2012 Annual Sustainability Report

Grupo Algar's professionals are called associates, and the department in charge of policies for internal stakeholders is Human Talents. These names are more than simple words. They express the deep respect with which Company treats all the people that make up its soul. In addition, the Company adopts the Network Company management model.

The Group's founder, Mr. Alexandre Garcia, always considered each employee an agent of change that played a key role in the sustainability of the business. After all, performing one's duties as efficiently as possible and serving clients with kindness and dedication are a very personal attributes. Based on this idea, the Group has developed–in a very spontaneous manner–a culture in which the people who make it happen are valued so that their inborn talents are awakened.

To keep motivation and passion for serving, which are well translated in the Vision PEOPLE SERVING PEOPLE, Human Talents works jointly with Grupo Algar's corporate university to develop tools to value each member of the organization in personal and professional aspects, thus promoting life quality, well-being and career development.

Algar Telecom's talent valuing policy was awarded once more in 2012. The Company was ranked among the best companies to work for in Brazil by Época magazine and among the best IT and Telecom companies to work for in Brazil by Computerworld magazine.

The Company has a good relationship with trade unions. In 2012, 99% of the associates were covered by collective bargaining agreements. Only professionals performing executive functions are not covered by these agreements because there are specific compensation policies for them.

Associates' Profile

Based on the Vision PEOPLE SERVING PEOPLE, Grupo Algar places great value on people who enjoy developing relationships, take pleasure in helping others, work well in teams and have an inborn talent for innovation. These criteria allowed the Company and its subsidiaries to build efficient teams to develop and implement innovative solutions that focus on clients, quality and sustainability.

Grupo Algar closed the year 2012 with 20,714 associates, most of whom (84%) in the Southeast Region, where the Company started up.

Diversity is one of the features of Grupo Algar's talent team and is reflected in the balance between the percentage of professionals from both genders (54% male and 46% female) and different age groups. Considering consolidated data from all companies, young talents between 18 and 25 (mainly in Algar Tecnologia) account for 52.5% of the total although there are a larger number of talents from other age groups as well: 42.7% are between 30 and 50 and 4.9% are over age 50.

Full-time associates

Own associates (relative to Dec/31)
	Indefinite or permanent contract			Fixed-term or temporary contract
	2010	2011	2012	2010	2011	2012
Total	11,014	12,340	12,759	31	22	8
Third-party (relative to Dec/31)
	Permanent contract			Fixed-term or temporary contract
	2010	2011	2012	2010	2011	2012
Total			1	24	21	40
				2010	2011	2012
TOTAL Full-time associates				11,069	12,383	12,808

Part-time associates

Own associates (relative to Dec/31)
	Indefinite or permanent contract			Fixed-term or temporary contract
	2010	2011	2012	2010	2011	2012
Total	8,921	8,812	7,955	1	2	3
Third-party (relative to Dec/31)
	Permanent contract			Fixed-term or temporary contract
	2010	2011	2012	2010	2011	2012
Total				31	52	93
				2010	2011	2012
TOTAL Part-time associates				8,953	8,866	8,051
TOTAL (Full-time + Part-time associates)				20,022	21,249	20,859

Age group

Own associates (relative to Dec/31)
	Indefinite or permanent contract			Fixed-term or temporary contract
Age group	2010	2011	2012	2010	2011	2012
>50	1,662	1,763	1,009			1
30 to 50	11,065	11,740	8,842	8	7	4
<30	7,208	7,649	10,863	23	17	6
Total	19,935	21,152	20,714	31	24	11
Third-party (relative to Dec/31)
	Indefinite or permanent contract			Fixed-term or temporary contract
Age group	2010	2011	2012	2010	2011	2012
>50				1
30 to 50				2	2	3
<30				7	2
Total				10	4	3

Gender

Own associates (relative to Dec/31)
	Indefinite or permanent contract			Fixed-term or temporary contract
Gender	2010	2011	2012	2010	2011	2012
Masculine	9,914	10,994	11,236	19	14	6
Feminine	10,021	10,158	9,478	13	10	5
Total	19,935	21,152	20,714	32	24	11
Third-party (relative to Dec/31)
	Indefinite or permanent contract			Fixed-term or temporary contract
Gender	2010	2011	2012	2010	2011	2012
Masculine			1			3
Feminine
Total			1			3

Functional Category

Functional Category	TOTAL
Executive	245
Non executive	20,469
Total	20,714

Compensation

The Group's compensation system seeks to align and concentrate efforts to improve the Company's performance. It is a combination between fixed and variable pay, in addition to benefits. The fixed portion consists of the base monthly salary, 13th monthly pay, vacation pay and premium pays.

The variable portion, which is rising steadily, is intended to motivate and financially reward the effort of all executive and non-executive associates. Profit Sharing follows two different criteria. Part of it is paid to associates individually in connection with the results that each one achieves beyond his or her day-to-day targets. In addition, the Company distributes up to 12% of its net earnings to all associates on a yearly basis.

For the sake of consistency and balance, the Variable Compensation System determines previously set annual growth, profitability and financial health indicators as deflators.

Turnover

Own associates (relative to Dec/31/2012)

	Indefinite or permanent contract		Fixed-term or temporary contract		Indefinite or permanent contract		Fixed-term or temporary contract
Gender	Left Company	%	Left Company	%	Left Company	%	Left Company	%
Masculine	2,700	24.56	3	21.43	3,226	28.71	2	33.33
Feminine	6,819	67.13	8	0.00	1,607	16.96	2	40.00
Total	9,519	45.00	11	45.83	4,833	23.33	4	36.36
Age Group	Left Company	%	Left Company	%	Left Company	%	Left Company	%
>50	164	9.3	1	0	181	17.94
30 to 50	2,320	19.76	2	28.57	2,053	23.22
<30	7,035	91.97	8	47.06	2,599	23.93	4	66.67
Total	9,519	45	11	45.83	4,833	23.33	4	36.36
Third-party (relative to Dec/31/2012)
	Indefinite or permanent contract		Fixed-term or temporary contract		Indefinite or permanent contract		Fixed-term or temporary contract
Gender	Left Company	%	Left Company	%	Left Company	%	Left Company	%
Masculine			254	12,700
Feminine			25	833.33
Total			279	5,580
Age Group	Left Company	%	Left Company	%	Left Company	%	Left Company	%
>50
30 to 50			279	13,950
<30
Total			279	5,580
	Indefinite or permanent contract		Fixed-term or temporary contract		Indefinite or permanent contract		Fixed-term or temporary contract
Gender	Left Company	%	Left Company	%	Left Company	%	Left Company	%
Masculine					2	200	3	100.00
Feminine					2	0	0	0
Total					4	400	3	100.00
Age Group	Left Company	%	Left Company	%	Left Company	%	Left Company	%
>50
30 to 50
<30					4		3
Total					4		3	100.00

Relationship with Internal Stakeholders

Grupo Algar considers continuing education the best professional development tool to prepare its talents to face future challenges. This belief gave rise to UniAlgar in 1998. With the mission of "Promoting talent development to make the Algar businesses more competitive," the corporate university has become a strategic tool for all business segments to turn their teams' skills into competitive advantages.

UniAlgar is located in Uberlândia (Minas Gerais State), in a green area of 32,600 square meters, and has an excellent physical infrastructure. Its three buildings has 17 training rooms, 5 meeting rooms, an auditorium with a seating capacity of 600, a library with over 4,500 titles, a restaurant, an internet café and a bookshop. All facilities are air-conditioned, and there is parking for up to 200 vehicles.

UniAlgar distinguishes itself from conventional universities in that its curriculum is based on real corporate practices and concepts, focused on Algar companies' needs. In addition to offering presential training programs, the university uses internet-based learning tools, such as online courses, chatrooms, discussion forums, hot sites and a social network.

UniAlgar focuses mainly on personal and professional development, but also on issues like disseminating the corporate culture, assessing performance, evaluating the organizational climate and managing associates' health. In other words, it contributes to all the Group's initiatives geared to human talents, such as creating a pleasant working environment that can effectively help build a successful career. Consequently, it also serves as a knowledge base for all group companies.

UniAlgar also organizes courses, workshops and meetings (such as those of the Associates' Committee of each Algar company), as well as PRODEX (Executive Development Program), an annual event at which the companies' executives share their business visions, annual results, and future goals and objectives. Algar 2100, a workshop held at the beginning of the Group's strategic planning cycle, provides an opportunity to follow up on the companies' strategies and reflect on and build the future of the Algar businesses.

The corporate university's projects contribute to the recognition that Grupo Algar's professionals have on the market and lead to awards. In 2012, UniAlgar was chosen the Brazil's best corporate university by IQPC, an international business education organization that ranked other corporations present in Brazil.

Training

UniAlgar has a rich curriculum of presential and online courses, training and development programs offered throughout the year for specific purposes and target publics. These educational programs are reviewed every year so that participants' knowledge, skills and attitudes are in keeping with the specific duties of their positions and with Algar companies' strategic needs.

For example, UniAlgar trained about seventy associates in the Innovatrix™ methodology in 2012 to meet the needs of the Group's Innovation Advisory Committee. It also developed a specific program named Safra de Conhecimento [Knowledge Crop] to train Algar Agro's associates in Maranhão State. The learning materials (three booklets and DVDs) reflect the developers' idea of producing something that could be used anywhere, as well as by associates with no internet access in their daily lives. For Algar Telecom, UniAlgar developed Integrar, a continuing education program with cycles of up to 36 months that prepares talents to improve the Company's results, increases retention, provides an opportunity to share key knowledge and provides indicators for progress in target achievement. Many of the continuing education programs offered to all Algar companies are designed to develop leaderships at different levels of the organization. This is a key policy for Grupo Algar's survivability.

For instance, the Essencial program focuses on improving the skills of current leaders that have entered the labor market or been promoted recently. In turn, AVAN is a refresher program for professionals in leadership positions for over two years. The companies also invest in middle management programs to prepare supervisors. In this regard, the Médias Lideranças program was launched in late 2011 for Algar Tecnologia's supervisors. In 2012 alone, there were 85 groups with a total of 620 participants from the cities of Uberlândia, Belo Horizonte, Campinas and Brasília.

In addition to developing current leaders, UniAlgar has a series of programs designed to create a pool of talents able to take leadership positions in the future. Named Jovem Empreendedor (Young Entrepreneur), Grupo Algar's trainee program involved 62 professionals in 2012. In turn, the Talentos em Desenvolvimento (Talents in Development) program focuses on identifying associates that have great potential and may take up leadership positions one day and developing their managerial skills. The program was launched at Algar Telecom in 2010, and was extended to Algar Tecnologia in 2011 and to Engeset last year. By the close of 2012, 131 associates had taken part in it, and 15 of them had been promoted (11 at Algar Telecom and 4 at Algar Tecnologia).

Talent development among executives is based on the Potencial Sucessor (Potential Successor) program, which consists of two cycles. During the D1 cycle, which lasts three years, participants develop their skills through different activities that extend far beyond the classes: individual monitoring, practical experiences, coaching, learning forums, English language skills and pairing-up with another executive, who offers provides guidance and serves as a mentor and advisor. In 2012, 78 executives took part in Potencial Sucessor D1. After the first cycle, the most outstanding professionals become part of a talent pool whereas some remain in the program to fine-tune some of their skills. In the D1 cycle, participants are prepared to take up strategic positions in the companies according to the Group's leadership pipeline and essential leadership skills. In the D2 cycle, participants are prepared to take up senior management positions in the future. It is a more focused development program based on the requirements of the positions for which the participants are appointed, in addition to the Algar skills.

UniAlgar is also in charge of the corporate integration program, which explores Grupo Algar's history, operations, culture, management model principles (Network Company), commercial culture, Human Talents policy and Code of Ethics. In 2012, 294 new hires attended the program, with a total of 2,656 hours of training.

A total of R$11.042 million was invested in internal and external training programs in 2012. This investment benefited 20,668 professionals–52 officers, 161 coordinators, 28 consultants and 20,427 non-executive associates. The investment-base payroll ratio was 3.34%.

Health and Well-Being

Grupo Algar's commitment to its professionals' life quality and well-being led to the adoption of a series of practices that go far beyond those required by law. In this regard, the greatest stride made in 2012 was extending PDI (Programa de Desenvolvimento Individualizado da Saúde, or Customized Health Development Program, designed to improve life quality and previously offered to executives only) to all the associates of Algar companies.

Under the program, associates undergo check-ups for clinical, physical, nutritional and emotional conditions; start receiving health advice; and are encouraged to adopt healthy habits against sedentary lifestyles and stress, as well as a healthier diet. In the case of executives, annual bonuses are tied to health targets. In 2012, 282 of the 297 executives evaluated by PDI met their targets.

Also concerning health issues, Grupo Algar's multidisciplinary teams provided 260 psychological consultations, 400 medical consultations, 40 nutritional consultations and performed 60 physical evaluations. UniAlgar also offered the course "Occupational Health and Safety and Ergonomic Issues".

Also in this regard, Grupo Algar has a Corporate Health and Safety Committee. Based in Uberlândia, it meets every two months, and organizes and coordinates different activities.

Career Building

Grupo Algar adopts a fair, merit-based compensation system to stand out in the markets in which it is present and distinguish itself with a highly-skilled committed team. Each Algar company has specific career paths and participates in the performance appraisals formally applied to all associates of the holding company at least once a year. In addition to measuring individual performance, each associate's appraisal serves as a basis for a development plan with specific objectives so that he or she can achieve his or her goals.

In April 2012, Grupo Algar's yearly profit-sharing payments totaled R$24 million, which corresponds to 12% of Algar companies' net income. This bonus is part of the variable compensation package, which also comprises a bonus based on a professional's individual goals, as well as the targets of his/her area.

Another policy designed to value human capital is seeking people with the qualifications needed to take up vacant positions internally before announcing these vacancies to the market. In 2012, 3,946 associates were promoted at the Algar companies. Many of these promotions were made possible by the development programs described in the Training section.

Communication Channels

Grupo Algar has different communication channels to interact with its associates. One of them is TV Algar, an exclusive corporate TV show that can be viewed on computers, mobile devices or televisions installed in regional offices. The Algar companies can use this channel to release specific news. The most important news about Grupo Algar is conveyed through Toda Hora, a series of frames containing short informative texts. It is accessed by computer and shown on the televisions installed in social areas. Another corporate communication channel is Algar Net, which includes services related to vacation notices, pay slips and staff earnings reports. Conect@ is Algar's e-learning channel, with targeted and customized courses and training programs.

Human rights

Grupo Algar opposes any and all discrimination and adopts all applicable measures to prevent this type of conduct in its business. In 2012, only Algar Tecnologia, which provides contact center services among others, reported discrimination charges. Two discrimination charges were found to be true and gave rise to disciplinary action. Both were related to incidents of gender discrimination. The Ombudsman's Office investigated the charges and suggested that the leaders that committed these acts be fired. The company followed the suggestions. As a remediation action, workshops about moral damages, and moral and sexual harassment were organized for all leaders as early as the first half of 2013. 

The Code of Conduct, which applies to all Grupo Algar's companies, establishes that no partners or suppliers that use slave or child labor be accepted. As a result, all contracts signed by the Algar companies contain provisions stipulating that partners or suppliers must not employ minors, except as apprentices, and maintain unhealthy places of employment that may jeopardize their employees' health or in slave-like conditions. The Group recorded no such incidents in 2012.