Individual and Consolidated Interim Financial Information for the Quarter Ended June 30, 2016 and Report on Review of Interim Financial Information

Transcription

1 Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. (Convenience Translation into English from the Original Previously Issued in Portuguese) Individual and Interim Financial Information for the Quarter Ended June 30, 2016 and Report on Review of Interim Financial Information Deloitte Touche Tohmatsu Auditores Independentes

2 Deloitte Touche Tohmatsu Av. Presidente Wilson, º 25º e 26º andares Rio de Janeiro - RJ Brasil Tel: + 55 (21) Fax:+ 55 (21) (Convenience Translation into English from the Original Previously Issued in Portuguese) REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION To the Shareholders, Directors and Management off Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. Rio de Janeiro - RJ Introduction We have reviewed the accompanying individual and consolidated interim financial information of Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. ( Company ), included in the Interim Financial Information Form (ITR), for the quarter ended June 30, 2016, which comprises the balance sheet as at June 30, 2016 and the related income statement and statement of comprehensive income for the three- and six-months periods then ended, and the statement of changes in equity and statement of cash flows for the six-months period then ended, including the explanatory notes. Management is responsible for the preparation of the individual and consolidated interim financial information in accordance with CPC 21 (R1) 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 the Brazilian Securities and Exchange Commission (CVM), applicable to the preparation of Interim Financial Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and international standards on review of interim financial information (NBC TR 2410 and ISRE 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 the standards on auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the 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 is not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34 applicable to the preparation of Interim Financial Information (ITR) and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ( DTTL ), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as Deloitte Global ) does not provide services to clients. Please see for a more detailed description of DTTL and its member firms Deloitte Touche Tohmatsu. All rights reserved.

3 Deloitte Touche Tohmatsu Other matters Statements of value added We have also reviewed the individual and consolidated statements of value added (DVA) for the sixmonths period ended June 30, 2016, prepared under the responsibility of the Company s management, the presentation of which is required by the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Interim Financial Information (ITR), and as supplemental information by 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 are not prepared, in all material aspects, in relation to the interim financial information taken as a whole. Convenience translation The accompanying individual and consolidated interim financial information has been translated into English for the convenience of readers outside Brazil. Rio de Janeiro, August 10, 2016 DELOITTE TOUCHE TOHMATSU Auditores Independentes Roberto Paulo Kenedi Engagement Partner 2016 Deloitte Touche Tohmatsu. All rights reserved. 2

4 (Convenience Translation into English from the Original Previously Issued in Portuguese) Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. Balance sheets as at June 30, 2016 and December 31, 2015 (Amounts in thousands of Brazilian reais - R$) Reviewed by independent auditors to the extent described in the report dated August 10, 2016 Assets Note 06/30/ /31/ /30/ /31/2015 Current assets Cash and cash equivalents 4 18,195 77, , ,283 Securities ,969 9,314 Trade receivables 5 127, , , ,930 Due from related parties 17 1, Recoverable taxes 6 10,884 12,558 24,674 22,958 Inventories 7 68,271 72, , ,831 Other current assets 10,401 8,914 55,899 56,644 Subtotal of current assets 236, , , ,960 Available-for-sale asset ,907 - Total current assets 236, , , ,960 Noncurrent assets Long-term assets 79, , ,194 99,932 Trade receivables 5 5,909 5,909 15,671 13,210 Securities Escrow deposits 8 27,663 27,906 31,298 31,206 Recoverable taxes 6 19,701 18,079 20,342 18,686 Deferred income tax and social contribution 9 25,695 13,911 49,082 34,767 Other receivables ,332 2,063 Due from related parties , Investments , ,527-26,284 Property, plant and equipment , , , ,564 Intangible asset 11 19,897 19, , ,499 Total noncurrent assets 1,042,644 1,153,539 1,148,747 1,284,279 Total assets,, 1,279,289 1,457,394 1,878,155 2,156,239 (continued) 3

5 Balance sheets as at June 30, 2016 and December 31, 2015 (Amounts in thousands of Brazilian reais - R$) Reviewed by independent auditors to the extent described in the report dated August 10, 2016 Note 06/30/ /31/ /30/ /31/2015 Current liabilities Trade payables 37,146 38, , ,174 Due to related parties Borrowings, financing, debentures and leases payable 13 84,748 80, , ,175 Payroll, accruals and related taxes 41,017 39,288 75,468 78,070 Taxes, fees and contributions payable 15 9,398 5,917 24,480 18,811 Dividends and interests on capital payable 18 (d) 8 13, ,021 Advance from customers and other payables 4,139 5,004 17,403 27,213 Total current liabilities 176, , , ,464 Noncurrent liabilities Borrowings, financing, debentures and leases payable , , , ,248 Provisions 16 13,778 13,849 19,419 22,955 Deferred income tax and social contribution ,541 26,490 Other payables ,644 7,856 Total noncurrent liabilities 150, , , ,549 Equity Capital 18 (a) 740, , , ,820 Capital reserves and treasury shares 18 (b) 8,098 7,476 8,098 7,476 Earnings reserves 18 (c) 266, , , ,417 Cumulative translation adjustments 18 (e) (73,521) 34,949 (73,521) 34,949 Additional dividends proposed 18 (d) - 16,094-16,094 Retained earnings 10,423-10,423 - Equity attributable to owners of the Company 952,237 1,065, ,237 1,065,756 Noncontrolling interests ,395 12,470 Total equity 952,237 1,065, ,632 1,078,226 Total liabilities and equity 1,279,289 1,457,394 1,878,155 2,156,239 The accompanying notes are an integral part of this interim financial information. 4

6 (Convenience Translation into English from the Original Previously Issued in Portuguese) Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. Income statement for the six-months periods ended June 30, 2016 and 2015 (In thousands of Brazilian reais - R$, unless otherwise stated) Reviewed by independent auditors to the extent described in the report dated August 10, /01/2016 to 06/30/ /01/2015 to 06/30/ /01/2016 to 06/30/ /01/2015 to 06/30/2015 Note Revenue from sales and/or services 324, , , ,554 Gross revenue from sales and/or services , , , ,890 Taxes and returns 27 (52,938) (51,979) (71,452) (72,336) Cost of sales and/or services 28 (280,481) (262,687) (662,104) (535,584) Gross profit/loss 44,110 66, , ,970 Selling expenses 28 (21,443) (22,702) (74,610) (53,642) General and administrative expenses 28 (22,057) (25,163) (53,798) (46,445) Other operating expenses 30 (18,545) (1,787) (48,779) (9,294) Share of profit (loss) of investees 10 35,025 49,549 1,905 1,642 Profit (loss) before finance income (costs) 17,090 66,193 43,564 96,231 Finance income 29 6,511 26,477 25,121 32,168 Finance costs 29 (24,962) (25,960) (53,310) (38,648) Profit before income taxes (1,361) 66,710 15,375 89,751 Current income tax and social contribution 22 - (378) (23,259) (17,948) Deferred income tax and social contribution 22 11,784 (323) 18,034 (5,794) Profit for the period 10,423 66,009 10,150 66,009 Profit attributable to: Owners of the Company 10,423 66,009 10,423 66,009 Noncontrolling interests (273) - Basic and diluted earnings per share attributable to: Owners of the Company (in Brazilian reais - R$) The accompanying notes are an integral part of this interim financial information. 5

7 (Convenience Translation into English from the Original Previously Issued in Portuguese) Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. Income statement for the three-months periods ended June 30, 2016 and 2015 (In thousands of Brazilian reais - R$, unless otherwise stated) Reviewed by independent auditors to the extent described in the report dated August 10, 2016 Note 04/01/2016 to 04/01/2015 to 04/01/2016 to 04/01/2015 to 06/30/ /30/ /30/ /30/2015 Revenue from sales and/or services 164, , , ,461 Gross revenue from sales and/or services , , , ,220 Taxes and returns 27 (27,931) (25,992) (38,897) (35,759) Cost of sales and/or services 28 (143,912) (133,443) (325,520) (270,720) Gross profit/loss 21,039 30, , ,741 Selling expenses 28 (10,768) (10,698) (37,706) (26,881) General and administrative expenses 28 (11,959) (13,566) (27,638) (25,502) Other operating expenses 30 (18,384) (1,619) (42,329) (7,635) Share of profit (loss) of investees 10 17,757 27, Profit (loss) before finance income (costs) (2,315) 32,600 5,414 48,454 Finance income 29 1,374 7,708 13,218 17,000 Finance costs 29 (9,919) (16,145) (22,313) (29,069) Profit before income taxes (10,860) 24,163 (3,681) 36,385 Current income tax and social contribution 22 (1,535) 6,181 (14,524) (5,888) Deferred income tax and social contribution 22 10, ,586 (131) Profit (loss) for the period (1,407) 30,366 (1,619) 30,366 Profit attributable to: Owners of the Company (1,407) 30,366 (1,407) 30,366 Noncontrolling interests (212) - Basic and diluted earnings per share attributable to: Owners of the Company (in Brazilian reais - R$) 19 (0.0218) The accompanying notes are an integral part of this interim financial information. 6

8 (Convenience Translation into English from the Original Previously Issued in Portuguese) Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. Statement of comprehensive income for the six-months periods ended June 30, 2016 and 2015 (Amounts in thousands of Brazilian reais - R$) Reviewed by independent auditors to the extent described in the report dated August 10, /01/2016 to 06/30/ /01/2015 to 06/30/ /01/2016 to 06/30/ /01/2015 to 06/30/2015 Profit for the period 10,423 66,009 10,150 66,009 Other comprehensive income Items that can be subsequently reclassified to the income statement: Exchange rate effects on the translation of foreign investments (108,470) 10,844 (110,938) 10,844 Total comprehensive income for the period (98,047) 76,853 (100,788) 76,853 Comprehensive income attributable to: Owners of the Company (98,047) 76,853 (98,047) 76,853 Noncontrolling interests - - (2,741) - The accompanying notes are an integral part of this interim financial information. 7

9 (Convenience Translation into English from the Original Previously Issued in Portuguese) Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. Statement of comprehensive income for the three-months periods ended June 30, 2016 and 2015 (Amounts in thousands of Brazilian reais - R$) Reviewed by independent auditors to the extent described in the report dated August 10, /01/2016 to 06/30/ /01/2015 to 06/30/ /01/2016 to 06/30/ /01/2015 to 06/30/2015 Profit (loss) for the period (1,407) 30,366 (1,619) 30,366 Other comprehensive income Items that can be subsequently reclassified to the income statement: Exchange rate effects on the translation of foreign investments (63,915) (2,339) (65,111) (2,339) Total comprehensive income for the period (65,322) 28,027 (66,730) 28,027 Comprehensive income attributable to: Owners of the Company (65,322) 28,027 (65,322) 28,027 Noncontrolling interests - - (1,408) - The accompanying notes are an integral part of this interim financial information. 8

10 (Convenience Translation into English from the Original Previously Issued in Portuguese) Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. Statement of changes in equity ( and ) for the six-months periods ended June 30, 2016 and 2015 (In thousands of Brazilian reais - R$, unless otherwise stated) Reviewed by independent auditors to the extent described in the report dated August 10, 2016 Note Capital Stock option recognized Capital reserves Earnings reserves Treasury shares Gain on sale of treasury shares Legal reserve Reserve for investment Additional dividends proposed Cumulative translation adjustments Retained earnings Total attributable to the Company s owners Noncontrolling interests Total equity Balances as at December 31, ,820 6,111 (1,718) 3,083 45, ,948 16,094 34,949-1,065,756 12,470 1,078,226 Payment of additional proposed dividends (gross amount of R$ (d) per share) (16,094) - - (16,094) - (16,094) Noncontrolling interests arising from the acquisition of Uram Group Noncontrolling interests arising from the acquisition of Inemator Group Treasury shares Translation differences on foreign investments 18 (e) (108,470) - (108,470) (2,468) (110,938) Profit for the period 18 (c) ,423 10,423 (273) 10,150 Balances as at June 30, ,820 6,111 (1,345) 3,332 45, ,948 - (73,521) 10, ,237 10, ,632 Note Capital Stock option recognized Treasury shares Capital reserves Earnings reserves Gain on sale of treasury Legal shares reserve Reserve for investment Additional dividends proposed Cumulative translation adjustments Retained earnings Total attributable to the Company s owners Noncontrolling interests Total equity Balances as at December 31, ,000 6,111 (2,682) 2,053 38, ,381 10,238 13, , ,561 Payment of additional dividends (gross amount of R$ per share) 18 (d) (10,238) - - (10,238) - (10,238) Treasury shares ,393-1,393 Translation differences on foreign investments 18 (e) ,844-10,844-10,844 Profit for the period 18 (c) ,009 66,009-66,009 Payment of interest on capital (gross amount of R$ per share) (15,061) (15,061) - (15,061) Balances as at June 30, ,000 6,111 (2,057) 2,821 38, ,381-24,488 50, , ,508 The accompanying notes are an integral part of this interim financial information. 9

11 (Convenience Translation into English from the Original Previously Issued in Portuguese) Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. Statement of cash flows for the six-months periods ended June 30, 2016 and 2015 (Amounts in thousands of Brazilian reais - R$) Reviewed by independent auditors to the extent described in the report dated August 10, 2016 Note 06/30/ /30/ /30/ /30/2015 Cash flows from operating activities Cash provided by operations 9,322 40, , ,133 Profit (loss) before income tax and social contribution (1,361) 66,710 15,375 89,751 Reconciliation of profit (loss) before income tax and social contribution to cash provided by operating activities Depreciation 12 17,696 17,734 34,088 31,617 Write-off of assets ,543 2,237 Amortization 11 2,519 2,487 21,837 7,387 Amortization of inventory appreciation - - 1,172 - Provisions (71) 339 (2,975) (690) Allowance for doubtful debts (27) (334) 384 (141) Allowance for obsolescence 12 5,400-5,400 Share of profit (loss) of investees 10 (35,025) (49,549) (1,905) (1,642) Interest expense on debentures, borrowings and financing 29 16,423 14,454 25,157 20,275 Interest and exchange rate changes on advances and 29 1,568 leases 1,010 1,019 2,143 Interest and exchange rate changes on intragroup loans 29 2,429 (12,825) 3,684 (6,804) Changes in assets and liabilities 11,636 (27,672) (45,717) (64,570) Trade receivables 5 3,858 (10,794) (26,650) (18,354) Securities 4 (469) - 4,876 - Recoverable taxes 6 52 (11,833) (7,075) (9,656) Inventories 7 4,298 (10,981) 7,036 (38,596) Escrow deposits (345) (49) 13 Other receivables (1,224) 1,197 (16,294) 4,326 Trade payables (89) 3,577 11,077 7,319 Payroll, accruals and related taxes payable 2,351 2,811 4,467 5,409 Taxes, fees and contributions payable 15 3,481 3,713 (1,178) 430 Advance from customers and other payables (865) 449 (8,796) 6,905 Payment of income tax (IR) and social contribution (CSLL) - (5,466) (13,131) (22,366) Cash provided by operating activities 20,958 13,092 60,062 79,563 Cash flows from investing activities Purchase of property, plant and equipment 12 (6,316) (12,323) (31,032) (32,995) Purchase of intangible assets 11 (2,938) (2,327) (9,528) (9,723) Capital increase in subsidiaries 10 (1,276) (1,058) - - Dividends and interest on capital received 10 42,000 20,000-3,073 Acquisition of Marketing Software Company, LLC, 10 net of net cash acquired (123,465) Intragroup loans received 2, Acquisition of Valid Secure Packaging s assets (22,297) Cash provided by (used in) investing activities 34,033 4,292 (40,560) (185,407) Cash flows from financing activities Dividends paid 18 (d) (24,310) (15,068) (24,310) (15,068) Interest on capital paid, net 18 (d) (4,797) (12,964) (4,797) (12,964) Leases paid (4,385) (2,812) (4,987) (3,081) Debentures issued 13-62,500-62,500 Debentures paid 13 (62,500) (62,500) (62,500) (62,500) Payment of interest on debentures 13 (17,893) (15,149) (17,893) (15,149) Payment of interest on financing - - (625) (821) Payment of financing - - (3,336) (3,313) Borrowings , ,956 Repayment of borrowings - - (34,266) (20,922) Payment of interest on borrowings (9,700) (3,070) Cash provided by (used in) financing activities (113,885) (45,993) (127,642) 118,568 (continued) 10

12 Statement of cash flows for the six-months periods ended June 30, 2016 and 2015 (Amounts in thousands of Brazilian reais - R$) Reviewed by independent auditors to the extent described in the report dated August 10, 2016 Note 06/30/ /30/ /30/ /30/2015 Increase (decrease) in cash and cash equivalents (58,894) (28,609) (108,140) 12,724 Cash and cash equivalents at the beginning of period 4 77, , , ,066 Effect of changes in exchange rates on cash and cash equivalents held in foreign currency - - (13,327) (695) Cash and cash equivalents at the end of period 4 18,195 79, , ,095 Increase (decrease) in cash and cash equivalents (58,894) (28,609) (108,140) 12,724 The accompanying notes are an integral part of this interim financial information. 11

13 (Convenience Translation into English from the Original Previously Issued in Portuguese) Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. Statement of value added for the six-months periods ended June 30, 2016 and 2015 (Amounts in thousands of Brazilian reais - R$) Reviewed by independent auditors to the extent described in the report dated August 10, /01/2016 to 06/30/ /01/2015 to 06/30/ /01/2016 to 06/30/ /01/2015 to 06/30/2015 Revenue 373, , , ,768 Sale of goods and services, net of returns 372, , , ,439 Other revenue , Allowance for doubtful debts (384) 141 Inputs acquired from third parties (162,138) (141,265) (463,821) (337,399) Costs of sales and services (127,923) (123,024) (377,450) (286,783) Materials, power, outside services and other (34,215) (18,241) (86,371) (50,616) Gross value added 211, , , ,369 Depreciation and amortization (20,215) (20,221) (55,925) (39,004) Wealth created by the Company 190, , , ,365 Wealth received in transfer Share of profit (loss) of investees 35,025 49,549 1,905 1,642 Finance income 6,511 26,477 25,121 32,168 Total wealth for distribution 232, , , ,175 Payroll and related taxes (except INSS) 126, , , ,019 Salaries and wages 85,365 83, , ,232 Benefits 33,589 28,311 47,104 38,275 Severance pay fund (FGTS) 7,286 7,594 10,546 10,512 Taxes, fees and contributions 54,631 67,662 98, ,874 Federal 39,840 52,809 78,677 95,109 State 4,018 4,866 5,367 5,593 Municipal 10,773 9,987 14,589 14,172 Lenders and lessors 41,192 40,668 78,053 60,273 Interest 24,962 25,960 53,310 38,648 Rents 16,230 14,708 24,743 21,625 Shareholders 10,423 66,009 10,150 66,009 Interest on capital - 15,061-15,061 Retained earnings 10,423 50,948 10,423 50,948 Noncontrolling interests in retained earnings - - (273) - Wealth distributed 232, , , ,175 The accompanying notes are an integral part of this interim financial information. 12

14 (Convenience Translation into English from the Original Previously Issued in Portuguese) Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. Notes to the Interim Financial Information as at June 30, 2016 and December 31, 2015 (Amounts in thousands of Brazilian reais - R$, unless otherwise stated) Reviewed by independent auditors to the extent described in the report dated August 10, General information Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação S.A. ( Valid or Company ), headquartered at Avenida Presidente Wilson, nº º andar - Rio de Janeiro, operates in Brazil since 1993, when American Banknote Corporation acquired the Brazilian subsidiary of Thomas de La Rue, a company engaged in providing security printing services, operating in the Brazilian market for almost 50 years. The Company is engaged mainly in the printing industry in general, including security prints, lottery tickets and systems in general, including electronic, plastic and magnetic cards, encoding cards, and in the development, implementation and execution of electronic document management projects. The Company serves clients in both the private and public sectors, offering anti-fraud products and services, as well as processes and technologies that hinder forgery. The Company s main customers are large financial institutions, telecommunication companies, as well as state governments and governmental agencies. The Company s products include credit and debit cards, driver s licenses, security prints, ID cards, as well as the processing and issuance of documents with security prints and fraud prevention, document logistics, graphic product supply management services, smart cards, stamps, contactless cards, digital certificates, checks, bank statements and public utility bills. The Company, its subsidiaries and associates (hereinafter referred to as Company and its investees ) are the companies domiciled in Brazil, the United States, Spain, Denmark, Republic of Mauritius, Singapore, Panama, South Africa, United Arab Emirates, India, Indonesia, Argentina, Mexico, Uruguay and Colombia, as detailed in Note 2.3. As mentioned in Note 10, the business combinations occurred in 2015 and the first half of 2016, impacted the comparability of the information disclosed in this interim financial information. 2. Basis of preparation 2.1 Statement of compliance The Company s Interim Financial Information Form ("ITR") comprises the individual interim financial information, identified as, and the consolidated interim financial information, identified as, in accordance with CPC 21 (R1) and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB) and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM), applicable to the preparation of Interim Financial Information (ITR). The Company elected to present this individual and consolidated interim financial information in a single set, side by side. 13

15 The consolidated interim financial information include the interim financial information of Valid and the companies in which the Company holds joint control, as described in Note 2.2, whose reporting periods and accounting policies are similar. In the Company s individual interim financial information, the interim financial information on subsidiaries and associates is recognized under the equity method and in the Company s consolidated interim financial information, the financial information on subsidiaries is consolidated on a line-by-line basis, whereas the financial information on associates is recognized under the equity method. All intragroup transactions, balances, income and expenses are fully eliminated in consolidation. The Company s management understands that all information related to the interim financial information, and only such information, is being evidenced and correspond to the information used in its management. The individual and consolidated interim financial information was approved and authorized for disclosure by the Company s management on August 10, Basis of measurement The individual and consolidated interim financial information has been prepared based on the historical cost, except for financial instruments stated at fair value through profit or loss (Note 25) and fair values allocated to business combinations (Note 10). 2.3 Basis of consolidation The consolidated interim financial information include the Company s and its subsidiaries interim financial information (collectively referred to as Company and its investees ), whose percentage interest on the balance sheet dates is as follows: Equity interest - % 06/30/ /31/2015 Subsidiaries Name Direct Indirect Direct Indirect 1. Trust Administração e Participações Ltda. Trust Valid Participações Ltda. Valid Par Valid Soluciones y Servicios de Seguridad en Medios de Pago e Identificación S.A. Valid Argentina Interprint Ltda. Interprint Valid Certificadora Digital Ltda. Certificadora Valid Soluciones y Servicios de Seguridad en Medios de Pago e Identificación S.A. Valid Uruguay Valid Soluciones y Servicios de Seguridad en Medios de Pago e Identificación S.A.de C.V. Valid Mexico Grupo Uram S.R.L. Uram (*) 4.5. Inemator S.A. Inemator (*) 5. Valid Soluções e Serviços de Segurança em Meios de Pagamento e Identificação Valid Sucursal Valid Soluciones Tecnológicas Valid Spain Valid Soluciones y Servicios de Seguridad en Medios de Pago e Identificación S.A.S. Valid Colombia Valid USA, Inc. Valid USA ScreenCheck North America, LLC Screencheck Valid Secure Packaging, Inc VSP Marketing Software Company, LLC MSC Fundamenture A/S (Valid A/S) Fundamenture Fundamenture Logistics Limited Mauritius. Fundamenture Logistics Logos Solvo Limited Mauritius Logos Solvo Bluefish Technologies Holding Aps Bluefish holding Logos Smart Card Denmark A/S Logos Denmark Bluefish Technologies Latin America Inc. Bluefish Panamá Panamá Bluefish Technologies Europe AS Denmark Bluefish Denmark Bluefish Technologies Solutions ApS Denmark Bluefish Solutions Bluefish Technologies South Africa (Pty)Ltd Bluefish South Africa Bluefish Technologies Africa Limited Mauritius Bluefish Africa Bluefish Technologies Middle East FZE U.A.E. Bluefish U.A.E Bluefish Technologies Private Limited Índia Bluefish Índia Bluefish Technologies Asia Pte Ltd Singapore Bluefish Singapore PT Bluefish Technologies Indonésia Bluefish Indonesia Bluefish Technologies Investment Pte Singapore Bluefish Investment Bluefish Card Manufacturing Taiwan Ltd Bluefish Card Taiwan Logos Smart Card (Asia) Pte. Logos Singapore Ltd Singapore Logos Smart Card (Mauritius) Ltd Mauritius Logos Mauritius

16 (*) Interprint held significant influence in Uram and Inemator as at December 31, 2015, holding 31.17% interest in each one of these investees and began to hold control, beginning January 25, 2016, as detailed in Note Trust: company acquired in September 2006, headquartered in the State of Paraná, Brazil, primarily engaged in the manufacturing of instant lottery tickets and paper phone cards. 2. Valid Par: company created in August 2007, headquartered in the State of Rio de Janeiro, Brazil, engaged in holding interests in other entities. 3. Valid Argentina: company acquired in August 2007, headquartered in the city of Buenos Aires, Argentina, and leading company in the sale of bank cards and smart card (Simcards) in the Argentine market, besides exporting its products to other Latin American countries such as Peru, Bolivia, Uruguay and Paraguay. 4. Interprint: company acquired in May 2008, headquartered in the State of São Paulo, Brazil, engaged in the offering of complete payment and identification solutions for the financial and government industries. Its product portfolio includes, but is not limited to, driver s licenses, identity cards, biometric solutions (AFIS), and electronic printing. Its associates are Multidisplay Comércio e Serviços Tecnológicos S.A. ( Multidisplay ), located in Brazil and its direct subsidiaries are Valid Certificadora, Valid Mexico, Uram S.R.L Group ( Uram Group ) e Inemator S.A. and ( Inemator) and Valid Uruguay, located in Brazil, Mexico, Argentina and Uruguay, respectively Valid Certificadora: company established in June 2011, headquartered in the State of São Paulo, Brazil, and engaged mainly in the issuance of digital certificates such as e- CPF, e-cnpj and NF-e Valid Uruguay: company established in September 2014, headquartered in the city of Montevideo, Uruguay, and engaged in the provision of magnetic chip card and smart card personalization services in general Valid Mexico: company established in September 2014, headquartered in Mexico City (Federal District), Mexico, and engaged in the provision of smart card services in general Inemator: significant influence acquired on October 2, 2015 and control on January 25, 2016, headquartered in the city of Montevideo, Uruguay, engaged in providing software solution services to the telecommunication and banking market Uram: significant influence acquired on October 2, 2015 and control on January 25, 2016, headquartered in the city of Buenos Aires, Argentina, engaged in providing software solution services to the telecommunication and banking market. 15

17 5. Valid Sucursal: company established in December 2015, headquartered in the City of Bogota, Colombia, and engaged in operating as a sales office. 6. Valid Spain: company acquired in February 2010, headquartered in Madrid, Spain, produces, develops and sells smart cards (Simcards) to mobile services providers. Its direct subsidiaries are Valid Colombia, Valid USA and Fundamenture Valid Colombia: company established in April 2014, through subsidiary Valid Spain, headquartered in the City of Bogota, Colombia, and engaged in operating as a sales office Valid USA: company acquired in April 2012 in Pennsylvania, in the United States of America, engaged in operating in the means of payment, mobile telecommunication and identification areas. Its direct subsidiaries are ScreenCheck, VSP and MSC. Investees Location Core business Screencheck Indiana, USA Solution provider for the US identification systems market and has a workflow according to the AAMV rules, adaptable to different projects involving the identification area. VSP MSC Saint Paul, Minnesota, USA Los Angeles, California, USA Provides secure fulfillment services (inventory management control) to the prepaid security, gift card and rechargeable card markets in general. Provides highly effective database marketing solution services Fundamenture: company acquired in October 2015, located in Denmark, engaged globally in the production and sale of smart cards, development and implementation of operating systems for SIM cards and management of software and solutions for mobile operators. Fundamenture owns five direct subsidiaries and 12 indirect subsidiaries (together with Fundamenture, Fundamenture Group ), as follows: Subsidiary Direct/indirect Location Core business Fundamenture Logistics Direct Denmark Procurement matrix (Supply Chain) Logos Solvo Direct Mauritius Application development service for the Group companies Bluefish holding Direct Denmark Holding Logos Denmark Indirect Denmark Sale and development of software solutions Bluefish Panamá Indirect Panama Sale of sim cards and software solutions Bluefish Denmark Indirect Denmark Holding Bluefish Solutions Indirect Denmark Sale and development of software solutions Bluefish South Africa Indirect South Africa Sale of sim cards and software solutions. Provision of management services to Bluefish Africa. Bluefish Africa Indirect Mauritius Sale of sim cards and software solutions Bluefish U.A.E. Indirect United Arab Sale of sim cards and software solutions Emirates (Dubai) Bluefish India Indirect India Sale of sim cards and software solutions Bluefish Singapore Indirect Singapore Sale of sim cards and software solutions Bluefish Indonesia Indirect Indonesia Sale of sim cards Bluefish Investment Indirect Singapore Investment company Bluefish Card Taiwan Indirect Taiwan Sim card production hub Logos Singapore Direct Singapore Sale of sim cards and software solutions. Provides logistics management services to Fundamenture Logistics. Logos Mauritius Direct Mauritius Sale of software solutions to mobile network operators The subsidiaries are fully consolidated as from the date in which the Company obtains the control, and continue to be consolidated through the date in which such control ceases. The profit or loss and each component of other comprehensive income are attributable to the Company s owners and noncontrolling interests, when applicable 16

18 An associate is an entity over which the Company exercises significant influence without controlling it. The direct subsidiary Interprint had significant influence on associate Multidisplay; such investment was accounted for under the equity method until being classified as held for sale. The location and percentage interest of which are as follows: Associates Operating Segment Location Equity interest - % 06/30/ /31/2015 Multidisplay Telecom Rio de Janeiro, Brazil The investment in an associate is accounted for under the equity method as from the date the investee becomes an associate. Upon acquisition of the investment in an associate, any excess amount of the investment cost on the Company s and its investees share in the net fair value of the investee s identifiable assets and liabilities, proportionally to the interest acquired, is recognized as goodwill, which is included in the carrying amount of the investment. The individual and consolidated income statement reflects the share held by the Company in the profit or loss of the associate, as share of profit (loss) of investee. When a change is directly recognized in the associate s equity, the Company will recognize its share in the changes and report such fact in the statement of changes in equity, when applicable. Unrealized gains and losses arising from transactions between the Company and the associate are eliminated based on the interest held in the associate. On August 27, 2015, subsidiary Interprint entered into with Cielo S.A. a share purchase and sale agreement to sell 100% of its equity interest in Multidisplay. The completion of the transaction was contingent upon the compliance with certain conditions precedent, which were fully met on June 27, 2016; for this reason, such investment was reclassified to held-for-sale asset as at June 30, Information on the disclosure of these noncurrent assets available for sale is shown in Notes 10 and 32. The, through its subsidiary Interprint, holds 50% interest in Incard. On March 27, 2013, the subsidiary Interprint terminated the Joint Venture Agreement, executed on April 3, 2002 with Incard SA, because the agreement s purposes were not being achieved. Interprint, since it has relinquished the positions in the Executive Board and governance bodies to which it was entitled, ceased to hold joint control over such investee. The Company and Incard s controlling shareholders are discussing the outcome and Valid, through its subsidiary Interprint, recognized on December 31, 2014 an allowance for losses equivalent to 100% of the amount of its investment in Incard due to the uncertainty as to its realization. 2.6 Functional and reporting currency The individual and consolidated interim financial information is presented in Brazilian reais (R$), which is the functional of the and has been rounded to the nearest thousand, except when otherwise indicated. The Company and its investees determine their own functional currency, and for those entities, the functional currencies of which differ from the Brazilian real, the interim financial information is translated into the Brazilian real, and assets and liabilities at the closing rate and profit or loss at the average rate. 17

19 a) Transactions and balances Foreign currency-denominated transactions are translated into the Company s functional currency at the exchange rates prevailing on the transaction dates and adjusted based on the exchange rates on the reporting date. Exchange gains and losses on such assets and liabilities using the exchange rate prevailing on the date of transaction or beginning and end of the reporting periods are recognized as finance income or costs in profit or loss. b) Company s and its investees entities Functional currencies of the Company and its main investees: Investees Valid Trust Valid Par Valid Argentina Interprint Certificadora Valid Uruguay Valid Mexico Uram Inemator Valid Sucursal Valid Spain Valid Colombia Valid USA Screencheck VSP MSC Fundamenture Group (*) Functional currency Brazilian real Brazilian real Brazilian real Argentine Peso Brazilian real Brazilian real Uruguayan Peso Mexican Peso Argentine Peso Uruguayan Peso Colombian Peso Euro Colombian Peso US dollar US dollar US dollar US dollar US dollar (*) The functional currency of each Fundamenture Group company is determined based on its individual transactions; however, the US dollar functional currency is the most significant for Fundamenture Group. The assets and liabilities of those subsidiaries with functional currency different from the Brazilian real are translated into Brazilian reais at the exchange rate on the balance sheet date, and the corresponding income statements are translated at the average exchange rate on the transaction month. The exchange gain or loss arising from such translation is recorded separately in equity. In case of sale of any of such subsidiaries, the accumulated deferred amount recognized in equity relating to such subsidiary is recognized in the income statement. The goodwill and adjustments to the fair value of identifiable assets acquired and liabilities assumed arising from the acquisition of a foreign subsidiary are recognized as assets and liabilities from such transaction and translated based on the exchange rate at the end of the reporting period. Exchange rate differences are recognized in Other comprehensive income. 18

20 2.8 Use of estimates and judgments The preparation of individual and consolidated interim financial information in accordance with accounting practices adopted in Brazil and IFRSs requires Management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and assumptions are reviewed on an ongoing basis. Changes in accounting estimates are recognized in the year in which estimates are revised and in any future years that may be impacted. The main areas involving estimates and assumptions are described below: a) Impairment loss of non-financial assets - occurs when the carrying amount of an asset or cash-generating unit exceeds its recoverable value, which is the higher of the fair value less selling costs and the value in use. The calculation of the fair value less selling costs is based on available information on transactions involving the sale of similar assets or market prices less additional costs to dispose of the asset. The value in use is calculated based on the discounted cash flow model. The cash flows arise from the five-year budget and do not include reorganization activities to which the Company and its investees have not yet committed or significant future investments that will improve the asset base of the cashgenerating unit subject to tests. The recoverable amount is susceptible to the discount rate used in the discounted cash flow method, as well as to expected future cash receipts and the growth rate used in extrapolation. b) Taxes, contributions and levies: there are uncertainties surrounding the interpretation of complex tax regulations and the amount and timing of future taxable income. In view of the long-term nature and complexity of existing contractual instruments, differences between actual income and the assumptions adopted, or future changes in these assumptions, could require future adjustments to tax income and expenses already recorded. Provisions are recognized based on reasonable estimates with respect to potential effects of tax audits by the tax authorities in the respective jurisdictions where it operates. The amount of these provisions is based on various factors, such as the experience of past tax audits and different interpretations of tax regulations by the taxable entity and the competent tax authority. These interpretation differences can arise within an extensive set of issues, depending on the conditions in place in the jurisdictions where the Company and its investees operate. c) Deferred income tax and social contribution - recorded based on temporary differences between accounting and tax bases considering the prevailing tax legislation and the aspects mentioned in the preceding paragraph and the asset balances recognized to the extent that it is probable that there will be sufficient future taxable income based on projections and estimates prepared by Management. These projections and estimates include various circumstances relating to the Company s performance and factors that could differ from actual results. Under prevailing Brazilian tax laws, there is no term for utilization of tax losses. However, accumulated tax losses can be offset only up to the limit of 30% of annual taxable income in Brazil (see Note 9). 19

21 d) Provisions for tax, civil and labor risks - The Company and its investees recognize a provision for tax, civil and labor risks when the likelihood of loss is assessed as probable and can be reliably estimated. The likelihood of loss is assessed based on available evidences, the hierarchy of laws, available case rulings, most recent court decisions and their relevance within the legal system, and the assessment made by the outside legal counsel. Provisions are reviewed and adjusted so as to consider changes in circumstances, such as applicable statute of limitations, conclusions of tax audits or additional exposures identified based on new matters or court rulings. Management believes that these provisions for tax, civil and labor risks are fairly measured and stated in the interim financial information. e) Allowance for doubtful debts - recognized in an amount considered by Management as sufficient to cover probable losses on the collection of receivables, taking into consideration historical losses and an individual assessment of uncollectible balances receivable. f) Useful lives of property, plant and equipment and intangible assets - Management revises the estimated useful life of property, plant and equipment and intangible assets on an annual basis, at the end of the reporting period. g) Accrued profit sharing - measured on a monthly basis, based on financial performance and quality measurements, as well as the individual objectives of employees, established on an annual basis and recalculated at the end of the year, based on the best estimate of goals reached, as established in the annual budget. h) Fair value of financial instruments - when the fair values of financial assets and financial liabilities cannot be obtained from active markets, it is determined using valuation techniques, including the discounted cash flow method, which requires a certain level of judgment by Management. Such judgment includes the analysis of the data used, such as liquidity risk, credit risk and volatility. Changes in the assumptions related to these factors could affect the fair value of financial instruments. 3. Significant accounting policies All the accounting policies adopted in preparing the individual and consolidated interim financial information are consistent with those used in preparing the financial statements for the year ended December 31, 2015, published on the Official Gazette on April 7, 2016, except for the new and revised standards and interpretations below. 3.1 New and revised standards and interpretations Adoption of new and revised standards that had no effect or material effect on the interim financial information Below are the new and revised standards effective beginning January 1, The adoption of these standards did not have a material impact on the amounts reported in the current and prior periods: 20

22 IFRS 14 - Regulatory Deferral Accounts. Amendments to IFRS 11 - Accounting for Acquisitions of Interests in Joint Operations. Amendments to IAS 16 and IAS 41 - Property, Plant and Equipment, Biological Assets and Agricultural Produce. Amendments to IAS 16 and IAS 38 - Clarifications on the Accepted Depreciation and Amortization Methods. Amendments to IAS 27 - Option to Use the Equity Method in Separate Financial Statements. Amendments to IFRSs - Annual Improvement Cycles for Amendments to IAS 1 - Clarifications on the Judgment Process of Disclosures of the Financial Statements. Amendments to IFRS 10, IFRS 12 and IAS 28 - Application of Consolidation Exceptions for Investment Entities New and revised standards and interpretations already issued but not yet effective on June 30, 2016: The Company did not adopt the new and revised IFRS below which have already been issued but are not yet effective: Amendments to IAS 12 - Recognition of Deferred Tax Assets for Unrealized Losses (a). Amendments to IAS 7 - Need to include disclosure on changes in liabilities arising from financing activities (a). Amendments to IFRS 2 - Classification and Measurement of Share-based Payment Transactions (b). IFRS 9 - Financial Instruments (b). IFRS 15 - Revenue from Contracts with Customers (b). IFRS 16 - Leases (c). Effective for annual periods beginning on or after: (a) January 1, 2017; (b) January 1, 2018; and (c) January 1, The CPC has not yet issued any pronouncements equivalent to certain IFRSs above, effective in 2018 and 2019, but it is expected that such pronouncements will be issued before the effective date. The early adoption of IFRS is contingent on the prior approval of CFC and CVM through a resolution. Consequently, the Company and its investees did not adopt these amendments early in their interim financial information as at June 30,

23 4. Cash and cash equivalents and securities 06/30/ /31/ /30/ /31/2015 Cash and banks 2,469 22,048 77, ,124 Cash equivalents 15,726 55,041 42, ,159 Cash and cash equivalents 18,195 77, , ,283 Securities 469-4,438 9,314 Total current 18,195 77, , ,597 Total noncurrent Cash equivalents refer to highly liquid short-term investments in several financial institutions, which can therefore be redeemed at any time and immediately converted into a known cash amount with an insignificant risk of loss of value. The cash equivalents of the Company and its subsidiaries consist mainly of floating Bank Certificates of Deposits (CDB) and repurchase agreements backed by securities, subject to repurchase, yielding the Interbank Deposit Rate (CDI) variance. The average yield of cash equivalents was 99.56% p.a. of the CDI rate as at June 30, 2016 (100.4% p.a. of the CDI rate as at December 31, 2015). Securities are comprised of Criatec III investment fund in the amount of R$469 ( and ) and short-term investments held by Valid Argentina are comprised of certificates of deposit redeemable in up to three months, in the amount of R$3,969 (R$9,314 as at December 31, ), yielding interest of 28.8% p.a. as at June 30, 2016 (31.0% p.a. as at December 31, 2015), subject to risk of change in value. 5. Trade receivables 06/30/ /31/ /30/ /31/2015 Trade receivables 133, , , ,357 Allowance for doubtful debts (302) (329) (8,187) (9,217) Total 133, , , ,140 Total current: 127, , , ,930 Total noncurrent: 5,909 5,909 15,671 13,210 As at June 30, 2016, the Company had trade receivables recorded in noncurrent assets, and, comprising of R$5,560 (R$5,374 as at December 31, 2015, as detailed in this note) of receivables from a specific client and R$349 (R$535 as at December 31, 2015) arising from renegotiations. In addition to those amounts, the Company had R$9,762 () due mainly to the receivables of the indirect subsidiary Certificadora, from accreditation agreements with registration authority, with maturity dates over a year, adjusted to present value based on the IGP-M (R$7,301 as at December 31, 2015). 22