8661

Cielo S.A.
and Subsidiaries
Consolidated and individual interim financial information for the three and six-month periods ended June 30, 2013
KPDS 66661
Cielo S.A. and Subsidiaries Consolidated and individual interim financial information for the three and six month periods ended June 30, 2013
Contents
Report on review of interim financial information Balance sheets Statements of income Statements of comprehensive income Statements of changes in equity Statements of cash flows Statements of value added Notes to the individual and consolidated interim financial information for the three and six month periods ended June 30, 2013 3 5 6 7 8 9 10
11
Report on review of interim financial information

To the Shareholders and Management of Cielo S.A Barueri - SP Introduction We have reviewed the accompanying individual (Company) and consolidated (Consolidated) interim financial information of Cielo S.A. (Cielo), included in the Interim Financial Information Form (ITR) for the quarter ended June 30, 2013, which comprises the balance sheet as of June 30, 2013, the related statement of income and statement of comprehensive income for the three and six month periods then ended, the statement of changes in equity and statement of cash flows for three month period then ended, including the explanatory notes. Management is responsible for the preparation and fair presentation of the individual interim financial information in accordance with CPC 21 Interim Financial Reporting and consolidated interim financial information in accordance with CPC 21 and IAS 34 Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the presentation of such information in accordance with the standards issued by Brazilian Securities Commission (CVM), applicable to the preparation of Interim Financial Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and international standards on review of interim financial information (NBC TR 2410 and ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity) A review of interim financial information consists of make inquires, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the standards on auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the individual interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual interim financial information included in the ITR referred to above is not prepared in all material respects, in accordance with CPC 21(R1) applicable to the preparation of Interim Financial Information and presented in accordance with the standards issued by the CVM.
Conclusion on the consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial information included in the ITR referred to above is not prepared in all material respects, in accordance with CPC 21(R1) and IAS 34 applicable to the preparation of Interim Financial Information and presented in accordance with the standards issued by the CVM. Other matters
Interim statements of value added

We have also reviewed the individual and consolidated interim statements of value added (DVA), for the three and six month periods ended June 30, 2013, prepared by Management, the presentation of which is required by the standards issued by CVM applicable to the preparation of Interim Financial Information (ITR), and is considered as supplemental information for IFRS that does not require the presentation of a DVA. These statements were subject to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they are not prepared, in all material respects consistently with individual and consolidated interim financial information taken as a whole. Audit of corresponding values of prior year and prior quarters The corresponding values related to the year ended December 31, 2012 and the three and six month periods ended June 30, 2012, presented for comparative purposes, were previously audited and reviewed by other independent auditors who issued their reports dated February 6, 2013 and July 24, 2012, respectively, which did not contain any modification.
Osasco, August 6, 2013
KPMG Auditores Independentes CRC 2SP014428/O-6 Original report in Portuguese signed by Cludio Roglio Sertrio Accountant CRC 1SP212059/O-0
Cielo S.A. and Subsidiaries

Balance Sheets as of June, 2013 and 2012
(In thousands of Brazilian reais - R$)
Company (BR GAAP) ASSETS Current Assets Cash and cash equivalents Trade accounts receivable Trade receivables from subsidiaries and joint ventures Advanced and recoverable taxes Prepaid expenses Other receivables Total current assets Noncurrent Assets Deferred income tax and social contribution Escrow deposits Other receivables Investments Property and equipment Intangible assets: Goodwill on acquisition of investments Other intangible assets Total noncurrent assets Note 06/30/2013 12/31/2012
Consolidated (IFRS and BR GAAP) 06/30/2013 12/31/2012 LIABILITIES AND EQUITY Current Liabilities Payables to merchants Borrowings and financing Trade accounts payable Taxes payable Payables to subsidiaries and joint ventures Dividends payable Other payables Total current liabilities Note
Company (BR GAAP) 06/30/2013 12/31/2012
Consolidated (IFRS and BR GAAP) 06/30/2013 12/31/2012
4 5 22
232,876 6,739,941 145 10,160 15,851 6,998,973
282,487 5,586,770 149 4,825 14,006 5,888,237
429,665 7,111,658 113 2,354 12,852 24,559 7,581,201
404,335 5,864,906 134 3,076 7,017 19,015 6,298,483
12 13 14 15 22 18.g) 16
3,566,274 217,271 326,843 280,354 11,235 600,500 126,986 5,129,463
2,680,010 160,606 350,233 494,784 11,409 390,628 128,990 4,216,660
3,988,646 220,650 385,015 284,294 600,500 181,423 5,660,528
2,974,040 165,040 404,530 503,995 390,628 180,711 4,618,944
6 17 7 8
475,400 834,806 181 797,801 498,230
439,699 745,620 406 738,041 486,301
490,871 861,015 18,100 46,599 514,527
456,416 771,392 16,930 42,977 499,206
Noncurrent Liabilities Borrowings and financing Provision for risks Deferred income tax and social contribution Other payables Total noncurrent liabilities
13 17 6 16
1,206,358 916,975 4,304 2,127,637
1,129,661 819,121 6,857 1,955,639
2,095,238 952,724 324,331 10,115 3,382,408
1,949,098 853,026 307,717 12,616 3,122,457
9 10
56,799 55,042 2,718,259
87,278 63,890 2,561,235
959,368 1.039,356 3,929,836
936,116 1,005,988 3,729,025
EQUITY Capital Capital reserve Treasury shares Comprehensive income (loss) Earnings reserves Attributed to shareholders of Cielo S.A. Shareholders other than Cielo S.A. Total equity
18.a) 18.b) 18.c) 18.d) 18.e), f) e g)
1,000,000 107,034 (60,791) 5,338 1,408,551 2,460,132 2,460,132
500,000 99,951 (23,410) 4,979 1,695,653 2,277,173 2,277,173
1,000,000 107,034 (60,791) 5,338 1,408,551 2,460,132 7,969 2,468,101
500,000 99,951 (23,410) 4,979 1,695,653 2,277,173 8,934 2,286,107
Total Assets
9,717,232
8,449,472
11,511,037
10,027,508
Total Liabilities and Equity
9,717,232
8,449,472
11,511,037
10,027,508
The accompanying notes are an integral part of these financial statements.

Interim Statements of Income
For period of three and six months ended June 30, 2013 and 2012 (In thousands of Brazilian reais - R$, except earnings per share)
Company (BR GAAP) Note Net Revenue Cost of Services Gross Profit Operating Income (Expenses) Personnel General and administrative Sales and marketing Equity in subsidiaries Other operating expenses, net Operating Income Finance Income (Expenses) Finance income Financial expenses Revenues from advanced receivables Adjustments to present value Exchange rate changes, net 20 21 Three month period 06/30/2013 06/30/2012 1,360,695 (412,148) 948,547 1,205,691 (358,938) 846,753 Six month period 06/30/2013 06/30/2012 2,681,211 (789,482) 1,891,729 2,374,332 (711,158) 1,663,174
Consolidated (IFRS and BR GAAP) Three month period Six month period 06/30/2013 06/30/2012 06/30/2013 06/30/2012 1,604,526 (609,902) 994,624 1,245,051 (395,833) 849,218 3,151,060 (1,173,905) 1,977,155 2,449,378 (781,376) 1,668,002
21 21 21 7 21 e 29
(41,519) (70,110) (45,665) 790 (46,374) 745,669
(29,041) (82,360) (77,324) (1,870) (35,777) 620,381
(75,234) (127,261) (96,512) 5,524 (79,776) 1,518,470
(58,609) (142,563) (100,684) (132) (47,717) 1,313,469
(65,237) (70,756) (50,463) 407 (49,429) 759,146
(49,342) (57,455) (77,390) 216 (35,848) 629,399
(120,005) (129,327) (105,196) (879) (81,605) 1,540,143
(98,208) (94,315) (100,759) (120) (49,569) 1,325,031
28 28 28 28 28
4,360 (56,851) 268,102 (22,190) (65) 193,356
4,988 (21,473) 212,364 (3,360) 1,053 193,572
7,956 (93,330) 495,796 (24,563) 203 386,062
11,129 (33,437) 402,504 (14,751) 5,245 370,690
4,630 (63,857) 268,102 (22,190) (62) 186,623
5,558 (26,991) 212,364 (3,360) 1,054 188,625
8,655 (108,425) 495,796 (24,563) 202 371,665
12,546 (39,019) 402,504 (14,751) 5,237 366,517
Operating Income Before Income Tax And Social Contribution Income Tax and Social Contribution Current Deferred Net Profit for the Year Attributed to Shareholders of Cielo S.A. Shareholders other than Cielo S.A.
939,025
813,953
1,904,532
1,684,159
945,769
818,024
1,911,808
1,691,548
23 23
(339,362) 23,682 623,345
(309,571) 44,472 548,854
(678,173) 37,852 1,264,211
(617,425) 48,713 1,115,447
(346,404) 24,801 624,166
(311,733) 44,307 550,598
(687,539) 42,933 1,267,202
(621,611) 48,361 1,118,298
623,345 821 624,166
548,854 1,744 550,598
1,264,211 2,991 1,267,202
1,115,447 2,851 1,118,298
Basic Earnings per Share (in R$) - Basic Basic Earnings per Share (in R$) - Diluted
19.b) 19.b)
0.79533 0.79484
0.69985 0.69889
1.61311 1.61223
1.42252 1.42089
0.79533 0.79484
0.69985 0.69889
1.61311 1.61223
1.42252 1.42089

Interim Statements of Comprensive Income
For period of three and six months ended June 30, 2013 and 2012 (In thousands of Brazilian reais - R$)
Company (BR GAAP) Three month period 06/30/2013 06/30/2012 NET PROFIT FOR PERIODS Comprehensive income periods Exchange differences in the conversion of foreign transactions Exchange differences of foreign transactions Gains and losses from hedge instruments (bonds) on foreign transactions, net of taxes Total comprehensive income for periods TOTAL COMPREHENSIVE INCOME FOR PERIODS ATTRIBUTED TO Shareholders of Cielo S.A. Shareholders other than Cielo S.A. 623,345 548,854 Six month period 06/30/2013 06/30/2012 1,264,211 1,115,447
Consolidated (IFRS and BR GAAP) Three month period Six month period 06/30/2013 06/30/2012 06/30/2013 06/30/2012 624,166 550,598 1,267,202 1,118,298
62,892 (62,598) 294 623,639
548,854
53,743 (53,384) 359 1,264,570
1,115,447
62,892 (62,598) 294 624,460
550,598
53,743 (53,384) 359 1,267,561
1,118,298
623,639 821
548,854 1,744
1,264,570 2,991
1,115,447 2,851

Interim Statements of Changes in Equity
For the six months ended in June 30, 2013 and 2012 (In thousands of Brazilian reais - R$)
Attributed to controlling interest Earnings reserves Additional Proposed Dividends 346,760 (346,760) Total Controlling Interest 1,409,593 (346,760) (5,800) 5,234 16,933 1,115,447 (31,244) 2,163,403 Noncontrolling Interest Total Equity
Note
Capital
Capital Reserve 88,888 5,234 94,122
Treasury Shares (50,859) (5,800) 16,933 (39,726)
Legal Reserve 52,767 47,233 100,000
Capital Budget 708,202 (236,165) 472,037
Earnings Retention 1,115,447 (47,233) (31,244) 1,036,970
Comprehensive Income -
Balances as of December 31, 2011 Dividends paid in addition to the minimum mandatory dividends in 2011 Capital increase Acquisition of treasury shares Stock options granted Sale of treasury shares under the stock option plan Net profit for the six months period Allocation of net income Legal Reserve Interest on capital Effect from other shareholders other than Cielo S.A. on consolidated entities Balance as of June 30, 2012
263,835 236,165 500,000
14,971 2,851 (4,038) 13,784
1,424,564 (346,760) (5,800) 5,234 16,933 1,118,298 (31,244) (4,038) 2,177,187
Balances as of December 31, 2012 Dividends paid in addition to the minimum mandatory dividends in 2012 Capital increase Acquisition of treasury shares Stock options granted Sale of treasury shares under the stock option plan Net profit for the six month period Allocation of net income Legal reserve Proposed interest on capital Mandatory minimum dividends Effect from other shareholders other than Cielo S.A. on consolidated entities Total comprehensive income: Exchange differences in the conversion of foreign transactions Exchange rate changes on net foreign investments Gains and losses from hedge instruments (bonds) on foreign transactions, net of taxes Balance as of June 30, 2013
500,000 500,000 -
99,951 7,083 -
(23,410) (42,554) 5,173 -
100,000 63,210 -
1,152,250 (500,000) - -
443,403 (443,403) - -
1,264,211 (63,210) (49,400) (558,510) -
4,979 -
2,277,173 (443,403) (42,554) 7,083 5,173 1,264,211 (49,400) (558,510) 53,743 (53,384) 2,460,132
8,934 2,991 (3,956)
2,286,107 (443,403) (42,554) 7,083 5,173 1,267,202 (49,400) (558,510) (3,956) -
18.a) 18.c) 31 18.c)
18.e) 18.g) 18.g)
1,000,000
107,034
(60,791)
163,210
652,250
593,091
53,743 (53,384) 5,338
7,969
53,743 (53,384) 2,468,101

Interim Statements of Cash Flow For period of three and six months ended June 30, 2013 and 2012
Note Cash flow from operating activities Income before income tax and social contribution Adjustments to reconcile income before income tax and social contribution to net cash provided by operating activities: Depreciation and amortization Recognition (reversal) of provision for losses on property and equipment and intangible assets Residual cost of property and equipment and intangible assets written off or sold Stock option plan Losses on leased equipment Provision for risks tax, civil, labor Adjustment to present value of trade accounts receivable Interest of shareholders other than Cielo S.A. Exchange change rate on loans and interest on loans raised abroad Interest on borrowings and financing Impairment of goodwill Equity in subsidiaries Increase (decrease) in operating assets: Trade accounts receivable Trade receivables from subsidiaries Advanced and recoverable taxes Other receivables (current and noncurrent) Escrow deposits Advanced expenses Increase (decrease) in operating liabilities: Payables to merchants Trade accounts payable Taxes and contributions Payables to subsidiaries Other payables (current and noncurrent) Payment of tax, civil and labor lawsuits Cash from operations Interest paid Income tax and social contribution Net cash provided by operating activities Cash Flow From Investing Activities Capital increase in subsidiaries and joint ventures Receiving concerning the negotiation of the purchase price Braspag Receipt of compensation paid by sellers of Me-S Dividends from subsidiaries Addition POS, net borrowings FINAME Additions to property and equipment and intangible assets, excluding acquisitions POS Net cash used in investing activities Cash Flow From Financing Activities Acquisition of treasury shares Sale of treasury shares under the stock option plan Borrowings FINAME, net acquisition POS Payment of principal Dividends and interest on capital Net cash provided by (used in) financing activities Effect from exchange rate changes on cash and cash equivalents of foreign subsidiary Increase (decrease) in Cash and Cash Equivalents Cash And Cash Equivalents Closing balance Opening balance Increase (decrease) in Cash and Cash Equivalents
Company (BR GAAP) Three month period Six month period 06/30/2013 06/30/2012 06/30/2013 06/30/2012
Consolidated (IFRS and BR GAAP) Three month period Six month period 06/30/2013 06/30/2012 06/30/2013 06/30/2012
939,025
813,953
1,904,532
1,684,159
945,769
818,024
1,911,808
1,691,548
8 e 10 8 e 10
17 5
13 9 7
77,011 533 6,268 3,169 7,820 46,698 22,190 (1,154) 15,953 30,479 (790)
72,497 (269) 2,276 3,410 11,324 54,518 3,360 5,680 1,870
152,744 640 10,930 7,083 21,625 100,242 24,563 (549) 32,180 30,479 (5,524)
142,924 120 10,205 5,234 17,348 86,095 14,751 9,642 132
99,978 533 6,660 3,169 7,298 48,800 22,190 5,161 (1,154) 22,686 30,479 (407)
75,040 (269) 2,256 3,410 11,324 54,575 3,360 (1,744) 5,680 (216)
193,517 640 11,541 7,083 21,625 102,736 24,563 2,991 (549) 46,677 30,479 879
148,045 120 10,264 5,234 17,348 86,084 14,751 (2,851) 9,642 120
17
(1,095,377) 161 905 (39,905) (4,490)
(604,937) 1,013 (814) 4,261 (35,716) 1,068
(1,177,734) 4 (1,620) (89,186) (5,335)
(735,160) (600) (595) 7,020 (69,715) (4,672)
(1,176,701) 397 5,327 (3,531) (40,307) (4,069)
(601,351) (590) (1,422) 2,077 (35,744) 1,112
(1,271,315) 21 722 (6,714) (89,623) (5,835)
(740,350) (644) (1,203) 11,856 (69,826) (4,819)
17
345,446 (23,731) 7,409 (582) 17,013 (935) 353,116 (22,906) (257,967) 72,243
(194,486) 43,842 2,747 1,149 13,573 (2,303) 198,016 (4,923) (216,903) (23,810)
864,639 (23,390) (2,539) (174) (4,557) (2,388) 1,836,665 (31,270) (867,821) 937,574
157,252 48,046 (7,036) (16) (40,690) (2,314) 1,322,130 (8,120) (707,272) 606,738
424,162 (20,565) 9,736 (1,265) 26,780 (1,550) 409,576 (38,198) (267,540) 103,838
(194,486) 38,885 2,188 22,319 (2,333) 202,095 (4,923) (219,133) (21,961)
992,981 (19,515) (1,870) (5,212) (3,038) 1,944,592 (46,562) (883,128) 1,014,902
157,252 41,858 (8,381) (35,527) (2,344) 1,328,177 (8,120) (712,254) 607,803
13
7 9 9 7 8 e 13
(2,501) 1,504 (18,499) (2,656) (22,152)
(3,500) 1,800 (3,718) (5,418)
(4,501) 4,009 (18,499) (6,319) (25,310)
(3,500) 1,800 (6,471) (8,171)
(2,501) (18,541) (8,724) (29,766)
(4,786) (4,786)
(4,501) 8,189 (18,541) (17,525) (32,378)
(2,100) 600 (9,205) (10,705)
18.c) 18.c) 8 e 13 13 18.g)
2,881 (22,974) (49,742) (69,835) (19,744)
5,103 36,853 (200) 41,756 12,528
(42,554) 5,173 (90,463) (834,031) (961,875) (49,611)
(5,800) 16,933 62,749 (200) (666,217) (592,535) 6,032
2,881 (22,933) (49,742) (69,794) 5,316 9,594
5,103 36,853 (200) 41,756 15,009
(42,554) 5,173 (90,463) (834,031) (961,875) 4,681 25,330
(5,800) 16,933 62,749 (200) (666,217) (592,535) 4,563
4 4
(19,744) (19,744)
12,528 12,528
232,876 282,487 (49,611)
247,030 240,998 6,032
9,594 9,594
15,009 15,009
429,665 404,335 25,330
276,486 271,923 4,563

Interim Statements of value added For period of three and six months ended June 30, 2013 and 2012
Note Revenues Gross operating revenue Losses on leased equipment
Company (BR GAAP) Three month period Six month period 06/30/2013 06/30/2012 06/30/2013 06/30/2012
Consolidated (IFRS and BR GAAP) Three month period Six month period 06/30/2013 06/30/2012 06/30/2013 06/30/2012
20
1,512,835 (7,820) 1,505,015
1,343,463 (11,324) 1,332,139
2,979,525 (21,625) 2,957,900
2,642,214 (17,348) 2,624,866
1,765,493 (8,404) 1,757,089
1,392,069 (11,324) 1,380,745
3,466,866 (22,731) 3,444,135
2,735,124 (17,348) 2,717,776
Inputs from third parties Cost of services Materials, electric energy, outside services and others Other payables, net Gain (loss) on realization of assets
(310,794) (97,421) (10,453) (44,099) (462,767)
(264,100) (153,616) (21,894) (2,559) (442,169) 889,970
(588,779) (203,113) (24,426) (49,726) (866,044) 2,091,856
(522,893) (239,197) (24,417) (5,951) (792,458) 1,832,408
(498,806) (77,396) (16,006) (44,109) (636,317) 1,120,772
(294,633) (126,832) (22,275) (2,560) (446,300) 934,445
(953,312) (165,255) (34,215) (49,703) (1.202.485) 2,241,650
(581,175) (188,739) (24,614) (5,951) (800,479) 1,917,297
Gross value added Retentions Depreciation and amortization Wealth created, net Wealth received in transfer Equity in subsidiaries Noncontrolling interest Finance income, including exchange rate changes and advanced receivables, net
1,042,248
8 e 10
(77,011) 965,237
(72,497) 817,473
(152,744) 1,939,112
(142,924) 1,689,484
(99,978) 1,020,794
(75,040) 859,405
(193,517) 2,048,133
(148,045) 1,769,252
790 250,207 250,997
(1,870) 215,045 213,175 1,030,648
5,524 479,392 484,916 2,424,028
(132) 404,127 403,995 2,093,479
407 (821) 250,475 250,061 1,270,855
216 (1,744) 215,607 214,079 1,073,484
(879) (2,991) 480,085 476,215 2,524,348
(120) (2,851) 405,527 402,556 2,171,808
28
Total wealth for distribution Distribution of wealth Personnel and related taxes Profit-sharing Taxes and contributions Accrued interest and leasing Mandatory minimum dividends Proposed interest on capital Earnings retention Wealth distributed
1,216,234
26
18.g) 18.g)
(44,557) (14,325) (479,772) (54,235) (558,510) (49,400) (15,435) (1,216,234)
(35,931) (9,637) (413,321) (22,905) (31,244) (517,610) (1,030,648)
(85,753) (24,273) (957,639) (92,152) (558,510) (49,400) (656,301) (2,424,028)
(72,657) (19,473) (849,710) (36,192) (31,244) (1,084,203) (2,093,479)
(68,694) (17,676) (497,009) (64,131) (558,510) (49,400) (15,435) (1,270,855)
(52,751) (13,119) (428,036) (30,724) (31,244) (517,610) (1,073,484)
(131,086) (31,023) (985,056) (112,972) (558,510) (49,400) (656,301) (2,524,348)
(105,335) (26,314) (878,338) (46,374) (31,244) (1,084,203) (2,171,808)
10
Notes to the individual and consolidated interim financial information for the three and six month periods ended June 30, 2013
(Amounts in thousands of Brazilian reais - R$, unless otherwise stated)
General information
Cielo S.A. (the Company or Cielo) was established on November 23, 1995 in Brazil, and is primarily engaged in providing services related to credit and debit cards and other payment methods, as well as providing related services, such as signing up of merchants and service providers, rental, installation and maintenance of Point of Sales - POS equipment, and data capture and processing of electronic and manual transactions. Cielo is a corporation headquartered in Barueri, State of So Paulo, whose shares are traded on BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros, under ticker symbol CIEL3, and its subsidiaries comprise Banco do Brasil and Bradesco conglomerates. The operations of the Companys direct subsidiaries, indirect subsidiaries and joint ventures are as follows.
Direct subsidiaries
Servinet Servios Ltda. (Servinet) - engaged in the provision of maintenance and contacts with merchants and service providers for acceptance of credit and debit cards and other payment methods; development of related activities in the service segment that are of interest to Servinet; and holding investments in other companies as partner or shareholder. Servrede Servios S.A. (Servrede) and CieloPar Participaes Ltda. (CieloPar) mainly engaged in holding investments in other companies as partner or shareholder (holdings). In December 2012, these holdings were merged with an into by the then subsidiaries Multidisplay and Braspag, respectively, at carrying amounts and as of November 30, 2012. Cielo USA, Inc. (Cielo USA) - mainly engaged in holding investments in other companies as partner or shareholder (holdings). As of June 30, 2013, this holding company held the control of Me-S. Multidisplay Comrcio and Servios Tecnolgicos S.A. (Multidisplay) - engaged in data transmission services to load fixed or mobile phone credits, the sale of mobile or fixed phone credits, as well as technology, software development and licensing consulting services, product sale, and technology and sales representation services. Braspag Tecnologia em Pagamento Ltda. (Braspag) - engaged in software development; automated transaction processing; IT services for collection and management of trade accounts payable and receivable using the Internet.
11
Indirect subsidiaries
M4 Produtos e Servios S.A. (M4 Produtos) - Multidisplays subsidiary engaged in data transmission services to load fixed or mobile phone, prepaid television, prepaid transportation and similar credits; mobile payment and technology consulting services; and software development and licensing. Merchant e-Solutions, Inc. (Me-S) - Cielo USAs subsidiary engaged in the provision of services related to the facilitation of electronic payments with either credit or debit cards, comprising transaction authorization, financial clearing, and the notification of transactions to merchants. Joint ventures Companhia Brasileira de Gesto de Servios (Orizon), formerly Orizon Brasil Processamento de Informaes de Sade Ltda. - engaged in the provision of consulting and data processing services to medical companies in general; management of back office services for health operators in general; electronic network interconnection services between health operators and medical and hospital service providers (e.g.: hospitals, clinics and laboratories), and other health system agents and drugstores, based on a single technology platform; scanning and process automation services, call center services and other solutions; card reading and nonfinancial transactions routing services; lease or sale of card readers, other computer-based equipment and systems used for providing its services. Prevsade Comercial de Produtos e de Benefcios de Farmcia Ltda. (Prevsade) Orizons subsidiary engaged in medicine benefit services to corporate customers, healthcare plans, public customers, and large laboratories. Prevsade manages the relationship of its customers employees with drugstores, doctors and the contracting company itself. Precisa Comercializao de Medicamentos Ltda. (Precisa) - Orizons subsidiary engaged in the sale of medicines in general, with focus on health prevention and maintenance, with a scheduled delivery system. Precisa is a drugstore focused on the distribution of medicines to Prevsades customers, especially chronic patients. It is responsible for delivering medicines regularly administered to Prevsades customers with chronicle diseases, such as diabetes, cancer and heart and blood pressure conditions, which allow monitoring the delivery and use of medicines, increasing the treatments effectiveness. Guilher Comrcio, Importao, Exportao e Distribuio de Medicamentos e Teconologia para Sada Ltda. (Guilher) - Orizons subsidiary engages in the import, export, distribution, and marketing of pharmaceuticals and pharmaceutical raw materials, products and equipment technology for health, cosmetics, toiletries, perfumes and food. Paggo Solues e Meios de Pagamento S.A. (Paggo) - engaged in the accreditation of merchants for acceptance of credit and debit cards; the supply and provision of solutions and electronic means for transaction capture and processing arising from the use of credit and debit cards; and the management of payables to and receivables from the network of authorized merchants, through the capture, transmission, data processing and settlement of electronic transactions with credit and debit cards for mobile payments. Cielo and its subsidiaries are also referred to as Group throughout this report.
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Corporate restructuring
In 2012, the Group implemented a corporate restructuring process to simplify its operating structure:
a.
CieloPars capital reduction

In September 2012, CieloPars capital reduction, in the amount of R$48,718, was approved, and CieloPars interest in Paggo started to be directly held by Cielo. Capital was reduced at carrying amounts and, therefore, no gains or losses were recorded.
b.
Servredes capital reduction

In September 2012, Servredes capital reduction, in the amount of R$3,105, was approved and excess cash and cash equivalents was returned to Cielo. Capital was reduced at carrying amounts and, therefore, no gains or losses were recorded.
c.
Merger of CieloPar with and into Braspag

In December 2012, the Shareholders Meeting approved the downstream merger of CieloPar with and into Braspag, in accordance with the Merger Agreement and Rationale. As a result of this merger, CieloPar was liquidated and Braspag became its successor. CieloPars equity was valued on November 30, 2012 at R$17,874, at its carrying amount, according to the Accounting Valuation Report for Merger Purposes issued by a specialized independent firm.
d.
Merger of Servrede with and into Multidisplay

In December 2012, the Extraordinary Shareholders Meeting approved the downstream merger of Servrede with and into Multidisplay, in accordance with the Merger Agreement and Rationale. As a result of this merger, Servrede was liquidated and Multidisplay became its successor. Servredes equity was valued on November 30, 2012 at R$25,187, at its carrying amount, according to the Accounting Valuation Report for Merger Purposes issued by a specialized independent firm. The table below shows the valued net assets:
e.
Acquisition of Merchant e-Solutions

In August 2012, Cielo concluded the acquisition, through its direct subsidiary Cielo USA, of 100% of the Me-Ss capital, a US company provider of global payment solutions, which owns a state-of-the-art technological platform developed for the merchant acquisition business, that allowed Me-S to stand out in the US market. If this business combination had been completed on January 1, 2012, the Groups consolidated net revenue for the six month period ended June 30, 2012 would be approximately R$2,829,036 and profit for the six month period from continuing operations would be approximately R$1,117,497. In the quarter ended 30 June 2012 the Group's consolidated net income would be approximately R$ 1,460,067 and income from continuing operations would be approximately R$ 552,428. The Groups Management understands that these pro forma amounts correspond to an approximate measure of the Groups combined performance and, therefore, cannot be used as a basis for comparison in future periods. In order to determine the Groups pro forma consolidated net revenues and profit or loss as if Me-S had been acquired at the beginning of the prior year, Management:
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Calculated the depreciation of equipment acquired based on the fair values arising from the initial recognition of the business combination. Determined the borrowing costs as if such borrowing had been raised on January 1, 2012. Calculated the amortization of the related items to the allocation of goodwill arising on the acquisition as if the allocation was made on January 1, 2012.
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2.1

Summary of significant accounting practices

Statement of compliance
The Companys interim financial information is comprised of: The Companys interim financial information, which have been prepared in accordance with accounting practices adopted in Brazil, identified as Company (BR GAAP). The Companys consolidated interim financial information, which have been prepared in accordance with the International Financial Reporting Standards - IFRSs issued by the International Accounting Standards Board - IASB and in accordance with accounting practices adopted in Brazil, identified as Consolidated (IFRS and BR GAAP). The accounting practices adopted in Brazil include those established in the Brazilian Corporate Law, as well as the technical pronouncements, instructions and interpretations issued by the Accounting Pronouncements Committee (CPC) and approved by the Brazilian Securities and Exchange Commission (CVM). In the individual interim financial information, investments in subsidiaries and joint ventures are stated under the equity method of accounting in accordance with the legislation prevailing in Brazil. Thus, the individual interim financial information are not considered to be in conformity with IFRSs, which requires investments in subsidiaries to be accounted for separately from the parent company at fair value or cost.
2.2
Basis of preparation
The financial interim financial information have been prepared based on the historical cost, except if otherwise stated. The historical cost is generally based on the fair value of the consideration paid in exchange for assets.
2.3
Functional and presentation currency

The individual and consolidated interim financial information are presented in Brazilian reais (R$), which is the functional and reporting currency of the Company. In the preparation of the interim financial information of each Groups company (headquartered in Brazil and whose functional currency is the Brazilian real (R$)), foreign currencydenominated transactions are stated based on the exchange rates prevailing on the date of each transaction. At the end of each reporting period, monetary items denominated in foreign currency are retranslated at the exchange rates prevailing at the end of the period. Nonmonetary items recorded at fair value determined in foreign currency are retranslated at the rates prevailing on the date fair value was determined. Nonmonetary items measured at the historical cost in a foreign currency are translated using the exchange rate prevailing on the transaction
14
date. Exchange rate changes on monetary items are recognized in net profit or loss for the year in which they occur, except for those arising from foreign currency hedge transactions against risks of changes in foreign exchange rate (investment hedge). Management determined that the functional currency of its foreign subsidiaries is the US dollar. In Cielo USA, the main factor to determine the functional currency was the raising of US dollardenominated loans for the acquisition of control of Me-S. These loans will be fully settled using the cash from foreign transactions. In addition, with respect to Me-S, the services provided and cash flows are fully stated in US dollars. For purposes of presentation of the consolidated interim financial information, the assets and liabilities of subsidiaries Cielo USA and Me-S (based in the USA), originally denominated in US dollars, were translated into Brazilian reais at the exchange rates prevailing at each yearend. Profits or losses were translated at the average monthly exchange rates for the year. Exchange rate changes resulting from such translations were classified in comprehensive income and accumulated in equity. The goodwill and adjustments to the fair value of identifiable assets acquired and liabilities assumed arising from the acquisition of a foreign subsidiary are recognized as assets and liabilities and translated based on the exchange rate at the end of the reporting period. Exchange differences are recognized in equity. When a foreign transaction is written off (e.g.: disposal of interest, transfer of control of an investee or jointly-controlled entity, or loss of significant influence over an associate, whenever there are foreign transactions), the amount of the accumulated exchange rate change relating to such transaction recorded in the Groups equity is reclassified to profit or loss for the year .
2.4
Cash and cash equivalents

Include cash, bank accounts and highly-liquid, short-term investments with insignificant risk of change in value, stated at cost plus interest earned. Cash and cash equivalents are classified as loans and receivables and their income is recorded in profit or loss for the period.
2.5
a.
Trade accounts receivable and payable to merchants

Prepayment of receivables - stated at present value, determined on an individual basis, less cash flows of each one of the receivables recorded using the interest rates applied to such transactions. Settlement receivables - correspond mainly to the receivables from card association members for processed financial transactions that were authorized but not yet received. These receivables are generally settled on the following day. Receivables from merchants - represent the receivables from Me-Ss practice to prepay interchange fees to most merchants over the month and collect these fees at the beginning of the next month, as well as fees that are collected from merchants from transaction procession. Transactions pending transfer - refer to transactions carried out by the holders of credit and debit cards issued by financial institutions, consisting of receivables from card-issuing banks, less interchange fees and payables to merchants less processing fees (discount rate), both with maturities of less than one year.
b.
c.
d.
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e.
Settlement payables - correspond to the balances due to customers for processed transactions that have not yet been paid. Me-S pays merchants the amounts received from card association members on the business day subsequent to the day the transaction is captured. Merchant deposits - Me-S maintains funds as a security deposit to hedge against of the risk of a client going bankrupt and being unable to pay for the services provided. The amount withhold from each client is based on the risk factors associated to the client, which include, among others, the type of business and the volume of completed transactions.
f.
2.6
Property and equipment

Stated at historical cost, less depreciation. Depreciation is calculated under the straight-line method, based on the estimated useful lives of the assets. The estimated useful lives, residual values, and depreciation methods are reviewed at least on an annual basis, and the effects from any changes in estimates are recorded prospectively. Subsequent costs are added to the residual value of property and equipment or recognized as a specific item, as appropriate, only if the economic benefits associated to these items are probable and the amounts can be reliably measured. Other repairs and maintenance are recognized directly in profit or loss when incurred. An item of property and equipment is written off upon disposal or when there is no future economic benefits resulting from its continuous use. Any gain or loss from the sale or write-off of an item of property and equipment is determined by the difference between the sales amount received and the carrying value of the asset sold, recognized in profit or loss.
2.7
Intangible assets Separately acquired intangible assets

Separately acquired intangible assets with finite useful lives are stated at cost, less accumulated amortization and accumulated impairment losses thereon. Amortization is recognized on a straight-line basis, based on the estimated useful lives of the assets. The estimated useful life and amortization method are reviewed on an annual basis and the effect of any changes in estimate is accounted for on a prospective basis. Separately acquired intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses.
Internally generated intangible assets - research and development expenditure

Expenditure on research is recognized as expense when incurred. Internally generated intangible assets resulting from development costs (or from the research phase of an internal project) are recognized if, and only if, the following criteria are met: The technical feasibility of completing the intangible asset so that it will be available for use or sale. The intention to complete the intangible asset to use it or sell it. The ability to use or sell the intangible asset.
16
The ability to demonstrate how the intangible asset will generate probable future economic benefits. The availability of appropriate technical, financial and other resources to complete the development of the intangible asset to use it or sell it. The ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount originally recorded of internally generated intangible assets corresponds to the sum up of the costs incurred since the asset started to meet the recognition criteria previously mentioned. If no internally generated intangible asset may be recognized, the development costs are recognized in profit or loss when incurred. After initial recognition, internally generated intangible assets are stated at cost, less accumulated amortization and impairment losses, similarly to intangible assets acquired separately.
Intangible assets acquired in a business combination

In the consolidated interim financial information, intangible assets acquired in a business combination and recognized separately are stated at fair value on the acquisition date, which is equivalent to cost.
Derecognition of intangible assets

An intangible asset is written off after sale or when future economic benefits will not result from its use. The gain or loss arising from the derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.
2.8
Impairment of tangible and intangible assets excluding goodwill

At the end of each reporting period, and if there is evidence, the Group reviews the carrying amount of its tangible and intangible assets to determine if there is any indication that these assets might be impaired. If there is such an indication, the recoverable amount of the asset is estimated to measure the amount of impairment loss, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent allocation basis can be identified, corporate assets are also allocated to the cash-generating units or the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the carrying amount of an asset (or cash-generating unit) exceeds its recoverable amount, the carrying amount is reduced to its recoverable amount, and impairment losses are immediately recognized in the profit or loss.
2.9
Business combinations
In the consolidated interim financial information, business combinations are stated under the
17
acquisition method. The consideration transferred in a business combination is measured at fair value. Acquisition-related costs have been recognized in profit or loss, when incurred. The identifiable assets acquired and liabilities assumed are recognized at fair value on the acquisition date. Goodwill is measured based on the exceeding amount arising from the sum up of the amount transferred, the noncontrolling interest in the acquire and the fair value of the acquirers interest previously held in the acquire on the net amounts on the date of acquisition of the identifiable assets acquired and liabilities assumed. The noncontrolling interests that correspond to current interests and entitle their holders to a proportional portion of the entitys net assets in case of liquidation are measured based on the proportional stake of the noncontrolling interests in the acquirees identifiable net asset amounts recognized.
2.10
Goodwill
Goodwill arising from a business combination is stated at cost on the date of the business combination, net of accumulated impairment loss, if any. For impairment test purposes, goodwill is allocated to each one of the cash-generating units of the Company that benefit from the business combination synergies. The cash-generating units to which goodwill was allocated are tested for impairment annually or more frequently, when there is any indication of impairment. If the recoverable amount of a cash-generating unit is lower than its carrying amount, the impairment loss is first allocated to reduce the carrying amount of any goodwill allocated to the unit, and subsequently to the other assets of the cash-generating unit, proportionally to the carrying amount of each of its assets. Any goodwill impairment loss is directly recognized in profit or loss. Impairment losses are not reversed in subsequent periods. When the related cash-generating unit is sold, the amount corresponding to the goodwill is included in the calculation of the gains or losses on the sale.
2.11
Investments in subsidiaries and Joint ventures

A subsidiary is an entity, including an unincorporated entity such as a partnership, in which the parent company owns, directly or through other subsidiaries, shareholder rights that entitle it, on a permanent basis, to prevail in corporate decisions and grant it the power to elect the majority of the officers. Prevalence in corporate decision-making and the power to elect the majority of the officers, on a permanent basis, presumably occur when the investor owns more than 50% of the voting capital in other entity, therefore have control.Under this method, the components of assets and liabilities and income and expenses of indirect subsidiaries are added to the fully consolidated accounting positions and the book value of noncontrolling interests is determined by applying the interest percentage of noncontrolling shareholders in the subsidiarys equity. The income, assets and liabilities of subsidiaries are recognized in individual interim interim financial information under the equity method. Under equity method, investments in subsidiaries are initially recorded as cost and subsequently adjusted for recognition society participation in profit
18
and loss and other comprehensive income of the subsidiary. In the Companys consolidated interim financial information, the components of assets and liabilities and income and expenses of subsidiaries (direct and indirect) are added to the positions fully consolidated accounting of the participation of non-controlling shareholders is determined by applying the percentage of their participation on the subsidiarys equity. Joint Ventures that are entities over which control is carried out jointly by de Company and one or more partners. In individual and consolidated interim financial information, investments in joint ventures are recognized under equity method, from the date that the control is acquired. The Company has investments in foreign subsidiaries whose interim financial information were originally prepared in accordance with accounting practices adopted in the United States of America (US GAAP). No adjustments are made to the foreign subsidiaries financial statements because there are no material differences as compared to the accounting practices adopted in Brazil and IFRSs.
2.12
Income tax and social contribution - current and deferred

Income tax and social contribution expenses represent the aggregate of current and deferred taxes.
Current taxes
The provision for the Companys income tax and social contribution is calculated based on the taxable income for the year. Income tax was calculated at the rate of 15%, plus a 10% surtax on annual taxable income exceeding R$240. Social contribution was calculated at the rate of 9% on adjusted net income. Taxable income differs from the profit reported in the statement of income because it excludes income or expenses that are taxable or deductible in other years, and permanently excludes nontaxable or nondeductible items. The provision for income tax and social contribution is calculated individually (by Groups company) based on the statutory rates prevailing at period end.
Deferred taxes
Deferred income tax and social contribution are recognized on the differences between assets and liabilities recognized for tax purposes and related amounts recognized in the consolidated interim financial information; however, they are not recognized if generated in the first-time recording of assets and liabilities in transactions that do not affect the tax bases, except in business combinations. Deferred income tax and social contribution are determined based on the tax rates and laws in effect at the period end of interim financial information and applicable when the respective income tax and social contribution are paid. Deferred tax assets or liabilities are not recognized on temporary differences resulting from goodwill or the initial recognition of other assets and liabilities in a transaction that neither affects taxable income nor book income (except for business combinations). Deferred income tax and social contribution assets are recognized only to the extent that it is probable that there will be a positive tax base for which temporary differences can be used and tax loss carryforwards can be offset. The recovery of deferred tax assets is reviewed at the end of each reporting period and when it is no longer probable that future taxable income will be available to allow the recovery of all or part of the assets, these are adjusted to their expected recoverable amount.
19
Deferred tax assets and liabilities are measured at the rates applicable in the period in which the liability or asset is expected to be settled or realized, according to the tax legislation prevailing at the end of each reporting period or to a new legislation, when this has been substantially approved. The deferred tax assets and liabilities are measured to reflect the tax implication that would arise from the way in which the Group expects, at the end of each reporting period, to recover or settle the carrying amount of these assets and liabilities. Current and deferred taxes are recognized in profit or loss, except when they correspond to items recorded in Comprehensive income, or directly in equity. In these cases, current and deferred taxes are recognized in Comprehensive income, in equity. When current and deferred taxes result from the initial recognition of a business combination, the tax effect is accounted for on the recognition of a business combination.
2.13
Employees benefits s
The Company and its subsidiaries are co-sponsors of a defined contribution pension plan. Contributions are made based on a percentage of the employees compensation. Payments to defined contribution plans are recognized as expense when the services they entitle to are provided. Additionally, the Company has a Corporate Education Program whose objective is to reach learning, ensuring mapping and dissemination of key knowledge through practical and educational activities that encourage the creation, acquisition, dissemination, use and sharing of knowledge, focus to business results. The Company's development activities focused on all employees such as, leadership development, e-learning, training contract, on-demand training, continuing education and languages. Additionally, the Company offers its employees other benefits such as health insurance, dental care, life insurance and personal accident. Costs related actions described are recognized in income when incurred.
2.14 a.
Financial assets and financial liabilities Financial assets

Financial assets are classified in the following specific categories: (i) at fair value through profit or loss; (ii) held to maturity; (iii) loans and receivables; and (iv) available for sale. Classification is made according to the nature and purpose of the financial assets and is determined upon initial recognition. Financial assets at fair value through profit or loss Financial assets are classified at fair value through profit or loss when they are held for trading or designated at fair value through profit or loss when acquired. A financial asset is classified as held for trading if it is:
Acquired principally for the purpose of selling it in the near term. Part of a portfolio of identified financial instruments that are jointly managed and for which there is evidence of a recent actual pattern of short-term profit-taking.
20
A derivative that is not a designated and effective hedging instrument in hedge accounting. A financial asset that is not held for trading can be designated at fair value through profit or loss upon initial recognition when: This designation eliminates or significantly reduces an inconsistency that might arise upon measurement or recognition. It is part of a managed group of financial assets or liabilities, or both, and its performance is evaluated based on fair value according to the risk management or investment strategy documented by the Company and the respective information is internally provided on the same basis. It is part of a contract containing one or more embedded derivatives, and technical pronouncement CPC 38 and rule IAS 39 - Financial Instruments: Recognition and Measurement permits that the combined contract as a whole (assets or liabilities) be designated at fair value through profit or loss. Financial assets at fair value through profit or loss are measured at fair value, with any gains or losses recognized in profit or loss for the year. Net gains or losses recognized in profit or loss include dividends or interest earned by the financial asset.
Financial assets held to maturity

Financial assets with fixed or determinable payments and fixed maturities, which the Company has the intention and ability to hold to maturity are classified as held to maturity. Held-tomaturity financial assets are measured at amortized cost using the effective interest rate method, less the allowance for impairment losses. Revenue is recognized using the effective interest rate method.
Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market, measured at amortized cost using the effective interest method, less the allowance for impairment losses. Interest income is recognized by applying the effective interest method, except for short-term receivables when the recognition of interest would be immaterial.
Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets designated as available for sale and not classified in the any of the categories above. Available-for-sale financial assets are measured at fair value. Interest, inflation adjustment and exchange rate changes, if applicable, are recognized in profit or loss when incurred. Changes arising from measurement at fair value are recognized in a specific line item of equity when incurred, and are charged to profit or loss when realized or considered unrecoverable.
Effective interest rate method

It is a method used to calculate the amortized cost of a financial asset or a financial liability and allocating interest income or interest expenses over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (including all fees paid or received that are an integral part of the effective interest rate, transaction costs, and 21
other premiums or discounts) through the expected life of the financial asset or, when appropriate, over a shorter period.
b.
Financial liabilities
Financial liabilities are classified as follows: (i) at fair value through profit or loss; or (ii) as other financial liabilities. Financial liabilities at fair value through profit or loss This category includes financial liabilities held for trading or measured at fair value through profit or loss. A financial liability is classified as held for trading if it is:
Incurred principally for the purpose of repurchasing it in the near term. Part of a portfolio of identified financial instruments that are jointly managed and for which there is evidence of a recent actual pattern of short-term profit-taking. A derivative that is not designated as an effective hedging instrument. Financial liabilities that are not held for trading can be designated at fair value through profit or loss upon initial recognition when: This designation eliminates or significantly reduces an inconsistency that might arise upon measurement or recognition. They are part of a managed group of financial assets or liabilities, or both, whose performance is valued based on fair value, in accordance with the Companys documented risk management or investment strategy, and whose related information is provided internally on the same basis. They are part of a contract containing one or more embedded derivatives, and IAS 39 permits that the combined contract as a whole (assets or liabilities) is designated at fair value through profit or loss. Financial liabilities at fair value through profit or loss are stated at fair value, with any gains and losses recognized in profit or loss. Net gains or losses recognized in profit or loss comprise any interest paid on financial liabilities.
Other financial liabilities

Other financial liabilities are initially measured at fair value, net of transaction costs, and are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on a yield basis. The effective interest method is a method for calculating the amortized cost of a financial liability and allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability or, when appropriate, over a shorter period.
2.15
Derivatives
In the period from August 23, 2012 to November 16, 2012 the Company entered into Nondeliverable Forward - NDF derivative transactions to manage its exposure to currency
22
fluctuations in foreign investments. The Company used derivatives until raising third-party funds by issuing foreign currency-denominated bonds on November 16, 2012. The gains and losses on derivatives, net of taxes, are recognized in Comprehensive income in equity, and will be reclassified to profit or loss upon the sale of the foreign investments. There are no outstanding derivatives in the individual and consolidated interim financial information for the period ended June 30, 2013.
2.16
Hedge accounting
In the period from August 23 to November 16, 2012, the Group designated NDF transactions, a hedge instrument for currency risks, as hedge of net investments in foreign transactions. On November 16, 2012, the Group designated the fundraising of third-party funds by issuing bonds, a hedge instrument for foreign currency-related risks, as hedge of net investments in foreign transactions. On the dates the derivative was contracted and the funds related to the bond issue were raised, the Company documented the relationship between the hedging instrument and the hedged asset, including the description of its goals and risk management strategies. Additionally, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument that is used in a hedge relationship is highly effective in offsetting changes in the fair value. For hedges of net investments in foreign transactions, the gains or losses on the effective portion of the hedging instrument are recorded in Comprehensive income and accumulated in line item Hedge of net investment in foreign transactions, in the case of the NDF designation, and in line item Exchange differences arising on translation foreign loans, in the case of the foreign fundraising (bonds) designation. Any gains or losses on the ineffective portion, if any, are immediately recorded in profit or loss for the period. Any hedge gains and losses related to the accumulated effective portion in the reserve for translation of foreign currency are reclassified to profit or loss for the period when the foreign investment is sold. The Company projects the need to renew or contract new transactions to replace in case the derivative instrument expires before the hedged item.
2.17
Revenue recognition
Revenue is measured at the fair value of the amount received or receivable, less estimated returns, commercial discounts and/or bonuses granted and other similar deductions. Revenues from credit and debit card transactions are recognized when transactions are processed. Revenues from credit card transactions payable in installments are recognized in profit or loss when each installment is processed. Revenues from services to associates and merchants are recognized when the service is provided. The income from the dividends of investments is recognized when the shareholders right to receive these dividends is established (provided that it is probable that the future economic benefits will flow to the Group and the amount may be measured reliably).
23
Interest income is recognized when it is probable that the future economic benefits will flow to the Group and the amount may be measured reliably. The interest income is recognized under the straight-line method based on the time and the effective interest rate on the outstanding principal. The effective interest rate is the rate that discounts the estimated future cash receipts during the estimated useful life of the financial assets in relation to the initial net carrying amount of this asset. Revenues from the prepayment of receivables to merchants are recognized on a pro rata basis through their maturities. In the case of Me-S, in the context of its agreements with the banks, it assumes liabilities of the acquiring bank and is, therefore, accountable for the interchange rates. In addition, the bank receives market rates for its services and, therefore, is not exposed to the agreements risks and rewards. Additionally, there are factors such as the portability of the contracts with merchants and the fact that Me-S has a direct interaction with its clients, on a daily basis, and it holds the transactions credit risk. As a result, Me-S is the main debtor and recognizes revenue based on its gross amount and the interchange is recognized as cost of services.
2.18
Provision for risks

Recognized when there is a present obligation (legal or constructive) as a result of a past event, with probable outflow of resources, and the amount of the obligation can be reliably estimated. The amount recognized as a provision is the best estimate of the settlement amount at the end of the reporting period, taking into consideration the risks and uncertainties related to the obligation. When the economic benefit required to settle a provision is expected to be received from third parties, this amount receivable is recorded as an asset, only when reimbursement is virtually certain. Provisions recognized by the Company refer substantially to civil and labor lawsuits arising in the normal course of business, filed by third parties or former employees. These contingencies are assessed by the Companys and its subsidiaries Management and its legal counsel, using criteria that allow their proper measurement, despite the uncertainty concerning the decision, their period and amount. Provisions for tax lawsuits are recorded based on the total taxes under legal dispute, plus inflation adjustment and late payment interest incurred through the end of the reporting period.
2.19
Dividends and interest on capital

The proposed distribution of dividends and interest on capital made by the Companys Management that does not exceed the mandatory minimum dividends is recognized in line item Dividends payable in current liabilities as it is considered a legal obligation under the Companys bylaws; however, the portion of dividends exceeding mandatory minimum dividends declared by Management after the reporting period but before the issuance of the interim financial information is authorized is recognized in line item Proposed additional dividends in equity, whose effects are disclosed in note 18.g).
24
For corporate and accounting purposes, interest on capital is stated as allocation of profit or loss directly in equity.
2.20
Share-based compensation
The Company offers a stock option plan to its officers and executives, and the officers and executives of its subsidiary Servinet. Options are priced at fair value on the grant date of the plans and are recognized on a straight-line basis in profit or loss as a contra entry to equity. At the end of each reporting period, the Company reviews its estimates of the number of vested options based on the plans terms and conditions and recognizes the impact of the revision of initial estimates, if any, in the statement of income, as a contra entry to equity.
2.21
Use of estimates
The preparation of individual and consolidated interim financial information requires the Companys and its subsidiaries Management to make estimates that affect certain assets and liabilities, disclosure of contingent liabilities and the reported amounts of revenues and expenses for the year. Significant assets and liabilities subject to these estimates include the residual value of property and equipment and intangible assets, allowance for doubtful accounts (on trade accounts receivable from lease of POS equipment), deferred income tax and social contribution assets, appreciation of derivative financial instruments, impairment of goodwill and provision for risks. Actual results could differ from those estimates. The Company and its subsidiaries review estimates and assumptions annually.
2.22
Statement of value added (DVA)

The purpose of this statement is to disclose the wealth created by the Company and its distribution during a certain reporting period, and is presented by the Company, as required by the Brazilian Corporate Law, as an integral part of its individual financial information, and as supplemental information to the consolidated financial information, since this statement is not required by IFRSs. DVA has been prepared using information obtained in the same accounting records used to prepare the interim financial information and pursuant to the provisions of CPC 09 - Statement of Value Added. The first part of DVA presents the wealth created by the Company, represented by revenues (gross sales revenue, including taxes levied thereon, other income and the effects of the allowance for doubtful accounts), inputs purchased from third parties (cost of sales and purchases of materials, energy and services from third parties, including the taxes included upon purchase, the effects of impairment and recovery of assets, and depreciation and amortization) and the value added received from third parties (equity in subsidiaries, finance income and other income). The second part of DVA presents the distribution of wealth among employees, taxes and contributions, compensation to third parties and shareholders.
2.23
New and revised standards and interpretations issued and not yet adopted
The Group did not adopt the new and revised IFRSs already issued but not yet adopted below: Effective for annual periods beginning on or after January 1, 2014:
Amendments to IAS 32 - Offsetting of Financial Assets and Liabilities - outline the classification of certain rights denominated in foreign currency as equity instruments or financial liabilities.
25
Effective for annual periods beginning on or after January 1, 2015: IFRS 9 - Financial Instruments - introduces new requirements for classification, measurement and write-off of financial assets and liabilities. CPC had not yet issued certain pronouncements equivalent to IFRSs that became or would become effective on or after June 30, 2013. However, due to CPCs commitment to keep the set of standards issued by IASB up-to-date, these pronouncements and/or amendments issued by IASB are expected to be approved by the time their adoption becomes mandatory.
2.24
Reclassifications
The statements of income and cash flows for three and six month period ended June 30, 2013, presented for comparison purposes, were reclassified in order to reflect the tax incentive expenses related to donations and cultural and artistic activities in line item Income tax expenses - current as described in note 23.
Consolidated interim financial information

The consolidated interim financial information include the interim financial statements of the Company, its subsidiaries and jointly-controlled entities. Control is obtained when the Company has the power to control an entitys financial and operating policies to benefit from its activities. In the Companys individual interim financial information, the financial information on subsidiaries and jointly-controlled entities are recognized under the equity method. The profit or loss on the subsidiaries acquired during the year is included in the consolidated statement of income from the effective date of acquisition. The balance of profit or loss is attributable to the Companys owners and noncontrolling interests, despite of losses. When necessary, the subsidiaries interim financial information are adjusted their accounting policies to those set by the Group. All intercompany transactions, balances, income and expenses are fully eliminated in consolidated interim financial information. For subsidiaries, the full consolidation concept was applied, intended for investments in subsidiaries and entailing the recognition of all assets, liabilities, income and expenses in the parent, thus requiring the recognition of noncontrolling interests. The consolidated interim financial information include the accounts of the Company (parent company) of the direct subsidiaries, Multidisplay, Servinet, Braspag, Servrede (until December 18, 2012), USA Cielo (from August 23, 2012) and CieloPar (until December 18, 2012), indirect subsidiaries Me-S (from August 31, 2012) and M4 Products.
Application of new accounting standards

Management conducted a detailed review to determine the effects of adopting IFRS 10 Consolidated Financial Statements (CPC 36 (R3) - Consolidated Financial Statements) and IFRS 11 - Joint Arrangements (CPC 19 (R2) - Business Combinations) in relation to the "joint ventures" of the group. The adoption of IFRS 10 or 36 CPC (R3), which has a new definition of control and additional control guidelines, and the adoption of IFRS 11 or 19 CPC (R2) resulted in changes to the accounting for investments held by the Group in "joint ventures" Paggo, Orizon, Precisa, Guilher and Prevsade, jointly-controlled entities in accordance with IAS 31 "Interest in Joint Ventures". According to IFRS 11 and CPC 19 (R2), these subsidiaries were
26
classified as "joint ventures" and recorded under the equity method, resulting in having to record proportionate interest in the net assets of the Group, the companies income and comprehensive income in a single account presented in the consolidated interim financial information and the consolidated interim income statements and comprehensive income as "investment" and equity", respectively. The Company prepared its opening balance sheet, considering the application of these new standards on December 31, 2011. Additionally, there were prepared the consolidated interim financial information regarding the statements of income and cash flows for the three and six month periods ended June 30, 2013.
Balance sheet for the year ended December 31, 2012

Consolidated (IFRS and BR GAAP) Effects of joint ventures (*) (40,146) 30,465 (9,681)
Assets:
12/31/2012 (Published) 6,338,629 3,698,560 10,037,189
12/31/2012 (Restated) 6,298,483 3,729,025 10,027,508
Current Noncurrent Total Assets
Liabilities and equity:

Current Noncurrent Equity Total liabilities and equity 4,627,457 3,123,625 2,286,107 10,037,189 (8,513) (1,168) (9,681) 4,618,944 3,122,457 2,286,107 10,027,508
Income statement for the semester ended June 30, 2012.

Consolidated (IFRS and BR GAAP) Effects of joint ventures (*) (32,472) (7,001) (171) (1,061) -
Income: Net Revenues Gross Profit Operating income Operating income before income tax and social contribution Net profit for period
06/30/2012 (Published) 2,481,850 1,675,003 1,325,202 1,692,609 1,118,298
06/30/2012 (Reasted) 2,449,378 1,668,002 1,325,031 1,691,548 1,118,298
27
Income statement for the period April 1, 2012 to June 30, 2012
Consolidated (IFRS and BR GAAP) Effects of reclassification Rouanet Law (Note 2.24) (4,000) (4,000) -
Income: Net revenues Gross Profit Operating income Operating income before income tax and social contribution Net profit for period
04/01/2012 to 06/30/2012 Effects of joint (Published) ventures (*) 1,261,088 853,400 633,548 (16,037) (4,182) (149) (600) -
04/01/2012 to 06/30/2012 (Reasted) 1,245,051 849,218 629,399 818,024 550,598
822,624 550,598
(*)
Effect of proportional consolidation of "Joint ventures" Paggo, Orizon, Prevsade and Precisa adjusted for comparison purposes with the consolidated financial statements of December 31, 2012 and the consolidated interim financial information for the six month period ended June 30 2012 and for the quarter ended June 30, 2012.
Statements of Cash Flows for the semester ended June 30, 2012
Consolidated (IFRS and BR GAAP) 06/30/2012 (Published) 613,554 (12,680) (592,535) 8,339 Effects of joint ventures (*) (5,751) 1,975 (3,776) 06/30/2012 (Reasted) 607,803 (10,705) (592,535) 4,563
Income: Cash Flow from Operating Activities Cash Flow from Investing Activities Cash Flow from Financing Activities Increase(decrease) in Cash and Cash Equivalents
Statements of Cash Flows for the period April 1, 2012 to June 30, 2012
Consolidated (IFRS and BR GAAP) 04/01/2012 to 06/30/2012 (Published) (19,611) (5,307) 41,756 16,838 04/01/2012 to 06/30/2012 (Reasted) (21,961) (4,786) 41,756 15,009
Income: Cash Flow from Operating Activities Cash Flow from Investing Activities Cash Flow from Financing Activities Increase(decrease) in Cash and Cash Equivalents
Effects of joint ventures (*) (2,350) 521 (1,829)
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3.1
Direct (individual control) and indirect subsidiaries

The equity interests held in the consolidated subsidiaries are as follows:
Interest - % Total capital 06/30/2013 Direct subsidiaries: Servinet Cielo USA Multidisplay Braspag Indirect subsidiaries: M4 Produtos Me-S 12/31/2012 Voting capital 06/30/2013 12/31/2012
99.99 100.00 50.10 99.99
99.99 100.00 50.10 99.99
99.99 100.00 50.10 99.99
99.99 100.00 50.10 99.99
50.10 100.00
50.10 100.00
50.10 100.00
50.10 100.00
The balances of assets and liabilities of direct and indirect subsidiaries as of June 30, 2013 and December 31, 2012, and the main statement of income line items for six month periods ended are as follows:
06/30/2013 M4 Produtos Cielo USA
Servinet Assets: Current assets Noncurrent assets Total assets Liabilities and equity: Current liabilities Noncurrent liabilities Equity Total liabilities and equity
Multidisplay
Braspag
Me-S
21,323 49,257 70,580
13,665 30,599 44,264
53,156 13,769 66,925
8,301 14,752 23,053
496,996 202,862 699,858
3,375 1,895,146 1,898,521
17,013 34,025 19,542 70,580
11,856 32,408 44,264
53,593 53 13,279 66,925 12/31/2012 M4 Produtos
2,955 16 20,082 23,053
456,858 5,208 237,792 699,858
3,379 1,208,003 687,139 1,898,521
Servinet Assets: Current assets Noncurrent assets Total assets Liabilities and equity: Current liabilities Noncurrent liabilities Equity Total liabilities and equity
Multidisplay
Braspag
Me-S
Cielo USA
26,393 48,398 74,791
14,113 31,897 46,010
49,632 12,073 61,705
9,395 14,337 23,732
321,052 192,047 513,099
1,098 1,758,256 1,759,354
25,017 32,181 17,593 74,791
11,596 34,414 46,010
47,156 14,549 61,705
5,473 16 18,243 23,732
320,048 5,982 187,069 513,099
4,434 1,121,172 633,748 1,759,354
29
06/30/2013 M4 Produtos
Servinet Multidisplay Profit or loss: Net revenue Gross profit (loss) Operating profit (loss) before finance income (expenses) Profit (loss) before income tax and social contribution Profit (loss) for the six month period
Braspag
Me-S
Cielo USA
45,581 44,346 2,692 2,953 1,950
58,588 3,216 6,337 6,401 5,923
22,119 11,241 7,692 7,826 5,130 06/30/2012 M4 Produtos
9,516 6,478 2,812 2,884 1,839
394,646 104,621 41,915 41,483 26,037
(28,206) (2,170) (16,667) (353)
Servinet Multidisplay Profit or loss: Net revenue Gross profit (loss) Operating profit (loss) before finance income (expenses) Profit (loss) before income tax and social contribution Profit (loss) for the six month period
Braspag Servrede
CieloPar
50,588 48,579 2,757 3,217 1,871
60,825 3,766 6,080 6,080 5,713
20,913 13,329 7,305 7,572 4,997
8,587 5,794 2,677 3,109 2,346
(3,162) 737 (4,601) (4,086)
3,680 (1,786) (1,782) (1,782)
3.2
Joint ventures
Interests in joint ventures include:
Interest - % Total capital 06/30/2013 Joint ventures: Orizon Prevsade Precisa Guilher Paggo 12/31/2012 Voting capital 06/30/2013 12/31/2012
40.95 40.95 40.95 40.95 50.00
40.95 40.95 40.95 50.00
40.95 40.95 40.95 40.95 50.00
40.95 40.95 40.95 50.00
The joint ventures assets and liabilities as of June 30, 2013 and December 31, 2012, and the main statement of income line items for the six month periods ended June 30, 2013 and 2012:
30
06/30/2013 Orizon Assets Current assets Noncurrent assets Total assets Liabilities and equity: Current liabilities Noncurrent liabilities Equity (equity deficiency) Total liabilities and equity Precisa Prevsade Paggo Guilher
72,902 63,108 136,010
18,147 1,365 19,512
6,513 508 7,021
1,865 474 2,339
109 109
7,932 263 127,815 136,010
4,906 14,606 19,512
1,964 5,057 7,021
1,063 999 277 2,339
22 87 109
12/31/2012 Orizon Assets: Current assets Noncurrent assets Total assets Liabilities and equity: Current liabilities Noncurrent liabilities Equity (equity deficiency) Total liabilities and equity 67,245 61,234 128,479 Precisa Prevsade 22,406 959 23,365 4,431 319 4,750 Paggo 3,719 502 4,221
7,369 411 120,699 128,479
8,208 15,157 23,365
1,695 3,055 4,750
3,359 2,000 (1,138) 4,221
06/30/2013 Orizon Income: Net Revenue Gross profit(loss) Operating profit (loss) before finance income (costs) Profit (loss) before income tax and social contribution Profit (loss) for the six month period Precisa Prevsade Paggo Guilher
41,383 18,875 6,935 8,941 7,117
36,961 1,517 (444) (437) (551)
5,939 3,735 2,712 2,794 2,002
23 (3,091) (7,637) (7,586) (7,586)
(26) (64) (64) (64)
31
06/30/2013 Orizon Profit or loss: Net revenue Gross profit (loss) Operating profit (loss) before finance income (costs) Profit (loss) before income tax and social contribution Profit (loss) for the six month period Precisa Prevsade Paggo
33,894 15,743 9,418 11,592 9,439
43,592 4,203 3,372 3,252 2,976
5,234 1,692 795 795 634
218 (3,495) (8,068) (7,971) (7,971)
Cash and cash equivalents

Company (BR GAAP) 06/30/2013 Cash and banks: Local currency Foreign currency Short-term investments: Debentures subject to repurchase agreements (a) Bank certificates of deposit (CDBs) (a) Money Market Deposit Account - MMDA (b) Total 12/31/2012 Consolidated (IFRS and BR GAAP) 06/30/2013 12/31/2012
756 1,953 144,578 82,038 3,551 232,876
41,681 14,772 210,671 12,092 3,271 282,487
12,167 172,913 151,555 89,479 3,551 429,665
47,227 101,625 214,640 37,572 3,271 404,335
Short-term investments have the following characteristics: (a) As of June 30, 2013, the average yield of debentures subject to repurchase agreements and CDBs was 102.11% (102.61% as of December 31, 2012) of the Interbank Deposit Certificate (CDI) rate. The funds invested abroad (New York - USA) in MMDA earn yield at a fixed rate of 0.25% per year. The balances under line item Cash and banks consist of cash on hand and cash available in bank accounts in Brazil and abroad, derived primarily from deposits made by credit and debit card-issuing banks, in the case of the Company, and by the card association members, in the case of Me-S. Such amounts are used to settle transactions with merchants. These short-term investments are highly liquid and their fair values do not differ materially from their carrying amounts.
(b)
32
Trade Accounts Receivable

Company (BR GAAP) 06/30/2013 Prepayment of receivables (a) Settlement receivables (b) Receivables from merchants (c) Bank account blocking (d) Meal ticket and transport card capture and processing (e) Receivables from mobile payment services (f) Disputes of credit card charges - chargeback (g) Other receivables Total 6,702,669 9,477 4,354 22,157 1,284 6,739,941 12/31/2012 5,541,085 8,737 12,139 22,469 2,340 5,586,770 Consolidated (IFRS and BR GAAP) 06/30/2013 6,702,669 235,240 84,610 9,477 4,354 49,887 22,157 3,264 7,111,658 12/31/2012 5,541,085 162,793 69,445 8,737 12,139 43,364 22,469 4,874 5,864,906
(a)
The balance corresponds to prepayment of receivables to merchants relating to card transactions that will be received from the issuing banks within up to 360 days after the date receivables are prepaid to merchants. Additionally, as of June 30, 2013, this amount is net of the adjustment to present value relating to the finance income received in advance on the date of release of cash in the amount of R$156,182 (R$131,619 as of December 31, 2012), as it is related to the prepayment of receivables for spot and installment sales with original maturity after the date of the reporting periods. Corresponds to the receivables recognized by subsidiary Me-S. These correspond to the receivables from the card association members for processed financial transactions that were authorized but not yet received by Me-S by the end of the reporting periods. These amounts receivable are usually received on the business day following the transaction capture date. The card association sends to Me-S the amounts due to merchants for processing, net of the interchange fee withheld by the card-issuing banks. Correspond to the interchange fees prepaid by subsidiary Me-S to the merchants during the month. These interchange fees, as well as the commission on the services provided by Me-S, are received at the beginning of the month subsequent to the transaction month. The Company offers card-issuing banks to bank account blocking services upon prior approval from merchants to block any transfer of receivables from such merchants to another bank. For these services, the Company receives a commission, which is paid in the month subsequent to the request of the bank account blocking by the card-issuing banks. Receivables from Companhia Brasileira de Solues e Servios - CBSS arising from the provision of transportation and meal tickets card capture and processing services. Receivables from electronic payment services provided by subsidiaries M4 Produtos and Multidisplay through cell phones and sale of phone credits with credit cards. Refer substantially to receivables from disputes from credit card holders. Chargeback losses for the six month period ended June 30, 2013 total R$ 1,058 (R$373 as of June 30, 2012) . Additionally, the expense of losses chargeback for quarter ended June 30, 2013 is R$ 538 (R$ 345 for de quarter ended June 30, 2012).
(b)
(c)
(d)
(e) (f) (g)
33
The aging of trade accounts receivable is as follows:

Company (BR GAAP) 06/30/2013 Current Up to 45 days past-due Total 6,717,784 22,157 6,739,941 12/31/2012 5,564,301 22,469 5,586,770 Consolidated (IFRS and BR GAAP) 06/30/2013 7,089,501 22,157 7,111,658 12/31/2012 5,842,437 22,469 5,864,906
Deferred income tax and social contribution

Broken down as follows:
Company (BR GAAP) 06/30/2013 Deferred income tax and social contribution assets (a) Deferred income tax and social contribution liabilities (b) 475,400 12/31/2012 439,699 Consolidated (IFRS and BR GAAP) 06/30/2013 490,871 12/31/2012 456,416
324,331
307,717
Deferred income tax and social contribution arise from temporary differences mainly due to temporarily nondeductible provisions and are recorded in noncurrent assets. Deferred income tax and social contribution reflect the tax effects attributable to temporary differences between the tax base of assets and liabilities and the related carrying amount. Reported amounts are monthly reviewed. (a) Deferred income tax and social contribution are as follows:
Company (BR GAAP) 06/30/2013 Temporary differences: Provision for risks Accrual for sundry expenses Discount to present value of prepayment of receivables Allowance for losses on POS equipment Effect on allocation of subsidiary Multidisplay acquisition price Total 12/31/2012 Consolidated (IFRS and BR GAAP) 06/30/2013 12/31/2012
304,602 118,235 53,102 1,314 (1,853) 475,400
274,978 121,026 44,750 1,096 (2,151) 439,699
316,165 120,290 53,102 1,314 490,871
283,766 126,804 44,750 1,096 456,416
34
(b)
Breakdown of deferred income tax liabilities recognized by foreign companies

Consolidated (IFRS and BR GAAP) 06/30/2013 Temporary differences: Fair value of Me-Ss intangibles, acquired in 2012 Other temporary differences Total 12/31/2012
319,123 5,208 324,331
301,735 5,982 307,717
Investments
Company (BR GAAP) 06/30/2013 Subsidiaries Joint ventures Total 751,202 46,599 797,801 12/31/2012 695,064 42,977 738,041 Consolidated (IFRS and BR GAAP) 06/30/2013 46,599 46,599 12/31/2012 42,977 42,977
The primary information about investment amounts and equity income recorded in the Financial Statements of the Parent Company for subsidiaries, indirect subsidiaries and joint ventures entities are shown in the table below.
Adjusted equity (shareholders deficit) 06/30/2013 Subsidiaries: Servinet Servrede (e) Multidisplay (e) CieloPar (d) Braspag (d) Cielo USA Subsidiaries Total Jointly controlled entities: Orizon (a) Paggo (b) Jointly controlled entities Total Total 12/31/2012 Profit (loss) for the semester 06/30/2013 06/30/2012 Equity interest - % 06/30/2013 12/31/2012 Equity in investees for the six month period 06/30/2013 06/30/2012 Investments 06/30/2013 12/31/2012
19,542 48,780 20,082 687,139
17,593 50,858 18,243 633,748
1,950 5,923 1,839 (353)
1,871 (4,086) (1,782) -
99.99 50.10 99.99 100.00
99.99 50.10 99.99 100.00
1,950 2,967 1,839 (353) 6,403
1,871 (4,086) (1,782) (3,997)
19,542 24,439 20,082 687,139 751,202
17,593 25,480 18,243 633,748 695,064
127,815 277
120,699 (1,138)
7,117 (7,586)
9,439 -
40.95 50.00
40.95 50.00
2,914 (3,793) (879) 5,524
3,865 3,865 (132)
46,460 139 46,599 797,801
43,546 (569) 42,977 738,041
35
The primary information about investment amounts and equity income recorded in the Financial Statements of the parent company for jointly-controlled entities are shown in the table below.
Adjusted equity (shareholders deficit) 06/30/2013 Jointly controlled entities: Orizon (a) Paggo (b) (c) Total 12/31/2012 Profit (loss) for the semester 06/30/2013 06/30/2012 Equity interest - % 06/30/2013 12/31/2012 Equity in investees for the six month period 06/30/2013 06/30/2012 Investments 06/30/2013 12/31/2012
127,815 277
120,699 (1,138)
7,117 (7,586)
9,439 (7,971)
40.95 50.00
40.95 50.00
2,914 (3,793) (879)
3,865 (3,985) (120)
46,460 139 46,599
43,546 (569) 42,977
Key Financial Information concerning the indirect subsidiaries and jointly controlled entities.
Profit (loss) for the six month period ended 06/30/2013 2,002 (551) (64) 5,130 26,037 06/30/2012 634 2,976 5,713 4,997 (7,971) 2,346 -
Equity 06/30/2013 Prevsade Precisa Guilher Multidisplay (e) M4 Produtos Paggo (b) (c) Braspag (d) Me-S 5,057 14,606 87 13,279 237,792 12/31/2012 3,055 15,157 14,549 187,069
Equity interest - % 06/30/2013 40.95 40.95 40.95 50.10 100.00 12/31/2012 40.95 40.95 50.10 100.00
(a)
The amount of R$5,880 is not reflected in the investment because it refers to the unrealized gain on capital contribution with goodwill, initially reflected in CBGS Ltda. and transferred to the indirect subsidiary CBGS as a result of the merger. In November 2009, CBGS was merged into subsidiary Orizon. As described in note 1, on September 3, 2012, the capital reduction of CieloPar was approved and the interest held by CieloPar in Paggo started to be directly held by the Company. The investment recognized by Cielo considers the adjustments to the opening balance sheet of subsidiary Paggo arising from the adoption of the purchase price allocation procedures, as prescribed by CPC 15 - Business Combinations, mainly represented by the provision for losses on software platforms, as described in note 9. As described in note 1, on December 18, 2012, the merger of CieloPar with and into Braspag was approved and the interest held by CieloPar in Braspag started to be directly held by the Company. As described in note 1, on December 18, 2012, the merger of Servrede with and into Multidisplay was approved and the interest held by Servrede in Multidisplay started to be directly held by the Company. The consolidation of the interim financial information of direct subsidiaries Multidisplay, Braspag and indirect subsidiaries M4 Produtos and Me-S (acquired on August 31, 2012) was based on the interim financial information for the quarter ended May 31, 2013 to calculate the
(b) (c)
(d)
(e)
36
investments as of June 30, 2013. Accordingly, the equity in investees refers to the six month period ended May 31, 2013. Changes in investments for the six month periods ended June 30, 2013 and 2012 are as follows:
Company (BR GAAP) Consolidated (IFRS and BR GAAP)
Balance as of December 31, 2011 Capital increase in controlled entities CieloPar Capital increase in jointly-controlled entities Paggo Dividends receivable from direct subsidiaries - Servrede Equity in investees Balance as of June 30, 2012 Balance as of December 31, 2012 Equity in investees Capital increase in jointly-controlled entities Paggo Dividends receivable from direct subsidiaries Multidisplay Exchange differences on foreign investments Balance as of June 30, 2013
176,060 3,500 (1,800) (132) 177,628 738,041 5,524 4,501 (4,009) 53,744 797,801
39,691 2,100 (120) 41,671 42,977 (879) 4,501 46,599
Property and equipment

Company (BR GAAP) 06/30/2013 Annual depreciation rate - % POS equipment (*) Data processing equipment Machinery and equipment Facilities Furniture and fixtures Vehicles Total 33 20 10 10 10 20 Accumulated depreciation 12/31/2012
Cost
Net
Net
1,176,707 51,180 41,056 14,824 6,770 2,753 1,293,290
(712,569) (29,507) (39,968) (8,128) (3,503) (1,385) (795,060)
464,138 21,673 1,088 6,696 3,267 1,368 498,230
452,618 21,864 1,427 5,470 3,545 1,377 486,301
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Consolidated (IFRS and BR GAAP) 06/30/2012 Annual depreciation rate - % POS equipment (*) Data processing equipment Machinery and equipment Facilities Furniture and fixtures Vehicles Total 33 20 10 10 10 20 Accumulated depreciation 12/31/2012
Cost
Net
Net
1,177,414 63,867 48,611 30,119 10,348 2,753 1,333,112
(713,015) (38,029) (46,000) (14,795) (5,361) (1,385) (818,585)
464,399 25,838 2,611 15,324 4,987 1,368 514,527
452,749 25,909 1,903 11,918 5,350 1,377 499,206
(*)
As of June 30, 2013 and December 31, 2012, provisions for losses on POS equipment were recorded in the amounts of R$3,863 and R$3,223, respectively, as a reduction of the related under line item. Changes in property and equipment for the six month periods ended June 30, 2013 and 2012 are as follows:
Company (BR GAAP) Writeoffs (10,922) (8) (10,930)
12/31/2012 POS equipment Data processing equipment Machinery and equipment Facilities Furniture and fixtures Vehicles Total 452,617 21,864 1,427 5,470 3,545 1,378 486,301
Additions 161,076 3,097 1,635 42 246 166,096
Depreciation (138,633) (3,288) (339) (409) (312) (256) (143,237)
06/30/2013 464,138 21,673 1,088 6,696 3,267 1,368 498,230
Consolidated (IFRS and BR GAAP) Foreign exchange changes 06/30/2013 13 100 161 14 288 464,399 25,838 2,611 15,324 4,987 1,368 514,527
Additions 161,118 3,981 1,231 4,348 144 246 171,068
Writeoffs (10,952) (269) (9) (11,230)
Depreciation (138,529) (3,883) (684) (942) (512) (255) (144,805)
38
Company (BR GAAP) Writeoffs (10,203) (2) (10,205)
12/31/2011 Additions POS equipment Data processing equipment Machinery and equipment Facilities Furniture and fixtures Vehicles Total 476,102 18,487 2,450 6,027 3,830 1,363 508,259 96,298 2,637 90 33 10 300 99,368
Depreciation (131,540) (2,623) (657) (363) (296) (229) (135,708)
06/30/2012 430,657 18,501 1,883 5,697 3,542 1,434 461,714
Consolidated (IFRS and BR GAAP) Additions/ transfers 96,299 3,109 93 425 39 300 100,265
Write-offs (10,203) (40) (16) (10,259)
Depreciation (131,541) (3,011) (696) (889) (435) (229) (136,801)
06/30/2012 430,657 20,882 2,228 12,067 5,300 1,434 472,568
As of June 30, 2013, there are no net amounts related to finance lease operations. As of June 30, 2013 and December 31, 2012, the Company entered into loan agreements with the National Bank for Economic and Social Development (BNDES - Finame) to acquire new POS equipment, as described in note 13.(a).
Goodwill on acquisition of investments

The breakdown of goodwill as of June 30, 2013 and December 31, 2012 is as follows:
Company (BR GAAP) 06/30/2013 Multidisplay: Goodwill on acquisition of subsidiary (a) Reclassification of the tax benefit from the goodwill merged into Multidisplay(b) Braspag: Goodwill on acquisition of subsidiary (a) Reclassification of the tax benefit from the goodwill merged into Braspag(b) Health Project (Orizon) Paggo Me-S Total 20,690 12/31/2012 20,690 Consolidated (IFRS and BR GAAP) 06/30/2013 20,690 10,658 12/31/2012 20,690 10,658
25,966 10,143 56,799
25,966 10,143 30,479 87,278
25,966 13,377 10,143 878,534 959,368
25,966 13,377 10,143 30,479 824,803 936,116
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(a)
In calculating equity in subsidiaries Servrede and CieloPar in 2012, the effects of PMIPL provisions, in the amounts of R$20,690 and R$25,966, respectively, were eliminated, since the effects related to the goodwill originally reported therein have been reflected in the Company, as established by CVM Instructions 319/99 and 349/01, considering that the mergers carried out in 2012 did not change the economic substance of that goodwill. As there are evidences of actual economic benefits to be earned as a result of the future decrease in taxes due to the utilization of the goodwill tax benefit by the merging companies Multidisplay and Braspag, deferred income tax and social contribution assets were recognized against the equity line item referred to above in subsidiaries Servrede and CieloPar, amounting to R$14,343 and R$12,597, respectively. In the consolidated interim financial information, tax credits were reclassified from line item Deferred income tax and social contribution to underline item Goodwill. Changes in goodwill during the six month periods ended June 30, 2013 and 2012 are as follows:
Company (BR GAAP) Balance as of December 31, 2011 Acquisition adjustments Balance as of June 30, 2012 Balance as of December 31, 2012 Acquisition adjustments (a) Impairment of goodwill Exchange variation on intangible abroad Balance as of June 30, 2013 10,143 10,143 87,278 -(30,479) 56,799 Consolidated (IFRS and BR GAAP) 127,813 (600) 127,213 936,116 (14,411) (30,479) 68,142 959,368
(b)
(a)
Refers to adjustments in the purchase price of the share, as follows: In November 2012, the Me-S was assessed by Washington State in relation to differences of interpretation regarding the calculation basis for calculating taxes on income earned in the period 2006-2009. The amount of R $ 8,189, which was paid by the Me-S and was returned by sellers Cielo USA in January 2013 being the aforementioned amount recorded as a reduction of goodwill. In December 2012, the Me-S identified tax credits in the amount of R$ 6,222 in the opening balance sheet dated as of August 31, 2012 by increasing its equity at that date. In the same manner, Cielo USA recorded this amount as a reduction of goodwill, and consequently, an increase in investment at the acquisition date.
Health Project
In January, 2008, CBGS subscribed 693,480 new common shares without par value in favor of its parent CBGS Ltda., for R$139,045, which represented its fair value as of that date. As part of the payment, CBGS Ltda. delivered all the shares in Polimed Ltda. and Dativa Conectividade em Sade Ltda. (Dativa) for R$71,691, transferring the goodwill on the acquisition of these subsidiaries in the amounts of R$47,145 and R$9,108, respectively, net of
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amortization incurred through the transaction date. Additionally, as a result of the portion paid in cash, CBGS Ltda. generated goodwill of R$16,764, net of the allowance for losses and amortization incurred through December 31, 2008. The goodwill generated in CBGS Ltda.s capital subscription process is as follows:
Goodwill Goodwill recorded in CBGS Ltda. arising from the acquisition of 40.95% interest in CBGS Allowance for losses on goodwill Interest % Net
55,880 (39,116) 16,764
99.99 99.99
55,880 (39,116) 16,764
Goodwill recorded in joint venture CBGS: Orizon Dativa Total Effect of tax benefit of goodwill incorporated by Orizon
47,145 9,108 73,017
40.95 40.95
19,306 3,731 39,801 (13,532)
Total
26.269
Acquisition of control - Multidisplay

In August 2010, the Company acquired, through its direct subsidiary Servrede, 50.1% of the control of Multidisplay and its wholly-owned subsidiary M4 Produtos, which collectively form M4U, pioneering Brazilian company in and leader of the technology platform development segment both for loading cell phones and mobile payments. Under CPC 15 - Business Combinations, the goodwill was measured as the amount by which the sum up of: (a) the consideration transferred as payment for the control of the acquire; and (b) the amount of the no controlling interest on the acquire exceeded the net value (on the acquisition date) of the identifiable assets acquired. The price for the acquisition of 50.1% of the capital of M4U totaled R$50,650, of which R$25,600 was paid on the acquisition date and the remaining balance, recorded as Other payables in noncurrent liabilities, will be paid in 37 monthly installments, beginning on the transaction date, contingent to the attainment of certain financial performance goals, set out in the Share Purchase and Sale Agreement. The amount of the investment recorded by Servrede includes goodwill on acquisition of the subsidiary in the amount of R$31,348, generated as follows: Net assets acquired Fair value of assets acquired (*) Fair value of net assets acquired (-) Total consideration paid Goodwill initially registered 2,300 17,002 19,302 50,650 31,348
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Due to the commencement of the restructuring process mentioned in Note 1, the tax benefit from the goodwill for R$10,658 was incorporated by the subsidiary Multidisplay. Therefore, the remaining value of Goodwill in the amount of R$ 20,690 was reconstituted in the Company as set out by CVM Rule No. 319/99 and 349/01. (*) The fair value of the service agreements, software platform and noncompeting clauses (identifiable assets acquired) of M4U in August 2010 was recognized based on the appraisal report prepared by independent appraisers.
Acquisition of equity interests - Paggo

In September 2010, the Company, Tele Norte Leste Participaes S.A. (TNL) and Paggo Acquirer Gesto de Meios de Pagamento Ltda. (Paggo Acquirer, a TNL subsidiary) entered into an Investment Agreement to govern the interests of Paggo Acquirer and the Company (through its subsidiary CieloPar) in a new company called Paggo Solues e Meios de Pagamento S.A. Accordingly, the Company sought to improve its range of products, aligned with its strategy adopted for the mobile payment sector. Paggo Acquirer and the Company hold 50% each of the capital of Paggo. On February 28, 2011, the interest in Paggo was acquired for R$47,000, whose amount was fully paid on the acquisition date. The amount of the investment recorded by Cielo includes goodwill on acquisition of shares in the amount of R$46,979, generated as follows:
Net assets acquired Fair value of assets acquired (*) 52,224 (52,203) 21 47,000 46,979
Total amount paid for the assets acquired Goodwill
(*)
Corresponds basically to the provision for loss of software licenses recognized in jointly-controlled entity Paggo in the balance sheet as of February 28, 2011, date of recognition of the effects of allocation of goodwill on the acquisition of joint control. The adjustments related to the allocation of the purchase price were recognized retrospectively on the amounts recorded upon acquisition, as if the business combination had been concluded on that date. Based on the appraisal report on the allocation of goodwill arising from the acquisition of Paggo, prepared by independent appraisers, and according to CPC 15 - Business Combinations, the Companys Management believes that the amount paid is basically reflected in expected future earnings, i.e., goodwill. Acquisition of control - Braspag In May, 2011, the Company acquired, through its direct subsidiary CieloPar, 100% of the shares of Braspag, a leading payment processing company in the Brazilian electronic payment industry. All the shares of Braspag were acquired for R$40,000. The amount of the investment recorded by CieloPar included goodwill on acquisition of shares in the amount of R$39,343, generated as follows:
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Net assets acquired Fair value of net liabilities acquired (*) Fair value of net assets acquired Acquisition price Goodwill
1,624 (967) 657 40,000 39,343
Due to the commencement of the restructuring process mentioned in Note 1, the tax benefit from the goodwill for R $13,377 was incorporated by the subsidiary Braspag. Therefore, the remaining value of Goodwill in the amount of R $ 25,966 was reconstituted in the Company as set out by CVM in Rule No. 319/99 and 349/01. (*) According to the appraisal report used to allocate the purchase price of Braspag, prepared by independent appraisers taking into consideration the characteristics of the acquire, the intangible assets identified were the software platform and the customer portfolio totaling R$4,638, net of the provision for tax and social security contingencies of R$5,605.
Acquisition of control - Me-S

In August 2012, the Company completed the acquisition, through its direct subsidiary Cielo USA, of 100% of the shares of Me-S, a US company headquartered in Redwood City, California. The interim financial information of Me-S has been prepared in accordance with accounting practices adopted in the United States of America (US GAAP) in US dollars. On the acquisition date, there were no material adjustments to align the US GAAP to the accounting practices adopted in Brazil and the IFRSs. Cielo USA allocated the fair value of Me-Ss assets acquired and liabilities assumed based on a purchase price allocation study (PPA), prepared by a specialized, independent firm; accordingly, the balance sheet in Brazilian reais as of August 31, 2012, considered as the opening balance sheet, is as follows:
Book value Net assets (liabilities) acquired: Cash and cash equivalents Other assets (a) Property and equipment Goodwill Intangible assets (b) Deferred income tax - liabilities on the fair value of intangible assets (c) Payables to merchants Other payables (d) Total Acquisition adjustments Fair value on acquisition date
93,500 22,194 1,949 67,709 107,734 (87,916) (25,072) 180,098
6,222 (67,709) 821,338 (304,254) (8,114) 447,483
93,500 28,416 1,949 929,072 (304,254) (87,916) (33,186) 627,581
(a)
On acquisition date, tax benefits amounting to R$6,222 was identified and recognized.
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(b)
Refers to the allocation of the following adjustments at fair value of the following intangible assets: (i) software platform of R$223,300; (ii) relationship with clients of R$512,778; (iii) noncompete agreements with sellers of client portfolios of R$71,862; and (iv) other intangible assets of R$13,398, totaling R$821,338. For acquisition accounting purposes and in accordance with the US tax law, the fair value of the acquisition of the investments allocated to intangible assets is not deductible for US income tax calculation purposes. Accordingly, a provision for deferred income tax was recognized. These deferred amounts are amortized in profit or loss proportionally to the amortization of intangible assets in the period. On acquisition date, a provision for probable losses on tax contingencies amounting to R$8,114 was identified and recognized. The amount of the investment recorded by Cielo USA includes goodwill on acquisition of shares in the amount of R$818,875, generated as follows:
Net assets acquired Fair value of assets acquired and liabilities assumed Fair value of net assets acquired Purchase price: Acquisition of control - Me-S Cash and cash equivalents acquired Goodwill 180,098 447,483 627,581 1,365,256 81,200 818,875
(c)
(d)
10
Other intangible assets

Company (BR GAAP) 06/30/2013 Annual amortization rate - % Software Project development Relationship with customers Noncompete agreement Service agreement Total 20 20 10 7.5 20 Accumulated Cost 121,165 25,044 953 22,398 9,114 178,674 amortization (90,775) (12,074) (564) (17,816) (2,403) (123,632) Net 30,390 12,970 389 4,582 6,711 55,042 Net 35,042 14,473 412 7,006 6,957 63,890 12/31/2012
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Consolidated (IFRS and BR GAAP) 06/30/2013 Annual amortization rate % Software (a) Project development (b) Noncompete agreement (c) Service agreement (d) Relationship with customers (e) Trademarks (f) Total 6.66 - 20 20 7.5 - 50 4 - 20 4 - 20 10 Accumulated Cost 404,626 160,275 134,255 27,838 558,901 6,424 1,292,319 amortization (117,735) (87,819) (27,574) (789) (18,551) (495) (252,963) Net 286,891 72,456 106,681 27,049 540,350 5,929 1,039,356 Net 282,407 73,627 105,661 27,028 511,489 5,776 1,005,988 12/31/2012
(a)
Software - refers to software licenses acquired from third parties and used to provide services relating to information processing and business transactions with customers. Additionally, in 2012, when 100% of Me-Ss capital stock was acquired, the adjustment to fair value of the software platform was recognized in Cielo USA in the amount of R$223,300 (equivalent to US$110,000 thousand). The independent appraisal firm engaged to issue the appraisal report measured the software platforms fair value using the average of the values obtained from applying the approaches Relief-from-Royalty (at a 16% royalty fee) and Cost Approach - Thirdparty Cost Estimates. The useful life defined for this software platform is 15 years. As of June 30, 2013 and December 31, 2012, the provision of losses for discontinued software of R$2,000 is recognized as a reduction of the balance of the respective line item.
(b)
Project development - refers to expenses on the development of new products or services designed to increase the Companys and its subsidiaries invoicing and revenues. There are other intangible generated from the allocation of the price paid for the acquisition of control of M4U, Braspag and Me-S, in August 2010, May 2011 and August 2012, respectively. These intangibles were recorded based on appraisal reports prepared as of those dates by independent appraisers. The criteria used to measure the value of these intangible assets are described as follows.
(c)
Noncompete agreement: Multidisplay e M4 Produtos - the amount of the noncompete agreement (With and Without) was calculated under the Income Approach, by using a discount rate of 17.5% per year, perpetuity of 4% per year and estimated useful life of 89 months. Me-S - Me-S entered into a contract with Synovus Financial Corporation, under which no competition shall exist in relation to the portfolio acquired from Columbus Bank and Trust Company (CB&T) and any new customers acquired through CB&T as a result of the Recommendation Agreement. The fair value of this agreement was estimated using the With and Without approach, while its useful life was defined to be the expiration date of the agreement.
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Additionally, Cielo USA entered into a noncompete agreement with approximately 10 employees, maturing 18 months after the end of the transaction. The fair value of this agreement was estimated based on the With and Without approach, and its useful life was defined to be the expiration date of the agreement. (d) Service agreements: Multidisplay e M4 Produtos - the four service agreements with telecommunication operators were measured based on the discounted cash flow of each agreement, by using a discount rate of 16.5% per year, during the residual life of each agreement, of approximately 53 months. Me-S - when Me-S acquired CB&Ts customer portfolio, it entered into an agreement under which it would have preference in referring new customers. The fair value of this agreement was estimated based on the Excess Earnings approach, and its useful life was defined to be the expiration date of the agreement, that is, 2020. Relationship with customers: Braspag - the principal component of the portfolio of intangible assets is the customer portfolio, which was valued under the Income Approach, taking into consideration the balance of active customers and the respective churn rate, using an estimated useful life of 120 months. Me-S - Me-Ss customer portfolio was classified under three main groups: e-commerce, bank customer and B2B/Others. Each portfolio was valued separately under the Excess Earnings approach and taking into consideration each portfolios specific and individual features. A 10% per year discount rate was used for e-commerce and bank customer portfolios and 11% for B2B/Others. The estimated useful life was based on the years in which each portfolio reaches approximately 80% and 90% of the accumulated amount of the discounted cash flow. An interval between the lowest and the highest value obtained was adopted. Trademarks - valued under the Relief-from-Royalty approach, assuming a 0.3% royalty fee, based on parameters obtained from the Royalty Source Intellectual Property Database, and a discount rate of 10%. Changes in intangible assets for the six month periods ended June 30, 2013 and 2012 are as follows:
Company (BR GAAP) 12/31/2012 Software Project development Relationship with customers Noncompete agreement Service agreements Total 35,042 14,473 412 7,006 6,957 63,890 Additions Amortization 659 659 (5,311) (1,503) (23) (2,424) (246) (9,507) 06/30/2013 30,390 12,970 389 4,582 6,711 55,042
(e)
(f)
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Consolidated (IFRS and BR GAAP) Foreign exchange variation 19,081 4,466 8,776 575 42,058 500 75,456
12/31/2012 Software Project development Noncompete agreement Service agreements Relationship with customers Trademarks Total 282,407 73,627 105,661 27,028 511,489 5,776 1,005,988
Addictions 5,314 1,481 140 6,935
Write-offs (311) (311)
Amortizations (19,911) (6,807) (7,896) (554) (13,197) (347) (48,712)
06/30/2013 286,891 72,456 106,681 27,049 540,350 5,929 1,039,356
Company (BR GAAP) 12/31/2011 Software Project development Total 31,768 17,479 49,247 Additions 3,281 3,281 Amortization (5,713) (1,503) (7,216) 06/30/2013 29,336 15,976 45,312
Consolidated (IFRS and BR GAAP) 12/31/2011 Software Project development Noncompete agreement Service agreements Relationship with customers Total 40,849 17,479 12,658 14,674 1,357 87,017 Additions 5,118 5,118 Write-offs (5) (5) Amortizations (6,645) (1,387) (1,050) (2,090) (72) (11,244) 06/30/2012 39,317 16,092 11,608 12,584 1,285 80,886
Expenses on the amortization of intangible assets were recorded in line items General and administrative expenses and Cost of sales in the statement of income.
11
Transactions Pending Transfer

The amounts due by credit cardholders through the card-issuing banks and the amounts to be transferred to merchants are recorded in memorandum accounts. As of June 30, 2013 and December 31, 2012, balances corresponding transfers are:
Company (BR GAAP) and Consolidated (IFRS and BR GAAP) 06/30/2013 Payables to merchants Advances from issuing banks Receivables from issuing banks Total transactions pending transfer 49,708,747 2,637,248 (48,779,721) 3,566,274 12/31/2012 48,821,639 1,410,133 (47,551,762) 2,680,010
In addition to the provision of services consisting of the transfer of credit and debit card transaction amounts between the card-issuing banks and the merchants, the Company also
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guarantees accredited merchants that they will unconditionally receive the amounts of transactions paid using credit cards. As described in note 24.c), the Company adopts a strategy to mitigate card-issuing banks credit risk itself against the risk of default by such financial institutions. Based on the insignificant historical amount of Companys losses due to default from card-issuing banks and the current credit risks of these financial institutions, the Company estimates that the fair value of the guarantees provided to merchants is immaterial and, therefore, is not recognized as a liability.
12
Payables to merchants
Company (BR GAAP) 06/30/2013 Transactions pending transfer (a) Payables to merchants (b) Merchant deposits (c) Total 3,566,274 3,566,274 12/31/2012 2,680,010 2,680,010 Consolidated (IFRS and BR GAAP) 06/30/2013 3,566,274 331,178 91,194 3,988,646 12/31/2012 2,680,010 216,026 78,004 2,974,040
(a)
Transactions pending transfer - Transactions pending transfer correspond to the difference between the amounts received from cardholders relating to transactions made by cardholders and the amounts to be transferred to merchants. In general, the settlement term for credit card issuers with the Company is 28 days, while the Companys average settlement term with merchants is 30 days. Therefore, the balance payable as of June 30, 2013 and December 31, 2012 refers to a float of approximately two days. Payables to merchants - Represented by amounts due to merchants by Me-S related to transactions captured and processed until the balance sheet dates. Such amounts are settled on the day following the date on which transactions are captured. Merchant deposits - Me-S maintains escrow deposits from clients in order to hedge against the potential risk of complaints from credit card holders due to fraud in the transaction or bankruptcy of merchant.
(b)
(c)
13
Borrowings and financing

Company (BR GAAP) 06/30/2013 Finame (a) Long-term financing - ten-year bonds (b) Total Current Noncurrent Total 389,349 1,034,280 1,423,629 217,271 1,206,358 1,423,629 12/31/2012 337,437 952,830 1,290,267 160,606 1,129,661 1,290,267 Consolidated (IFRS and BR GAAP) 06/30/2013 389,349 1,926,539 2,315,888 220,650 2,095,238 2,315,888 12/31/2012 337,437 1,776,701 2,114,138 165,040 1,949,098 2,114,138
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(a)
Finame
The weighted average rate of the financial charges is 6.37% per year as of June 30, 2013 (7.77% per year as of December 31, 2012). The Company is the beneficiary of a credit facility with BNDES relating to Finame on lending transactions, i.e., a loan granted by BNDES to finance the acquisition of new machinery and equipment manufactured in Brazil. Such transfer occurs through the extension of credit to the Company, generating rights received by the accredited financial institution as a financial agent, in this case, Bank of Brazil SA and Bank Safra SA, who contract with the Company such financing transactions. The contracts are guaranteed the transfer of fiduciary ownership of property acquired through Finame.
(b)
Long-term financing - ten-year bonds

In November 2012, the Company and its subsidiary Cielo USA completed a financial transaction whereby bonds were issued in the total amount of US$875 million, out of which US$470 million were issued by the Company and US$405 million were issued by Cielo USA. The amount raised by Cielo USA was used to pay the acquisition of control of Me-S. The proceeds raised by the Company were used to increase its working capital. The financing obtained is subject to an interest rate of 3.75% per year. Interests are paid on a semiannual basis and principal in November 2022. Costs directly associated with the issuance of these bonds (banks, auditors and legal fees) were recorded in liabilities and are being allocated to profit or loss over the term of the agreement, based on the amortized cost method. There are no financial covenants in connection with the financial transactions of issuance of bonds. Changes in borrowings and financing for the six month periods ended June 30, 2013 and 2012 are as follows:
Company (BR GAAP) Balance as of December 31, 2011 New borrowings Payment of principal Accrued interest and charges recognize Interest paid Balance as of June 30, 2012 Balance as of December 31, 2012 New borrowings Payment of principal Exchange rate changes (principal and interest) Accrued interest and charges recognized Interest paid Balance as of June 30, 2013 150,848 159,047 (200) 9,642 (8,120) 311,217 1,290,267 142,577 (90,463) 80,338 32,180 (31,270) 1,423,629 Consolidated (IFRS and BR GAAP) 150,848 159,047 (200) 9,642 (8,120) 311,217 2,114,138 142,577 (90,463) 149,521 46,677 (46,562) 2,315,888
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Borrowings and financing recorded in noncurrent liabilities

The borrowings and financing classified as noncurrent as of June 30, 2013 by maturity date is broken down as follows:
Company (BR GAAP) 143,670 29,142 2,994 1,030,552 1,206,358 Consolidated (IFRS and BR GAAP) 143,670 29,142 2,994 1,919,432 2,095,238
Year of maturity 2014 2015 2016 2022 Total
14
Trade accounts payable

Company (BR GAAP) 06/30/2013 Suppliers Accrual for sundry expenses Total 58,830 268,013 326,843 12/31/2012 81,654 268,579 350,233 Consolidated (IFRS and BR GAAP) 06/30/2013 117,002 268,013 385,015 12/31/2012 135,951 268,579 404,530
15
Taxes Payable
Company (BR GAAP) 06/30/2013 Income tax and social contribution, net of prepayments Tax on revenue (Cofins) Withholding income tax (IRRF) Service tax (ISS) Tax on revenue (PIS) Other taxes payable Total 12/31/2012 Consolidated (IFRS and BR GAAP) 06/30/2013 12/31/2012
232,394 16,928 15,218 5,740 6,574 3,500 280,354
449,544 15,134 14,866 6,343 6,223 2,674 494,784
232,388 17,680 15,581 7,164 6,860 4,621 284,294
455,478 15,951 15,773 7,512 6,523 2,758 503,995
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16
Other payables
Company (BR GAAP) 06/30/2013 Current liabilities: Accrual for sundry expenses Accrued vacation and related charges Profit-sharing Payables on the acquisition of subsidiaries (*) Other payables Total Noncurrent liabilities: Other payables Total 12/31/2012 Consolidated (IFRS and BR GAAP) 06/30/2013 12/31/2012
49,171 20,858 24,273 32,684 126,986
37,658 18,297 41,594 31,441 128,990
49,343 29,296 32,165 32,684 37,935 181,423
38,150 27,306 57,866 31,441 25,948 180,711
4,304 4,304
6,857 6,857
10,115 10,115
12,616 12,616
(*)
Remaining balance payable for the acquisition of M4U, contingent to the attainment of certain financial performance goals, as described in note 9.
17
a.
Provision for risks and escrow deposits

Provision for risks
The Company and its subsidiaries are parties to lawsuits and administrative proceedings before courts and governmental bodies, arising in the normal course of business and involving tax, labor, civil and other matters. Management, based on information and assessments made by its legal counsel, through the review of pending civil and labor lawsuits and, based on past experience on the amounts claimed in lawsuits, has recognized a provision in an amount considered sufficient to cover probable losses on pending proceedings, as follows:
Company (BR GAAP) Write-offs/ reversals (ii) (599) (6,016) (3,834) (10,449) Inflation adjustment 386 1,081 87 1,554
12/31/2012 Tax Civil Labor Total 751,873 20,886 46,362 819,121
Additions (i) 88,804 6,421 13,912 109,137
Payments (2,097) (291) (2,388)
06/30/2013 840,464 20,275 56,236 916,975
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Consolidated (IFRS and BR GAAP) Write-offs/ reversals (ii) (599) (6,017) (3,838) (10,454) Inflation adjustment 404 1,083 97 1,584
Additions (i) 88,804 6,421 16,381 111,606
Payments (2,097) (941) (3,038)
06/30/2013 863,047 21,984 67,693 952,724
Company (BR GAAP) Write-offs/ reversals (ii) (3,156) (4,799) (7,955) Inflation adjustment 275 556 83 914
Additions (i) 66,381 5,886 20,869 93,136
Payments (2,314) (2,314)
06/30/2012 669,434 11,698 43,114 724,246
Consolidated (IFRS and BR GAAP) Write-offs/ reversals (ii) (3,401) (7,813) (11,214) Inflation adjustment 299 564 85 948
Additions (i) 66,381 5,886 24,083 96,350
Payments (2,314) (30) (2,344)
06/30/2012 691,973 17,059 52,588 761,620
(i)
Correspond mainly to the increase in the provision for tax risks for the six month periods ended June 30, 2013 and 2012, relating to taxes with suspended payment, recorded as a balancing item to Taxes on services, and other additions to the provision for civil and labor risks, represented by new lawsuits and changes in the assessment of the likelihood of losses made by the legal counsel, which were recorded as a balancing item to Other operating expenses, net, in the statement of income. Basically represented by the reversal of the provision for civil and labor risks due to prescription of the allowed time to start legal proceedings, settlement of lawsuits or change in the risk of loss as assessed by the Companys and its subsidiaries legal counsel.
(ii)
Civil lawsuits
Refer basically to collection of transactions made through the Companys system that were not transferred to merchants in view of noncompliance with clauses of the affiliation contract, and compensation for losses caused by transactions not transferred at that time. As of June 30, 2013, the provision for probable losses on civil lawsuits totals R$20,275 (Company), and R$21,984 (Consolidated), and the escrow deposit balance is R$ 5,083 (Company) and R$ 5,101 (Consolidated). Additionally, as of June 30, 2013, the Company is a party to public civil lawsuits and civil investigations, most of them filed by the Public Prosecution Office or professional
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organizations, whose intention is to defend collective interests (such as consumers and workers rights). Judicial decisions may grant rights to groups of people (even without their consent). In many situations, the group in availing a favorable outcome will only be defined after the final decision.
Labor lawsuits
Refers to labor lawsuits that, as of June 30, 2013, include 293 claims against Cielo and 69 against Servinet, totaling 362 claims, out of which 91 had been filed by former employees. The remaining labor lawsuits, totaling 271, were filed by subcontractors, some of whom claiming the recognition of an employment relationship. The risk of loss on labor claims, when these are started, is assessed as possible. Only after the court decision is issued, the lawsuits are reclassified to probable or remote loss, depending on the decision and based on the history of losses on similar lawsuits. In general, labor lawsuits are related to salary equalization, overtime, annual bonus, rights guaranteed by agreements between the employer and the labor union, recognition of employment relationship, tenure after occupational disease, and pain and suffering. As of June 30, 2013, the provision for probable losses on labor claims amounts to R$ 56,236 (Company) and R$67,693 (consolidated), and the escrow deposit balance is R$ 4,124 (Company) and R$ 6,335 (consolidated).
Tax lawsuits
Refer to differences in interpretation by tax authorities, especially regarding: Noncumulative Cofins - in February 2004, the Company and its subsidiary Servinet filed an injunction to avoid payment of Cofins according to Law 10833/03, which requires the noncumulative calculation at the rate of 7.6%, and began to make escrow deposits for amounts determined monthly. As a result, the difference between the Cofins due calculated based on the rate established by the cumulative and noncumulative calculation method is being recorded as provision for risks since then. Escrow deposits have been made for unpaid Cofins amounts. In November 2011, Servinet withdrew the lawsuit for joining the installment payment program introduced by Law 11941/09 and is currently awaiting for the definition of the amounts to be converted into Federal Governments funds and the amounts to be calculated by the company. Cielos lawsuit is halted in the Federal Regional Court of the 3rd Region/SP due to the recognition of the matter by the Federal Supreme Court in the court records of the Extraordinary Appeal, which is pending judgment. As of June 30, 2013, the provision for risks totals R$806,054 (Company) and R$826,609 (Consolidated), and the escrow deposit balance is R$792,690 (Company) and R$813,886 (Consolidated). Amazon Investment Fund (FINAM) - in 2007, the Company received a tax assessment notice for calendar year 2002, fiscal year 2003. The Federal Revenue Service alleges that the Request for Review of Tax Incentive Issue Order (PERC) was not filed within the statutory deadline and, therefore, they do not recognize the portion of corporate income tax (IRPJ) related to FINAM. The administrative proceedings are pending inclusion in the trial docket for judgment of the voluntary appeal filed by the Company by the Administrative Board of Tax Appeals (CARF). As of June, 30, 2013, he balance of the provision recognized is R$13,940 (Company and Consolidated).
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Social contribution (CSLL) 2002 - in 2007, a tax assessment notice was filed against the Company to require the payment of CSLL (adjustment portion) for calendar year 2002, plus tax assessment fine (75%) and late payment interest, as well as separate fine (50%) on the estimated CSLL amounts not paid. Due to the maintenance of the tax assessment notice at the administrative level, in July 2011, the Company decided to challenge the amounts in the court. The tax credits were fully deposited in escrow accounts and is being challenged in the court through an annulment action filed in August 2011. Currently, the tax debt annulment action is pending decision. As of June, 30, 2013, the balance of the provision recognized is R$10,895 (Company and consolidated), and the escrow deposit amount is R$10,895 (Company and consolidated). Provisional Act 1212/95 - PIS/PASEP - in April 1997, the subsidiary Servinet was granted an injunction that exempted it from the payment of PIS based on billings. The Federal Government filed an appeal that was upheld by the court. On August 26, 2010, the subsidiary filed a debt expiration claim with the Third Region Finance Attorney of So Paulo. This Administrative Proceeding resulted in a Tax Execution Action, which is pending notification for filing of appeals. As of June, 30, 2013, the balance of the provision recognized is R$1,958 (Consolidated). Negative Balance of IRPJ of the year 2008 - In 2009, the Company offset the negative balance of income (IRPJ) for calendar year 2008 for tax debts owed in 2009 upon presentation of Settlement Statement (PER / DCOMP). In assessing the Settlement Statement in 2012, the Internal Revenue Service of Brazil did not approve the tax credit and, therefore, issued Order No. 022 405 395. In January 2013, the Company filed a Lawsuit for Annulment of Tax Debt in the Civil Court of the Judiciary Subsection of Osasco / SP, in order to demonstrate and prove the negative credit balance of the 2008 calendar year. The full amount of the tax credit is deposited in escrow. On June 30, 2013, the accrued balance for risks is R$ 7,045 and the value of the escrow deposit is R$ 7,045, for the parent Company and Consolidated entities. The Company and its subsidiaries are challenging other interpretations of the law by tax authorities and, therefore, as of June, 30, 2013, recognized provisions for risks in the amounts of R$2,530 (Company) and R$2,600 (Consolidated). To cover other lawsuits assessed by the legal counsel as possible loss, the Company and its subsidiaries maintains escrow deposits in the amount of R$14,969 (Company) and R$17,753 (Consolidated). The Companys and its subsidiaries Management, based on the opinion of their legal counsel, believes that the actual disbursement of the provision for risks will not occur before December 31, 2018. Additionally, as of June 30, 2013 and December 31, 2012, the Company and its subsidiaries are parties to tax, civil and labor lawsuits assessed by their legal counsel as possible likelihood of losses, for which no provision was recorded, as follows:
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Company (BR GAAP) 06/30/2013 Tax Civil Labor Total 87,537 115,505 33,761 236,803 12/31/2012 85,623 104,810 27,297 217,730
Consolidated (IFRS and BR GAAP) 06/30/2013 101,375 115,505 39,137 256,017 12/31/2012 98,850 104,810 32,057 235,717
b.
Escrow deposits
In the six month periods ended June 30, 2013 and 2012, the Company and its subsidiaries have escrow deposits related to the provision for tax, labor and civil risks, broken down as follows:
Company (BR GAAP) 12/31/2012 Tax Civil and labor Total 738,372 7,248 745,620 Addition 87,227 1,959 89,186 06/30/2013 825,599 9,207 834,806
Consolidated (IFRS and BR GAAP) 12/31/2012 Tax Civil and Labor Total 762,352 9,040 771,392 Addition 87,227 2,396 89,623 06/30/2013 849,579 11,436 861,015
Company (BR GAAP) 12/31/2011 Tax Civil and Labor Total 592,458 4,759 597,217 Addition 67,360 2,355 69,715 06/30/2012 659,818 7,114 666,932
Consolidated (IFRS and BR GAAP) 12/31/2011 Tax Civil and Labor Total 616,439 6,219 622,658 Addition Write-off 67,360 2,520 69,880 (54) (54) 06/30/2012 683,799 8,685 692,484
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18
a.
Equity
Capital social
Capital as of June 30, 2013 is represented by 786,115,469 fully subscribed and paid in (655,096,224 shares as of December 31, 2012). According to the minutes of the Annual General Meeting and Special Meeting held on April 26, 2013 approved the capital increase of the Company in the amount of R$ 500,000. For realization of the capital increase was partly used the balance from the budget reserve capital. As commented in note 19.a), the number of shares outstanding as of June 30, 2013 is 784,523,090 (654,368,446 shares as of December 31, 2012). Share capital can be increased by up to 2,400,000,000 additional common shares, regardless of any amendments to bylaws, at the discretion of the Board of Directors, which has the power to establish the share issue price, the terms and conditions for subscription and payment of shares up to the authorized capital limit. Except in the cases described below, shareholders will have the preemptive right to subscribe for shares issued in a capital increase, which shall be exercised as from the publication of the minutes of the Board of Directors meeting that approved the capital increase. Within the authorized capital limit, the Company may grant stock option or subscription to Management members and employees. The Board of Directors may exclude the preemptive right or reduce the term for exercising such right in the issuance of shares, debentures convertible into shares or subscription bonus whose placement shall be made upon trade in stock exchanges, public subscription or upon exchange for shares, within the authorized capital limit. The Board of Directors may also resolve on any shares that remained unsubscribed in the capital increase during the term for exercising the preemptive right and establish, prior to their sale on stock exchanges to the benefit of the Company, the apportionment, proportional to the amounts subscribed, among the shareholders that have indicated, in the subscription bulletin or list, interest in subscribing possible remaining shares.
b.
Capital Reserve
Represents share-based payment costs and goodwill on the subscription of shares related to capital contributions by shareholders exceeding the amount allocated to capital formation. The capital reserve is R$107,034, as of June 30, 2013 (R$99,951 as of December 31, 2012).
c.
Treasury shares
On March 16, 2012, the Companys Board of Directors, in accordance with article 19 of its bylaws, article 30 of Law 6404/76, CVM Instruction 10/80, as amended, and CVM Instruction 358/02 and subsequent amendments thereto, approved the acquisition of up to 2,000,000 common shares, with no par value, for cancellation, disposal or holding in treasury and, especially, to fulfill the exercise of options granted under the Companys Stock Option Plan, without capital reduction, within 365 days from the disclosure of the material fact. Additionally, these share buybacks are limited to the balance available in the capital reserve calculated in the year, pursuant to articles 1 and 12 of CVM Instruction 10/80. The Companys Management should define the number of shares that will be bought back, within the authorized limits, and the buyback timing.
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Changes in treasury shares are stated as follows:

Company (BR GAAP) and Consolidated (IFRS and BR GAAP) Average cost R$ per share 32.17 32.17 32.17 34.57 45.85 45.85 45.85 45.85 38.18 38.18 38.18
Shares Balance on January 1, 2013 Sale in January 2013 Sale in February 2013 Buy-back in February 2013 Buy-back in March 2013 Sale in March 2013 Sale in April 2013 Balance on treasury shares before the bonus Increase of treasury shares due to the bonus (*) Sale in May 2013 Sale in June 2013 Balance as of June 30, 2013 727,778 (11,455) (42,672) 70,819 660,000 (14,591) (56,938) 1,332,941 266,588 (2,342) (4,808) 1,592,379
Value (23,410) 368 1,373 (4,066) (38,488) 551 2,608 (61,064) 89 184 60,791
(*)
Bonus: new ordinary shares were issued, attributing to shareholders, free of charge, as a bonus one new common share for each batch of five common shares they held, generating the total effect of 266,588 new shares. The shares bought back will be held in treasury to be later disposed of, cancelled or used in the exercise of stock options granted to the Companys officers and employees.
d.
Comprehensive income (loss)

Represent cumulative translation adjustments for translation into the foreign currency of the foreign investments and gains or losses on instruments designed to hedge foreign investments, net of taxes. These balances have accumulated adjustments to the balance sheet dates, as follows:
Company (BR GAAP) e Consolidated (IFRS and BR GAAP) 06/30/2013 Exchange rate on investments abroad Result on hedging instruments (bonds) on foreign operations, net of tax Result on hedging (NDF) instruments on foreign operations, net of tax Total 60,588 (44,605) (10,645) 5,338 12/31/2012 6,845 8,779 (10,645) 4,979
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e.
Earnings reserve - Legal

Recognized with amounts corresponding to 5% of net profit for the year, pursuant to article 193 of Law 6404/76, up to the limit of 20% of capital. The legal reserve balance is R$163,210 as of June 30, 2013 (R$ 100,000 as of December 30, 2012).
f.
Earnings reserve Capital Budget

On December 31, 2012, an earnings reserve was recognized due to the retention of a portion of net profit for the year, as prescribed by article 196 of Law 6404/76 and article 5, sole paragraph, of CVM Instruction 469, of May 2, 2008. In 2012, such retention is based on the capital budget, prepared by Management and approved by the Board of Directors on January 30, 2013, which will be submitted for approval at the Shareholders General Meeting to be held on April 26, 2013. The capital budget proposal is based on the working capital investment needs in order to fund the prepayment of receivables (ARV) transaction. The capital budget reserve balance as of June 30, 2013 is R$652,250 (R$ 1,152,250 as of December 30, 2012).
g.
Dividends and interest on capital

Under Companys bylaws, shareholders are entitled to a minimum dividend of 50% of net income after the recognition of the legal reserve of 5% of net profit for the year until the reserve equals 20% of the capital. The allocation of the remaining balance of net profit for the year is decided at the Shareholders Meeting. At year-end, the Company accrues the minimum dividends not paid during the year up to the limit of the previously mentioned minimum mandatory dividend. Under bylaws, the Company may prepare semiannual or shorter balance sheets and, based on them, in accordance with the limits provided for applicable law, the Board of Directors may approve the distribution of dividends against net income. The Board of Directors may also declare intermediary dividends against existing net income based on the last balance sheet approved by the shareholders. The Board of Directors meeting, held on February 6, 2013, approved the distribution of supplementary dividends and interest on capital, based on the financial statements as of December 31, 2012, in the amounts of R$803,502 (represented by the sum of R$360,099 recorded as dividends payable as of December 31, 2012, and R$443,403, amount in excess of the minimum mandatory dividend recorded in equity as Additional proposed dividends as of December 31, 2012) and R$35,916 as interest on capital (R$30,529, net of IRRF). Dividends were paid to shareholders on March 28, 2013. Dividends and interest on equity for the year ended December 31, 2012 were ratified by the Ordinary and Extraordinary General Meeting held on 26 April 2013. On June 30, 2013, the mandatory minimum dividends and interest on capital, for the 1st half of 2013, were accrued in the amount of R $ 558,510 and R $ 49,400 (R $ 41,990, net of withholding tax), respectively, under the caption "dividends payable" in the financial statements and consolidated.
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Mandatory minimum dividends were calculated as follows:

Net income Earnings reserves Legal reserve Basis for minimum dividends Dividends provisioned Interest on own capital paid Withholding tax on interest on capital Minimum mandatory dividend - 50% 1,264,211 (63,210) 1,201,001 558,510 49,400 (7,410) 600,500
19
a.
Earnings per Share

Change in the number of common shares
Shares issued Shares as of December 31, 2012 Exercise of stock options: January 2013 February 2013 Treasury shares buyback - February 2013 Treasury shares buyback - March 2013 Exercise of stock options: March 2013 April 2013 Effect of bonus shares April 2013 Exercise of stock options: May 2013 June 2013 Total Common 654,368,446
11,455 42,672 (70,819) (660,000) 14,591 56,938 130,752,657 2,342 4,808 784,523,090
b.
Earnings per share

In compliance with CPC 41 - Earnings per Share, the following tables reconcile the net profit and weighted average of outstanding shares with the amounts used to calculate the basic and diluted earnings per share. On April 26, 2013, there was an increase in the capital stock by R$ 500,000 through the capitalization of reserves of the capital budget, which was attributed to shareholders, free of charge, as a bonus, one new common share for each batch of five common shares they hold at the close of day April 26, 2013. These events were retrospectively considered in the calculation of basic and diluted earnings, as if they had occurred at the beginning of the earliest year presented as follows:
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Basic earnings per share

Company (BR GAAP) 06/30/2013 Net profit for the six month period available to common shares Weighted average number of outstanding common shares (in thousands) Earnings per share (in R$) basic 06/30/2012 Consolidated (IFRS and BR GAAP) 06/30/2013 06/30/2012
1,264,211 783,708 1.61311
1,115,447 784,137 1.42252
1,264,211 783,708 1.61311
1,115,447 784,137 1.42252
Diluted earnings per share

Company (BR GAAP) 06/30/2013 Net profit for the six month period available to common shares Diluted denominator: Weighted average number of outstanding common shares (in thousands) Potential increase in common shares as a result of the stock option plan Total (in thousands) Earnings per share (in R$) - diluted 06/30/2012 Consolidated (IFRS and BR GAAP) 06/30/2013 06/30/2012
1,264,211
1,115,447
1,264,211
1,115,447
783,708 430 784,138 1.61223
784,137 895 785,032 1.42089
783,708 430 784,138 1.61223
784,137 895 785,032 1.42089
20
Net Revenue
Company (BR GAAP) Quarter: Six month period: Quarter: Consolidated (IFRS and BR GAAP) Six month period:
06/30/2013 06/30/2012 06/30/2013 06/30/2012 06/30/2013 06/30/2012 06/30/2013 06/30/2012 Gross operating revenue Tax on services Total
1,512,836 (152,141) 1,360,695
1,343,463 (137,772) 1,205,691
2,979,525 (298,314) 2,681,211
2,642,214 (267,882) 2,374,332
1,765,492 (160,966) 1,604,526
1,392,069 (147,018) 1,245,051
3,466,866 (315,806) 3,151,060
2,735,124 (285,746) 2,449,378
Gross operating revenue is comprised of commissions charged to merchants, rental of POS equipment and services rendered for the use of network, as well as other services related to electronic payment means.
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21
Expenses by nature
The Company elected to present the consolidated statement of income by function. The breakdown of costs of services and net operating expenses by nature is as follows:
Company (BR GAAP) Quarter: 06/30/2013 Personnel expenses Depreciation and amortization Professional services Acquiring costs (a) Sales and marketing (b) Costs of mobile phone credits in subsidiaries (c) Others Total Classified as: Cost of services provied Personal expenses General and administrative expenses Sales and marketing Other operating expenses, net Total 66,786 77,011 77,232 332,364 45,665 06/30/2012 51,980 72,497 73,023 290,565 77,324 Six month period: 06/30/2013 124,866 152,744 142,860 628,622 96,512 06/30/2012 105,160 142,924 119,244 559,683 100,684 Quarter: 06/30/2013 96,972 99,979 65,993 478,957 50,462 06/30/2012 75,403 75,040 42,143 290,611 77,390 Consolidated (IFRS and BR GAAP) Six month period: 06/30/2013 182,754 193,517 122,098 909,206 105,196 06/30/2012 150,731 148,045 58,829 559,883 100,759
16,758 615,816
18,051 583,440
22,661 1,168,265
33,036 1,060,731
25,802 27,622 845,787
30,296 24,985 615,868
56,023 41,244 1,610,038
56,498 49,482 1,124,227
412,148 41,519 70,110 45,665 46,374 615,816
358,938 29,041 82,360 77,324 35,777 583,440
789,482 75,234 127,261 96,512 79,776 1,168,265
711,158 58,609 142,563 100,684 47,717 1,060,731
609,902 65,237 70,756 50,463 49,429 845,787
395,833 49,342 57,455 77,390 35,848 615,868
1,173,905 120,005 129,327 105,196 81,605 1,610,038
781,376 98,208 94,315 100,759 49,569 1,124,227
(a)
Acquisition costs are mainly represented by expenses on logistics and maintenance of POS equipment, supplies to merchants, customer registration and service, telecommunication services, and capture and processing of transactions. Marketing and sales expenses include campaigns for trademark development, marketing and advertising, endomarketing and sales incentives to partners and issuing banks. Correspond to the cost of the product sold related to the credit minutes for cell phones sold by the subsidiary Multidisplay.
(b) (c)
22
Related-Party Balances and Transactions

In the normal course of activities and under market conditions, the Company conducts transactions with related parties, such as receivables from card-issuing banks, which are the financial groups in which its controlling shareholders hold interests, and expenses on and income from services provided by Me-S, Servinet, Orizon, Multidisplay, M4 Produtos, CieloPar, Braspag and Paggo. In conducting its business and engaging services, the Company makes market quotations and surveys intended to find the best technical and pricing terms, and the decision on whether or not a transaction should be conducted is made by the chief decision maker of the function purchasing the product or service, regardless of whether such transaction is conducted with related or unrelated parties. Also, the type of business conducted by the Company requires it to enter into agreements with several card-issuing entities, some of which are its shareholders. The Company believes that all
61
the agreements entered into with related parties are carried out on an arms-length basis. The tables below include the balances as of June 30, 2013 and December 2012 and the amount, by type of agreement, shareholders and subsidiaries, of transactions with related parties conducted by the Company related to the six month periods ended June 30, 2013 and December 2012:
Company (BR GAAP) 06/30/2013 Shareholders Banco Bradesco Assets and liabilities: Short-term investments (a) Trade accounts receivable Receivables from subsidiaries Payables to subsidiaries (c) Banco do Brasil Subsidiaries and Joint Ventures Cielo Inc. 12/31/2012
Servinet
Orizon
M4U
Paggo
Braspag
Total
Total
63,687 1,096 -
12,488 1,871 -
(9,988)
113 -
(129)
32 (1,118)
76,175 2,967 145
88,157 4,026 149 (11,409)
- (11,235)
Company (BR GAAP) Quarter ended June 30, 20112
Quarter ended June 30, 2013 Shareholders Banco Bradesco Revenues: Income from shortterm investments (a) Revenue from other services (b) Revenue from the rental of POS equipment (c) Expenses: Other operating expenses membership commission Other operating expenses (d) Service agreement with Servinet (e) Data processing services (f) Banco do Brasil Subsidiaries and Joint Ventures
Servinet Orizon
Multidisplay
M4U
Paggo
Braspag
Total
Total
1,142 4,144
222 4,845
340
1,052
118
91
1,364 10,590
2,048 8,717
351
351
444
(1,298) (3,465) -
(1,026) (582) (28,192) -
(700) (259) -
(716) (1,120)
(2,324) (5,463) (28,192) (1,379)
(2,037) (3,508) (29,824) -
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Company (BR GAAP) 06/30/2013 Shareholders Banco Bradesco Revenues: Income from short-term investments (a) Revenue from other services (b) Revenue from the rental of POS equipment (c) Expenses: Other operating expenses membership commission Other operating expenses (d) Service agreement with Servinet (e) Data processing services (f)) Banco do Brasil Subsidiaries and Joint Ventures 06/30/2012
Servinet Orizon Multidisplay
M4U Paggo Braspag
Total
Total
2,184 8,279 -
459 8,898 -
709
735 -
2,133 -
237 -
177 -
2,643 20,459 709
4,768 15,973 871
(2,669) (6,618) -
(2,164) (1,192) (53,126) -
(700) (776)
(716) (2,569)
(4,833) (9,226) (53,126) (3,345)
(4,620) (7,056) (58,988) -
(a) (b)
The terms, charges and interest rates of short-term investments were agreed under conditions similar to those applicable to unrelated parties. Correspond to fraud prevention and bank account blocking services provided by the Company to the shareholder banks and commissions for the processing of transactions for M4 Produtos and Multidisplay. These related-party transactions are carried out at prices and under conditions similar to the transactions carried out with other issuing banks. See note 5.(e). Services contracted with shareholder banks, relating to: (i) corporate collective life insurance; (ii) health and dental insurance; and (iii) private pension agreement. The Company understands that the financial conditions adopted by the shareholders in respect of prices, terms and other conditions were applied under conditions similar to those adopted with respect to third parties. The Company engaged Servinet to provide POS equipment installation and maintenance service to merchants. The payment for the services provided is determined based on the costs incurred by Servinet when the service is provided, plus taxes and a payment margin. Refer to data processing services provided by M4 Produtos and Braspag.
(c) (d)
(e)
(f)
Main related-party transactions Balances of issuing banks

Receivables from issuing banks, whose net amounts are recorded under the caption payables to merchants, refer to the amounts payable by the issuers to the company arising from the transactions carried out with credit and debit cards, which will be subsequently transferred by the company to the authorized merchants. These related-party transactions are carried out at prices and under conditions similar to the transactions carried out with other issuers of credit or debit cards.
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Domicile Bank Incentives

The Company entered into agreements with domicile banks to promote the invoicing of commissions and prepayment of receivables. In these agreements, the Company remunerates the banks based on the performance goals established therein.
Advanced payment of receivables with issuing banks

The company has agreements with issuing banks to transfer in advance the amounts from the transactions carried out by the banks customers with credit cards. These advanced payments are performed in order to generate short-term working capital and the amounts deposited in current account are net of rates for advances, on a pro rata basis, calculated at the market rates that do not significantly differ from those adopted by the issuing banks that are not the companys shareholders.
Use of Cielo authorized network (Value Added Network - VAN)

The Company entered into service agreements with Companhia Brasileira de Solues e Servios - CBSS. These services include the capture, authorization and processing of transactions with ALELO cards, as well as services provided to merchants, operational and financial back office services, protection against fraud, issuance of statements and financial control over the electronic transactions resulting from these transactions. The rates and tariffs charged from these related-party transactions are carried out at prices and under conditions similar to the transactions carried out with other banks.
VAN services and connectivity rate Amex

On June 30, 2010, the company entered into a nonexclusive service agreement for the capture of credit card transactions issued under amex (van) card association, with bankpar s.a. (bankpar), a bradesco groups company which holds the rights over the american express (amex) card association in brazil. In addition, in December 2011, the company entered into an amendment to the service agreement to renew the van agreement by December 31, 2012, as well as to balance the economic benefits of the company and bankpar in connection with this agreement, based on the appraisal prepared by the advisors of a specialized investment bank. In financial terms, this balance was performed by including the connectivity rate payable by the company, in the amount of R$38 million, to bankpar for the technology that provides the companys access to the systems of the amexs merchants. The expansion of this partnership with amex card association has a high potential for generating value to the company as it represents an addition to its portfolio of card associations. The execution of these documents was approved by the board of directors in accordance with the legal restrictions.
Bank Account Blocking

Refers to bank account blocking service agreements entered into with various banks, whose service consists of ensuring to the banks the blocking of the bank accounts of the authorized merchants that carry out financial transactions with them. These related-party transactions are carried out at prices and under conditions similar to the transactions carried out with other domicile banks.
Recordkeeping of Cielos shares

A stock book-entry service agreement entered into between Cielo and Banco Bradesco S.A., whereby the latter provides stock book-entry and share certificate issuance services to the Company.
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Operating services - stock option program

Service agreement consisting of rendering operating services for the stock option program and the related grants entered into with Bradesco S.A. Corretora de Ttulos e Valores Mobilirios.
Other widespread agreements

In addition to the balances recorded, the Company engages other services from the main shareholders, namely:
Cash management services. Insurance. Private pension services. Corporate credit card.
23
Income tax and social contribution

The effective rate of income tax and social contribution for the three and six month periods ended June 30, 2013 and 2012 is as follows:
Company (BR GAAP) Quarter 06/30/2013 Income before income tax social contribution Statutory tax rates - % Income tax and social contribution at statutory rates Interest on capital tax benefit Impairment of goodwill Effect on permanent differences, net 06/30/2012 Six month period 06/30/2013 06/30/2012 Consolidated (IFRS and BR GAAP) Quarter 06/30/2013 06/30/2012 Six month period 06/30/2013 06/30/2012
939,025 34 (319,269) 16,796 (10,363) (2,844) (315,680)
813,953 34 (276,744) 10,623 1,022 (265,099)
1,904,532 34 (647,541) 16,796 (10.363) 787 (640,321).
1,684,159 34 (572,614) 10,623 (6,721) (568,712).
945,769 34 (321,561) 16,796 (10,363) (6,475) (321,603).
818,024 34 (278,128) 10,623 79 (267,426).
1,911,808 34 (650,015) 16,796 (10,363) (1,024) (644,606).
1,691,548 34 (575,126) 10,623 (8,747) (573,250).
Income tax and social contribution Current Deferred (339,362) 23,682 (309.571) 44,472 (678,173). 37,852 (617,425) 48,713 (346,404) 24,801 (311,733) 44,307 (687,539). 42,933 (621,611) 48,361
The donations to the Cultural and Artistic Activities (Rouanet Law), Sports and Fund for Children and Adolescents Rights were recorded in line item Income tax expenses - current. The tax incentives recorded in line item Income tax expenses - current, in Company and Consolidated, totaled R $ 5,000 for the six month period ended June 30, 2013 (R$ 7,300 for the six month period ended June 30, 2012). In the quarter ended June 30, 2013, tax benefits recorded as income tax expense - current Company and Consolidated R$ 5,000 (R$ 3,300 in the quarter ended June 30, 2013).
24
Financial Instruments
The estimated fair values of the Groups financial assets and financial liabilities were determined using available market inputs and appropriate valuation methodologies. However,
65
considerable judgment was required to interpret market input and then develop the most appropriate fair value estimates. Accordingly, estimates presented herein are not necessarily indicative of the amounts that could be realized in the market. The use of different market methodologies may have a significant effect on the estimated realizable values. These financial instruments are managed through operating strategies which aim at obtaining liquidity, security, and profitability. The control policy consists of permanent monitoring of the contracted rates compared to market rates. The Group does not make investments for speculative purposes, either in derivatives or any other risk assets.
a.
Capital Risk management

The Group manages its capital to ensure that its companies can continue as going concerns, and at the same time maximizes the return to all their stakeholders by optimizing the debt and equity balance. The Groups equity structure consists of its net debt (borrowings and financing detailed in note 13, less cash and cash equivalents) and equity. The Group is not subject to any external capital requirement. The debt ratio at the end of the period is as follows:
Company (BR GAAP) 06/30/2013 Debt (i) Cash and cash equivalents Net Debt Equity (ii) Debt ratio, net (1,423,629) 232,876 (1,190,753) 2,478,527 48.04% 12/31/2012 (1,290,267) 282,487 (1,007,780) 2,277,173 44.26%
Consolidated (IFRS and BR GAAP) 06/30/2013 (2,315,888) 429,665 (1,886,223) 2,486,496 75.86% 12/31/2012 (2,114,138) 404,335 (1,709,803) 2,286,107 74.79%
(i) (ii)
Debt is defined as short- and long-term borrowings, as detailed in note 13. Equity includes the entire share capital and the Groups reserves, managed as capital.
b.
Financial assets and financial liabilities

The Groups financial assets and financial liabilities refer to cash and cash equivalents, trade accounts receivable, receivables from subsidiaries and Joint ventures, escrow deposits, trade accounts payable to merchants, subsidiaries and Joint ventures and due to the acquisition of subsidiaries, suppliers and borrowings and financing. The estimated fair values of financial instruments as of June 30, 2013 are as follows:
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06/30/2013 Company (BR GAAP) Carrying amount 232,876 6,739,941 145 834,806 326,843 3,566,274 11,235 32,684 1,423,629 Market value 232,876 6,739,941 145 834,806 326,843 3,566,274 11,235 32,684 1,332,063 Consolidated (IFRS and BR GAAP) Carrying amount 429,665 7,111,658 113 861,015 385,015 3,988,646 32,684 2,315,888 Market value 429,665 7,111,658 113 861,015 385,015 3,988,646 32,684 2,144,402
Type Cash and cash equivalents Trade accounts receivable Receivables from subsidiaries and Joint ventures Escrow deposits Trade accounts payable Payables to merchants Payables to subsidiaries Payables on the acquisition of subsidiaries and Joint ventures Borrowings and financing Loans and receivables Loans and receivables Loans and receivables Loans and receivables Other financial liabilities Other financial liabilities Other financial liabilities Other financial liabilities Other financial liabilities
The market value of financial assets and financial liabilities and short- and long-term financing was determined, when applicable, by using current interest rates available for transactions conducted under similar conditions and with similar maturity dates.
c.
Credit Risk
The Company has an instrument to mitigate the credit risk of the VISA card-issuing banks, used as a hedge against the risk of default by such banks. This hedging instrument consists of the commitment assumed by the VISA brand, pursuant to foreign regulations, to guarantee the transfer to the Companys merchants of all sales made with VISA cards on the related due dates in the event of default by an issuer. The guarantee model implemented by the VISA brand together with the Company prescribes the provision of guarantees (collaterals or bank guarantees) considering the credit risk of the issuer, sales volume with VISA cards and residual risk of default by cardholders. The provision of guarantees is mandatory for all card-issuing banks with credit risk, and amounts are reviewed periodically by VISA and the Company. If the issuer does not provide the requested guarantees, it is not accepted as a member of the system or is disqualified as such. Since July 1, 2010, the Company has also started accrediting the MASTERCARD brand, and the related credit risk is guaranteed by the MASTERCARD brand itself, in case of default by the card-issuing banks with the Company. The MASTERCARD brand requires card-issuing banks participating in the system to provide guarantees, collaterals or bank guarantees. If the issuer does not provide the requested guarantees, it is not accepted as a member of the system or is disqualified as such. The brand systems also prescribe that cardholders can contest transactions made with credit cards within certain timeframes from the date of the transaction. For this purpose, the Company enters into an affiliate agreement with authorized merchants establishing all rules for acceptance of these cards at the point of sale. If transactions are contested by cardholders and the merchant is no longer an affiliated member at the date of the contestation or has no amounts receivable from the Company, then collection will be made through debit to bank account or outside collection agencies and there may be losses to the Company. The Company leases POS equipment to all affiliated merchants that do not have their own systems to capture transactions. The rent is deducted, on the due date, from the amount of
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transactions payable to merchants. However, the rent may not be received on the due date whenever there are no amounts payable to merchants. In these cases, the Company collects the rent through debit to future sales, bank account or outside collection agencies, and losses on rent may be incurred.
d.
Risk of fraud
The Company uses an antifraud system to monitor transactions with credit and debit cards, which detects and identifies suspected fraud at the time of the authorization and sends an alert message to the card-issuing bank for it to contact the cardholder.
e.
Derivative transactions Derivative policy

According to the internal policy, the Companys finance income (costs) must arise from the generation of cash from its activities rather than from gains in the financial market. Accordingly, it considers that derivatives should only be used to hedge against potential exposures arising from the risks to which it is subject, without speculative purposes. The contra entry to a derivative transaction should be a non-hedged asset or liability. The criteria adopted for definition of the notional value of the derivatives is linked to the amount of the debt and/or assets denominated in foreign currency. Hedges of net investments in foreign operations The Company, after the funds raised on the issuance of bonds in November 2012 and based on the interpretation 16 of the International Financial Reporting Interpretations Committee - IFRIC (ICPC 06 - Net Investment Hedge of Foreign Transactions, issued in July 2008, in accordance with IAS 39 (CPC 38 - Financial Instruments: Recognition and Measurement), elected to designate as hedge for the investment in Cielo USA, in the amount of US$311,981 thousand, the ten-year bonds held by the Company, in the amount of US$470,000 thousand. The designated financial instrument value, i.e., the ten-year bonds, is increased by the income tax and social contribution gross-up (rate of 34% under Brazilian applicable legislation) for purposes of analysis of the hedge accounting effectiveness. The net investment hedge effects were recorded in accordance with CPC 38 and IAS 39 Financial Instruments: Recognition and Measurement. Accordingly, the Company formally designated the transactions by documenting: (i) the hedge purpose; (ii) hedge type; (iii) nature of the hedged risk; (iv) identification of the hedged item; (v) identification of the hedging instrument; (vi) relationship between the hedge and hedged item (retrospective effectiveness test); and (vii) prospective effectiveness. The adoption of the effectiveness tests described in the accounting practices confirmed the effectiveness of the financial instrument; accordingly, for the six month period ended June 30, 2013, there was no ineffectiveness recorded in profit or loss from net investment hedges in Cielo USA; consequently, gains or losses from these transactions were fully recorded in the Companys equity.
f.
Currency risk
The Group conducts a few transactions in foreign currency, mainly represented by transactions performed by foreign credit card holders in establishments in Brazil. In addition, as described in
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note 1, on August 31, 2012 the Company acquired the control of Me-S through its holding Cielo USA, both headquartered in the United States of America, whose transactions are conducted in US dollar (functional currency). The exposures to currency risks are managed in accordance with the criteria set by the policies approved using currency futures contracts.
As of June 30, 2013, the net exposure to foreign exchange rate risk, in thousands of US dollars, is as follows:
Company (BR GAAP) Assets: Cash and cash equivalents Trade accounts receivable Other assets Investments in foreign currency Property and equipments Intangible assets, including goodwill Total Liabilities: Payables to merchants Other liabilities Repayment of borrowings and financing - principal Repayment of borrowings and financing - interest Repayment of borrowings and financing - expenses Deferred income tax on items allocated to intangible assets related to the acquisition of Me-S Tax effect on hedge instruments - bonds designated as hedge of the net foreign investment Total Short position in US dollars Consolidated (IFRS and BR GAAP)
2,655 311,981 314,636
79,862 144,402 10,877 1,534 830,208 1,066,883
(2,575) (470,000) (2,154) 159,800 (314,929) (293)
(193,262) (14,069) (875,000) (4,047) 4,068 (146,425) 159,800 (1,068,935) (2,052)
The Company enters into forward exchange transactions for US dollars to hedge against fluctuations in exchange rates, which reduces significantly potential currency risks.
Sensitivity analysis of foreign currency

The Group is mainly exposed to US dollar fluctuations. The table below shows the Groups sensitivity to a 10% appreciation and depreciation in Brazilian real (R$) against this currency. 10% is the sensitivity rate used to internally present the foreign currency risks to Managements key personnel and corresponds to Managements assessment of the possible changes in exchange rates.
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Only outstanding monetary items in foreign currency are included in this sensitivity analysis, whose translation is adjusted at the end of the reporting period based on a change of 10% in exchange rates. The sensitivity analysis includes intercompany borrowings when the loan is denominated in any currency other than the creditors or debtors currency. A positive figure indicates an increase in profit or loss and equity when the Brazilian real is appreciated by 10% against the foreign currency considered. Considering the depreciation of 10% of the Brazilian real against the foreign currency considered, there would be an equivalent effect against profit or loss and equity and the balances presented would be negative.
Company (BR GAAP) 06/30/2013 Profit or loss (i) +10% Equity (i) +10% Profit or loss (i) -10% Equity (i) -10% (459) (459) 459 459 06/30/2012 535 535 (535) (535) Consolidated (IFRS and BR GAAP) 06/30/2013 (459) (459) 459 459 06/30/2012 535 535 (535) (535)
(i)
Refers mainly to the exposure of trade accounts receivable and trade accounts payable in US dollars at the end of each reporting period.
g.
Interest risk on short-term investments

The Companys results of operations are subject to significant fluctuations resulting from short term investments with floating interest rates. Pursuant to its financial policies, the Company invests its funds in prime banks and has not entered into transactions with financial instruments for speculative purposes.
h.
Liquidity risk
The Group manages the liquidity risk by maintaining proper reserves, bank and other credit facilities to raise new borrowings that it considers appropriate, based on the continuous monitoring of budgeted and actual cash flows, and the combination of the maturity profiles of financial assets and financial liabilities.
i.
Capital risk management

The Group manages its capital to ensure that the Groups companies can continue as going concerns, and at the same time maximizes the return of all their stakeholders by optimizing the debt and equity balance. The Groups equity structure consists of its net debt (borrowings detailed in note 13 less cash and cash equivalents stated in note 4), and equity (which includes capital, reserves, and earnings reserve as stated in nota 18). The Group is not subject to any external capital requirement.
j.
Interest rate sensitivity analysis - short-term investments and financing

The funds from the Companys short-term investments are impacted by changes in the CDI rate (source: Cetip) and borrowings are impacted by the changes in the long-term interest rate (TJLP (source: Central Bank of Brazil - Bacen)) and Libor (source: Bloomberg). As of June 30, 2013, assuming an increase or reduction of 10%, 25% and 50% in the interest rates, there would be an
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increase or decrease in finance income (costs), as follows:

Company (BR GAAP) 10% Short-term investments Borrowings and financing 781 3,162 25% 1,953 7,905 50% 3,907 15,811 Consolidated (IFRS and BR GAAP) 10% 845 4,576 25% 2,113 11,439 50% 4,227 22,878
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Commitments
The Company is engaged in the capture, transmission, processing and settlement of transactions with credit and debit cards. To conduct said activities, the Company entered into the following agreements:
a.
Lease agreements
As of June 30, 2013, future annual payments under lease agreements in effect are estimated as follows:
Year 2013 2014 2015 Total 6,907 14,688 15,617 37,212
Most contracts specify a termination fine equivalent to three-month rent, and a partial return can be negotiated for each case.
b.
Telecommunications, POS equipment, technology and logistics services

As of June 30, 2013, future payments under telecommunications, POS equipment, and technology and logistics service agreements in effect are estimated as follows:
Year 2013 2014 2015 Total 295,762 628,929 668,698 1,593,389
Transactions capture and processing agreements stipulate termination fines totaling R$5,907. Logistics service agreements are in effect since June 2007, with a minimum period of 12 months and a termination fine of R$4,843. Telecommunication agreements stipulate termination fines totaling R$43,400.
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Profit-Sharing
The Company and its subsidiaries pay profit-sharing to their employees and officers, subject to the achievement of operational goals and specific objectives, established and approved at the beginning of each year.
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Employees and Management profit-sharing amounts for the six month periods ended June 30, 2013 and 2012 and for the quarters ended June 30, 2013 and 2012 were recorded in line item Personnel expenses in the statement of income, as follows:
Company (BR GAAP) Quarter: 06/30/2013 06/30/2012 Employees Officers Total 10,706 3,619 14,325 6,350 3,287 9,637 Six month period 06/30/2013 06/30/2012 18,043 6,230 24,273 13,840 5,633 19,473 Quarter: 06/30/2013 06/30/2012 13,825 3,851 17,676 9,832 3,287 13,119 Consolidated (IFRS and BR GAAP) Six month period 06/30/2013 06/30/2012 24,328 6,695 31,023 20,681 5,633 26,314
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Management Compensation
Key Management personnel includes the members of the Board of Directors and the Supervisory Board, the CEO, and the officers.
Quarter: 06/30/2013 Fixed Officers Board of Directors and Supervisory Board Total 1,288 440 1,728 Variable (*) 2,827 2,827 Total 4,115 440 4,555 Fixed 2,873 874 3,747
Six month period: 06/30/2013 Variable (*) 4,789 4,789 Total 7,662 874 8,536
(*)
Not including the stock option plan (see note 31). Managements (Executive Committee and Board of Directors) overall compensation in 2013, set by the Annual General Meeting held on April 26, 2013, was R$32,468, plus related taxes and contributions thereon, as prescribed by the prevailing laws, whereas the annual compensation payable to the members of the Supervisory Board was R$309.
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Finance Income (Expenses)

Quarter: 06/30/2013 Finance revenue: Interest on short-term investments Other finance revenue Total Financial expenses: Late payment interest and fines Late payment interest and risk fines Prepayment flow receivables with issuers 06/30/2012 Six month period: 06/30/2013 06/30/2012 Quarter: 06/30/2013 06/30/2012 Six month period: 06/30/2013 06/30/2012
4,297 63 4,360
4,818 170 4,988
7,813 143 7,956
10,922 207 11,129
4,516 114 4,630
5,372 186 5,558
8,453 202 8,655
12,301 245 12,546
(13) (239) (34.356)
(6) (432) (14,509)
(45) (2,440) (50,069)
(21) (915) (20,577)
(19) (253) (34,356)
(13) (446) (14,509)
(62) (2,468) (50,069)
(35) (947) (20,577)
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Quarter: 06/30/2013 Interest on borrowings Restatement on the balance due to the acquisition of 50.1% equity Multidisplay Other financial expenses Total Prepayment of receivables: Revenue from prepayment of receivables (a) Present value adjustment expenses (b) Total Exchange rate changes, net (c) Total (15.953) 06/30/2012 (5,680)
Six month period: 06/30/2013 (32,180) 06/30/2012 (9,642)
Quarter: 06/30/2013 (22,686) 06/30/2012 (5,680)
Six month period: 06/30/2013 (46,677) 06/30/2012 (9,642)
(581) (5,709) (56,851)
(846) (21,473)
(1,242) (7,354) (93,330)
(2,282) (33,437)
(581) (5,962) (63,857)
(5,458) (885) (26,991)
(1,242) (7,907) (108,425)
(5,458) (2,360) (39,019)
268,102 (22,190) 245,912 (65) 193,356
212,364 (3,360) 209,004 1,053 193,572
495,796 (24,563) 471,233 203 386,062
402,504 (14,751) 387,753 5,245 370,690
268,102 (22,190) 245,912 (62) 186,623
212,364 (3,360) 209,004 1,054 188,625
495,796 (24,563) 471,233 202 371,665
402,504 (14,751) 387,753 5,237 366,517
(a)
Revenue from the prepayment of receivables for the six month periods ended June 30, 2013 and 2012 and quarters ended June 30, 2013 and 2012 comprises income from the transaction volume for the six month periods and quarters then ended. As described in note 5.(a), the fair value adjustment recorded in the consolidated interim financial information was calculated on the prepayment receivables. The assumptions adopted for the calculation are as follows: Interest rates use were the same contractors on prepayment of receivables from customers. Calculations were carried out separately, discounting cash flows for each recorded receivable. The Companys Management recognized the fair value adjustment of accounts receivable balance in view of the materiality of values adjusted, of interest rates and transaction terms. Monthly, Management reviews the assumptions mentioned and the changes are recorded in profit or loss for the year.
(b)
(c)
It follows basically the amount received in U.S. dollars, Visa International Service Association and MasterCard Worldwide relating to transactions with foreign cards, credit and debit cards, and gains and losses originally denominated in foreign currency, represented by:
Company (BR GAAP) Quarter: 06/30/2013 Exchange rate changes, net: Revenue Expense Total 06/30/2012 Six month period: 06/30/2013 Quarter: 06/30/2012 Consolidated (IFRS and BR GAAP) Six month period: 06/30/2013 06/30/2012
06/30/2012 06/30/2013
126 (191) (65)
2,250 (1,197) 1,053
621 (418) 203
6,757 (1,512) 5,245
129 (191) (62)
2,251 (1,197) 1,054
623 (421) 202
6,758 (1,521) 5,237
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Other operating expenses, net

Represented by:
Company (BR GAAP) Quarter: 06/30/2013 06/30/2012 Allowance for doubtful accounts Provision for risks, net Impairment of goodwill Allowance for losses on inactive POS equipment Other Total (10,785) (7,078) (30,479) (16,682) (19,286) Six month period: 06/30/2013 06/30/2012 (26,107) (17,788) (30,479) (22,869) (18,569) Quarter: 06/30/2013 06/30/2012 (10,785) (9,221) (30,479) (16,682) (19,527) Consolidated (IFRS and BR GAAP) Six month period: 06/30/2013 06/30/2012 (26,107) (20,396) (30,479) (22,869) (18,870) -
(6,794) 8,762 (46,374)
(1,531) 1,722 (35,777)
(15,538) 10,136 (79,776)
(10,271) 3,992 (47,717)
(6,794) 7,850 (49,429)
(1,531) 1,892 (35,848)
(15,538) 10,915 (81,605)
(10,271) 2,441 (49,569)
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Insurance
As of June 30, 2013, the Company has the following insurance agreements:
Type Civil liability and Directors and Officers Nominated risks (fire, windstorm and smoke, electrical damages, electronic equipment, theft and flood) Loss of profits Vehicles POS equipment warehousing POS equipment transportation Insured amount 105,000 28,271 13,925 1,258 146,828 1,250,518
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Stock Option Plan

The Extraordinary General Meeting held on June 1, 2009 ratified the approval of the Companys stock option plan, which is effective for ten years counted from the date of first grant to beneficiaries. Stock options may be granted provided that capital dilution does not exceed, at any time during the effectiveness of the plan, 0.3% per year. The Companys Board of Directors will define the beneficiaries eligible for the stock option plan annually or at the frequency considered appropriate. At meetings held on July 1, 2009, September 23, 2009, July 6, 2010, July 22, 2011 and July 23, 2012, the Board of Directors approved the first, second, third, fourth and fifth grants of options for the purchase of common and/or restricted shares, respectively, as shown in the table below, without any option for the settlement of options in cash. In 2010 and 2009 (first, second and third grants), the beneficiaries under the Stock Option Plan and Vesting Agreement may exercise the first portion of the stock options granted, equivalent to 1/3 of total, after one year.
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The Extraordinary General Meeting held in April 2011 approved the changes in the fourth and fifth grants and the following changes to the plan: possibility of eligible employees choosing a stock option plan, a restricted stock plan or a combination of both; exercise of 50% of the options and/or restricted shares after two years and 50% after three years. In addition, the Board of Directors meeting held on February 29, 2012 approved the Companys Management retention plan under the Restrict Shares program, limited to the amount of R $ 5,800. The purpose of this program is to minimize the risks for the Companys business arising from the loss of Management members and enhance the commitment of such members to long-term results. The Management retention program is effective for two years and the shares granted will be donated to the executives who remain in the Company at the end of the program.
Number of shares Bonus 2012 68,717 40,505 163,314 262,413 19,369 554,318 Bonus 2013 5,344 11,462 71,403 273,433 189,146 23,246 14,149 588,183 Exercise price (R$ per share) 23.68 35.32 33.33 26.05 44.48 Fair Value of Options (R$ per share) 10.43 13.75 13.38 12.48 18.34 52.28 52.46
Grant date July 2009 September 2009 July 2010 July 2011 July 2012 February 2012 (Restrict shares) February 2013 (Restrict shares) Total
Granted 1,042,320 220,480 1,073,680 1,315,854 987,487 96,850 70,819 4,807,490
Cancelled (90,596) (55,335) (285,627) (191,234) (38,015) (76) (660,883)
Exercised (994,727) (148,338) (600,492) (19,870) (6,838) (1,770,265)
Balance 31,058 68,774 422,278 1,640,596 1,131,780 139,465 84,892 3,518,843
In 2013, the fair value of the options was measured using the Black & Scholes pricing model. In the previous years, the Company used the binomial methodology, based on the following economic assumptions:
Grating date July and September 2009 Dividend yield Share price volatility Vesting period 6.66% 36.67% 4 years
July 2010 5.73% 37.51% 4 years
July February 2011 2012 8.87% 38.27% 5 years
July February 2012 2013 3.61% 26.97% 2 years
4.67% 5.36% 38.88% 31.65% 2 years 6 years
The fair value is allocated to profit or loss for the six month period with a contra entry to the capital reserve on a straight-line basis over a term of up to 24 and 36 months. In the six month period ended June 30, 2013, expenses totaled R$8,651 (R$5,374 as of June 30, 2012), recorded in line item Personnel expenses, and 132,806 shares were exercised in the amount of R$1,314 for the six month period ended June 30, 2013 (478,043 shares in the amount of R$12,599 for the six month period ended June 30, 2012), and the total shares granted was recorded in line item Capital reserve in equity as of June 30, 2013 in the amount of R$7,083 (R$5,234 as of June 30, 2012). Additionally, in the quarter ended June 30, 2013 was recognized expense of R $ 4,447 (R$ 3,320 in the quarter ended June 30, 2012), recorded in line item "Personnel expenses".
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32
a.
Employee Benefits
Pension Plan
The Company contributes monthly to a defined contribution pension plan (PGBL) for its employees, and contributions made during the six month period ended June 30, 2013, amounted to R$3,282 (R$3,369 as of June 30, 2012), recorded under line items Cost of services and Personnel expenses. Additionally, in the quarter ended June 30, 2013, the Company incurred expenses of contributions amounting to R$ 1,377 (R$ 1,702 in the quarter ended June 30, 2012), recorded in line items "Cost of services" and "Personnel expenses".
b.
Others benefits
Besides the benefit of pension plan the company and its subsidiaries offer their employees, which include: health insurance, dental care, life insurance and personal accident and professional training, the amount of these expenses totaled R$ 8,181 in the six month period ended June 30, 2013 (R$ 6,717 as of June 30, 2012). Additionally, in the quarter ended June 30, 2013, the Company and its subsidiaries incurred expenses of R$ 5,082 (R$ 2,499 in the quarter ended June 30, 2012).
33
Noncash Transactions
Company (BR GAAP) Six month period 06/30/2013 Acquisition of POS equipment through new Finame loans Exchange rate changes on net foreign investments Adjustment of deferred tax assets performed to the opening balance of Me-S and recognized as an adjustment to goodwill Mandatory minimum dividends and interest on own capital proposed Provision of withholding tax on interest on capital Exchange rate changes on borrowings and financing 161,076 53,743 582,105 7,410 80,887 06/30/2012 96,298 Consolidated (IFRS and BR GAAP) Six month period 06/30/2013 161,076 6,222 582,105 7,410 150,070 06/30/2012 96,298 -
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Segment Reporting
The Company has a single business segment, which is reported consistently with the internal reports provided to the Chief Operating Decision-Maker - CODM. This segment derives from the provision of services related to the capture and processing of credit and debit card transactions, other payment means and related services. With regard to information on geographical area, the Company conducts transactions in Brazil and in the United States of America through its subsidiaries Me-S and Cielo USA. Summarized financial data for those subsidiaries is disclosed in Note 3.
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35
Approval of Individual and Consolidated Interim Financial Information

The individual and consolidated interim financial information were approved by the Companys Board of Directors and authorized for issuance on August 6, 2013.
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DEAR SHAREHOLDERS:
We present the performance analysis and interim financial information of Cielo S.A. (Company) and subsidiaries for the quarter ended June 30, 2013, and the Independent Accountants Report on Review of Interim Financial Information. The Companys financial statements are presented in accordance with IFRS (International Financial Reporting Standards) issued by IASB (International Accounting Standards Board) and in accordance with Brazilian accounting practices, in consonance with CPC 21 - Demonstrao Intermediria and IAS 34 - Interim Financial Reporting.
HIGHLIGHTS
Transaction financial volume totaled R$104.7 billion, up 14.1% year-on-year or R$12.9 billion; Net Operating Revenue of R$1,604.5 millions, up 28.9% or R$359.5 million year-on-year and increase of 3.7% or R$58.0 million quarter-on-quarter; EBITDA of R$859.1 million, up 22.0% or R$154.7 million year-on-year and decrease of 1.8% or R$15.4 million quarter-on-quarter; EBITDA margin at 53.5%, down 3.1 p.p. year-on-year and 3.0 p.p. quarter-on-quarter;
Cielos net income totaled R$623.3 million, up 13.6% or R$74.5 million year-on-year and down 2.7% or R$17.5 million quarter-on-quarter;
OPERATING PERFORMANCE
TRANSACTION FINANCIAL VOLUME In 2Q13, Cielo captured 1.416 billion transactions, up 10.4% over 2Q12 and 4.3% over 1Q13. Transaction financial volume totaled R$104.7 billion, up 14.1% when compared with the R$91.7 billion in the same period of 2012, and up 5.9% in relation to 1Q13. The transaction financial volume specifically with credit cards totaled R$65.7 billion in 2Q13, up 12.1% year-on-year and 3.7% quarter-on-quarter. With debit cards, transaction financial volume totaled R$39.0 billion in 2Q13, up 17.8% as compared with the same period of the previous year and 9.9% over the previous quarter.
POINTS OF SALE MERCHANT AND EQUIPMENT BASE The number of Points of Sale Merchants, totaled 1.37 million at the end of 2Q13, up 8.4% year-onyear and 2.5% quarter-on-quarter. Points of Sale Merchants are those that have made at least a single transaction in the last 60 days.
Points of Sale Merchants Points of Sale Merchants 60 days ('000) 2Q13 1,370 2Q12 1,264 1Q13 1,336 2Q13 X 2Q12 2Q13 X 1Q13 8.4% 2.5%
The installed POS equipment base expanded 9.9% over the same period of the previous year and 0.3% over 1Q13. In this quarter, the POS equipment base remained practically stable quarter-onquarter due to the optimization of our supply chain in accelerating the uninstallation process and equipment recycling. WiFi / GPRS equipment ended 2Q13 representing 52% of the installed base.
POS Terminals # Installed POS (thousand) % Wireless 2Q13 1,742 52% 2Q12 1,586 42% 1Q13 1,738 49% 2Q13 X 2Q12 9.9%
9.7 p.p
2Q13 X 1Q13 0.3%

2.6 p.p
FINANCIAL PERFORMANCE
COMPARISON FOR THE QUARTER ENDED JUNE 30, 2013 AND MARCH 31, 2013 NET OPERATING REVENUE The Company and its subsidiaries net revenue from capture, transmission, processing and transaction settlement services for transactions with credit and debit cards, POS rental and other revenues increased R$58.0 million, or 3.7%, compared to R$1,546.5 million in 1Q13. The increase in net revenues is related to the expansion of the Company business and to the impact of the dollar appreciation in U.S. generated revenue.
COST OF SERVICES PROVIDED The cost of services provided increased R$45.9 million, or 8.1%, to R$609.9 millions in 2Q13, compared to R$564.0 in 1Q13. This increase was chiefly due to the following: (i) Increase of R$24.3 million due to increased logistics and processing services costs, especially related to equipment maintenance and activation after versions upgrades, exchange of discontinued equipment and increase in the number of terminal maintenance; Increase of R$8.0 million in costs of subsidiaries, chiefly by the subsidiary Merchant eSolutions due to the average dollar appreciation against the real; Increase of R$7.4 million due to the higher transaction volume; and
(ii) (iii)
(iv)
Increase of R$6.2 million from depreciation of POS terminals, chiefly explained by the increase in the total base and the change in the equipment mix with more wireless terminals.
OPERATING EXPENSES Operating expenses rose R$34.0 million, or R$16.8%, to R$ 235.5 million in 2Q13 as compared to R$201.5 million in 1Q13. The main variations are: Personnel Expenses. Personnel expenses increased 19.0% or R$10.4 million to R$65.2 million in 2Q13, compared to R$54.8 million in 1Q13. This increase is mainly due to adjustment to the provision for profit sharing relative to 2013 occurred in 2Q13, and also the reversal of a provision for profit sharing relative to 2012, occurred in 1Q13. General and Administrative Expenses. General and administrative expenses were up 20.8% or R$12.3 million, to R$70.8 million in 2Q13, compared to R$58.5 million in 1Q13. This variation was due to higher spending on professional services in 2Q13 specially those related to new project/services creation and corporate systems development. Sales and marketing expenses. Sales and marketing expenses decreased 7.8% or R$4.2 million from the R$54.7 million in 1Q13 to R$50.5 million in 2Q13. This variation is due to the lower sales and marketing initiatives shared with issuing banks in 2Q13 as compared to the previous quarter. Equity Equivalence. Equity equivalence variation was R$1.7 million, from a revenue of R$0.4 million in 2Q13 to R$1.3 million expense in 1Q13, this increase is primarily due to the results of subsidiary Orizon in 2Q13. Other Net Operating Expenses. Other net operating expenses increased R$17.2 million or 53.6%, to R$49.4 million in 2Q13, or R$32.2 million compared to 1Q13. The increase is chiefly related to impairment of goodwill from Paggo in the amount of R$30.5 million.
FINANCIAL RESULT Financial income totaled R$186.6 million in 2Q13, compared to 1Q13, when the result totaled R$185.0 million, there was a 0.9% increase. Financial revenues. Financial revenue increased R$0.6 million or 15.0% to R$4.6 million in 2Q13, as compared to R$4.0 million in 1Q13. Financial expenses. Financial expenses increased R$19.2 million or 43.3% to R$63.8 million in 2Q13, compared to R$44.6 million in 4Q12, mainly due to the interest from increased prepayment of receivables operations with issuers in 2Q13. Prepayment of receivables and adjustment to present value. Revenue from prepayment of receivables net of the adjustment to present value increased R$20.6 million or 9.1% to R$245.9 million in 2Q13, compared to R$225.3 million in 1Q13, mainly due to the continuous product expansion. 3
COMPARISON FOR THE QUARTER ENDED JUNE 30, 2013 AND JUNE 30, 2012
NET OPERATING REVENUE The Company and its subsidiaries net revenue from capture, transmission, processing and transaction settlement services for transactions with credit and debit cards, POS rental and other revenues increased R$359.4 million, or 28.9%, to R$1,604.5 million in 2Q13, as compared to R$1,245.1 million in 2Q12. This increase is substantially due to the consolidation of the financial statements of Merchant e-Solutions (Me-S), started from 4Q12, and the expansion of the Companys business.
COST OF SERVICES PROVIDED The cost of services provided increased R$214.1 million or 54.1% to R$609.9 million in 2Q13, as compared to R$395.8 million in 2Q12. This increase was chiefly due to the following: (i) Increase of R$147.0 million due to the increased costs of subsidiaries, mainly impacted by the consolidation of Me-S which began in 4Q12, and therefore not considered in 2Q12; Increase of R$20.0 million due to higher depreciation and amortization costs, chiefly explained by the amortization of intangible related to the Cielo Inc. consolidation, as well as by the increase in the total base and change in the equipment mix with more wireless terminals; R$18.5 million growth due to the higher transaction volume; Increase of R$18.1 million in brand fees from the increased number of transactions; among others.
(ii)
(iii) (iv)
OPERATING EXPENSES Operating expenses increased R$15.7 million or 7.1% to R$235.5 million in 2Q13, compared to R$219.8 million in the same period of 2012. Operating expenses increased primarily due to the consolidation of Me-S financial statements as of 4Q12. The main variations are: Personnel expenses. Personnel expenses have increased by 32.2% or R$15.9 million to R$65.2 million in 2Q13, compared to R$49.3 million in 2Q12. This variation is mainly due to the Me-S consolidation, the adjustment to the provision for profit sharing relative to 2013, and the adjustment in wages established by the collective agreement. General and Administrative Expenses. General and administrative expenses increased 23.2% or R$13.3 million to R$70.8 million in 2Q13, compared to R$57.5 million in 2Q12. The variation was chiefly the result of the Me-S consolidation as of 1Q12. 4
Sales and marketing expenses. Sales and marketing expenses decreased 34.8% or R$26.9 million, to R$50.5 million in 2Q13, as compared to R$77.4 million in 2Q12, to the decrease in campaigns held with partners (franchises and brands) and to the decrease in sales and marketing shared initiatives made in partnership with the issuing banks in 2Q13. Equity Equivalence. Equity equivalence increased R$0.2 million, to R$0.4 million revenue in 2Q13, compared to R$0.2 million revenue in 2Q12, thanks to the better results of subsidiary Orizon in 2Q13. Other Net Operating Expenses. Other net operating expenses increased R$13.6 million or 37.9%, to R$49.4 million in 2Q13, compared to the R$35.8 million in 2Q12. The increase is chiefly related to impairment of goodwill from Paggo in the amount of R$30.5 million.
FINANCIAL RESULT Financial income totaled R$186.6 million in 2Q13, down 1.1% as compared to R$188.6 million in 2Q12. Financial revenues. Financial revenue decreased R$1.0 million or 16.7% to R$4.6 million in 2Q13, compared to R$5.6 million in 2Q12. Financial expenses. Financial expenses increased R$36.8 million, or 136.6% from R$27.0 million in 2Q12 to R$63.8 million in 2Q13. This variation is mainly due to the increase in prepayment of receivables with issuer banks and appropriation of interest on new loans and financing, essentially higher Finame loans and the bond issue by Cielo and subsidiary Cielo USA. Prepayment of receivables and adjustment to present value. Revenue from prepayment of receivables net of the adjustment to present value increased R$36.9 million or 17.7% to R$245.9 million in 2Q13, compared to R$209.0 million in 2Q12, mainly due to the continuous product expansion.
EBITDA
EBITDA corresponds to net income, plus depreciation and amortization, income tax and social contribution and financial income/expenses. It should be noted that, for this calculation, the share of minority shareholders is added to the parent company's net income.
EBITDA ( R$ million) Cielo Net Income Shareholders other than Cielo S.A. Financial Income Income Tax and Social Contribution Depreciation and Amortization EBITDA % EBITDA Margin 2T13 623.3 0.8 (186.6) 321.6 100,0 859.1 53.5% 2T12 548.9 1.7 (188.6) 267.4 75,0 704.4 56.6% 1T13 640.9 2.2 (185.0) 323,0 93.5 874.5 56.5%
EBITDA is not financial performance measurements recognized under Brazilian GAAP, IFRS or U.S. GAAP and should not be considered individually as an alternative to net income, an operating performance measurement or as an alternative to operating cash flow or as a measurement of liquidity. EBITDA present limitations that impair their use as a measurement of the Company's profitability since they do not take into consideration certain costs and expenses that result from the Company's business that could have a significant effect on its net income, such as financial expenses, taxes, depreciation, capital expenses and other related charges. Despite these considerations, the Company's Board believes that EBITDA is important parameters for investors as they provide relevant information on our operating results and the segments profitability.
CORPORATE GOVERNANCE
The Company has adopted a responsible, transparent, ethical stance in managing its businesses and seeks to improve its corporate governance standards according to best market practices in order to preserve shareholders' rights through equal, clear and open treatment. Cielo has a Board of Directors comprised of 10 members (two independent members) and a Fiscal Council with three members. Besides these corporate bodies, advisory committees were established to make recommendations on business strategy, including long-term strategies, Company performance, and oversight and monitoring of the adopted measures. Currently, besides the Audit Committee, which is provided for in the bylaws, the following advisory committees have been instated: Finance, Personnel and Corporative Governance. The Company has Information Disclosure and Trading polices, as well as a Code of Ethics, which establishes standards of conduct in relationships with all stakeholders: employees, clients, suppliers, investors, regulatory bodies, society and governments.
INDEPENDENT AUDITORS
As required by CVM Instruction n 381/03, we inform that during the second quarter of 2013 the Company contracted KPMG independent audit services. The Companys policy for contracting independent accountant services ensures there is no conflict of interest, loss of independence or objectivity. In accordance with internationally accepted principles, these principles consist of: (a) an auditor should not audit its own work, (b) an auditor should not perform management functions on behalf of its client and (c) an auditor should not seek its clients interests. In 2013 neither the independent auditors nor its parties rendered the Company services that were not related to audit.
The information in the performance analysis related to EBITDA, EBITDA margin, financial volume and number of transactions, discount rate, industry and sector information, net revenue contributions, number of employees, total investments, and managerial revenue have not been reviewed by the independent accountants on June 30, 2013.

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Cielo S.A.

Report on review of interim financial information

Interim statements of value added

Osasco, August 6, 2013

Cielo S.A. and Subsidiaries

Company (BR GAAP) 06/30/2013 12/31/2012

Consolidated (IFRS and BR GAAP) 06/30/2013 12/31/2012

232,876 6,739,941 145 10,160 15,851 6,998,973

282,487 5,586,770 149 4,825 14,006 5,888,237

429,665 7,111,658 113 2,354 12,852 24,559 7,581,201

404,335 5,864,906 134 3,076 7,017 19,015 6,298,483

3,566,274 217,271 326,843 280,354 11,235 600,500 126,986 5,129,463

2,680,010 160,606 350,233 494,784 11,409 390,628 128,990 4,216,660

3,988,646 220,650 385,015 284,294 600,500 181,423 5,660,528

2,974,040 165,040 404,530 503,995 390,628 180,711 4,618,944

475,400 834,806 181 797,801 498,230

439,699 745,620 406 738,041 486,301

490,871 861,015 18,100 46,599 514,527

456,416 771,392 16,930 42,977 499,206

1,206,358 916,975 4,304 2,127,637

1,129,661 819,121 6,857 1,955,639

2,095,238 952,724 324,331 10,115 3,382,408

1,949,098 853,026 307,717 12,616 3,122,457

56,799 55,042 2,718,259

87,278 63,890 2,561,235

959,368 1.039,356 3,929,836

936,116 1,005,988 3,729,025

18.a) 18.b) 18.c) 18.d) 18.e), f) e g)

1,000,000 107,034 (60,791) 5,338 1,408,551 2,460,132 2,460,132

500,000 99,951 (23,410) 4,979 1,695,653 2,277,173 2,277,173

1,000,000 107,034 (60,791) 5,338 1,408,551 2,460,132 7,969 2,468,101

500,000 99,951 (23,410) 4,979 1,695,653 2,277,173 8,934 2,286,107

Total Liabilities and Equity

The accompanying notes are an integral part of these financial statements.

Cielo S.A. and Subsidiaries

(41,519) (70,110) (45,665) 790 (46,374) 745,669

(29,041) (82,360) (77,324) (1,870) (35,777) 620,381

(75,234) (127,261) (96,512) 5,524 (79,776) 1,518,470

(58,609) (142,563) (100,684) (132) (47,717) 1,313,469

(65,237) (70,756) (50,463) 407 (49,429) 759,146

(49,342) (57,455) (77,390) 216 (35,848) 629,399

(120,005) (129,327) (105,196) (879) (81,605) 1,540,143

(98,208) (94,315) (100,759) (120) (49,569) 1,325,031

4,360 (56,851) 268,102 (22,190) (65) 193,356

4,988 (21,473) 212,364 (3,360) 1,053 193,572

7,956 (93,330) 495,796 (24,563) 203 386,062

11,129 (33,437) 402,504 (14,751) 5,245 370,690

4,630 (63,857) 268,102 (22,190) (62) 186,623

5,558 (26,991) 212,364 (3,360) 1,054 188,625

8,655 (108,425) 495,796 (24,563) 202 371,665

12,546 (39,019) 402,504 (14,751) 5,237 366,517

(339,362) 23,682 623,345

(309,571) 44,472 548,854

(678,173) 37,852 1,264,211

(617,425) 48,713 1,115,447

(346,404) 24,801 624,166

(311,733) 44,307 550,598

(687,539) 42,933 1,267,202

(621,611) 48,361 1,118,298

623,345 821 624,166

548,854 1,744 550,598

1,264,211 2,991 1,267,202