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GROWTH WITH QUALITY

Strategy Fundamentals at KPMG

The fundamental pillars of our strategy present elements that sustain our growth: high performance people who are passionate about what they do, and who rely on a global network of specialists whose governance and ethics ensure that quality and consistent services are delivered, generating value for our various stakeholders. Understanding the four pillars demonstrates that ongoing growth can only be achieved when grounded upon the quality of our services.

The themes prioritized by our stakeholders that sustain the pillar Growth with Quality - providing quality and independent services, appear in third place. We rely on quality, ethics and independence, with respect for the requirements of our clients, market and society, to address them. We are therefore moving forward with our mission, creating value and opportunities to enable our various stakeholders to achieve their full potential.

The quality of our services is made viable by a global services model that is supported by a network of shared knowledge and continually enhanced methods and adapted to changing scenarios and experiences faced by member firms in their respective countries.

See below the main strategies we have adopted to ensure the permanent development of service quality.

Differentiated approach

For a strategic use of our services we prize a personalized service in our segment, offered by way of our Industry Program. We rely on top performing professionals in the accounting, financial and specific management areas of each market segment, and an operational process aligned worldwide, supported by constant market research, offering highly specialized and personalized solutions.

Our business model is complemented by the activities of the Markets practice that seeks to maximize relations between the three areas – Audit, Tax and Advisory – , and by the Business Development Managers (BDMs), who are responsible for developing business and attending clients from different market sectors.

In addition, we have structured the Brazilian Multinational segments focused on assisting Brazilian companies whose operations are expanding throughout the world, and also the German, China and Japanese Desks, which attend German, Chinese or Japanese companies or joint ventures, irrespective of the operational sector or location of their business, which do business in Brazil. With knowledge of the original cultures, we are in a position to meet their specific requirements.

We always aim to provide quality services, and accordingly seek to align this differentiated approach to the training and development of our professionals as well as to the risk, quality and integrity reliable control systems, which underpin our organizational structure globally, as will be described in the next pillars.

Industry Program

Investments and Innovation

GRI 2.9

The contexts in which we operate are constantly changing and we need to be continually updating if we are to help our clients protect themselves from the risks and take advantage of the opportunities that come out of each change. That task is firmly underpinned by our commitment to innovation, by the research we carry out, and by the sharing of know-how and best practices between the staff of our member firms.

Meanwhile, in line with our global strategy, we frequently analyze the market in the pursuit of new practices which might be incorporated to expand the portfolio of solutions we offer our clients.

As a result of our alignment with the global strategic targets established for the period 2011-2015 and our observation of the Brazilian market, we have identified opportunities to expand and diversify our portfolio of services and, in 2012, consolidated new areas of expertise:

Entrepreneur Market

In 2011, we took over the operations of the fifth largest auditing firm in Brazil. The takeover included the company’s physical offices, its portfolio of clients and its staff, but not the license to go on trading under its name.

Throughout 2012, we consolidated the integration of our professionals and developed our expertise in catering for the vigorous market of nonregulated companies, which we term the Entrepreneur Market.

This market offers opportunities despite the international macroeconomic instability, given the growth on the domestic market. These companies should also increase their participation in the Brazilian capitals market and consequently will need to adapt to another level of professionalism, market visibility, management and corporate governance.

We are qualified to serve these companies during the necessary changes, assisting in the expansion and consolidation of their business on the domestic and international markets, ensuring that they are recognized for their innovative management practices and the transparency of their operations and accountability to the market.

An important part of this market is developing in regions outside the states of Rio de Janeiro and São Paulo, which makes the new offices a strategic acquisition. Our presence has intensified in three regions of major growth and vocation to the entrepreneur sector: North and North-East, Santa Catarina and upstate São Paulo.GRI 2.9

Tax Technology Group (TTG)

implemented in 2011 – initially as Tax Innovation – TTG was bolstered in 2012 by the development of a technological solution, called KTax, in response to a material change in the form and processes by which taxes are actually declared, audited and charged . The information is provided electronically, which enables the tax authority to crosscheck it and monitor the consistency of transactions undertaken and declared by companies. This presents the challenge of submitting all the information required in the necessary format, making sure it is consistent and accurate.

Ktax is a comprehensive tax compliance solution that KPMG introduced to the market, which enables clients to electronically check the data reported to the various tax authorities, federal and state agencies, checking for compliance with tax regulations. The client accordingly analyses information and can rectify any inconsistencies and inadequacies expeditiously and efficiently.

Supply Chain

Aligned to the acquisition of the company BrainNet by KPMG in Germany, since November of 2012 KPMG in Brazil has professionals in São Paulo and Rio de Janeiro working in a new line of Management Consulting services, aimed at Procurement and Supply Chain Management.

This new line of services is enabling us to grow the support offered to our clients for the strategic management of the entire value chain (purchasing, logistics and operations), in projects focused on costs reduction and also strengthening out the level of services. This acquisition brings important opportunities for Advisory as well as for the Tax area, which helps in evaluating the tax impact on transit of goods around the world.

Relationships with Clients and the Market

GRI 4.16

Client satisfaction

GRI PR5

One of the main ways of measuring the quality of our service is to talk to our clients through two means:

• Client service - through our field teams we routinely receive feedback, identify our strengths and learn how we can improve.
• The Satisfaction Survey - conducted annually, complements the routine feedback and helps us to adapt our services to clients’ expectations, fostering our development, strengthening our relationships and permitting material issues related to our business to be monitored.

  A sample of clients is selected to participate in the survey via two criteria: clients of jobs/projects closed in the financial year with remuneration over and above R$ 50,000. Questionnaires are sent out by e-mail.

In 2012 the survey was sent to 857 of the 2090 clients that qualified under this criteria, and 19% were returned. In addition to rating standard indicators, clients can use a specific field to make additional comments.

Within the same context, the process for engaging stakeholders in 2011 was an important instrument to understanding issues relevant to undertaking our business, according to the perspectives of our main stakeholders.

Dialogue, production and sharing knowledge

GRI 4.16

The raw material of our work is knowledge, which we generate and process daily in our quest to understand the innumerable business challenges and opportunities and help our clients to handle them.

This is why we continually invest in ways of obtaining quality information and getting it to our professionals. To maintain their high performance they are constantly encouraged to seek qualified information in their departments and segments, building up strategic expertise that renders our services effective and internationally renowned.

Part of the repertoire we build is also placed at the disposal of our stakeholders in order to qualify the debate about the complex issues we address. Constant collaborations with the press, research, studies, debates and sponsorship of events provide clarity and guidance about complex issues and are some of the strategies for disseminating this expertise.

See below information about the number of the dissemination dialogue tools we use:

Audit Committee Institute (ACI)

A debate group organized by the member firms of KPMG International involving professionals from more than 30 countries to disseminate and absorb knowledge and good practices about political, economic, corporate, legal and tax trends that influence business. In 2012 KPMG in Brazil held six meetings attended by more than 500 people.

The Press

An important tool for disseminating information of public interest via its various media. In 2012 we were directly or indirectly cited in 5008 news articles, most of which reported on studies and research carried out by us or consulted our professionals as a source to make market valuations.

Studies and research

Used to update our professionals around the world and the market as a whole.

Highlights of KPMG in Brazil's publications in 2012
Corporate Governance and Capital Markets Study - 2012 edition	III Directory of Accounting Transparency and Corporate Governance - Administrative Region of Campinas - SP - 2011/2012 Edition	Accounting and Tax Synopsis 2012	Consolidated Regulatory Practice 2012 - Banks and Insurance
Business Magazine – quarterly	Research on Mergers and Acquisitions 2012

A number of important publications by other KPMG International member firms:
Expect the Unexpected: building business value in a changing world	Business Perspective on Sustainable Growth: Preparing for Rio+20	Capitalizing on Sustainability on Mining	Transport perspectives – November/December 2012
Impact of IFRS: Shipping	Global Oil & Gas - Profile and perspectives	Optimizing banking operating models

Events

We also encourage the dissemination of knowledge through events, seminars and lectures we sponsor. In 2012 we invested R$ 1.7 million in these initiatives.

Main Events of 2012

Membership of entities


GRI 4.13 Keeping in touch with important themes to our stakeholders is strategic so we can meet their expectations and effectively contribute to the market and society.

This is why our professionals are members of several associations, sharing expertise through debates and serving on councils, boards and workgroups addressing specific issues.

Entities supported by KPMG in Brazil and the type of contribution offered

Brazilian Association of Wholesales and Distributors - ABAD Membership and participation in events. Brazilian Association of Financial Law – ABDF/RJ Membership and participation in events. Brazilian Association of Human Resources – ABRH/RJ Membership and participation in events. Brazilian Association of Private and Venture Capital – ABVCAP / SP and RJ Membership and participation in events. Rio de Janeiro Trade Association – ACRJ Membership and participation in events. Association of Analysts and Professionals from the Capitals and Investment Market – Apimec / SP Association, participation in events and composition of director table. Brazilian Association of Public Stock Corporations – Abrasca / SP and RJ Membership and participation in events. José Gilberto Munhoz, partner at KPMG, is a member of the Auditing and Accounting Standards Committee (CANC) and a representative to Abrasca. Manuel Fernandes and Roberto Cunha, partners at KPMG, are also members of CANC. Rodrigo Uchoa is a member of the Juridical Committee (COJUR). Campo Grande Trade Association - ACICG Membership and participation in events. British Chamber of Trade and Industry in Brazil – Britcham / SP and RJ Membership and participation in events. David Bunce, Advisory/T&R partner at KPMG, is a member of the entity's board and is now the Chairman of Britcham. Fabiana Veloso Pereira, director-partner at KPMG, is member of the Legal Committee; Roberto Haddad, partner at KPMG, is amember of the Tax Committee and Stephen Rimmer, partner at KPMG, is the coordinator of Commerce Committee. Brazil-Germany Chamber of Trade – AHK / SP, RJ and Porto Alegre Membership, participation in events, marketing actions and exchange. The AHK São Paulo, includes a KPMG professional in the Working Group of Marketing. In São Paulo Leslie Laurenti, partner-director at KPMG, is responsible for the Chamber's financial statements auditing, and Charles Krieck a member of the Board. In Porto Alegre, Wladimir Omiechuk, partner at KPMG, is member of the Business Council. American Chamber of Trade – Amcham Brazil Iêda Novais, a KPMG partner-director, is member of the Board of Directors and the Executive Committee and chairs the Sustainability Committee. American Chamber of Trade - Amcham / Belo Horizonte, Brasília, Campinas, Curitiba, Goiânia, Porto Alegre, Recife, Ribeirão Preto, Rio de Janeiro, Salvador, São Paulo and Uberlândia Membership, participation in events and committees. In total, 10 professionals from KPMG are members of several strategic committees in the themes of Energy and Business Affairs, Economy and Finances, Foreign Trade, Tax and Sustainability, amongst others. Jaime Cervatti, COO at KPMG, serves on the Amcham Curitiba Board and Manuel Fernandes, partner at KPMG, is a director of Amcham Rio de Janeiro Japanese Brazil Chamber of Trade and Industry – SP Participation in events. Fujii Toshiharu, Audit partner and head of the KPMG Japanese Desk, is a member of the Statutory Audit Council. Brazilian Dutch Chamber of Trade – Dutcham Participation in events. Alexandre Fujimoto, KPMG Audit director, is a member of the Advisory Council. Portuguese Chamber of Trade in Brazil – CPCB / RJ, SP and Salvador Participation in events. At CPCB Rio de Janeiro, Bernardo Moreira, Audit partner at KPMG, is a member of the Statutory Audit Council. Regional Administration Council - São Paulo – CRA Professional membership.

Regional Accounting Council – CRC Professional membership. Brazilian Institute of Finance Executives – Ibef/ São Paulo, Campinas, Curitiba and Rio de Janeiro Participation in events, lectures, boards and study groups. At Ibef São Paulo, Pedro Melo, the Chairman of KPMG, is a board member and Marienne Coutinho, KPMG TAX INTL partner, is head of the sub-commission of international taxes, member of the tax commission and of Ibef Women. José Luiz de Carvalho, partner at KPMG, is a deputy director and Silbert Sasdelli, partner at KPMG, is responsible for the financial statements audit in the institute. In Rio de Janeiro, Manuel Fernandes, lead partner from the KPMG's local office, is a member of the Board of Directors and Roberto Haddad, a KPMG partner, is an associate director. In Campinas, Jarib Fogaça, KPMG partner, is a member of the Board Brazilian Institute of Corporate Governance – IBGC / SP, RJ, MG and South.Participation in events. In SP and RJ, Sidney Ito, KPMG partner, is a director of IBGC and Claudio Sertório, partner at KPMG, is a coordinator of the Governance Committee for Financial Institutions. In RJ, MG and South, Iêda Novais, partner-director at KPMG, is a member of the Certified Counselors Committee. Brazilian Institute of Petroleum, Gas and Biofuels – IBP Participation in events. Bernardo Moreira, KPMG Audit Partner is a board member. Institute of Independent Auditors in Brazil – IBRACON Contribution of fixed sum. Eduardo Pocetti, a KPMG partner, chairs the Institute and is a member of the Board of Directors. Pedro Melo, chairman at KPMG, is secretary of the Board of Directors. Ethos Institute for Social Responsibility Membership and support for 2012 Annual Conference. National Quality Foundation – FNQ / SPMembership and participation in events. Iêda Novais, a KPMG partner-director, is a member of the Executive Committee, the Board of Trustees and the Audit Committee. Elizabeth Fontanelli, partner-director at KPMG, is member of the Risk Committee. Business Leaders Group (Lide São Paulo, Rio de Janeiro and the Porto Alegre). Participação em eventos e debates. Business Leaders Group for Women – Lidem/SP Participation in events. Competitive Brazil Movement Membership and sponsorship. FIEP – Federation of Industries in Paraná State Jaime Cervatti, COO at KPMG, is an invited member of the Corporate Citizenship Board Movimento + Mulher 360Patrícia Molino represents KPMG on the Board of Directors and three other professionals participate in the subcommittees. Junior Achievement Brazil KPMG is one of the sponsors of the national program and carries out voluntary corporate initiatives. Pedro Melo, the Chairman of KPMG, is a board member. Junior Achievement Rio de JaneiroMembership and voluntary corporate initiatives. Manuel Fernandes, lead partner from KPMG's Rio office, is a member of the Board. Network of Women Leaders for Sustainability – Environmental MinistryIêda Novais, partner-director at KPMG, is a member of the Strategic Council and Coordinator at Work Group 1 – GT1 – Women's Empowerment and Corporate Governance

Financial results

GRI EC1 | EC4 | EC8

Despite the poor performance of Brazil’s economy and the persisting crisis in Europe and the US, KPMG in Brazil experienced growth compatible with the strategic planning outlined for 2010 to 2015.

The value generated for society through our services is, at times, intangible. However, as can be seen in the Statement of Added Value, in 2012 we made substantial efficiency gains in operating costs while expanding the distribution of wealth via salaries, taxes and investment in the community.

* This information refers to the periods January to December 2012, 2011 and 2010, and represents the activities of all of the independent entities that operate under the name KPMG in Brazil. According to the legislation in force, the independent entities that operate under the brand KPMG in Brazil are exempt from publishing a balance sheet. This does not apply to the companies KPMG Structure Finance and KPMG Transaction Services, which are required to publish their balance sheets in mainstream newspapers in Brazil.