Estacio Part 12 31 2007 Free Translation

(A free translation from the original in Portuguese)
Estácio Participações S.A.
Financial Statements
December 31, 2007
with Report of Independent Auditors

A free translation from the original in Portuguese
ESTÁCIO PARTICIPAÇÕES S.A.
FINANCIAL STATEMENTS
December 31, 2007
Contents
Message from the Management.........................................................................................1
Report of Independent Auditors..........................................................................................4
Audited Financial Statements
Balance Sheets...................................................................................................................6
Statements of Income.........................................................................................................7
Statement of Changes in Shareholders’ Equity..................................................................8
Statement of Changes in Financial Position.......................................................................9
Statement of Cash Flows..................................................................................................10
Notes to Financial Statements..........................................................................................11

December 31, 2007
MESSAGE FROM THE MANAGEMENT
Estácio Participações S.A. was incorporated on March 31, 2007 through the transfer to its
capital of the majority interests (99%) of the capital of five post-secondary education
controlling institutions: Sociedade de Ensino Superior Estácio de Sá – SESES, Sociedade
Tecnopolitana da Bahia - STB, Sociedade de Ensino Superior do Ceará - SESCE,
Sociedade de Ensino Superior de Pernambuco – SESPE and Sociedade de Ensino Superior
do Pará – SESPA, institutions controlled by Estácio’s shareholders. All these institutions are
organized as limited-liability companies and the controlling institutions STB, SESCE,
SESPE and SESPA were transformed into for-profit companies already in 2005. SESES
was transformed from a philanthropic organization into a for-profit company, pursuant to
Brazilian legislation - also as limited liability company, in February 2007.
Estácio Participações has a strong position in the post-secondary education sector in Brazil
enabling the Company to access the capital markets in July of 2007, when it became a
publicly held company. The net proceeds from the IPO, of R$251 million, are being invested
in the opening of new units, maintenance and expansion of existing units, acquisitions of
other institutions and development of related businesses.
In compliance with governance standards, the Company, its managers and controlling
shareholders signed an agreement with the São Paulo Stock Exchange – BOVESPA to join
the Level 2 Corporate Governance Segment and is committed to adopting best corporate
governance practices in all of its activities. The company also follows the regulations
regarding arbitration as issued by the Market Arbitration Committee, in accordance with the
Company´s by-laws.
In fiscal year 2007, in addition to the administrative improvement changes, the Company
continued to grow, recording 178,000 students in its undergraduate programs.
Approximately 70,000 new students enrolled in the teaching units during the year, spread
across 11 states.
With all of its subsidiaries joining the “University for All” Federal Program (Programa
Universidade para Todos - PROUNI), the Company had over 12,000 scholarship students in
this program in 2007, representing more than a 27% increase over 2006.
The Ministry of Education – MEC authorized the creation of nine programs in four of our
colleges, of 24 programs in the Salvador and São Paulo University Centers and also
recognized 17 traditional undergraduate programs and 12 technical programs, which were
3

granted G (good) and VG (very good) grades. The colleges located in Belo Horizonte,
Campo Grande, Recife and Fortaleza received excellent grades in the external evaluation
carried out by INEP.
In 2007, the Company posted consolidated gross revenue of R$1.3 billion and net revenue
of R$860 million, and registered an additional R$63 million in taxes due to the
transformation of SESES into a for- profit company. Despite the additional tax burden,
already expected, Estácio recorded an operational cash generation (EBITDA) of over
R$100 million, as shown in the Financial Statements herein.
The academic and operational rationalization in progress, with changes occurring in the
whole organizational framework, is leading the Company to scale gains and consistent
margin expansion. In line with these objectives, we reviewed the syllabuses for 43
undergraduate programs (bachelor and graduate degree programs) and 56 technical
programs.
Based on its sound balance sheet and cash available and no indebtedness, the Company plans
to expand its leading position in the post-secondary education sector in Brazil. As an initial
step into growth in the São Paulo market, the Company acquired IREP, the controlling
institution of UniRadial, with 10,000 students. In early 2008, it completed the acquisition of
another three post-secondary education institutions in São Paulo, adding more 4 thousand
students.
We are taking important steps to create a distance learning unit, granting to a group of
students the opportunity to enhance their education and professional career, in spite of
distance, income or other constraints, allowing them to complete their studies at home or at
the workplace. This teaching model is a global trend.
We began a national integration project, with the expansion of the academic and corporate
management systems to all units, which is expected to be concluded in 2008. Another
important development was the centralization, in Rio de Janeiro, of all the back office
activities of our units with the creation of a Shared Services Center, a driver to operating
gains.
In 2007, net income stood at R$80.9 million, including on a pro-forma basis the first quarter
and excluding non-recurring expenses related to the IPO and goodwill amortization from
acquisition. This represents an increase of 36% on 2006, and a 20% return on Shareholder’s
Equity position, as of December 31, 2007 and a net income margin of 9.4% of net revenue.
Since the Company was incorporated on March 31, 2007, net income for the nine months of
operations amounted to R$27.3 million.
In 2007, the Company invested a total amount of R$94.3 million, with R$55.7 million used
to acquire IREP/Radial and R$38.6 million allocated to maintenance capex, national
integration and organic expansion.
The management will submit to the Annual Shareholders’ Meeting a proposal for a dividend
payment of approximately R$13.6 million, corresponding to 50% of net income, after Legal
Reserve constitution.
4

At the same time, It will be submitted to the shareholders’ meeting a Capex budget for 2008
in the amount of up to R$293 million, to support its operations and organic growth, with
expansion of existing units and the acquisition of post-secondary institutions, to be financed
mainly with existing cash and internal cash generation.
As of 2007 fiscal year ended on December, 31, the independent auditors that rend services
to the company, Ernest & Young Auditores independentes S.S., had not rendered any
services which were not linked to the Company´s External Auditor contract agreement that
could have represented more than 5% of the annual contracted fee.
The Company´s Fiscal Committee is not of permanent function, being installed solely in the
years requested by the shareholders holding a certain percentage of interest as established by
the applicable law. At the present, the fiscal Committee is not on operation, not having being
installed during 2007 social year.
The Company performance reached in the year derives from the confidence on its operations
granted from the shareholders and other share owners, from suppliers and from faculty and
employees´ performance and dedication. To all, the Company is grateful for all of your
cooperation.
Rio de Janeiro, march 19, 2008.
The Management
5

A free translation from Portuguese into English of Report of Independent Auditors of
financial statements prepared in Brazilian currency in accordance with the accounting
practices adopted in Brazil.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
1. We have audited the accompanying balance sheet of Estácio Participações S.A. and the
consolidated balance sheet of Estácio Participações S.A. and its subsidiaries as of December
31, 2007, and the related statements of income, shareholders’ equity and changes in financial
position for the period from March 31, 2007 to December 31, 2007. These financial
statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements.
2. We conducted our audit in accordance with generally accepted audit standards in Brazil, which
comprised: (a) the planning of our work, taking into consideration the materiality of balances,
the volume of transactions and the accounting and internal control systems of the Company
and its subsidiaries; (b) the examination, on a test basis, of the documentary evidence and
accounting records supporting the amounts and disclosures in the financial statements; and (c)
an assessment of the accounting practices used and significant estimates made by management
of the Company and its subsidiaries, as well as an evaluation of the overall financial statement
presentation.
3. In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of Estácio Participações S.A. and the consolidated financial position of
Estácio Participações S.A. and its subsidiaries at December 31, 2007, and the results of their
operations, changes in their shareholders’ equity and changes in their financial position for the
period from March 31, 2007 to December 31, 2007, in accordance with the accounting
practices adopted in Brazil.
4

4. We conducted our audit with the purpose of issuing an opinion on the financial statements
referred to in the first paragraph. The statement of cash flows for the period from March 31,
2007 to December 31, 2007, presented to provide additional information on the Company and
its subsidiaries, is not required as part of the basic financial statements, according to the
accounting practices adopted in Brazil. The statement of cash flows was submitted to the
same audit procedures described in the second paragraph and, in our opinion, is fairly
presented, in all material respects, in relation to the overall financial statements.
Rio de Janeiro, March 10, 2008.
ERNST & YOUNG
Auditores Independentes S.S.
CRC-2SP015199/O – 6 – F - RJ
Fernando Alberto S. de Magalhães
Accountant CRC-1SP 133.169/O-0-S – RJ
5

Balance sheets as of December 31, 2007
(In thousands of reais)
Parent Company Consolidated Parent Company Consolidated
Assets Liabilities and shareholders’ equity
Current assets Current liabilities
Cash and cash equivalents (Note 4) 2,974 22,853 Loans and financing (Note 9) 175
Marketable Securities (Note 4) 198,001 206,365 Suppliers 1,115 17,212
Accounts receivable (Note 5) 89,487 Salaries and payroll charges (Note 10) 40 58,510
Accounts receivable – FIES System 3,705 Taxes payable (Note 11) 52 12,810
Advances to employees / third parties 6,423 Prepaid monthly tuition fees (Note 5) 30,967
Related parties (Note 6) 13,905 Taxes paid in installments 502
Prepaid expenses 583 Related Parties (Note 6) 3
Other 1,161 5,821 Dividends payable (Note 14) 13,658 13,658
Commitments payable (Note 1) 5,702
Total current assets 202,136 349,142 Other 2,835
Total current liabilities 14,868 142,371
Noncurrent assets
Noncurrent Noncurrent liabilities
Prepaid expenses 946 Noncurrent
Judicial deposits 283 Loans and financing (Note 9) 2
Provision for contingencies (Note 13) 13,703
1,229 Taxes paid in installments 223
Permanent assets Total noncurrent liabilities 13,928
Investments (Note 7)
Investments in subsidiaries 164,726
Goodwill 53,382 53,382 Deferred revenues
Other 233 Advance under partnership agreement (Note 12) 11,395
218,108 53,615
Fixed assets (Note 8) 165,498 Stockholder's equity (Note 14)
Deferred Asset 3,586 Capital 295,237 295,237
Capital reserve 96,482 96,482
218,108 222,699 Income reserves 13,657 13,657
Total noncurrent assets 218,108 223,928 405,376 405,376
Total assets 420,244 573,070 Total liabilities and shareholders’ equity 420,244 573,070
See accompanying notes.
6

Statements of Income
Period from March 31, 2007 to December 31, 2007
Parent Company Consolidated
Gross revenue
Undergraduate Program 803,728
Associate Program 105,632
Specialization 25,292
Others 20,208
954,860
Deductions
Gratuities - Scholarships (253,801)
Monthly tuition fees and charges returned (2,156)
Allowances (29,954)
Taxes (28,694)
(314,605)
Net revenue 640,255
Direct Cost of services rendered (409,288)
Gross profit 230,967
Operating (expenses) revenue
Provision for Doubtful accounts (Note 5) (27,587)
General and administrative expenses (3,632) (169,821)
Equity accounting (Note 7) 42,762
Goodwill amortization (Note 7) (2,321) (2,321)
Financial income (Note 15) 9,174 20,323
Financial expenses (Note 15) (1,198) (8,133)
44,785 (187,539)
Operating income 44,785 43,428
Non-operating income (expenses), net (Note 16) (17,470) (14,004)
Income before social contribution and income taxes 27,315 29,424
Social contribution (Note 17) (554)
Income tax (Note 17) (1,555)
Net income for the period 27,315 27,315
7

Statement of Changes in Shareholders’ Equity
Capital
Reserve
Shares Income Retained
Capital premium Legal retention earnings Total
Company incorporation on March 31, 2007 1 1
Capital increase on March 31, 2007 27,072 27,072
Constitution of reserve 96,482 96,482
Capital increase on August 1, 2007 268,164 268,164
Allocation of net income:
Constitution of reserves 1,365 12,292 (13,657)
Dividends proposed (13,658) (13,658)
At December 31, 2007 296,236 96,482 1,365 12,292 406,375
Income reserves
8

Statement of Changes in Financial Position
Sources of funds
From activities:
Amounts that do not affect w orking capital:
Equity accounting (42,762)
Goodw ill amortization 2,321 2,321
Residual value of permanent asset disposals 1,372
Depreciation and amortization 19,005
Total from (used in) activities (13.126) 50,013
From shareholders:
Capital subscription and capital increase in cash 268,165 268,165
From third parties
Decrease in noncurrent assets, net 6,903
Initial net w orking capital of companies included in
consolidation (10,768)
Total sources 255,039 314,313
Applications of funds
Investment increase, including goodw ill 54,113 55,709
Increase in fixed assets 31,003
Increase in deferred charges 3,570
Decrease in noncurrent liabilities, net 506
Transfer from noncurrent to current liabilities 710
Decrease in deferred income 2,386
Dividends proposed 13,658 13,658
Total applications 67,771 107,542
Increase in working capital 187,268 206,771
Changes in net working capital
Current assets
At end of period 202,136 349,142
At beginning of period
202,136 349,142
Current liabilities
At beginning of period
14,868 142,371
Increase in net working capital 187,268 206,771
See accompanying notes. 9

Statement of Cash Flow
Cash flow from operating activities
Adjustments to reconcile net income to cash generated
by operating activities:
Depreciation and amortization 19,005
Goodwill amortization 2,321 2,321
Equity pickup (42,762)
(13,126) 48,641
Changes in assets and liabilities :
Increase in accounts receivable (14,048)
Increase in other assets (1,161) (8,987)
Increase in accounts payable 1,115 2,205
Increase in taxes payable - Suppliers 52 1,496
Increase in salaries and social charges 40 (22,663)
Increase in prepaid monthly tuition fees 2,058
Increase (decrease) in the provision for contingencies (,374)
Increase in other liabilities 6,417
Changes in transactions with related parties:
Increase in accounts receivable (5,309)
Increase in accounts payable 3
Deferred revenue (2,386)
Initial cash of companies included in
consolidation (1)
Net cash gerated by (used in)
operating activities (13,077) 7,049
Cash flow from investing activities:
Short-term investments (198,001) (159,515)
Investments in subsidiaries 1,590
Goodwill on investment acquisition (55,703) (55,703)
Other investments (6)
Fixed assets (29,631)
Deferred charges (3,570)
Net cash used in investing
activities (252,114) (248,425)
Cash flow from financing activities :
Capital increase in cash 268,165 268,165
Payment of loans and financing (3,936)
Net cash generated by
financing activities 268,165 264,229
Increase in cash 2,974 22,853
At beginning of period - -
Increase in cash 2,974 22,853
See accompanying notes. 10

Notes to financial statements
December 31, 2007
(In thousands of reais, unless otherwise stated)
1 Operations
Estácio Participações S.A. was incorporated by private investors that subscribed to shares
as of March 31, 2007, and is business corporation based in the city and state of Rio de
Janeiro, primarily engaged in developing and/or managing activities and institutions in higher
and professional education areas as well as in other education-related areas, managing own
assets and businesses, and holding equity interest in other non-business or business
companies, either as member or shareholder, in Brazil or abroad.
At the same date of its incorporation, with an initial capital of R$ 1 (represented by 1,000
registered book-entry common shares, without par value), the shareholders approved a
capital increase through issue of 299,999,000 common shares and 100,000,000 preferred
shares, all of them registered book-entry shares without par value, which were fully
subscribed and paid up with the transfer of the investment held by each shareholder of
Estácio Participações in units of interest of Sociedade de Ensino Superior Estácio de Sá
Ltda. (SESES) and in the Sponsoring Entities Sociedade de Ensino Superior do Pará Ltda.
(SESPA), Sociedade de Ensino Superior do Ceará Ltda. (SESCE), Sociedade de Ensino
Superior de Pernambuco Ltda. (SESPE) and Sociedade Tecnopolitana da Bahia Ltda.
(STB), based on the appraisal reports prepared by a specialized firm, in the amount of R$
27,072.
On June 21, 2007, reverse split of shares representing Company capital was approved in
the proportion of 2 (two) shares to 1 (one) share of the same type and class, in accordance
with the provisions of Brazil’s Corporation Law article 12.
On July 26, 2007, the Company obtained registration with the Brazilian Securities
Commission (CVM) to trade its shares on the São Paulo State Stock Exchange (“Bovespa”).
On July 27, 2007, the Company communicated the beginning of the Public Offering of
Primary and Secondary Distribution of Share Deposit Certificates (Units) of its issue. There
was issue of 11,918,400 Units, fully subscribed by new shareholders. Shareholders João
Uchôa Cavalcanti Neto, Marcel Cléofas Uchoa, André Cléofas Uchoa and Cléofas Uchôa
sold 7,945,600 Units, each representing 1 (one) common share and 2 (two) preferred shares
of the Company, which were all also acquired by new shareholders. The Units offered were
traded for R$ 22.50 (twenty-two reais and fifty cents) per share. The primary shares offered
were sold for R$ 268,164, which resulted in Company cash inflow of R$ 255,083.
As disclosed in the Definitive Public Offering Memo for Primary and Secondary Distribution
of Units issued by the Company, these funds were destined to finance business expansion
through potential acquisitions; opening of new units and expansion and maintenance of
existing units.
11

December 31, 2007
1 Operations--Continued
To date the Company destined only part of these funds, as described below, the remaining
balance was maintained in short-term investment.
On September 3, 2007, upon operation financial settlement, the Company acquired all the
units of interest representing 100% of capital of Irep Sociedade de Ensino Superior, Médio e
Fundamental Ltda. (“IREP”) and Faculdade Radial de Curitiba Sociedade Ltda.
(“CURITIBA”), companies that compose Centro Universitário Radial. The total cost of
acquisition amounted to R$ 54,113, and the units of interest purchase and sale contract was
entered into on August 20, 2007. In addition, the Company acknowledged Sellers’ credit
right before IREP in the amount of R$ 5,152 as dividends receivable, settled on January 30,
2008, and in the amount of R$ 550 as intercompany loan (both disclosed in the consolidated
financial statements in commitments payable).
2 Basis of preparation and presentation of the financial statements
The consolidated financial statements have been prepared in accordance with accounting
practices adopted in Brazil, with the observance of the accounting guidelines established
under Brazil’s Corporation Law and specific rules issued by the Brazilian Securities
Commission (CVM).
Since the Company was incorporated on March 31, 2007, its statement of income is not
presented on a comparative basis, and also includes only 9 months of operation.
The preparation of the financial statements in conformity with said accounting practices
requires management to use accounting estimates. These accounting estimates were based
on the Company management’s judgment for determining the adequate amounts to be
recorded in the financial statements. Significant items subject to these estimates and
assumptions include selection of useful lives and recoverability of fixed assets, credit risk
analysis in determining the allowance for bad debts, as well as the analysis of other risks in
determining other provisions, including provision for contingencies, and measurement of
financial instruments and other assets and liabilities at the date of the financial statements.
The settlement of transactions involving these estimates may result in amounts significantly
different from those recorded in the financial statements due to uncertainties inherent in the
estimate process. The Company reviews its estimates and assumptions at least annually.
12

December 31, 2007
2 Basis of preparation and presentation of the financial statements--Continued
Assets and liabilities are classified as current whenever their realization or settlement is
likely to occur within the following twelve months. Otherwise, they are stated as noncurrent.
Authorization for preparing the consolidated financial statements was granted by Company
management on March 10, 2008.
Significant accounting practices adopted by the Company are summarized as follows:
(a) Cash and cash equivalents
Include bank account balances and short-term investments redeemable within 90 days from
the balance sheet dates.
Short-term fixed-income, variable-income investments as well as in federal securities and
Bank Deposit Certificates (CDB) refer to investments redeemable in more than 90 days from
balance sheet date and comprise securities acquired to be actively traded, classified as
trading securities. Such investments are posted at market value determined based on
quotations or estimates, also related realized and unrealized gains or losses are recognized
in the statement of income.
(b) Accounts receivable and prepaid monthly tuition fees
Accounts receivable are derived from provision of educational activity services and do not
include any amounts of services provided after the balance sheet dates. Services billed but
not yet provided at the balance sheet dates are accounted for as prepaid monthly tuition
fees and will be recognized in the respective net income (loss) for the year under the accrual
basis of accounting.
Accounts receivable – FIES System are represented by educational loans, contracted by the
students with Caixa Econômica Federal (CEF), whereby the financed funds are transferred
monthly by CEF into a specific bank checking account. This amount has been used
exclusively to pay the social security taxes withheld (INSS) on the salaries of the Company’s
employees.
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December 31, 2007
(c) Allowance for bad debts
This allowance, recorded as a reduction of accounts receivable, is set up in an amount
considered sufficient by the Company’s management to cover any losses on collection of
amounts related to monthly tuition fees and checks receivable, considering the risks
involved.
(d) Investments in subsidiaries
Investments in subsidiaries are carried under equity method, and eliminated on
consolidation. Other permanent investments are stated at acquisition cost. Goodwill on
investment acquisition is being amortized over the period of the projections of future results
on which it was based.
(e) Fixed assets
Stated at acquisition or construction cost, monetarily restated pursuant to the legislation in
force to December 31, 1995, less accumulated depreciation. Depreciation is calculated by
the straight-line method over the useful live of the assets at the rates mentioned in Note 8.
Assets acquired through leasing have their guaranteed residual value (GRV) capitalized
directly in Leased assets – under the Fixed assets group of accounts – and, after settlement
of these contracts (normally 36 months), these amounts are transferred to the definitive
fixed asset accounts, and depreciation starts to be calculated over remaining useful life of
the assets. The portion related to leasing is not capitalized, and is recorded directly in the
statement of income.
(f) Deferred charges
Comprise expenses incurred with special projects, being amortized over the period of 5
years from the date benefits start to accrue.
(g) Loans and financing
Stated at the principal amount plus financial charges thereon incurred on a time proportion
basis through the balance sheet dates, according to contractually defined terms.
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December 31, 2007
(h) Provision for contingencies
The provision for contingencies is set up based on an estimate made by Company’s
management, supported by the opinion of its internal and external legal advisors, in
amounts considered sufficient to cover any probable losses related to the legal proceedings.
(i) Other current and noncurrent liabilities
Stated at known or estimated values, increased by charges and monetary restatement, as
applicable.
A provision is recognized in the balance sheet when the Company has a legal or
constructive obligation arising from past events, the settlement of which is expected to result
in an outflow of economic benefits. Certain liabilities due to uncertainty with respect to the
timing and amount of the outflow of economic benefits required for their settlement are
estimated as incurred and recorded as a provision. Provisions are recorded reflecting the
best estimates of the risk involved.
(j) Deferred revenues
This refers to advances on revenues under the partnership agreement, which have been
recognized in net income (loss) for the year, over the contract period.
(k) Taxation
At September 30, 2005, the Sponsoring Entities SESPA, SESCE, SESPE and STB had
their form of business organization modified from non-profit entities to business entities, thus
being subject to the tax burden levied on the latter. SESES was considered a non-profit
philanthropic entity until February 9, 2007, when its form of organization was modified and it
became a business company. Therefore, to that date, SESES had benefited from tax
immunity and exemption, pursuant to the terms of articles 150 - item VI, C - and 195 -
paragraph 7 – of the Federal Constitution, and of articles 12 and 15 of Law No. 9532/97,
ruling on tax immunity and exemption, and was recognized as an entity of public interest
within federal and state laws by Decree No. 86072 of June 4, 1981, and Law No. 2536 of
January 3, 1975, respectively. IREP and CURITIBA have already been constituted as
commercial companies. However, as SESES and IREP e a CURITIBA and the Sponsoring
Entities had already enrolled under the “College for Everyone” Program (Programa
Universidade para Todos - PROUNI), in accordance with Law No. 11096/2005, regulated by
Decree No. 5493/2005 and Brazilian IRS Revenue Procedure No. 456, dated October 5,
2004, pursuant to the terms of article 5 of Executive Order No. 213, dated September 10,
2004, they benefit from exemption, during the program enrollment effective term, from the
following federal taxes:
15

December 31, 2007
(k) Taxation—Continued
• Corporate Income Tax (IRPJ) and Social Contribution Tax on Net Profit (CSLL),
instituted by Law No. 7689 of December 15, 1988;
• Social Contribution Tax on Gross Revenue for Social Security Financing
(COFINS), instituted by Complementary Law No. 70 of December 30, 1991; and
• Social Contribution Tax on Gross Revenue for Social Integration Program (PIS),
instituted by Complementary Law No. 7 of September 7, 1970.
The above exemptions are applicable to the amount of revenue earned from higher
education activities, derived from undergraduate and occupationally specific sequential
courses. Also, as a result of such change in the form of organization to business companies,
the Sponsoring Entities and SESES became subject to the following events as from October
2005 and February 2007, respectively:
(i) loss of Service Tax (ISS) immunity; and
(ii) loss of the 100% exemption regarding the employer contribution to the National Institute
for Social Security (INSS), which is required to be paid through a system of staggered
payments as provided for under PROUNI legislation (20% in the 1st
year, 40% in the 2nd
year
up to 100% in the 5th
year).
IRPJ e CSLL
As from October 2005 and February 2007, respectively, the Sponsoring Entities and SESES
started to calculate current income tax and social contribution following the criteria
established by the Brazilian IRS Revenue Procedure, specifically for PROUNI, whereby the
taxpayer is allowed not to pay such taxes on profit from specific regular undergraduate and
polytechnic educational activities (associate programs) that benefit from favorable tax
treatment (the so-called “lucro da exploração”) and to convert them into capital reserve. Prior
to that date, the Sponsoring Entities and SESES, as non-profit organizations, were exempt
from these taxes.
PIS
SESES and the Sponsoring Entities paid PIS based on 1% of their payroll through the
period they changed into business companies. From then on, PIS started being paid under
PROUNI rules, whereby revenues from regular undergraduate and polytechnic educational
activities (associate programs) are exempt from PIS contributions. Revenues from other
educational activities are subject to PIS at the rate of 0.65%, whereas revenues from
activities not related to education are subject to PIS at the rate of 1.65%.
16

December 31, 2007
(k) Taxation--Continued
COFINS
Beginning October 2005, considering that the Sponsoring Entities were already under
PROUNI, they were exempted from COFINS on revenues from regular undergraduate and
polytechnic educational activities (associate programs). Revenues from other educational
activities are subject to COFINS at the rate of 3.0%, whereas revenues from activities not
related to education are subject to COFINS at the rate of 7.6%. As a philanthropic entity,
SESES shall only be subject to COFINS under PROUNI rules, since it had its form of
organization changed into a business company on February 9, 2007.
(l) Additional information
In order to provide additional information, the statement of cash flows is being presented,
prepared in accordance with NPC20 – Accounting Standards and Procedures issued by the
Brazilian Institute of Independent Auditors - IBRACON.
3 Consolidation principles
The consolidated financial statements comprise the financial statements of the Company
and of its following subsidiaries at the balance sheet date is summarized as follows:
Ownership interest
SESES 100%
SESPA 100%
SESCE 100%
SESPE 100%
STB 100%
IREP 100%
CURITIBA (*) 100%
(*) 98% directly and 2% through IREP.
The reporting period in the financial statements of consolidated subsidiaries is the same as
that of the Company and accounting practices have been uniformly applied by consolidated
companies and are consistent with those used in prior period. The operations of subsidiaries
IREP and CURITIBA were consolidated as from their acquisition, i.e. only after September
2007 (4 months).
17

December 31, 2007
3 Consolidation principles--Continued
The main consolidation procedures are:
• Elimination of intercompany account balances, components of assets and/or
liabilities between consolidated companies;
• balances of intercompany current accounts and others under Assets and/or
Liabilities;
• effects from significant intercompany transactions; and,
• interest in capital, reserves and retained earnings of the consolidated companies.
4 Cash and cash equivalents and Marketable Securities
12/31/2007
Cash and cash equivalents:
Cash and banks 2,766 21,923
Short-term investments 208 930
2,974 22,853
Marketable Securities:
National Treasury Bills (LFT) 98,387 102,543
Bank Deposit Certificates – CDB 20,754 21,630
Debentures of financial institutions 78,860 82,192
198,001 206,365
Total 200,975 229,218
Short-term investments are made in Private Credit Fixed-Income Investment Fund
(Exclusive Fund) denominated ESTARPART, managed by UBS Pactual Serviços
Financeiros S.A. DTVM. This fund is composed by Federal Securities (49.7%), Bank Deposit
Certificates - CDB (10.5%) and Debentures of Financial Institutions (39.9%), remunerated at
rates varying from 100.70% and 101.40% of Interbank Deposit Certificate (CDI). The
investment fund allows prompt redemption with no grace period. At December 31, 2007, CDI
rate was of 11.12% p.a.
18

December 31, 2007
5 Accounts receivable
Consolidaded
31/12/2007
Monthly tuition fees 195,644
Uncleared checks 17,340
Unidentified credits (3,353)
Allowance for bad debts (120,144)
89,487
Breakdown of accounts receivable by aging is as follows:
31/12/2007 %
To be due 15,424 7%
Overdue for up to 30 days 19,238 9%
Overdue from 31 to 60 days 16,191 8%
Overdue for more than 180 days 120,144 56%
212,984 100%
Consolidated
Changes in consolidated allowance for doubtful accounts were as follows:
Balance at March 31, 2007 91,788
Constitution of allowance for doubtful accounts 27,587
Addition IREP and CURITIBA (1)
2,185
Provision write-off (2)
(1,416)
Balance at December 31, 2007 120,144
(1)
As described in Note 3, the operations of subsidiaries IREP and CURITIBA were
consolidated as from their acquisition, i.e. only as from September 2007 (4 months).
(2)
Reversal against accounts receivable after resorting to all collection procedures.
19

December 31, 2007
5 Accounts receivable--Continued
Monthly tuition fees received in advance amounting to R$ 30,967 are recognized in the
statement of income on an accrual basis
6 Balances and transactions with related parties
The most significant transactions with related parties carried out under conditions
considered by management to be consistent with those observable in the market relate to:
Type of transation Parent Company Consolidated Index
Current Asset
Loans to companies (1)
SESSE 5,028 CDI + 3,66% a.a.
SESAL 3,618 CDI + 3,66% a.a.
UNEC 3,073 CDI + 3,66% a.a.
SESAP 2,186 CDI + 3,66% a.a.
13,905
Current liabilities
Loans to companies
SESES 3
3
Rent payable to shareholders (2) 11
Suppliers 1
Statement of Income
Financial income
Loans w ith shareholders 339
and related companies 104 2,181
104 2,520
General and administrative expenses
Rent (2) 255
Sundry services (3) 1,258
1.513
12/31/2007
20

December 31, 2007
6 Balances and transactions with related parties--Continued
(1) Controlling shareholders also hold all the units of interest of the following entities: (i)
Sociedade de Ensino Superior de Sergipe Ltda. (“SESSE”), sponsoring Faculdade de
Sergipe – FASE; (ii) Sociedade de Ensino Superior de Alagoas S/C Ltda. (“SESAL”),
sponsoring Faculdade de Alagoas – FAL; (iii) União Nacional de Educação e Cultura –
UNEC, sponsoring Faculdade Câmara Cascudo, in Rio Grande do Norte State; and (iv)
Sociedade de Ensino Superior do Amapá Ltda. (“SESAP”), sponsoring Faculdade do
Amapá – FAMAP. In 2007, loan agreements were entered into by and between these
sponsoring companies and consolidated companies, maturing on September 1, 2008.
(2) Annual rent contracts were entered into for 12 properties owned by shareholder João
Uchôa Cavalcanti Netto, of which 8 are commercial rooms used by Management, 3 are
stores used by SESES and 1 apartment used by an employee transferred to Rio de
Janeiro. In November/2007, the rent contracts of 3 commercial rooms were rescinded.
The rent contracts of the other commercial rooms were rescinded in January/2008.
(3) Other transactions with related parties:
(a) Editora Rio’s main business purpose is to publish books and periodicals, as well as
receive commissions on advertising and promotion of Universidade Estácio de Sá,
according to the contract entered into by the parties, rescinded on May 29, 2007. For
publicity intermediation services, 20% fees are charged, as determined by the Executive
Council for Standard Rules (CENP), which regulates this type of activity. Shareholding
structure of Editora Rio is: (i) 98% of units of interest are held by SVJ Participações
Ltda. (owned by 2 employees of SESES and José Roberto Vasconcelos (Academic
Director)); (ii) 1% of units of interest are held by Dílson Gomes Navarro (Managing Vice-
President of SESES); and 1% of units of interest are held by Sylvio Augusto do Rego
Barros Reis (SESES employee). The amounts paid to Editora Rio until May 29, 2007
and disclosed in the December 31, 2007 consolidated financial statements aggregated
R$ 948.
(b) SESES entered into, in September 2004, a rent contract of 200 computers of Estácio
de Sá Futebol Clube Ltda., which were received under a free lease agreement with
Investiplan Computadores e Sistemas Ltda., rescinded on April 29, 2007. Rent of these
200 computers totaled R$ 65 at December 31, 2007. On January 7, 2008, SESES
entered into a contract to sponsor Estácio de Sá Futebol Clube Ltda., valid for 12
months. This sponsoring totals R$ 1,430.
21

December 31, 2007
6 Balances and transactions with related parties--Continued
(c) Certain expenses incurred by the general administration department (Financial, Legal
and Operations) of SESES attributed, on a minority basis, to the non-consolidated
companies (SESSE, SESAL, UNEC, SESAP) were recorded by SESES. As from April
2007, these expenses started to be debited directly to the sponsoring companies,
based on technical apportionment criteria among such companies, totaling R$ 66 at
December 31, 2007. As described in Note 20, the Company has already signed the
agreement memorandum for the acquisition of these companies.
7 Investments in subsidiaries
(a) Changes in investments and goodwill
Equity
Balance at pickup / Balance at
3/31/2007 Additions amortization 12/31/2007
Investment
SESES 90,247 22,270 112,517
SESPA 7,130 994 8,124
SESCE 7,136 9,769 16,905
SESPE 5,138 2,740 7,878
STB 13,903 8,144 22,047
IREP (1,291) (1,077) (2,368)
CURITIBA (299) (78) (377)
123,554 (1,590) 42,762 164,726
Goodwill
IREP 49,050 (2,044) 47,006
CURITIBA 6,653 (277) 6,376
- 55.703 (2.321) 53.382
Total 123,554 54,113 40,441 218,108
On September 3, 2007, the Company acquired all the units of interest corresponding to
100% of capital of IREP and CURITIBA, companies that compose Centro Universitário
Radial. The total cost of acquisition was R$ 54,113, and the contract for units of interest
purchase and sale was entered into on August 20, 2007.
22

December 31, 2007
7 Investments in subsidiaries--Continued
(a) Changes in investments and goodwill--Continued
Upon acquisition of these investments, as of August 31, 2007, net equity of investees was
negative. As such, the initial equity pickup balance was negative, and goodwill represented
the difference between this result and cost of acquisition. Thus, goodwill of R$ 55,703 was
arrived at based on future profitability, according to the Economic and Financial Valuation
Report issued by a specialized company, to be amortized over 8 years.
(b) Information about subsidiaries
SESES SESPA SESC E SESPE STB IREP C URITIBA
Ownership interest 100% 100% 100% 100% 100% 100% 100%
Units of interest held 12,113,000 964,400 6,897,000 3,727,000 3,371,000 12,431 248,134
Paid-up capital 12,113 964 6,897 3,727 3,371 1,958 253
Net equity (capital deficiency) 112,517 8,124 16,905 7,878 22,047 (2,368) (377)
Capital reserve balance - PROUNI 6,792 225 3,204 910 2,380 377
Reserve constitution in the period 6,792 225 3,204 910 2,380
Net income (loss) for the period 15,478 769 6,565 1,830 5,763 (1,077) (78)
Total investment (including goodwill): TOTAL
December 31, 2007 112,517 8,124 16,905 7,878 22,047 44,638 5.999 2 18 ,10 8
The result of equity pickup recorded by the Company comprises a proportional portion
resulting from recording of PROUNI tax incentive by subsidiaries as Capital Reserve in the
amount of R$ 13,511. As such, in order to better reflect in the consolidated financial
statements the economic nature of this tax incentive, its effect was adjusted directly in the
consolidated statement of income in income and social contribution tax expenses.
(c) Significant information on subsidiaries
The financial statements used for application of the equity method of accounting were
prepared as of March 31, 2007.
Description of subsidiaries and activities developed by them are summarized as follows:
23

December 31, 2007
(c) Significant information on subsidiaries--Continued
(i) SESES
With its principal place of business in the City of Rio de Janeiro, until February 9, 2007
SESES was defined as a non-profit philanthropic company, mainly engaged in maintaining
schools for any educational level, in conformity with Brazilian laws, as well as developing
philanthropic initiatives, on a free of charge basis, aiming at assisting the community in the
areas including healthcare and legal, medical, and social services, as well as recreation,
sports and charitable assistance to invalids. As from February 10, 2007, the form of
business organization adopted was changed and SESES became a business company.
Currently, SESES includes 48 units in seven Brazilian states and comprises one University –
Universidade Estácio de Sá – and eight colleges. Universidade Estácio de Sá consists of 39
units located in the State of Rio de Janeiro. Colleges supported by SESES are: Faculdade
Estácio de Sá in the City of Campo Grande, State of Mato Grosso do Sul; Faculdade
Estácio de Sá in the City of Belo Horizonte and Faculdade Estácio de Sá in the City of Juiz
de Fora, both in the State of Minas Gerais; Faculdade Estácio de Sá in the City of Ourinhos,
State of São Paulo; Faculdade Estácio de Sá of Santa Catarina, in the State of Santa
Catarina; Faculdade Estácio de Sá in the City of Vitória and Faculdade Estácio de Sá in the
District of Vila Velha, both in the State of Espírito Santo; and Faculdade Estácio de Sá of
Goiás, in the State of Goiás.
(ii) SESPA
With its principal place of business in the City of Belém, until September 30, 2005 SESPA
was defined as a non-profit company. As from that date, the form of business organization
adopted was changed and SESPA became a business company. SESPA is the sponsor of
Faculdade do Pará – FAP.
(iii) SESCE
With its principal place of business in the City of Fortaleza, until September 30, 2005
SESCE was defined as a non-profit company. As from that date, the form of business
organization adopted was changed and SESCE became a business company. SESCE is
the sponsor of Faculdade Integrada do Ceará – FIC, located in the City of Fortaleza, which
includes two units, and Faculdade de Medicina de Juazeiro do Norte – FMJ, located in the
City of Juazeiro do Norte.
24

December 31, 2007
(iv) SESPE
With its principal place of business in the City of Recife, until September 30, 2005 SESPE
adopted was changed and SESPE became a business company. SESPE is the sponsor of
Faculdade Integrada do Recife – FIR.
(v) STB
With its principal place of business in the City of Salvador, until September 30, 2005 STB
was changed and STB became a business company. STB is the sponsor of Centro
Universitário da Bahia – UNIFIB, which comprises two units.
The purpose of sponsoring entities SESPA, SESCE, SESPE and STB is: developing higher
education courses, supporting university research and continuing education courses;
organizing and maintaining independent separate schools and college league systems or
University Centers or Universities; providing cultural services in the teaching area by means
of agreements with local, foreign, public or private entities; providing educational services at
their respective different levels; developing and promoting arts and related sciences;
participating in cultural and artistic initiatives, conferences, courses, lectures, etc.
(vi) IREP
Located in São Paulo, it is an entrepreneurial company, with 8 units, to wit 6 in São Paulo, 1
in ABC region in São Paulo and 1 in Curitiba.
IREP’s business purpose is integral education; education for the formation and improvement
of professionals; high level technicians and researchers; pure and applied research;
conduction and promotion of cultural and artistic activities at all levels; formation of
secondary level technicians; extension of the three-level education courses; administration
of properties and chattels, as long as components of own assets; participation in capital of
companies that have similar or different business purposes in relation to its own, in Brazil or
abroad.
25

December 31, 2007
(vii) CURITIBA
Located in Curitiba, it is an entrepreneurial company whose business purpose is the
administration of institutions that offer university courses, in-person and on-line courses,
sequential and graduate courses, extension and post-graduate courses (lato and stricto
sensu), technical and technological Master and PhD courses, that render consulting
services, carry out researches and training.
8 Fixed assets
Restated
cost
Accumulated
depreciation Net
Annual
depreciation
rates (%)
Land 21,226 - 21,226
Buildings 77,982 (23,261) 54,721 4%
Leasehold improvements 58,596 (41,859) 16,737 (i)
Furniture and fixtures 25,479 (13,479) 12,000 10%
Computers and peripherals 23,620 (19,529) 4,091 20%
Machinery and equipment 17,887 (8,844) 9,043 10%
Vehicles 211 (95) 116 20%
Library 35,417 (14,516) 20,901 10%
Right of use - softw are program 20,468 (15,363) 5,105 20%
Facilities 4,729 (1,256) 3,473 10%
Other 8,499 (3,956) 4,543 10%
Construction in progress 984 - 984
Commercial lease 12.558 - 12,558
307.656 (142.158) 165.498
Consolidated
31/12/2007
(i) Amortization of leasehold improvements has been made over the respective agreement term, unless these
improvements have a useful life that is shorter than such term.
The Company has entered into leasing agreements for several assets used in its operations,
subject to interest rates ranging between 1.20 and 1.97% p.m. with purchase option
provision. Operating expenses incurred in such agreements totaled R$ 3,392 at December
31, 2007 Commitments made in connection with such agreements, including that related to
the net book value (purchase option) amounted at December 31, 2007 to R$ 8,877 to be
paid in monthly installments until 2009.
26

December 31, 2007
8 Fixed assets--Continued
The building located at Rua do Bispo, 83 (Rebouças Campus), owned by SESES, was
offered as collateral, in connection with a litigation in court in which the Municipality of Rio de
Janeiro is charging the payment of the Municipal Real Estate Tax (IPTU) related to said
building from SESES. According to information from its legal advisors, a favorable judgment
has already been issued and SESES has been addressing with the Municipal authorities the
release of respective lien.
Additionally, as discussed in Note 9, certain assets acquired by means of finance were
offered as guarantee for respective agreements. The Company has not offered other
guarantees consisting of its own assets for any other transaction performed.
9 Loans and financing
Type Financial Charges
Em moeda nacional
FINAME TJLP + 6% ao ano 177
177
Current Liabilities 175
Non current liabilities 2
177
31/12/2007
Consolidated
As guarantee for loans and financing, promissory notes were offered guaranteed by “aval”
of members and financed assets themselves, the net book value of which as of December
31, 2007 was R$ 270. The long-term amount represented by an arrangement with FINAME
(Government Agency for Machinery and Equipment Financing) shall be paid in monthly
installments to 2009.
10 Salaries and payroll charges
Salaries and payroll charges payable 40 29,847
Accrual for vacation pay and related charges 28,663
40 58,510
12/31/2007
27

December 31, 2007
11 Taxes payable
ISS payable 3,062
IRRF payable 21 6,548
IRPJ payable 2,005
CSLL payable 7 771
PIS and COFINS payable 24 424
52 12,810
12/31/2007
12 Advance under partnership agreement
On March 24, 2004 a partnership agreement was entered into between SESES and
affiliates (including Sponsoring Entities) and UNIBANCO – União de Bancos Brasileiros
S.A., effective until March 24, 2009.
The purpose of such agreement was granting exclusivity/preference to UNIBANCO with
respect to the offering and provision of products and services to students, employees and
suppliers, as well as for UNIBANCO to be the main provider of financial services. In
exchange for it, UNIBANCO made an advance payment equivalent to R$ 4,000 to SESES
and Sponsoring Entities to be offset on a monthly basis during the term of the agreement
based on a method established by the parties.
On August 3, 2006, the parties entered into an amendment to said agreement aiming at
extending the partnership and changing the type of remuneration to SESES and affiliates
(including Sponsoring Entities), the other provisions in the agreement remaining valid.
According to such amendment, in exchange for the exclusivity granted to UNIBANCO, and
for maintaining such a condition during the term of the agreement, i.e., until July 31, 2011,
UNIBANCO paid to SESES and Sponsoring Entities fixed revenues of R$ 15,954, which
have been recognized in the statement of income over the term of the agreement. At
December 31, 2007 the balance related to revenues paid in advance in connection with the
partnership agreement amounted to R$ 11,395, recorded under deferred revenues
On February 18, 2008, without significant changes in the main contractual clauses, the
parties entered into a new agreement extending the partnership until February 18, 2018. In
consideration for the exclusive rights granted to UNIBANCO during the validity of the
contract, UNIBANCO will pay to the Company the additional amount of R$ 18,000.
28

December 31, 2007
13 Provision for contingencies
Subsidiaries are involved in several civil, labor and tax proceedings at different levels.
Management, based on the opinion of its internal and external legal advisors, recorded a
provision at an amount considered to be sufficient to cover potential losses on such pending
actions.
At December 31, 2007, the provision for contingencies, net of corresponding judicial
deposits, was as follows:
Provision for Judicial Total
contingencies deposits net
Civil 7,888 (1,990) 5,898
Labor 7,671 (1,837) 5,834
Tax 7,822 (5,851) 1,971
23,381 (9,678) 13,703
31/12/2007
Consolidated
Changes in the provision for contingencies are as under:
Balance at March 31, 2007 22,541
Additions computed in the corresponding tax account (i) 5,627
Additions 455
Write-offs (5,242)
Balance at December 31, 2007 23,381
(i) Refers to FINSOCIAL and PIS that are being questioned in court by SESES and deposited with the courts
(see Note 13c). In the statement of income, these taxes were posted to the corresponding tax account.
(a) Civil contingencies
Most of the proceedings involve mainly undue collections, claims for material damages and
pain and suffering. Our legal advisors carried out a survey, evaluation and quantification of
civil proceedings, also management maintains a provision for probable losses from these
cases in the amount of R$ 7,888 at December 31, 2007.
29

December 31, 2007
13 Provision for contingencies--Continued
(a) Civil contingencies--Continued
Main proceeding involving probable loss is related to a claim for damages that was filed
related to an accident resulting from a stray bullet which shot a student in the Rebouças
Campus. The trial court entered judgment against SESES and, the Court of Appeals of Rio
de Janeiro, upon the appeal filed by SESES, sustained judgment partially, establishing: (i)
payment of damages for pain and suffering to the plaintiffs, in the approximate amount of
R$ 1,800; (ii) ongoing medical treatment; (iii) monthly pension for life in the amount of a
minimum salary plus labor charges (13th Monthly Salary, vacation pay and Government
Severance Indemnity Fund for Employees - FGTS); and (iv) continuous lease of an adapted
real estate for plaintiff’s abode (home care). Average amount spent on a monthly basis by
SESES for the plaintiff’s medical treatment is approximately R$ 39. Without prejudice of
decisions to be issued in connection with Appeals to the High Court of Justice and to the
Supreme Court of Justice filed against the Court of Appeals of Rio de Janeiro judgment, still
pending, plaintiffs filed a request for provisory execution of judgment, and the amount of
R$ 1,800 was deposited in court in three equal and consecutive installments as from
December 2006. According to our legal advisors’ assessment the likelihood of an
unfavorable outcome is considered to be probable and estimated at R$ 5,800 at December
31, 2007. Therefore, relevant amount is accrued in the consolidated financial statements.
The major suits for which the likelihood of loss is possible are shown below:
(i) Declaratory action, with request for interim relief, filed by Associação Beneficente e
Educacional Recoleta, the objective of which is to sentence SESES to pay contractual
fine in the amount of R$ 2,350, in view of the rescission of the surface agreement
regarding the property located in Barra da Tijuca, in Rio de Janeiro. Based on the
opinion of our legal advisors, the likelihood of loss is possible; and
(ii) Public civil action, with request for interim relief, filed by the Federal Public Ministry,
regarding several higher education institutions, including the Company, the objective of
which is to refrain the defendants from charging fee to issue the first copy of the
diploma for completion of studies and the refund, in duplicate, of the fee charged from
students already graduated. Based on the opinion of our legal advisors, the likelihood of
loss is possible, and the case amount is estimated at R$ 1,000, and;
(iii) Suit filed by Wilson Park Hotel (“WPH”) and others, with request for interim relief, the
purpose of which is to eliminate the effects of the agreement for lease, assignment of
lease and sublease of the property located at Rua Caçador, nº 185 (currently 211), in
the city of Nova Hamburgo, Rio Grande do Sul state. Based on the opinion of our legal
advisors, the suit is estimated at R$ 500.
No provision for contingencies was recorded for such proceedings in the consolidated
financial statements.
30

December 31, 2007
(b) Labor contingencies
Labor claims refer namely to overtime, recognition of employment relationship and salary
parity. The legal advisors gathered information, assessed and quantified the labor-related
claims and, in order to cover probable losses on such claims, management recorded
provision in the amount of R$ 7,671 at December 31, 2007.
Among the labor claims considered most significant considering the amount involved and
the institutional interest, we pinpoint five assessment notices drawn up by the Ministry of
Labor, in the total amount of R$ 1,050. Such assessment notices refer to the percentage of
positions held by physically challenged employees; adequate facilities for household
employees’ children; lack of recording of entry and exit time and rest periods of teachers;
and hiring of apprentice workers. Based on the opinion of our legal advisors, the likelihood
of loss is possible; therefore no provision was recorded in the consolidated financial
statements.
(c) Tax contingencies
SESES is questioning the assessment referring to collection of FINSOCIAL (Social Security
Funding Tax) in court, considering the suspension, by the Brazilian IRS, of its tax immune
condition, through Declaratory Statute No.14/96. Judicial deposits in the amount of R$ 930
were made in 2005 regarding this process, and a provision for contingencies in the same
amount was recorded.
SESES is also questioning the requirement to pay Social Contribution Tax on Gross
Revenue for Social Integration Program (PIS) in court. This concerns a suit the objective of
which is the declaration of non-existence of a legal-tax relationship for purposes of payment
of the PIS, once SESES was granted a Philanthropic Welfare Entity Certificate (CEBAS), in
addition to recognition of the right to reimburse the amounts paid over the past ten years. A
favorable decision was handed down to the Entity, and the Federal Government filed an
appeal on the merit of the case, still pending judgment. On account of this process, judicial
deposits are being made in the PIS amounts that would be due (at the rate of 1% on
payroll). At December 31, 2007, judicial deposits correspond to R$ 4.900, and a provision
for contingencies in the same amount was recorded, considered sufficient by management
and its internal and outside legal advisors.
31

December 31, 2007
(c) Tax contingencies--Continued
(i) Contribution to the INSS - Employer
SESES was defined as a non-profit philanthropic entity until February 9, 2007. Thus, until
such date, in the terms of article 150, item VI, subitem C, and article 195, paragraph 7 of the
Federal Constitution, and articles 12 and 15 of Law No. 9532/97, it was entitled to tax
immunity and exemption, being considered a public interest entity at the federal and state
levels, through Decree No. 86072, of June 4, 1981, and Law No. 2536, of January 3, 1975,
respectively. In addition, SESES holds the following certificates issued by Government
agencies: (a) certificate of registration with the Municipal Council of Social Welfare; (b)
Declaratory Certificate of Good Standing at the State Level; and (c) Philanthropic Welfare
Entity Certificate – CEBAS, issued by the National Council of Social Welfare - CNAS.
Article 55 of Law No. 8212/91, subsequently amended by Law No. 9732/98, sets forth that
the philanthropic welfare entity meeting the following requirements is exempt its share of
payment to the INSS: (a) is considered a Federal, State and Municipal public interest entity;
(b) holds the Certificate of Entity for Philanthropic Purposes – CEFF, issued by the National
Council of Social Welfare, renewed every three years; (c) promotes exclusive free of charge
philanthropic welfare services; (d) its officers, board members, members, establishers,
benefactors do not receive compensation, advantages or benefits, under any
circumstances; and (e) possible operating income is fully invested in maintenance and
development of its institutional objectives.
Law No. 9732/98, in addition to amending the wording of item III, article 55 of Law No.
8212/91, established the following: (a) educational non-profit entities that do not offer
exclusive and free of charge services to needy people are exempt from the contribution
taxes referred to in articles 22 (contribution to the INSS - employer) and 23 (CSLL and
COFINS) of Law No. 8212/91, proportionally to the value of seats offered, full-time and free
of charge, to needy people, provided the requirements set forth in article 55 of the referred
to Law are met, (b) the new wording of article 55 of Law No. 8212/91, and article 4 of the
mentioned Law, will be effective as from April 1999 and (c) as from April 1999, all and any
exemptions from contributions to the INSS granted, whether generally speaking or under
special circumstances, not complying with article 55 of Law No. 8212/91, in its new wording,
or with article 4 of said Law, are cancelled. We must point out that the effectiveness of
article 1, regarding the new wording of article 55 of Law No. 8212/91, and of articles 4, 5
and 7 has been suspended as a result of the injunction obtained on the Notice of Claim of
Unconstitutionality – ADIN No. 2028-5, of November 11, 1999.
32

December 31, 2007
(ii) Contribution to the INSS - Employer—Continued
As mentioned above, at the time of its organization, SESES was defined as a non-profit
entity and, as such, was entitled to exemption from payment of the INSS tax levied on
payroll. Subsequent legal rulings maintained its condition as an exempt corporate entity until
February 2007, occasion when SESES was transformed into a profit-oriented company.
SESES is being questioned by the INSS as to renewals of the CEBAS granted in 2000 and
2003. The Social Security Revenue Office filed appeals with the Ministry of Social Security
for the purpose of eliminating the effects of the last two CEBAS renewals granted by CNAS.
SESES, however, enrolled with PROUNI in December 2004, which grants the entities that
adhere and adopt its rules the right to restore the CEBAS and reestablish exemption from
the social contribution tax, in the event the rejection or canceling of the exemption regarding
the past two three-year periods was not based on non-compliance with the provisions
established in items III, IV and V, article 55 of Law No. 8218/91, that is: (a) promote free of
charge welfare services; (b) managing officers are not entitled to compensation; and (c)
operating income is invested in the development of its institutional objectives. The
questionings presented by the Social Security Revenue Office do not allege violation of the
above provisions, which, in theory, would grant SESES the right to restore the CEBAS
should it come to lose such right.
Considering that, from the tax authorities’ viewpoint, CEBAS is mandatory in order to benefit
from tax immunity/exemption benefits, in the event of its canceling in a given moment, all
other social contribution taxes due by business companies may come to be required by tax
authorities retroactively, increased by late payment charges, in addition to the INSS
amounts under dispute.
The Company management, based on the opinion of its legal advisors, does not expect an
unfavorable outcome in this process, classifying the likelihood of loss as remote; as such, no
provision was recorded in the consolidated financial statements.
33

December 31, 2007
(ii) Transformation into profit-oriented business company
The Sponsoring Entities and SESES changed their form of business organization from civil
non-profit companies to profit-oriented companies on September 30, 2005. With such
change, the Sponsoring Entities and SESES are no longer entitled to the tax
immunity/exemption benefits granted to non-profit entities, and are now subject to taxation
rules applicable to the other corporate entities, excluding exemptions under PROUNI rules.
Management, based on the opinion of its legal and tax advisors, understands that the mere
transformation of the Sponsoring Entities into profit-oriented companies is not a tax-
triggering event, and that only profits, earnings, revenues and capital gains generated after
such transformation are subject to taxation, except for tax benefits under PROUNI rules.
Accordingly, the surplus amounts generated during the period in which the Sponsoring
Entities benefited from tax immunity and exemption were not and will not be subject to
taxation, provided such amounts are not distributed to the entities’ members and are
reinvested in the institutions themselves, in other words, the amounts remain in the entities’
corporate assets. Tax authorities, however, could question such transformation and require
payment of the taxes levied on exempt profit earned to that date.
(d) Other contingent tax issues
With reference to the other taxes to which SESES and the Sponsoring Entities are subject,
we highlight the following:
(i) CPMF (Provisional Contribution Tax on Financial Transactions): in SESES’ understanding, it
is not subject to such tax, in the terms of Constitutional Amendment No. 21/99, in the same
way as its legal advisors construe that said exemption was provided for in Law No. 9311/96
and applicable IRS Revenue Procedures;
(ii) COFINS (Social Contribution Tax on Gross Revenue for Social Security Financing):
exemption from the mentioned tax for tax-triggering events occurring after February 1, 1999,
on revenues from own activities of educational and welfare institutions, referred to in article
12 of Law No. 9532/97. Furthermore, SESES, based on the legal advisors’ opinion,
construed that it is entitled to such exemption, once the effectiveness of the articles of Law
No. 9732/98 was suspended by a Notice of Claim of Unconstitutionality;
(iii) CSLL (Social Contribution Tax on Net Profit): SESES and the Sponsoring Entities
understood that, while under the non-profit regime and considering suspension of the
effectiveness of the articles of Law No. 9732/98 by a Notice of Claim of Unconstitutionality,
they were exempt from the referred to tax, in the terms of article 15, paragraph 1 of Law No.
9532/97.
34

December 31, 2007
(d) Other contingent tax issues–Continued
The management of SESES, of the Sponsoring Entities and their legal advisors are of the
opinion that the total exemption from the above taxes is ensured; accordingly, no provision
was recorded in the consolidated financial statements.
14 Shareholders’ equity
(a) Capital
The Company was set up on March 31, 2007 with initial capital of R$ 1, divided into 1,000
registered, book entry common shares, with no par value. On said date, shareholders
approved capital increase to R$ 27,073 through issue of 299,999,000 common shares and
100,000,000 preferred shares, all registered, book-entry shares with no par value, which
were fully subscribed and paid through contribution of investment held by each Company
shareholder in units of interest of SESES, SESPA, SESCE, SESPE and STB.
Of the total transferred capital, R$ 15,191 refers to capital reserve recorded in the
shareholder’s equity of the related investees, resulting from the PROUNI tax incentive. Such
amounts cannot be distributed to members of these subsidiaries and, consequently, to the
Company shareholders, via capital reduction or refund for a five-year term after the date
said capital increase occurs in the investees.
On June 21, 2007, reverse split of shares representing Company capital was approved in
the proportion of 2 (two) shares to 1 (one) share of the corresponding type and class,
according to the provisions of article 12 of Brazil’s Corporation Law. As a result of the
referred to reverse share split, Company subscribed and paid up capital became R$ 27,073,
divided into 200,000,000 registered book-entry shares with no par value, comprising
150,000,000 common and 50,000,000 preferred shares.
On August 1, 2007, the Company’s Board of Directors approved capital increase, observing
authorized capital limit, through capital subscription of R$ 268,164, with public issue of
35,755,200 shares, comprising 11,918,400 common and 23,836,800 preferred shares, all
registered, book-entry shares with no par value, for R$ 7.50 (seven reais and fifty cents) per
common share and R$ 7.50 (seven reais and fifty cents) per preferred share.
35

December 31, 2007
14 Shareholders’ equity--Continued
(a) Capital--Continued
As such, Company capital was increased from R$ 27,073 to R$ 295,237, divided into
161,918,400 registered book-entry common shares with no par value and 73,836,800
registered book-entry preferred shares with no par.
At December 31, 2007, the Company’s authorized subscribed and paid-up capital amounted
to R$ 1,000,000, as under:
Shareholder Common Preferred
João Uchôa Cavalcanti Netto 137,554,397 32,608,795
Marcel Cleófas Uchôa 1,507,500 500,000
André Cleófas Uchoa 1,500,000 500,000
Monique Uchoa Cavalcanti de Vasconcelos 1,500,000 500,000
UBS Pactual Asset Management 1,845,920 3,698,960
Other shareholders 18,010,583 36,029,045
161,918,400 73,836,800
Quantity of shares
(b) Capital reserve
As described in Note 2j, SESES was originally organized as a non-profit philanthropic entity
and, therefore, was entitled to tax immunity and tax exemption, being recognized as an
entity of public interest at federal and state levels. On February 9, 2007, when its form of
business organization changed to a for-profit entity, SESES became subject to the tax
burden levied on business entities, except for exemptions in connection with enrollment
under the PROUNI Program.
Similarly to SESES, although not philanthropic in nature, the Sponsoring Entities were also
recognized as non-profit entities when they were established, being entitled to certain tax
exemptions up to September 30, 2005, on which occasion their form of business
organization changed to business entities.
Upon capital increase referred to above, Company’s shareholders assigned the stock issue
price at R$ 27,072, whereas assets used for capital subscription indicated that SESES’ and
the Sponsoring Entities’ units of interest had an equity value of R$ 123,554.
36

December 31, 2007
(b) Capital Reserve--Continued
Capital increase (R$ 27,072) is equivalent to funds actually contributed by controlling
shareholders, in the form of initial capital or capital increase through capitalization of profits
and income reserves generated after SESES and the Sponsoring Entities became business
entities. The difference (R$ 96,482) between the amount assigned to the assets by
subscribing shareholders and the equity value of such assets was recorded by the Company
under a specific capital reserve account (premium on capital subscription) and refers
substantially to the remaining balance of retained earnings of subsidiary companies (SESES
and the Sponsoring Entities) before their form of business organization changed from non-
profit entities to business entities.
(c) Income reserve
(c.1) Legal reserve
The legal reserve is constituted appropriating 5% of net income for the year until its balance
reaches 20% of the amount of realized capital, or 30% of capital increased by capital
reserves. After this limit, such appropriation is no longer required. Capital reserve may only
be used to increase capital or absorb accumulated losses.
(c.2) Profit retention reserve
This reserve is destined to be used in capital investments, according to article 196 of Brazil’s
Corporation Law.
The proposed allocation of net income for the year ended December 31, 2007 provides for
profit retention of R$ 12,292, to be used in the annual investments program established in
the 2008 budget, subject to approval by the General Shareholders’ Meeting.
(d) Dividends
Under the Company’s charter, shareholders are assured of compulsory minimum dividends
of 25% (twenty-five percent) of net income for the year, adjusted as allowed by article 202 of
Brazil’s Corporation Law.
37

December 31, 2007
(d) Dividends--Continued
Proposed dividends presented in the Company’s financial statements, subject to approval
by the General Shareholders’ Meeting, are as under:
Net income for the year 27,315
Appropriation to legal reserve (1,365)
Adjusted net income – dividends calculation base 25,950
Percentage of proposed dividends 52.63%
Proposed dividends payable (13,658)
(e) Allocation of adjusted net income
Net income for the year 27,315
Appropriation to legal reserve (1,365)
Adjusted net income 25,950
Proposed dividends (13,658)
Profit retention reserve (12,292)
-
15 Financial result
Financial income
Arrears fine and interest 6,835
Short-term investments yield 9,070 10,849
Other 104 2,639
9,174 20,323
Financial expenses
Bank expenses 1 3,050
Interest and charges payable 3 884
CPMF 1,191 3,891
Other 3 308
1,198 8,133
12/31/2007
38

December 31, 2007
16 Nonoperating result
Nonoperating income
Income from fixed asset disposals 3,317
Other nonoperating income 220
3,537
Nonoperating expenses
Extraordinary expenses (i) (17,470) (17,470)
Other nonoperating expenses (71)
(17,470) (17,541)
(17,470) (14,004)
12/31/2007
(i) According to Circular Letter CVM/SNC/SEP No. 01/2007, the Company recorded
expenses related to its listing process in extraordinary expenses, detailed below:
12/31/2007
Parent Company
and Consolidated
Lawyers, auditors and consultants 3,210
Taxes and charges 114
Placement commission 13,320
Other 826
17,470
39

December 31, 2007
17 Income and social contribution taxes
Under Law No. 11096/2005, regulated by Decree No. 5493/2005 and Revenue Procedure
No. 456/2004, on the terms of article 5 of Executive Act No. 213/2004, higher educational
entities while participating in the PROUNI program are exempt from IRPJ and CSLL, among
others, and the tax computation shall be performed based on profit from tax incentive
operations (“lucro da exploração”).
Sponsoring companies SESPA, SESCE, SESPE and STB as well as SESES started to
participate in the PROUNI program in the 1st 2005 half, and started to use its benefits upon
conversion of the companies from not-for-profit to entrepreneurial companies in October
2005 and February 2007, respectively. Before said dates, the referred to sponsoring
companies and SESES were IRPJ and CSLL exempt.
Reconciliation of taxes determined by the sponsoring companies, at statutory rates, and the
amount of taxes recorded in 2007 is as under:
12/31/2007
Income before income and social contribution taxes 27,315 29,424
Company tax loss 13,126
Permanent additions:
Nondeductible expenses 1,151
Goodwill amortization 2,321 2,321
Permanent exclusions:
Equity pickup (42,762)
Tax loss offset (109)
Other (3,254)
Temporary additions/exclusions:
Provision for contingencies 3,494
Calculation base (13,126) 46,153
Rates
Income tax 15% 15%
Surtax (on excess portion) 10% 10%
Social contribution 9% 9%
Income and social contribution taxes:
Income tax 6,923
Surtax (on excess portion) 4,540
Social contribution 4,157
15,620
Less: total exemption (capital reserve of Sponsoring Companies) (13,511)
Income and social contribution taxes due – current 2,109
40

December 31, 2007
17 Income and social contribution taxes--Continued
As described in Notes 2k and 7b, subsidiaries benefit from tax incentives related to federal
taxes while participating in the “PROUNI” program, and such incentives are recognized by
these subsidiaries in capital reserve, while the effect on the Company is recorded in equity
pickup. For consolidation purposes, the incentive portion considered in the Company’s
statement of income is adjusted against income and social contribution tax expenses
account.
The Company has not recognized deferred tax assets on income and social contribution tax
losses since it has been recently set up, and its future results will basically derive from
equity pickup. Subsidiary SESES and subsidiaries SESPA, SESCE, SESPE and STB were
converted from not-for-profit companies to entrepreneurial companies in February 2007 and
October 2005, respectively, and do not present a history of profits. In view of this, deferred
tax assets on temporary differences and income and social contribution tax losses
(R$ 4,463) have not been recorded.
18 Financial instruments
Financial asset and liability market values were determined based on market information
available and valuation methodologies deemed appropriate to each case. However,
considerable judgment was required in interpreting market data to estimate the most
appropriate realizable value. As a consequence, the estimates presented herein do not
necessarily indicate amounts realizable in the current exchange market. The use of different
market information and/or valuation methodologies may have a material effect on the
amount relating to market value.
The Company’s financial instruments under assets and liabilities at March 31, 2007 are
recorded in the balance sheet accounts at amounts compatible with those observable in the
market. Main financial instruments are described below as well as the criteria, assumptions
and limitations adopted for determining their market values:
(a) Cash and cash equivalents
Amounts accounted for under this heading approximate market values due to these
instruments’ short-term maturities.
41

December 31, 2007
18 Financial instruments--Continued
(b) Related parties
Stated at book value, since there are no similar instruments in the market and they refer to
related-party transactions.
(c) Loans and financing
Loans and financing market values are similar to those stated in the account balances, and
their conditions and terms are mentioned in Note 9.
(d) Other asset and liability financial instruments
The Company financial assets’ and liabilities’ estimated realizable values were determined
based on information available in the market and appropriate valuation methodologies.
Risk management
All subsidiaries’ operations are carried out with banks that have proven liquidity, thus
minimizing their risks. Management sets up an allowance for bad debts in an amount
deemed sufficient to cover possible risks underlying the accounts receivable realization;
accordingly, the risk of incurring in losses on billed amounts has been measured and
accounted for. Major market risk factors that affect the Company business may be listed as
follows:
(a) Credit risk
The Company’s enrollment policy for preparation of these financial statements is closely
associated with the credit risk level tolerated by the entities in the course of their businesses.
(b) Interest rate risk
The interest rate risk to which the subsidiaries are exposed relates to their long-term debt
and, to a lower extent, their short-term debt. The floating-interest-rate debt expressed in
Brazilian reais is principally subject to the fluctuations in the Long-Term Interest Rate (TJLP)
and in the Interbank Deposit Certificate (CDI). Additionally, any increase in interest rates
may raise the cost of educational loans, including those loans under FIES, and reduce the
demand for courses.
42

December 31, 2007
18 Financial instruments--Continued
Risk management--Continued
(c) Exchange rate risk
The Company’s net income is not subject to changes deriving from exchange rate volatility,
since its subsidiaries do not have significant foreign-currency-denominated operations.
There were no operations involving derivatives at December 31, 2007.
19 Insurance (unaudited)
The Company and its subsidiaries rely on a risk management program aimed to limit their
risks, seeking coverage compatible with their size and operations. Insurance coverage was
taken out at the amounts stated below, considered sufficient by management to cover any
losses, based on the nature of its activity, the risks underlying its operations, and guidance
from insurance expert advisors.
At December 31, 2007, the Company and its subsidiaries had the following main insurance
policies taken out from third parties:
Insurance types Insured amounts
Fixed assets fire 29,450
Civil liability 4,880
Fixed expenses 1,340
Eletronic equipament 1,530
Aircraft crash 860
Other types 3,508
20 Commitments
The subsidiaries have several facilities’ rental contracts, and future commitments are related
to contracts effective on March 31, 2007 will correspond to R$ 72,000 on a yearly basis, for
the next 5 years, considering that their due dates will be renewed as usual and the amounts
known at that date.
43

December 31, 2007
20 Commitments--Continued
Controlling shareholders hold all the units of interest of the following sponsoring companies:
(i) SESSE; (ii) SESAL; (iii) UNEC; and (iv) SESAP, sponsoring Faculdade do Amapá. In
addition, said shareholders hold all the units of interest of Asociación de Estudios
Superiores de Las Américas, in Paraguay, which has one unit, and 80% of the units of
interest of Escuela de Informática SRL, in Uruguay, which has one unit, both recently
acquired.
On April 7, 2007, the Company entered into an Agreement Memorandum with controlling
shareholders, as members of said companies, in order to acquire, through a cash payment,
these companies at book value as soon as they present positive net equity. Presently, it is
not possible to forecast when this will occur.
21 Remuneration of administrators
Remuneration of administrators, comprising Board of Directors’ members is computed in
expenses for the period. As approved by the Common and Special Shareholders’ Meeting of
April 30, 2007, maximum limit of R$ 150 per month was established for remuneration of
Board of Directors members.
Remuneration of statutory directors is being made by subsidiary SESES, and then
apportioned to the other sponsoring companies, as mentioned in Note 6. The monthly
amount of such remuneration, including applicable social charges, is R$ 392.
22 Subsequent events
On February 29, 2008, through subsidiary IREP, the Company concluded the acquisition of
all the units of interest of (i) Sociedade Interlagos de Educação e Cultura S/S Ltda.,
sponsoring Faculdade Interlagos (Fintec) for R$ 6,295; (ii) Sociedade Abaeté de Educação
e Cultura Ltda., controlling company of Instituto Euro-Latino-Americano de Cultura e
Tecnologia Ltda., sponsoring Faculdade Europan, for R$ 8,352; and (iii) Faculdade Brasília
de São Paulo Ltda., for R$ 2,235. On said date these acquisitions were financially settled, in
part through debt assumption (which totaled R$ 3,099).
44

December 31, 2007
23 Changes in Brazil’s Corporation Law
Law No. 11638, approved on December 28, 2007 by the Brazilian President, amends and
revokes provisions of Law No. 6404, dated December 15, 1976 and Law No. 6385, dated
December 7, 1976.
The requirements of this law apply to financial statements for fiscal years ended on or after
January 1, 2008. The Company is analyzing the impacts of the changes introduced by the
new Law, mainly in relation to disclosure of the Statement of Cash Flow and the Statement
of Value Added, creation of an account subgroup denominated Adjustments to Asset
Valuation in net equity, introduction of new criteria for classification and valuation of financial
instruments, including derivatives, and the concept of Adjustment to Present Value for long-
term asset and liability operations as well as significant short-term ones.
Presently it is not possible to anticipate the effects from Law No. 11638/07 on the
Company’s results of operations and financial position for the year ending December 31,
2008, and retrospectively on the financial statements for the year ended December 31,
2007, when compared with the financial statements for the year ending December 31, 2008.
* * *
45

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