GRI 1.1 | 1.2

For the third year running we are proud to present the KPMG in Brazil Sustainability Report, produced in accordance with the international guidelines issued by the Global Reporting Initiative (GRI) and independent assurance by BSD Consulting. By submitting it for independent assurance, we are demonstrating our commitment to transparency and to the evolution of our practices.

This report sets out the strategies and initiatives we have put in place to preserve core aspects of our business, such as ethics, transparency, governance, quality, independence and the fair treatment of our professionals, all of which are key attributes of sustainability and validated by our stakeholder consultation.

As in previous years, the preparation of this document mobilized staff at KPMG in Brazil in multiple, productive efforts involving both looking back and looking ahead.

LOOKING BACK

Challenges: Brazil's economy and regulatory restrictions are impacting our revenue

In hindsight, 2012 was an extremely challenging year. In Brazil we are experiencing the effects of the country’s economic slowdown, which led to low GDP growth of 0,9%. The situation is affecting all of the segments our clients operate in, directly affecting our business.

Our sector also experienced volatility. In the quest for a response to the economic and confidence crisis that originated in the global financial market, regulations and restrictions were heightened on auditing, which impacted our activities worldwide.

Specifically in Brazil, the Brazilian Securities Commission determined that the auditing of companies listed on the stock exchange must be carried out by alternate firms, which has had a major impact on our revenue. In view of this, we decided that rather than shrinking our operations, it was time to invest heavily in our growth strategy and in restructuring our portfolio.

In addition to our internal drive to growth and innovation, in 2012 we worked actively with governments, regulatory authorities, investors and professional boards around the world to ensure that opportunities to move forward are not wasted and confidence in the markets is restored.

Opportunities: the entrepreneur market and foreign investment sustain our growth

Our projections showed that, despite the recession, foreign investment would continue to flow consistently into Brazil – encouraged by incentive policies, by the robustness of our domestic market and by the major events we will be hosting over the next few years – and the enterprise market, in which we began investing in 2011, would continue to grow.

Based on that analysis, we invested in the acquisition of two expertises that have expanded our portfolio of solutions on offer to help our domestic and foreign clients navigate their way more safely through current tax, social, economic and market complexities. By the end of 2011, in the area of tax compliance, we hired a team of experienced professionals and put together the best solution on the market for current dynamic demand. In November of 2012, another acquisition brought to our professional staff a team of domestic and international supply chain specialists, which helps big clients structure and manage their supply chain in Brazil and around the world, in what is also an important opportunity for the tax area, which helps evaluating the tax impacts on transit of goods.

Bolstered by these strategies, in 2012 the revenue of the network of independent firms that operate under the KPMG brand in Brazil reached R$ 805 million, 13.7% up on 2011.

To support that growth, we increased the size of our team by absorbing the staff of the newly acquisitions and together with the staff of the auditing firm whose Brazilian operations we took over in 2011, we reached approximately a thousand new employees incorporated in 18 months, an increase of 25%. To consolidate these new operations and integrate these staff into our culture and methodology required a huge effort throughout 2012, but enabled us to take our activities to a new level.

LOOKING AHEAD

The outlook for 2013 is an environment favorable to the development of a range of services which we provide. A series of changes in tax law, involving electronic monitoring, a requirement for companies to declare on their tax receipts the estimated tax on products and services, a single rate for ICMS on interstate transactions involving imported goods and a change in the accounting criteria in line with the international rules and principles of the IFRS, mean companies must revise their tax processes and procedures, which is likely to mean they will seek expert guidance.

Another favorable aspect is the entrepreneur market, which continues to boom and is in the sights of foreign investors, stimulating demand for diagnostics, compliance and governance.

Regionalization is another important strategy for consolidation and growth to be intensified in 2013. Since 2011, we have expanded our regional and sub-regional offices, increasing the presence of partners and directors in various regions of Brazil. By this means, we offer services with KPMG’s global quality, without losing sight of the challenges and opportunities specific to each region.

Government measures in favor of transparency and initiatives like the Natural Capital Declaration – whereby financial institutions make a commitment to incorporate environmental, social and corporategovernance factors into business – promise to build up a head of steam and cause clients to seek our assistance to adapt their businesses in line with new standards.

In view of these aspects, we are forecasting significant growth of 25% for 2013.

The contribution of sustainability to our strategy

We believe that the greatest contribution we can make to sustainable development is by applying our abilities, values, knowledge and experience to the wide-ranging challenges facing our clients and communities.

Globally, KPMG has gained a recognition for its services to sustainability and for its efforts to promote debate and produce knowledge on the subject. Two initiatives carried out in 2012 to raise awareness about sustainability are particularly worth a mention.

In February 2012, we held the KPMG Sustainability Summit: Preparing for Rio+20, in New York, in partnership with the United Nations Environment Program (UNEP), the United Nations Global Compact and the World Business Council for Sustainable Development. With the participation of experts and leaders such as Ban Ki-moon, Michael Bromberg, Bill Clinton and Yvo de Boer, approximately 600 executives from 40 countries discussed a preparatory agenda for Rio+20, which sought convergence between business development and resource scarcity. The final document, with 15 recommendations ratified by participants, was presented at Rio+20.

At the event, KPMG launched the publication Expect the Unexpected: Building business value in a changing world, a study which explores the ten megaforces that are set to impact each sector and the way we do business over the next two decades.

Our knowledge and experience tell us that those forces will affect the current and future operations of KPMG in Brazil and those of our clients. As a result, we are in no doubt that our growth can only be sustainable in the long term if it is associated with the development of the economy, the market and society, understood in synergistic terms, while respecting the limits of our planet.

We know that we are only in the early stages of this path of building a genuine culture of sustainability which truly guides the way we think, take decisions and act, but we are making every effort to see that it evolves year on year.

We understand sustainability as a centerpiece to ensuring the longevity of our business and the planet as a whole. For that reason, it has increasingly become a recurring theme in our leadership meetings and in the training sessions, discussions, conduct and actions of the entire staff of KPMG in Brazil.

Thus, we have exerted our best efforts to make sustainability our path.