Você está na página 1de 65

Cielo S.A.

Individual and Consolidated


Interim Financial Information for the
Three- and Six-month Periods ended June
30, 2016 and Report on Review of Interim
Financial Information - ITR

KPDS 157528

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Contents
Report on review of Interim Financial Information - ITR

Statements of financial position

Interim statements of profit or loss

Interim statements of comprehensive income

Interim statements of changes in equity

Interim statements of cash flows

Interim statements of value added

10

Notes to the individual and consolidated interim financial information

11

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Operations .......................................................................................................................................... 11
Significant accounting practices ........................................................................................................ 12
Consolidated interim financial information ....................................................................................... 13
Cash and cash equivalents .................................................................................................................. 15
Trade receivables ............................................................................................................................... 15
Income tax and social contribution .................................................................................................... 16
Investments ........................................................................................................................................ 18
Property and equipment ..................................................................................................................... 22
Intangible assets ................................................................................................................................. 24
Prepayment of receivables from card-issuing banks .......................................................................... 27
Payables to merchants ........................................................................................................................ 27
Borrowings......................................................................................................................................... 28
Taxes payable..................................................................................................................................... 29
Other payables ................................................................................................................................... 29
Provision for tax, civil and labor risks and escrow deposits .............................................................. 30
Equity ................................................................................................................................................. 33
Earnings per share .............................................................................................................................. 36
Net revenue ........................................................................................................................................ 37
Expenses by nature ............................................................................................................................ 37
Other operating expenses, net ............................................................................................................ 38
Commitments ..................................................................................................................................... 38
Employee benefits .............................................................................................................................. 39
Profit sharing ...................................................................................................................................... 39
Compensation of key management personnel .................................................................................... 40
Stock option plan and restricted shares .............................................................................................. 40
Finance income .................................................................................................................................. 41
Financial instruments ......................................................................................................................... 42
Related-party balances and transactions ............................................................................................ 48
Segment information .......................................................................................................................... 54
Noncash transactions ......................................................................................................................... 56
Insurance ............................................................................................................................................ 56
Approval of interim financial information ......................................................................................... 56

KPMG Auditores Independentes


Av. Dionysia Alves Barreto, 500 - 10 andar - Cj. 1001 - Centro
06086-050 - Osasco/SP - Brasil
Caixa Postal 79518 - CEP 04707-970 - So Paulo/SP - Brasil
Telefone 55 (11) 2856-5300, Fax 55 (11) 2856-5320
www.kpmg.com.br

Report on the review of the Interim Financial Information


To the Shareholders and Management of
Cielo S.A.
Barueri-SP

Introduction
We have reviewed the accompanying individual and consolidated interim financial information
of Cielo S.A. (Company), included in the Interim Financial Information Form (ITR) for the
quarter ended June 30, 2016, which comprise the balance sheet as of June 30, 2016 and related
statements of income and comprehensive income for the three and six month periods then ended
and the changes in shareholders' equity and cash flows for the six month period then ended,
including the explanatory notes.
Company's Management is responsible for the preparation and fair presentation of the individual
and consolidated interim financial information in accordance with CPC 21 (R1) - Demonstrao
Intermediria 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 the review
We conducted our review in accordance with Brazilian and International Standards on Review
of Interim Financial Information (NBC TR 2410 - Reviso de Informaes Intermedirias
Executada pelo Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information
Performed by the Independent Auditor of the Entity, respectively). A review of interim financial
information consists of making inquiries, 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 auditing standards 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. Therefore, we do not express an audit
opinion.

KPMG Auditores Independentes, uma sociedade simples brasileira e


firma-membro da rede KPMG de firmas-membro independentes e
afiliadas KPMG International Cooperative (KPMG International), uma
entidade sua.

KPMG Auditores Independentes, a Brazilian entity and a member


firm of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (KPMG International), a
Swiss entity.

Conclusion on the interim financial information


Based on our review, nothing has come to our attention that causes us to believe that the
accompanying individual and consolidated interim financial information included in the ITR
referred to above has not been 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 CVM.
Other matters
Interim statements of value added
We have also reviewed the individual and consolidated interim statements of value added
(DVA), for the six month period ended June 30, 2016, which were prepared under Companys
Management responsibility, 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, which 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 have not been
prepared, in all material respects consistently with individual and consolidated interim financial
information taken as a whole.

Osasco, August 01, 2016

KPMG Auditores Independentes


CRC 2SP028567/O-1 F-SP
Original report in Portuguese signed by
Andr Dala Pola
Accountant CRC 1SP214007/O-2

KPMG Auditores Independentes, uma sociedade simples brasileira e


firma-membro da rede KPMG de firmas-membro independentes e
afiliadas KPMG International Cooperative (KPMG International), uma
entidade sua.

KPMG Auditores Independentes, a Brazilian entity and a member


firm of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (KPMG International), a
Swiss entity.

Cielo S.A.
Statements of Financial Position at June 30, 2016 and December 31, 2015
(In thousand of Brazilian Reais - R$)

Parent Company

Assets
Current Assets
Cash and cash equivalents
Trade receivables
Trade receivables from related parties
Prepaid and recoverable taxes
Prepaid expenses
Derivative financial instruments
Other receivables

Notes

4
5
28

27

Total current assets

06/30/2016

Consolidated

12/31/2015

06/30/2016

Parent Company

12/31/2015

10,846
8,829,436
2,890
22,968
12,347

44,487
10,153,664
1,587
10,369
213,314
16,736

1,228,552
9,765,395
656
2,549
35,472
62,062

1,249,524
11,151,905
459
1,814
17,350
213,314
41,488

8,878,487

10,440,157

11,094,686

12,675,854

Liabilities and Equity

06/30/2016

12/31/2015

06/30/2016

12/31/2015

585,445
183,000
3,002,468
603,914
576,177
19,673
612,365
1,606
142,657

891,898
1,269,190
3,290,353
554,834
158,192
17,808
540,938
176,256

1,052,524
183,000
3,003,162
739,185
586,607
2,856
612,365
1,606
514,190

1,503,254
1,269,190
3,291,228
663,214
275,733
398
540,938
519,999

5,727,305

6,899,469

6,695,495

8,063,954

6,518,669
1,514,371
15,213

8,437,535
1,401,073
11,804

7,810,497
1,539,482
238,182
16,572

10,008,265
1,420,270
303,678
17,667

8,048,253

9,850,412

9,604,733

11,749,880

3,500,000
61,983
(133,365)
10,700
4,455,809

2,500,000
64,305
(140,648)
13,401
4,083,619

3,500,000
61,983
(133,365)
10,701
4,455,808

2,500,000
64,305
(140,648)
13,401
4,083,619

Attributable to:
Owners of the Parent Company
Noncontrolling interests

7,895,127
-

6,520,677
-

7,895,127
3,651,151

6,520,677
3,643,290

Total equity

7,895,127

6,520,677

11,546,278

10,163,967

21,670,685

23,270,558

27,846,506

29,977,801

Current Liabilities
Payables to merchants
Prepayment of receivables from card-issuing banks
Borrowings
Trade payables
Taxes payable
Payables to related parties
Dividends payable
Derivative financial instruments
Other payables

Notes

11
10
12
13
28
16.g)
27
14

Total current liabilities


Noncurrent Assets
Financial investments
Deferred income tax and social contribution
Escrow deposits
Other receivables
Investments
Property and equipment
Intangible assets

12
6.a)
15.b)
7
8
9

Total noncurrent assets

Total assets

70,613
833,250
1,404,516
8,913
9,706,210
592,511
176,185
12,792,198

21,670,685

66,124
650,169
1,296,203
11,766
9,934,761
720,204
151,174
12,830,401

23,270,558

70,613
940,910
1,411,937
32,837
94,831
628,976
13,571,716
16,751,820

27,846,506

66,124
744,893
1,302,455
41,352
105,108
751,517
14,290,498
17,301,947

29,977,801

Consolidated

Noncurrent liabilities
Borrowings
Provision for tax, civil and labor risks
Deferred income tax and social contribuition
Other payables

12
15.a)
6.b)
14

Total noncurrent liabilities


Equity
Issued capital
Capital reserve
Treasury shares
Comprehensive income
Earnings reserves

Total Liabilities and Equity

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

16.a)
16.b)
16.c)
16.d)
16.e) and f)

Cielo S.A.
Interim statements of profit or loss
For the three- and six-month periods ended June 30, 2016 and 2015
(In thousand of Brazilian Reais - R$, except earnings per share)

Parent Company
Three-month period
Note
Net revenue

18

Cost of services provided

19

Gross profit
Operating income (expenses)
Personnel
General and administrative
Sales and marketing
Share of profit of investees
Other operating expenses, net
Operating profit
Finance income
Finance income
Finance costs
Revenue from purchase of receivables
Exchange differences, net

Operating profit before income tax and


social contribution
Income tax and social contribution
Current
Deferred

6.b)
6.b)

Profit for the period

Three-month period

Six-month period

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

1,799,217

1,716,806

3,625,572

3,419,191

3,069,024

2,795,781

6,116,922

5,147,545

(1,093,341)

(1,018,478)

(1,516,907)

(1,302,763)

(2,979,840)

(2,296,133)

2,532,231

2,400,713

1,552,117

1,493,018

3,137,082

2,851,412

(548,920)

(73,412)
(98,505)
(82,332)
88,199
(62,090)
1,022,157

26
26
26
26

Six-month period

06/30/2016

1,250,297

19
19
19
7
19 and 20

Consolidated

(512,088)
1,204,718

(61,579)
(95,886)
(67,512)
104,466
(54,835)

(141,045)
(200,190)
(140,625)
156,309
(114,328)

1,029,372

2,092,352

(124,278)
(186,583)
(121,638)
147,164
(108,983)
2,006,395

(135,159)
(141,331)
(85,596)
2,496
(84,640)
1,107,887

(115,563)
(121,320)
(70,346)
3,642
(59,630)
1,129,801

(261,612)
(287,844)
(146,644)
4,480
(177,536)
2,267,926

(222,052)
(236,184)
(125,387)
7,353
(115,218)
2,159,924

7,855
(275,946)
604,306
(3,114)

3,280
(292,702)
493,620
1,344

35,806
(598,910)
1,228,342
(5,241)

54,613
(468,841)
956,534
3,568

41,250
(289,954)
603,571
(3,037)

23,880
(301,500)
493,620
1,354

100,010
(628,729)
1,226,964
(5,159)

76,971
(489,750)
956,534
3,594

333,101

205,542

659,997

545,874

351,830

217,354

693,086

547,349

1,355,258

1,234,914

2,752,349

2,552,269

1,459,717

1,347,155

2,961,012

2,707,273

(490,994)
124,903

(348,017)
(17,449)

989,167

869,448

(950,874)
183,081
1,984,556

(752,955)
(18,017)
1,781,297

Attributable to:
Owners of the Company
Noncontrolling interests

(565,211)
135,198

(453,759)
14,160

(1,105,751)
212,698

(930,880)
57,329

1,029,704

907,556

2,067,959

1,833,722

989,167
40,537

869,448
38,108

1,984,556
83,403

1,781,297
52,425

1,029,704

907,556

2,067,959

1,833,722

Earnings per share (in R$) - Basic

17

0.43799

0.38526

0.87860

0.78883

0.43799

0.38526

0.87860

0.78883

Earnings per share (in R$) - Diluted

17

0.43709

0.38423

0.87680

0.78671

0.43709

0.38423

0.87680

0.78671

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

Cielo S.A.
Interim statements of comprehensive income
For the three- and six-month periods ended June 30, 2016 and 2015
(In thousands of Brazilian Reais - R$)

Parent Company
Three-month period
06/30/2016
Profit for the period
Comprehensive income
Exchange differences on translating of foreign operations:
Exchange differences on foreign investments
Gains and losses from hedging instruments of foreign operations, net of taxes
Changes for the period
Total comprehensive income for the period

06/30/2015

Consolidated
Six-month period

Three-month period

06/30/2016

06/30/2015

06/30/2016

1,984,556

1,781,297

1,029,704

06/30/2015

06/30/2016

06/30/2015

2,067,959

1,833,722

989,167

869,448

(109,395)
108,291

(33,089)
28,921

(218,290)
215,589

139,994
(142,247)

(109,395)
108,291

(33,089)
28,921

(218,290)
215,589

139,994
(142,247)

(1,104)

(4,168)

(2,701)

(2,253)

(1,104)

(4,168)

(2,701)

(2,253)

988,063

865,280

1,981,855

1,779,044

907,556

Six-month period

1,028,600

903,388

2,065,258

1,831,469

Attributable to:
Owners of the Company

988,063

865,280

1,981,855

1,779,044

Noncontrolling interests

40,537

38,108

83,403

52,425

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

Cielo S.A.
Interim statements of changes in equity
For the six-month periods ended June 30, 2016 and 2015
(In thousands of Brazilian Reais - R$)

Attributable to owners of the Company


Earnings reserves

Issued
capital
Balance as at January 1, 2015
Dividends paid in addition to the minimum mandatory dividends in 2014
Capital increase
Stock options granted
Sale of treasury shares under the stock option plan
Profit for the six-month period
Allocation of profit for the six-month period:
Legal reserve
Interest on capital
Mandatory minimum dividends
Effect of noncontrolling interests on consolidated entities

2,000,000
16g)
16.a)
25
25 and 16.c)

Treasury
shares

75,854

(194,478)

11,530
(14,145)
-

Legal
reserve
360,992

Capital
budget
1,776,914
(500,000)

Additional
dividends

Earnings
retention

Total
Comprehensive
owners of the
income Parent Company

283,859

5,969

(283,859)
-

1,781,297

21,336
-

4,309,110

15,290

4,324,400

(283,859)
11,530
7,191
1,781,297

52,425

(283,859)
11,530
7,191
1,833,722

(114,100)
(410,685)
-

3,590,688

(114,100)
(410,685)
3,590,688

139,994
(142,247)

139,994
(142,247)

89,065
-

Balances as at June 30, 2015

2,500,000

73,239

(173,142)

450,057

1,276,914

1,167,447

3,716

5,298,231

3,658,403

8,956,634

Balance as at January 1, 2016

2,500,000

64,305

(140,648)

500,000

3,583,619

13,401

6,520,677

3,643,289

10,163,966

1,000,000
-

16,325
(18,647)
-

(24,904)
32,187
-

(1,000,000)
-

1,984,556

(24,904)
16,325
13,540
1,984,556

83,403

(24,904)
16,325
13,540
2,067,959

(238,000)
(374,366)
-

(75,541)

(238,000)
(374,366)
(75,541)

Capital increase
Acquisition of treasury shares
Stock options granted
Sale of treasury shares under the stock option plan
Profit for the six-month period
Allocation of profit for the six-month period:
Legal reserve
Interest on capital
Mandatory minimum dividends
Effect of noncontrolling interests on consolidated entities
Comprehensive income:
Exchange differences on translating foreign operations:
Exchange differences on net foreign investments
Gains and losses on hedging instruments on foreign operations, net of taxes
Balances as at June 30, 2016

16.a)
25
25 and 16.c)

16.e)
16.g)
16.g)

99,228
-

16.d)
16.d)

3,500,000

61,983

599,228

2,583,619

1,272,962

(133,365)

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

(99,228)
(238,000)
(374,366)
-

Total
equity

16.d)
16.d)

(89,065)
(114,100)
(410,685)
-

Noncontrolling
interests

Comprehensive income:
Exchange differences on translating foreign operations:
Exchange differences on net foreign investments
Gains and losses on hedging instruments on foreign operations, net of taxes

16.e)
16.g)
16.g)

500,000
-

Capital
reserve

139,994
(142,247)

(218,290)
215,589
10,700

(218,290)
215,589
7,895,127

3,651,151

(218,290)
215,589
11,546,278

Cielo S.A.
Interim statements of cash flows
For the six-month periods ended June 30, 2016 and 2015
(In thousands of Brazilian Reais - R$)

Parent Company
Note
Cash flows from operating activities
Profit before income tax and social contribution
Adjustments to reconcile profit before income tax and social contribution
To net cash generated by operating activities:
Depreciation and amortization
Recognition of provision for losses on property and equipment and intangible assets
Residual value of property and equipment and intangible assets disposed of
Stock option granted
Losses on non-performing loans and chargebacks
Provision for tax, civil and labor risks
Unearned revenue from purchase of receivables
Noncontrolling interests
Exchange differences relating to interest on foreign borrowings
Result on financial instruments
Interest on borrowings
Provision for losses on investments
Share of profit (loss) of investees
(Increase) decrease in operating assets:
Trade receivables
Receivables from related parties
Prepaid and recoverable taxes
Other receivables (current and noncurrent)
Escrow deposits
Prepaid expenses

06/30/2016

06/30/2015

06/30/2016

06/30/2015

2,752,349

2,552,269

2,961,012

2,707,273

8 and 9

215,321

199,007

488,751

382,412

8 and 9
25
20
15.a)
5

21,305
22,983
16,325
56,190
119,223
(37,376)

12

(220,661)
213,314
590,058

11,128
8,285
11,530
82,974
95,827
44,391
5,781
325,178

11,128
8,824
11,530
91,059
97,298
44,391
52,425
5,781
344,264

(156,309)

(147,164)

21,305
24,962
16,325
84,236
125,137
(37,376)
83,403
(220,661)
213,314
618,967
23,997
(4,480)

1,361,604
(1,303)
2,751
(108,313)
(12,599)

234,475
(2,225)
(309)
(95,757)
(2,636)

1,423,885
(197)
11,418
(16,548)
(109,482)
(18,122)

(237,117)
308
268
(11,435)
(96,230)
(4,263)

(1,448,833)
49,080
(9,848)
1,865
(28,584)
(5,925)
3,392,617
(628,127)
(634,103)

(354,194)
(64,146)
(5,802)
3,763
(71,358)
(4,510)
2,826,507
(38,486)
(972,827)

(1,621,156)
75,971
(25,493)
2,458
(88,701)
(5,925)
4,027,000
(654,736)
(880,444)

16,386
(50,183)
6,663
65,997
(5,257)
3,434,169
(61,270)
(1,071,632)

2,130,387

1,815,194

2,491,820

2,301,267

15.b)

Increase (decrease) in operating liabilities:


Payables to merchants
Trade payables
Taxes payable
Payables to related parties
Other payables (current and noncurrent)
Payment of tax, civil and labor lawsuits
Cash generated from operations
Interest paid
Income tax and social contribution paid

15.a)
12

Net cash generated by operating activities


Cash flows from investing activities
Capital increase in subsidiaries, joint ventures and associate
Dividends received from subsidiaries
Goodwill on investments in subsidiaries and associated company
Additions to property and equipment and intangible assets, net of provision (reversal) for
losses

7
7
9
8 and 9

Net cash used in investing activities

16.c)
12
12
16.g)
16.g)

Net cash generated by (used in) financing activities


Effect of exchange rate changes on cash and cash equivalents of foreign subsidiary

(8,422,930)
15,132
-

(9,240)
-

(18,263)
(14,467)

(156,926)

(306,858)

(194,608)

(8,314,607)

(8,714,656)

(203,848)

(8,347,337)

(24,904)
13,540
32,495
(1,653,865)
(20,910)
(520,028)

7,191
8,839,422
(4,846,219)
(10,020)
(759,660)

(24,904)
13,540
32,495
(1,653,865)
(20,910)
(595,570)

7,191
8,839,422
(4,846,219)
(10,020)
(759,660)

(2,173,672)

3,230,714

(2,249,214)

3,230,714

(59,730)

24,913

Increase (decrease) in cash and cash equivalents


Cash and cash equivalents
Closing balance
Opening balance

4
4

Increase (decrease) in cash and cash equivalents

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

(7,353)

(9,540)
176,110
-

9,644

Cash flows from financing activities


Acquisition of treasury shares
Sale of treasury shares under the stock option plan
Borrowings
Payment of principal
IRRF on interest on capital paid
Dividends and interest on capital paid

Consolidated

(33,641)

(3,668,748)

10,846
44,487

89,289
3,758,037

(33,641)

(3,668,748)

(20,972)

1,228,552
1,249,524
(20,972)

(2,790,443)

1,208,278
3,998,721
(2,790,443)

Cielo S.A.
Interim statements of value added
For the six-month periods ended June 30, 2016 and 2015

(In thousands of Brazilian Reais - R$)

Parent Company

Revenues
Sales of services
Losses on non-performing loans and chargebacks

Note

06/30/2016

06/30/2015

06/30/2016

06/30/2015

18
20

4,032,324
(56,190)

3,802,578
(82,974)

6,727,416
(84,236)

5,665,173
(91,059)

3,976,134

3,719,604

6,643,181

5,574,114

Inputs purchased from third parties


Cost of services
Materials, electric energy, outside services and others
Other expenses, net
Impairment of assets

Gross value added


Retentions
Depreciation and amortization

(751,500)
(290,872)
(7,142)
(18,867)

(2,505,536)
(298,944)
(49,945)
(43,356)

(1,903,276)
(252,592)
(8,243)
(18,966)

(1,196,150)

(1,068,381)

(2,897,780)

(2,183,077)

2,779,984

2,651,223

3,745,401

3,391,037

(199,007)

(488,751)

(382,412)

2,564,663

2,452,216

3,256,650

156,309
-

147,164
-

4,480
83,403

26

1,396,837

1,014,715

1,462,863

1,037,099

1,553,146

1,161,879

1,550,745

992,027

4,117,809

3,614,095

4,807,396

4,000,652

(159,032)
(34,853)
(1,268,846)
(670,522)
(612,366)
(1,372,190)

(145,524)
(32,977)
(1,182,872)
(471,425)
(524,785)
(1,256,512)

(288,259)
(44,744)
(1,616,410)
(706,621)
(612,366)
(1,538,995)

(247,641)
(42,956)
(1,430,548)
(498,210)
(524,785)
(1,256,512)

(4,117,809)

(3,614,095)

(4,807,396)

(4,000,652)

Total wealth for distribution


Distribution of wealth
Personnel and related taxes
Profit-sharing
Taxes and contributions
Interest and rental expenses
Proposed dividends and interest on capital
Earnings retention

(813,571)
(324,442)
(14,853)
(43,284)

(215,321)

8 and 9

Wealth created, net


Wealth received in transfer
Share of profit of investees
Noncontrolling interests
Finance income, including purchase of receivables and
exchange differences, net

Consolidated

23

Wealth distributed

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

10

3,008,625

7,353
(52,425)

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Notes to the individual and consolidated interim financial


information
(Amounts in thousands of Brazilian Reais - R$, unless otherwise stated)

Operations
Cielo S.A. (the Company or Cielo) was established in Brazil on November 23, 1995, and is
primarily engaged in providing services related to credit and debit cards and other means of
payment, including signing up of merchants and service providers, rental, installation and
maintenance of POS (point-of-sale) terminals, data capture and processing of electronic and
manual transactions.
Cielo is a corporation headquartered in Barueri, State of So Paulo. Cielos 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 Companys direct and indirect subsidiaries, joint ventures and associate that, together with
Cielo, are also referred to as "Group" throughout this report, provide services related to means
of payment or complementary to the acquiring services, such as provision of services in
processing means of payments that involve cards, maintenance services and contacts with
merchants for acceptance of credit and debit cards, data transmission services to load fixed or
mobile phone credits, software development and licensing of computer programs, electronic
transation's processing, IT services for collection and management of accounts payable and
receivable using the Internet, data processing services and support services to medical
companies.

Significant events of the quarter ended June 30, 2016


In the three-month period ended June 30, 2016, the following events occurred, which
significantly impacted the Company's financial position:

Increase in Cielos profit by R$119,719 or 13.8% when comparing to the quarters ended
June 30, 2016 and 2015;

On April 8, 2016, the capital increase of the Company in the amount of R$ 1,000,000, with the
partial use of the balance from the capital budget reserve, was approved;

On April 13, 2016, a partial payment was made of the balance related to public debentures
amounting to R$1,863,828, of which R$1,533,331 refers to the principal and R$330,497 to
interest;

Approval of the payment of dividends and interest on capital in the amount of R$612,366
related to profit earned in the first half of 2016;

11

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

New corporate business


On August 27, 2015, Cielo communicated the market in general and other stakeholders that it
had signed documents to increase interest in its direct subsidiary Multidisplay, which is the
parent company of M4Produtos. On July 4, 2016, after the fulfillment of the suspensive
conditions relating to the transaction, among them the authorizations from the Central Bank of
Brazil and the CADE (Brazilian Antitrust Agency), the final documents were signed, increasing
Cielos interest in Multidisplay from 50.10% to 91.44%, by means of investment of R$82.7
million.

2
2.1

Significant accounting practices


Statement of compliance, basis of preparation and presentation
The individual (Company) and consolidated interim financial information has been prepared in
accordance with the international standard IAS 34 - Interim Financial Reporting and other
International Financial Reporting Standards - IFRSs issued by the International Accounting
Standards Board - IASB and accounting practices adopted in Brazil which includes 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").
The individual and consolidated interim financial information is presented in Brazilian reais
(R$), which is the Companys functional and presentation currency, and has been prepared

based on the historical cost, unless otherwise stated.


The accounting policies applied in preparing the individual and consolidated interim financial
information are the same as those used in the previous year, disclosed in Note 2 to the Financial
Statements of the Company and its subsidiaries for the year ended December 31, 2015,
approved and published on February 1, 2016 and made available on the website of CVM.
Therefore, the interim accounting information should be read together with the financial
statements as of December 31, 2015.

2.2

Main judgements, estimates and accounting assumptions


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 period. 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, impairment of goodwill, provision for risks and determining the fair value
of financial instruments. Since Managements judgment involves making estimates concerning
the probability of occurrence of future events, actual results could differ from those estimates.
The Company and its subsidiaries review estimates and assumptions at least annually.

12

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

2.3

Regulations issued by the Central Bank of Brazil (BACEN)


Due to Law 12865, published on October 9, 2013, the Company is subject to regulations issued
by the Central Bank of Brazil (BACEN), according to guidelines established by the National
Monetary Council (CMN), and regulations issued by the Central Bank itself. Therefore, the
Company is subject to authorization of the Central Bank to operate, and must comply with the
rules covering, among others, risk management, minimum equity levels and compliance with
requirements similar to those of a Financial Institution. Management is taking the necessary
steps and making adjustments to be in full compliance with the latest regulations as of the
beginning from the granting of authorization by the BACEN.
In addition to the individual and consolidated financial information prepared in accordance with
IFRSs and the accounting practices adopted in Brazil, the Company will be subject to disclose,
as from the authorization by the regulatory agency, the financial information prepared in
accordance with the set of criteria, procedures and accounting rules embodied in the Chart of
Accounts for Institutions of the Brazilian Financial System (COSIF), which differs from some
practices currently adopted and whose effects may be different.
The Company has filed the authorization request protocol for Payment Institution in 2014 and,
on June 29, 2016, the Company was notified by BACEN to provide documentation for the 2nd
stage of the authorization process.

2.4

New and revised standards and interpretations issued and not yet adopted
The new IFRSs issued by the IASB and not yet effective are:

IFRS 9 - Financial Instruments - introduces new requirements for classification, mensurement


and derecognition of financial assets and liabilities (effective for anual periods beginning on or
after January 1, 2018). The Company does not expect significant effects of adopting this
standard on the Financial Statements.

IFRS 15 - Revenue from Contracts with Customers - introduces new requirements to recognize
revenue from sales of goods and services (effective for annual periods beginning on or after
January 1, 2018). The Company does not expect significant effects of adopting this standard on
the Financial Statements.

IFRS 16 - Leases - Requires recognition of operating leases in the same formats of finance
leases (effective for annual periods beginning on or after January 1, 2019). The Company is
evaluating the effects of adopting this standard on the Financial Statements.

Consolidated interim financial information


The consolidated interim financial information includes the interim financial information of the
Company and its subsidiaries. When necessary, the subsidiaries interim financial information is
adjusted to conform their accounting policies to those set by the Group.
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.
In the Companys individual interim financial information, the interim financial information on
subsidiaries, joint ventures and associate is accounted for under the equity method.
13

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

The consolidated interim financial information includes the following direct and indirect
subsidiaries, joint ventures and associate:
Companies
Direct subsidiaries:
Servinet Servios Ltda. (Servinet)

Interest in the capital (%)


06/30/2016
12/31/2015

Main activities

99.99

99.99

Cateno Gesto de Contas de Pagamentos S.A.


(Cateno)

70.00

70.00

Cielo USA, Inc. (Cielo USA)

100.00

100.00

Multidisplay Comrcio e Servios Tecnolgicos S.A.


(Multidisplay)
Braspag Tecnologia em Pagamento Ltda. (Braspag)

50.10

50.10

99.99

99.99

Aliana Pagamentos e Participaes Ltda. (Aliana)

99.99

99.99

Cielo Cayman Island (Cielo Cayman)

100.00

100.00

Indirect subsidiaries:
M4Produtos e Servios S.A. (M4Produtos)

50.10

50.10

Merchant e-Solutions, Inc. (Me-S)

100.00

100.00

Direct joint ventures:


Companhia Brasileira de Gesto de Servios. (Orizon)

40.95

40.95

Provision of data processing services for healthcare


companies, management of back office services for health
operators, electronic network interconnection services
between health operators and medical and hospital service
providers and other health system agents and drugstores.

Paggo Solues e Meios de Pagamento S.A. (Paggo)

50.00

50.00

Provision of services relating to signing up of merchants


for acceptance of credit and debit cards through the
capture, transmission, data processing and settlement of
electronic transactions.

Indirect joint ventures


Prevsade Comercial de Produtos e de Benefcios de
Farmcia Ltda. (Prevsade)

40.95

40.95

Provision of medicine benefit services to corporate


customers, healthcare plans, public customers, and large
laboratories.

40.95

40.95

Import, export, distribution, and sale of medicines and


pharmaceutical raw materials, products and technology
equipment for health.

30.00

30.00

Facilitator for online payments and digital portfolio, both


for the physical world and for electronic commerce.

Guilher Comrcio, Importao, Exportao e


Distribuio de Medicamentos e Tecnologia para Sade
Ltda. (Guilher)
Indirect associate:
Stelo S.A. (Stelo)

14

Provison of maintenance services and contacts with


merchants and service providers for acceptance of credit
and debit cards.
Provision of services in processing means of payments
that involve credit, debit and multiple cards of private and
prepais labels (not including credit card management).
Holding ownership interests in other companies as partner
or shareholder.
Provision of services in data transmission to load fixed or
mobile phone credits.
Development and licensing of software for computer,
automated transaction processing, IT services for
collection and management of accounts payable and
receivable using the Internet.
Providing services of contacts developing and
maintenance with merchants and holding ownership
interests in other companies as partner or shareholder.
Holding ownership interests in other companies as partner
or shareholder. Cielo Cayman did not carry out any
operational, non-operational, equity or financial activity in
the period ended June 30, 2016.

Provision of services in data transmission to load fixed or


mobile phone, prepaid transportation, and mobile
payment.
Provision of services related to electronic payments with
credit or debit cards.

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Cash and cash equivalents


Weighted average rate
per year

Cash and banks:


Local currency
Foreign currency
Short-term investments:
Debentures subject to repurchase agreements
Bank certificates of deposit - CDB
Money Market Deposit Account - MMDA

Parent Company
06/30/2016

12/31/2015

06/30/2016

12/31/2015

2,369
1,297

4,258
30,581

6,247
259,402

5,669
384,697

6,999
181
-

6,558
170
2,920

952,781
10,122
-

837,228
19,010
2,920

10,846

44,487

1,228,552

1,249,524

100.99% of DI
100.92% of DI
0.25%

Total

Consolidated

The balances in 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
cardissuing banks, in the case of the Company, and by card association members, in the case of
Me-S, and such amounts are used to settle transactions with merchants.
These short-term investments are highly liquid and their carrying amounts do not differ from
their fair values.

Trade receivables
Parent Company
06/30/2016

Consolidated

12/31/2015 06/30/2016

12/31/2015

8,786,771
358,074
139,065
316,413
4,864
13,387
116,356
20,444
10,021

10,094,141
461,030
149,585
292,376
6,645
20,948
85,502
28,175
13,503

9,765,395

11,151,905

Purchase of receivables (a)


Receivables for processed financial transactions (b)
Receivables for interchange fees to merchants (c)
Receivables for merchant commissions (d)
Bank account lock (e)
Meal and transportation voucher capture and processing (f)
Receivables for mobile payment services (g)
Challenges of credit card holders - chargeback (h)
Other receivables

8,786,771
4,864
13,387
20,444
3,970

10,094,141
6,645
20,948
28,175
3,755

Total

8,829,436

10,153,664

(a)

The balance corresponds to purchase of receivables made by the Company from merchants, relating to card transactions that will be received from the
card-issuing banks within 360 days after the date receivables. As at June 30, 2016, this amount is net of the revenue from purchase of receivables, to be
recognized to the maturity dates of the transactions, totaling R$ 349,346 (R$ 386,722 as at December 31, 2015), since it is related to the purchase of
receivables for credit and installment sales with original maturity after the date of the reporting periods.

(b)

Refers to the receivables recognized by the subsidiary Me-S. These correspond to amounts due from card association members for processed
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 associations send to Me-S the amounts due to merchants for processing, net of the
interchange fee withheld by the card-issuing banks.

(c)

Refer to the interchange fees prepaid by the subsidiary Me-S to merchants during the month. These interchange fees, as well as the commission on
services provided by Me-S, are received at the beginning of the month subsequent to the transaction month.

(d)

The balance refers to commissions earned by the subsidiary Cateno resulting from payment accounts management services under the Ourocard
Payment Arrangement. In general, fees resulting from credit card transactions are settled in 28 days and those arising from debit card transactions are
settled one business day following the transaction.

(e)

The Company offers to card-issuing banks account lock 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 lock by the issuing banks.

15

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

(f)

Receivables from Companhia Brasileira de Solues e Servios (Alelo) arising from the provision of meal and transportation voucher capture and
processing services.

(g)

Receivables for electronic payment services provided by subsidiaries M4Produtos and Multidisplay through mobile phones and sale of phone credits
with credit and debit cards.

(h)

Refer substantially to receivables for transactions challenged by credit card holders (chargeback).

The aging of trade receivables is as follows:


Parent Company

Current
Up to 45 days past-due
Total

Consolidated

06/30/2016

12/31/2015

06/30/2016

12/31/2015

8,808,992
20,444

10,125,489
28,175

9,744,951
20,444

11,123,730
28,175

8,829,436

10,153,664

9,765,395

11,151,905

Income tax and social contribution


Deferred income tax and social contribution arise from temporary differences caused mainly by
temporarily non-deductible provisions, and are classified in noncurrent assets and noncurrent
liabilities.
Deferred income tax and social contribution reflect future 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.

Breakdown of deferred income tax and social contribution - Assets


Parent Company

Temporary differences:
Provision for tax, labor and civil risks
Accrual for sundry expenses
Allowance for losses on POS equipment and
doubtful debts
Total

Consolidated

06/30/2016

12/31/2015

06/30/2016

12/31/2015

508,775
302,893

470,254
166,512

516,850
402,478

476,164
255,326

21,582

13,403

21,582

13,403

833,250

650,169

940,910

744,893

16

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

b.

Breakdown of deferred income tax - Liabilities recognized in foreign companies


Consolidated
06/30/2016

12/31/2015

Temporary differences:
Fair value of Me-Ss intangible assets, acquired in 2012
Other temporary diferences

220,611
17,571

288,752
14,926

Total

238,182

303,678

Deferred income and social contribution tax assets as at June 30, 2016, as shown in note 6(a),
were recognized on temporary differences. According to Management's best estimate, tax
credits recognized on the accrual for sundry expenses, allowance for losses on POS equipment
and doubtful debts, in the amount of R$ 324,475 (R$ 424,060 - consolidated) will be realized
mainly during 2016. The portion of tax credits on the provision for tax, labor and civil risks, in
the amount of R$ 508,775 (R$ 516,850 - consolidated), will be realized upon the final outcome
of each lawsuit, partially estimated at up to 5 years, except for 46% of the provision for labor
risks which is estimated to be realized in up to 10 years, according to the development of the
lawsuit described in note 15.

Current income tax and social contribution


The effective rate of income tax and social contribution for the three- and six-month periods
ended June 30, 2016 and 2015 is as follows:
Parent Company
Three-month period

Consolidated

Six-month period

06/30/2015

06/30/2016

06/30/2015

1,355,258
34%

1,234,914
34%

2,752,349
34%

2,552,269
34%

(460,788)

(419,871)

(935,799)

54,060
3,024

20,264
-

29,988

06/30/2016

06/30/2015

1,459,717
34%

1,347,155
34%

2,961,012
34%

2,707,273
34%

(867,771)

(496,304)

(458,033)

(1,006,744)

(920,473)

80,920
16,058

38,794
14,331

54,060
3,024

20,264
-

80,920
16,058

38,794
14,331

35,518

53,145

50,036

849

1,238

1,523

2,500

7,625

(1,377)

17,883

(6,362)

8,358

(3,068)

15,190

(8,703)

Income tax and social


contribution

(366,091)

(365,466)

(767,793)

(770,972)

(430,013)

(439,599)

(893,053)

(873,551)

Current
Deferred

(490,994)
124,903

(348,017)
(17,449)

(950,874)
183,081

(752,955)
(18,017)

(565,211)
135,198

(453,759)
14,160

(1,105,751)
212,698

(930,880)
57,329

17

06/30/2016

Six-month period

06/30/2015

Profit before income tax and


social contribution
Statutory rates - %
Income tax and social
contribution at statutory rates
Tax benefit of interest on
capital
Tax benefit of R&D
Share of profit (loss) of
investees
Effect on permanent
differences, net

06/30/2016

Three-month period

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Incentives to Cultural and Artistic Activities (Lei Rouanet), Sports, Pronas activities, Child
and Adolescent Rights Fund and Elderly Fund are recorded in line item income tax expenses current. Tax incentives recorded as income tax expense - current, in the Parent Company and
Consolidated, totaled R$20,769 in the six-month period ended June 30, 2016 (R$7,220 in the
six-month period ended June 30, 2015). In the three-month period ended June 30, 2016, tax
incentives recorded as income tax expenses - current, Parent Company and Consolidated,
totaled R$11,205 (R$5,350 in the three-month period ended June 30, 2015).

Investments
Parent Company

(a)

Consolidated

06/30/2016

12/31/2015

06/30/2016

12/31/2015

Subsidiaries
Joint ventures
Associate
Goodwill on acquisition of investments (a)

9,564,363
85,048
56,799

9,801,843
76,119
56,799

78,048
6,640
10,143

69,119
10,847
25,142

Total

9,706,210

9,934,761

94,831

105,108

The goodwill arising from investments in subsidiaries, associate and joint ventures are included in the carrying amount of the investment in the
individual financial information. In the consolidated financial information, the goodwill arising from the acquisition of subsidiaries is recognized in
intangible assets.

The main information on direct and indirect subsidiaries, joint ventures and associate relating to
the investment amounts and the share of profit (loss) of investees recorded in the individual and
consolidated interim financial information is shown in the table below:

18

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

06/30/2016
Ownership
interest - %
Subsidiaries:
Servinet
Multidisplay
Braspag
Cielo USA
Cateno
Aliana

Assets

Liabilities

Equity

Investments

99.99
50.10
99.99
100.00
70.00
99.99

68,897
128,242
38,177
2,517,138
12,379,631
7,318
15,139,403

46,473
69,648
8,064
1,513,133
289,246
324
1,926,888

22,424
74,967
30,113
1,004,005
12,090,385
6,994
13,228,888

22,424
37,559
30,112
1,004,005
8,463,270
6,993
9,564,363

40.95
50.00

237,985
308
238,293

16,060
209
16,269

221,925
99
222,024

84,998
50
85,048

Total
Joint ventures:
Orizon (*)
Paggo

12/31/2015

Total

Ownership
interest - %

Assets

Liabilities

Equity

Investments

99.99
50.10
99.99
100.00
70.00
99.99

68,288
79,520
37,112
3,096,353
12,437,546
25,845
15,744,664

49,225
33,340
6,892
1,860,357
352,716
2,302,530

19,063
62,554
30,220
1,235,996
12,084,830
25,845
13,458,508

19,063
31,338
30,220
1,235,996
8,459,381
25,845
9,801,843

40.95
50.00

219,046
336
219,382

18,962
209
19,171

200,084
127
200,211

76,055
64
76,119

Associate:
30.00
79,305
27,180
52,125
6,640
30.00
51,747
15,595
36,152
10,846
Stelo
(*) 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 its then subsidiary Orizon.
06/30/2016
Three-month period

Subsidiaries:
Servinet
Multidisplay
Braspag
Cielo USA Inc.
Cateno
Aliana
Total
Joint ventures:
Orizon
Paggo
Total
Associate:
Stelo

Profit (loss)
before
income tax and
social
contribution

Profit (loss)
for the
quarter

Share of profit
(loss) of investes
for the quarter

Six-month period
Share of
profit (loss) of
Profit (loss)
investes for
for the six- the six-month
month period
period

06/30/2015
Three-month period
Six-month period
Share of
Share of
profit (loss)
Profit (loss)
profit (loss)
of investes
for the sixof investes
Profit (loss) for
for the
month
for the sixthe quarter
quarter
period monh period

Net
revenue

Gross
profit
(loss)

Operating profit
(loss) before
finance
income (costs)

72,124
349,620
19,447
1,202,473
1,147
1,644,811

70,508
17,855
7,529
(49,192)
382,495
1,156
430,351

4,017
13,522
(2,206)
(14,710)
327,844
(28,387)
300,080

5,024
12,499
(1,223)
(43,622)
389,337
(28,382)
333,633

1,769
3,379
(403)
(8,038)
129,501
(2,569)
123,639

1,769
1,693
(403)
(8,038)
90,651
(2,569)
83,103

3,362
12,646
(107)
(13,701)
256,974
(28,391)
230,783

3,362
6,336
(107)
(13,701)
179,882
(28,391)
147,381

1,589
2,287
1,285
10,548
123,224
138,933

1,589
1,146
1,285
10,548
86,257
100,824

3,012
6,460
2,352
16,406
164,007
192,237

3,012
3,236
2,352
16,406
114,805
139,811

72,851
72,851

33,552
33,552

19,863
(28)
19,835

27,520
(28)
27,492

12,462
(14)
12,448

5,103
(7)
5,096

21,836
(28)
21,808

8,942
(14)
8,928

8,911
(14)
8,897

3,649
(7)
3,642

17,990
(27)
17,963

7,367
(14)
7,353

20

(6,923)

(22,311)

(22,467)

(8,667)

(2,600)

(14,827)

(4,448)

19

Cielo S.A.
Individual and Consolidated Interim Financial Information
for the Three- and Six-month Periods ended June 30, 2016 and
Report on Review of Interim Financial Information - ITR

The main financial information relating to indirect subsidiaries and indirect joint ventures is as follows:
12/31/2015

06/30/2016
Ownership
interest - %
Indirect subsidiaries
M4Produtos
Me-S
Indirect joint ventures:
Prevsade
Guilher

Assets

Liabilities

Ownership
interest - %

Equity

Assets

Indirect joint
ventures:
Prevsade
Guilher

Equity

50.10

110,558

92,572

17,986

50.10

108,108

88,391

19,717

100.00

1,048,873

534,673

514,200

100.00

1,317,182

709,628

607,554

40.95
40.95

26,293
14,190

1,446
11,970

24,847
2,220

40.95
40.95

22,218
14,601

1,472
13,307

20,746
1,294

06/30/2016

Indirect
subsidiaries:
M4Produtos
Me-S

Liabilities

06/30/2015

Net
revenue

Gross
profit

Operating profit
before finance
income

Profit before income


tax and social
contribution

Profit for the Profit for the


three-month
six-month
period
period

51,77
900,972

28,988
242,355

13,995
55,971

14,26
55,241

3,984
15,027

12,608
34,482

2,702
23,404

6,174
46,914

6,022
3,547

4,327
753

3,886
527

5,252
1,375

2,049
421

4,102
926

1,784
55

3,7
291

20

Profit for the Profit for the


three-month
six-month
period
period

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

The consolidation of the interim financial information, for direct subsidiaries Multidisplay,
Braspag and Cielo USA, as well as for indirect subsidiaries M4Produtos and Me-S, was based
on the financial information as at May 31, 2016 to calculate the investments as at June
30, 2016. Accordingly, the share of profit (loss) of investees refers to the six-month period
ended May 31, 2016.
The Company has investments in foreign subsidiaries whose interim financial information was
originally prepared in accordance with generally accepted accounting principles in the United
States (U.S. GAAP). No adjustments are made to the interim financial information of foreign
subsidiaries, given that there are no significant differences in relation to Brazilian accounting
practices.
As at June 30, 2016 and December 31, 2015, the goodwill arising on the acquisition of
investments in the individual statement of financial position and the goodwill arising on the
acquisition of investments in joint ventures and associate in the consolidated statement of
financial position are recognized in line item Investments, as shown in the breakdown below:
Parent Company

Consolidated

06/30/2016

12/31/2015

06/30/2016

12/31/2015

Multidisplay
Braspag
Orizon
Stelo (*)

20,690
25,966
10,143
-

20,690
25,966
10,143
-

10,143
-

10,143
14,999

Total

56,799

56,799

10,143

25,142

(*) The Company recognized a provision for impairment related to the goodwill established during the initial
investment in Stelo because it is not possible to predict the beginning of cash generation in this operation.

The details of the nature of the goodwill arising on the acquisition of investments recognized in
line item Investments have not changed in relation to those disclosed in note 09 - Goodwill on
acquisition of investments of the Company's financial statements as of December 31, 2015.

21

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Changes in investments for the six-month period ended June 30, 2016 and 2015 are as follows:

Parent
Company

Consolidated

Balance at December 31, 2014

1,025,856

69,010

Capital increase - Cateno


Capital increase - Aliana
Capital increase - Stelo
Goodwill on acquisition of Stelo
Exchange differences on foreign investment
Dividends received:
Multidisplay
Servinet
Gain on share of profit of investees

8,390,200
32,730
139,994

17,731
14,999
-

(5,132)
(10,000)
147,164

7,353

Balance at June 30, 2015

9,720,812

109,093

Balance at December 31, 2015

9,934,761

105,108

Advances for future capital increase - Stelo


Provision for loss on investment
Exchange differences on foreign investment
Dividends received:
Multidisplay
Cateno
Gain on share of profit of investees

9,540
(218,290)

9,240
(23,997)
-

(117)
(175,993)
156,309

4,480

Balance at June 30, 2016

9,706,210

94,831

Property and equipment


Parent Company
06/30/2016

POS equipment
Data processing equipment
Machinery and equipment
Facilities
Furniture and fixtures
Vehicles
Total

12/31/2015

Annual
depreciation
rate - %

Cost

Accumulated
depreciation

Net

Net

33
20
10 - 20
10
10
20

1,535,091
147,284
47,099
46,131
11,188
1,350

(1,064,419)
(81,352)
(41,077)
(3,864)
(3,806)
(1,114)

470,672
65,932
6,022
42,267
7,382
236

589,838
72,480
6,856
43,015
7,558
457

1,788,143

(1,195,632)

592,511

720,204

22

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Consolidated
06/30/2016

POS equipment
Data processing equipment
Machinery and equipment
Facilities
Furniture and fixtures
Vehicles
Total

12/31/2015

Annual
depreciation
rate - %

Cost

Accumulated
depreciation

Net

Net

33
20
10 - 20
10
10
20

1,536,279
180,786
61,461
69,681
15,914
1,448

(1,065,152)
(101,104)
(50,238)
(12,920)
(6,029)
(1,150)

471,127
79,682
11,223
56,761
9,885
298

590,593
86,669
9,522
54,949
9,255
529

1,865,569

(1,236,593)

628,976

751,517

Changes in property and equipment for the six-month periods ended June 30, 2016 and 2015 are
as follows:
Parent Company

12/31/2015

Disposals and
Allowance for
Additions
losses

Depreciation

06/30/2016

POS equipment
Data processing equipment
Machinery and equipment
Facilities
Furniture and fixtures
Vehicles

589,838
72,480
6,856
43,015
7,558
457

100,298
5,462
1,485
318
-

(44,163)
(125)

(175,301)
(12,010)
(834)
(2,233)
(494)
(96)

470,672
65,932
6,022
42,267
7,382
236

Total

720,204

107,563

(44,288)

(190,968)

592,511

Disposals
and
Allowance for
Additions
losses

Depreciation

06/30/2015

(181,337)

781,586

12/31/2014
Total

701,274

23

281,063

(19,414)

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

12/31/2015 Additions

Consolidated
Disposals
and
Allowance
for losses
Depreciation

Exchange
differences

06/30/2016

POS equipment
Data processing equipment
Machinery and equipment
Facilities
Furniture and fixtures
Vehicles

590,593
86,669
9,522
54,949
9,255
529

100,331
10,174
3,844
4,888
1,345
-

(44,249)
(1)
(1)
(125)

(175,495)
(14,586)
(1,637)
(3,076)
(660)
(106)

(53)
(2,574)
(506)
(54)
-

471,127
79,683
11,223
56,760
9,885
298

Total

751,517

120,581

(44,376)

(195,560)

(3,187)

628,976

12/31/2014 Additions

Disposals
and
Allowance
for losses

Depreciation

Exchange
differences

06/30/2015

(19,443)

(184,922)

(1,424)

807,506

Total

723,915

289,380

As at June 30, 2016 and December 31, 2015, an allowance for impairment of POS equipment of
R$47,024 and R$25,719, respectively, is recorded. Additionally, as at those dates, the Company
had borrowing agreements with the National Bank for Economic and Social Development
(BNDES - Finame) to acquire new POS equipment and did not have finance leases payable.

Intangible assets
Parent Company

a.

Consolidated

06/30/2016

12/31/2015

06/30/2016

12/31/2015

Goodwill on acquisition of investments


Other intangible assets

176,185

151,174

1,557,724
12,013,992

1,884,977
12,405,521

Total

176,185

151,254

13,571,716

14,290,498

Goodwill on acquisition of investments


As at June 30, 2016, the goodwill on acquisition of investments in subsidiaries is recognized in
line item Intangible assets in the consolidated statement of financial position, according to the
breakdown below:
Consolidated

Multidisplay
Braspag
Me-S
Total

24

06/30/2016

12/31/2015

30,772
35,583
1,491,369
1,557,724

31,348
39,343
1,814,286
1,884,977

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Changes in goodwill in the six-month periods ended June 30, 2016 and 2015 are as follows:
Consolidated
Balance as at December 31, 2014
Exchange differences
Reclassification of goodwill of Me-S
Balance as at June 30, 2015

1,112,623
207,364
191,938
1,511,925

Balance as at December 31, 2015


Exchange diferences
Reclassification of goodwill on tax benefit

1,884,977
(322,917)
(4,336)

Balance as at June 30, 2016

1,557,724

a.
There were no changes in the Parent Company goodwill balance in the periods presented.

b.

Other intangible assets


The breakdown of other intangible assets is as shown below:
Parent Company
06/30/2016

Software
Project development
Relationship with customers
Non-compete agreement
Service agreements

12/31/2015

Annual
amortization
rate - %

Cost

Accumulated
amortization

Net

Net

20
20
10
7.5
20

334,649
35,771
953
10,284
11,994

(177,914)
(18,647)
(707)
(8,204)
(11,994)

156,735
17,124
246
2,080
-

140,056
8,075
270
2,773
-

393,651

(217,466)

176,185

151,174

Total

Consolidated
06/30/2016

Software
Project development
Relationship with customers
Non-compete agreement
Service agreements
Trademarks
Exploitation Rights-Ourocard
Arrangements
Total

12/31/2015

Annual
amortization
rate - %

Cost

Accumulated
amortization

Net

Net

6.66 - 20
20
4 - 20
7.5 - 50
8 - 20
10

792,753
306,375
505,905
138,344
31,963
3,211

(345,661)
(205,656)
(167,674)
(82,486)
(17,561)
(3,211)

447,092
100,720
338,231
55,858
14,402
-

503,946
113,614
440,756
74,923
21,726
-

3.33

11,572,000

(514,311)

11,057,689

11,250,556

13,350,551

(1,336,560)

12,013,992

12,405,521

25

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Changes in intangible assets for the six-month periods ended June 30, 2016 and 2015 are as
follows:
Parent Company
12/31/2015

Additions

Amortizations

06/30/2016

Software
Project development
Relationship with customers
Non-compete agreement

140,056
8,075
270
2,773

38,647
10,717
-

(21,968)
(1,668)
(24)
(693)

156,735
17,124
246
2,080

Total

151,174

49,364

(24,353)

176,185

12/31/2014

Additions

Amortizations

06/30/2015

126,672

25,796

(17,670)

134,798

Total

Consolidated
Granting
of rights Disposals

12/31/2015

Additions

503,946
113,614

56,492
17,534

440,756
74,923
21,726

Transfers

Amortizations

Exchange
differences

06/30/2016

(1,892)
-

(49,686)
(13,430)

(61,768)
(16,998)

447,092
100,720

(27,774)
(8,577)
(858)

(74,751)
(10,488)
(6,466)

338,231
55,858
14,402

Software
Project development
Relationship with
customers
Non-compete agreement
Service agreements
Trademarks Exploitation
Right-Ourocard (b)

11,250,556

(192,867)

11,057,689

Total

12,405,521

74,026

(1,892)

(293,192)

(170,471)

12,013,992

12/31/2014

Additions

Granting
of rights Disposals

Transfers (a)

Amortizations

Exchange
differences

06/30/2015

1,206,992

49,028

(301,998)

(197,490)

125,157

12,453,179

Total

11,572,000

(510)

(a)

On June 30, 2015, other intangible assets balance was transferred to goodwill, related to the acquisition of Me-S and
recorded in subsidiary Cielo USA.

(b)

In the association between the Company and BB Elo Cartes, a wholly-owned subsidiary of Banco do Brasil, BB Elo
Cartes granted to Cateno the right to operate the payment account management activity of the Ourocard Payment
Arrangement which, based on a valuation study conducted by independente auditors, was appraised at R$11,572
million with definite useful life of 30 years. The amortization is recorded on a straight-line basis at the rate of 3.33%
per year.

Expenses on depreciation of property and equipment and amortization of intangible assets were
recognized in Cost of services provided and General and administrative expenses in the
statement of profit or loss.
The additional information in this note has not changed in relation to that disclosed in the
Company's financial statements as of December 31, 2015 and is being presented in note 9 and
10 to those financial statements.

26

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

10

Prepayment of receivables from card-issuing banks


The Company receives in advance receivables from card-issuing banks for transactions made by
cardholders, which will be transferred to merchants at the agreed settlement date. These
prepayments have an average collection period of approximately three business days and the
weighted average rate of financial charges as at June 30, 2016 is 101.79% of the DI - Interbank
Deposit rate (101.99% of the DI as at December 31, 2015).
The amounts due by credit cardholders through card-issuing banks and the amounts to be
transferred to merchants are recorded in memorandum accounts.
In the Parent Company and Consolidated, the balances of prepayment of receivables with card
issuers are R$183,000 as at June 30, 2016 and R$1,269,190 as at December 31, 2015.

11

Payables to merchants
Parent Company

Payables to merchants
Receivables from issuing banks
Transactions pending transfer (a)
Payables to merchants (b)
Merchant deposits (c)
Total

Consolidated

06/30/2016

12/31/2015

06/30/2016

12/31/2015

51,132,776
(50,547,331)
585,445
-

58,685,347
(57,793,449)
891,898
-

51,132,776
(50,547,331)
585,445
394,955
72,124

58,685,347
(57,793,449)
891,898
491,684
119,672

585,445

891,898

1,052,524

1,503,254

(a)

Transactions pending transfer - Transactions pending transfer refer 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 at June 30, 2016 and December 31,
2015 refers to a float of approximately two days.

(b)

Payables to merchants - Represented by amounts due to merchants by the subsidiary Me-S relating to transactions
captured and processed until the end of the reporting period. Such amounts are settled on the business day following
the date on which transactions are captured.

(c)

Merchant deposits - The subsidiary Me-S requires deposits from customers in order to hedge against the potential risk
of complaints from credit card holders due to fraud in the transaction or bankruptcy of the merchant.

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
guarantees accredited merchants that they will unconditionally receive the amounts of
transactions paid using credit cards. As described in note 27(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.

27

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

12

Borrowings
Interest rate
per year

Parent Company
06/30/2016

12/31/2015

Consolidated
06/30/2016

12/31/2015

FINAME

6.90%

296,182

384,431

296,182

384,431

Long-term financing - Ten-year bonds

3.75%

1,507,392

1,835,003

2,799,915

3,406,608

Private debentures

100% to 111% of DI

3,506,415

3,506,434

3,506,415

3,506,434

Public debentures

105.8% of DI

3,151,207

4,729,805

3,151,206

4,729,805

R&D financing (*)

4.0%
100% of Libor and
spread of 0.73% to 1%

58,656

58,663

58,656

58,663

1,001,285

1,213,552

1,001,285

1,213,552

Total

9,521,137

11,727,888

10,813,659

13,299,493

Current
Noncurrent

3,002,468
6,518,669

3,290,353
8,437,535

3,003,162
7,810,497

3,291,228
10,008,265

Total

9,521,137

11,727,888

10,813,659

13,299,493

Borrowing in foreign currency - operation 4131

(*) The Company has financial investments, recognized at amortized cost in noncurrent assets, remunerated at
101.00% of the Interbank Deposit (DI) rate in the amount of R$70,613 (R$66,124 as at December 31, 2015), pledged
as collateral for the borrowing.

The debt structure as well as the information related to borrowings and their covenants have not
changed in relation to the information disclosed in note 13 - Borrowings of the Company's

financial statements as of December 31, 2015.


The Company was compliant with the financial ratio related to the covenants of its borrowings
described above.
As at June 30, 2016, the Company had financial instruments designated as hedging instrument
to manage its exposure to fluctuations in interest rates and exchange rates, as mentioned in note
27 (f) and (g).
Changes in borrowings for the six-month periods ended June 30, 2016 and 2015 are as follows:
Parent Company
Balance at December 31, 2014

Consolidated

6,268,518

7,339,742

New borrowings
Payment of principal
Exchange differences (principal and interest)
Accrued interest and charges
Interest paid

8,839,422
(4,846,219)
215,542
325,178
(38,486)

8,839,422
(4,846,219)
395,787
344,264
(61,270)

Balance at June 30, 2015

10,763,955

12,011,726

Balance at December 31, 2015

11,727,888

13,299,493

New borrowings
Payment of principal
Exchange differences (principal and interest)
Mark-to-market
Accrued interest and charges
Interest paid

32,495
(1,653,865)
(547,311)
5,775
584,282
(628,127)

32,495
(1.653,865)
(828,695)
5,775
613,192
(654,736)

9,521,137

10,813,659

Balance at June 30, 2016

28

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Breakdown of borrowings recorded in noncurrent liabilities


Borrowings classified as noncurrent as at June 30, 2016 by maturity date are broken down
as follows:

13

Year of maturity

Parent
Company

Consolidated

2017
2018
2019
2020
2021
2022
2023
2024
Total

52,734
1,575,394
7,457
6,925
6,975
1,515,526
3,345,392
8,266
6,518,669

51,959
1,573,991
5,998
5,409
5,400
2,814,082
3,345,392
8,266
7,810,497

Taxes payable
Parent Company

14

Consolidated

06/30/2016

12/31/2015

06/30/2016 12/31/2015

Income tax and social contribution, net of


prepayments and withholding income tax
Tax on revenue (Cofins)
Service tax (ISS)
Tax on revenue (PIS)
Other taxes payable

531,595
19,259
6,541
7,340
11,442

103,762
26,899
7,233
9,136
11,162

529,167
21,712
13,313
7,971
14,444

192,799
41,883
14,375
12,495
14,181

Total

576,177

158,192

586,607

275,733

Other payables
Parent Company

Current liabilities:
Accrual for sundry expenses
Accrual for vacation and related charges
Profit-sharing
Other payables
Total
Noncurrent liabilities:
Other payables
Total

Consolidated

06/30/2016

12/31/2015

06/30/2016

12/31/2015

73,677
34,127
34,853
-

82,102
25,465
68,689
-

235,627
80,108
48,549
149,906

222,644
42,809
93,643
160,903

142,657

176,256

514,190

519,999

15,213

11,804

16,572

17,667

157,870

188,060

530,762

537,666

29

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

15

Provision for tax, civil and labor risks and escrow deposits

a.

Provision for tax, civil and labor 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 from its legal counsel, in the analysis of pending lawsuits
and past experience on the amounts claimed in labor, civil and tax lawsuits, recognized a
provision in an amount considered sufficient to cover probable future cash disbursements on
pending lawsuits in the six-month periods ended June 30, 2016 and 2015, as follows:
Parent Company

12/31/2015

Additions (i)

Write-offs/
reversals

Inflation
adjustment

Payments

06/30/2016

Tax
Civil
Labor

1,292,010
25,918
83,145

99,078
13,998
5,475

(275)
(2,267)

509
2,463
242

(5,495)
(430)

1,391,322
36,884
86,165

Total

1,401,073

118,551

(2,542)

3,214

(5,925)

1,514,371

12/31/2014

Additions (i)

Write-offs/
reversals

Inflation
adjustment

Payments

06/30/2015

1,205,427

109,759

(16,100)

2,168

(4,510)

1,296,744

Total

Consolidated

12/31/2015

Additions (i)

Write-offs/
reversals

Inflation
adjustment

Payments

06/30/2016

Tax
Civil
Labor

1,292,010
27,626
100,634

99,078
13,998
14,811

(275)
(452)
(5,278)

509
2,463
283

(5,495)
(430)

1,391,322
38,140
110,020

Total

1,420,270

127,887

(6,005)

3,255

(5,925)

1,539,482

12/31/2014

Additions (i)

Write-offs/
reversals

Inflation
adjustment

Payments

06/30/2015

1,223,633

112,361

(17,243)

2,180

(5,257)

1,315,674

Total

(i)

Refer mainly to the increase in the provision for tax risks for the six-month periods ended June 30, 2016 and 2015, relating to taxes with suspended
payment, recorded as an offsetting entry to Taxes on services and Other operating expenses, net, 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 an
offsetting entry to Other operating expenses, net, in the statement of profit or loss.

Tax lawsuits
The balances below refer to the provision for tax risks, arising from differences in
interpretation by tax authorities, and related escrow deposits:

30

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Main tax lawsuits (ii)

Provision for tax lawsuits


(Consolidated)
06/30/2016
12/31/2015

Escrow deposits
(Consolidated)
06/30/2016
12/31/2015

Noncumulative Cofins
Amazon Investment Fund (FINAM)
Social contribution (CSLL) 2002
Negative Balance of IRPJ of the calendar year 2008
Others

1,356,050
16,298
10,895
7,045
1,034

1,257,102
15,835
10,895
7,045
1,133

1,339,421
10,895
7,045
19,949

1,239,776
10,895
7,045
11,638

Total

1,391,322

1,292,010

1,377,310

1,269,354

(ii) The status of such tax lawsuits has not changed in the six-month period ended June 30, 2016 when compared with the 2015 Financial Statements
approved and published on February 1, 2016.

Based on the opinion of its legal counsel, the Management of the Company and its subsidiaries
estimates that the actual disbursement of the provision for tax risks will occur within 5 years and
understands that the development of the lawsuits will depend on external factors not under the
Companys control.

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.
Based on the opinion of its legal counsel, the management of the Company and its subsidiaries
estimates that the actual disbursement of the mentioned provision for civil risks will occur
within 5 years and understands that the development of the lawsuits will depend on external
factors not under the Companys control.
Additionally, as at June 30, 2016, the Company is a party to public civil lawsuits, most of
them filed by the Public Prosecution Office or professional organizations, whose intention is to
defend collective interests (such as consumers rights and labor rights). Court decisions may
grant rights to groups of people (even without their consent). In many situations, the groups
decision on availing a favorable outcome will only be made after the final decision.

Labor lawsuits
Refer to labor lawsuits that, as at June 30, 2016, included 318 claims against the Company
and 72 against the subsidiaries, totaling 390 claims. Of these claims, 143 were filed by former
employees, and the other remaining 247 claims 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. As a general
rule, only after the decisions of the higher or lower courts are 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
and effects of annual bonus, rights guaranteed by agreements between the employer and the
labor union, recognition of employment relationship, and pain and suffering.

31

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Based on the opinion of its legal counsel, the Management of the Company and its subsidiaries
estimates that the actual disbursement of 53.8% of the mentioned provision for labor risks will
occur within 5 years, and 46.2% within 10 years, and understands that the development of the
lawsuits will depend on external factors not under the Companys control.
Additionally, as at June 30, 2016, 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 recognized, as follows:
Parent Company

b.

Consolidated

06/30/2016

12/31/2015

06/30/2016

12/31/2015

Tax
Civil
Labor

85,708
94,689
84,403

83,534
83,260
81,725

90,004
94,689
110,305

113,939
83,260
102,147

Total

264,800

248,519

294,998

299,346

Escrow deposits
In the six-month periods ended June 30, 2016 and 2015, the Company and its subsidiaries have
escrow deposits related to the provision for tax, labor and civil risks, broken down as follows:
Parent Company

Tax
Civil
Labor
Total

Total

12/31/2015

Addition

Write-off

06/30/2016

1,266,231
5,991
23,981
1,296,203

108,255
83
2,293
110,631

(274)
(1,590)
(454)
(2,318)

1,374,212
4,484
25,820
1,404,516

12/31/2014

Addition

Write-off

06/30/2015

1,103,037

96,643

(886)

1,198,794

Consolidated
12/31/2015

Addition

Write-off

06/30/2016

Tax
Civil
Labor

1,269,354
6,043
27,058

108,255
83
3,605

(298)
(1,590)
(573)

1,377,311
4,536
30,090

Total

1,302,455

111,943

(2,461)

1,411,937

12/31/2014

Addition

Write-off

06/30/2015

1,108,475

97,221

(991)

1,204,705

Total

32

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

16
a.

Equity
Share capital
Capital as at June 30, 2016 is R$ 3,500,000 represented by 2,264,012,551 common shares (R$
2,500,000 represented by 1,886,677,126 as at December 31, 2015),
fully subscribed and paid in.
As mentioned in note 17, the number of shares, net of treasury shares as at June 30, 2016 is
2,258,567,830 (1,881,830,814 shares as at December 31, 2015).
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, according to the number
of shares already held, shareholders will have the preemptive right to subscribe for shares issued
in a capital increase, which shall be exercised until 30 days as from the publication of the
minutes of the Board of Director's meeting thatapproved the capital increase. 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 on stock exchanges, public subscription or upon exchange for shares,
in public offering for acquisition of control, within the authorized capital limit. The Board of
Directors may also resolve on any shares that remained unsubscribed in the capital
increaseduring 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 as at June 30, 2016 is R$61,983 (R$64,305 as at December 31, 2015).

c.

Treasury shares
On February 26, 2016, the Company's Board of Directors, pursuant to article 8, paragraph 3 of
CVM Instruction No. 567/15, approved the acquisition of up to 1,000,000 common shares,
without par value, issued by the Company itself, equivalent to approximately 0.13% of the
outstanding shares of the Company, to allow the exercise of the option or shares to be granted
under the Company's Stock Option Plan (Plan), approved and adopted in the Annual and
Extraordinary General Meetings held on 06/01/2009 and 04/29/2011, respectively, and for the
statutory directors and non statutory eligible according to the rules set out in the Plan, within
365 days from the disclosure of the significant event of the offering which communicated the
approval of the repurchase program. Moreover, these acquisitions of shares issued by the
Company itself are limited to the balance available in line item "Capital reserve" calculated
during the fiscal year, in compliance with articles 1 and 12 of Instruction 10/80.

33

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

The Company's Management is responsible for deciding when and what number of shares to
buy, within authorized limits.
Changes in treasury shares are as follows:
Parent Company and Consolidated

Shares

Amount

Average cost R$ per share

Balance at December 31, 2015


Sale in January 2016
Sale in February 2016
Repurchase in February 2016
Repurchase in March 2016
Sale in March 2016
Sale in April 2016
Balance on treasury shares before the bonus

(4,846,312)
32,966
255,158
(394,350)
(394,355)
113,005
5,491
(5,228,397)

(140,648)
957
7,405
(12,263)
(12,641)
3,322
161
(153,707)

29.02
29.02
29.02
29.19
29.40
29.40
29.40
29.40

Increase in treasury shares due to the bonus (*)


Sale in April 2016
Sale in May 2016
Sale in June 2016

(1,046,778)
147,468
653,943
29,043

3,613
16,018
711

24.49
24.49
24.49

Balance at June 30, 2016

(5,444,721)

(133,365)

24.49

(*)

Bonus: New common shates were issued and one new common share for each lot of five common shares was freely
assigned to shareholders , as bonus, generating total effect of 1,046,778 new shares.

d.

Comprehensive income
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. The balances below reflect accumulated adjustments at the end of the reporting
period, as follows:
Parent Company and
Consolidated

Exchange differences on foreign investments


Gains (losses) on hedging instruments (bonds) on foreign operations, net of taxes
Gains (losses) on hedging instruments (NDF) on foreign operations, net of taxes
Total

e.

06/30/2016

12/31/2015

374,540
(353,195)
(10,645)

592,829
(568,783)
(10,645)

10,700

13,401

Earnings reserve - legal


Recognized with amounts corresponding to 5% of profit for the period, pursuant to article 193
of Law 6404/76, up to the limit of 20% of capital. The legal reserve balance is R$599,228 as at
June 30, 2016 (R$500,000 as at December 31, 2015).

34

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

f.

Earnings reserve - capital budget


During the Board of Directors meeting held on February 1, 2016, the financial statements were
submitted together with the capital budget proposed in connection with the year ended
December 31, 2015, which was submitted for approval at the Annual General of Meeting of
Shareholders held on April 8, 2016. The capital budget consists of the equivalent of 68.4% of
the total income earned in fiscal year 2015, net of the legal reserve and the balance withheld in
the capital budget referring to financial year 2014. The capital budget proposal is justified by the
need to strengthen the working capital and assure greater robustness and financial stability to the
Company and facilitate the financing of is operations, especially the acquisition of sale
receivables (ARV), and provide funds for an eventual repurchase of the Company shares.
As per the minutes of the Extraordinary General Meetings held on April 8, 2016, a
capital increase of the Company in the amount of R$1,000,000 from the capital budget reserve
balance was approved.
The capital budget reserve balance as at June 30, 2016 is R$2,583,619 (R$3,583,619 as at
December 31, 2015).

g.

Dividends and interest on capital


Under the Companys bylaws, shareholders were entitled to a minimum dividend of 30% of
profit after the recognition of the legal reserve of 5% of profit for the year until the reserve
equals 20% of the capital, as provided for in the Corporate Laws article 202.
The allocation of the remaining balance of profit for the year will be decided at the Annual and
Extraordinary General 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 the bylaws, the Company may prepare semiannual or shorter period statements of
financial position and, based on them, in accordance with the limits provided for in applicable
law, the Board of Directors may approve the distribution of dividends from the profit account.
The Board of Directors may also declare interim dividends from the existing profit account
based on the latest statement of financial position approved by the shareholders.
On February 1, 2016, the Board of Directors approved, subject to agreement by the Annual and
General Meeting held on April 8, 2016, the proposal for payment of dividends and interest on
capital, totaling R$401,538 and R$139,400, respectively, referring to the profit accrued in the
second half of 2015 and paid on March 31, 2016, which, together with the dividends and
interest on capital of R$524,785 paid in September 2015, correspond to a distribution of 31.6%
of the profit earned in 2015 after the recognition of the legal reserve.
As at June 30, 2016, provisions for minimum mandatory dividends and interest on capital for
the first half of 2016 were recorded in the amount of R$374,366 and R$238,000 (R$202,300,
net of withholding income tax), respectively, in line item Dividends payable in individual and
consolidated interim accounting information, whose approval for payment on September 30,
2016 was given by the Companys Board of Directors at the Annual General Meeting held on
August 1, 2016.

35

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

17

Earnings per share

a. Change in the number of common shares

(*)

Shares issued

Common

Shares at December 31, 2015


Exercise of stock options:
January 2016
February 2016
Repurchase in February 2016
Repurchase in March 2016
March 2016
April 2016
Effect of bonus shares (*)
April 2016
May 2016
June 2016

1,881,830,814

Total

2,258,567,830

32,966
255,158
(394,350)
(394,355)
113,005
5,491
376,288,648
147,467
653,943
29,043

Bonus: New common shates were issued and one new common share for each lot of five common shares was freely
assigned to shareholders, as bonus, generating total effect of 1,046,778 new common shares.

Earnings per share


In compliance with CPC 41 - Earnings per Share, the following tables reconcile the profit and
the weighted average number of outstanding shares with the amounts used to calculate the basic
and diluted earnings per share.

Basic earnings per share


Parent Company and Consolidated
Three-month period

Profit for the quarter available for common shares


Weighted average number of outstanding common shares (in
thousands)
Earnings per share (in R$) - basic

Six-month period

06/30/2016

06/30/2015

06/30/2016

06/30/2015

989,167

869,448

1,984,556

1,781,297

2,258,401

2,256,756

2,258,771

2,258,160

0.43799

0.38526

0.8786

0.78883

Diluted earnings per share


Parent Company and Consolidated
Three-month period
Six-month period
06/30/2016
06/30/2015
06/30/2016
06/30/2015
Profit for the quarter available for 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

989,167

869,448

1,984,556

1,781,297

2,258,401
4,647

2,256,756
6,076

2,258,771
4,647

2,258,160
6,076

Total (in thousands)

2,263,048

2,262,832

2,263,418

2,264,236

0.43709

0.38423

0.87680

0.78671

Earnings per share (in R$) - diluted

36

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

18

Net revenue
Parent Company

Three-month period

Consolidated

Six-month period

Three-month period

Six-month period

06/30/2016

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

Taxes on services

2,001,471
(202,254)

1,909,308
(192,502)

4,032,324
(406,752)

3,802,578
(383,387)

3,377,657
(308,633)

3,078,642
(282,861)

6,727,416
(610,494)

5,665,173
(517,628)

Total

1,799,217

1,716,806

3,625,572

3,419,191

3,069,024

2,795,781

6,116,922

5,147,545

Gross operating revenue

The gross operating revenue is derived from the capture, transmission, processing and financial
settlement of the transactions made with credit and debit cards, management of payment
accounts related to Ourocard Payment Arrangement, rental of POS equipment, and provision of
services for using the network.

19

Expenses by nature
The Company elected to present the consolidated statement of profit or loss by function.
The breakdown of cost of services provided and net operating expenses by nature is as follows:
Parent Company
Three-month period
Six-month period

Consolidated
Three-month period
Six-month period

06/30/2016 06/30/2015 06/30/2016 06/30/2015 06/30/2016 06/30/2015 06/30/2016 06/30/2015


Personnel expenses
Depreciation and
amortization
Professional services
Acquiring costs (a)
Sales and marketing (b)
Costs of mobile phone
credits in subsidiaries (c)
Others

110,695

100,016

217,085

201,842

187,921

167,590

370,003

324,941

105,939
105,414
440,432
82,333

102,610
87,687
408,171
67,512

215,321
208,260
867,316
140,625

199,007
170,288
807,116
121,638

241,147
120,722
1,118,824
85,596

225,964
87,832
975,589
70,346

488,751
241,135
2,197,295
146,644

382,412
174,930
1,706,977
125,387

20,446

25,904

40,922

60,069

190,217
19,206

104,234
38,067

332,907
76,741

191,654
88,673

Total

865,259

791,900

1,689,529

1,559,960

1,963,633

1,669,622

3,853,476

2,994,974

548,920
73,412

512,088
61,579

1,093,341
141,045

1,018,478
124,278

1,516,907
135,159

1,302,763
115,563

2,979,840
261,612

2,296,133
222,052

98,505
82,332

95,886
67,512

200,190
140,625

186,583
121,638

141,331
85,596

121,320
70,346

287,844
146,644

236,184
125,387

62,090

54,835

114,328

108,983

84,640

59,630

177,536

115,218

865,259

791,900

1,689,529

1,559,960

1,963,633

1,669,622

3,853,476

2,994,974

Classified as:
Cost of services provided
Personnel expenses
General and administrative
expenses
Sales and marketing
Other operating expenses,
net
Total
(a)

Acquiring 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.

(b)

Sales and marketing and sales expenses include campaigns for trademark development, advertising and marketing, internal marketing and sales
incentives to partners and issuing banks.

(c)

Refer to the cost of the product sold related to the credit minutes for cell phones sold by the direct subsidiary Multidisplay.

37

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

20

Other operating expenses, net


Represented by:
Parent Company
Three-month period

Consolidated

Six-month period

Three-month period

Six-month period

06/30/2016

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

(28,531)

(41,902)

(56,190)

(82,974)

(45,605)

(49,988)

(84,236)

(91,059)

(8,325)

(152)

(17,206)

(426)

(12,800)

3,133

(23,531)

2,425

(26,669)

(13,167)

(43,284)

(18,867)

(26,670)

(13,167)

(43,285)

(18,966)

(23,997)

(7,839)

Allowance for doubtful


debts
Provision for risks, net
Write-off provision for loss
on property and equipment
Provision for loss on
investments (a)
Expenses on strategic
projects (b)
Others
Total

(392)

(7,839)

(392)

1,435

778

2,352

1,123

435

784

(2,487)

221

(62,090)

(54,835)

(114,328)

(108,983)

(84,640)

(59,630)

(177,536)

(115,218)

(a)

In the six-month period ended June 30, 2016, the Company recognized a provision for impairment loss related to the
investment in Stelo, through its subsidiary Aliana.

(b)

Expenses on investment banks and attorneys fees related to the strategic project of creating Cateno in association
with BB ELO Cartes, a wholly-owned subsidiary of Banco do Brasil S.A.

21

Commitments
The Company is engaged in the capture, transmission, processing and financial settlement of
transactions made using credit and debit cards. In order to conduct said activities, the Company
entered into the following agreements:

a. Lease agreements
As at June 30, 2016, future annual payments under lease agreements in effect are
estimated as follows:
Consolidated

Up to 1 year
1 year to 5 years

14,979
33,551

Total

48,530

Most agreements specify a penalty for termination equivalent to three-month rent, and a partial
return can be negotiated for each case.

b. Suppliers of telecommunications, technology (processing of transactions), logistics


services, call center and back office
As at June 30, 2016, based on prevailing contracts, the minimum commitments with
suppliers of technology, telecommunications, logistics services, call center, back office and
telesales are as follows:

38

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Consolidated
Up to 1 year
1 year to 5 years

212,598
599,644

Total

812,242

The call center contracts contain penalties for termination in the amount of R$11,053. The
transaction capture and processing contracts, as well as the telecom contracts and back office,
do not provide for penalty for termination.

22

Employee benefits
Pension plan
The Company and its subsidiary Servinet contribute monthly to a defined contribution pension
plan (PGBL) for their employees, and contributions made during the six-month period ended
June 30, 2016 amounted to R$4,323 (R$5,544 during the six-month period ended June 30,
2015), recognized in line items Cost of services provided and Personnel expenses.

Others benefits
Besides the benefit of pension plan the Company and its subsidiaries offer their employees,
health insurance, dental care, life and personal accident insurance and professional training, the
amount of these expenses totaled R$27,311 in the six-month period ended June 30, 2016
(R$23,463 in the six-month period ended June 30, 2015).
The Company has a Corporate Education Program that aims to leverage learning, ensuring the
mapping and the dissemination of key knowledge through practical and educational activities
that encourage the creation, acquisition, dissemination, use and sharing of knowledge, focusing
on business results. In addition, in the Company, there is development of actions for all
employees, for example, leadership development, e-learning, contract training, on-demand
training, continuing education and languages. The costs related to the actions described are
recognized in profit or loss when incurred.

23

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 fiscal year.
The shares of employees and managers in profit for the six-month periods ended June 30, 2016
and 2015 were recorded under "Personnel expenses" in the statement of profit or loss and are
presented as follows:
Parent Company
Three-month period
Six-month period

Employees
Statutory Directors
Total

Consolidated
Three-month period
Six-month period

06/30/2016

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

13,829

13,428

27,786

26,294

18,716

18,597

37,265

35,788

3,651

3,537

7,067

6,683

3,899

3,780

7,479

7,168

17,480

16,965

34,853

32,977

22,615

22,377

44,744

42,956

39

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

24

Compensation of key management personnel


Key management personnel include the members of the Board of Directors and the officers.
Expenses recognized in profit for the periods are as follows:

Statutory Directors
Board of Directors
Total

Three-month period
06/30/2016
Fixed Variable (*)
Total

Six-month period
06/30/2016
Fixed Variable (*)

2,706
515
3,221

4,510
975
5,485

2,728
2,728

5,434
515
5,949

Three-month period

Statutory Directors
Board of Directors
Total
(*)

5,774
5,774

Total
10,284
975
11,259

Six-month period

Fixed

06/30/2015
Variable (*)

Total

Fixed

06/30/2015
Variable (*)

Total

1,586
487
2,073

2,764
2,764

4,350
487
4,837

3,450
897
4,347

5,468
5,468

8,918
897
9,815

Not including the stock option plan (see note 25).

Management (Executive Committee and Board of Directors) and the Fiscal Council overall
compensation in 2016, set by the Annual General Meeting held on April 8,
2016, was R$46,458, plus related taxes and contributions thereon, as prescribed by the
prevailing laws.
For the Fiscal Council, annual compensation approved for the year ended December 31, 2016
and 2015 was R$515 and R$547, respectively.

25

Stock option plan and restricted shares


As at June 30, 2016, the position of the stock option plan and stock option plans of restricted
shares was as follows:
Number of shares
Grant
date

July 2011
July 2012
July 2013
July 2014
March 2015
July 2015
March 2016
(*)

Total

Granted

Canceled

Exercised

Bonus

Balance

2012

2013

2014

2015

2016

Exercise
price
(R$ per
share)

Fair value
of options
(R$ per
share)

1,315,854
986,475
1,049,141
1,561,552
178,492
557,354

(276,942)
(183,624)
(266,809)
(171,667)
(27,516)

(2,409,103)
(2,002,462)
(1,137,964)
(244,939)
(27,135)
(41,823)

262,413
-

273,433
188,945
-

836,145
1,047,455
989,734
-

54,395
254,514
370,317
303,607
-

25,785
107,483
263,000
311,729
34,971
105,050

81,980
398,786
1,267,419
1,760,282
186,328
593,065

7.54
12.87
15.03
22.65
-

3.01
5.29
7.00
10.44
23.49
34.59

235,535
5,885,415

(914,329)

(24,250)
(5,894,756))

262,413

462,579

2,866,756

983,049

47,109
895,127

258,394
4,546,254

26.48

(*) In a meeting of the Board of Directors held on January 27, 2016, the plan Scio Cielo 2016 - "Restricted shares", granted in
March of the same year, was approved.

40

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

In the six-month period ended June 30, 2016, a provision of R$16,325 was recognized, net of
charges (R$11,530 in the six-month period ended June 30, 2015), with an offsetting entry to line
item Personnel expenses. These amounts correspond to the portion of Statutory Directors in
the amount of R$9,949 net of charges (R$4,883 as at June 30, 2015).
1,237,073 shares were exercised, in amount of R$18,647 for the six-month period ended June
30, 2016 (690,498 shares amounting to R$14,145 for the six-month period ended June 30,
2015), and the total stock options granted which was recorded in line item Capital reserve in
equity, as at June 30, 2016, in the amount of R$2,322 (R$2,615 as at June 30,
2015).

26

Finance income
Parent Company
Three-month period

Consolidated

Six-month period

Three-month period

Six-month period

06/30/2016

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

Finance income:
Interest on short-term investments
Other finance income
Pis and Cofins on finance income (b)

7,171
1,070
(386)

2,641
639
-

36,020
1,535
(1,749)

53,365
1,248
-

42,030
1,234
(2,014)

23,165
715
-

102,929
1,947
(4,866)

75,628
1,343
-

Total

7,855

3,280

35,806

54,613

41,250

23,880

100,010

76,971

Finance costs:
Late payment interest and fines
Provision for risks fines and interest
Withholding income tax on interest
remittance abroad
Interest on borrowings
Other finance costs

(28)
(1,353)

(24)
(363)

(54)
(3,260)

(116)
(1,482)

(31)
(1,377)

(53)
(369)

(78)
(3,301)

(171)
(1,494)

(2,703)
(266,510)
(5,352)

(2,735)
(283,902)
(5,678)

(6,257)
(579,106)
(10,233)

(5,002)
(452,462)
(9,779)

(2,703)
(280,212)
(5,631)

(2,735)
(291,825)
(6,518)

(6,257)
(608,017)
(11,076)

(5,002)
(471,547)
(11,536)

Total

(275,946)

(292,702)

(598,910)

(468,841)

(289,954)

(301,500)

(628,729)

(489,750)

Income from purchase of receivables:


Revenue from purchase of receivables (a)
Pis and Cofins on finance income (b)
Cost of funding with third parties (c)

678,986
(31,529)
(43,151)

561,697
(68,077)

1,364,523
(62,848)
(73,333)

1,085,811
(129,277)

678,252
(31,530)
(43,151)

561,697
(68,077)

1,363,146
(62,848)
(73,333)

1,085,811
(129,277)

Total

604,306

493,620

1,228,342

956,534

603,571

493,620

1,226,964

956,534

(3,114)

1,344

(5,241)

3,568

(3,037)

1,354

(5,159)

3,594

333,101

205,542

659,997

545,874

351,830

217,354

693,086

547,349

Exchange differences, net (d)


Total
(a)

Revenue from purchase of receivables net of pro rata temporis adjustment for the three and six-month periods ended June 30, 2016 and 2015
comprises revenue from the purchased volume of transactions with credit in cash and installment sales, recognized according to the maturity dates of
the transactions.

(b)

Expenses on Pis and Cofins on finance income earned by the Group companies, subject to the non-cumulative taxation regime, at the rates of 0.65%
and 4%, respectively, as laid down in Decree 8426/15, effective July 1, 2015. The expenses incurred in the period were recognized as Finance
Income and Income from Purchase of Receivables, in the proportion of their levy, for better presentation of the line items.

(c)

Financial charges arising from funding with third parties to undertake transactions related to purchase of receivables. Funding for the six-month period
ended June 30, 2015 was partially in the form of Promissory Notes issued on December 29, 2014 and fully redeemed on April 13, 2015, funds from
Bank of Tokyo-Mitsubishi UFJ, Ltd. and transactions related to advances on the flow of receivables with issuers. Cost of funding with third parties was
recognized in line item Revenue from Purchase of Receivables in order to reflect better the net effect of purchase of receivables in the individual and
consolidated interim financial information.

(d)

Derives substantially from the exchange variation related to two borrowings in U.S. dollars in the amounts of US$204,625 thousand and US$109,016
thousand, equivalent to R$630,000 and R$370,000 at the contracting dates respectively, both maturing on December 19, 2016 taken from Bank of
Tokyo-Mitsubishi UFJ, Ltd and variation of financial instruments contracted to hedge these transacations, represented by:

41

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Parent Company
Three-month period

Exchange differences, net:


Revenues
Expenses
Total

27

Consolidated
Six-month period

Three-month period

Six-month period

06/30/2016

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

06/30/2016

06/30/2015

45,221
(48,335)

1,344
-

88,950
(94,191)

3,568
-

45,313
(48,350)

1,362
(8)

89,051
(94,210)

3,607
(13)

(3,114)

1,344

(5,241)

3,568

(3,037)

1,354

(5,159)

3,594

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,
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 that aim at obtaining
liquidity, profitability and security. 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 either in 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 capital structure consists of its equity and net debt (borrowings less cash and cash
equivalents, derivative financial instruments and financial investments).
The subsidiary Cateno complies with a minimum equity, under the BACEN regulations,
corresponding to 2% of the monthly average of the payment transactions within the scope of the
Ourocard Payment Arrangement. There is no requirement for compliance with a minimum
equity for the other Group companies. From the granting of the authorization to operate as a
Payment Institution by the BACEN, the parent company Cielo will be subject to compliance
with the regulations, which include, but not limited to, risk management, minimum equity, and
compliance with requirements similar to those applicable to a Financial Institution.

42

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

The indebtedness ratio at the end of the period is as follows:


Parent Company

Consolidated

06/30/2016

12/31/2015

06/30/2016

12/31/2015

Debt (i)
Derivative financial instruments (ii)
Cash and cash equivalentes
Financial investments

(9,521,137)
(1,606)
10,846
70,613

(11,727,888)
213,314
44,487
66,124

(10,813,659)
(1,606)
1,228,552
70,613

(13,299,493)
213,314
1,249,524
66,124

Net debt

(9,441,284)

(11,403,963)

(9,516,100)

(11,770,531)

7,895,127

6,520,677

11,546,278

10,163,967

119.58%

174.89%

82.42%

115.81%

Equity (iii)
Indebtdness ratio net
(i)

Debt is defined as short- and long-term borrowings, as described in note 12.

(ii)

Derivative financial instruments comprise the position of the swap contracts, mentioned in item g - Fair value hedge.

(iii)

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
receivables, receivables from related parties, escrow deposits, derivative financial instruments,
financial investments, trade payables, payables to merchants and related parties and borrowings.
The estimated fair values of financial instruments as at June 30, 2016 are as follows:
06/30/2016
Parent Company

Type
Cash and cash equivalents
Trade receivables
Receivables from related parties
Escrow deposits
Financial investments
Trade payables
Payables to merchants
Payables to related parties
Derivative financial instruments (Swap)
Borrowings
Borrowings

Fair value through profit or loss


Loans and receivables
Loans and receivables
Loans and receivables
Held-to-maturity
Other financial liabilities
Other financial liabilities
Other financial liabilities
Fair value through profit or loss
Loans and receivables
Fair value through profit or loss

Consolidated

Carrying
amount

Fair
value

Carrying
amount

Fair
value

10,846
8,829,436
2,890
1,404,516
70,613
603,914
585,445
19,673
1,606
8,519,852
1,001,285

10,846
8,829,436
2,890
1,404,516
70,613
603,914
585,445
19,673
1,606
8,699,220
1,001,285

1,228,552
9,765,395
656
1,411,937
70,613
739,185
1,052,524
2,856
1,606
9,812,373
1,001,285

1,228,552
9,765,395
656
1,411,937
70,613
739,185
1,052,524
2,856
1,606
9,958,482
1,001,285

The fair value of financial assets and financial liabilities and short- and long-term borrowings
was determined, when applicable, by using current interest rates available for transactions
conducted under similar conditions and with similar maturity dates.
The Company applies CPC 40 for financial instruments measured at fair value in the statement
of financial position, which requires disclosure of fair value measurements at the following fair
value measurement hierarchy:

43

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

Inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

Inputs for the asset or liability that are not based on data adopted by the market (that is,
unobservable inputs) (Level 3).
The following table presents the Groups assets and liabilities as at June 30, 2016:
Parent Company

Consolidated

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

10,846
-

70,613
10,236,842

1,228,552
-

70,613
11,177,988

Liabilities:
Borrowings

9,521,137

10,813,658

Others (other financial liabilities)


Derivative financial instrument (swap)

1,209,032
1,606

1,794,565
1,606

Assets:
Cash and cash equivalentes
Derivative financial instrument (swap)
Financial investments
Others (loans and receivables)

c. Credit risk
In Cielos operations of merchant acquiring, the primary risk refers to the possibility of default
of card issuers, which are required to transfer to Cielo the amounts charged relating to
transactions carried out by holders of the cards issued by them, so that Cielo can then transfer
these amounts to its affiliated establishments. This primary risk is substantially mitigated by the
very legal-financial model of transferring amounts adopted by Cielo, since the amounts already
paid by the holders to an issuer that may become in default will always be treated as third-party
funds and, as such, should be transferred to Cielo and, then, from Cielo to the commercial
establishment - the end creditor of the transaction.
Cielos model of transferring amounts substantially mitigates the risk of default of the card
issuers, also remaining a residual risk to Cielo relating to the possible default of cardholders to
the issuer in a situation of default. This residual risk may or may not exist for Cielo depending
on the risk/guarantee model adopted by the card Brand on its operation with the card issuers and
acquirers.
Each branch has its own guarantee system, which is specified in its regulations. Considering the
variation of the guarantee model and the risk level of the accrediting entities, the Company
assesses and manages such risks according to the model of each brand, requiring or waiving the
provision of guarantees.
Note that even with this model of hedging provided by the Brand, in any situation of default of
any card issuer, Cielo will always resort primarily to its legal-financial model of transferring
amounts for the prompt recovery of amounts received or that come to be received from
cardholders by the card issuer.

44

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

The Company has rights subject to credit risk with financial institutions recorded in line items
of cash and cash equivalents, financial investments, derivative financial instruments and
receivables from issuing banks, totaling R$8,910,895 in the Parent Company and
R$11,064,560 in Consolidated.

d. Fraud risk
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. Transactions with derivative financial instruments


Policy on the use of derivatives
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
offsetting entry to a derivative transaction should be an unhedged asset or liability.
The criterion 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.

f. 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
(technical interpretation ICPC 06 - Hedge of Net Investments in Foreign Operations), issued in
July 2008, and on standard IAS 39 (technical pronouncement 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 to hedge against the risk of foreign currency fluctuations. The
value of the designated financial instrument, 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 accounted for in accordance with CPC 38 and IAS 39 Financial Instruments: Recognition and Measurement. Accordingly, the Company formally
designated the transactions by documenting the: (i) purpose of the hedge; (ii) type of the hedge;
(iii) nature of the hedged risk; (iv) identification of the hedged item; (v) identification of the
hedging instrument; (vi) demonstration of the relationship between the hedge and the hedged
item (retrospective effectiveness test); and (vii) prospective demonstration of effectiveness.
The adoption of the effectiveness tests confirmed the effectiveness of the financial instrument;
accordingly, for the six-month period ended June 30, 2016, there was no ineffectiveness
recognized in profit or loss from net investment hedges in Cielo USA; consequently, gains or
losses on these transactions were fully recognized in the Companys equity.

45

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

g. Fair value hedge


The Company, upon contracting of Swap Financial Instrument based on Technical
Pronouncement CPC 38 (Financial Instruments: Recognition and Measurement) corresponding
to the International Accounting Standard 39 (Financial Instruments: Recognition and
Measurement), designated it as hedging instrument for the borrowing from Bank of TokyoMitsubishi UFJ, Ltd. in the amount of US$313,641 thousand, equivalent to R$1,000,000
maturing on 12/19/2016, to hedge against the risk of foreign currency fluctuations and exposure
to Libor interest rates.
As at June 30, 2016 and December 31, 2015, the individual and consolidated position of
Swaps is as follows:
06/30/2016
Valuation

12/31/2015
Fair value
(market)

Amount
receivable/
(payable)

Amount
receivable/
(payable)

Maturity
date

Notional
R$

Long
position

Swap floating rate in US$ (114.2857%


Libor + 0.8343% p.a.) vs. floating rate
in R$ (99.4% of DI)

12/19/2016

630,000

27,064

(2,633)

(3,330)

21,101

160,789

Swap floating rate in US$ (114.2857%


Libor + 1.1429% p.a.) vs. floating rate
in R$ (99.4% of DI)

12/19/2016

370,000

(19,911)

(1,546)

(1,250)

(22,707)

52,525

1,000,000

7,153

(4,179)

(4,580)

(1,606)

213,314

(1,606)

213,314

Total
Current assets

Short
MTM
position Adjustment

Fair value
(market)

The terms of the borrowing and swap agreements were entered into so that the comparison
between the swaps long position (Companys accounts receivable) and the borrowing balance
(Companys accounts payable), both adjusted at fair value, does not present losses or gains
deriving from contracted foreign exchange and interest rate variation for hedged item.
Accordingly, the Company remains exposed only to swaps short position, which has notional
value in reais in the amount of R$1,000,000 remunerated at 99.4% of the daily average interest
rate of the DI - Interbank Deposits.
In order to document the adopted designation strategy and the effectiveness of the derivative
financial instrument, the Company used the hypothetical derivative method, which is based on a
comparison of change in the fair value of a hypothetical derivative with terms identical to the
critical terms of the variable-rate liability, and this change in the fair value is considered a
representation of the present value of the cumulative change in the future cash flow expected for
the hedged liability. Accordingly, gains and losses on the hedging instrument and the hedged
item are recognized at fair value in profit or loss for the period in which they arise.
The method used by the Company to determine the market value consists in calculating the
future value based on contracted conditions and determine the present value based on market
curves extracted from BM&F BOVESPA.
As at June 30, 2016, the hedging relationships established by the Company were effective,
according to prospective tests conducted. Thus, no reversal for hedge accounting ineffectiveness
was recognized.

46

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

h. Foreign exchange rate risk


The Group conducts a few transactions in foreign currency, mainly represented by transactions
performed by foreign credit card holders in merchants in Brazil. In addition, 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 dlar
(functional currency).
The exposures to foreign exchange rate risks are managed in accordance with the criteria set by
the policies approved using currency futures contracts.
As at June 30, 2016, the net exposure to foreign exchange rate risk, in thousands of US
dollars, is as follows:
Parent Company

Consolidated

Assets:
Cash and cash equivalents
Trade receivables
Other assets
Investments in foreign currency
Property and equipment
Intangible assets, including goodwill

1,296
312,794
-

81,708
154,882
4,767
5,251
708,745

Total

314,090

955,353

Liabilities:
Payables to merchants
Other liabilities
Foreign borrowings - principal
Foreign borrowings - interest
Foreign borrowings - charges
Deferred income tax
Tax effect on hedging instruments - bonds designated as hedge of the net foreign investment

(218)
(470,000)
(2,203)
159,800

(145,734)
(15,585)
(875,000)
(2,831)
2,948
(77,482)
159,800

Total

(312,621)

(953,884)

1,469

1,469

Long (short) position - US dollar

The Company enters into forward exchange transactions for US dollars to hedge against
fluctuations in exchange rates, which reduces significantly potential currency risks.

Foreign currency sensitivity analysis


The Group is mainly exposed to US dollar fluctuations.
Sensitivity analysis includes only monetary items outstanding and denominated in foreign
currency and adjusts translation at the end of each reporting period for a change of 10%, 25%
and 50% in exchange rates. The sensitivity analysis includes borrowings from third parties when
they are denominated in a currency different from that of the creditor or debtor. As at June
30, 2016, estimating the increase or decrease by 10%, 25% and 50% in exchange rates, there
would be an increase or decrease in profit or loss and equity, in thousands of Brazilian reais
(R$), as follows:
Parent Company and Consolidated

Profit or loss (i)


Equity (i)

Problable
scenario
10%

Possible
scenario
25%

Remote
scenario
50%

361
(471)

902
(1,179)

1,805
(2,357)

(i) Refers mainly to the exposure of trade receivables and trade payables in US dollars at the end of each reporting

period.

47

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

i. Interest rate risk on financial investments


The Companys results of operations are subject to significant fluctuations resulting from
financial investments with floating interest rates. Pursuant to its financial policies, the Company
invests its funds in prime banks. The Company operates with financial instruments within the
limits of approval established by Management.

j. 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.

k. Interest rate sensitivity analysis - Financial investments and borrowings


Income from financial assets and interest arising from the Company's borrowings are mainly
affected by variations in DI rate (source: Cetip). As at June 30, 2016, the balances exposed to
variations in DI rate are R$77,793 for Parent Company and R$1,033,516 for Consolidated
referring to financial investments and R$7,658,907 for Parent Company and Consolidated
referring to borrowings. Estimating an increase or a decrease of 10%, 25% and 50% in interest
rates would increase or decrease revenues or expenses as follows:
Parent Company

Financial investments
Borrowings

28

Consolidated

Probable
Scenario
10%

Possible
Scenario
25%

Remote
Scenario
50%

Probable
Scenario
10%

Possible
Scenario
25%

Remote
Scenario
50%

3,602
57,911

9,005
144,776

18,010
289,553

10,293
60,802

25,732
152,004

51,464
304,008

Related-party balances and transactions


In the normal course of activities and under market conditions, the Company, its subsidiaries
and associate conduct transactions with related parties, such as receivables (related to operations
of purchase of receivables) from card-issuing banks, which are the financial groups in which its
controlling shareholders, Banco Bradesco S.A. and Banco do Brasil, hold interests, as well as
expenses and income from services provided by Servinet, Orizon, Multidisplay, M4Produtos,
Cateno, Braspag, Paggo Solues Aliana and Stelo.
In conducting its business and engaging services, the Company and its subsidiaries make market
quotations and surveys intended to find the best technical and pricing terms. Also, the type of
business conducted by the Company requires it to enter into agreements with several
cardissuing entities, some of which are its direct and indirect shareholders. The Company and its
subsidiaries believe that all the agreements entered into with related parties are carried out on an
arms-length basis.
The tables below include the balances as at June 30, 2016 and December 31, 2015, by type of
agreement, shareholders and subsidiaries, of transactions with related parties conducted by the
Company, its subsidiaries and associate related to the six-month periods ended June 30, 2016
and 2015:

48

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Parent Company
06/30/2016
Shareholders

12/31/2015

Subsidiaries, Joint Ventures and Associate

Banco
Bradesco

Banco do
Brasil

Servinet

Orizon

Multidisplay

M4Produtos

Paggo

Braspag

Cateno

1,070

7,583

8,653

13,550

3,278
-

1,780
(3,506,415)
-

(15,144)

34
-

1,221
-

906
(978)

9
-

69
(481)

38
-

613
(2,856)

(214)

5,058
(3,506,415)
2,890
(19,673)

5,892
(3,506,434)
1,587
(17,808)

Assets (Liabilities):
Cash and cash
equivalents (a)
Trade receivables
Borrowings (f)
Receivables from related parties
Payables to related parties

Stelo

Aliana

Total

Total

Consolidated
06/30/2016
Shareholders

Assets (Liabilities):
Cash and cash equivalents (a)
Trade receivables
Borrowings (f)
Receivables from related
parties
Payables to related
parties

12/31/2015

Subsidiaries, Joint Ventures and Associate

Banco Bradesco

Banco do Brasil

Servinet

Orizon

Multidisplay

M4Produtos

Paggo

Braspag

Cateno

7,358
3,278
-

8,784
1,780
(3,506,415)

34

49

Stelo

Aliana

Total

Total

16,142
5,058
(3,506,415)

289,631
5,892
(3,506,434)

613

656

459

(2,856)

(2,856)

(398)

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Parent Company
Six-month
period ended
June 30, 2015

06/30/2016
Shareholders

Revenues:
Income from financial investments (a)
Revenue from other services (b)
Revenue from rental of POS equipment
Expenses:
Other operating expenses - membership commission
Other operating expenses (c)
Service agreement with Servinet and Aliana (d)
Data processing services (e)
Finance costs (f)
Promissory notes placement service provision

Subsidiaries, Joint Ventures and Associate

Banco
Bradesco

Banco do
Brasil

2,953
19,938
-

11,753
11,784
-

8
28

4,857
-

4,080
-

120
-

14,706
40,787
28

48,214
32,815
63

(1,927)
(14,760)
-

(1,550)
(1,327)
(246,805)
-

(83,959)
-

(7,310)
-

(4,106)
(1,795)
-

(1,338)
-

(3,477)
(27,503)
(85,297)
(1,795)
(246,805)
-

(3,866)
(22,055)
(73,724)
(282)
(150,436)
(4,360)

Servinet

Orizon

Multidisplay

50

M4Produtos

Paggo

Braspag

Cateno

Stelo

Aliana

Total

Total

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Consolidated

Six-month
period ended
June 30, 2015

06/30/2016
Shareholders

Revenues:
Income from financial investments (a)
Revenue from other services (b)
Revenue from the rental of POS equipment
Expenses:
Other operating expenses - membership commission
Other operating expenses (c)
Finance costs (f)
Payment management service provision (g)
Promissory notes placement service provision

Subsidiaries, Joint Ventures and Associate

Banco
Bradesco

Banco do
Brasil

Servinet

Orizon

2,953
19,938
-

76,294
11,784
-

8
28

(1,927)
(14,760)
-

(1,550)
(1,327)
(246,805)
(11,579)
-

Multidisplay

M4Produtos

Paggo

Braspag

Cateno

Stelo

Aliana

Total

Total

79,247
31,730
28

68,401
27,547
63

(3,477)
(16,087)
(246,805)
(11,579)
-

(3,866)
(15,213)
(150,436)
(6,975)
(4,360)

(a)
(b)

Balances corresponding to the amounts held in current account and short-term investments whose terms, charges and interest rates were agreed under conditions similar to those applicable to unrelated parties.
Correspond to services of fraud prevention and receivables-based financing provided by the Company to the shareholder banks, commission on processing of transactions for the companies M4Produtos, Multidisplay and Orizon, provision
of financial, administrative, procurement, legal, and HR services for the company Braspag and purchase of receivables from the company Multidisplay. These related-party transactions are carried out at prices and conditions similar to those
practiced with other issuing banks.

(c)

Services contracted with shareholder banks, relating to: (i) corporate collective life insurance; (ii) health and dental insurance; and (iii) private pension agreement. Development of mobile capture solution services to company M4Produtos
and transactions pre-processing services to Braspag. 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.

(d)

Provision of accreditation and maintenance services by the subsidiaries Servinet and Aliana with commercial establishments and service provider entities for the acceptance of credit and debit cards, as well as other means of payment.
Foreseen remuneration for provided services is established based on costs incurred by Servinet and Aliana upon provision of said services, plus taxes and contributions, as well as remuneration margin.

(e)

Refer to data processing services provided by Braspag.

(f)

Refer to the balances of the Private Debenture issuance maintained by BB Elo Cartes, a company of the Banco do Brasil conglomerate.

(g)

Service provision by Banco do Brasil to Cateno in order to operate as Payment Institution in the management of post-paid accounts and purchase functions by charging the Ourocard Payment Arrangement while Cateno's Granted Rights are
not exercised by it.

51

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Main related-party transactions


Balances of card-issuing banks
Receivables from card-issuing banks, whose net amounts are recognized in line item 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.

Domicile Bank Incentives


The Company entered into agreements with domicile banks to promote the invoicing of
commissions and purchase of receivables. Under these agreements, the Company remunerates
the banks based on the performance and metrics established therein.

Prepayment of receivables from card-issuing banks


The Company has agreements with card-issuing banks to transfer in advance the amounts from
the transactions carried out by the banks customers with credit cards. These prepayment
transactions are performed in order to generate short-term working capital and the amounts
deposited in current account are net of prepayment fees, on a pro rata basis, calculated at the
market rates that do not significantly differ from those adopted by the card-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 fees and tariffs
charged for these related-party transactions are carried out at prices and under conditions similar
to the transactions carried out with other third party partners.

52

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

VAN services and connectivity rate - Amex


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. Until December 31, 2015 this agreement also established BankPar
remuneration by the Company through payment of connectivity rate for the Companys access
to merchants affiliated to Amex brand acquiring systems. Partnership with Amex brand has high
potential of generating value to the Company to the extent that supplements its brand portfolio.
Execution of such agreement was approved by the Board of Directors, with abstention from
those legally impeded by conflict of interest. Prices charged for the provision of this service are
similar to those practiced with other third party partners.

Bank account lock


Refers to bank account lock 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.

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.

Payment management services


Banco do Brasil entered into an agreement with Cateno in order to operate as Payment
Institution in managing post-paid accounts and purchase functions by charging the Ourocard
Payment Arrangement while Cateno's Granted Rights are not exercised by it. The agreement has
a clause for compensation of 0.01% on the total financial flow of transactions under the
Contracting partys management.

Securities bookkeeping services


Contract entered into with Banco Bradesco S.A. for the provision of debenture and mandatory
bank bookkeeping services.

Securities management services


Contract entered into with Banco Bradesco BBI S.A. for the provision of promissory notes,
debentures coordination and distribution services, being the latter pursuant to the terms of CVM
Instruction No. 400.

Public and private securities operating management services


The object of the contract entered into with Banco do Brasil S.A. is to regulate the provision of
movement, custody and financial settlement services for transactions carried out with public
securities registered with SELIC and private securities registered with CETIP.

53

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Representation services with CIP


Contract entered into with Banco do Brasil S.A. for representation of the bank with
CIP(Interbank Payment Clearing House) aiming at provision of settlement services for
transactions
carried out with credit and/or debt cards and provision of STR (Reserve Transfer System)
issuance services.

Other widespread agreements


In addition to the balances recorded, the Company engages other services from the main
shareholders, namely:
Cash management services.
Insurance.
Health insurance and private pension services.
Corporate credit card.
Payment to suppliers.

Cateno project
On February 27, 2015, the Company entered into an association with BB Elo Cartes
Participaes S.A., a wholly owned subsidiary of Banco do Brasil S.A., for the creation of
Cateno.

29

Segment information
Information by operating segments is presented consistently with the internal reports provided
to the Chief Operating Decision-Maker - CODM
As of the association closing process with BB Elo Cartes, when Cateno was established on
February 27, 2015, with operating activities that refer substantially to managing payment
accounts within the scope of the Ourocard Payment Arrangement, the Group now holds two
types of business: (i) service provision related to capturing and processing of credit and debit
card transactions, other means of payment, accreditation of merchants and related services, and
(ii) management of transactions arising from credit and debit card transactions, among which
issuing cards, managing payment accounts, support to management and control of security in
transactions, payments of fees to the brands and payment arrangements, and other services
related to managing payment accounts.
Therefore, as of 2015, Management started separately monitoring the operating profit or loss
of its business units in order to make decisions on allocation of resources and performance
evaluation. Performance of segments is assessed based on several metrics, such as net revenue,
profit before taxes, profit for the year, among others that in many cases are measured differently
from operating profit or loss in the consolidated interim financial information. Additionally,
financial information presented in the segment performance does not correspond to the profit or
loss of any Groups company individually.

54

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Regarding operations in different geographical areas, the Company carries out transactions in
Brazil and the United States of America through its subsidiaries Me-S and Cielo USA.
Three-month period ended June 30, 2016
Capturing and
processing of
transactions

Management of
payment
accounts

Domestic market
Foreign market
Net operating revenue
Cost of services provided
Depreciation and amortization
Gross profit
Operating expenses
Depreciation and amortization
Operating profit
Finance income (costs)
Profit (loss) before taxes
Income tax and social contribution
Profit (loss)

2,017,585
441,992
2,459,577
(976,318)
(126,363)
1,356,896
(394,648)
(18,322)
943,926
563,868
1,507,794
(446,381)
1,061,413

Attributable to:
Owners of the Company
Noncontrolling interests

1,059,726
1,687

Consolidated

Capturing and
processing of
transactions

Management of
payment
accounts

Consolidated

609,447
609,447
(317,764)
(96,462)
195,221
(31,260)
163,961
(212,038)
(48,077)
16,368
(31,709)

2,627,032
441,992
3,069,024
(1,294,082)
(222,825)
1,552,117
(425,908)
(18,322)
1,107,887
351,830
1,459,717
(430,013)
1,029,704

1,843,440
380,688
2,224,128
(799,561)
(115,415)
1,309,152
(332,369)
(14,115)
962,668
460,669
1,423,337
(465,508)
957,829

571,653
571,653
(291,354)
(96,433)
183,866
(16,733)
167,133
(243,316)
(76,183)
25,908
(50,275)

2,415,093
380,688
2,795,781
(1,090,914)
(211,849)
1,493,018
(349,102)
(14,115)
1,129,801
217,354
1,347,155
(439,599)
907,556

(70,559)
38,850

989,167
40,537

956,688
1,141

(87,242)
36,967

869,448
38,108

Six-month period ended June 30, 2016

Domestic market
Foreign market
Net operating revenue
Cost of services provided
Depreciation and amortization
Gross profit
Operating expenses
Depreciation and amortization
Operating profit
Finance income (costs)
Profit (loss) before taxes
Income tax and social contribution
Profit (loss)
Attributable to:
Owners of the Company
Noncontrolling interests

Three-month period ended June 30, 2015

Capturing and
processing of
transactions

Management of
payment
accounts

4,013,477
900,972
4,914,449
(1,900,885)
(258,976)
2,754,588
(777,629)
(36,876)
1,940,083
1,163,628
3,103,711
(941,582)
2,162,129

2,155,818
6,311

Six-month period ended June 30, 2015

Consolidated

Capturing and
processing of
transactions

Management of
payment
accounts

Consolidated

1,202,473
1,202,473
(627,081)
(192,898)
382,494
(54,650)
(1)
327,843
(470,542)
142,699
48,529
(94,170)

5,215,950
900,972
6,116,922
(2,527,966)
(451,874)
3,137,082
(832,279)
(36,877)
2,267,926
693,086
2,961,012
(893,053)
2,067,959

3,658,749
709,805
4,368,554
(1,542,383)
(226,226)
2,599,945
(640,733)
27,608
1,931,604
884,023
2,815,627
(910,400)
1,905,227

778,991
778,991
(398,946)
(128,578)
251,467
(23,147)
228,320
(336,675)
(108,355)
36,848
(71,507)

4,437,740
709,805
5,147,545
(1,941,329)
(354,804)
2,851,412
(663,880)
(27,608)
2,159,924
547,349
2,707,273
(873,551)
1,833,722

(171,262)
77,092

1,984,556
83,403

1,902,005
3,222

(120,710)
49,203

1,781,297
52,425

In order to start operating in the Management of Payment Accounts business segment, the
Ourocards Payment Arrangement exploitation rights were granted to the subsidiary Cateno, in
February 2015, in the amount of R$11,572 million.
The balances by segment as at June 30, 2016 and December 31, 2015 are as follows:

55

Cielo S.A.
Individual and Consolidated Interim Financial Information for the
Three- and Six-month Periods ended June 30, 2016 and Report on Review of Interim

Statement of financial position


as at June 30, 2016
Capturing and
Management
processing of
of Payment
transactions
Accounts
Total assets
Purchases of property and equipment and
intangible assets
Investment in subsidiaries and associate

15,466,875

12,379,631

27,846,506

172,421
94,830

882
-

173,303
94,830

Statement of financial position


as at December 31, 2015
Capturing and
Management
processing of
of Payment
transactions
Accounts
Total assets
Purchases of property and equipment and
intangible assets
Investment in subsidiaries and associate

30

Consolidated

17,540,255

12,437,546

29,977,801

553,463
105,108

11,601,343
-

12,154,806
105,108

Noncash transactions
Parent Company

Exchange differences on net foreign investments


Exchange differences on borrowings
Minimum dividends and interest on capital proposed
Minimum dividends and interest on capital receivable from
direct subsidiary
Noncontrolling interests contribution

31

Consolidated

Consolidated

06/30/2016
218,290
326,650
612,366

06/30/2015
139,994
213,566
524,785

06/30/2016
218,290
608,034
612,366

06/30/2015
139,994
393,811
524,785

117
-

2,159
-

3,590,688

Insurance
As at June 30, 2016, the Company has the following insurance agreements:
Insured
amount

Type
Civil liability of Directors and Officers
Named perils (fire, windstorm and smoke, electrical damages, electronic equipment, theft
and flood)
Loss of profits
Vehicles
POS equipment warehousing
POS equipment transportation
POS equipment FINAME

32

265,000
264,035
18,977
511
221,028
2,097,091
918,699

Approval of interim financial information


The individual and consolidated interim financial information was approved by the Companys
Board of Directors and authorized for issue on August 1, 2016.

56

DEAR SHAREHOLDERS:
We present the performance report and interim financial information of Cielo S.A. (Companys or
Cielo), subsidiaries and associated company (Group), presented as part of quarter statement forms
ITR, for the quarter ended June 30, 2016, and the Independent Auditors Report on Review of Interim
Financial Information.
The individual (Company) and consolidated interim financial information has been prepared in accordance
with the international standard IAS 34 - Interim Financial Reporting and other International Financial
Reporting Standards - IFRSs issued by the International Accounting Standards Board - IASB and accounting
practices adopted in Brazil which includes 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").
The consolidated financial information includes the balances of Cielo's accounts (parent company), its direct
subsidiaries Multidisplay, Servinet, Braspag, Cielo USA, Cateno and Aliana, as well as indirect subsidiaries
Me-S and M4Produtos. The result of joint ventures Orizon and Paggo and associated Stelo is accounted for
under the equity method in interim financial information. The results of subsidiaries acquired during the year
are included in the consolidated statement of income from the date of acquisition. When necessary,
adjustments are made to the financial statements of subsidiaries to bring the accounting policies adopted in
line with those adopted by the Group. All intercompany transactions, balances, income and expenses are
eliminated in the consolidation process.

HIGHLIGHTS 2Q16
Transaction financial volume totaled R$142.6 billion, up 9.9% compared to 2Q15, or R$12.9 billion, and
up 2.2% compared to 1Q16, or R$3.1 billion;
Net operating revenue totaled R$3,069.0 million, up 9.8% year-on-year, or R$273.2 million, and up 0.7%
compared to 1Q16, or R$21.1 million;
Accounting result with purchase of receivables totaled R$603.6 million, up 22.3% year-on-year, or
R$110.0 million, and down 3.2% quarter-on-quarter, or R$19.8 million. Purchase of receivables reached
20.4% over the financial credit volume, up 1.9 p.p. compared to 2Q15 and up 0.3 p.p. compared to 1Q16;
Total expenditure totaled R$1,961.1 million, up 17.7% year-on-year, or R$295.2 million, and up 3.9%
compared to 1Q16, or R$73.3 million;
Cielos net income totaled R$989.2 million, up 13.8% year-on-year, or R$119.8 million, and down 0.6%
quarter-on-quarter, or R$6.2 million;
EBITDA of R$1,349.0 million, down 0.5% year-on-year, or R$6.8 million, and down 4.2% quarter-onquarter, or R$58.6 million.

OPERATING PERFORMANCE

In 2Q16, the transaction financial volume totaled R$142.6 billion, an expansion of 9.9% compared to
R$129.7 billion in the same period in 2015, and up 2.2% compared to R$139.5 billion recorded in 1Q16.
Specifically with credit cards, financial volume totaled R$81.0 billion in 2Q16, up 4.5% compared to 2Q15
and up 1.7% quarter-on-quarter.
With debit cards, financial volume totaled R$61.6 billion in 2Q16, an increase of 17.9% compared to 2Q15
and up 2.8% quarter-on-quarter.
In addition, Cielo captured 1.631 billion transactions in 2Q16, an increase of 9.1% compared to 2Q15 and up
0.5% over 1Q16.

FINANCIAL PERFORMANCE 2Q16


COMPARISON FOR THE QUARTERS ENDED JUNE 30, 2016 AND MARCH 31, 2016

Cielos consolidated net revenue totaled R$3,069.0 million in 2Q16, increased by R$21.1 million or 0.7%,
compared to R$3,047.9 million in 1Q16. Such growth derives from increased revenue from subsidiaries due
to ongoing business expansion, partially offset by the average dollar depreciation in the quarter, applied in
the consolidation of foreign investments.

The cost of services provided totaled R$1,516.9 million in 2Q16, increased R$54.0 million, or 3.7%
compared in 1Q16. This increase was mainly due to the following:
(i)

Increase of R$39.9 million related to the subsidiaries M4U and Merchant e-Solutions, due to
ongoing business expansion, chiefly related to an increase of mobile credit sales, partially
reduced by the average dollar depreciation in the quarter, which impacts the costs of foreign
subsidiaries;

(ii)

Increase of R$8.5 million in costs related to the management of the Ourocard Arrangement, such
as cards issuing and management, supplies and call centers, due to ongoing business expansion
of subisidiary Cateno;

(iii)

Net increase of R$5.6 million in costs related to the acquiring business, mostly represented by:
(a) Increase of R$9.5 million in transaction costs, such as capture and processing, telecom
services, call centers, brands fees and expenditures with merchants, basically due to the
increased volume and number of captured transactions in 2Q16; and
(b) Decrease of R$3.9 million in costs related to equipment, chiefly due to reduced maintenance
volumetry and activation of POS terminals compared to the previous quarter.

Operating expenses totaled R$444.2 million in 2Q16, increased R$19.3 million or 4.5%, compared in 1Q16.
The increase is chiefly due to the following factors:
Personnel Expenses Personnel expenses increased R$8.7 million or 6.9%, to R$135.2 million in 2Q16,
compared to R$126.5 million in 1Q16. This increase is chiefly due to higher expenditures related to
executives retirement and severance pay in 2Q16.
General and Administrative Expenses General and administrative expenses, excluding depreciation,
decreased R$5.0 million or 3.9%, to R$123.0 million in 2Q16, compared to R$128.0 million in 1Q16. The
decrease is basically due to the result of several initiatives to streamline administrative expenses at the
Company, partially offset by expenses with business partners (partnership fees) in subsidiary Me-S and
other measures to accredit and activate parent companys clients.

Sales and Marketing Expenses Sales and marketing expenses increased R$24.5 million or 40.2%, to
R$85.6 million in 2Q16, compared to R$61.0 million in 1Q16. The increase is chiefly due to the scheduling
of expenditures related to institutional campaigns advertisements and higher expenses with marketing actions
executed with issuing banks by parent company in 2Q16, in the Q-o-Q comparison.
Equity Interest The equity interest result increased R$0.5 million to R$2.5 million in revenues in 2Q16,
compared to R$2.0 million in revenues in 1Q16. The increase is related to higher profits from the jointlyowned subsidiary Orizon, partially decreased by losses in Stelo associated company in 2Q16.
Other Net Operating Expenses Other net operating expenses decreased by R$8.3 million or 8.9%, to
R$84.6 million in 2Q16, compared to R$92.9 million in 1Q16. The decrease is chiefly due to the recognition
of a provision for impairment in investments and goodwill in Stelo no 1Q16, partially offset by higher
expectations of losses with POS terminals and bad debts.

The financial income totaled R$351.8 million in 2Q16, up 3.1% or R$10.5 million. The main variations are
the following:
Financial Revenues Financial revenues decreased R$17.5 million or 29.8%, to R$41.3 million in 2Q16,
compared to R$58.8 million in 1Q16. The reduction is chiefly related to the decrease in average balance of
financial investments in 2Q16 when compared to the previous quarter, due to the use of available funds to
pay dividends in March 2016, as well as the payment of the first tranche of public debentures in April 2016.
Financial Expenses Financial expenses decreased R$48.8 million or 14.4%, to R$290.0 million in 2Q16,
compared to R$338.8 million in 1Q16. The reduction is chiefly due to the decrease in average indebtedness
with third parties, when compared to the previous quarter.
Purchase of receivables accounting results Accounting revenue from purchase of receivables, net of
funding with third parties and the taxes on financial revenues decreased R$19.8 million or 3.2%, to R$603.6
million in 2Q16, compared to R$623.4 million in 1Q16. The decrease is primarily related to higher funding
volume with third parties to finance the purchase of receivables (ARV), as well as the reduction of the
average term of operations, in spite of product ongoing business expansion.

COMPARISON FOR THE QUARTERS ENDED JUNE 30, 2016 AND 2015

Cielos consolidated net revenue totaled R$3,069.0 million in 2Q16, increased 9.8% or R$273.2 million,
compared to R$2,795.8 million in 2Q15. The increase in net revenue is chiefly related to the ongoing
business expansion of Cielo, including revenues from Ourocard Arrangement in Cateno, M4Us mobile
credit sales and the dollar appreciation effect over the revenues in U.S. from subsidiary Me-S, partially
impacted by a decrease of gross MDR of the parent company.

The cost of services provided totaled R$1,516.9 million in 2Q16, increased R$214.1 million or 16.4%,
compared in R$1,302.8 million year-on-year. The increase was chiefly due to the following:
(i)

Increase of R$149.9 million related to the subsidiaries Merchant e-Solutions, due to the average
dollar appreciation in the quarter and ongoing business expansion; and M4U, due to the increase
of mobile credit sales;

(ii)

Increase of R$26.4 million related to the management of the Ourocard Arrangement, such as
brands fees, supplies, cards issuing and management, due to ongoing business expansion of
subsidiary Cateno;

(iii)

Net increase of R$37.8 million in the costs related to the acquiring business, mostly represented
by:
(a) Increase of R$25.4 million in transaction costs, such as capture and processing, telecom
services, call centers, brands fees and expenditures with merchants, chiefly due to the
increased volume and number of transactions, when compared to the same quarter of the prior
period;
(b) Increase of R$7.3 million related to equipment costs, including installation, uninstallation,
POS terminals maintenance and activation, chiefly due to higher volumetry, when compared
to 2Q15; and
(c) Increase of R$5.1 million in other costs related to acquiring activities, as well as the hiring of
professional services related to strategic projects, operational systems support and
maintenance.

Operating expenses totaled R$444.2 million in 2Q16, increased R$81.0 million or 22.3%, compared to
R$363.2 million in 2Q15. The main variations are described below:
Personnel Expenses Personnel expenses increased R$19.6 million or 17.0%, to R$135.2 million in 2Q16,
compared to R$115.6 million in 2Q15. Such increase is mainly due to higher expenditures related to
executives retirement and severance pay in 2Q16, the increase in personnel expenses at subsidiaries Cateno
and Me-S, this last one as a result of the average dollar appreciation in the quarter, as well as the 8.2%
average adjustment over wages established in Collective Agreement in 3Q15 and related effects on the
parent companys charges.
General and Administrative Expenses - General and administrative expenses, excluding depreciation,
increased R$15.8 million or 14.7%, to R$123.0 million in 2Q16, compared to R$107.2 million in 2Q15. The
increase is mainly related to the expenses with business partners ("partnership fees") in subsidiary Merchant
e-Solutions, also impacted by the average dollar appreciation in the quarter, as well as expenditures related to
the accreditation and activation of Cielos clients.
Sales and Marketing Expenses Sales and marketing expenses increased R$15.3 million or 21.7%, to
R$85.6 million in 2Q16, compared to R$70.3 million in 2Q15. The increase is substantially related to higher
expenses incurred for marketing activities held in conjunction with issuing banks by parent company in
2Q16, when compared to same period last year.
Equity Interest The Equity Interest result decreased R$1.1 million or 31.5%, to R$2.5 million in revenues
in 2Q16, compared to R$3.6 million in revenues in 2Q15. The reduction is chiefly due to the loss at Stelo
associated company in 2Q16.
Other Net Operating Expenses Other net operating expenses increased R$25.0 million or 41.9%, to
R$84.6 million in 2Q16, compared to R$59.6 million in 2Q15. This increase is mainly related to higher
provision for losses with POS terminals in 2Q16 and higher provision for civil and labor risks, in the Q-o-Q
comparison.

The financial income totaled R$351.8 million in 2Q16, up R$134.4 million or 61.9% compared to 2Q15,
which presented a figure of R$217.4 million. The main variations are described as follows:
Financial Revenues Financial revenues increased R$17.4 million or 72.7%, to R$41.3 million in 2Q16,
compared to R$23.9 million in 2Q15. The increase is chiefly due to higher average balance of financial
investments held by subsidiary Cateno, due to minimum prudential capital.

Financial Expenses Financial expenses decreased R$11.5 million or 3.8%, to R$290.0 million in 2Q16,
compared to R$301.5 million in 2Q15. The decrease is chiefly due to the lower average indebtedness with
third parties, partially offset by the increase in DI rate and average dollar appreciation in the period when
compared to same period last year.
Purchase of Receivables Accounting Results Accounting revenue from purchase of receivables, net of
funding with third parties and of taxes on financial revenues increased R$110,0 million, to R$603.6 million
in 2Q16, compared to R$493.6 million in 2Q15. The increase is chiefly due to the growth in the financial
volume of purchased receivables, in line with ongoing product expansion; higher average spread in the
quarter (increase in DI rate), reduced funding volume with third parties to finance the purchase of receivables
(ARV), partially offset by the beginning of PIS and COFINS over financial income from the second half of
2015.

EBITDA totaled R$1,349.0 million in 2Q16, down 0.5% compared to 2Q15 and down 4.2% over 1Q16, as
follows:
EBITDA (R$ million)
Cielo Net Income
Noncontrolling interests
Financial Income (Expenses)
Tax and Social Contribution
Depreciation and Amortization
EBITDA
% EBITDA Margin

2Q16
989.2
40.5
(351.8)
430.0
241.1
1,349.0
44.0%

2Q15
869.4
38.1
(217.4)
439.6
226.1
1,355.8
48.5%

1Q16
995.4
42.9
(341.3)
463.0
247.6
1,407.6
46.2%

EBITDA consists of net income, plus income tax and social contribution, financial income (expenses) and
depreciation and amortization. It should be noted that, for this calculation, the share of non-controlling
shareholders is added to the parent company's net income.
Management believes that the EBITDA is an important parameter for the investors because it provides
relevant information about our operating results and the profitability.
The EBITDA is not an accounting measurement used in the accounting practices adopted in Brazil. It does
not represent the cash flow for the presented periods and it should not be considered as an alternative to net
income as an operating performance measure or as an alternative to operating cash flow or as a measurement
of liquidity. Additionally, the EBITDA has limitations that may harm its use as an indicator of the
profitability of the Company and its subsidiaries, since costs related to the business are not considered, and
could deeply impact the income, e.g., financial expenses, taxes, depreciation, equity expenses and other
related charges.

CORPORATE GOVERNANCE
Corporate Governance is a priority for Cielo, where a key goal is continuous improvement to support
sustainable, long-term corporate performance. In this spirit, Cielo voluntarily adopts the best corporate
governance practices beyond those required for companies listed on BM&FBovespa Novo Mercado.
Our commitment to corporate efficiency and long-term value creation is explained, for instance, through (a)
the adoption of appropriate decision-making systems and its monitoring by Cielo; (b) the establishment of a
Corporate Governance Office, which aims to support management agencies and committees/advisory
committees of the Company and its subsidiaries, as well as ensuring the monitoring of the best practices of
corporate governance; (c) adoption of ethics and sustainable practices; (d) the formal annual performance
assessment of the Board of Directors members on an individual and group basis; (e) the variation of
personnel who hold the Chairman of the Board of Directors and Chief Executive Officer positions; (f) the
creation of an annual calendar for the Board of Directors, covering the subjects likely to be discussed over
the year; (g) restricting the flow of internal company information exclusively to the Corporate Governance
Electronic Portal; (h) maintaining the Related Party Transactions Policy as well as situations involving
Conflicts of Interest; and (i) the existence of a Code of Ethics which establishes rules of conduct when
communicating to stakeholders.
The Board of Directors of the Company is composed of 11 (eleven) members, who do not perform
management activities, out of which 3 (three) are independent, where their independence aims to serve the
best interests of the Company and its minority shareholders. The Board of Directors shall determine the
general direction of the Companys business, elect members of Management and supervise its management,
among others. The Management is composed of 5 (five) members and performs general management of the
company, respecting the guidelines defined by the Board of Directors. In addition to demonstration of
Cielos adherence to the best Corporate Governance practices, the Board of Directors has 5 (five) support
committees, which are: Audit Committee, Finance Committee, Corporate Governance Committee, People
Management Committee and Sustainability Committee. The Management has 9 (nine) assistance forums:
Issuer Risk Forum, Earnings Release Forum, Ethics Forum, Expenses Forum, Management of Continuous
Business Expansion Forum, Social Investments Forum, Pricing Forum, Projects Forum and Diversity Forum.
The Fiscal Council of Cielo is an independent management body, installed to supervise management
activities, and is composed of 5 (five) members, of which 1 (one) is an independent member.
Regarding Sustainability, the company maintains structured practices, such as: (a) establishment of a climate
strategy, including the conduction and dissemination of a Greenhouse Gas (GHG) Inventory and offsetting
emissions through the purchase of carbon credits; (B) support for social projects that contribute to the
improvement of child and adolescent education, empower young people for work, promoting child health,
developing cancer research and new treatments, and implementing the inclusion of people with disabilities;
(C) the implementation of several policies that address important issues such as ethics, anti-corruption
practices and the environment, in order to guide the Company's practices aimed at contributing to a healthy
environment and the economic and social development of Brazil.
Since 2011, Cielo is listed at OTCQX, with a Level 1 American Depositary Receipts (ADR) Program,.
Since 2014, Cielo joined the BM&FBOVESPA Corporate Sustainability Index (ISE) and has also been
included in the Euronext-Vigeo EM70 Sustainability Index since 2015.
On April 29, 2016, the Company published its 2015 Sustainability Report, which was prepared based on the
Global Reporting Initiative (GRI), G4 version, providing information on the Companys performance
regarding the most material aspects for the sustainability of its business, seeking to demonstrate its ability to
generate long-term, sustainable value to all its stakeholders.

RELATIONSHIP WITH INDEPENDENT AUDITORS


Under CVM Rule 381/03, we inform that during 1Q16 the Company contracted the independent audit
services of KPMG.
The Companys Policy for contracting independent audit services seeks to ensure that there are no conflicts
of interest, loss of independence or objectivity. These principles, based on internationally accepted
principles, consist of: (a) the auditor should not audit his own work, (b) the auditor should not exercise
management positions at his client, and (c) the auditor should not foster the interests of the client.
Cielo declares that the independent auditors has supplied it with services not related to external audit,
consisting of (i) review of sustainability report and greenhouse gases inventory and (ii) issuance of
international certificate ISAE-3402, for the subsidiary Merchant e-Solutions. Both contracts met the
corporate governance requirements of the company, under which any extraordinary engagement of
independent audit that audits the financial directly or indirectly statements need first be reviewed by the
Audit Committee and authorized by the Board of Directors. The contracts values representing 13.0% of
aggregated costs of audit fees of Cielo and its subsidiaries Cateno, Cielo USA and Merchant e-Solutions and
associated Stelos financial statements.
Performance reporting information on EBITDA, financial volume and number of transactions, discount
rates, industry and sector information, net revenue additions, number of employees, total investments, and
managerial revenue was not reviewed by the independent auditors.
***