specialty Steel, Açominas, South America and North America.

The GEC meets every two weeks. The responsibilities of its members are divided into Business Operations and Functional Processes.

The Business Operations are defined on the basis of the product line and geographical location of the units: Long Steel Brazil, Specialty Steel, Açominas, South America (Argentina, Chile, Colombia, Peru and Uruguay) and North America (United States and Canada).

The Functional Processes, which provide support for all of the Group’s operations, include Sales and Marketing, Industrial Processes, Logistics, Metallics, Procurement, Operational Planning, Human Resources and Organizational Development, Finance and Investor Relations, Accounting and Auditing, Legal Affairs, Management Systems, Strategy and Business Development, Information Technology, Corporate Communications and Public Affairs, and Social Responsibility.

The Executive Committee is assisted by Support Committees, created on the basis of specialization and technical knowledge, and by Excellence Committees, which have the role of identifying best management practices and encouraging the exchange of know-how between the units. Examples of these committees include those for Disclosure, Risk Management, Human Resources and Environment.

Sarbanes-Oxley

In the first half of 2007, the Gerdau Group should complete the certification phase of compliance with the Sarbanes-Oxley Act, required of companies trading shares on the U.S. stock market. All processes involved in the calculation and consolidation of financial statements have been mapped out, and internal and external audits have been carried out to ensure the compliance and effectiveness of internal controls. This process is supported by the Risk Management Committee.

In addition, a Disclosure Committee supervises all materials required for disclosure and meets regularly to review the published data. This committee is made up of Investor Relations, Audit, Legal, Accounting and Finance directors.

Independent audit

The policy regarding the hiring of external auditors ensures that there is no conflict of interest or loss of objectivity or independence on the part of the auditors in relation to the Gerdau Group. In compliance with Instruction 308 of the Brazilian Securities Commission (CVM), the external auditor will be changed every five years, which will be in 2007.

Code of ethics

The Gerdau Ethical Guidelines are based on the seriousness and coherence that define the Group’s relations with its employees, customers, shareholders, suppliers, communities, competitors and environment. The Gerdau Group maintains channels of communication that encourage the free expression of opinions, attitudes and concerns by all stakeholders. For this reason, the Group’s website contains a “Talk to Gerdau” page, and its intranet offers an Ethics Channel for direct communication from employees, ensuring anonymity and confidentiality in dealing with the information received.

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