ifrs 12.31.2011

7/30/2019 IFRS 12.31.2011

1/147

7/30/2019 IFRS 12.31.2011

2/147

2

Diagnsticos da Amrica S.A.

(Publicly-held company)

Financial statements

December 31, 2011 and 2010

Contents

Management report 3

Independent auditors' reporton the financial statements 15

Balance sheets 18

Statements of income 20

Statements of changes in shareholders

equity 21

Statements of cash flows - Indirect method 22

Statements of added value 23

Notes to the financial statements 24

7/30/2019 IFRS 12.31.2011

3/147

3

Management ReportThe year 2011 was marked by the beginning of the integration process of the Company with MD1,as well as the alignment around a strategy which seeks to balance growth and return forshareholders. Nine companies of the MD1 group, including Sergio Franco, CDPI, Multimagem andProecho were integrated into the company in a year in which we also worked on integratingCERPE, Cytolab and Previlab. We also adapted our strategy to enable faster growth throughinvestments in opening new units, changing imaging equipment, improving the quality in serviceunits and capturing the synergies from integrated companies.

We implemented the unification of central structures for purchasing, logistics and TechnicalOperations Centers (NTO). We have not incorporated MD1 operating companies yet, due to theOperation Reversibility Preservation Agreement (APRO), signed on October 26, 2011 between theAdministrative Council for Economic Defense (CADE) and the Company. However, the agreementwith CADE allowed the incorporation of the company MD1 on November , 2011, which gave theCompany the use of a premium (future profitability) determined in the merger of shares from thiscompany.

We aligned our organization with the establishment of consistent metrics, which allowed us to makeimportant decisions, such as: extracting efficiency gains from managing the portfolio of units andservices, reducing the cost of services provided through the consolidation of central laboratories(NTO), reviewing of the logistics network, management of glosses and credit portfolio, improvingrisk management. We experienced through the years an increase in costs and expenses directlylinked to the service improvement process, new equipment installation and the process of expanding

our service network (pre-operating and start-up expenses), besides improving glosses monitoringprocess.

We implemented the new model of Radiology and Diagnostic Imaging (RDI) in the MEGA unitswith great success. It is meant by MEGA units those which provide in its portfolio a greater numberof tests, including MRI and/or CT. It is noteworthy that we have already seen improvement inservice usage level for Resonance and Tomography in these units.

We moved from a partial growth-/margin-oriented vision to an integrated vision that considers theReturn on Invested Capital (ROIC). We are adopting a more focused vision on generating free cashflow to shareholders.

Efforts with paying sources, aiming to establish ourselves in all segments as the best cost/benefitsolution to the market, were essential to reinforce our partnership bonds and promote diagnosis

support services, more and more appreciated by patients and by the medical community. JoiningPremium segment meets these two objectives. We improved relation activities with the medicalcommunity because of MD1 integration. We will especially continue engaged and committed inachieving the goal of being the best solution for paying sources and physicians.

The alignment of our employees in a single culture enables us to integrate all our brands andregional characteristics. The cultural link which unites us is made up of people who determine theiractions based on ethics and integrity, who are driven by a dream to be the best company in theworld in its segment; who think and act like owners; who are pride of our company and brands; whothe results drive our growth; who work with excellence; who take care of our customers and whowant the best people and lead by example. In addition, we also aligned the incentives: promoting a

7/30/2019 IFRS 12.31.2011

4/147

4

new model of variable compensation which encourages people to go beyond their goals, accordingto market realities.

We have continuously been improving our processes to maintain our accreditation and certificationof national and international recognition. This year, we received more than one certification, ISOIEC 17025, adding to our portfolio which comprises certificates such as CAP College ofAmerican Pathologists, PALC Accreditation Program for Clinical Laboratories SBPC, DICQSBAC, ISO 9001, ISO 14001, OHSAS 18001, ONA, in addition to technical skills acquired inhospitals where we work, related to the Joint Commission and Canadian Accreditationrequirements.

By being aligned, we continued diversifying our risks in order to have a balance and sustainablemanagement. We continued diversifying our relationship with paying sources, promoting more and

better business. We encouraged business growth such as the Support Market, Hospitals andServices to Governments; because we believe they are essential sources of increase in our medicaland institutional relationship and promote returns of scale.

In July 2011, we entered into two major associations, Cytolab and Previlab, which opened doors tostate of So Paulo countryside, a large market in which we did not have significant presence. Nowwe march confidently in a fast and effective integration, providing significant tangible andintangible gains to the Company.

Our results reproduce the strength of such alignment. Our EBITDA reached R$ 499.6 million,representing a growth of 29.8% compared to R$ 384.8 million in the same period last year and amargin of 22.9% (decrease of 3.8% p.p. compared to the previous year). If we consider theproforma vision, there was a decrease of 0.5% in EBITDA, and 2.8 p.p. compared to the EBITDA

margin. When we exclude the effect of non-recurring expenses in 2011, totaling R$ 53.5 million,we reached an EBITDA of R$ 553.1 million, a margin of 25.4% on net revenue, 1.3 p.p. below themargin reported in 2010. Compared to the proforma, the recurring EBITDA margin was 2.8 p.p.below the margin reported in 2010. Net income reached R$ 145.5 million, which represents asignificant increase of 48.3% in relation to the previous year (R$ 98.0 million). Compared to 2010proforma, there was a decrease of 6.7%.

The investments accounted for R$ 193.2 million, giving priority to the modernization of oursystems, infrastructure and medical equipment.

These actions generated recognition. In 2011, we received the prize of best company in Healthcarefrom Valor Econmico Newspaper. We were awarded the prize "Turnoround of the year" by TMAPWC for our performance, and we were also recognized by Institutional Investor magazine.

Last year, CDPI (MD1 group) was the clinical diagnostic imaging that most published scientificworks in the Radiological Society of North America (RSNA), the largest radiology event in theworld.

Thus, with our purposes increasingly steadier, we look at 2012. We are challenged to ensure a newpace of organic growth, to develop new business segments in our operations, improve our services,to enhance our knowledge and technical quality, and strengthen the alignment of our people withthe DASA Culture.

7/30/2019 IFRS 12.31.2011

5/147

5

Overview

The Company is a leading ancillary service provider for supporting diagnoses in Latin America,being among the four largest publicly traded companies in the industry worldwide.1. It has operationsin 13 Brazilian states and the Federal District, through 25 different brands. In December 2011, theCompany had 17,911 employees compared to 11,743 in December 2010 and 522 units, including 44Mega Units.

Its services can be divided into three lines:

Outpatient & Inpatient: The more traditional segment of the company, assisting directlythrough the 444 service units throughout the Brazilian territory, offering the followingservices:

o Clinical Analysis;o Diagnostic Imaging;

Support for Laboratories: With the Alvaro brand, the Company provides services to small-and medium-sized laboratories. It has 4,912 customers laboratories distributed throughoutthe national territory.

Public Sector: Operating in the sector through CientficaLab brand whose focus is toprovide ancillary services to support the diagnosis for the public sector. In December 2011,it served 619 sampling points, among hospitals and outpatient network, in 30 public clientsin the states of So Paulo, Rio de Janeiro, Esprito Santo, Minas Gerais and Tocantins.

In the Companys business operation, our Management believes that the similarities among thecompanies comprising the group DASA, since they are related to socioeconomic and similarbusiness, service provision and production processes of the same type, similar type of customers,suppliers and logistics process, it is defined as "ancillary services for supporting diagnosis" as theonly operating segment and reporting unit, given the similarity which exists throughout theCompany's business.

Economic conjuncture

Sources: Instituto Brasileiro de Geografia e Estatstica(IBGE Brazilian Institute of Geography andStatistics) and Banco Central do Brasil(Brazilian Central Bank).

In 2011, Brazilian economic activity, unlike many developed economies increased 2.7%.

1Based on 2011 revenue.

7/30/2019 IFRS 12.31.2011

6/147

6

Regarding the labor market, data released by the Ministry of Labor and Employment (MTE) indicateexpansion in the generation of vacancies during the year 2011, with more than 1.9 million new jobs.

According to IBGE study, inflation measured by Brazilian National Consumer Price Index (IPCA),showed acceleration and closed the year at 6.5%.

The trade balance accrued in twelve months experienced an increase compared to the previous year,reaching $ 29.79 billion. The greater dynamism of exports contributes to the widening trade surplus.In turn, foreign direct investment totaled $ 66.7 billion in 2011.

The scenario of global uncertainty contributed to US dollar appreciation, which ranged from R$1.66/ US$ in December 2010 to R$ 1.88/US$ in December 2011.

Comments on the healthcare industry and diagnostic medicine in BrazilSources: Agncia Nacional de Sade (ANS Brazilian National Health Agency), IBGE, OMS,PNAD

Brief description

Health services in general and diagnostics medicine in particular form, in Brazil, a market ofconsiderable size and constant growth. Seen in a wider concept of product and service consumption,

the health market boasts even more vigorous figures.According to OMS, the total expenditure with health services represents 8.4% of the entire BrazilianGDP in 2008. Demographic and economic factors explain the evolution of the market. First of all,Brazilian population lives longer, thanks to the advances in medicine and the improvement of livingconditions, as shown in other IBGE studies. The life expectancy at birth has passed from 45.5 yearsin 1940, to 73.1 years in 2010. In 2050, according to official forecasts, it will be 81.3 years levelsimilar to Iceland, Hong Kong, China, and Japan. Besides that, the so-called active part of thepopulation grew, situated between 15 and 64 years, passing from 57.8% of the total in 1980 to 62.1%in 2009, is a factor that explains the higher consumption of diagnosis support auxiliary services,since this group is the largest consumer of goods and services.

As a determinant for the higher demand for health services, the increased income also adds up afterthe economy stabilized in the middle of the 90s, and more recently the social rise of the poorerlayers of the population. Another fundamental data is the recent growth of the number of formaljobs, by means of which workers have access to health plans, great paying source of hospitals,doctors, and examinations. According to data from the IBGE Monthly Job Research, from 2002 to2011, the proportion of the working population grew from 49.5% to 54.0% of the entire populationof the country, and the average revenue increased 92%.

7/30/2019 IFRS 12.31.2011

7/147

7

Diagnostic medicine

The diagnostics medicine market includes both clinical analysis examinations and image diagnostics.We estimate that there are approximately 16,000 laboratories acting in this segment in Brazil. Untilthe beginning of the 90s, clinical analysis examinations in Brazil were conducted by doctors in anon-standardized manner, in their offices or in small- or medium-sized laboratories.

Since the middle of the 90s, the clinical analysis market has changed as a result of the acceleration oftechnological development and the implementation of new techniques and services able to processdiagnostic tests with high accuracy and efficiency, and in higher volumes.

Private sector

The number of health plan beneficiaries, those who more intensively use medicine services andproducts, according toAgncia Nacional de Sade(ANS) information, has reached 63.04 million inSeptember, 2011, presenting a growth of 61.1% in the period from 2004 to 2011. Still according tothe ANS, 62% of the 63.04 million of beneficiaries all over the country were linked to collectiveplans.

The beneficiaries are still very concentrated in the south and southeast regions, where the economyis more developed, with a higher offer of formal jobs. Approximately 64.13% of the health planbeneficiaries live in the southeast region of the country, of which 61.3% live in the State of SoPaulo.

Popular market

Classes C and D are one of the main actuation segments of the Company, and these classes ingeneral do not have a health plan and pay in cash. With the revenue increase of the poorer layers ofthe population, allied to the lack of offer of diagnosis support auxiliary services at popular prices,this market has shown a large growth.

Despite the increase of the purchasing power of the lower classes, according to ANS and IBGE data,in 2011 only 24.6% of the Brazilian population had access to health plans. Besides that, most of thepeople in the C and D classes do not have access to this service. As a consequence from this data,this layer of the population, which is the largest in the country, has little access to preventive healthcare and worse quality and expectancy of a healthy life.

Public sector

The health public sector in Brazil is managed by Sistema nico de Sade(SUS), created in 1988 andresponsible for the public health structure hospitals, clinics, research centers, and service centers.

To supply the lack of service of the sector, private suppliers can integrate the SUS network by meansof contracts established by public bids. At this level, the payment is determined by the serviceprovided: clinical analysis, surgery, or treatment.

In the last 10 years, as a consequence of the growth of demand of health services by the population,the Brazilian government had to invest in the expansion of the SUS network and start contractingprivate institutions to provide services that the SUS network does not offer.

In an attempt to offer public health services at a lower cost and higher efficiency, the government hasincreased the number and types of third-party services provided by private companies. The Company

7/30/2019 IFRS 12.31.2011

8/147

8

acknowledged this tendency and invested strongly in this segment by means of its subsidiaryCientficaLab, which acts exclusively in this sector by means of bids.

Performance and investment comments

Regarding the figures detailed below, we present a comparison between the values reported by theCompany in 2011 and the values reported in the same period of 2010 and pro forma, including theMD1 and Cerpe data. The pro forma is an evidence of computed numbers, assuming that certainevents, in this case the acquisition of Cerpe and MD1, have occurred before the operation closuredates. This presentation form is a manner of reflecting, in the comparative information fromprevious periods, relevant facts that occurred in the present, in order to enable the comparison ofintermediate information.

Gross operational revenue

We arrived at the end of 2011 with a gross revenue of R$ 2,390.1 million, representing a growth of46.5% in comparison with the previous year. When compared to the pro forma, the growth was13.0%. In the quarter, we have reached R$ 601.1 million in gross revenue, representing a growth of49.2% compared to the fourth quarter of 2010 and 14.6% compared to the fourth quarter pro forma.

The Ambulatory and Hospital segment achieved a R$ 2,000.8 million revenue in 2011, representing

a growth of 58.3% year against year and 16.3% year against 2010 pro forma. This growth is theresult of (i) the projects destined to increase the efficiency of the services offered, including theexpansion and renovation of the service centers, (ii) optimization of the service center portfolio andopening of new centers, (iii) addition of 41 new hospitals in the base served, (iv) acquisitions ofPrevilab and Cytolab in the third quarter, accelerating the strategy to enter new markets. In 4Q11, thegrowth reached 60.3% compared to 4Q10, of which 57.5% came from organic growth.

We reached 18.5 million requests in the year 2011, an increase in volume of 74.5% in respect to theprevious year, and 19.8% in respect to the pro forma. In the last quarter of 2011 we served 4.6million requests, a growth of 70.4% compared to the same period of the previous year, and 18.8%compared to the pro forma.

The performance of Standard brands finished the year 2011 with a gross revenue of R$ 673.1

million, which represents a growth of 28.2% in the pro forma vision. This growth results from thehigher access to diagnostic services by the low-income population.

The support market finished the year 2011 with a gross revenue of R$ 232.4 million representing anexpressive growth of 27.1% in respect to 2010, and 11.5% in respect to the pro forma. Consideringonly 4Q11, the support segment grew 19.0% in respect to 4Q10 and 6.0% in respect to the proforma, reaching R$ 57.2 million.

The average revenue per laboratory this semester decreased 1.1%, but grew 4.0% if compared to thepro forma. The number laboratories served grew 19.7% compared to 4Q10, and 1.9% compared tothe pro forma. The average revenue per request decreased 2.0% year against year, and 2.0% inrespect to the pro forma.

7/30/2019 IFRS 12.31.2011

9/147

9

CientificaLab, brand that acts exclusively in the public sector, reached a R$ 157.0 million revenue in2011 and represented a setback of 15.6% if compared with the previous year. In this quarter, thegross revenue was R$ 39.7 million, representing a setback of 2.3% in respect to 4Q10. At the end of2011, this segment represented 6.6% of the total revenue of the Company.

We finished the year 2011 with 30 clients that demanded 1.3 million requests. Therefore, wefinished the year serving 619 collection points (95 hospital units and 524 units of the ambulatorynetwork).

Costs and gross profit

In 2011, the costs of services provided totaled R$1,399.2 million, equivalent to 64.2% of the netrevenue. This percentage represents a decrease of 1.2 p.p. if compared to the costs of 2010. In 2011,the gross profit was R$780.7 million, a growth of 40.5% in respect to the previous year, and 11.3%in the pro forma vision, and the gross margin of the period reached 35.8 %, representing an 1.2 p.p.decrease over the same period of 2010 and 0.1 p.p. in the pro forma vision.

Operational expenses

At the end of 2011, the operational expenses added up to R$ 406.7 million, and if compared to thepercentage over net revenue of 2010 there was a 4.4de p.p. decrease in operational expenses, and adecrease of 1.6 p.p. if compared to the pro forma vision.

EBITDA

In 2011, we achieved an EBITDA of R$ 499.6 million, representing a growth of 29.8% in respect tothe R$ 384.8 million on the same period of the previous year, and a margin of 22.9% (decrease of3.8% p.p. in comparison to the previous year). If we consider the pro forma vision, there was adecrease of 0.5% in the EBITDA, and 2.8 p.p. in respect to the margin.

When we exclude the effect of expenses not recurring in 2011, in the amount of R$ 53.5 million, weachieve an EBITDA of R$553.1 million, with a margin of 25.4 % over the net revenue, 1.3 p.p.below the margin reported in 2010. Compared to the pro forma, the recurring EBITDA margin was2.8 p.p. below the margin reported in 2010.

In 4Q11, the EBITDA reached R$ 104.4 million, compared with R$ 81.7 million in 4Q10 and R$111.4 million in the pro-forma view. Similarly, excluding the effect of non-recurring expenses, wesee an EBITDA of R$ 132.0 million compared with R$ 127.7 million as reported in 2010, with theexclusion of non-recurring items, which means that there was a growth of 34.7%. In relation to pro-forma, there was a growth of 3.6%.

This expansion was the result of a strong growth in income, as already mentioned, and also themaintenance of costs and administrative expenses according to the plans of the Management.

Our commitment is aimed at the sustenance of the results obtained, even with the daunting challengeof operational and administrative integration of recent acquisitions. The recent accomplishmentsshall be preserved and our focus is now aimed at the completion of a new growth cycle, with qualityand also added value for the Company.

7/30/2019 IFRS 12.31.2011

10/147

10

Net Profit

The net profit reached R$ 145.5 million, which gives a significant increase of 48.3% when comparedwith the previous year (R$ 98.0 million). Compared with the pro-forma for 2010, there was a declineof 6.7%.

Debt

The net debt of the Company came to R$ 872.4 million at the end of 2011. Out of the total grossdebt, 73.0% are allocated in the long term and about 7.9% are for debts taken out in foreigncurrency. In December 2010, the company made an offer for the purchase of all papers issued by thecompanys full subsidiary, DASA Finance Corporation; the company acquired some 87.1% of thetotal papers in circulation. The debt in foreign currency consists mainly of bank loans, and alsofinancing of equipment and International Papers which were not purchased as part of the purchaseoffer. The debt in national currency is largely made up of Promissory Notes and Debentures.

Investments

Investments in CAPEX in 2011 came to R$ 193.2 million, or 70.4% more than in 2010. Theseinvestments were mainly aimed at: (i) purchase of imaging equipment; (ii) refurbishment andexpansion of the existing service units; (iii) implementation and development of the production andservice systems.

Information to shareholders Capital Markets

The Company shares closed the year at R$ 15.50, which was 31.1% off over the year, compared to a18.1% fall in the So Paulo Stock Market Index (Ibovespa) as a whole. Between January andDecember 2011, the shares of the company were traded at 100% of the stock market sessions held atBM&F Bovespa, involving a financial volume of R$ 6.4 billion (for a daily average of R$ 25.8million). This strong negotiation resulted in the companys inclusion on the Ibovespa indexcompanies, with a participation of 0.589%, this being the first company in the health segment tohave ever been part of the Ibovespa stock index.

7/30/2019 IFRS 12.31.2011

11/147

11

Remuneration to Shareholders

The Administration Board, on September 30, 2011, authorized the distribution of interest on capitalto shareholders for a gross sum of R$ 30.0 million, of which R$ 26.4 million net.

These values shall be assigned to the mandatory minimum dividend to which the shareholders areentitled, in relation to the results calculated over the business year ended on December 31, 2011, andwhich have totaled R$ 34.6 million which corresponds to 25% of the Net Profit of the Business Yearof 2011, adjusted by legal reserve.

The Administration is now proposing the payment of additional dividends totaling R$ 1.8 million, tobe approved at the next General Meeting to be held up to April 30, 2012, which shall give a totalgross value of R$ 40.0 million, of which R$ 36.4 million net.

Administration Board

The members of the Administration Board were elected at the shareholders meeting of April 2011,as below:

Name Position Held

Term of Office

Start Duration

Romeu Crtes Domingues President May 9, 2011

Up to theAGM of April2013

Jos Lucas Ferreira de Melo Vice-President (independent) May 9, 2011

Luis Guilherme Ronchel Soares Board Member (independent) May 9, 2011

Dickson Esteves Tangerino Board Member May 9, 2011

Oscar de Paula Bernardes Board Member (independent) May 9, 2011

Aside from the Administration Board, in May 2011 there was also a reorganization of the CompanyCommittees, meaning the presence of 2 non-statutory committees (Auditing and People), comprisingmembers of the Administration Board and Company Directors. In the audit committee there is oneexternal member for co-ordination.

7/30/2019 IFRS 12.31.2011

12/147

12

Board of DirectorsWe now present the list of the current Board of Directors:

Name Position Held

Term of Office

Start Duration

Marcelo Noll Barboza President April 28, 2010

Until the date ofthe AGM thatapproves theaccounts for thebusiness year of2012

Marcelo Noll Barboza Financial Director (Interim)February 14 ,2012

Marcelo Noll Barboza Investor Relations Director (Interim) February 14 ,2012

Ronaldo Azevedo de CarvalhoDiagnostic Procedures Director(Interim) February 28, 2010

Carlos Elder Maciel de Aquino Ex-officio DirectorFebruary 14 ,2012

Marcelo Rucker People Manager April 28, 2010

Octavio Fernandes da Silva Filho Operations Vice-President April 28, 2010

Relevant Events

Signature of APRO at the CADE MD1 Operation

On October 26, 2011, the Company celebrated, together with the Administrative Council forEconomic Defense (CADE), on the records of the Act of Concentration, an Agreement for thePreservation of Reversibility of the Operation (APRO).

The main purpose of APRO is that of preventing, up to the moment of the judgment of the merit ofthe Act of Concentration and in relation to the companies which are objects of the Operation, anyirreversible change or one that is difficult to remedy, ensuring the reversibility of the Operation inthe event that CADE feels that it shall be necessary to enforce restrictions on the judgment of itsmerit. The signature of APRO does not mean any attachment between CADE and the analysis ofmerit, or any anticipation in relation to the result of the judgment of the Act of Concentration.

In addition, we inform that the APRO as celebrated does not require the Company to proceed withthe reversal of the integration measures as already adopted up to the date of celebration of theagreement. Similarly, there was no blockage of the incorporation, on October 10, 2001, of MD1Diagnsticos S/A by the companys directly controlled Company, MD1 Participaes Ltda, and theincorporation of MD1 Participaes Ltda by the company on November 1, 2011.

On March 5, 2012, the Secretariat for Economic Monitoring of the Brazilian Ministry for Finance(SEAE) issued an opinion statement, of merely opinative content, which recommends the approval

7/30/2019 IFRS 12.31.2011

13/147

13

of the Operations with the restrictions as presented in the aforementioned opinion statement. Theissue of this statement does not mean any attachment of CADE in relation to the analysis of themerits of, or any anticipation of the results of, the judgment of this institution in relation to theAssociation.

The operation is still under the examination of the authorities acting in defense of competition, andthe administration of the Company continues to co-operate actively for the positive conclusion ofthe analysis.

Incorporation of MD1 Participaes Ltda

At the Special General Meeting held on November 1, 2011, there was the unanimous approval ofthe incorporation, by the Company, of its controlled company MD1 Participaes Ltda, with theresulting extinction of the Incorporated Company, which was therefore succeeded by the Companyin relation all rights and obligations thereof, in the terms of Article 227 of Law No. 6404/76 andArticle 1116 of the Brazilian Civil Code.

Prospects for 2012

A lot is expected of the year 2012. After the acquisitions of Cerpe, Sergio Franco, CDPI,Multimagem, Pro-Echo, Cytolab and Previlab, we are prepared for strong growth in 2012. All theinvestments made in the expansion and modernization of the existing units, the inauguration of newunits, and the replacement of imaging equipment, together with larger investments in qualityimprovement shall provide an environment which is more conducive to growth. In this year we shallimplement a unified system for service, bookings and debt collection which shall not only improvethe service we provide but shall also have an impact on the improvement of the processes ofpayment collection for the exams.

We expect a year showing important growth in all the markets in which we are active. The mainpoints expected by the Company are the following:

Continuity and enhancement of the changes started in 2011, seeking sustainable margins andreturns with improved quality of service;

Growth across all business lines, with opening of new units and identification ofopportunities in new markets;

To offer services that meet and surpass the expectations of the clients in relation to the Company,thereby promoting excellence both in the markets where the company is already active as also innew areas of activity;

We stress, specifically in relation to the companies of the MD1 group, that the practices establishedin the Agreement for Preservation of Reversibility of the Operation (APRO) shall be respected bythe Company.

Relationship with the medical community

Aware of the importance of a good relationship with the medical community for the company tocontinue to provide a service of excellence according to the cutting edge of science and the needs ofthe patients, the Company shall continue to develop its institutional medical communication programso that there is an alignment with the corporate strategy of the company and also consideration of theregional specificities of each market.

7/30/2019 IFRS 12.31.2011

14/147

14

A lot of emphasis shall be placed on the scientific productions and also on the development ofinnovative projects that generate new services and products as a way to boost generation of income.In 2011, we promoted several different events with famous doctors, events which shall be focused ononce again in 2012.

Relationship with independent auditors

In compliance with Instruction No. 381/2003 of the Brazilian Securities Commission (CVM), weinform that the Company did not hire services that were not related to external audits in the businessyear of 2011. The Companys main policy is that of complying with the regulations that setrestrictions for services provided by independent auditors. The financial information about thecompany, as presented here, agree with accounting practices normally taken up in Brazil and arepart of the financial statements as audited.

According to a decision taken by a Meeting of the Administration Board of the Company onNovember 7, 2011, it was informed to CVM and also to the Market, on November 11, 2011, thatthere would be a replacement of KPMG Auditores Independentes by Ernst & Young TercoAuditores Independentes S/S, in the role of independent auditor of the financial statements of thebusiness year starting as from January 1, 2012. This substitution was caused by the provisionsestablished in CVM Instruction No. 308 of May 14, 1999 and also by Deliberation No. 549 ofSeptember 10, 2008, which address the issue of rotativity of independent auditors.

Non-financial information, as also any other operational information, were not objects of an auditby our independent auditors.

Commitment Clause

The Company is bound to the arbitration of the Market Arbitration Chamber, as according to thecommitment clause stated in Article 44 of the companys Articles of Incorporation.

Board Declaration

Observing the provisions mentioned in CVM Instruction No. 480, we do hereby declare that we havediscussed and revised the financial statements and now agree therewith and also with the reportprepared by the independent audit on the aforesaid Financial Statements, for the business yearending on December 31, 2011.

Thanks

We would like to thank our collaborators for the alignment, effort and talent which have allowed usto obtain consistent results, and also our clients and shareholders, for the trust that has beenbestowed upon us.

7/30/2019 IFRS 12.31.2011

15/147

15

Independent auditors' report on the financial statements

ToBoard of Directors and Shareholders ofDiagnsticos da Amrica S.A.Barueri - SP

We have audited the accompanying individual and consolidated financial statements ofDiagnsticos da Amrica S.A. ("Company"), identified as Parent company and Consolidated,respectively, which comprise the balance sheet as of December 31, 2011 and the related statementsof income, changes in shareholders' equity and cash flows, for the year then ended, and a summaryof significant accounting policies and other explanatory notes.

Managements responsibility regarding the financial statements

Management is responsible for the preparation and fair presentation of these individual financialstatements in accordance with the accounting practices adopted in Brazil and of the consolidatedfinancial statements in accordance with the International Financial Reporting Standards (IFRS)issued by the International Accounting Standards Board - IASB, and in accordance with theaccounting practices adopted in Brazil as well as for the internal controls that it deemed necessaryto enable the preparation of these financial statements free from material misstatement, whether dueto fraud or error.

Auditors responsibility

Our responsibility is to express an opinion on these financial statements based on our audit, whichwas conducted in accordance with the Brazilian and international auditing standards. Thosestandards require that we comply with relevant ethical requirements and plan and perform the auditto obtain reasonable assurance whether the financial statements are free of material misstatement.

An audit involves the performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on our judgment, includingthe assessment of the risks of material misstatement in the financial statements, whether due tofraud or error. In making those risk assessments, we consider internal controls relevant to theentitys preparation and fair presentation of the financial statements in order to design auditprocedures that are appropriate in the circumstances, but not for the purposes of expressing anopinion on the effectiveness of these entities internal controls. An audit also includes evaluating theappropriateness of accounting principles used and the reasonableness of accounting estimates madeby Management, as well as evaluating the overall presentation of the financial statements.

7/30/2019 IFRS 12.31.2011

16/147

16

We believe that the audit evidences we have obtained are sufficient and appropriate to provide abasis for our audit opinion.

Opinion on the individual financial statements

In our opinion, the individual financial statements referred to above present fairly, in all materialrespects, the financial position of Diagnsticos da Amrica S.A. as of December 31, 2011, theperformance of its operations and its cash flows, for the year then ended, in accordance with theaccounting practices adopted in Brazil.

Opinion on the consolidated financial statements

In our opinion, the consolidated financial statements referred to above present fairly, in all materialrespects, the financial position of Diagnsticos da Amrica S.A. as of December 31, 2011, theperformance of its operations and its cash flows, for the year then ended, in conformity withInternational Financial Reporting Standards - IFRS issued by the International AccountingStandards Board (IASB) and the accounting practices adopted in Brazil.

Emphasis

As described in the note 4, the individual financial statements were prepared in accordance with

accounting practices adopted in Brazil. In the case of Company, these practices differ from IFRS, asfar as the individual financial statements are concerned, only as regards the valuation of investmentsin subsidiaries under the equity method, as, for IFRS purposes, they would be valued at cost or fairvalue. Our opinion is not qualified related to this issue.

Other issues

Statements of added value

We have also audited the individual and consolidated statements of value added (DVA) for the yearended December 31, 2011, whose presentation is required by Brazilian Corporate Law for publicly-held companies and as supplementary information under IFRS, as these standards do not require the

presentation of a statement of value added. These statements were submitted to the same auditprocedures previously described and, in our opinion, these supplementary statements are adequatelypresented, in all material respects, in relation to the basic financial statements taken as a whole.

7/30/2019 IFRS 12.31.2011

17/147

17

So Paulo, March 26, 2012

KPMG Auditores IndependentesCRC 2SP014428/O-6

Original report signed byMarcos Antonio BoscoloAccountant CRC 1SP198789/O-0

7/30/2019 IFRS 12.31.2011

18/147



Balance sheets

December 31, 2011 and 2010

(In thousand of Reais)

Assets Note 2011 2010 2011 2010

Current assetsCash and cash equivalents 7 156,978 280,478 249,945 302,262Marketable securities 8 10,475 23,048 41,371 49,456Trade accounts receivable 9 352,456 309,926 490,019 357,070Inventories 10 58,529 47,152 77,367 52,390Recoverable taxes 11.a 80,169 35,647 118,413 51,494Prepaid expenses 1,387 2,449 1,457 2,489Other accounts receivable 48,510 32,907 24,645 29,999

708,504 731,607 1,003,217 845,160

Noncurrent assetsDeferred tax assets 11.b 101,703 106,848 166,672 131,048Prepaid expenses 13 14 13 17Judicial deposits 15,130 13,945 18,294 14,233Advances for future capital increases 27 48,307 11,103 3 -Marketable securities 8 37,876 34,808 75,029 63,507

203,029 166,718 260,011 208,805

Investments 12 368,173 186,463 317 320Property, plant and equipment 13 466,594 410,364 655,860 462,042Intangible assets 14 2,317,781 349,788 2,363,391 428,612

3,355,577 1,113,333 3,279,579 1,099,779

4,064,081 1,844,940 4,282,796 1,944,939

See the accompanying notes to the financial statements

Parent Company Consolidated

7/30/2019 IFRS 12.31.2011

19/147


Publicly-held company)

Balance sheets

ecember 31, 2011 and 2010

n thousand of Reais)

iabilities and shareholders' equity Note 2011 2010 2011 2010

urrent liabilities

Suppliers 15 52,748 48,998 76,641 58,517

Loans and financing 16 282,864 331,148 298,198 335,867

Debentures 17 13,296 69,031 13,296 69,031

Taxes and contributions payable 12,444 12,806 22,555 15,799

Social and Labor Liabilities 18 53,087 60,772 75,628 68,733

Installment payment of taxes 19 3,702 5,289 7,963 7,412

Accounts payable from acquisition of subsidiaries 20 11,988 30,932 11,988 30,932

Dividends and interest on shareholders capital 22.e 34,546 26,711 34,546 26,711

Financial instruments derivatives 25 1,262 26,502 1,262 26,502

Provision for negative equity of subsidiaries 12 21,911 17,299 - -

Other accounts payable 43,525 45,861 48,134 46,047

531,373 675,349 590,211 685,551

oncurrent liabilities

Loans and financing 16 25,723 354,165 101,322 402,138

Debentures 17 696,337 - 696,337 -

Installment payment of taxes 19 9,837 7,704 32,561 20,393

Deferred tax liability 11.b 133,921 23,901 145,024 24,045

Tax, social security, labor and civil provisions 21 67,614 102,926 81,047 103,300

Accounts payable from acquisition of subsidiaries 20 54,122 53,819 67,517 61,084

Debts with Related Parties 27 - - 23,948 21,352

Financial instruments derivatives 25 1,862 12,189 1,862 12,189

Other accounts payable 944 - 947 -

990,360 554,704 1,150,565 644,501

hareholders' equity 22ap ta , , , , , ,ap ta reserve , , , ,ro t reserves , , , ,qu ty eva uat on a ustment , , , ,

Treasury shares (18,617) (7,028) (18,617) (7,028)Additional dividends proposed 1,857 - 1,857 -

2,542,348 614,887 2,542,348 614,887

Non-controlling interests - - (328) -

2,542,348 614,887 2,542,020 614,887

4,064,081 1,844,940 4,282,796 1,944,939



7/30/2019 IFRS 12.31.2011

20/147



Statements of income

Years ended December 31, 2011 and 2010

(In thousand of Reais, except earnings per share)

Note 2011 2010 2011 2010

Revenues 30 1,538,427 1,359,348 2,179,874 1,501,967

Cost of services rendered (992,517) (849,528) (1,399,216) (946,456)

Gross profit 545,910 509,820 780,658 555,511

Other income 22,365 3,403 29,509 4,497

Administrative expenses 24 (343,506) (237,251) (435,615) (266,555)

Income before net financial expenses, equity in income of

subsidiaries and income taxes 224,769 275,972 374,552 293,453

Financial income 31 74,497 105,495 95,542 223,698

Financial expenses 31 (232,896) (272,082) (259,205) (377,060)

Net financial expenses (158,399) (166,587) (163,663) (153,362)

Equity in income of subsidiaries 12 102,778 25,700 - -

Income before income taxes 169,148 135,085 210,889 140,091

Income and social contribution taxes 23 (23,693) (37,119) (65,634) (42,125)

Net income for the year 145,455 97,966 145,255 97,966

Profit attributable to:

Owners of the Company 145,455 97,966 145,455 97,966



Earnings per share

Basic earnings per ordinary share (Reais) 0.46824 0.42751

Diluted earnings per ordinary share (Reais) 0.46815 0.42669

Quantity of share - basic 310,644 229,153

Quantity of share - dluted 310,705 229,594



7/30/2019 IFRS 12.31.2011

21/147



Statement of changes in shareholders equity

Years ended on December 31, 2011 and 2010

(In thousand Reais)

Note CapitalCapital

reserveLegal reserve

Profit

retention

Equity

evaluation

adjustment

Treasury

Shares

Retained

earnings

Additional

dividends

proposed

TotalNon-controlling

interest

Total

equity

Balance at January 1, 2010 402,091 65,427 7,132 75,315 3,674 - - - 553,639 - 553,639

Net income for the year - - - - - 97,966 - 97,966 - 97,966

Depreciation of the deemed cost - - 408 (408) - - - - - -

Distributions: - -

Legal reserve - - 4,898 - - - (4,898) - - - -

Profit retention - - - 63,068 - - (63,068) - - - -

Interest on shareholders capital - - - - - - (30,000) - (30,000) - (30,000)

Acquisition of treasury shares - - - - - (7,028) - - (7,028) - (7,028)

Transactions with stock-based payments - 309 - - - - - - 309 - 309

Balance at December 31, 2010 402,091 65,737 12,030 138,791 3,266 (7,028) - - 614,887 - 614,887

Net income for the year - - - - - - 145,455 - 145,455 (200) 145,255

Non-controlling interest - - - - - - - - - (128) (128)

Capital increase 22 1,832,044 - - - - - - - 1,832,044 - 1,832,044

Depreciation of the deemed cost - - - 1,067 (1,067) - - - - - -

Distributions:

Legal reserve 22 - - 7,272 - - - (7,272) - - - -

Profit retention 22 - - 98,183 - - (98,183) - - - -

Dividends 22 - - - 4 - - (8,143) - (8,139) - (8,139)

Interest on shareholders capital 22 - - - - - - (30,000) - (30,000) - (30,000)

Dividends additional proposed 22 - - - - - - (1,857) 1,857 - - -

Acquisition of treasury shares 22 - - - - - (11,589) - - (11,589) - (11,589)

Transactions with stock-based payments 22 - (310) - - - - - - (310) - (310)

Balance at December 31, 2011 2,234,135 65,427 19,302 238,045 2,199 (18,617) - 1,857 2,542,348 (328) 2,542,020


Attributable to owners of the Company

7/30/2019 IFRS 12.31.2011

22/147



Consolidated statements of cash flows - Indirect method

Years ended December 31, 2011 and 2010

(In thousand Reais)

2011 2010 2011 2010

Cash flows from operating activities


Adjustments for:Depreciation and amortization 98,954 84,049 125,764 91,321

Additions to provisions for contingencies 12,469 9,016 12,469 9,016

Negative goodwill - - (510) -

Deferred taxes 23,693 18,600 41,206 21,513

Interest and monetary variation on loans 135,462 60,168 155,281 147,090

Written-off of PP&E 344 10,228 4,929 13,025


Stock option plan (309) 309 (309) 309

Equity in income of subsidiaries (102,778) (25,700) -

Capital gain in the subsidiary (2,020) - - -

Increase in accounts receivable (42,530) (63,915) (111,502) (79,543)

Increase in inventories (11,377) (4,552) (23,928) (5,116)

Increase in other current assets (15,228) (50,396) (45,134) (70,354)

(Increase) decrease in other non-current assets (13,680) 3,072 15,878 (15,730)

Increase in suppliers 3,750 5,799 11,095 5,463

(Decrease) increase in accounts payable and provisions (78,928) (125,671) (64,602) 16,853Interest paid (264,578) (20,126) (273,191) (61,656)

Income tax and social contribution paid - (1,010) (18,344) (1,272)

Net cash (used in) provided by operating activities (111,301) (2,163) (25,643) 168,885

Cash flows from investing activities

Dividends received - 510 - 9

Additions in property, plant and equipment (129,053) (84,358) (176,688) (94,289)

Additions in intangible assets (28,671) (30,379) (29,974) (31,626)

Additions in investments (94,700) (79,856) (743) -

Dividends received of subsidiaries 8,000 - - -

Acquisition of MD1, net of cash (86,906) - (86,906) -

Subsidiary indirect acquisition - Previlab, net of cash - - (20,849) -

Subsidiary indirect acquisition - Cytolab, net of cash - - (9,876) -

Acquisition of Cerpe, net of cash - - - (48,230)

Net cash used in investment activities (331,330) (194,083) (325,036) (174,136)

Cash flows by financing activities

Loans 944,066 649,515 955,989 583,470

Payment of loans (586,640) (159,593) (619,332) (523,518)

Dividends and interest on shareholders equity paid (26,706) (23,331) (26,706) (23,331)

Acquisition of treasury shares (11,589) (7,028) (11,589) (7,028)

Net cash from financing activities 319,131 459,563 298,362 29,593

(Decrease) increase in cash and cash equivalent (123,500) 263,317 (52,317) 24,342

(Decrease) increase in cash and cash equivalent

At the beginning of the year 280,478 17,161 302,262 277,920

At the end of the year 156,978 280,478 249,945 302,262

(123,500) 263,317 (52,317) 24,342



7/30/2019 IFRS 12.31.2011

23/147



Consolidated statements of added value

Years ended in December 31, 2011 and 2010

(In thousand Reais)

2011 2010 2011 2010

RevenuesSale of goods, products and services 1,707,432 1,475,768 2,390,134 1,631,990

Other revenues 22,365 3,403 29,509 4,497

Provision for doubtful accounts e disallowances (105,186) (25,955) (109,601) (27,408)

Third party supplier

(including the taxes - ICMS, IPI, PIS and COFINS)

Cost of products, goods and services (397,151) (270,661) (560,012) (279,518)

Materials, energy, third party services and others (281,093) (308,684) (395,066) (353,416)

Gross added value 946,367 873,872 1,354,964 976,145

Depreciation and amortization (98,954) (84,049) (125,764) (91,321)

Net added value produced by the Company 847,413 789,823 1,229,200 884,824

Added value received as a transfer

Equity in income of subsidiaries 102,778 25,700 - -

Financial income 74,497 105,495 95,542 223,698

Total added value to be distributed 1,024,688 921,017 1,324,742 1,108,522

Distribution of added value 1,024,688 921,017 1,324,742 1,108,522

Personnel 363,258 297,824 501,438 348,824

Taxes, rates and contributions 202,908 186,058 311,289 213,566

Return on managed assets

Interests and rents 313,067 339,169 366,760 448,166

Return on own assets

Dividends and interest on shareholders equity paid 38,143 30,000 38,143 30,000

Retained earnings for the year 107,312 67,966 107,312 67,966




7/30/2019 IFRS 12.31.2011

24/147



Notes to the financial statements

(In thousands of Reais)

24

1 Operations

The Company is a publicly-held corporation with its registration granted by the Brazilian Securitiesand Exchange Commission (CVM) on November 5, 2004, and has been listed on the Bovespa NovoMercado Segment since November 19, 2004.

The Companys corporate purpose is to render services directly to individuals or through healthinsurance plans, insurance companies, entities of medical-hospital assistance entities, other entitiesfor healthcare financing, in the following areas : (i) clinical analysis, directly or through contractedlaboratories; and (ii) other auxiliary services of diagnostic support (SAD), exclusively throughspecialized clinics, as, for instance, in the following areas : a) cytology and pathologic anatomy; b)

diagnostic by imaging and graphic methods; and c) nuclear medicine. As the administration doesnot control them separately in their business process, therefore they are not being recognized asreportable segments.

In addition, it explores activities related to: (i) tests in food and substances to evaluate risks for thehuman being; (ii) importation, for its own use, of medical-hospital equipment, sets for diagnosticsand related material in general; (iii) granting and administration of business franchising includingadvertising and publishing fund, training and selection of labor, supplying of equipment andresearch material suppliers, among others. The Company operate in lab-to-lab business (supportlaboratories) through the brand Alvaro, and began offering services in the public health sectorthrough brand CientficaLab. The Company can also participate in other entities.

7/30/2019 IFRS 12.31.2011

25/147





25

As of December 31, 2011, the Company has 522 operational units:

Brands Location12/31/11 12/31/10

Delboni Auriemo So Paulo 41 37Lavoisier So Paulo 78 72Bronstein Rio de Janeiro 42 42Lmina Rio de Janeiro 13 13Santa Casa Paran 7 6Pasteur Braslia 22 24Frischmann Paran 35 36Image Bahia 5 4Laboratrio lvaro Paran 18 18LabPasteur Cear 18 18MedLabor Tocantins - 1Vita-Lmina Santa Catarina 2 2Atalaia Gois 22 14Exame Braslia 19 18MedImagem Rio de Janeiro 7 7Hospital Me de Deus Porto Alegre 1 1Cedic/Cedilab Mato Grosso 13 7Unimagem Cear 1 1CERPE Pernambuco 43 38Srgio Franco Rio de Janeiro 76 -Proecho Rio de Janeiro 15 -Multi Imagem Rio de Janeiro 6 -

CDPI Rio de Janeiro e So Paulo 6 -Previlab So Paulo 20 -Cytolab So Paulo 11 -Premiun So Paulo 1 -

522 359

On December 31, 2011, the Club DA brand had 23 units, with 19 units linked to the DelboniAuriemo brand and 4 units linked to Lmina brand.

7/30/2019 IFRS 12.31.2011

26/147





26

CientficaLab operates in the public healthcare segment, and its major source of revenue are thecontracts formalized with clients in the public healthcare sector. This operation ended the year

2011 with 30 clients, which demand 1.3 million requisitions. The CientficaLab meets in 619sampling points, with 95 Inpatient and 524 outpatient clinics.

The type and range of the services provided vary according to the needs and interest of the publicentity requiring the service, and they may comprise three different models:

Lab to lab (support): Includes the transport of samples and central processing. In this case,CientficaLab provides collection of materials, training given to civil servants and sometimesrefurbishment in PSCs to ensure the service quality;

Outpatient: In addition to the support service, it comprises patient service and samplecollection; and

Inpatient: Refers to patient service, test collection, local collection for emergency tests,transport and central processing for the other exams.

7/30/2019 IFRS 12.31.2011

27/147





27

2 Acquisition of subsidiaries

(a)Business combination

Acquisition of Instituto de Endocrinologia e Medicina Nuclear do Recife Ltda. - CERPE

The Company, through its subsidiary DA Participaes, has acquired on October 25, 2010,100% of the capital stock of the Instituto de Endocrinologia e Medicina Nuclear do RecifeLtda. - CERPE, and 69.5% of the capital stock of CERPE was handed in the act, and 30.5% ofthe capital stock of CERPE will be delivered in a maximum of 10 years. The acquisition valueof CERPE was R$ 52,501, of which R$ 45,246 paid in cash and R$ 7,255 will be retained in adeposit account linked to the acquisition, this amount, R$ 4,316 will be retained for six years asa guarantee contingencies and R$ 2,939 as a final installment to be paid within 10 years.

This acquisition strengthens the Company performance in clinical analysis and pathologicanatomy and widens its geographical performance in the Northeastern part of the country, asCERPE has great representativeness in the clinical analysis, bone densitometry and nuclearmedicine segment in the State of Pernambuco, through its 38 units at the time of theacquisition.

The process to allocate the goodwill was concluded during this quarter, with the conclusion ofthe study to determine the fair values for the assets and liabilities acquired, undertaken by anindependent appraiser.

The amounts recognized for the assets and liabilities acquired on the acquisition, have beensummarized below, adjusted according to the result of the study prepared by the independentappraiser:

7/30/2019 IFRS 12.31.2011

28/147





28

In the process of assets and liabilities identification there were also considered intangible assets,which were not recognized in the acquired company books, in the amount of R$13,395:

R$ 12,197 (i)

R$ 1,198 (ii)R$ 13,395

(i) brands which are amortized in a linear base during the 30 year estimated useful life.(ii) relationship with hospitals which is amortized in a linear base during the 24 month estimated

useful life.

Assets Liabilities

Current 14,173 Current 7,275

Cash and cash equivalents 432 Suppliers 2,814Marketable securities 3,839 Loans and financing 65Trade accounts receivable 8,690 Taxes and contributions payable 1,367Inventories 462 Income tax and social contribution 463Other accounts receivable 750 Salaries, social security charges and vacation payable 1,829

Payment of taxes in installments 95Other accounts payable 642

Noncurrent 17,399 Noncurrent 7,732Judicial deposits 251Investments 42

Payment of taxes in installments 11,444

Property and equipment, net 3,567Provision for contingencies 374

Intangible assets, net 13,539

Deferred income taxes 8

Debts with Related Parties 1,352

Shareholders' equity (13,435)

Total assets31,572 Total liabilities 31,572

7/30/2019 IFRS 12.31.2011

29/147





29

Goodwill

The goodwill recorded as acquisition result, after the identification of intangible assets, wasR$65,936, as demonstrated below:

Investment value 52,501Unsecured liabilities 13,435Goodwill 65,936

Acquisition ofMD1 Diagnsticos S.A.

The Company has acquired on January 05, 2011, 100% of the capital stock of the MD1Diagnsticos S.A. ("MD1"). The consideration transferred is summarized below:

Cash R$ 88,232Incorporation of shares R$ 1,832,044Total R$ 1,920,276

MD1 shareholders equity for purposes of the increase to the Companys capital from theincorporation of shares was subject to an appraisal report prepared on December 7, 2010 by PluralCapital Consultoria e Assessoria Ltda. Under the terms of the appraisal report, the economic valueof MD1 was determined as R$1,976,705, after deducting the amount of R$88,232 paid at sight bythe Company for aquisition the minority part at the corporations en the MD1 group, (i) CDPI Clnica de Diagnstico por Imagem Ltda. acquisition of 16.50%, (ii) Clnica de Ressonncia e MultiImagem Ltda acquisition of 28.00% and (iii) ProEcho Cardiodata Servios Mdicos Ltdaacquisition of 10.00%. The economic value of MD1 is R$1,888,473, which is greater than thecapital increase in the Company. The increase in the Companys capital from the incorporation ofshares was R$1,832,044, corresponding to the price of R$ 22.29 for the issue of new shares

7/30/2019 IFRS 12.31.2011

30/147

7/30/2019 IFRS 12.31.2011

31/147





31

Sharing of business practices, aiming the reduction of operating, market, credit and liquidityrisks; and

Re-segmentation of the brand portfolio and attendance models, with the objective of promotinga better service for the clients, development of service channels and construction of a neworganic expansion plan, after the operational and administrative integration of MD1.

The operation will also enable the exploration by DASA of other operating assets of MD1Shareholders, including those related to the services of clinical analysis and to the operation ofpositron emission tomography (Pet CT) in some hospitals.

The operation was submitted to the Brazilian System for the Defense of Competition. See additionalcomments on this subject in this note in unit (b).

As a result of the corporate reorganization of MD1 and the acquisition of its subsidiaries listedbelow, the investments held by MD1 and the Company in the entities are as follows:

Corporation MD1 investment DASA investment

MD1 Diagnsticos S.A. - 100.00%Laboratrios Mdicos Dr. Srgio Franco Ltda. 100.00% -CDPI Clnica de Diagnstico por Imagem Ltda. 83.50% 16.50%Clnica de Ressonncia e Multi Imagem Ltda. 72.00% 28.00%

Pro-Echo Cardiodata Servios Mdicos Ltda. 90.00% 10.00%

7/30/2019 IFRS 12.31.2011

32/147





32

The amounts recognized for the assets and liabilities assumed on the acquisition date, aresummarized below:

Assets MD1 CDPI CRMI Pro-echo

Current 1 10,666 6,117 11,385

Cash and Banks 1 355 777 151

Financial investments - - 42 -

Trade accounts receivable, net - 8,684 3,943 7,124Inventories - 275 356 144

Recoverable taxes - 793 549 2,050

Prepaid expenses - 28 7 11

Others receivables - 531 443 1,905

Noncurrent 287,980 41,680 16,462 29,315

Judicial deposits - 753 377 133

Deferred tax - 7,402 1,554 6,914

Related party transactions - 308 - -

Investments 276,054 3 - -Property, plant and equipment - 32,956 14,351 22,259

Intangible assets 11,926 258 180 9

Total assets 287,981 52,346 22,579 40,700

7/30/2019 IFRS 12.31.2011

33/147





33

Liabilities MD1 CDPI CRMI Pro-echo

Current 1,991 19,233 5,211 17,751

Suppliers - 3,052 954 1,478

Loans and Financing - 6,392 1,564 11,843Salaries, social security charges andvacation payable - 2,013 455 1,219

Taxes and contributions payable - 342 160 161

Unsecured liabilities 1,407 281 - -

Other accounts payable 584 7,153 2,078 3,050

Noncurrent 1,550 15,663 4,097 25,343

Loans and Financing - 12,939 2,212 7,556

Installment taxes - 723 285 361

Deferred tax - 58 401 891

Provision for contingencies - 336 1,199 1,778

Other accounts payable 1,550 1,607 - 14,757

Non-controlling interests - (52) 236 -

Shareholders' Equity (Negative) 284,440 17,502 13,035 (2,394)

Total liabilities 287,981 52,346 22,579 40,700

7/30/2019 IFRS 12.31.2011

34/147





34

The goodwill recognized from the incorporation of shares in MD1 and from the companies from theMD1 Group, was identified as follows:

MD1 CDPI CRMI Pro-echo Total

Investment interest 100.00% 16.50% 28.00% 10.00%

Acquisition price 1,832,043 50,068 33,627 4,537 1,920,275Shareholders' Equity(Negative) (a) 284,440 2,888 3,650 (239) 290,739Goodwill 1,547,603 47,180 29,977 4,776 1,629,536

(a) Adjusted to the share percentageThe Company incurred costs related to the acquisition of R$4,797 which refer to external legal feesand due diligence costs. The legal fees and due diligence costs were included as part ofadministrative expenses reported in the Companys statement of income.

In the process of assets and liabilities identification there were also considered intangible assets,which were not recognized in the books of the acquired companies, and registered in the subsidiaryLaboratrios Mdicos Dr. Sergio Franco Ltda, which in the date of acquisition was controlled byMD1 Diagnsticos S.A, in the amount of R$269,027:

R$ 233,279(i)R$ 35,748(ii)

R$ 269,027

(i)brands which are amortized in a linear base during the 30 year estimated useful life.(ii) relationship with hospitals which is amortized in a linear base during the 20 year estimateduseful life.

7/30/2019 IFRS 12.31.2011

35/147

7/30/2019 IFRS 12.31.2011

36/147





36

The acquisition of PREVILAB was submitted to the departments of Brazilian Antitrust System,according to the current legislation.

In the 6 months previous to December 31, 2011, PREVILAB has contributed with a gross incomeof R$13,466 and net profit of R$2,033. If this acquisition had occurred on January 1, 2011, themanagement estimates that the gross consolidated income would have an increase of R$10,309 anda net profit increase of R$1,533 (unaudited information)

Assets Liabilities

Current 1,127

Current 5,455

Cash and banks 88 Suppliers 834

Trade accounts receivable, net 213 Loans and Financing 1,213

Inventories 180 Taxes and con tributions payable 202

Recoverable taxes 646 Salaries, s ocial security charges and vacation 999

Income tax and social contribution 154

Payment of taxes in installments 1,280

Other accounts payable 773

Noncurrent 1,867 Noncurrent 2,314

Judicial deposits 336 Loans and Financing 71

Investments 30 Payment of taxes in installments 2,102

Property, plant and equipment 1,501 Provision for contingencies 141

Negative Shareholders' Equity (4,775)

Capital 518

Accumulated loss es (5,293)

Total assets 2,994 Total liabili ties 2,994

7/30/2019 IFRS 12.31.2011

37/147

7/30/2019 IFRS 12.31.2011

38/147

7/30/2019 IFRS 12.31.2011

39/147





39

In the 6 months previous to December 31, 2011, PREVILAB has contributed with a gross incomeof R$6,808 and net profit of R$1,097. If this acquisition had occurred on January 1, 2011, the

management estimates that the gross consolidated income would have an increase of R$5,822 and anet profit increase of R$1,938 (unaudited information)

b) Agreement on Preservation of Reversibility of Operation (APRO)

On October 26, 2011, the Company executed with the Administrative Council for EconomicDefense (CADE) an Agreement on Preservation of Reversibility of Operation (APRO), in theprocess of Concentration Act.

APRO has the objective of preventing, up to the Concentration Act trials of merit and in relation tothe companies object of the Operation, the following: (a) Laboratrios Mdicos Dr. Srgio FrancoLtda., (ii) Pro Echo Servios Mdicos Ltda, (iii) CDPI Clnica de Diagnstico por Imagem Ltda.,

(iv) Clnica de Ressonncia e Multi Imagem Ltda, (v) CheckUp Unidade Preventiva, Diagnstico eMedicina Preventiva Ltda., (vi) Imagem e Diagnstico Ltda, (vii) Clnica de Ressonncia MultiImagem Caxias Ltda., (viii) Clnica de Ressonncia Multi Imagem Petrpolis Ltda., (ix)Multimagem Pet S.A. and (x) Incebrs Instituto Brasileiro da Coluna e do Crebro Ltda.,irreversible amendment or of difficult reparation, ensuring the reversibility of the Operation in caseCADE eventually understands that an imposition of restrictions shall be necessary at the moment ofthe trials of merit. The execution of the APRO does not imply CADE to be bond as for the analysisof the merit or any anticipation related to the result of the Concentration Act sentence.

Additionally, we inform that the APRO, as executed, does not bond the Company to revert the stepsfor the integration already taken until its execution.

As foreseen in APRO, the Company has contracted an independent auditor to attest theaccomplishment of the Agreement. In the first report, issued on February 9, 2012 (they shall beissued twice a month), BDO RCS Auditores Independentes concluded that "all requirementsestablished in the Clauses of APRO related to the liabilities to be accomplished by theCompromisers".

The Company, based on the legal report of its legal advisors, has concluded that, for the purpose ofaccomplishing the obligations of disclosing the ICVM480 information, DASA is not a relating partof the companies of Amil Group, as those companies are not controlled by or controllers of DASA,neither are they under common, direct or indirect control, nor do their controllers exercisesignificant influence over DASA. Notwithstanding, the management, intending to assure the total

7/30/2019 IFRS 12.31.2011

40/147





40

accomplishment of APRO executed with CADE, has defined that any contract between companiesof DASA group and companies of Amil group must be previously submitted to the approval of the

Auditing Committee.On March 5 2012, the Economic Supervision Office of the Ministry of Finance (SEAE) issuedtechnical report number 06145/2012/RJ related to the concentration act between the companiesDiagnsticos da Amrica S/A and MD1 Diagnsticos S/A simply as an opinion, recommending theapproval of the Operation with the restrictions presented in the technical report. The issuing of thisreport does not imply any bond to CADE as for the merit analysis or any anticipation of the trialresult on this association. The report presented by SEAE was not a surprise to the Company and,inclusively, it is in line with the communication previously sent to the market through the Notice tothe Market disclosed on 07/27/2011, that is, SEAE conclusions are apparently backed on premisesbased on partial data related to interpretations about corporate relations among DASA, individualshareholders bound to JHSPE Empreendimentos and its subsidiaries, Amil Participaes S.A and itssubsidiaries and FMG Empreendimentos Hospitalares.

The technical report is available in the internet site:http://www.fazenda.gov.br/littera/pdf/08012010038201043.pdf

The Operation is still undergoing examination from the antitrust authorities and the Company is stillactively cooperating to the positive conclusion of the analysis.

c) Corporate Restructuring incorporation of MDI Participaes Ltda by the Company

Allocation of capital in DASA Empreendimentos e Participaes Ltda.On September 03, 2011 the Company allocated assets and duties in the subsidiary DASAEmpreendimentos e Participaes Ltda, in the amount of R$2,049,614 corresponding to the totalamount of the shares at book value and the related premium values determined in the followingcompanies:

7/30/2019 IFRS 12.31.2011

41/147

7/30/2019 IFRS 12.31.2011

42/147





42

3 Group entities

The Consolidated financial Statements include the financial information of the Company andfollowing subsidiaries:

% Share

12/31/11 12/31/10Direct subsidiaries:

DASA Real Estate Empreendimentos Imobilirios Ltda. 99.99% 99.99%CientficaLab Produtos Laboratoriais e Sistemas Ltda. 99.99% 99.99%DASA Finance Corporation 100.00% 100.00%DA Participaes Ltda. (d) - 99.00%DASA Brasil Participaes Ltda. 99.00% 99.00%MD1 Participaes Ltda. (f) - 99.00%Instituto de Endocrinologia e Medicina Nuclear do Recife S.A. (CERPE) (d) 100.00% -DASA Log Empreendimentos Ltda. (e) 99.00% -DASA Sudoeste Participaes Ltda. (g) 99.00% -DASA Nordeste Participaes Ltda. (h) 99.00% -DASA Centro-Oeste Participaes Ltda. (i) 99.00% -Pro Echo Cardiodata Servios Mdicos Ltda. (a) 69.15% -CRMI - Clnica de Ressonncia e Multi Imagem Ltda. (a) 100.00% -CDPI - Clnica de Diagnstico por Imagem Ltda. (a) 100.00% -Laboratrios Mdicos Dr.Srgio Franco Ltda. (a) 100.00% -CYTOLAB Laboratrio de Anatomia Patolgica Citologia Diagnstica eAnlises Clnicas Ltda. (a) 100.00% -

Indirect Subsidiaries:Instituto de Endocrinologia e Medicina Nuclear do Recife S.A. (CERPE) (d) - 100.00%Pro Echo Cardiodata Servios Mdicos Ltda. (j) 30.85% -

Clnica de Ressonncia e Multi-Imagem Caxias Ltda. (b) 99.00% -Clnica de Ressonncia e Multi-Imagem Petrpolis Ltda. (b) 70.00% -Imagem e Diagnstico Ltda. (c) 99.94% -Check-Up UP - Unidade Prevent., Diagn. e Medicina Preventiva Ltda. (c) 55.00% -INCEBRAS Instituto Brasileiro da Coluna e do Cerebro Ltda. (c) 29.00% -Multimagem PET S/A (c) 100.00% -Previlab Anlises Clnicas Ltda. (k) 80.00% -STAT Anlises Clnicas Ltda. (k) 98.00% -

7/30/2019 IFRS 12.31.2011

43/147





43

(a) Companies acquired by the Group. See further details under Explanatory Note nr. 2.(b) Entities owned by CRMI Clnica de Ressonncia e Multi Imagem Ltda.

(c) Entities owned by CDPI Clnica de Diagnstico por Imagem Ltda.(d) Incorporated on April 29, 2011 by the subsidiary Instituto de Endocrinologia e Medicina

Nuclear do Recife S.A. (CERPE). Which shall thereinafter be a direct subsidiary of thecontroller.

(e) On May 17, 2011 DASA LOGEmpreendimentos Ltda was constituted as a subsidiary, with thesocial object of (1) commercializing, warehousing, importing and distributing equipment usedto provide auxiliary services for diagnostic support; and (ii) management of own and/or thirdparty assets. The Company activity has not started.

(f) On September 3, 2011 the corporate name DASA Empreendimentos e Participaes Ltda. wasaltered to MD1Participaes Ltda. Company incorporated on November 1, 2011.

(g) On May 9, 2011 the subsidiary DASA Sudoeste Participaes Ltda was constituted, with thecorporate object (i) to participate in other company, entrepreneurial or not, as partner orshareholder, in Brazil or abroad; and (ii) to manage own and/or third party assets. The companyactivities have not started yet.

(h) On May 9, 2011 the subsidiary DASA Nordeste Participaes Ltda was constituted, with thecorporate object (i) to participate in other company, entrepreneurial or not, as partner orshareholder, in Brazil or abroad; and (ii) to manage own and/or third party assets. The companyactivities have not started yet.

(i) On May 9, 2011 the subsidiary DASA Centro-Oeste Participaes Ltda was constituted, withthe corporate object (i) to participate in other company, entrepreneurial or not, as partner or

7/30/2019 IFRS 12.31.2011

44/147





44

shareholder, in Brazil or abroad; and (ii) to manage own and/or third party assets. The companyactivities have not started yet.

(j) Share of the subsidiary Laboratrios Mdicos Dr. Srgio Franco Ltda.(k) Company controlled by DASA Brasil Participaes Ltda.

7/30/2019 IFRS 12.31.2011

45/147





45

4 Basis of preparation

4.1 Statement of compliance (regarding the IFRS and CPC rules)

These financial statements include:

The consolidated financial statements were prepared in accordance with the InternationalFinancial Reporting System (IFRS) issued by theInternational Accounting Standards Board(IASB) and also in accordance with the accounting practices adopted in Brazil that follow thepronouncements issued by the Accounting Pronouncements Committee (CPCs);

The individual financial statements of the subsidiary were prepared in accordance with theaccounting practices adopted in Brazil (CPCs).

The parent Company's individual financial statements were prepared in accordance with theCPCs, which call for presenting investments in subsidiaries in accordance with the equitymethod, unlike the IFRS, which require investments in subsidiaries to be valued at cost or fairvalue.

However, there is no difference between the consolidated shareholders' equity andconsolidated result presented by Company and the shareholders' equity and result of theparent company in the individual financial statements. Accordingly, the Company'sconsolidated financial statements and the Parent Company's individual financial statementsare being presented side by side in a single set of financial statements.

The issue of individual and consolidated financial statements was authorized by the Board ofDirectors in meeting held on March 26, 2012.

7/30/2019 IFRS 12.31.2011

46/147





46

4.2 Basis of measurement

The individual and consolidated financial statements have been prepared on the historicalcost basis except for the following material items in the statement of financial position: (i)derivative financial instruments are measured at fair value; and (ii) financial instruments atfair value through profit or loss are measured at fair value.

4.3 Functional and presentation currency

These individual and consolidated financial statements are presented in real, which is theCompanys functional currency. All financial information presented in real has been roundedto the nearest value, except if otherwise indicated.

4.4 Use of estimates and judgments

The preparation of the individual and consolidated financial statements in conformity withIFRSs and with CPCs requires management to make judgments, estimates and assumptionsthat 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. Revisions to accountingestimates are recognized in the period in which the estimates are revised and in any futureperiods affected.

The information about assumptions and estimation uncertainties that have a significant risk ofresulting in a material adjustment within the next financial year are included in the followingnotes:

Note 9 Trade accounts receivable Note 21 Tax, social security, labor and civil provisions Note 5.8 Reduction on recoverable value (impairment) main premises used for

projections of discounted cash flow used for calculation of goodwill impairment test

7/30/2019 IFRS 12.31.2011

47/147





47

4.5 Segregation between current and noncurrent

The Company executed the segregation of property items in current when classified accordingto the following premises: It is expected to be realized or it is intended to be sold or consumedwithin the normal property cycle (12 months) of the Company; (ii) it is essentially maintainedfor the purpose of being traded; (iii) it is expected to be realized up to twelve months after thedate of balance.

4.6 Statements of comprehensive income

There were no transactions in the equity, in all relevant aspects, which could lead toadjustments that could compose the statements of comprehensive income. The net income ofthe year is equal to the comprehensive income.

7/30/2019 IFRS 12.31.2011

48/147





48

5 Significant accounting policies

The accounting policies set out below have been consistently applied by the Company and itssubsidiaries in all periods shown in these individual and consolidated financial statements. Theaccounting policies have been consistently applied by the Group.

5.1 Basis of consolidationi. Business combination:

For acquisitions occurred on January 1, 2009 or beyond, the business combinations are

recorded in the acquisition date, that is, in the date the control is transferred to the Group,using the acquisition method. Control means the power to rule the financial and operationalpolicies of the company in order to obtain benefits from its activities. The Company measuresthe goodwill on the acquisition date as:

The value of the transferred compensation; minus The net amount (usually the fair value) of the acquired identified assets and the liabilities.The payable contingent compensation is measured by its fair value on the acquisition date. Ifthe contingent compensation is classified as proprietary instrument, then it is not re-measuredand the liquidation is registered in the net worth. For the others, the subsequent alterations infair value are registered in the final result.

As part of the transition to IFRS and CPC, the Company opted for not presenting again thebusiness combinations held before January 1st,2009. As for the acquisitions before January1st 2009, the premium represents the amount booked under the accounting practicespreviously adopted. This premium was tested for reduction of its value recovered in thetransition date.

7/30/2019 IFRS 12.31.2011

49/147





49

ii. Acquisition of shares from non-controlling shareholdersIt is registered as transactions between shareholders. Consequently, no goodwill is recognizedas resulting from these transactions.

Adjustments to the participation of non-controlling in transactions that do not involve loss ofcontrol are registered based on the participation percentage in net assets of the subsidiary.

iii. Subsidiaries

The financial statements of subsidiaries are included in the consolidated financial statementsfrom the date that control commences until the date that control ceases. The accountingpolicies of subsidiaries have been changed when necessary to align them with the policiesadopted by the Group.

In individual financial statements of the Company, the financial information of thesubsidiaries is recognized through the equity method.

iv. Transactions eliminated on consolidation

Balances and transactions Intra-group, and income and expenses arising from intra-grouptransactions, are eliminated in preparing the consolidated financial statements. Unrealisedgains arising from transactions with equity-accounted investees are eliminated against theinvestment to the extent of the Group interest in the investee. Unrealised losses are eliminatedin the same way as unrealised gains, but only to the extent that there is no evidence ofimpairment. Description of the main consolidation procedures:

Write-off asset and liability account balances between the consolidated companies; Elimination of participation in capital, reserves and accrued earnings of the subsidiaries;

7/30/2019 IFRS 12.31.2011

50/147





50

Highlight of the non-controlling shareholders share value in the consolidated financialstatements.

5.2 Foreign currencyForeign currency transactions

Transactions in foreign currency, i.e., all those transactions that are not held in the functionalcurrency, are translated at the exchange rate on the dates of each transaction. Monetary assetsand liabilities in foreign currency are translated into the functional currency by the exchangerate on the closing date. The gains and losses from the exchange rate variations on the

monetary assets and liabilities are recognized in profit and loss. Non monetary assets andliabilities acquired or contracted in foreign currency are translated based on the exchange rateon the dates of the transactions or on the dates of valuation at fair value when this is used.

5.3 Financial instrumentsi. Financial instruments non-derivative

The Group initially recognises loans and receivables and deposits on the date that they areoriginated. All other financial assets (including assets designated at fair value through profitor loss) are recognised initially on the trade date, which is the date that the Group becomes aparty to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows fromthe asset expire, or it transfers the rights to receive the contractual cash flows on the financialasset in a transaction in which substantially all the risks and rewards of ownership of thefinancial asset are transferred. Any interest in transferred financial assets that is created orretained by the Company is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement offinancial position when, and only when, the Company has a legal right to offset the amountsand intends either to settle on a net basis or to realise the asset and settle the liabilitysimultaneously.

7/30/2019 IFRS 12.31.2011

51/147





51

The Group classifies the non-derivative financial assets in the following categories:

Financial assets at fair value through profit or loss

A financial asset is classified at fair value through profit or loss if it is classified as held fortrading or is designated as such upon initial recognition. Financial assets are designated at fairvalue through profit or loss if the Group manages such investments and makes purchase andsale decisions based on their fair value in accordance with the Group documented riskmanagement or investment strategy. Attributable transaction costs are recognised in profit orloss as incurred. Financial assets at fair value through profit or loss are measured at fair value,and changes therein are recognised in profit or loss.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are notquoted in an active market. Such assets are recognised initially at fair value plus any directlyattributable transaction costs. Subsequent to initial recognition, loans and receivables aremeasured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables comprise, trade accounts receivable and other receivables.

Cash and cash equivalents

Cash and cash equivalent cover cash balance and financial investments with originalmaturity of three months or less from the date of the execution, which are subject to aninsignificant risk of value alteration and are used for managing short term obligations.

7/30/2019 IFRS 12.31.2011

52/147





52

ii.Non-derivative financial liabilitiesThe Group initially recognises debt securities issued and subordinated liabilities on the datethat they are originated. All other financial liabilities (including liabilities designated at fairvalue through profit or loss) are recognised initially on the trade date, which is the date thatthe Group becomes a party to the contractual provisions of the instrument. The Groupderecognises a financial liability when its contractual obligations are discharged, cancelled orexpire.

The Group classifies the non-derivative financial liabilities under the category of otherfinancial liabilities. Such financial liabilities are initially recognized by fair value added byany attributable transaction costs. After the initial recording, those financial liabilities aremeasured by the amortized cost through the method of effective interests.

The Company has the following non-derivative financial liabilities: Loans and financing,debentures, suppliers and other payables.

iii.Sha

ifrs 12.31.2011

Documents