CORPORATE GOVERNANCE   4.1

Eternit has a corporate governance structure consisting of a Board of Directors, Advisory Board, five advisory committees, an Executive Board, internal controls and internal auditing areas. The Company also uses an independent external auditing firm, rotated every five years, in accordance with CVM (Brazilian Securities Commission) Instruction No. 308/99.

With the objective of increasing its level of transparency in accordance with the best corporate governance practices, since 2010 Eternit’s has used the Meeting on the Web tool (www.assembleianaweb.com.br), which facilitates participation and voting at shareholders meetings, from any part of Brazil or the rest of the world.

ETERNIT’S CORPORATE GOVERNANCE STRUCTURE

* Gathers function

DIFFERENTIALS OF ETERNIT’S CORPORATE GOVERNANCE STRUCTURE    4.4 FREE FLOAT OF OVER 76.1%, COMPARED WITH THE NOVO MERCADO REQUIREMENT OF ONLY 25%. PRACTICE OF DISTRIBUTING QUARTERLY DIVIDENDS. 57% OF THE MEMBERS OF THE BOARD DIRECTORS ARE INDEPENDENT COMPARED WITH THE NOVO MERCADO MINIMUM REQUIREMENT OF 20%. “SPEAK TO THE BOARD” COMMUNICATION CHANNEL, PROVIDING DIRECT CONTACT WITH THIS BODY AND GUARANTEEING ANONYMITY FOR THOSE WHO WISH IT. SEVEN PUBLIC MEETINGS HELD IN 2012, COMPARED TO THE NOVO MERCADO'S MINIMUM REQUIREMENT FOR LISTED COMPANIES OF JUST ONE MEETING A YEAR. ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) SINCE 2007, ONE OF THE PIONEERS IN THIS REGARD AMONG BRAZIL’S LISTED COMPANIES.

Eternit, its shares having been listed on the stock exchange since 1948, adopts a corporate governance model based on the best global market practices, ensuring its responsible operation in the communities where it is present, constantly striving for transparency in its relationship with its stakeholders. Because it operates in this manner, with complete respect for Brazilian Corporation Law, since August 2006 the Company has been part of the BM&FBovespa Novo Mercado, a section of the market for companies with the highest level of corporate governance.

Having its capital thinly spread, Eternit constantly strives to improve its relationship with its shareholders, capital markets, and all other stakeholders. In recognition of these efforts, for the fourth year running the Company was awarded IRGR Latin America prize for Best Corporate Governance in Latin America, promoted by IR Global Rankings (IRGR).

Board of Directors

The Board of Directors has the mission of promoting the growth and sustainability of Eternit, taking an active and independent stance, always taking into account the interests of all the shareholders. This body provides the guidelines for the Company’s businesses and strategies, elects the Executive Board, manages the dividend and risk policies, and creates committees for specific themes. In 2012, the board underwent a formal process of self-evaluation, while its internal regulations were reformulated in December of this year, with a view to making the operation of this body more dynamic, with respect to obligations and duties. Under the new regulations, any board member that does not consider himself sufficiently independent with respect to any particular matter debated by the board, must absent himself from the decision-making process, with this absence being registered in the meeting minutes.

Consisting of up to 7 members, strategically chosen for their technical abilities particularly in regard to sustainability, with a mandate of one year and the possibility of re-election at the Annual General Meeting, meets every two months on even months on a routine basis. Extraordinary sessions of the board can be convened by any of the board members. Eight meetings were held in 2012. From February 2013, meetings will be monthly. In uneven months the meetings will be for the assessment of operational and financial performance, while meetings in even months will be for decision-making.

The remuneration paid to the members of Board of Directors in 2012 amounted to a total of R$1,824,000, R$972,000 being in the form of variable remuneration, corresponding to 1% of net earnings for the financial year, approved at the Annual General Meeting of April 12, 2012, and granted based on the Company’s financial and socio-environmental performance.

Members of the Board of Directors   4.34.74.13

Sergio Alexandre Melleiro	Lírio Albino Parisotto	Élio Antonio Martins	Luiz Barsi Filho	Luis Terepins
Marcelo Munhoz Auricchio	Benedito Carlos Dias da Silva

Advisory Board

The Advisory Board, installed on April 13, 2011, is a body that provides support to the Board of Directors, having the task of providing an opinion on the more important issues at Eternit and its subsidiaries.

When convened, its members participate actively in the meetings of the committees and the Board of Directors. All have a mandate of one year, with the possibility of re-election at the Annual General Meeting, and receive remuneration that is exclusively fixed, amounting to a total of R$323,000 for the year. In 2012, this board participated at all the meetings of the Committees for Human Resources, Auditing, Control and Treasury, and the Board of Directors.

Members of the Advisory Board

Guilherme Affonso Ferreira	Mário Fleck	Victor Adler

1 In accordance with concept of independent member as set out in the regulations of the BM&FBOVESPA Novo Mercado

Committees

Eternit has five committees that provide advice to the Board of Directors, permitting in-depth discussion on specific themes: Auditing, Financial Control and Treasury; Socio-environmental Responsibility; Legal Matters; Strategic Planning and Human Resources. In December 2012, the scope of operation was defined for each committee in the internal regulations of the Board of Directors.

The President of the Board of Directors and the CEO of the Executive Board participate on all the committees. Among the other members who can be part of these to governance bodies, can be employees, and even consultants or external auditors, with each committee having a reporting member and secretary. The meetings of the committee, held every two months, are registered by the secretary in specific reports. There were 28 meetings held in 2012.

Executive Board   4.24.5

The Executive Board has six members, with a mandate of one year and the possibility of re-election, including the Company’s Chief Executive Officer, who is also the Investor Relations Director and the provisional Director of Development and New Business. This body meets every two months, and has the task of carrying out the strategic decisions proposed by the Board of Directors, proposed by the Board of Directors, monitoring all the work, and Eternit’s results, and promoting synergy between the various areas and/or companies within the Group.

The Executive Board’s annual remuneration consists of a fixed portion, which totalled R$5,961,000 in 2012, and a variable proportion (profit-sharing bonus), which for the year amounted to R$5,531,000. Executives may acquire shares of Eternit from the net amount received in the form of profit-sharing for the year, as part of the Share Purchase Incentive Plan.

Members of the Executive Board

Élio Antonio Martins	Flávio Grisi	Marcelo Ferreira Vinhola	Nelson Pazikas	Rogério Renner dos Santos
Rubens Rela Filho

Internal Controls and Internal and External Auditing   4.9

The Internal Controls Area, restructured in 2011, is independent and has the mission of protecting Eternit’s assets through a combination of procedures and the implementation of management standards. It establishes the procedures for all the companies in the group, guaranteeing internal alignment with respect to the particularities of each business.

In 2012, this area completed the revision of the administrative standards, begun the previous year. The second stage of this project consisted of developing and maintaining an internal controls communication channel for the receiving of criticisms and suggestions that could contribute to the perfecting of standards, as well as making visits to units do answer queries by employees in each location.


Internal Auditing is also an independent area, reporting directly to the CEO of the Executive Board, and has the function of verifying the compliance of the companies in the Eternit Group to company standards, policies and internal values. The area caters to requests by the Executive Board and the Board of Directors. The auditing department operates on the basis of an annual verification calendar which involves auditing of the company headquarters, as well as all the plants and companies in the group, twice a year.

Eternit also hires External Auditors, rotated every five years in accordance with the regulations of the CVM (Brazilian Securities Commission). Deloitte Touche Thomatsu was replaced in March 2012 by Ernst & Young Terco, the current provider of external auditing services, with a contract that runs to March 2017.