IRSA I NVESTMENTS

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1e3c78f03ffd9}}\cell\row}
\clbrdrl\brdrs\brdrw5\brdrcf5 \clbrdrr\brdrs\brdrw5\brdrcf5 \cellx10700
\pard\intbl\plain \li400 \f3\fs60 Form 20-F
\par\pard\intbl\plain \li400 \f3\fs20
\par\pard\intbl\plain \li400 \f3\fs34 IRSA INVESTMENTS & REPRESENTATIONS INC - IRS
\par\pard\intbl\plain \li400 \f3\fs26 Filed: December 27, 2007 (period: June 30,
2007)
\par\pard\intbl\plain \li400 \f3\fs24 Annual and transition report of foreign
private issuers pursuant to sections 13 or 15(d)\cell\row}
{\trowd \trbrdrl\brdrs\brdrw5\brdrcf5 \trbrdrr\brdrs\brdrw5\brdrcf5
\trbrdrb\trbrdrs\trbrdrw5\brdrcf5 \trrh5200 \clbrdrl\brdrs\brdrw5\brdrcf5
\clbrdrr\brdrs\brdrw5\brdrcf5 \clbrdrb\brdrs\brdrw5\brdrcf5 \cellx10700
\pard\intbl\plain \cell\row}\page
{\trowd \trbrdrt\brdrs\brdrw5\brdrcf5 \trbrdrl\brdrs\brdrw5\brdrcf5
\trbrdrr\brdrs\brdrw5\brdrcf5 \trrh500 \clbrdrt\brdrs\brdrw5\brdrcf5
\clbrdrl\brdrs\brdrw5\brdrcf5 \clbrdrr\brdrs\brdrw5\brdrcf5
\clvertalc\clshdng100\clcfpat10\clcbpat10\cellx10700
\pard\intbl\plain \cf8\f3\fs60\qc Table of Contents\cell\row}
{\trowd \trbrdrl\brdrs\brdrw5\brdrcf5 \trbrdrr\brdrs\brdrw5\brdrcf5
\trbrdrb\brdrs\brdrw5\brdrcf5 \trrh13350 \clbrdrl\brdrs\brdrw5\brdrcf5
\clbrdrr\brdrs\brdrw5\brdrcf5 \clbrdrb\brdrs\brdrw5\brdrcf5 \clvertalt\cellx10700
\pard\intbl\plain \cf8\f3\fs14\ql
\par\pard\intbl\plain\f3\fs14\ql
\par\pard\intbl\plain\f3\fs20\ql\ul\li800{\field{\*\fldinst HYPERLINK \\l
"doc_1_1"}{\*\fldrslt 20-F - FORM 20-F}}\par\pard\intbl\plain \f3\fs14\ql
\par\pard\intbl\plain \f3\fs28\ql\ul \li800 {\field{\*\fldinst HYPERLINK \\l
"part_1_2_1"}{\*\fldrslt PART
I}}\par\pard\intbl\plain\brdrb\brdrs\brdrcf5\f3\fs10\ql
\par\pard\intbl\plain\f3\fs20\ul\pnindent1800\lnhang\li1800\ri0\fi-
1000{{{\field{\*\fldinst HYPERLINK \\l "item_1_3_1"}{\*\fldrslt Item
17}}}\plain\f3\fs20\tab}\plain\f3\fs20\ul{\field{\*\fldinst HYPERLINK \\l
"item_1_3_1"}{\*\fldrslt Item 18}}
"item_1_3_2"}{\*\fldrslt 8}}
\par\pard\intbl\plain \f3\fs14\ql
"part_1_2_2"}{\*\fldrslt Part
II}}\par\pard\intbl\plain\brdrb\brdrs\brdrcf5\f3\fs10\ql
"item_1_3_3"}{\*\fldrslt 238}}
"part_1_2_3"}{\*\fldrslt Part
III}}\par\pard\intbl\plain\brdrb\brdrs\brdrcf5\f3\fs10\ql
"item_1_3_4"}{\*\fldrslt 244}}
I}}\par\pard\intbl\plain\brdrb\brdrs\brdrcf5\f3\fs10\ql
1000{{{\field{\*\fldinst HYPERLINK \\l "item_1_3_5"}{\*\fldrslt ITEM
1.}}}\plain\f3\fs20\tab}\plain\f3\fs20\ul{\field{\*\fldinst HYPERLINK \\l
"item_1_3_5"}{\*\fldrslt Identity of Directors, Senior Management and Advisers}}
"item_1_3_6"}{\*\fldrslt Offer Statistics and Expected Timetable}}
"item_1_3_7"}{\*\fldrslt Key Information}}
"item_1_3_8"}{\*\fldrslt Information on the Company}}
4A.}}}\plain\f3\fs20\tab}\plain\f3\fs20\ul{\field{\*\fldinst HYPERLINK \\l
"item_1_3_9"}{\*\fldrslt Unresolved Staff Comments.}}
"item_1_3_10"}{\*\fldrslt Operating and Financial Review and Prospects}}
"item_1_3_11"}{\*\fldrslt Directors, Senior Management and Employees}}
"item_1_3_12"}{\*\fldrslt Major Shareholders and Related Party Transactions}}
"item_1_3_13"}{\*\fldrslt Financial information}}
"item_1_3_14"}{\*\fldrslt The Offer and Listing}}
"item_1_3_15"}{\*\fldrslt Additional Information}}
"item_1_3_16"}{\*\fldrslt Quantitative and qualitative disclosures about market
risk}}
"item_1_3_17"}{\*\fldrslt Description of Other than Equity Securities}}
II}}\par\pard\intbl\plain\brdrb\brdrs\brdrcf5\f3\fs10\ql
"item_1_3_18"}{\*\fldrslt Defaults, Dividend Arrearages and Delinquencies}}
"item_1_3_19"}{\*\fldrslt Material Modifications to the Rights of Security Holders
and Use of Proceeds}}
15T.}}}\plain\f3\fs20\tab}\plain\f3\fs20\ul{\field{\*\fldinst HYPERLINK \\l
"item_1_3_20"}}
"item_1_3_21"}}
III}}\par\pard\intbl\plain\brdrb\brdrs\brdrcf5\f3\fs10\ql
"item_1_3_22"}{\*\fldrslt Financial Statements}}
"item_1_3_23"}{\*\fldrslt Financial Statements}}
"item_1_3_24"}{\*\fldrslt Exhibits}}
\par\pard\intbl\plain\f3\fs20\ul\li800{\field{\*\fldinst HYPERLINK \\l
"part_1_2_7"}{\*\fldrslt SIGNATURES}}
"doc_1_2"}{\*\fldrslt EX-1.2 (ENGLISH TRANSLATION OF THE AMENDMENT TO THE
BYLAWS.)}}\par\pard\intbl\plain\f3\fs14\ql
"doc_1_3"}{\*\fldrslt EX-2.1 (INDENTURE DATED MAY
11)}}\par\pard\intbl\plain\f3\fs14\ql
"doc_1_4"}{\*\fldrslt EX-4.2 (ENGLISH TRANSLATION OF THE AMENDMENT TO THE EXCHANGE
OF OPERATING SERVICES)}}\par\pard\intbl\plain\f3\fs14\ql
"doc_1_5"}{\*\fldrslt EX-12.1 (CERTIFICATION PURSUANT TO SECTION 302 CHIEF
EXECUTIVE OFFICER.)}}\par\pard\intbl\plain\f3\fs14\ql
FINANCIAL OFFICER.)}}\par\pard\intbl\plain\f3\fs14\ql
EXECUTIVE OFFICER)}}\par\pard\intbl\plain\f3\fs14\ql
FINANCIAL OFFICER)}}\cell\row}
{\*\bkmkstart filing_1}{\*\bkmkend filing_1}{\*\bkmkstart doc_1_1}{\*\bkmkend
doc_1_1}\par\pard\plain\f0\fs16\par\pard\plain\ul{\field{\*\fldinst HYPERLINK \\l
"toc" }{\*\fldrslt\cf3\f52\fs16\b\ql Table of
Contents}}\par\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\
brdrsp0\par\pard\plain\f0\fs4\par\par\pard\plain\sb396\cf1\f51\fs24\b\qc United
States\par\pard\plain\cf1\f51\fs28\b\qc SECURITIES AND EXCHANGE
COMMISSION\par\pard\plain\cf1\f51\fs20\b\qc Washington, D.C.
20549\par\pard\plain\sb198\cf1\f51\fs28\b\qc FORM 20-
F\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
{\trowd\cellx432\cellx10800\trrh206
\pard\plain\intbl\cf1\f54\fs16\b\ql �\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
ACT OF 1934\cell{
{\trowd\cellx432\cellx10800\trrh206\row}}}\pard\plain\sb198\cf1\f51\fs16\qc
OR\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f54\fs16\b\ql x\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934\cell{
{\trowd\cellx432\cellx10535\trrh206\row}}}\pard\plain\sb198\cf1\f51\fs16\qc For the
fiscal year ended: June\~30, 2007\par\pard\plain\sb198\cf1\f51\fs16\qc
OR\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f54\fs16\b\ql �\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934\cell{
{\trowd\cellx432\cellx10707\trrh206\row}}}\pard\plain\sb198\cf1\f51\fs16\qc For the
transition period from \plain\cf1\f51\fs16\ul\qc
\~\~\~\~\~\~\~\~\~\~\~\~\plain\cf1\f51\fs16\qc to \plain\cf1\f51\fs16\ul\qc
\~\~\~\~\~\~\~\~\~\~\~\~\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f54\fs16\b\ql �\cell\pard\plain\intbl\cf1\f51\fs16\b\ql SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934\cell{
{\trowd\cellx432\cellx10800\trrh206\row}}}\pard\plain\sb198\cf1\f51\fs16\qc Date of
event requiring this shell company report\par\pard\plain\cf1\f51\fs16\qc Commission
file number: 1-13542\par\pard\plain\sb198\cf1\f51\fs28\b\qc IRSA INVERSIONES Y
REPRESENTACIONES SOCIEDAD AN\u211?NIMA\par\pard\plain\cf1\f51\fs16\b\qc (Exact name
of Registrant as specified in its charter)\par\pard\plain\sb198\cf1\f51\fs20\b\qc
IRSA INVESTMENTS AND REPRESENTATIONS INC.\par\pard\plain\cf1\f51\fs13\b\qc
(Translation of Registrant\u8217?s name into
English)\par\pard\plain\sb198\cf1\f51\fs16\b\qc Republic of
Argentina\par\pard\plain\cf1\f51\fs13\b\qc (Jurisdiction of incorporation or
organization)\par\pard\plain\sb198\cf1\f51\fs16\b\qc Bol\u237?var
108\par\pard\plain\cf1\f51\fs16\b\qc (C1066AAB) Buenos Aires,
Argentina\par\pard\plain\cf1\f51\fs13\b\qc (Address of principal executive
offices)\par\pard\plain\cf1\f51\fs9\ql
\~\par\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\
par\pard\plain\f0\fs4\par\par\pard\plain\sb88\cf1\f51\fs16\ql Securities registered
or to be registered pursuant to Section\~12(b) of the
Act:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
{\trowd\clvertalc\cellx5400\clvertalb\cellx5615\clvertalc\cellx10799\trrh-66\trrh0
\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell\pard\plain\intbl\f0\fs16\ql \~\cell{
{\trowd\clvertalc\cellx5400\clvertalb\cellx5615\clvertalc\cellx10799\trrh-
66\trrh0\row}}}
{\trowd\clvertalb\cellx5400\clvertalb\cellx5615\clbrdrb\brdrs\brdrcf1\clvertalb\cel
lx10799\trrh228
\pard\plain\intbl\brdrb\brdrs\cf1\f51\fs13\b\qc Title of each
class\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Name of each exchange on which
registered\cell{
lx10799\trrh228\row}}}
{\trowd\clvertalb\cellx5400\clvertalb\cellx5615\clvertalb\cellx10799\trrh429
\pard\plain\intbl\cf1\f51\fs16\b\qc Global Depositary Shares, each
representing\par\pard\plain\intbl\cf1\f51\fs16\b\qc ten shares of Common
Stock\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\b\qc New York Stock Exchange\cell{
{\trowd\clvertalb\cellx5400\clvertalb\cellx5615\clvertalb\cellx10799\trrh429\row}}}
\pard\plain\intbl\cf1\f51\fs16\b\qc Common Stock, par value one Peso per
share\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\b\qc New York Stock Exchange*\cell{
\pard\plain\cf1\f51\fs9\ql
par\pard\plain\f0\fs4\par\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql *\cell\pard\plain\intbl\cf1\f51\fs16\ql Not for
trading, but only in connection with the registration of Global Depositary Shares,
pursuant to the requirements of the Securities and
Exchange\plain\intbl\cf1\f51\fs16\ql Commission.\cell{
{\trowd\cellx216\cellx10800\trrh412\row}}}\pard\plain\sb198\cf1\f51\fs16\ql
Securities registered or to be registered pursuant to Section\~12(g) of the Act:
None\par\pard\plain\sb198\cf1\f51\fs16\ql Securities for which there is a reporting
obligation pursuant to Section\~15(d) of the Act:
None\par\pard\plain\sb198\cf1\f51\fs16\ql The number of outstanding shares of the
issuer\u8217?s common stock as of June\~30, 2007 was
464,969,156.\par\pard\plain\sb198\cf1\f51\fs16\ql Indicate by check mark if the
registrant is a well known\plain\cf1\f51\fs16\b\ql seasoned
issuer\plain\cf1\f51\fs16\ql , as defined in Rule 405 of the Securities
Act:\par\pard\plain\sb198\cf1\f54\fs16\qc �\plain\cf1\f51\fs16\qc
\~\~Yes\~\~\~\~\~\~\~\~\~\~\~\~\plain\cf1\f54\fs16\b\qc
�\plain\cf1\f51\fs16\b\qc \~\~\plain\cf1\f51\fs16\qc
No\par\pard\plain\sb198\cf1\f51\fs16\ql If this report is an annual or transition
report, indicate by check mark if the registrant is not required to file reports
pursuant to Section\~13 or 15 (d)\~of the\plain\cf1\f51\fs16\ql Securities
Exchange Act of 1934.\par\pard\plain\sb198\cf1\f54\fs16\qc
x\plain\cf1\f51\fs16\qc \~\~Yes\~\~\~\~\~\~\~\~\~\~\~\~\plain\cf1\f54\fs16\qc
�\plain\cf1\f51\fs16\qc \~\~No\par\pard\plain\sb198\cf1\f51\fs16\ql Indicate by
check mark whether the registrant (1)\~has filed all reports required to be filed
by Section\~13 or 15(d) of the Securities Exchange Act of
1934\plain\cf1\f51\fs16\ql during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)\~has been
subject to such filing\plain\cf1\f51\fs16\ql requirements for the past 90
days.\par\pard\plain\sb198\cf1\f54\fs16\qc x\plain\cf1\f51\fs16\qc
\~\~Yes\~\~\~\~\~\~\~\~\~\~\~\~\plain\cf1\f54\fs16\qc �\plain\cf1\f51\fs16\qc
\~\~No\par\pard\plain\sb198\cf1\f51\fs16\ql Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of\plain\cf1\f51\fs16\ql \u8220?accelerated filer and large
accelerated filer\u8221? in Rule 12b-2 of the Exchange Act. (check
one):\par\pard\plain\sb198\cf1\f51\fs16\b\qc Large accelerated
filer\~\~\plain\cf1\f54\fs16\b\qc �\plain\cf1\f51\fs16\b\qc
\~\~\~\~\~\~\~\~\~\~\~\~Accelerated filer\~\~\plain\cf1\f54\fs16\b\qc
x\plain\cf1\f51\fs16\b\qc \~\~\~\~\~\~\~\~\~\~\~\~Non-accelerated
filer\~\~\plain\cf1\f54\fs16\b\qc �\par\pard\plain\sb198\cf1\f51\fs16\ql Indicate
by check mark which financial statement item the registrant has elected to follow.
{\*\bkmkstart part_1_2_1}{\*\bkmkend part_1_2_1}{\*\bkmkstart item_1_3_1}
{\*\bkmkend item_1_3_1}\par\pard\plain\sb198\cf1\f54\fs16\qc
�\plain\cf1\f51\fs16\qc \~\~Item\~17\~\~\~\~\~\~\~\~\~\~\~\~\plain\cf1\f54\fs16\qc
x\plain\cf1\f51\fs16\qc \~\~Item\~18\par\pard\plain\sb198\cf1\f51\fs16\ql If this
is an annual report, indicate by check mark whether the registrant is
a\plain\cf1\f51\fs16\b\ql shell company\plain\cf1\f51\fs16\ql (as defined in Rule
12b-2 of the Exchange Act).\par\pard\plain\sb198\cf1\f54\fs16\qc
�\plain\cf1\f51\fs16\qc \~\~Yes\~\~\~\~\~\~\~\~\~\~\~\~\plain\cf1\f54\fs16\qc
x\plain\cf1\f51\fs16\qc \~\~No\par\pard\plain\cf1\f51\fs36\ql
par\pard\plain\f0\fs4\par
\
page\par\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp
0\par\pard\plain\f0\fs4\par\par\pard\plain\ul{\field{\*\fldinst HYPERLINK \\l "toc"
}{\*\fldrslt\cf3\f52\fs16\b\ql Table of Contents}}{\*\bkmkstart toc}{\*\bkmkend
toc}\par\pard\plain\cf1\f51\fs16\b\qc Table of
Contents\par\pard\plain\cf1\f51\fs16\b\qc IRSA INVERSIONES Y REPRESENTACIONES
SOCIEDAD AN\u211?NIMA\par\pard\plain\cf1\f51\fs18\ql \~{\*\bkmkstart item_1_3_2}
{\*\bkmkend item_1_3_2}
\par\pard\plain
{\trowd\clvertalc\cellx647\clvertalb\cellx1088\clvertalc\cellx9942\clvertalb\cellx1
0253\clvertalc\cellx10797\trrh-66\trrh0
\~\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql
0253\clvertalc\cellx10797\trrh-66\trrh0\row}}}
{\trowd\clvertalb\cellx9943\clvertalb\cellx10254\clbrdrb\brdrs\brdrcf1\clvertalb\ce
llx10798\trrh172
\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Page\~No.\cell{
{\trowd\clvertalb\cellx9943\clvertalb\cellx10254\clbrdrb\brdrs\brdrcf1\clvertalb\ce
llx10798\trrh172\row}}}
{\trowd\clvertalc\cellx9943\clvertalc\cellx10799\trrh-66\trrh0
\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql \~\cell{
{\trowd\clvertalc\cellx9943\clvertalc\cellx10799\trrh-66\trrh0\row}}}
{\trowd\cellx9943\clvertalb\cellx10254\clvertalb\cellx10798\trrh206
\pard\plain\intbl\li176\fi-176\ul{\field{\*\fldinst HYPERLINK \\l "tx46076_1" }
{\*\fldrslt\cf3\f51\fs16\ql Disclosure Regarding Forward-Looking
Information}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 5\cell{
{\trowd\cellx9943\clvertalb\cellx10254\clvertalb\cellx10798\trrh206\row}}}
{\*\fldrslt\cf3\f51\fs16\ql Certain Measurements and
Terms}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
{\*\fldrslt\cf3\f51\fs16\ql Presentation of Financial and Certain Other
{\*\fldrslt\cf3\f51\fs16\ql Market Data}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
{\trowd\cellx9943\clvertalb\cellx10254\cellx10798\trrh206
\pard\plain\intbl\cf1\f51\fs16\b\qc Part I\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\f0\fs16\ql \~\cell{
{\trowd\cellx9943\clvertalb\cellx10254\cellx10798\trrh206\row}}}
{\trowd\clvertalc\cellx647\clvertalc\cellx9943\clvertalc\cellx10799\trrh-66\trrh0
{\trowd\clvertalc\cellx647\clvertalc\cellx9943\clvertalc\cellx10799\trrh-
66\trrh0\row}}}
{\trowd\cellx647\clvertalb\cellx1088\clvertalb\cellx9942\clvertalb\cellx10253\clver
talb\cellx10797\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql
Item\~1\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\li176\fi-
176\ul{\field{\*\fldinst HYPERLINK \\l "tx46076_5" }{\*\fldrslt\cf3\f51\fs16\ql
Identity of Directors, Senior Management and
Advisers}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
talb\cellx10797\trrh206\row}}}
66\trrh0\row}}}
Offer Statistics and Expected Timetable}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
176\ul{\field{\*\fldinst HYPERLINK \\l "tx46076_7" }{\*\fldrslt\cf3\f51\fs16\ql Key
66\trrh0\row}}}
\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\li176\fi-176\ul{\field{\*\fldinst HYPERLINK \\l
"tx46076_8" }{\*\fldrslt\cf3\f51\fs16\ql (a) Selected Financial
Data}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_9" }{\*\fldrslt\cf3\f51\fs16\ql (b) Capitalization and
Indebtedness}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_10" }{\*\fldrslt\cf3\f51\fs16\ql (c) Reasons for the Offer and Use of
Proceeds}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_11" }{\*\fldrslt\cf3\f51\fs16\ql (d) Risk
Factors}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Information on the Company}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_13" }{\*\fldrslt\cf3\f51\fs16\ql (a) History and Development of the
Company}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_14" }{\*\fldrslt\cf3\f51\fs16\ql (b) Business
Overview}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_15" }{\*\fldrslt\cf3\f51\fs16\ql (c) Organizational
Structure}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_16" }{\*\fldrslt\cf3\f51\fs16\ql (d) Property, Plant and
Equipment}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Item\~4\~A\cell\pard\plain\intbl\cf1\f51\fs13\ql
"tx46076_17" }{\*\fldrslt\cf3\f51\fs16\ql Unresolved Staff
Comments.}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Operating and Financial Review and
Prospects}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_19" }{\*\fldrslt\cf3\f51\fs16\ql (a) Operating
Results}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_20" }{\*\fldrslt\cf3\f51\fs16\ql (b) Liquidity and Capital
Resources}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_21" }{\*\fldrslt\cf3\f51\fs16\ql (c) Research and Development, Patents and
Licenses, etc}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_22" }{\*\fldrslt\cf3\f51\fs16\ql (d) Trend
66\trrh0\row}}}
"tx46076_23" }{\*\fldrslt\cf3\f51\fs16\ql (e) Off-Balance Sheet
Arrangements}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_24" }{\*\fldrslt\cf3\f51\fs16\ql (f) Tabular Disclosure of Contractual
Obligations}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_25" }{\*\fldrslt\cf3\f51\fs16\ql (g) Safe
Harbor}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Directors, Senior Management and
Employees}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_27" }{\*\fldrslt\cf3\f51\fs16\ql (a) Directors and Senior
Management}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_28" }{\*\fldrslt\cf3\f51\fs16\ql (b)
Compensation}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_29" }{\*\fldrslt\cf3\f51\fs16\ql (c) Board
Practices}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
talb\cellx10797\trrh206\row}}}\pard\plain\cf1\f51\fs13\ql
\~\par\pard\plain\cf1\f51\fs16\qc 2
\
}{\*\fldrslt\cf3\f52\fs16\b\ql Table of Contents}}{\*\bkmkstart part_1_2_2}
{\*\bkmkend part_1_2_2}{\*\bkmkstart item_1_3_3}{\*\bkmkend item_1_3_3}
\par\pard\plain
"tx46076_30" }{\*\fldrslt\cf3\f51\fs16\ql (d)
Employees}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_31" }{\*\fldrslt\cf3\f51\fs16\ql (e) Share
Ownership}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Major Shareholders and Related Party
Transactions}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_33" }{\*\fldrslt\cf3\f51\fs16\ql (a) Major
Shareholders}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_34" }{\*\fldrslt\cf3\f51\fs16\ql (b) Related Party
Transactions}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_35" }{\*\fldrslt\cf3\f51\fs16\ql (c) Interests of Experts and
Counsel}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Financial Information}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_37" }{\*\fldrslt\cf3\f51\fs16\ql (a) Consolidated Statements and Other
Financial Information}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_38" }{\*\fldrslt\cf3\f51\fs16\ql (b) Significant
Changes}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
The Offer and Listing}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_40" }{\*\fldrslt\cf3\f51\fs16\ql (a) Offer and Listing
Details}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_41" }{\*\fldrslt\cf3\f51\fs16\ql (b) Plan of
Distribution}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_42" }{\*\fldrslt\cf3\f51\fs16\ql (c)
Markets}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_43" }{\*\fldrslt\cf3\f51\fs16\ql (d) Selling
Shareholders}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_44" }{\*\fldrslt\cf3\f51\fs16\ql (e)
Dilution}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_45" }{\*\fldrslt\cf3\f51\fs16\ql (f) Expenses of the
Issue}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Additional Information}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_47" }{\*\fldrslt\cf3\f51\fs16\ql (a) Share
Capital}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_48" }{\*\fldrslt\cf3\f51\fs16\ql (b) Memorandum and Articles of
Association}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_49" }{\*\fldrslt\cf3\f51\fs16\ql (c) Material
Contracts}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_50" }{\*\fldrslt\cf3\f51\fs16\ql (d) Exchange
Controls}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_51" }{\*\fldrslt\cf3\f51\fs16\ql (e)
Taxation}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_52" }{\*\fldrslt\cf3\f51\fs16\ql (f) Dividends and Paying
Agents}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_53" }{\*\fldrslt\cf3\f51\fs16\ql (g) Statement by
Experts}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_54" }{\*\fldrslt\cf3\f51\fs16\ql (h) Documents on
Display}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_55" }{\*\fldrslt\cf3\f51\fs16\ql (i) Subsidiary
66\trrh0\row}}}
Quantitative and Qualitative Disclosures About Market
Risk}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Description of Securities Other than Equity
Securities}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\cf1\f51\fs16\b\qc Part
II\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
66\trrh0\row}}}
Defaults, Dividend Arrearages and
Delinquencies}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Material Modifications to the Rights of Security Holders and Use of
Proceeds}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Item\~15T\cell\pard\plain\intbl\cf1\f51\fs13\ql
"tx46076_60" }{\*\fldrslt\cf3\f51\fs16\ql Controls and
Procedures}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_61" }{\*\fldrslt\cf3\f51\fs16\ql A. Disclosure Controls and
Procedures}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_62" }{\*\fldrslt\cf3\f51\fs16\ql B Management\u180?s annual report on
internal control over financial
reporting}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
\
{\*\bkmkend part_1_2_3}{\*\bkmkstart item_1_3_4}{\*\bkmkend item_1_3_4}
\par\pard\plain
66\trrh0\row}}}
"tx46076_63" }{\*\fldrslt\cf3\f51\fs16\ql C Attestation report of the registered
public accounting firm}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql 241\cell{
66\trrh0\row}}}
"tx46076_64" }{\*\fldrslt\cf3\f51\fs16\ql D Changes in internal control over
financial reporting}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
(a) Audit Committee Financial Expert}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_66" }{\*\fldrslt\cf3\f51\fs16\ql (b) Code of
Ethics}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_67" }{\*\fldrslt\cf3\f51\fs16\ql (c) Principal Accountant Fees and
Services}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_68" }{\*\fldrslt\cf3\f51\fs16\ql (d) Exemptions from the Listing Standards
for Audit Committees}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
"tx46076_69" }{\*\fldrslt\cf3\f51\fs16\ql (e) Purchase of Equity Securities by the
Issuer and Affiliated Purchasers}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\cf1\f51\fs16\b\qc Part
III\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
66\trrh0\row}}}
Financial Statements}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Financial Statements}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
66\trrh0\row}}}
Exhibits}}\cell\pard\plain\intbl\cf1\f51\fs13\ql
\
}{\*\fldrslt\cf3\f52\fs16\b\ql Table of Contents}}{\*\bkmkstart tx46076_1}
{\*\bkmkend tx46076_1}\par\pard\plain\cf1\f51\fs16\b\qc DISCLOSURE REGARDING
FORWARD-LOOKING INFORMATION\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Private
Securities Litigation Reform Act of 1995 provides a \u8220?safe harbor\u8221? for
forward looking statements.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql This annual
report includes forward-looking statements, principally under the captions \u8220?
Summary\u8221? \u8220?Risk Factors,\u8221?\plain\cf1\f51\fs16\ql \u8220?Operating
and Financial Review and Prospects\u8221? and \u8220?Business Overview.\u8221? We
have based these forward-looking statements\plain\cf1\f51\fs16\ql largely on our
current beliefs, expectations and projections about future events and financial
trends affecting our business. Many important factors, in\plain\cf1\f51\fs16\ql
addition to those discussed elsewhere in this annual report, could cause our actual
results to differ substantially from those anticipated in our\plain\cf1\f51\fs16\ql
forward-looking statements, including, among other
things:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
{\trowd\clvertalc\cellx432\cellx988\cellx1096\cellx10799\trrh412
\u8226?\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql changes in general economic, business,
political or other conditions in Argentina or changes in general economic or
business conditions in\plain\intbl\cf1\f51\fs16\ql Latin America;\cell{
{\trowd\clvertalc\cellx432\cellx988\cellx1096\cellx10799\trrh412\row}}}\pard\plain\
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql changes in capital markets in general that
may affect policies or attitudes toward lending to or investing in Argentina or
Argentine\plain\intbl\cf1\f51\fs16\ql companies;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql changes in exchange rates or regulations
applicable to currency exchanges or transfer;\cell{
{\trowd\clvertalc\cellx432\cellx988\cellx1096\cellx8799\trrh206\row}}}\pard\plain\c
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql unexpected developments in pending
litigation;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql increased costs;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql unanticipated increases in financing and
other costs or the inability to obtain additional debt or equity financing on
attractive terms; and\cell{
li176\sb88\cf1\f51\fs16\ql the risk factors discussed under \u8220?Risk
Factors\u8221?.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The words \u8220?
believe,\u8221? \u8220?may,\u8221? \u8220?will,\u8221? \u8220?aim,\u8221? \u8220?
estimate,\u8221? \u8220?continue,\u8221?\plain\cf1\f51\fs16\ql \u8220?
anticipate,\u8221? \u8220?intend,\u8221? \u8220?expect,\u8221? \u8220?
forecast\u8221? and similar words are intended to identify\plain\cf1\f51\fs16\ql
forward-looking statements. Forward-looking statements include information
concerning our possible or assumed future results of operations,
business\plain\cf1\f51\fs16\ql strategies, financing plans, competitive position,
industry environment, potential growth opportunities, the effects of future
regulation and the effects of\plain\cf1\f51\fs16\ql competition. Forward-looking
statements speak only as of the date they were made, and we undertake no obligation
to update publicly or to revise any\plain\cf1\f51\fs16\ql forward-looking
statements after we distribute this annual report because of new information,
future events or other factors. In light of the risks and\plain\cf1\f51\fs16\ql
uncertainties described above, the forward-looking events and circumstances
discussed in this annual report might not occur and are not guarantees
of\plain\cf1\f51\fs16\ql future performance.{\*\bkmkstart tx46076_2}{\*\bkmkend
tx46076_2}\par\pard\plain\sb286\cf1\f51\fs16\b\qc CERTAIN MEASUREMENTS AND
TERMS\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As used throughout this annual
report, the terms \u8220?IRSA,\u8221? the \u8220?Company,\u8221? \u8220?
we,\u8221? \u8220?us,\u8221? and\plain\cf1\f51\fs16\ql \u8220?our\u8221? refer to
IRSA Inversiones y Representaciones Sociedad An\u243?
nima\plain\cf1\f51\fs16\i\ql ,\plain\cf1\f51\fs16\ql together with our
consolidated subsidiaries, except where we\plain\cf1\f51\fs16\ql make clear that
such terms refer only to the parent
company.\par\pard\plain\sb198\sa44\fi462\cf1\f51\fs16\ql In Argentina the standard
measure of area in the real estate market is the square meter
(m\plain\cf1\f51\fs11\ql\super 2\plain\cf1\f51\fs16\ql ), while in the United
States and certain other\plain\cf1\f51\fs16\ql jurisdictions, the standard measure
of area is the square foot (sq. ft.).\par\pard\plain\cf1\f51\fs13\ql
\
}{\*\fldrslt\cf3\f52\fs16\b\ql Table of Contents}}\par\pard\plain\cf1\f51\fs16\ql
All units of area shown in this annual report (\plain\cf1\f51\fs16\i\ql
e.g.\plain\cf1\f51\fs16\ql , gross leasable area of buildings and size of
undeveloped land) are expressed in terms of square meters.\plain\cf1\f51\fs16\ql
One square meter is equal to approximately 10.764 square feet. One hectare is equal
to approximately 10,000 square meters and approximately 2.47 acres.{\*\bkmkstart
tx46076_3}{\*\bkmkend tx46076_3}\par\pard\plain\sb286\cf1\f51\fs16\b\qc
PRESENTATION OF FINANCIAL AND CERTAIN OTHER
INFORMATION\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In this annual report where
we refer to \u8220?Peso,\u8221? \u8220?Pesos,\u8221? or \u8220?Ps.\u8221? we mean
Argentine pesos, the lawful\plain\cf1\f51\fs16\ql currency in Argentina; when we
refer to \u8220?U.S. dollars,\u8221? or \u8220?US$\u8221? we mean United States
dollars, the lawful currency of the\plain\cf1\f51\fs16\ql United States of
America; and when we refer to \u8220?Central Bank\u8221? we mean the Argentine
Central Bank.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql This annual report
contains our audited consolidated financial statements as of June\~30, 2007 and
2006 and for the fiscal years ended June\~30, 2007,\plain\cf1\f51\fs16\ql 2006 and
2005 (our audited consolidated financial statements), which have been audited by
Price Waterhouse\~& Co. S.R.L., Buenos Aires, Argentina,\plain\cf1\f51\fs16\ql
member firm of PricewaterhouseCoopers, an independent registered public accounting
firm, whose report is included herein.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
We prepare our consolidated financial statements as of June\~30, 2007 and 2006 in
thousands of Pesos and in accordance with generally accepted\plain\cf1\f51\fs16\ql
accounting principles in Argentina, as set forth by the\plain\cf1\f51\fs16\i\ql
Federaci\u243?n Argentina de Consejos Profesionales de Ciencias Econ\u243?
micas\plain\cf1\f51\fs16\ql (\u8220?FACPCE\u8221?) and as implemented, adapted,
amended, revised and/or supplemented by the\plain\cf1\f51\fs16\i\ql Consejo
Profesional de Ciencias Econ\u243?micas\plain\cf1\f51\fs16\i\ql de la Ciudad
Aut\u243?noma de Buenos Aires\plain\cf1\f51\fs16\ql (\u8220?CPCECABA\u8221?)
(collectively, \u8220?Argentine GAAP\u8221?) and the regulations of
the\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\cf1\f51\fs16\ql , which differ in certain significant respects from
accepted accounting principles in the United States of
America\plain\cf1\f51\fs16\ql (\u8220?U.S. GAAP\u8221?). Such differences involve
methods of measuring the amounts shown in the consolidated financial statements as
well as\plain\cf1\f51\fs16\ql additional disclosures required by U.S. GAAP and
Regulation S-X of the U.S. Securities and Exchange Commission (\u8220?SEC\u8221?).
See Note 28\plain\cf1\f51\fs16\ql to our consolidated financial statements for a
description of the principal differences between Argentine GAAP and U.S. GAAP, as
they relate to us, and\plain\cf1\f51\fs16\ql reconciliation to U.S. GAAP of net
income and shareholders\u8217? equity.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
In order to comply with regulations of the\plain\cf1\f51\fs16\i\ql Comisi\u243?n
Nacional de Valores\plain\cf1\f51\fs16\ql , we recognized deferred income tax
assets and liabilities on an\plain\cf1\f51\fs16\ql undiscounted basis. This
accounting practice represented a departure from Argentine GAAP for the years ended
June\~30, 2006 and 2005. However, such\plain\cf1\f51\fs16\ql departure has not had
a material effect on our consolidated financial statements. As further discussed
below, the CPCECABA issued revised accounting\plain\cf1\f51\fs16\ql standards, one
of which required companies to account for deferred income taxes on an undiscounted
basis, thus aligning its accounting practices with that\plain\cf1\f51\fs16\ql of
Valores\plain\cf1\f51\fs16\ql . Since the\plain\cf1\f51\fs16\i\ql Comisi\u243?n
Nacional de Valores\plain\cf1\f51\fs16\ql adopted the CPCECABA standards
effective for our fiscal year\plain\cf1\f51\fs16\ql beginning July\~1, 2006, there
is no longer a difference on this subject between Argentine GAAP and
Valores\plain\cf1\f51\fs16\ql
regulations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Additionally, after
considerable inflation levels for the second half of 2002 and the first months of
2003, on March\~25, 2003, the Argentine\plain\cf1\f51\fs16\ql government
instructed the Comisi\u243?n Nacional de Valores to issue the necessary regulations
to preclude companies under its supervision from\plain\cf1\f51\fs16\ql presenting
price-level restated financial statements. Therefore, on April\~8, 2003, the
Comisi\u243?n Nacional de Valores issued a resolution providing
for\plain\cf1\f51\fs16\ql the discontinuance of inflation accounting as of
March\~1, 2003. We complied with the Comisi\u243?n Nacional de Valores resolution
and accordingly\plain\cf1\f51\fs16\ql recorded the effects of inflation until
February\~28, 2003. Comparative figures were restated until that date, using a
conversion factor of 1.1232. Since\plain\cf1\f51\fs16\ql Argentine GAAP required
companies to discontinue inflation adjustments only as of October\~1, 2003, the
application of the Comisi\u243?n Nacional de\plain\cf1\f51\fs16\ql Valores
resolution represented a departure from\par\pard\plain\cf1\f51\fs13\ql
\
Argentine GAAP. However, due to low inflation rates during the period from March to
September 2003, such a departure has not had a material effect
on\plain\cf1\f51\fs16\ql our consolidated financial
statements.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In compliance with Rule 3-09
of Regulation S-X, also contained in this annual report are the consolidated
financial statements of Banco\plain\cf1\f51\fs16\ql Hipotecario S.A. (\u8220?Banco
Hipotecario\u8221?) as of June\~30, 2007 and 2006 and for the twelve months ended
June\~30, 2007, 2006 and 2005, which\plain\cf1\f51\fs16\ql also have been audited
by Price Waterhouse\~& Co. S.R.L., Buenos Aires, Argentina, member firm of
PricewaterhouseCoopers, an independent registered\plain\cf1\f51\fs16\ql public
accounting firm, whose report is included
herein.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The\plain\cf1\f51\fs16\i\ql
Comisi\u243?n Nacional de Valores\plain\cf1\f51\fs16\ql issued General Resolutions
485 and 487 on December\~29, 2005 and January\~26, 2006, respectively,
which\plain\cf1\f51\fs16\ql adopted, with certain modifications, the new
accounting standards previously issued by the CPCECABA through its Resolution CD
93/2005. These\plain\cf1\f51\fs16\ql standards were effective for our fiscal year
ended June\~30, 2007. The most significant changes included in the accounting
standards adopted by the\plain\cf1\f51\fs16\ql Comisi\u243?n Nacional de Valores
related to (i)\~changes in the impairment test of long-lived assets and
(ii)\~changes to deferred income tax accounting.\plain\cf1\f51\fs16\ql Under the
new standards, the carrying value of a long-lived asset is considered impaired when
the expected cash flows from such asset are separately\plain\cf1\f51\fs16\ql
identifiable and less than its carrying value. Expected cash flows are determined
primarily using the anticipated cash flows discounted at a
rate\plain\cf1\f51\fs16\ql commensurate with the risk involved. The new standards
also provide for the accounting treatment of differences between the tax basis and
book basis of\plain\cf1\f51\fs16\ql non-monetary items for deferred income tax
calculation purposes when companies prepare price-level restated financial
statements. The new accounting\plain\cf1\f51\fs16\ql standard mandates companies
to treat these differences as temporary but allows a one-time accommodation to
continue treating those differences as\plain\cf1\f51\fs16\ql permanent at the time
of adoption of the standard. As a result, we elected to continue treating
differences as permanent. In addition, the new standards\plain\cf1\f51\fs16\ql
provide for the recognition of deferred income taxes on a non-discounted
basis.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Certain amounts which appear in
this annual report (including percentage amounts) may not sum due to rounding.
Solely for the convenience of the\plain\cf1\f51\fs16\ql reader, we have translated
certain Peso amounts into U.S. dollars at the exchange rate quoted by the Central
Bank for June\~30, 2007, which was Ps.3.093\plain\cf1\f51\fs16\ql = US$1.00. We
make no representation that the Peso or U.S. dollar amounts actually represent or
could have been or could be converted into U.S. dollars\plain\cf1\f51\fs16\ql at
the rates indicated, at any particular rate or at
all.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql References to fiscal years 2003,
2004, 2005, 2006 and 2007 are to the fiscal years ended June\~30 of each such
years.{\*\bkmkstart tx46076_4}{\*\bkmkend
tx46076_4}\par\pard\plain\sb286\cf1\f51\fs16\b\qc MARKET
DATA\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Market data used throughout this
annual report were derived from reports prepared by unaffiliated third-party
sources. Such reports generally state\plain\cf1\f51\fs16\ql that the information
contained therein has been obtained from sources believed by such sources to be
reliable.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 7
\
{\*\bkmkend part_1_2_4}\par\pard\plain\cf1\f51\fs16\b\qc PART
I\par\pard\plain\cf1\f51\fs18\ql \~{\*\bkmkstart item_1_3_5}{\*\bkmkend item_1_3_5}
\par\pard\plain
{\*\bkmkstart tx46076_5}{\*\bkmkend tx46076_5}\pard\plain\intbl\cf1\f51\fs16\b\ql
ITEM\~1.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Identity of Directors, Senior
Management and Advisers\cell{
{\trowd\cellx972\cellx8508\trrh206\row}}}\pard\plain\sb88\fi462\cf1\f51\fs16\ql
This item is not applicable.\par\pard\plain\cf1\f51\fs27\ql \~{\*\bkmkstart
item_1_3_6}{\*\bkmkend item_1_3_6}
\par\pard\plain
ITEM\~2.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Offer Statistics and Expected
Timetable\cell{
\par\pard\plain
ITEM\~3.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Key Information\cell{
{\trowd\cellx972\cellx7001\trrh206\row}}}{\*\bkmkstart tx46076_8}{\*\bkmkend
tx46076_8}\pard\plain\sb88\cf1\f51\fs16\b\ql A. Selected Financial
Data\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following selected consolidated
financial data has been derived from our consolidated financial statements as of
the dates and for each of the\plain\cf1\f51\fs16\ql periods indicated below. This
information should be read in conjunction with and is qualified in its entirety by
reference to our consolidated financial\plain\cf1\f51\fs16\ql statements and the
discussion in Operating and Financial Review and Prospects included elsewhere in
this annual report. The selected consolidated\plain\cf1\f51\fs16\ql statement of
income data for the years ended June\~30, 2007, 2006, and 2005 and the selected
consolidated balance sheet data as of June\~30, 2007 and\plain\cf1\f51\fs16\ql
2006 have been derived from our consolidated financial statements as of June\~30,
2007 and 2006 which have been audited by Price Waterhouse\~&
Co.\plain\cf1\f51\fs16\ql S.R.L., Buenos Aires, Argentina, member firm of
PricewaterhouseCoopers, an independent registered public accounting
firm.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The selected consolidated income
statement data for the years June\~30, 2004 and 2003 and the selected consolidated
balance sheet data as of\plain\cf1\f51\fs16\ql June\~30, 2005 and 2004 have been
derived from our audited consolidated financial statements as of June\~30, 2005 and
2004 and for the three years in the\plain\cf1\f51\fs16\ql period ended June\~30,
2005 which are not included herein. Certain reclassifications have been made to the
audited consolidated financial statements as of\plain\cf1\f51\fs16\ql June\~30,
2005 and 2004 and for the three years in the period ended June\~30, 2005 to conform
to current year presentation.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The
selected consolidated balance sheet data as of June\~30, 2003 have been derived
from our audited consolidated financial statements as of\plain\cf1\f51\fs16\ql
June\~30, 2004 and 2003 and for each of the three years in the period ended
June\~30, 2004 which are not included herein. Certain reclassifications
have\plain\cf1\f51\fs16\ql been made to the audited consolidated financial
statements as of June\~30, 2004 and 2003 and for the three years in the period
ended June\~30, 2004 to\plain\cf1\f51\fs16\ql conform to current year
presentation.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 8
\
}{\*\fldrslt\cf3\f52\fs16\b\ql Table of Contents}}\par\pard\plain\cf1\f51\fs16\b\qc
Summary Consolidated Financial and Other Information for
IRSA\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
{\trowd\clvertalc\cellx5597\clvertalb\cellx5702\clvertalc\cellx6520\clvertalc\cellx
6615\clvertalb\cellx6715\clvertalc\cellx7355\clvertalc\cellx7450\clvertalb\cellx755
0\clvertalc\cellx8190\clvertalc\cellx8285\clvertalb\cellx8385\clvertalc\cellx9025\c
lvertalc\cellx9120\clvertalb\cellx9220\clvertalc\cellx9860\clvertalc\cellx9955\clve
rtalb\cellx10055\clvertalc\cellx10695\clvertalc\cellx10790\trrh-66\trrh0
rtalb\cellx10055\clvertalc\cellx10695\clvertalc\cellx10790\trrh-66\trrh0\row}}}
lx10703\clvertalb\cellx10798\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc As of and for the year ended
June\~30,\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
lx10703\clvertalb\cellx10798\trrh172\row}}}
{\trowd\clvertalb\cellx5597\clvertalb\cellx5702\clvertalb\cellx6520\clvertalb\cellx
6615\clvertalb\cellx6715\clvertalb\cellx10701\clvertalb\cellx10796\trrh688
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in\~thousands
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc of US$,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc
except\plain\intbl\cf1\f51\fs13\b\qc ratios)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc
(in thousands of Ps., except ratios\plain\intbl\cf1\f51\fs11\b\qc\super
(2)\plain\intbl\cf1\f51\fs13\b\qc )\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
6615\clvertalb\cellx6715\clvertalb\cellx10701\clvertalb\cellx10796\trrh688\row}}}
lx6520\clvertalb\cellx6615\clvertalb\cellx6715\clbrdrb\brdrs\brdrcf1\clvertalb\cell
x7355\clvertalb\cellx7450\clvertalb\cellx7550\clbrdrb\brdrs\brdrcf1\clvertalb\cellx
8190\clvertalb\cellx8285\clvertalb\cellx8385\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9
695\clvertalb\cellx10790\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc
2007\plain\intbl\cf1\f51\fs11\b\qc\super
(1)\cell\pard\plain\intbl\cf1\f51\fs13\ql
2007\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc
2003\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
695\clvertalb\cellx10790\trrh172\row}}}
{\trowd\clshdng100\clcfpat12\clcbpat12\cellx5597\clvertalb\clshdng100\clcfpat12\clc
bpat12\cellx5702\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx6520\clvertalb\clshd
ng100\clcfpat12\clcbpat12\cellx6615\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx6
715\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx7355\clvertalb\clshdng100\clcfpat
12\clcbpat12\cellx7450\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx7550\clvertalb
\clshdng100\clcfpat12\clcbpat12\cellx8190\clvertalb\clshdng100\clcfpat12\clcbpat12\
cellx8285\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx8385\clvertalb\clshdng100\c
lcfpat12\clcbpat12\cellx9025\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx9120\clv
ertalb\clshdng100\clcfpat12\clcbpat12\cellx9220\clvertalb\clshdng100\clcfpat12\clcb
pat12\cellx9860\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx9955\clvertalb\clshdn
g100\clcfpat12\clcbpat12\cellx10055\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx1
0695\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10790\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql INCOME STATEMENT
DATA\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql \~\cell{
0695\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10790\trrh206\row}}}
talb\cellx6715\clvertalb\cellx7355\clvertalb\cellx7450\clvertalb\cellx7550\clvertal
b\cellx8190\clvertalb\cellx8285\clvertalb\cellx8385\clvertalb\cellx9025\clvertalb\c
ellx9120\clvertalb\cellx9220\clvertalb\cellx9860\clvertalb\cellx9955\clvertalb\cell
x10055\clvertalb\cellx10695\clvertalb\cellx10790\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\i\ql Argentine
GAAP\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
x10055\clvertalb\cellx10695\clvertalb\cellx10790\trrh206\row}}}
Revenues:\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Development and sale of
properties\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr
24,491\cell\pard\plain\intbl\cf1\f51\fs16\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
46,616\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Office and other non-shopping center
rental properties\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Shopping
centers\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Credit card
operations\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Hotel
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Financial operations and
others\cell\pard\plain\intbl\cf1\f51\fs13\ql
456\cell\pard\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li968\fi-176\cf1\f51\fs16\ql Total
revenues\cell\pard\plain\intbl\cf1\f51\fs13\ql
Costs\cell\pard\plain\intbl\cf1\f51\fs13\ql
(100,759\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell\pard\plain\intbl\cf1\f51\fs13
\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
(154,667\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gross
profit:\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
(39\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell\pard\plain\intbl\cf1\f51\fs13\ql \
~\cell\pard\plain\intbl\cf1\f51\fs16\qr 61\cell\pard\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li968\fi-176\cf1\f51\fs16\ql Total gross
profit\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gain from recognition of inventories
at net realizable value\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\u8212?\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql
\u8212?\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Selling
expenses\cell\pard\plain\intbl\cf1\f51\fs13\ql
(36,763\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell\pard\plain\intbl\cf1\f51\fs13\
ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Administrative
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gain on purchasers\u8217?
rescissions of sales\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net (loss) income from retained
interest in securitized receivables\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gain from operations and holdings of
real estate assets, net\cell\pard\plain\intbl\cf1\f51\fs13\ql
0695\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10790\trrh206\row}}}\pard\plain\
cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 9
\
}{\*\fldrslt\cf3\f52\fs16\b\ql Table of Contents}}
\par\pard\plain
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Operating income
(loss):\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
~\cell\pard\plain\intbl\cf1\f51\fs16\qr 61\cell\pard\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li968\fi-176\cf1\f51\fs16\ql Total operating
income\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Amortization of
goodwill\cell\pard\plain\intbl\cf1\f51\fs13\ql
(476\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell\pard\plain\intbl\cf1\f51\fs13\ql
(1,472\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell\pard\plain\intbl\cf1\f51\fs13\q
l \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql (Loss) gain on equity
investees\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Financial results,
net\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other income (expenses),
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Income before taxes and minority
interest\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Income tax and minimum presumed
income tax\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Minority
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Basic net income (loss) per
share\plain\intbl\cf1\f51\fs11\ql\super
0.08\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 0.24\cell\pard\plain\intbl\cf1\f51\fs16\ql
\~\cell{
GDS\plain\intbl\cf1\f51\fs11\ql\super (3)\cell\pard\plain\intbl\cf1\f51\fs13\ql
13.65\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Diluted net income (loss) per
\~\cell{
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Weighted - average number of shares
outstanding\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Adjusted weighted - average number
of shares\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Capital
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Dividends declared per
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\i\ql U.S.
Revenues\cell\pard\plain\intbl\cf1\f51\fs13\ql
x10058\clvertalb\cellx10698\clvertalb\cellx10793\trrh206\row}}}\pard\plain\cf1\f51\
fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 10
\
\par\pard\plain
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gain on purchasers\u8217?
rescissions of sales\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net income (loss) from retained
interest in securitized receivables\cell\pard\plain\intbl\cf1\f51\fs13\ql
~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Operating (loss)
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other incomes (expenses),
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Basic net income (loss) before
extraordinary items and accounting\plain\intbl\cf1\f51\fs16\ql changes per
\~\cell{
\~\cell{
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Diluted net income (loss) before
extraordinary items and accounting\plain\intbl\cf1\f51\fs16\ql changes per
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Weighted - average number of shares
outstanding\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Adjusted weighted - average number
of shares\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql BALANCE SHEET
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\i\ql Argentine
\
\par\pard\plain
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cash and banks and current
investments\cell\pard\plain\intbl\cf1\f51\fs13\ql
Inventories\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgages and lease receivables,
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Non-current
investments\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fixed assets,
2,027,311\cell\pard\plain\intbl\cf1\f51\fs16\ql
1,235,223\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total current
assets\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Short-term
debt\plain\intbl\cf1\f51\fs11\ql\super (6)\cell\pard\plain\intbl\cf1\f51\fs13\ql
liabilities\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Long-term
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total non-current
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Shareholders\u8217?
equity\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\i\ql U.S.
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cash and banks and current
Inventories\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgages and lease receivables,
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other receivables and prepaid
investments\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fixed assets,
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Intangible assets,
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Trade accounts
payable\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql CASH FLOW
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net cash provided by operating
activities\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net cash used in investing
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net cash provided by (used in)
financing activities\cell\pard\plain\intbl\cf1\f51\fs13\ql
x10008\clvertalb\cellx10694\clvertalb\cellx10789\trrh206\row}}}\pard\plain\cf1\f51\
fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 12
\
\par\pard\plain
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\i\ql U.S.
GAAP\plain\intbl\cf1\f51\fs11\b\i\ql\super
(8)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net cash provided by operating
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net cash used in investing
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net cash provided by (used in)
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Effect of exchange rate changes on
cash and cash equivalents\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Effect of inflation
accounting\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql OTHER FINANCIAL
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Capital
expenditures\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Depreciation and
amortization\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Ratio of current assets to current
1.803\cell\pard\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Ratio of shareholders\u8217? equity
to total liabilities\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Ratio of non-current assets to total
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Working
capital\plain\intbl\cf1\f51\fs11\ql\super
x10137\clvertalb\cellx10698\clvertalb\cellx10793\trrh206\row}}}\pard\plain\f0\fs4\p
ar\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql Solely
for the convenience of the reader, we have translated Peso amounts into U.S.
dollars at the exchange rate quoted by\plain\intbl\cf1\f51\fs16\i\ql Banco de
la\plain\intbl\cf1\f51\fs16\i\ql Naci\u243?n Argentina\plain\intbl\cf1\f51\fs16\ql
for June\~30, 2007 which was Ps.3. 093\~per US$1.00. We make no representation that
the Peso or U.S.\~dollar\plain\intbl\cf1\f51\fs16\ql amounts actually represent,
could have been or could be converted into dollars at the rates indicated, at any
particular rate or at all. See\plain\intbl\cf1\f51\fs16\ql \u8220?Exchange Rates
and Exchange Controls.\u8221? Sums may not total due to rounding.\cell{
{\trowd\cellx432\cellx10162\trrh825\row}}}\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (2)\cell\pard\plain\intbl\cf1\f51\fs16\ql In
thousands of Pesos of June\~30, 2007. Includes adjustment for inflation through
February\~28, 2003. Sums may not total due to rounding.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (3)\cell\pard\plain\intbl\cf1\f51\fs16\ql We have
calculated earnings per share data under Argentine GAAP and U.S. GAAP based on the
weighted average number of common shares\plain\intbl\cf1\f51\fs16\ql outstanding
during the respective period. Each Global Depositary Shares (\u8220?GDS\u8221?)
represents ten common shares.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (4)\cell\pard\plain\intbl\cf1\f51\fs16\ql Under
both Argentine and U.S. GAAP we have considered the diluted effects of our
outstanding convertible notes and warrants. However,
under\plain\intbl\cf1\f51\fs16\ql U.S. GAAP, we have used the treasury-stock
method in calculating the diluted effect of the outstanding warrants. In addition,
the computation of\plain\intbl\cf1\f51\fs16\ql diluted net income per share / GDS
under U.S. GAAP for the year ended June\~30, 2004 excludes potential common shares
because the effect of\plain\intbl\cf1\f51\fs16\ql their inclusion would be anti-
dilutive, or would increase the reported net income per share / GDS. Each GDS
represents ten common shares.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (5)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Includes our 11.8% investment in Banco Hipotecario and our investments in
undeveloped plots of land.\cell{
\par\pard\plain
Includes short-term debt (including the current portion of seller financing) and
current mortgages payable.\cell{
\par\pard\plain
Includes long-term debt (including the non-current portion of seller financing) and
non-current mortgages payable.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (8)\cell\pard\plain\intbl\cf1\f51\fs16\ql This
table is intended to present cash flows from operating, investing and financing
activities under Argentine GAAP but following the
classification\plain\intbl\cf1\f51\fs16\ql guidelines of SFAS No.\~95 under U.S.
GAAP. See Note 28 to our audited consolidated financial statements included
elsewhere in this annual report\plain\intbl\cf1\f51\fs16\ql for details of the
differences in classifications affecting the categories of cash flows.\cell{
\par\pard\plain
Includes the purchase of fixed assets (including facilities and equipment),
undeveloped plots of land and renovation and remodeling of hotels
and\plain\intbl\cf1\f51\fs16\ql shopping centers.\cell{
\par\pard\plain
Corresponds to depreciation and amortization included in operating income.\cell{
\par\pard\plain
Working capital is calculated by subtracting consolidated current liabilities from
consolidated current assets.\cell{
{\trowd\cellx432\cellx9955\trrh206\row}}}\pard\plain\cf1\f51\fs13\ql
\
}{\*\fldrslt\cf3\f52\fs16\b\ql Table of Contents}}\par\pard\plain\cf1\f51\fs16\b\ql
Exchange Rates\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In April 1991, Argentine
law established a fixed exchange rate according to which the Central Bank was
statutorily obliged to sell U.S. dollars to\plain\cf1\f51\fs16\ql any individual
at a fixed exchange rate of Ps.1.00 per US$1.00. On January\~7, 2002, the Argentine
congress enacted the Public Emergency Law,\plain\cf1\f51\fs16\ql abandoning over
ten years of fixed Peso-U.S. dollar parity at Ps.1.00 per US$1.00. After devaluing
the Peso and setting the official exchange rate at\plain\cf1\f51\fs16\ql Ps.1.40
per US$1.00, on February\~11, 2002, the government allowed the Peso to float. The
shortage of U.S. dollars and their heightened demand caused\plain\cf1\f51\fs16\ql
the Peso to further devalue significantly in the first half of 2002. Since
June\~30, 2002, the Peso has appreciated versus the U.S. dollar from an
exchange\plain\cf1\f51\fs16\ql rate of Ps.3.80 =US$1.00 to an exchange rate of
Ps3.140=US$1.00 at December\~17, 2007 as quoted by\plain\cf1\f51\fs16\i\ql Banco
de la Naci\u243?n Argentina\plain\cf1\f51\fs16\ql at the
U.S.\plain\cf1\f51\fs16\ql dollar selling rate. The Central Bank may indirectly
affect this market through its active
participation.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The following table
presents the high, low, average and period closing exchange rate for the purchase
of U.S. dollars stated in\plain\cf1\f51\fs16\i\ql nominal\plain\cf1\f51\fs16\ql
Pesos per\plain\cf1\f51\fs16\ql U.S. dollar.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
{\trowd\clvertalc\cellx8208\clvertalb\cellx8315\clvertalc\cellx8798\clvertalb\cellx
8905\clvertalc\cellx9388\clvertalb\cellx9495\clvertalc\cellx10203\clvertalb\cellx10
lx10799\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Exchange
Rate\plain\intbl\cf1\f51\fs11\b\qc\super (4)\cell{
lx8798\clvertalb\cellx8905\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9388\clvertalb\cell
x9495\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10203\clvertalb\cellx10311\clbrdrb\brdrs
\brdrcf1\clvertalb\cellx10794\trrh344
High\plain\intbl\cf1\f51\fs11\b\qc\super
Low\plain\intbl\cf1\f51\fs11\b\qc\super
Average\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Period
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Closing\cell{
\brdrcf1\clvertalb\cellx10794\trrh344\row}}}
12\clcbpat12\cellx10203\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10311\clverta
lb\clshdng100\clcfpat12\clcbpat12\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fiscal year ended June\~30,
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 2.8000\cell{
lb\clshdng100\clcfpat12\clcbpat12\cellx10794\trrh206\row}}}
talb\cellx9388\clvertalb\cellx9495\clvertalb\cellx10203\clvertalb\cellx10311\clvert
alb\cellx10794\trrh206
alb\cellx10794\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql June
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql July
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql August
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql September
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql October
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql November
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql December 2007 (through December\~17,
2007)\cell\pard\plain\intbl\cf1\f51\fs13\ql
alb\cellx10794\trrh206\row}}}\pard\plain\sb88\cf1\f51\fs16\ql
Source:\plain\cf1\f51\fs16\i\ql Banco de la Naci\u243?n
Argentina\par\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\b
rdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql The
high exchange rate stated was the highest closing exchange rate of the month during
the fiscal year or any shorter period, as indicated.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (2)\cell\pard\plain\intbl\cf1\f51\fs16\ql The low
exchange rate stated was the lowest closing exchange rate of the month during the
fiscal year or any shorter period, as indicated.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (3)\cell\pard\plain\intbl\cf1\f51\fs16\ql Average
month-end closing exchange rates.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (4)\cell\pard\plain\intbl\cf1\f51\fs16\ql All
prices are market prices.\cell{
Fluctuations in the Peso-U.S. dollar exchange rate may affect the equivalent in
dollars of the price in Pesos of our shares on the Buenos
Aires\plain\cf1\f51\fs16\ql Stock Exchange. Increases in Argentine inflation or
devaluation of the Argentine currency could have a material adverse effect on our
operating results.{\*\bkmkstart tx46076_9}{\*\bkmkend
tx46076_9}\par\pard\plain\sb286\cf1\f51\fs16\b\ql B. Capitalization and
Indebtedness\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This item is not applicable.
{\*\bkmkstart tx46076_10}{\*\bkmkend
tx46076_10}\par\pard\plain\sb286\cf1\f51\fs16\b\ql C. Reasons for the Offer and Use
of Proceeds\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This item is not applicable.
tx46076_11}\par\pard\plain\sb286\cf1\f51\fs16\b\ql D. Risk
Factors\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql You should carefully consider
the risks described below, in addition to the other information contained in this
annual report, before making an\plain\cf1\f51\fs16\i\ql investment decision. We
also may face additional risks and uncertainties that are not presently known to
us, or that we currently deem immaterial, which\plain\cf1\f51\fs16\i\ql may impair
our business. In general, you take more risk when you invest in the securities of
issuers in emerging markets such as Argentina than when\plain\cf1\f51\fs16\i\ql
you invest in the securities of issuers in the United States. You should understand
that an investment in our common shares and GDSs involves a
high\plain\cf1\f51\fs16\i\ql degree of risk, including the possibility of loss of
your entire investment.\par\pard\plain\cf1\f51\fs13\ql
\
Risks Relating to Argentina\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql
Argentina\u8217?s current growth and stabilization may not be
sustainable.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql During 2001 and 2002,
Argentina experienced a period of severe political, economic and social crisis.
Although the economy has recovered\plain\cf1\f51\fs16\ql significantly over the
past three years, uncertainty remains as to whether the current growth and relative
stability are sustainable. Sustainable economic\plain\cf1\f51\fs16\ql growth is
dependant on a variety of factors, including international demand for Argentine
exports, the stability and competitiveness of the Peso
against\plain\cf1\f51\fs16\ql foreign currencies, confidence among consumers as
well as foreign and domestic investors and stable and relatively low
inflation.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Argentine economy remains
fragile for the following reasons:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql
unemployment remains high;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the
availability of long-term fixed rate credit is
limited;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql investment as a percentage of GDP
remains low;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the current fiscal surplus
could become a fiscal deficit;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the current
trade surplus could reverse into a trade
deficit;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql inflation has risen recently and
threatens to accelerate;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the
country\u8217?s public debt remains high and international financing is limited;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the recovery has depended to some
extent on high commodity prices, which are volatile and outside the control of the
country, and excess capacity,\plain\cf1\f51\fs16\ql which has reduced
considerably.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql A substantial part of our
operations, properties and customers are located in Argentina. As a result, our
business is to a very large extent dependent\plain\cf1\f51\fs16\ql upon the
economic conditions prevailing in Argentina. Although the economic situation in
Argentina has improved, instability is still prevalent and no\plain\cf1\f51\fs16\ql
assurance can be given that macroeconomic conditions in Argentina will not
deteriorate again.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql The continuing
rise of inflation may have an adverse effect on the
economy.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql After several years of price
stability, the devaluation of the Peso in January 2002 imposed pressures on the
domestic price system that generated\plain\cf1\f51\fs16\ql high inflation
throughout 2002. In 2003, inflation substantially stabilized. However, inflationary
pressures have since reemerged with consumer prices\plain\cf1\f51\fs16\ql
increasing by 6.1% during 2004 and increasing by 12.3% in 2005. As a result of the
execution of fixed price agreements and restrictions on, and
in\plain\cf1\f51\fs16\ql certain cases, suspension of, exports, consumer prices
only increased by 9.8% in 2006. As of November\~30, 2007, according to the
argentine statistics and\plain\cf1\f51\fs16\ql census agency, or INDEC, consumer
prices increased by 8.5% on an annualized
basis.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In the past, inflation has
materially undermined the Argentine economy and the government\u8217?s ability to
create conditions conducive to\plain\cf1\f51\fs16\ql growth. A return to a high
inflation environment could slow the rebound in the long term credit market and
real estate market and may also undermine\plain\cf1\f51\fs16\ql Argentina\u8217?s
foreign competitiveness by diluting the effects of the Peso devaluation and
negatively impacting the level of economic activity and\plain\cf1\f51\fs16\ql
employment.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 15
\
}{\*\fldrslt\cf3\f52\fs16\b\ql Table of
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql If inflation remains high or
continues to rise, Argentina\u8217?s economy may be negatively impacted which could
have an adverse effect on our\plain\cf1\f51\fs16\ql
business.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Argentina\u8217?s ability
to obtain financing from international markets is limited which may affect its
ability to implement reforms and foster\plain\cf1\f51\fs16\b\i\ql economic
growth.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In the first half of 2005,
Argentina restructured part of its sovereign debt that had been in default since
the end of 2001. As of March\~31, 2007, the\plain\cf1\f51\fs16\ql Argentine
government announced that as a result of the restructuring, it had approximately
US$136.3\~billion in total outstanding debt remaining. Of
this\plain\cf1\f51\fs16\ql amount, approximately US$26.5\~billion are defaulted
bonds owned by creditors who did not participate in the restructuring of the
external financial debt.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Some
bondholders in the United States, Italy and Germany have filed legal actions
against Argentina, and holdout creditors may initiate new suits
in\plain\cf1\f51\fs16\ql the future. Additionally, foreign shareholders of certain
Argentine companies have filed claims in excess of US$17\~billion before the
International Centre\plain\cf1\f51\fs16\ql for the Settlement of Investment
Disputes, or ICSID, alleging that certain government measures are inconsistent with
the fair and equitable treatment\plain\cf1\f51\fs16\ql standards set forth in
various bilateral treaties to which Argentina is a
party.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Argentina\u8217?s past default
and its failure to restructure completely its remaining sovereign debt and fully
negotiate with the holdout creditors\plain\cf1\f51\fs16\ql may prevent Argentina
from reentering the international capital markets. Litigation initiated by holdout
creditors as well as ICSID claims may result in\plain\cf1\f51\fs16\ql material
judgments against the Argentine government and could result in attachments of, or
injunctions relating to, assets of Argentina that the
government\plain\cf1\f51\fs16\ql intended for other uses. As a result, the
government may not have the financial resources necessary to implement reforms and
foster growth which could\plain\cf1\f51\fs16\ql have a material adverse effect on
the country\u8217?s economy and, consequently, our
business.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Significant devaluation of
the Peso against the U.S.\~dollar may adversely affect the Argentine economy as
well as our financial performance.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Despite the positive effects of the real depreciation of the Peso in 2002 on the
competitiveness of certain sectors of the Argentine economy, it
has\plain\cf1\f51\fs16\ql also had a far-reaching negative impact on the Argentine
economy and on businesses and individuals\u8217? financial condition. The
devaluation of the\plain\cf1\f51\fs16\ql Peso has had a negative impact on the
ability of Argentine businesses to honor their foreign currency-denominated debt,
initially led to very high\plain\cf1\f51\fs16\ql inflation, significantly reduced
real wages, had a negative impact on businesses whose success is dependent on
domestic market demand, such as utilities\plain\cf1\f51\fs16\ql and the financial
industry, and adversely affected the government\u8217?s ability to honor its
foreign debt obligations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql If the Peso
devalues significantly, all of the negative effects on the Argentine economy
related to such devaluation could recur, with adverse\plain\cf1\f51\fs16\ql
consequences to our business. Moreover, it would likely result in a decline in the
value of our common shares and the GDSs as measured in U.S.
dollars.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Significant appreciation of
the Peso against the U.S. dollar may adversely affect the Argentine
economy.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql A substantial increase in the
value of the Peso against the U.S. dollar also presents risks for the Argentine
economy. The appreciation of the Peso\plain\cf1\f51\fs16\ql against the U.S.
dollar negatively impacts the financial condition of entities whose foreign
currency-denominated assets exceed their foreign\plain\cf1\f51\fs16\ql currency-
denominated liabilities, such as us. In addition, in the short term, a significant
real appreciation of the Peso would adversely affect exports.
This\plain\cf1\f51\fs16\ql could have a negative effect on GDP growth and
employment as well as reduce the Argentine public sector\u8217?s revenues by
reducing tax collection\plain\cf1\f51\fs16\ql in real terms, given its current
heavy reliance on taxes on exports. The appreciation of the Peso against the U.S.
dollar could have an adverse effect on\plain\cf1\f51\fs16\ql the Argentine economy
and our business.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc
16
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\b\i\ql Government measures to preempt
or respond to social unrest may adversely affect the Argentine
economy.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql During its crisis in 2001 and
2002, Argentina experienced social and political turmoil, including civil unrest,
riots, looting, nationwide protests,\plain\cf1\f51\fs16\ql strikes and street
demonstrations. Despite Argentina\u8217?s ongoing economic recovery and relative
stabilization, social and political tension and high\plain\cf1\f51\fs16\ql levels
of poverty and unemployment continue. Future government policies to preempt, or in
response to, social unrest may include expropriation,\plain\cf1\f51\fs16\ql
nationalization, forced renegotiation or modification of existing contracts,
suspension of the enforcement of creditors\u8217? rights, new taxation
policies,\plain\cf1\f51\fs16\ql including royalty and tax increases and
retroactive tax claims, and changes in laws and policies affecting foreign trade
and investment. Such policies could\plain\cf1\f51\fs16\ql destabilize the country
and adversely and materially affect the economy, and thereby our
business.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Exchange controls and
restrictions on transfers abroad and capital inflow restrictions have limited and
can be expected to continue to limit the\plain\cf1\f51\fs16\b\i\ql availability of
international credit.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In 2001 and 2002,
Argentina imposed exchange controls and transfer restrictions substantially
limiting the ability of companies to retain foreign\plain\cf1\f51\fs16\ql currency
or make payments abroad. These restrictions have been substantially eased,
including those requiring the Central Bank\u8217?s prior\plain\cf1\f51\fs16\ql
authorization for the transfer of funds abroad in order to pay principal and
interest on debt obligations. However, Argentina may re-impose
exchange\plain\cf1\f51\fs16\ql control or transfer restrictions in the future,
among other things, in response to capital flight or a significant depreciation of
the Peso. In addition, the\plain\cf1\f51\fs16\ql government issued Decree
No.\~616/2005 in June 2005 that established new controls on capital inflows that
could result in less availability of international\plain\cf1\f51\fs16\ql credit.
Pursuant to such Decree, the Ministry of Economy\u8217?s Resolution No.\~292/2005
was repealed and it was established that any indebtedness in\plain\cf1\f51\fs16\ql
favor of foreign creditors by individuals and legal entities residing in Argentina
and conducting business in the private sector must be settled in
Argentina\plain\cf1\f51\fs16\ql and must mature no earlier than 365\~days
irrespective of the manner of settlement, except in the following cases:
transactions related to foreign trade\plain\cf1\f51\fs16\ql financing, and
original issuances of debt instruments admitted to public offering and listed in
self-regulated stock exchanges.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Therefore, (a)\~any cash inflows in the domestic foreign exchange market arising
from debts incurred with foreign creditors by individuals or
legal\plain\cf1\f51\fs16\ql entities in the private sector and (b)\~transfer by
non-residents to acquire financial assets or liabilities of any kind in the
financial and non-financial private\plain\cf1\f51\fs16\ql sector, excluding direct
foreign investment and original issuances of debt instruments admitted to public
offering and listed on self-regulated stock\plain\cf1\f51\fs16\ql exchanges must
meet the following requirements: (i)\~they may be remitted abroad only after
expiration of a term of at least 365\~days counted after the\plain\cf1\f51\fs16\ql
date on which such funds officially entered the Argentine foreign exchange market;
(ii)\~the amounts resulting from the exchange rate settlement
transaction\plain\cf1\f51\fs16\ql are to be deposited in an account opened at an
Argentine banking system institution, (iii)\~a non-transferable, non-interest
bearing deposit of 30% of the\plain\cf1\f51\fs16\ql amount being settled is to be
made in the name of the depositor for a term of 365\~days and (iv)\~such deposit is
to be held in U.S. dollars at one of the\plain\cf1\f51\fs16\ql Argentine banking
system institutions and may not be used as guarantee or collateral of any loan.
Non-compliance with the requirements laid down in\plain\cf1\f51\fs16\ql Decree
616/2005 shall be punished in accordance with the Criminal Foreign Exchange
Regime.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Additional controls could have a
negative effect on the economy and our business if imposed in an economic
environment where access to local\plain\cf1\f51\fs16\ql capital is substantially
constrained. Moreover, in such event, restrictions on the transfers of funds abroad
may impede your ability to receive dividend\plain\cf1\f51\fs16\ql payments as a
holder of GDSs.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Payment of dividends
to non-residents has been limited in the past and may be limited
again.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Beginning on February 2002, any
payment of dividends, irrespective of amount, outside Argentina needed prior
authorization from the Central Bank.\plain\cf1\f51\fs16\ql In December 2002 the
rule was amended through Communication \u8220?A\u8221? 3845 which required
Argentine companies to obtain prior\plain\cf1\f51\fs16\ql authorization from the
Central Bank to purchase currency in excess of US$150,000 (in the aggregate) per
calendar month. This rule applied, among\plain\cf1\f51\fs16\ql others, to the
payment of dividends.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql On January\~7, 2003, the Central
Bank issued communication \u8220?A\u8221? 3859 which is still enforceable and
pursuant to which Argentine\plain\cf1\f51\fs16\ql companies have no limitation on
their ability to purchase foreign currency and transfer it outside Argentina to pay
dividends, to the extent such dividend\plain\cf1\f51\fs16\ql payments result from
an approved and audited financial statement. In the future, similar restrictions
may be enacted by the Argentine government or the\plain\cf1\f51\fs16\ql Central
Bank again and, if this were to occur, it could have an adverse effect on the value
of our common shares and the GDSs.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql
The stability of the Argentine banking system is
uncertain.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql During 2001 and the first half
of 2002, a very significant amount of deposits were withdrawn from financial
institutions. This massive withdrawal\plain\cf1\f51\fs16\ql of deposits was
largely due to the loss of confidence of depositors in the Argentine
government\u8217?s ability to repay its debts, including its
debts\plain\cf1\f51\fs16\ql within the financial system, and to maintain peso-
dollar parity in the context of its solvency
crisis.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql To prevent a run on the U.S.
dollar reserves of local banks, the government restricted the amount of money that
account holders could withdraw\plain\cf1\f51\fs16\ql from banks and introduced
exchange controls restricting capital outflows. The government subsequently imposed
new restrictions and released a schedule\plain\cf1\f51\fs16\ql stating how and
when deposits would become available.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
These measures taken by the government to protect the solvency of the banking
system, in particular the emergency laws that converted certain
U.S.\plain\cf1\f51\fs16\ql dollar-denominated debts into Pesos, generated
significant opposition directly against banks from depositors frustrated by the
loss of their savings. Many\plain\cf1\f51\fs16\ql depositors instituted court
challenges, eventually at the Supreme Court level, on constitutional grounds
seeking restitution of their deposits in their original\plain\cf1\f51\fs16\ql
currency. Under Argentine law, Supreme Court rulings are limited to the particular
facts and defendants in the case, although lower courts tend to
follow\plain\cf1\f51\fs16\ql precedent set by the Supreme Court. Initial Supreme
Court rulings struck down on constitutional grounds pesification pursuant to Law
No.\~25,561 (the\plain\cf1\f51\fs16\ql \u8220?Public Emergency Law\u8221?).
However, the Supreme Court has found in subsequent holdings that emergency laws
enacted by the Argentine\plain\cf1\f51\fs16\ql Congress were necessary to mitigate
the crisis, the regulations were not disproportionate to the emergency, and the
measures did not violate the\plain\cf1\f51\fs16\ql constitutional property rights
of those affected. For instance, the Supreme Court held on December\~27, 2006
in\plain\cf1\f51\fs16\i\ql Massa, Juan Agustin vs. Poder
Ejecutivo\plain\cf1\f51\fs16\i\ql Nacional y Otro\plain\cf1\f51\fs16\ql that
banks should repay deposits originally denominated in U.S. dollars in Pesos at an
exchange rate of Ps.1.40 per US$1.00, subject to\plain\cf1\f51\fs16\ql CER or
Coeficiente de Estabilizaci\u243?n de Referencia indexation, plus interest, at a 4%
annual rate. Notwithstanding the foregoing, however, numerous\plain\cf1\f51\fs16\ql
other cases challenging the constitutionality of the pesification pursuant to the
Public Emergency Law are still pending. We cannot assure you that
the\plain\cf1\f51\fs16\ql Supreme Court will consistently uphold the views
expressed in its latest rulings, or that future rulings will not negatively affect
the banking system as a\plain\cf1\f51\fs16\ql whole. If the Argentine government
is called upon to provide additional financial assistance to the banks through the
issuance of additional government\plain\cf1\f51\fs16\ql debt, this could add to
Argentina\u8217?s outstanding debt and would increase the burdens of the public
sector.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql While the condition of
Argentina\u8217?s financial system has improved and depositors affected by the
restrictions imposed in 2001 and 2002 have\plain\cf1\f51\fs16\ql regained access
to their deposits, albeit mainly in Pesos and subject to certain restrictions, you
should not underestimate the long-term implications of the\plain\cf1\f51\fs16\ql
most recent crisis for Argentina\u8217?s economy and the credibility of its
financial system. Adverse economic developments, even if not related to
or\plain\cf1\f51\fs16\ql attributable to the financial system, could easily result
in deposits flowing out of the banks and into the foreign exchange market, as
depositors seek to\plain\cf1\f51\fs16\ql shield their financial assets from a new
crisis. Any run on deposits could create liquidity or even solvency problems for
financial institutions and bring\plain\cf1\f51\fs16\ql about similar measures or
other government interventions.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\b\i\ql The Argentine economy could be
adversely affected by economic developments in other global
markets.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Financial and securities markets
in Argentina are influenced, to varying degrees, by economic and market conditions
in other global markets.\plain\cf1\f51\fs16\ql Although economic conditions vary
from country to country, investors\u8217? perception of the events occurring in one
country may substantially affect\plain\cf1\f51\fs16\ql capital flows into and
securities from issuers in other countries, including Argentina. The Argentine
economy was adversely impacted by the political and\plain\cf1\f51\fs16\ql economic
events that occurred in several emerging economies in the 1990s, including Mexico
in 1994, the collapse of several Asian economies between\plain\cf1\f51\fs16\ql
1997 and 1998, the economic crisis in Russia in 1998 and the Brazilian devaluation
in January 1999. In addition, Argentina continues to be affected
by\plain\cf1\f51\fs16\ql events in the economies of its major regional partners.
Furthermore, the Argentine economy may be adversely affected by events in developed
economies\plain\cf1\f51\fs16\ql which are trading partners or that impact the
global economy.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In the future, political
and economic crises in the international markets can be expected to adversely
affect the Argentine economy and its financial\plain\cf1\f51\fs16\ql system and
therefore our business.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Recent
Presidential and Congressional elections may adversely affect the Argentine
economy.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On October\~28, 2007,
presidential and congressional elections took place in Argentina. Cristina
Fern\u225?ndez de Kirchner was elected as\plain\cf1\f51\fs16\ql President, the
ruling party maintained the majority in Congress and as a result there exists
uncertainty regarding the economic policy to be carried out
by\plain\cf1\f51\fs16\ql the new government. There are no assurances that future
uncertainties preceding and resulting from the Congressional and the Presidential
elections will\plain\cf1\f51\fs16\ql not negatively impact the Argentine economy
and/or local bonds and stock markets.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Risks
Relating to our Business\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Our
performance is subject to risks associated with our properties and with the real
estate industry.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our economic performance
and the value of our real estate assets, and consequently the value of the
securities issued by us, are subject to the risk\plain\cf1\f51\fs16\ql that if our
properties do not generate sufficient revenues to meet its operating expenses,
including debt service and capital expenditures, our cash flow
and\plain\cf1\f51\fs16\ql ability to pay distributions to our shareholders will be
adversely affected. Events or conditions beyond our control that may adversely
affect our operations\plain\cf1\f51\fs16\ql or the value of our properties
include:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql downturns in the national,
regional and local economic climate;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql
volatility and decline in discretionary
spending;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql competition from other office,
industrial and commercial buildings;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql local
real estate market conditions, such as oversupply or reduction in demand for
office, or other commercial or industrial
space;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql changes in interest rates and
availability of financing;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the exercise by
our tenants of their legal right to early termination of their
leases;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql vacancies, changes in market
rental rates and the need to periodically repair, renovate and re-lease
space;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql increased operating costs,
including insurance expense, utilities, real estate taxes, state and local taxes
and heightened security costs;\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\ql civil disturbances, earthquakes and
other natural disasters, or terrorist acts or acts of war which may result in
uninsured or underinsured losses;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql
significant expenditures associated with each investment, such as debt service
payments, real estate taxes, insurance and maintenance costs
which\plain\cf1\f51\fs16\ql are generally not reduced when circumstances cause a
reduction in revenues from a property;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql
declines in the financial condition of our tenants and our ability to collect rents
from them;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql changes in our ability or our
tenants\u8217? ability to provide for adequate maintenance and insurance, possibly
decreasing the useful life of and\plain\cf1\f51\fs16\ql revenue from property;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql law reforms and governmental
regulations (such as those governing usage, zoning and real property
taxes).\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql If any one or more of the
foregoing conditions were to affect our business, it could have a material adverse
effect on our financial condition and\plain\cf1\f51\fs16\ql results of
operations.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Our investment in
property development or redevelopment may be less profitable than we
anticipate.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We are engaged in the
development and construction of office space, retail and residential properties,
frequently through third-party contractors.\plain\cf1\f51\fs16\ql Risks associated
with our development, re-development and construction activities include the
following, among others:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql abandonment of
development opportunities and renovation
proposals;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql construction costs of a project
may exceed its original estimates for reasons including raises in interest rates or
increases in the costs of materials\plain\cf1\f51\fs16\ql and labor, making a
project unprofitable;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql occupancy rates and
rents at newly completed properties may fluctuate depending on a number of factors,
including market and economic\plain\cf1\f51\fs16\ql conditions, resulting in lower
than projected rental rates and a corresponding lower return on our
investment;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql pre-construction buyers may
default on their purchase contracts or units in new buildings may remain unsold
upon completion of construction;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the
unavailability of favorable financing alternatives in the private and public debt
markets;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql sale prices for residential units
may be insufficient to cover development
costs;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql construction and lease-up may not
be completed on schedule, resulting in increased debt service expense and
construction costs; and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql we may be unable
to obtain, or may face delays in obtaining, necessary zoning, land-use, building,
occupancy and other required governmental\plain\cf1\f51\fs16\ql permits and
authorizations, or we may be affected by building moratoria and anti-growth
legislation.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 20
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\b\i\ql The real estate industry in
Argentina is increasingly competitive.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Our real estate and construction activities are highly concentrated in the Buenos
Aires metropolitan area, where the real estate market is
highly\plain\cf1\f51\fs16\ql competitive due to a scarcity of properties in
sought-after locations and the increasing number of local and international
competitors.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Furthermore, the Argentine
real estate industry is generally highly competitive and fragmented and does not
have high-entry barriers restricting new\plain\cf1\f51\fs16\ql competitors from
entering the market. The main competitive factors in the real estate development
business include availability and location of land, price,\plain\cf1\f51\fs16\ql
funding, design, quality, reputation and partnerships with developers. A number of
residential and commercial developers and real estate
services\plain\cf1\f51\fs16\ql companies compete with us in seeking land for
acquisition, financial resources for development and prospective purchasers and
tenants. Other companies,\plain\cf1\f51\fs16\ql including joint ventures of
foreign and local companies, have become increasingly active in the real estate
business in Argentina, further increasing this\plain\cf1\f51\fs16\ql competition.
To the extent that one or more of our competitors are able to acquire and develop
desirable properties, as a result of greater financial\plain\cf1\f51\fs16\ql
resources or otherwise, our business could be materially and adversely affected. If
we are not able to respond to such pressures as promptly as
our\plain\cf1\f51\fs16\ql competitors, or the level of competition increases, our
financial condition and results of our operations could be adversely
affected.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In addition, many of our
shopping centers are located in close proximity to other shopping centers, numerous
retail stores and residential properties.\plain\cf1\f51\fs16\ql The number of
comparable properties located in the vicinity of our properties could have a
material adverse effect on our ability to lease retail space
in\plain\cf1\f51\fs16\ql our shopping centers or sell units in our residential
complexes and on the rent price or the sale price that we are able to charge. We
cannot assure you\plain\cf1\f51\fs16\ql that other shopping center operators,
including international shopping center operators, will not invest in Argentina in
the near future. As additional\plain\cf1\f51\fs16\ql companies become active in
the Argentine shopping center market, such increased competition could have a
material adverse effect on our results of\plain\cf1\f51\fs16\ql
operations.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql We face risks associated
with property acquisitions.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We have in
the past acquired, and intend to acquire in the future, properties, including large
properties (such as the acquisition of Abasto de Buenos\plain\cf1\f51\fs16\ql
Aires or Alto Palermo Shopping) that would increase our size and potentially alter
our capital structure. Although we believe that the acquisitions that
we\plain\cf1\f51\fs16\ql have completed in the past and that we expect to
undertake in the future, have, and will, enhance our future financial performance,
the success of such\plain\cf1\f51\fs16\ql transactions is subject to a number of
uncertainties, including the risk that:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql we
may not be able to obtain financing for acquisitions on favorable
terms;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql acquired properties may fail to
perform as expected;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the actual costs of
repositioning or redeveloping acquired properties may be higher than we
estimate;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql acquired properties may be
located in new markets where we may have limited knowledge and understanding of the
local economy, absence of\plain\cf1\f51\fs16\ql business relationships in the area
or unfamiliarity with local governmental and permitting procedures;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql we may not be able to efficiently
integrate acquired properties, particularly portfolios of properties, into our
organization and to manage new\plain\cf1\f51\fs16\ql properties in a way that
allows us to realize cost savings and synergies.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\b\i\ql Some of the land we have
purchased is not zoned for development purposes, and we may be unable to obtain, or
may face delays in obtaining\plain\cf1\f51\fs16\b\i\ql the necessary zoning
permits and other authorizations.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We own
several plots of land which are not zoned for development purposes or for the type
of developments we intend to propose, including Santa\plain\cf1\f51\fs16\ql
Mar\u237?a del Plata, Puerto Retiro and Terrenos de Caballito. In addition, we do
not yet have the required land-use, building, occupancy and
other\plain\cf1\f51\fs16\ql required governmental permits and authorizations. We
cannot assure you that we will continue to be successful in our attempts to rezone
land and to\plain\cf1\f51\fs16\ql obtain all necessary permits and authorizations,
or that rezoning efforts and permit requests will not be unreasonably delayed.
Moreover, we may be\plain\cf1\f51\fs16\ql affected by building moratoria and anti-
growth legislation. If we are unable to obtain all of the governmental permits and
authorizations we need to\plain\cf1\f51\fs16\ql develop our present and future
projects as planned, we may be forced to make unwanted modifications to such
projects or abandon them altogether.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql
Acquired properties may subject us to unknown
liabilities.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Properties that we acquire
may be subject to unknown liabilities for which we would have no recourse, or only
limited recourse, to the former\plain\cf1\f51\fs16\ql owners of such
properties.\~As a result, if a liability were asserted against us based upon
ownership of an acquired property, we might be required to
pay\plain\cf1\f51\fs16\ql significant sums to settle it, which could adversely
affect our financial results and cash flow. Unknown liabilities relating to
acquired properties could\plain\cf1\f51\fs16\ql
include:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql liabilities for clean-up of
undisclosed environmental contamination;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql
law reforms and governmental regulations (such as those governing usage, zoning and
real property taxes); and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql liabilities
incurred in the ordinary course of
business.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Some potential losses are
not covered by insurance, and certain kinds of insurance coverage may become
prohibitively expensive.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We currently
carry liability, fire, business interruption, flood, extended coverage and rental
loss insurance on all of our properties. Although we\plain\cf1\f51\fs16\ql believe
the policy specifications and insured limits of these policies are generally
customary, there are certain types of losses, such as lease and
other\plain\cf1\f51\fs16\ql contract claims and terrorism and acts of war that
generally are not insured. Should an uninsured loss or a loss in excess of insured
limits occur, we could\plain\cf1\f51\fs16\ql lose all or a portion of the capital
we have invested in a property, as well as the anticipated future revenue from the
property. In such an event, we might\plain\cf1\f51\fs16\ql nevertheless remain
obligated for any mortgage debt or other financial obligations related to the
property. We cannot assure you that material losses in\plain\cf1\f51\fs16\ql
excess of insurance proceeds will not occur in the future. If any of our properties
were to experience a catastrophic loss, it could seriously disrupt
our\plain\cf1\f51\fs16\ql operations, delay revenue and result in large expenses
to repair or rebuild the property.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In
addition, we cannot assure you that we will be able to renew our insurance coverage
in an adequate amount or at reasonable prices. Insurance\plain\cf1\f51\fs16\ql
companies may no longer offer coverage against certain types of losses, such as
losses due to terrorist acts and mold, or, if offered, these types
of\plain\cf1\f51\fs16\ql insurance may be prohibitively expensive. Moreover, we do
not purchase life or disability insurance for any of our key employees. If any of
our key\plain\cf1\f51\fs16\ql employees were to die or become incapacitated, we
could experience losses caused by a disruption in our operations which will not be
covered by\plain\cf1\f51\fs16\ql insurance, and this could have a material adverse
effect on our financial condition and results of
operations.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Demand for our premium
properties which target the high-income demographic may be
insufficient.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We have focused on
development projects intended to cater to affluent individuals and have entered
into property swap agreements pursuant to\plain\cf1\f51\fs16\ql which we
contribute our undeveloped properties to ventures with developers who will deliver
to us units in full-service apartments in premium locations\plain\cf1\f51\fs16\ql
of downtown Buenos\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc
22
\
Aires, such as the Renoir towers. These developments are currently estimated to be
completed in 2008 and will bring to the market over 11,500
square\plain\cf1\f51\fs16\ql meters of high quality residential apartments. At the
time the developers return these properties to us, demand for premium apartments
could be\plain\cf1\f51\fs16\ql significantly lower than we currently project. In
such case, we would be unable to sell these apartments at the prices or in the time
frame we estimated,\plain\cf1\f51\fs16\ql which could have a material adverse
effect on our financial condition and results of
operations.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql It may be difficult to
buy and sell real estate quickly and transfer restrictions apply to some of our
properties.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Real estate investments are
relatively illiquid and this tends to limit our ability to vary its portfolio
promptly in response to changes in economic or\plain\cf1\f51\fs16\ql other
conditions. In addition, significant expenditures associated with each equity
investment, such as mortgage payments, real estate taxes and\plain\cf1\f51\fs16\ql
maintenance costs, are generally not reduced when circumstances cause a reduction
in income from the investment. If income from a property
declines\plain\cf1\f51\fs16\ql while the related expenses do not decline, our
business would be adversely affected. A significant portion of our properties are
mortgaged to secure\plain\cf1\f51\fs16\ql payment of indebtedness, and if we are
unable to meet our mortgage payments, we could lose money as a result of
foreclosure on the properties by the\plain\cf1\f51\fs16\ql various mortgagees. In
addition, if it becomes necessary or desirable for us to dispose of one or more of
the mortgaged properties, we might not be able\plain\cf1\f51\fs16\ql to obtain a
release of the lien on the mortgaged property without payment of the associated
debt. The foreclosure of a mortgage on a property or
inability\plain\cf1\f51\fs16\ql to sell a property could adversely affect our
business. In transactions of this kind, we may also agree, subject to certain
exceptions, not to sell the\plain\cf1\f51\fs16\ql acquired properties for
significant periods of time.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Our
level of debt may adversely affect our operations and our ability to pay our debt
as it becomes due.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We have had, and
expect to continue to have, substantial liquidity and capital resource requirements
to finance our business. As of June\~30, 2007,\plain\cf1\f51\fs16\ql our
consolidated financial debt was Ps.1,414.5 million (including accrued and unpaid
interest and deferred financing costs). The fact that we are
leveraged\plain\cf1\f51\fs16\ql may affect our ability to refinance existing debt
or borrow additional funds to finance working capital, acquisitions and capital
expenditures. This would\plain\cf1\f51\fs16\ql require us to allocate a
substantial portion of cash flow to repay principal and interest, thereby reducing
the amount of money available to invest in\plain\cf1\f51\fs16\ql operations,
including acquisitions and capital expenditures. Our leverage could place us at a
disadvantage compared to our competitors who are less\plain\cf1\f51\fs16\ql
leveraged and limit our ability to react to changes in market conditions, changes
in the real estate industry and economic downturns. Although we
have\plain\cf1\f51\fs16\ql successfully restructured our debt, we cannot assure
you that we will not relapse and become unable to pay our
obligations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We may not be able to
generate sufficient cash flows from operations to satisfy our debt service
requirements or to obtain future financing. If we\plain\cf1\f51\fs16\ql cannot
satisfy our debt service requirements or if we default on any financial or other
covenants in our debt arrangements, the holders of our debt will
be\plain\cf1\f51\fs16\ql able to accelerate the maturity of such debt or cause
defaults under the other debt arrangements. Our ability to service debt obligations
or to refinance\plain\cf1\f51\fs16\ql them will depend upon our future financial
and operating performance, which will, in part, be subject to factors beyond our
control such as\plain\cf1\f51\fs16\ql macroeconomic conditions and regulatory
changes in Argentina. If we cannot obtain future financing, we may have to delay or
abandon some or all of\plain\cf1\f51\fs16\ql our planned capital expenditures,
which could adversely affect our ability to generate cash flows and repay our
obligations.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql We are subject to risks
inherent to the operation of shopping centers that may affect our
profitability.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Shopping centers are
subject to various factors that affect their development, administration and
profitability. These factors include:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the
accessibility and the attractiveness of the area where the shopping center is
located;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the intrinsic attractiveness of
the shopping center;\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\ql the flow of people and the level of
sales of each shopping center rental unit;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql
increasing competition from internet
sales;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the amount of rent collected from
each shopping center rental unit; and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the
fluctuations in occupancy levels in the shopping
centers.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql An increase in operating costs,
caused by inflation or other factors, could have a material adverse effect on us if
our tenants are unable to pay\plain\cf1\f51\fs16\ql higher rent due to the
increase in expenses. Moreover, the shopping center business is closely related to
consumer spending and to the economy in which\plain\cf1\f51\fs16\ql customers are
located. All of our shopping centers are in Argentina, and, as a consequence, their
business could be seriously affected by potential\plain\cf1\f51\fs16\ql recession
in Argentina. For example, during the economic crisis in Argentina, spending
decreased significantly, unemployment, political instability
and\plain\cf1\f51\fs16\ql inflation significantly reduced consumer spending in
Argentina, lowering tenants\u8217? sales and forcing some tenants to leave our
shopping centers. If\plain\cf1\f51\fs16\ql this were to occur again, it could have
a material adverse effect on the revenues from the shopping center
activity.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql The loss of significant
tenants could adversely affect both the operating revenues and value of our
shopping center and other rental
properties.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql If certain of our most
important tenants were to experience financial difficulties, including bankruptcy,
insolvency or a general downturn of\plain\cf1\f51\fs16\ql business, or if we
simply failed to retain their patronage, our business could be adversely affected.
Our shopping centers and, to a lesser extent, our office\plain\cf1\f51\fs16\ql
buildings are typically anchored by significant tenants, such as well known
department stores who generate shopping traffic at the mall. A decision
by\plain\cf1\f51\fs16\ql such significant tenants to cease operations at our
shopping centers or office buildings could have a material adverse effect on the
revenues and\plain\cf1\f51\fs16\ql profitability of the affected segment and, by
extension, on our financial condition and results of operations. The closing of one
or more significant tenants\plain\cf1\f51\fs16\ql may induce other tenants at an
affected property to terminate their leases, to seek rent relief and/or cease
operating their stores or otherwise adversely\plain\cf1\f51\fs16\ql affect
occupancy at the property. If we are not able to successfully lease the affected
space again, the bankruptcy and/or closure of significant
tenants,\plain\cf1\f51\fs16\ql could have an adverse effect on both the operating
revenues and underlying value of the properties
involved.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql We are subject to payment
default risks due to our investments in credit card businesses through our
subsidiary Alto Palermo.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our subsidiary
Alto Palermo owns an 80% interest in Tarshop S.A., or Tarshop, a credit card
company that originates credit card accounts to\plain\cf1\f51\fs16\ql promote
sales from Alto Palermo\u8217?s tenants and other selected retailers. During the
fiscal year ended June\~30, 2007, Tarshop had net revenues of\plain\cf1\f51\fs16\ql
Ps.213.0 million, representing 44.1% of Alto Palermo\u8217?s revenues and 28.8% of
our consolidated revenues for such fiscal year. Credit card\plain\cf1\f51\fs16\ql
businesses such as Tarshop are adversely affected by defaults or late payments by
card holders on credit card accounts, difficulties enforcing collection
of\plain\cf1\f51\fs16\ql payments, fraudulent accounts and the writing off of past
due receivables. The present rates of delinquency, collection proceedings and loss
of receivables\plain\cf1\f51\fs16\ql may vary and be affected by numerous factors
beyond our control, which, among others,
include:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql adverse changes in the Argentine
economy;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql adverse changes in the regional
economies;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql political
instability;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql increases in unemployment;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql erosion of real and/or nominal
salaries.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 24
\
These and other factors may have an adverse effect on rates of delinquency,
collections and receivables, any one or more of which could have a
material\plain\cf1\f51\fs16\ql adverse effect on the results of operations of
Tarshop\u8217?s credit card business. In addition, if our credit card business is
adversely affected by one or\plain\cf1\f51\fs16\ql more of the above factors, the
quality of our securitized receivables is also likely to be adversely affected.
Therefore, we could be adversely affected to\plain\cf1\f51\fs16\ql the extent that
we hold an interest in any such securitized
receivables.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Our subordinated
interest in Tarshop\u8217?s securitized assets may have no
value.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Tarshop S.A., an Alto Palermo
subsidiary, is a credit card company that originates credit card accounts to
promote sales from Alto Palermo\u8217?s\plain\cf1\f51\fs16\ql tenants and other
selected retailers. Tarshop\u8217?s accounts receivables, which consist of cash
flows from consumer financing and personal loans, are\plain\cf1\f51\fs16\ql placed
into a number of trust accounts that securitize those receivables. Tarshop sells
beneficial interests in these trust accounts through the sale of
debt\plain\cf1\f51\fs16\ql certificates, but remains a beneficiary of these trust
accounts by holding Ps.77.8 million in debt certificates as of June\~30,
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We cannot assure you that
collection of payments from credit card accounts will be sufficient to distribute
earnings to holders of participation\plain\cf1\f51\fs16\ql certificates, which
would reduce Tarshop\u8217?s earnings. In addition, local authorities might
increase credit card or trust account regulations, negatively\plain\cf1\f51\fs16\ql
affecting Tarshop\u8217?s revenues and results of
operation.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql We are subject to risks
affecting the hotel industry.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The full-
service segment of the lodging industry in which our hotels operate is highly
competitive. The operational success of our hotels is highly\plain\cf1\f51\fs16\ql
dependant on our ability to compete in areas such as access, location, quality of
accommodations, rates, quality food and beverage facilities and
other\plain\cf1\f51\fs16\ql services and amenities. Our hotels may face additional
competition if other companies decide to build new hotels or improve their existing
hotels to\plain\cf1\f51\fs16\ql increase their
attractiveness.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In addition, the
profitability of our hotels depends on:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql
our ability to form successful relationships with international and local operators
to run our hotels;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql changes in tourism and
travel patterns, including seasonal changes;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql taxes and governmental regulations
affecting wages, prices, interest rates, construction procedures and
costs.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Our business is subject to
extensive regulation and additional regulations may be imposed in the
future.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our activities are subject to
federal, state and municipal laws, and to regulations, authorizations and licenses
required with respect to construction,\plain\cf1\f51\fs16\ql zoning, use of the
soil, environmental protection and historical patrimony, consumer protection and
other requirements, all of which affect our ability to\plain\cf1\f51\fs16\ql
acquire land, develop and build projects and negotiate with customers. In addition,
companies in this industry are subject to increasing tax rates,
the\plain\cf1\f51\fs16\ql creation of new taxes and changes in the taxation
regime. We are required to obtain licenses and authorizations with different
governmental authorities in\plain\cf1\f51\fs16\ql order to carry out our projects.
Maintaining our licenses and authorizations can be a costly provision. In the case
of non-compliance with such laws,\plain\cf1\f51\fs16\ql regulations, licenses and
authorizations, we may face fines, project shutdowns, cancellation of licenses and
revocation of authorizations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In
addition, public authorities may issue new and stricter standards, or enforce or
interpret existing laws and regulations in a more restrictive\plain\cf1\f51\fs16\ql
manner, which may force us to make expenditures to comply with such new rules.
Development activities are also subject to risks relating to
potential\plain\cf1\f51\fs16\ql delays or an inability to obtain
all\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 25
\
necessary zoning, environmental, land-use, development, building, occupancy and
other required governmental permits and authorizations. Any
such\plain\cf1\f51\fs16\ql delays or failures to obtain such government approvals
may have an adverse effect on our
business.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In the past, the Argentine
government imposed strict and burdensome regulations regarding leases in response
to housing shortages, high rates of\plain\cf1\f51\fs16\ql inflation and
difficulties in accessing credit. Such regulations limited or prohibited increases
on rental prices and prohibited eviction of tenants, even for\plain\cf1\f51\fs16\ql
failure to pay rent. Most of our leases provide that the tenants pay all costs and
taxes related to their respective leased areas. In the event of a
significant\plain\cf1\f51\fs16\ql increase in the amount of such costs and taxes,
the Argentine government may respond to political pressure to intervene by
regulating this practice,\plain\cf1\f51\fs16\ql thereby negatively affecting our
rental income. We cannot assure you that the Argentine government will not impose
similar or other regulations in the\plain\cf1\f51\fs16\ql future. Changes in
existing laws or the enactment of new laws governing the ownership, operation or
leasing of properties in Argentina could negatively\plain\cf1\f51\fs16\ql affect
the Argentine real estate market and the rental market and materially and adversely
affect our operations and
profitability.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Lease Law No.\~23,091
imposes restrictions that limit our
flexibility.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Argentine laws governing
leases impose certain restrictions, including the
following:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql lease agreements may not
contain inflation adjustment clauses based on consumer price indexes or wholesale
price indexes. Although many of our\plain\cf1\f51\fs16\ql lease agreements contain
readjustment clauses, these are not based on an official index nor do they reflect
the inflation index. In the event of\plain\cf1\f51\fs16\ql litigation it may be
impossible for us to adjust the amounts owed to us under our lease
agreements;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql residential leases must comply
with a mandatory minimum term of two years and retail leases must comply with a
mandatory minimum term of\plain\cf1\f51\fs16\ql three years except in the case of
stands and/or spaces for special
exhibitions;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql lease terms may not exceed
ten years, except for leases regulated by Law No.\~25,248 (which provides that
leases containing a purchase option are\plain\cf1\f51\fs16\ql not subject to term
limitations); and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql tenants may rescind
commercial lease agreements after the initial six-month
period.\par\pard\plain\sb198\cf1\f51\fs16\ql As a result of the foregoing, we are
exposed to the risk of increases of inflation under our leases and the exercise of
rescission rights by our tenants could\plain\cf1\f51\fs16\ql materially and
adversely affect our business and we cannot assure you that our tenants will not
exercise such right, especially if rent values stabilize or\plain\cf1\f51\fs16\ql
decline in the future.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Eviction
proceedings in Argentina are difficult and time
consuming.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Although Argentine law permits
a summary proceeding to collect unpaid rent and a special proceeding to evict
tenants, eviction proceedings in\plain\cf1\f51\fs16\ql Argentina are difficult and
time-consuming. Historically, the heavy workloads of the courts and the numerous
procedural steps required have generally\plain\cf1\f51\fs16\ql delayed
landlords\u8217? efforts to evict tenants. Eviction proceedings generally take
between six months and two years from the date of filing of the
suit\plain\cf1\f51\fs16\ql to the time of actual
eviction.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Historically, delinquency
regarding our office rental space has been very low, approximately 2%, and we have
usually attempted to negotiate the\plain\cf1\f51\fs16\ql termination of lease
agreements with defaulting tenants after the first few months of non-payment in
order to avoid legal proceedings. Delinquency may\plain\cf1\f51\fs16\ql increase
significantly in the future, and such negotiations with tenants may not be as
successful as they have been in the past. Moreover,
new\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 26
\
Argentine laws and regulations may forbid or restrict eviction proceedings, and in
such case, they would likely have a material and adverse effect on
our\plain\cf1\f51\fs16\ql financial condition and results of
operation.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Our assets are
concentrated in the Buenos Aires area.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Our principal properties are located in the City of Buenos Aires and the Province
of Buenos Aires and a substantial portion of our revenues are\plain\cf1\f51\fs16\ql
derived from such properties. For the fiscal year ended June\~30, 2007, more than
87% of our consolidated revenues were derived from properties in
the\plain\cf1\f51\fs16\ql Buenos Aires metropolitan area including the City of
Buenos Aires. Although we own properties and may acquire or develop additional
properties outside\plain\cf1\f51\fs16\ql Buenos Aires, we expect to continue to
depend to a large extent on economic conditions affecting those areas, and
therefore, an economic downturn in\plain\cf1\f51\fs16\ql those areas could have a
material adverse effect on our financial condition and results of
operations.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql We face risks associated
with potential expansion to other Latin American
markets.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql From 1994 to 2002, we had
substantial investments outside of Argentina, including Brazil Realty, which was
sold in 2002, and Fondo de Valores\plain\cf1\f51\fs16\ql Inmobiliarios in
Venezuela, which was sold in 2001. We continue to believe that Brazil and other
Latin American countries offer attractive opportunities\plain\cf1\f51\fs16\ql for
growth in the real estate sector. We will continue to consider investment
opportunities outside of Argentina as they
arise.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Investments in Brazil and other
Latin American countries are subject to significant risks including sovereign risks
and risks affecting these\plain\cf1\f51\fs16\ql countries\u8217? real estate
sectors. These risks include competition by well-established as well as new
developers, unavailability of financing or\plain\cf1\f51\fs16\ql financing on
terms that are not acceptable to us, exchange rate fluctuations, lack of liquidity
in the market, rising construction costs and inflation,\plain\cf1\f51\fs16\ql
extensive and potentially increasing regulation and bureaucratic procedures to
obtain permits and authorizations, political and economic instability that
may\plain\cf1\f51\fs16\ql result in sharp shifts in demand for properties, risks
of default in payment and difficulty evicting defaulting
tenants.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql If the bankruptcy of
Inversora D\u225?rsena Norte is extended to our subsidiary Puerto Retiro S.A., we
will likely lose a significant investment\plain\cf1\f51\fs16\b\i\ql in a unique
waterfront land reserve in the City of Buenos
Aires.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On November\~18, 1997, in
connection with the acquisition of our subsidiary Inversora Bol\u237?var S.A.,
or \u8220?Inversora Bol\u237?var,\u8221?\plain\cf1\f51\fs16\ql we indirectly
acquired 35.2% of the capital stock of Puerto Retiro. Inversora Bol\u237?var had
purchased such shares of Puerto Retiro from Redona\plain\cf1\f51\fs16\ql
Investments Ltd. N.V. in 1996. In 1999, through Inversora Bol\u237?var, we
increased our interest in Puerto Retiro to 50.0% of its capital
stock.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On April\~18, 2000, Puerto Retiro
received notice of a complaint filed by the Argentine government, through the
Ministry of Defense, seeking to\plain\cf1\f51\fs16\ql extend the bankruptcy of
Inversora D\u225?rsena Norte S.A. (\u8220?Indarsa\u8221?). Upon filing of the
complaint, the bankruptcy court issued an order\plain\cf1\f51\fs16\ql restraining
the ability of Puerto Retiro to dispose of, in any manner, the real property it had
purchased in 1993 from Tandanor S.A.\plain\cf1\f51\fs16\ql (\u8220?
Tandanor\u8221?). Puerto Retiro appealed the restraining order which was confirmed
by the court on December\~14, 2000.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In
1991, Indarsa had purchased 90% of Tandanor, a formerly government owned company,
which owned a large piece of land near Puerto Madero\plain\cf1\f51\fs16\ql of
approximately 8 hectares, divided into two spaces: Planta 1 and 2. After the
purchase of Tandanor by Indarsa, in June 1993 Tandanor
sold\plain\cf1\f51\fs16\ql \u8220?Planta 1\u8221? to Puerto Retiro, for a sum of
US$18\~million pursuant to a valuation performed by J.L. Ramos, a well-known real
estate\plain\cf1\f51\fs16\ql brokerage firm in
Argentina.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Indarsa failed to pay to the
Argentine government the outstanding price for its purchase of the stock of
Tandanor. As a result the Ministry of\plain\cf1\f51\fs16\ql Defense requested the
bankruptcy of Indarsa. Since the only asset of Indarsa was its holding in Tandanor,
the Argentine government is seeking to extend\plain\cf1\f51\fs16\ql the bankruptcy
to the companies or individuals which, according to its view, acted as a single
economic group. In particular, the Argentine government\plain\cf1\f51\fs16\ql has
requested the extension of the bankruptcy to Puerto Retiro which acquired Planta 1
from Tandanor.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 27
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The time for producing evidence in
relation to these legal proceeding has expired. The parties have submitted their
closing arguments and are\plain\cf1\f51\fs16\ql awaiting a final judgment.
However, the judge has delayed his decision until a final judgment in the criminal
proceedings against the former Defense\plain\cf1\f51\fs16\ql Minister and former
directors of Indarsa has been delivered. We cannot give you any assurance that we
will prevail in this proceeding, and if the\plain\cf1\f51\fs16\ql plaintiff\u8217?
s claim is upheld by the courts, all of the assets of Puerto Retiro would likely be
used to pay Indarsa\u8217?s debts and our investment in\plain\cf1\f51\fs16\ql
Puerto Retiro, valued at Ps.54.9 million, as of June\~30, 2007. As of June\~30,
2007, we had not established any reserve in respect of this
contingency.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Property ownership
through joint ventures may limit our ability to act exclusively in our
interest.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We develop and acquire
properties in joint ventures with other persons or entities when we believe
circumstances warrant the use of such structures.\plain\cf1\f51\fs16\ql For
example, in the Shopping Center segment, we own 62.5% of Alto Palermo, while Parque
Arauco S.A. owns 29.5%. In the Development and Sale\plain\cf1\f51\fs16\ql segment,
we have a majority ownership interests in various properties, including 100%
ownership of Pereiraola S.A. and 100% of Caballito. We also
have\plain\cf1\f51\fs16\ql ownership of 50% in Puerto Retiro and Cyrsa. In the
Hotel operations segment, we own 50% of the Llao Llao Hotel, while another 50% is
owned by the\plain\cf1\f51\fs16\ql Sutton Group. We own 80% of the Hotel
Libertador, while 20% is owned by Hoteles Sheraton de Argentina S.A. In the
financial services sector, we own\plain\cf1\f51\fs16\ql 11.8% of Banco
Hipotecario, while the Argentine government has a controlling interest in
it.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We could become engaged in a dispute
with one or more of our joint venture partners that might affect our ability to
operate a jointly-owned\plain\cf1\f51\fs16\ql property. Moreover, our joint
venture partners may, at any time, have business, economic or other objectives that
are inconsistent with our objectives,\plain\cf1\f51\fs16\ql including objectives
that relate to the timing and terms of any sale or refinancing of a property.\~For
example, the approval of certain of the other investors\plain\cf1\f51\fs16\ql is
required with respect to operating budgets and refinancing, encumbering, expanding
or selling any of these properties. In some instances, our
joint\plain\cf1\f51\fs16\ql venture partners may have competing interests in our
markets that could create conflicts of interest.\~If the objectives of our joint
venture partners are\plain\cf1\f51\fs16\ql inconsistent with our own objectives,
we will not be able to act exclusively in our
interests.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql If one or more of the
investors in any of our jointly owned properties were to experience financial
difficulties, including bankruptcy, insolvency or\plain\cf1\f51\fs16\ql a general
downturn of business, there could be an adverse effect on the relevant property or
properties and in turn, on our financial performance. Should
a\plain\cf1\f51\fs16\ql joint venture partner be declared bankrupt, we could
become liable for our partner\u8217?s share of joint venture
liabilities.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql We may not be able to
recover the mortgage loans we have provided to purchasers of units in our
residential development properties.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In
recent years, we have provided mortgage financing to purchasers of units in our
residential development properties. Before January 2002, our\plain\cf1\f51\fs16\ql
mortgage loans were U.S.\~dollar-denominated and accrued interest at a fixed
interest rate generally ranging from 10% to 15%\~per year and for
terms\plain\cf1\f51\fs16\ql generally ranging from one to fifteen years. However,
on March\~13, 2002, the Central Bank converted all U.S.\~dollar denominated debts
into Peso\plain\cf1\f51\fs16\ql denominated debts at the exchange rate of Ps.1.00
= US$1.00. In addition, the Central Bank imposed maximum interest rates of 3% for
residential\plain\cf1\f51\fs16\ql mortgage loans to individuals and 6% for
mortgage loans to businesses. These regulations adversely affected the U.S.\~dollar
value of our outstanding\plain\cf1\f51\fs16\ql
mortgages.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Beside risks normally
associated with providing mortgage financing, including the risk of default on
principal and interest, other regulatory risks\plain\cf1\f51\fs16\ql such as
suspension of foreclosure enforcement proceedings could adversely affect our cash
flow. Argentine law imposes significant restrictions on our\plain\cf1\f51\fs16\ql
ability to foreclose and auction properties. Thus, when there is a default under a
mortgage, we do not have the right to foreclose on the unit. Instead,
in\plain\cf1\f51\fs16\ql accordance with Law No.\~24,441, in order to reacquire a
property we are required to purchase it at a court ordered public auction, or at an
out-of-court\plain\cf1\f51\fs16\ql auction. However, the Public Emergency Law
temporarily suspended all judicial and non-judicial mortgage and pledge enforcement
actions. Several laws\plain\cf1\f51\fs16\ql and decrees extended this mortgage
foreclosure suspension period. On June\~14, 2006, a new suspension period was
approved, which established a 180-day\plain\cf1\f51\fs16\ql suspension period for
mortgage foreclosure proceedings affecting debtors\u8217? only dwellings and where
the original loan was no higher than\plain\cf1\f51\fs16\ql
Ps.100,000.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 28
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Law No.\~25,798 enacted
November\~5, 2003, and implemented by Decrees No.\~1284/2003 and No.\~352/2004,
among others, sets forth a system to\plain\cf1\f51\fs16\ql restructure delinquent
mortgage payments to prevent foreclosures on a debtor\u8217?s only dwelling (the
\u8220?Mortgage Refinancing System\u8221?).\plain\cf1\f51\fs16\ql The Mortgage
Refinancing System establishes a trust over assets contributed by the Argentine
government and income from restructured mortgage loans.\plain\cf1\f51\fs16\i\ql
Banco de la Naci\u243?n Argentina\plain\cf1\f51\fs16\ql , in its capacity as
trustee of said trust, enters into debt restructuring agreements with delinquent
mortgage debtors\plain\cf1\f51\fs16\ql establishing the following terms: (i)\~a
grace period on the mortgage loan of one year and (ii)\~monthly installment
payments on the mortgage loan not to\plain\cf1\f51\fs16\ql exceed 30% of the
aggregate income of the family living in the mortgaged property. Banco de la
Naci\u243?n Argentina then subrogates the\plain\cf1\f51\fs16\ql mortgagee\u8217?s
rights against the debtor, by issuing notes delivered to the mortgagee to settle
the amounts outstanding on the mortgage loan. The sum\plain\cf1\f51\fs16\ql
restructured under the Mortgage Refinancing System may not exceed the appraisal
value of the property securing the mortgage after deducting any
debts\plain\cf1\f51\fs16\ql for taxes and maintenance. The Mortgage Refinancing
System was established for a limited period of time, during which parties to a
mortgage loan\plain\cf1\f51\fs16\ql agreement could opt to participate in it.
However, it was extended by a number of decrees and
laws.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Law No.\~26,167, enacted in
November, 2006 established a special proceeding to replace ordinary trials
regarding the enforcement of mortgage loans.\plain\cf1\f51\fs16\ql Such special
proceedings give creditors ten days to inform the debtor of the amounts owed to
them and later agree with the debtor on the amount and\plain\cf1\f51\fs16\ql terms
of payment. If the parties fail to reach an agreement, payment conditions are to be
determined by the judge.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We cannot
assure you that laws and regulations relating to foreclosure on real estate will
not continue to change in the future or that any changes\plain\cf1\f51\fs16\ql
will not adversely affect our business, financial condition or result of
operations.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql We are dependent on our
chairman Eduardo Elsztain and certain other senior
managers.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our success depends on the
continued employment of Eduardo S. Elsztain, our chief executive officer, president
and chairman of the board of\plain\cf1\f51\fs16\ql directors, who has significant
expertise and knowledge of our business and industry. The loss of or interruption
in his services for any reason could have\plain\cf1\f51\fs16\ql a material adverse
effect on our business. Our future success also depends in part upon our ability to
attract and retain other highly qualified personnel.\plain\cf1\f51\fs16\ql We
cannot assure you that we will be successful in hiring or retaining qualified
personnel. A failure to hire or retain qualified personnel may have
a\plain\cf1\f51\fs16\ql material adverse effect on our financial condition and
results of operations.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql We may face
potential conflicts of interest relating to our principal
shareholders.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our largest beneficial
owner is Mr.\~Eduardo\~S. Elsztain, through his indirect shareholding through
Cresud. As of November\~30, 2007, such beneficial\plain\cf1\f51\fs16\ql ownership
consisted of: (i)\~199,312,028 shares held by Cresud, (ii)\~7,998,522 shares held
by IFISA, (iii)\~586,000 shares held by Consultores Venture\plain\cf1\f51\fs16\ql
Capital Limited, a stock corporation organized under the laws of Cayman Islands,
(iv)\~1,154,279 held by Dolphin Fund PLC, a limited liability
company\plain\cf1\f51\fs16\ql organized under the laws of Isle of Man and
(v)\~311,367 shares held directly by
Mr.\~Elsztain.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Conflicts of interest
between our management, us and our affiliates may arise in the performance of our
respective business activities. As of\plain\cf1\f51\fs16\ql November\~30, 2007,
Mr.\~Elsztain also beneficially owned (i)\~approximately 31.8% of Cresud\u8217?s
common shares and (ii)\~approximately 62.5% of the\plain\cf1\f51\fs16\ql common
shares of our subsidiary Alto Palermo. Although Mr.\~Elsztain does not have a
majority of our shares, he is our largest shareholder and
exercises\plain\cf1\f51\fs16\ql substantial influence over us. If Mr.\~Elsztain
were considered the beneficial owner of IRSA due to his substantial influence over
us, he would be the\plain\cf1\f51\fs16\ql beneficial owner of 62.5% of our
subsidiary Alto Palermo shares.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We
cannot assure you that our principal shareholders and their affiliates will not
limit or cause us to forego business opportunities that their\plain\cf1\f51\fs16\ql
affiliates may pursue or that the pursuit of other opportunities will be in our
interest.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 29
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Due to the currency mismatches
between our assets and liabilities, we have significant currency
exposure.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As of June\~30, 2007, the
majority of our liabilities, such as our unsecured loan agreement, our Series 3
secured floating rate notes due 2009, our\plain\cf1\f51\fs16\ql 8.5% notes due
2017, Alto Palermo\u8217?s Series I Notes, the mortgage loan to our subsidiary
Hoteles Argentinos S.A., our 8% convertible notes and\plain\cf1\f51\fs16\ql Alto
Palermo\u8217?s convertible notes are denominated in U.S. dollars while our
revenues and most of our assets as of June\~30, 2007 are denominated
in\plain\cf1\f51\fs16\ql Pesos. This currency gap exposes us to a risk of exchange
rate volatility, which would negatively affect our financial results if the dollar
were to\plain\cf1\f51\fs16\ql appreciate against the Peso. Any further
depreciation of the Peso against the U.S. dollar will correspondingly increase the
amount of our debt in Pesos,\plain\cf1\f51\fs16\ql with further adverse effects on
our results of operation and financial condition and may increase the collection
risk of our leases and other receivables\plain\cf1\f51\fs16\ql from our tenants
and mortgage debtors, most of whom have Peso-denominated
revenues.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Risks Relating to our Investment
in Banco Hipotecario\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Our investment
in Banco Hipotecario is subject to risks affecting Argentina\u8217?s financial
system.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As of June\~30, 2007, IRSA owned
11.8% of Banco Hipotecario, which represented 7.3% of IRSA\u8217?s consolidated
assets at such date.\plain\cf1\f51\fs16\ql Substantially all of Banco
Hipotecario\u8217?s operations, properties and customers are located in Argentina.
Accordingly, the quality of its loan portfolio,\plain\cf1\f51\fs16\ql its
financial condition and results of operations depend to a significant extent on
economic and political conditions prevailing in Argentina. The
political\plain\cf1\f51\fs16\ql and economic crisis in Argentina during 2002 and
2003 and the Argentine government\u8217?s actions to address it have had and may
continue to have a\plain\cf1\f51\fs16\ql material adverse effect on Banco
Hipotecario\u8217?s business, financial condition and results of
operations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Financial institutions are
subject to significant regulation relating to functions that historically have been
mandated by the Central Bank and other\plain\cf1\f51\fs16\ql regulatory
authorities. Measures adopted by the Central Bank have had, and future regulations
may have, a material adverse effect on Banco\plain\cf1\f51\fs16\ql
Hipotecario\u8217?s financial condition and results of
operations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On July\~25, 2003, the
Central Bank announced its intention to adopt new capital adequacy requirements
that it will implement gradually through to\plain\cf1\f51\fs16\ql 2009. In
addition, the IMF and other multilateral agencies encouraged the Argentine
government to impose minimum capital adequacy, solvency and\plain\cf1\f51\fs16\ql
liquidity requirements consistent with international standards, which could impose
material operating restrictions on Banco
Hipotecario.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Laws and decrees
implemented during the economic crisis in 2001 and 2002 have substantially altered
contractual obligations affecting\plain\cf1\f51\fs16\ql Argentina\u8217?s
financial sector. Recently, the Argentine Congress has considered various
initiatives intended to reduce or eliminate a portion of the\plain\cf1\f51\fs16\ql
mortgage loan portfolio on the debt owed to Banco Hipotecario. Also, there have
been certain initiatives intended to review the terms pursuant to
which\plain\cf1\f51\fs16\ql Banco Hipotecario was privatized. As a result, we
cannot assure you that the Argentine legislature will not enact new laws that will
have a significant\plain\cf1\f51\fs16\ql adverse effect on Banco
Hipotecario\u8217?s shareholders\u8217? equity or that the Argentine government
would compensate Banco Hipotecario for the\plain\cf1\f51\fs16\ql resulting loss.
These uncertainties could have a material adverse effect on the value of our
investment in Banco Hipotecario.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql
Banco Hipotecario relies heavily on mortgage lending, and the value of our
investment in it depends in part on its ability to
implement\plain\cf1\f51\fs16\b\i\ql successfully its new business diversification
strategy.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Historically, Banco Hipotecario
has been engaged exclusively in mortgage lending and related activities. As a
result, factors having an adverse effect\plain\cf1\f51\fs16\ql on the mortgage
market have a greater adverse impact on Banco Hipotecario than on its more
diversified competitors. Due to its historic concentration in\plain\cf1\f51\fs16\ql
this recession-sensitive sector, Banco Hipotecario is particularly vulnerable to
adverse changes in economic and market conditions in Argentina due
to\plain\cf1\f51\fs16\ql their adverse effect on (i)\~demand for new mortgage
loans and (ii)\~the asset quality of outstanding mortgage loans.\~The last economic
crisis had a material\plain\cf1\f51\fs16\ql adverse effect on its liquidity,
financial\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 30
\
conditions and results of operations. In addition, a number of governmental
measures that apply to the financial sector have had a material adverse
effect\plain\cf1\f51\fs16\ql particularly on Banco Hipotecario, impairing its
financial condition.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In light of the
economic conditions in Argentina for the foreseeable future, Banco Hipotecario
cannot rely exclusively on mortgage lending and\plain\cf1\f51\fs16\ql related
services. Accordingly, Banco Hipotecario has adapted its business strategy to
confront the challenges of these new market conditions. Banco\plain\cf1\f51\fs16\ql
Hipotecario\u8217?s ability to diversify its operation will depend on how
successfully it diversifies its product offerings and transforms itself into
a\plain\cf1\f51\fs16\ql financial institution that no longer relies solely on
mortgage lending.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In the past years
Banco Hipotecario has made several investments that are designed to enable it to
develop retail banking activities. Banco\plain\cf1\f51\fs16\ql Hipotecario must
overcome significant challenges to achieve this goal including, among others, its
lack of experience and client relationships outside the\plain\cf1\f51\fs16\ql
mortgage sector, the existence of large, well-positioned competitors and
significant political, regulatory and economic uncertainties in Argentina. As
a\plain\cf1\f51\fs16\ql result, we cannot give you any assurance that Banco
Hipotecario will be successful in developing significant retail banking activities
in the foreseeable\plain\cf1\f51\fs16\ql future, if at all. If Banco Hipotecario
is unable to diversify its operations by developing its retail banking activities
and other non-mortgage banking\plain\cf1\f51\fs16\ql activities, the value of our
substantial investment in Banco Hipotecario would likely be materially and
adversely affected.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Banco
Hipotecario\u8217?s mortgage loan portfolio is not adequately indexed for inflation
and any significant increase in inflation could have a\plain\cf1\f51\fs16\b\i\ql
material adverse effect on its financial
condition.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In accordance with Emergency
Decree No.\~214/02 and its implementing regulations, pesified assets and
liabilities were adjusted for inflation as of\plain\cf1\f51\fs16\ql February\~3,
2002 by application of the\plain\cf1\f51\fs16\i\ql Coeficiente de
Estabilizaci\u243?n de Referencia\plain\cf1\f51\fs16\ql , or CER, a consumer price
inflation coefficient. On May\~6, 2002,\plain\cf1\f51\fs16\ql the Executive Branch
issued a decree providing that mortgages originally denominated in U.S. dollars and
converted into Pesos pursuant to Decree\plain\cf1\f51\fs16\ql No.\~214/2002 and
mortgages on property constituting a borrower\u8217?s sole family residence may be
adjusted for inflation only pursuant to a coefficient\plain\cf1\f51\fs16\ql based
on salary variation, the CVS, which during 2002 was significantly less than
inflation as measured by the wholesale price index, or WPI.
Through\plain\cf1\f51\fs16\ql December\~31, 2002, the WPI and the CVS posted
cumulative increases of 118.2% and 0.2%, respectively, and the CER increased 41.4%.
During 2003,\plain\cf1\f51\fs16\ql inflation rose by 4.3% as measured by the WPI,
3.7% as measured by the CER and 15.8% as measured by the CVS. As a result, only 10%
of Banco\plain\cf1\f51\fs16\ql Hipotecario\u8217?s mortgage loans are adjusted for
inflation in accordance with the CER, 30% are adjusted in accordance with the CVS
and 60% remain\plain\cf1\f51\fs16\ql entirely unindexed. Additionally, pursuant to
Law No.\~25,796, Section\~1, repealed effective April\~1, 2004, the CVS as an
indexation mechanism applied to\plain\cf1\f51\fs16\ql the relevant portion of
Banco Hipotecario\u8217?s mortgages loans. The CVS increased until it was repealed
by 5.3%, whereas the increase in CER was\plain\cf1\f51\fs16\ql 5.5% as of
December\~31, 2004 and the WPI increased by 7.9%. During 2005 the CER was 11.75%
and the WPI 10.7%, while in 2006 the CER and WPI\plain\cf1\f51\fs16\ql increased
by 10.3% and 7.1%, respectively.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Argentina\u8217?s history prior to the adoption of the Convertibility Law raises
serious doubts as to the ability of the Argentine government
to\plain\cf1\f51\fs16\ql maintain a strict monetary policy and control inflation.
As a result of the high inflation in Argentina from 2002 onwards, Banco
Hipotecario\u8217?s\plain\cf1\f51\fs16\ql mortgage loan portfolio experienced a
significant decrease in value and if inflation were to increase significantly once
again, it might continue to undergo\plain\cf1\f51\fs16\ql a major decrease in
value. Accordingly, an increase in Banco Hipotecario\u8217?s funding and other
costs due to inflation might not be offset by\plain\cf1\f51\fs16\ql indexation,
which could adversely affect its liquidity and results of
operations.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Legislation limiting
Banco Hipotecario\u8217?s ability to foreclose on mortgaged collateral may have an
adverse effect on it.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Like other mortgage
lenders, the ability to foreclose on mortgaged collateral to recover on delinquent
mortgage loans impacts the conduct of Banco\plain\cf1\f51\fs16\ql
Hipotecario\u8217?s business. In February 2002, the Argentine government amended
Argentina\u8217?s Bankruptcy Law, suspending bankruptcies and\plain\cf1\f51\fs16\ql
foreclosures on real estate that constitutes the debtor\u8217?s primary residence,
initially for a six-month period and subsequently extended
until\plain\cf1\f51\fs16\ql November\~14, 2002. Since 2003, the Argentine
government has approved various laws that have suspended, in some cases,
foreclosures for a period of\plain\cf1\f51\fs16\ql time in accordance with Law
No.\~25,972 enacted on December\~18, 2004,\par\pard\plain\cf1\f51\fs13\ql
\
and, in some cases, temporarily suspended all judicial and non-judicial mortgage
and pledge enforcement actions. Several laws and decrees extended
this\plain\cf1\f51\fs16\ql mortgage foreclosure suspension period. Most recently,
on June\~14, 2006, Argentine Law 26,103 was enacted which established a 180-day
suspension\plain\cf1\f51\fs16\ql period for mortgage foreclosure proceedings
affecting debtors where the subject mortgage related to the debtor\u8217?s sole
residence and where the\plain\cf1\f51\fs16\ql original loan was not greater than
Ps.100,000.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Law No.\~25,798, enacted
November\~5, 2003, and implemented by Decrees No.\~1284/2003 and No.\~352/2004,
among others, sets forth a system to\plain\cf1\f51\fs16\ql restructure delinquent
mortgage payments to prevent foreclosures on a debtor\u8217?s sole residence
(the \u8220?Mortgage Refinancing System\u8221?).\plain\cf1\f51\fs16\ql The
Mortgage Refinancing System establishes a trust composed of assets contributed by
the Argentine government and income from restructured
mortgage\plain\cf1\f51\fs16\ql loans.\plain\cf1\f51\fs16\i\ql Banco de la
Naci\u243?n Argentina\plain\cf1\f51\fs16\ql , in its capacity as trustee of said
trust, enters into debt restructuring agreements with delinquent
mortgage\plain\cf1\f51\fs16\ql debtors establishing the following terms: (i)\~a
grace period on the mortgage loan of one year and (ii)\~monthly installment
payments on the mortgage loan\plain\cf1\f51\fs16\ql not to exceed 30% of the
aggregate income of the family living in the mortgaged
property.\plain\cf1\f51\fs16\i\ql Banco de la Naci\u243?n
Argentina\plain\cf1\f51\fs16\ql then subrogates the\plain\cf1\f51\fs16\ql
mortgagee\u8217?s rights against the debtor, by issuing notes delivered to the
mortgagee to settle the amounts outstanding on the mortgage loan. The
sum\plain\cf1\f51\fs16\ql restructured under the Mortgage Refinancing System may
not exceed the appraisal value of the property securing the mortgage after
deducting any debts\plain\cf1\f51\fs16\ql for taxes and maintenance. The Mortgage
Refinancing System was established for a limited period of time, during which
parties to mortgage loan\plain\cf1\f51\fs16\ql agreements could opt to participate
and was subsequently extended by a number of decrees and
laws.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Law No.\~26,167 enacted on
November\~29, 2006, suspended foreclosures and also established a special
proceeding for the enforcement of certain\plain\cf1\f51\fs16\ql mortgage loans.
Such special proceedings give creditors a 10-day period to inform the court of the
amounts owed under the mortgage loan. Soon\plain\cf1\f51\fs16\ql thereafter, the
judge will call the parties for a hearing in order to reach an agreement on the
amount and terms of payment thereunder. In case of failure\plain\cf1\f51\fs16\ql
by the parties to reach such agreement, they will have a 30-day negotiation period,
and if the negotiations do not result in an agreement, then,
payment\plain\cf1\f51\fs16\ql and conditions will be determined by the
courts.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On November\~29, 2006, Law
No.\~26,177 created the\plain\cf1\f51\fs16\i\ql Unidad de Reestructuraci\u243?
n\plain\cf1\f51\fs16\ql , a government agency responsible for the revision of each
of\plain\cf1\f51\fs16\ql the mortgage loans granted by the state-owned Banco
Hipotecario Nacional, the predecessor of Banco Hipotecario, before the enactment of
the\plain\cf1\f51\fs16\ql Convertibility Law in 1991. The\plain\cf1\f51\fs16\i\ql
Unidad de Reestructuraci\u243?n\plain\cf1\f51\fs16\ql also makes non-binding
recommendations to facilitate the restructuring of such\plain\cf1\f51\fs16\ql
mortgage loans. If no agreement is reached, the\plain\cf1\f51\fs16\i\ql Unidad de
Reestructuraci\u243?n\plain\cf1\f51\fs16\ql will submit a proposal to the
National Congress, which may recommend\plain\cf1\f51\fs16\ql forgiveness or other
write-off of such loans, extensions of their scheduled maturities or other
subsidies that adversely affect Banco Hipotecario\u8217?s\plain\cf1\f51\fs16\ql
ability to foreclose on such mortgage
loans.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Recently enacted Law No.\~26,313
established mandatory restructuring of certain mortgage loans granted by the former
Banco Hipotecario Nacional\plain\cf1\f51\fs16\ql prior to April\~1, 1991. The
language of the law is to a certain degree unclear as concern its scope of
application. Neither the Ministry of Economy nor the\plain\cf1\f51\fs16\ql Central
Bank have issued corresponding regulations explaining the application of the law as
yet. Banco Hipotecario\u8217?s management interpretation is\plain\cf1\f51\fs16\ql
that the law only applies to non-performing mortgage loans granted before April\~1,
1991, which were already restructured according to former\plain\cf1\f51\fs16\ql
regulations.\~However, although we regard the following scenario as unlikely, if
the regulations to be issued under the law were to interpret or provide
that\plain\cf1\f51\fs16\ql that the new recalculation is applicable to all
mortgage loans granted prior to April\~1, 1991, including performing
loans,\~depending on the way in which\plain\cf1\f51\fs16\ql such regulations were
made, Banco Hipotecario S.A., as legal successor to the former Banco Hipotecario
Nacional, might suffer a material financial loss\plain\cf1\f51\fs16\ql to the
extent that the law has not contemplated the payment of any damages or compensation
to the Bank in such regard.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We cannot
assure you that the Argentine government will not enact further new laws
restricting Banco Hipotecario\u8217?s ability to enforce its\plain\cf1\f51\fs16\ql
rights as creditors. Any such limitation on its ability to successfully implement
foreclosures could have a material adverse effect on its financial
condition\plain\cf1\f51\fs16\ql and results of
operations.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 32
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\b\i\ql Banco Hipotecario\u8217?s non-
mortgage loan portfolio has grown rapidly and is concentrated in the low- and
middle-income segments.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As a result of
Banco Hipotecario\u8217?s strategy to diversify its banking operations and develop
retail and other non-mortgage banking activities,\plain\cf1\f51\fs16\ql in recent
years its portfolio of non-mortgage loans has grown rapidly. During the period
between December\~31, 2004 and June\~30, 2007, Banco\plain\cf1\f51\fs16\ql
Hipotecario\u8217?s portfolio of non-mortgage loans grew 799.3% from Ps.232.2
million to Ps.1,855.9 million. A very substantial portion of its
portfolio\plain\cf1\f51\fs16\ql of non-mortgage loans consists of loans to low-
and middle-income individuals and, to a lesser extent, middle-market companies.
These individuals and\plain\cf1\f51\fs16\ql companies are likely to be more
seriously affected by adverse developments in the Argentine economy than high
income individuals and large\plain\cf1\f51\fs16\ql corporations. Consequently, in
the future Banco Hipotecario may experience higher levels of past due non-mortgage
loans that would likely result in\plain\cf1\f51\fs16\ql increased provisions for
loan losses. In addition, large-scale lending to low- and middle-income individuals
and middle-market companies is a new\plain\cf1\f51\fs16\ql business activity for
Banco Hipotecario, and as a result its experience and loan-loss data for such loans
are necessarily limited. Therefore, we cannot\plain\cf1\f51\fs16\ql assure you
that the levels of past due non-mortgage loans and resulting charge-offs will not
increase materially in the future.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql
Given the current valuation criteria of the Central Bank for the recording of BODEN
and other public securities on Banco Hipotecario\u8217?s\plain\cf1\f51\fs16\b\i\ql
balance sheets, its most recent financial statements may not be indicative of its
current financial condition.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco
Hipotecario prepares its financial statements in accordance with Central Bank
accounting rules which differ in certain material respects
from\plain\cf1\f51\fs16\ql Argentine GAAP. During 2002, Central Bank accounting
rules were modified in several respects that materially increased certain
discrepancies between\plain\cf1\f51\fs16\ql Central Bank accounting rules and
Argentine GAAP. In accordance with Central Bank accounting rules, Banco
Hipotecario\u8217?s consolidated balance\plain\cf1\f51\fs16\ql sheet as of
June\~30, 2007 includes US$816.6 million of BODEN issued by the Argentine
government as compensation for pesification, as well as US$\plain\cf1\f51\fs16\ql
84.4\~million representing its right to acquire additional BODEN. Banco
Hipotecario\u8217?s consolidated balance sheet at June\~30, 2007 also
includes\plain\cf1\f51\fs16\ql Ps.218.0 million representing Central Bank
borrowings which Banco Hipotecario incurred to finance its acquisition of the
additional BODEN. Also, since\plain\cf1\f51\fs16\ql September\~30, 2005 Banco
Hipotecario has subscribed BODEN 2012 for US$773.5 million and reduced Central Bank
borrowings for Ps.1,844.0 million.\plain\cf1\f51\fs16\ql Additionally, its most
recent consolidated annual income statements include the accrual of interest to be
received on BODEN not yet received and interest\plain\cf1\f51\fs16\ql to be paid
adjusted by CER on Central Bank
borrowings.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In accordance with Central
Bank accounting rules, the BODEN reflected on its consolidated balance sheets as of
June\~30, 2007 have been recorded\plain\cf1\f51\fs16\ql at 100% of face value.
However, the BODEN are unsecured debt obligations of the Argentine government,
which has defaulted on a significant portion of\plain\cf1\f51\fs16\ql its
indebtedness although the government is current in respect of payments due on the
BODEN and has restructured a substantial portion of its
sovereign\plain\cf1\f51\fs16\ql debt. As of June\~30, 2007, the BODEN were not
rated and were trading in the secondary market at a price of approximately US$97.20
for every US$100\plain\cf1\f51\fs16\ql of outstanding value. Carrying BODEN at a
value equal to their full face value, which is in excess of their current market
value, has the effect of\plain\cf1\f51\fs16\ql increasing Banco Hipotecario\u8217?
s total assets recorded on its consolidated balance sheet. In this important
respect, its most recent consolidated audited\plain\cf1\f51\fs16\ql annual
financial statements are not comparable to its historic financial statements and
have been prepared according to accounting principles that
differ\plain\cf1\f51\fs16\ql materially from Argentine
GAAP.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Due to interest rate and
currency mismatches of its assets and liabilities, Banco Hipotecario has
significant currency exposure.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As of
June\~30, 2007, Banco Hipotecario\u8217?s foreign currency-denominated liabilities
exceeded its foreign currency denominated assets by\plain\cf1\f51\fs16\ql
approximately US$118 million. Substantially all of Banco Hipotecario\u8217?s
foreign currency assets consist of dollar-denominated BODEN, but
Banco\plain\cf1\f51\fs16\ql Hipotecario\u8217?s liabilities in foreign currencies
are denominated in both U.S. Dollars and Euros. This currency gap exposes Banco
Hipotecario to risk\plain\cf1\f51\fs16\ql of exchange rate volatility which would
negatively affect Banco Hipotecario\u8217?s financial results if the U.S.\~Dollar
were to depreciate against the\plain\cf1\f51\fs16\ql Peso and/or the Euro. We
cannot assure you that the U.S.\~Dollar will not appreciate against the Peso, or
that we will not be adversely affected by Banco\plain\cf1\f51\fs16\ql
Hipotecario\u8217?s exposure to risks of exchange rate
fluctuations.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 33
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\b\i\ql Because of its large holdings of
BODEN and guaranteed government loans, Banco Hipotecario has significant exposure
to the Argentine public\plain\cf1\f51\fs16\b\i\ql
sector.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On December\~23, 2001, the
Argentine government declared the suspension of payments on most of its sovereign
debt, which as of December\~31,\plain\cf1\f51\fs16\ql 2001, totaled approximately
US$144.5 billion, a substantial portion of which was restructured by the issuance
of new bonds in the middle of 2005.\plain\cf1\f51\fs16\ql Additionally, the
Argentine government has incurred, and is expected to continue to incur,
significant new debt obligations, including the issuance of\plain\cf1\f51\fs16\ql
compensatory bonds to financial institutions. As of June\~30, 2007 Banco
Hipotecario had a total of US$901.1 million of BODEN issued by the
Argentine\plain\cf1\f51\fs16\ql Government. At that same date, Banco Hipotecario
also had a total of approximately US$0.2 million of guaranteed government loans.
Given Banco\plain\cf1\f51\fs16\ql Hipotecario\u8217?s BODEN holdings, Banco
Hipotecario has a significant exposure to the Argentine government\u8217?s
solvency. Further, defaults by\plain\cf1\f51\fs16\ql the Argentine government on
its debt obligations, including the BODEN and other government securities (such as
the guaranteed government loans) held\plain\cf1\f51\fs16\ql by Banco Hipotecario,
would materially and adversely affect its financial condition which would in turn
affect our investment.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Banco
Hipotecario operates in a highly regulated environment, and its operations are
subject to regulations adopted, and measures taken, by
the\plain\cf1\f51\fs16\b\i\ql Central Bank, the Comisi\u243?n Nacional de Valores
and other regulatory agencies.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Financial
institutions are subject to significant regulation relating to functions that
historically have been mandated by the Central Bank and other\plain\cf1\f51\fs16\ql
regulatory authorities. Measures adopted by the Central Bank have had, and future
regulations may have, a material adverse effect on Banco\plain\cf1\f51\fs16\ql
Hipotecario\u8217?s financial condition and results of operations. For example, on
July\~25, 2003, the Central Bank announced its intention to adopt
new\plain\cf1\f51\fs16\ql capital adequacy requirements that it will implement
gradually through to 2009. In addition, the IMF and other multilateral agencies
encouraged the\plain\cf1\f51\fs16\ql Argentine Government to impose minimum
capital adequacy, solvency and liquidity requirements consistent with international
standards, which could\plain\cf1\f51\fs16\ql impose material operating
restrictions on Banco Hipotecario.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Similarly, the\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\cf1\f51\fs16\ql , which authorizes Banco Hipotecario\u8217?s
offerings of securities and regulates the public\plain\cf1\f51\fs16\ql markets in
Argentina, has the authority to impose sanctions on Banco Hipotecario and its board
of directors for breaches of corporate governance. Under\plain\cf1\f51\fs16\ql
applicable law, the\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\cf1\f51\fs16\ql has the authority to impose penalties that range
from minor regulatory enforcement sanctions to\plain\cf1\f51\fs16\ql significant
monetary fines, to disqualification of directors from performing board functions
for a period of time, and (in an extreme case) prohibiting\plain\cf1\f51\fs16\ql
issuers from making public offerings, if they were to determine that there was
wrongdoing or material violation of law. Although Banco Hipotecario is
not\plain\cf1\f51\fs16\ql currently party to any proceeding before
Valores\plain\cf1\f51\fs16\ql , we cannot assure you that
Valores\plain\cf1\f51\fs16\ql will\plain\cf1\f51\fs16\ql not initiate new
proceedings against Banco Hipotecario, its shareholder or directors or impose
further sanctions.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Commencing in early
2002, laws and decrees have been implemented that have substantially altered the
prevailing legal regime and obligations\plain\cf1\f51\fs16\ql established in
contract. In the recent past, various initiatives have been presented to Congress
intended to reduce or eliminate the debt owed to Banco\plain\cf1\f51\fs16\ql
Hipotecario on a portion of its mortgage loan portfolio and there were initiatives
intended to review the terms pursuant to which Banco
Hipotecario\plain\cf1\f51\fs16\ql Nacional was privatized. As a result, we cannot
assure you that the legislative branch will not enact new laws that will have a
significant adverse impact\plain\cf1\f51\fs16\ql on Banco Hipotecario\u8217?s
shareholders\u8217? equity or that, if this were to occur, the Argentine government
would compensate us for the resulting\plain\cf1\f51\fs16\ql
loss.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql The Argentine government may
prevail in all matters to be decided at a Banco Hipotecario\u8217?s general
shareholders meeting.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql According to the
Privatization Law and Banco Hipotecario\u8217?s by-laws, holders of Class\~A and
Class D Shares have special voting rights\plain\cf1\f51\fs16\ql relating to
certain corporate decisions. Whenever such special rights do not apply (with
respect to the Class\~A Shares and the Class D Shares) and in
all\plain\cf1\f51\fs16\ql cases (with respect to the Class
B\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 34
\
Shares and the Class C Shares), each share of common shares entitles the holder to
one vote. Pursuant to Argentine regulations, Banco Hipotecario
may\plain\cf1\f51\fs16\ql not issue new shares with multiple
votes.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The holders of Class D Shares
have the right to elect nine of Banco Hipotecario\u8217?s board members and their
respective alternates. In addition,\plain\cf1\f51\fs16\ql for so long as Class\~A
Shares represent more than 42.0% of Banco Hipotecario\u8217?s capital, the Class D
Shares shall be entitled to three votes per\plain\cf1\f51\fs16\ql share, provided
that holders of Class D Shares will be entitled to only one vote per share in the
case of a vote on:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql a fundamental change in
Banco Hipotecario\u8217?s corporate
purpose;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql a change in Banco
Hipotecario\u8217?s domicile outside of
Argentina;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql dissolution prior to the
expiration of Banco Hipotecario\u8217?s corporate
existence;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql a merger or spin-off after
which Banco Hipotecario would not be the surviving
corporation;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql a total or partial
recapitalization following a mandatory reduction of capital;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql approval of voluntary reserves, other
than legally mandated reserves, when their amount exceeds Banco Hipotecario\u8217?s
capital stock and\plain\cf1\f51\fs16\ql it\u8217?s legally mandated
reserves.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In addition, irrespective of
what percentage of Banco Hipotecario\u8217?s outstanding capital stock is
represented by Class\~A Shares, the affirmative\plain\cf1\f51\fs16\ql vote of the
holders of Class\~A Shares is required to adopt certain decisions. Class D Shares
will not be converted into Class\~A Shares, Class B Shares or\plain\cf1\f51\fs16\ql
Class C Shares by virtue of their reacquisition by the Argentine government, PPP or
Programa de Propiedad Participada (the Shared Property
Program)\plain\cf1\f51\fs16\ql participants or companies engaged in housing
development or real estate activities.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
According to the Privatization Law, there are no restrictions on the ability of the
Argentine government to dispose of its Class\~A shares, and all
but\plain\cf1\f51\fs16\ql one of such shares could be sold to third parties in a
public offering. If the Class\~A shares represent less than 42% of Banco
Hipotecario\u8217?s total\plain\cf1\f51\fs16\ql voting stock as a result of the
issuance of new shares other than Class\~A shares, or otherwise the Class D shares
IRSA holds will automatically lose their\plain\cf1\f51\fs16\ql triple voting
rights. If this were to occur, we would likely lose ours current ability, together
with our affiliates that also hold Class D shares of Banco\plain\cf1\f51\fs16\ql
Hipotecario, to exercise substantial influence over decisions submitted to the vote
of Banco Hipotecario\u8217?s
shareholders.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Banco Hipotecario will
continue to consider acquisition opportunities which may not be
successful.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql From time to time in recent
years, Banco Hipotecario has considered certain possible acquisitions or business
combinations, and Banco Hipotecario\plain\cf1\f51\fs16\ql expects to continue
considering acquisitions that it believe offer attractive opportunities and are
consistent with its business strategy. We cannot assure\plain\cf1\f51\fs16\ql you,
however, that Banco Hipotecario will be able to identify suitable acquisition
candidates or that Banco Hipotecario will be able to acquire
promising\plain\cf1\f51\fs16\ql target financial institutions on favorable terms.
Additionally, its ability to obtain the desired effects of such acquisitions will
depend in part on its ability\plain\cf1\f51\fs16\ql to successfully complete the
integration of those businesses. The integration of acquired businesses entails
significant risks, including:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql unforeseen
difficulties in integrating operations and
systems;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql problems assimilating or
retaining the employees of acquired
businesses;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql challenges retaining customers
of acquired businesses;\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\ql unexpected liabilities or
contingencies relating to the acquired businesses;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the possibility that management may be
distracted from day-to-day business concerns by integration activities and related
problem solving.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Risks Related to the Global
Depositary Shares and the Shares\par\pard\plain\li88\sb88\cf1\f51\fs16\b\i\ql
Shares eligible for sale could adversely affect the price of our common shares and
Global Depositary Shares.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The market
prices of our common shares and GDS could decline as a result of sales by our
existing shareholders of common shares or GDSs in the\plain\cf1\f51\fs16\ql
market, or the perception that these sales could occur. These sales also might make
it difficult for us to sell equity securities in the future at a time and
at\plain\cf1\f51\fs16\ql a price that we deem
appropriate.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The GDSs are freely
transferable under US securities laws, including shares sold to our affiliates.
Cresud, which as of November\~30, 2007, owned\plain\cf1\f51\fs16\ql approximately
34.4% of our common shares (or approximately 199,312,028 common shares which may be
exchanged for an aggregate of 19,931,202\plain\cf1\f51\fs16\ql GDSs), is free to
dispose of any or all of its common shares or GDSs at any time in its discretion.
Sales of a large number of our common shares and/or\plain\cf1\f51\fs16\ql GDSs
would likely have an adverse effect on the market price of our common shares and
the GDS.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql We are subject to certain
different corporate disclosure requirements and accounting standards than domestic
issuers of listed securities in the\plain\cf1\f51\fs16\b\i\ql United
States.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql There is less publicly available
information about the issuers of securities listed on the\plain\cf1\f51\fs16\i\ql
Bolsa de Comercio de Buenos Aires\plain\cf1\f51\fs16\ql than
information\plain\cf1\f51\fs16\ql publicly available about domestic issuers of
listed securities in the United States and certain other countries. In addition,
all listed Argentine companies\plain\cf1\f51\fs16\ql must prepare their financial
statements in accordance with Argentine GAAP and the regulations of
Valores\plain\cf1\f51\fs16\ql which differ in\plain\cf1\f51\fs16\ql certain
significant respects from U.S. GAAP. For this and other reasons, the presentation
of Argentine financial statements and reported earnings may\plain\cf1\f51\fs16\ql
differ from that of companies in other countries in this and other
respects.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We are exempted from the rules
under the Exchange Act prescribing the furnishing and content of proxy statements,
and our officers, directors and\plain\cf1\f51\fs16\ql principal shareholders are
exempted from the reporting and short-swing profit recovery provisions contained in
Section\~16 of the Exchange Act.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql
Investors may not be able to effect service of process within the U.S. limiting
their recovery of any foreign judgment.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
We are a publicly held corporation (\plain\cf1\f51\fs16\i\ql sociedad an\u243?
nima\plain\cf1\f51\fs16\ql ) organized under the laws of Argentina. Most of our
directors and our senior managers,\plain\cf1\f51\fs16\ql and most of our assets
are located in Argentina. As a result, it may not be possible for investors to
effect service of process within the United States upon\plain\cf1\f51\fs16\ql us
or such persons or to enforce against us or them, in United States courts,
judgments obtained in such courts predicated upon the civil
liability\plain\cf1\f51\fs16\ql provisions of the United States federal securities
laws. We have been advised by our Argentine counsel, Zang, Bergel\~& Vi\u241?es,
that there is doubt as\plain\cf1\f51\fs16\ql to whether the Argentine courts will
enforce to the same extent and in as timely a manner as a US or foreign court, an
action predicated solely upon the\plain\cf1\f51\fs16\ql civil liability provisions
of the United States federal securities laws or other foreign regulations brought
against such persons or against us.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\b\i\ql If we are considered to be a
passive foreign investment company for United States federal income tax purposes,
U.S. holders of our equity\plain\cf1\f51\fs16\b\i\ql securities would suffer
negative consequences.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Based on the
current and projected composition of our income and the valuation of our assets,
including goodwill, we do not believe we were a\plain\cf1\f51\fs16\ql passive
foreign investment company (\u8220?PFIC\u8221?) for United States federal income
tax purposes for the taxable year ending June\~30, 2007, and\plain\cf1\f51\fs16\ql
we do not currently expect to become a PFIC, although there can be no assurance in
this regard. The determination of whether we are a PFIC is
made\plain\cf1\f51\fs16\ql annually. Accordingly, it is possible that we may be a
PFIC in the current or any future taxable year due to changes in our asset or
income composition\plain\cf1\f51\fs16\ql or if our projections are not accurate.
The volatility and instability of Argentina\u8217?s economic and financial system
may substantially affect the\plain\cf1\f51\fs16\ql composition of our income and
assets and the accuracy of our projections. If we become a PFIC, U.S. holders of
our equity securities will be subject to\plain\cf1\f51\fs16\ql certain United
States federal income tax rules that have negative consequences for U.S. holders
such as additional tax and an interest charge upon certain\plain\cf1\f51\fs16\ql
distributions by us or upon a sale or other disposition of our equity securities at
a gain, as well as additional reporting requirements. See \u8220?
Taxation\plain\cf1\f51\fs16\ql \u8211? Certain United States Federal Income Tax
Consequences \u8211? Passive Foreign Investment Company\u8221? for a more detailed
discussion of\plain\cf1\f51\fs16\ql the consequences if we are deemed a PFIC. You
should consult your own tax advisors regarding the application of the PFIC rules to
your particular\plain\cf1\f51\fs16\ql
circumstances.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Under Argentine law,
shareholder rights may be fewer or less well defined than in other
jurisdictions.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our corporate affairs are
governed by our by-laws and by Argentine corporate law, which differ from the legal
principles that would apply if we\plain\cf1\f51\fs16\ql were incorporated in a
jurisdiction in the United States, such as the States of Delaware or New York, or
in other jurisdictions outside Argentina. In\plain\cf1\f51\fs16\ql addition, your
rights or the rights of holders of our common shares to protect your or their
interests in connection with actions by our board of
directors\plain\cf1\f51\fs16\ql may be fewer and less well defined under Argentine
corporate law than under the laws of those other jurisdictions. Although insider
trading and price\plain\cf1\f51\fs16\ql manipulation are illegal under Argentine
law, the Argentine securities markets are not as highly regulated or supervised as
the US securities markets or\plain\cf1\f51\fs16\ql markets in some other
jurisdictions. In addition, rules and policies against self\u8211?dealing and
regarding the preservation of shareholder interests may\plain\cf1\f51\fs16\ql be
less well defined and enforced in Argentina than in the United States, putting
holders of our common shares and GDSs at a potential
disadvantage.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql The protections
afforded to minority shareholders in Argentina are different from and more limited
than those in the United States and may be\plain\cf1\f51\fs16\b\i\ql more
difficult to enforce.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Under Argentine
law, the protections afforded to minority shareholders are different from, and much
more limited than, those in the United States\plain\cf1\f51\fs16\ql and some other
Latin American countries. For example, the legal framework with respect to
shareholder disputes, such as derivative lawsuits and class\plain\cf1\f51\fs16\ql
actions, is less developed under Argentine law than under U.S. law as a result of
Argentina\u8217?s short history with these types of claims and
few\plain\cf1\f51\fs16\ql successful cases. In addition, there are different
procedural requirements for bringing these types of shareholder lawsuits. As a
result, it may be more\plain\cf1\f51\fs16\ql difficult for our minority
shareholders to enforce their rights against us or our directors or controlling
shareholder than it would be for shareholders of a\plain\cf1\f51\fs16\ql US
company.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql Holders of common shares may
determine to not pay any dividends.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In
accordance with Argentine corporate law we may pay dividends to shareholders out of
net and realized profits, if any, as set forth in our audited\plain\cf1\f51\fs16\ql
financial statements prepared in accordance with Argentine GAAP. The approval,
amount and payment of dividends are subject to the approval by
our\plain\cf1\f51\fs16\ql shareholders at our annual ordinary shareholders
meeting. The approval of dividends requires the affirmative vote of a majority of
the shareholders entitled\plain\cf1\f51\fs16\ql to vote at the meeting. As a
result, we cannot assure you that we will be able to generate enough net and
realized profits so as to pay dividends or that\plain\cf1\f51\fs16\ql our
shareholders will decide that dividends will be
paid.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 37
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\b\i\ql Our ability to pay dividends is
limited by law, by our by-laws and by certain restrictive covenants in our debt
instruments.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In accordance with Argentine
corporate law, we may pay dividends in Pesos only out of retained earnings, if any,
to the extent set forth in our\plain\cf1\f51\fs16\ql audited financial statements
prepared in accordance with Argentine GAAP. In addition, our ability to pay
dividends on our common shares is limited by\plain\cf1\f51\fs16\ql certain
restrictive covenants in our debt
instruments.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On February\~2, 2007, we
issued our 8.5% notes due 2017 in an aggregate principal amount of US$150.0
million. These bonds contain a covenant\plain\cf1\f51\fs16\ql limiting our ability
to pay dividends which may not exceed the sum
of:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql 50% of our cumulative consolidated net
income; or\par\pard\plain\li88\sb88\cf1\f51\fs16\ql 75% of our cumulative
consolidated net income if our consolidated interest coverage ratio for our most
recent four consecutive fiscal quarters is at\plain\cf1\f51\fs16\ql least 3.0 to
1; or\par\pard\plain\li88\sb88\cf1\f51\fs16\ql 100% of cumulative consolidated net
income if our consolidated interest coverage ratio for our most recent four
consecutive fiscal quarters is at\plain\cf1\f51\fs16\ql least 4.0 to 1;
or\par\pard\plain\li88\sb88\cf1\f51\fs16\ql 100% of the aggregate net cash proceeds
(with certain exceptions) and the fair market value of property other than cash
received by us or by our\plain\cf1\f51\fs16\ql restricted subsidiaries from
(a)\~any contribution to our equity capital or to the capital stock of our
restricted subsidiaries or issuance and sale of our\plain\cf1\f51\fs16\ql
qualified capital stock or the qualified capital stock of our restricted
subsidiaries subsequent to the issue of our notes due 2017, or (b)\~any
issuance\plain\cf1\f51\fs16\ql and sale subsequent to the issuance of our notes
due 2017, of our indebtedness, or of the indebtedness of our restricted
subsidiaries that has been\plain\cf1\f51\fs16\ql converted into or exchanged for
our qualified capital stock.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As a
result, we cannot give you any assurance that in the future we will pay any
dividends in respect of our common shares.\par\pard\plain\cf1\f51\fs27\ql
\~{\*\bkmkstart item_1_3_8}{\*\bkmkend item_1_3_8}
\par\pard\plain
ITEM\~4.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Information on the Company\cell{
tx46076_13}\pard\plain\sb88\cf1\f51\fs16\b\ql A. History and Development of the
Company\par\pard\plain\sb88\cf1\f51\fs16\b\ql General
Information\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our legal name is IRSA
Inversiones y Representaciones Sociedad An\u243?nima. We were incorporated and
organized on April\~30, 1943 under\plain\cf1\f51\fs16\ql Argentine law as a
sociedad an\u243?nima (stock corporation), and we were registered with the Public
Registry of Commerce of the City of Buenos Aires\plain\cf1\f51\fs16\ql
(\plain\cf1\f51\fs16\i\ql Inspecci\u243?n General de
Justicia\plain\cf1\f51\fs16\ql or \u8220?IGJ\u8221?) on June\~23, 1943 under
number 284, on page 291, book 46 of volume A. Pursuant to our\plain\cf1\f51\fs16\ql
bylaws, our term of duration expires on April\~5, 2043. Our shares are listed and
traded on the Bolsa de Comercio de Buenos Aires and Global
Depositary\plain\cf1\f51\fs16\ql Shares representing our shares are listed on the
New York Stock Exchange. Our principal executive offices are located at Bol\u237?
var 108, Buenos Aires\plain\cf1\f51\fs16\ql (C1066AAD), Argentina. Our
headquarters are located at Moreno 877, (C1091AAQ), Buenos Aires, Argentina. Our
telephone is +54 (11)\~4323-7400, and\plain\cf1\f51\fs16\ql our website is
www.irsa.com. Information contained in or accessible through our website is not a
part of this annual report. All references in this annual\plain\cf1\f51\fs16\ql
report to this or other internet sites are inactive textual references to these
URLs, or \u8220?uniform resource locators\u8221? and are for your
information\plain\cf1\f51\fs16\ql reference only. We assume no responsibility for
the information contained on these sites. Our Depositary Agent for the Global
Depositary Shares in the\plain\cf1\f51\fs16\ql United States is The Bank of New
York whose address is P.O. Box 11258 Church Street Station, New York, New York
10286, and whose telephone is\plain\cf1\f51\fs16\ql +1-610-312-
5315.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 38
\
History\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Since 1991, when our current
management and certain international investors acquired substantially all of our
capital stock, we have been actively\plain\cf1\f51\fs16\ql engaged in diverse real
estate activities in Argentina. Following our global public offering in December
1994, we developed our real estate activities in\plain\cf1\f51\fs16\ql the office
rental market by acquiring three office towers located in prime office zones of
Buenos Aires: Libertador 498, Maip\u250? 1300 and Madero\plain\cf1\f51\fs16\ql
1020.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Since 1996, we have, through our
subsidiary APSA, expanded our real estate activities into the shopping center
segment by acquiring controlling\plain\cf1\f51\fs16\ql interests in ten shopping
centers: Paseo Alcorta, Alto Palermo Shopping, Buenos Aires Design, Alto
Avellaneda, Alto Noa, Abasto Shopping, Patio\plain\cf1\f51\fs16\ql Bullrich,
Mendoza Plaza Shopping, Alto Rosario and C\u243?rdoba Shopping Villa Cabrera. Since
1996, we also entered into the residential real estate\plain\cf1\f51\fs16\ql
market through the development and construction of multi-tower apartment complexes
in the City of Buenos Aires and through the development of\plain\cf1\f51\fs16\ql
private residential communities in greater Buenos
Aires.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In 1997, we entered the hotel
market through the acquisition of a 50% interest in the Llao Llao Hotel near
Bariloche and the Inter-Continental\plain\cf1\f51\fs16\ql Hotel in the City of
Buenos Aires. In 1998, we also acquired the Libertador Hotel in the City of Buenos
Aires and subsequently sold a 20% interest to an\plain\cf1\f51\fs16\ql affiliate
of Sheraton Hotels.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In 2002, we issued
US$100.0 million of convertible notes due November 2007, accruing a 8%\~per annum
interest rate, payable on a semi-annual\plain\cf1\f51\fs16\ql basis. A warrant is
attached to each convertible note and grants its holder an option to acquire
additional shares. As of today, there are no outstanding\plain\cf1\f51\fs16\ql
convertible notes and warrants. As a result of the conversions and exercises our
outstanding capital stock increased to
578,676,460.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql During the 2004 fiscal year
we increased our ownership interest in Banco Hipotecario, reflecting the intention
to maintain the participation in Banco\plain\cf1\f51\fs16\ql Hipotecario as a
long-term investment.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql During the 2005
fiscal year we increased our ownership interest in Mendoza Plaza Shopping S.A. from
68.8% to 85.4% through our subsidiary Alto\plain\cf1\f51\fs16\ql Palermo. We also
opened Alto Rosario Shopping.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The
excellent prospects of the offices business had pushed us to make an important
investment in this segment by acquiring Bouchard 710 on
fiscal\plain\cf1\f51\fs16\ql year 2005, covering 15,014 square meters of rentable
premium surface.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In the 2007 fiscal
year, we consolidated our cash generating rental businesses, consummating various
significant acquisitions in the shopping center\plain\cf1\f51\fs16\ql and office
building business segments.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We purchased
Edificio Bouchard Plaza, also known as Edificio La Naci\u243?n, a 23-floor AAA
office building with a total leaseable area of\plain\cf1\f51\fs16\ql 33,324 sqm.,
located in downtown Buenos Aires. We also purchased Edificio Dock del Plata which
has a gross leaseable area of 7,921 sqm located in the\plain\cf1\f51\fs16\ql
exclusive area of Puerto Madero. With these new purchases, our premium office
leaseable area has increased above 70%, raising our share in this
market\plain\cf1\f51\fs16\ql segment close to 20%. In addition, we suscribed a
purchase option for Edificio Rep\u250?blica, one of the most emblematic buildings
in the City,\plain\cf1\f51\fs16\ql designed by architect C\u233?sar Pelli. This
building has 20 floors and 19,800 sqm. of gross leaseable area of class AAA
offices. We also launched the\plain\cf1\f51\fs16\ql development of an office
building at Dock IV of Puerto Madero, which will have approximately 11,000 sqm. of
leasable surface.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In December 2006, we
started to operate our tenth shopping center. Located in the neighborhood of Villa
Cabrera in the city of Cordoba, Cordoba\plain\cf1\f51\fs16\ql Shopping has a
35,000 sqm. total area, 106 stores, 12 cinema screens and a parking lot for 1,500
vehicles. Moreover, through its subsidiaries, we have\plain\cf1\f51\fs16\ql
started construction works in a shopping center in the neighborhood of Saavedra,
City of Buenos Aires, in the intersection of the Panamericana
Highway\plain\cf1\f51\fs16\ql and General Paz
Avenue.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 39
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql In order to finance the investments
and developments detailed above, in February 2007 we issued 8.5% US$150 million
ten-year notes. Bids were\plain\cf1\f51\fs16\ql received for up to 350% the offer
price, showing the investor\u8217?s community strong support to the Company\u8217?s
business plan. In addition, in\plain\cf1\f51\fs16\ql May 2007 APSA issued 7.875%
US$120 million ten year notes and 11% Ps.154 million five year
notes.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Capital
Expenditures\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql 2007 Fiscal
Year.\plain\cf1\f51\fs16\ql During the fiscal year ended June\~30, 2007, we had
capital expenditures of Ps.419.4 million. We made investments in fixed
assets\plain\cf1\f51\fs16\ql of Ps.410.1 million primarily in the acquisition of
Bouchard 551 for Ps.243.2 million, Ps.96.4 million thorough Alto Palermo primarily
for the\plain\cf1\f51\fs16\ql improvement of Shopping Centers and Ps.57.1 million
in the Hotel Segment, primarily in Llao Llao for Ps.49.4 million. We also invested
Ps.9.3 million in\plain\cf1\f51\fs16\ql undeveloped plots of
land.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql 2006 Fiscal
assets\plain\cf1\f51\fs16\ql of Ps.54.1 million primarily in shopping centers
totaling Ps.33.6 million and in Hotel segment of Ps.20.1
million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql 2005 Fiscal
assets\plain\cf1\f51\fs16\ql of Ps.79.3 million, primarily in shopping centers
totaling Ps.50.9 million and in the acquisition of Bouchard 710 for Ps.20.4
million. We also invested\plain\cf1\f51\fs16\ql Ps.0.7 million in undeveloped
plots of land.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Recent
Developments\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Agreement with Cyrela
Brazil Realty\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On August\~14, 2007,
we signed an agreement with Cyrela Brazil Realty S.A. Empreendimentos
e\plain\cf1\f51\fs16\ql Participa\u231?\u417?es (\u8220?Cyrela\u8221?) pursuant to
which we and Cyrela propose to develop residential projects in Argentina targeted
to diverse\plain\cf1\f51\fs16\ql market segments. We and Cyrela formed a new
company, Cyrsa S.A., to carry out the proposed development projects, and have each
agreed to make an\plain\cf1\f51\fs16\ql initial investment of US$30 million in
such company. Cyrela is a public company in Brazil and is one of the largest
developers of residential real estate\plain\cf1\f51\fs16\ql in the cities of Sao
Paulo and Rio de Janeiro. We and our principal shareholder Cresud have a long-
standing commercial relationship with Cyrela as\plain\cf1\f51\fs16\ql reflected by
our substantial investment in Brazil Realty S.A. from 1994 to 2002 and
Cresud\u8217?s recent investment in BrasilAgro, a company
focused\plain\cf1\f51\fs16\ql on agricultural opportunities in Brazil that was
founded by, among others, Cresud and another company owned by Mr.\~Elie Horn,
Cyrela\u8217?s\plain\cf1\f51\fs16\ql controlling shareholder and current chief
executive officer.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Cyrsa is currently
developing a parcel of land in Vicente Lopez, province of Buenos
Aires.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Acquisition of BankBoston
Tower\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On August\~27, 2007, we
signed a deed that entitles us to an undivided 50% ownership interest in an
office\plain\cf1\f51\fs16\ql building known as the BankBoston Tower, located at
265 Carlos Maria Della Paolera in the City of Buenos Aires. This modern property
was designed by\plain\cf1\f51\fs16\ql the recognized Architect Cesar Pelli and has
a gross leasable area of 31,670 square meters. The transaction was consummated for
an aggregate purchase\plain\cf1\f51\fs16\ql price of US$108 million (including
taxes), of which we paid US$54
million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Torres Renoir, Dock
III.\plain\cf1\f51\fs16\ql On September\~7, 2004, we entered into a barter and
option agreement with DYPSA under which we (i)\~exchanged an\plain\cf1\f51\fs16\ql
undeveloped parcel of land which forms part of our property, Dock III (identified
as plot 1c) for the future delivery of residential units, parking lots
and\plain\cf1\f51\fs16\ql storage spaces representing an aggregate of 28.5% of the
housing area of a 37-storey building to be constructed by DYPSA on plot 1c within
36 months\plain\cf1\f51\fs16\ql or less and (ii)\~granted an option to DYPSA to
acquire an undeveloped plot of land of Dique III (identified as plot 1e) of its
property within 548 days or\plain\cf1\f51\fs16\ql less from the date of signing
the deed of conveyance for plot 1c and subject to the completion of certain work-
in-progress in the 37-storey building. As\plain\cf1\f51\fs16\ql a result, we
signed the deed of conveyance of plot 1c at a price of US$8.0 million and the
option for plot 1e at US$10.8 million in November 2004. As\plain\cf1\f51\fs16\ql
guarantee for the first transaction, DYPSA set up a first degree mortgage on plot
1c in our favor for the total value of the property. In May
2006,\plain\cf1\f51\fs16\ql DYPSA exercised the option to acquire plot 1e and both
parties increased their valuation of the barter agreement to US$ 13.5 million. As
consideration\plain\cf1\f51\fs16\ql for plot 1e, DYPSA would deliver housing
units, individual storage spaces and parking lots representing an aggregate 31.5%
of the housing area of a\plain\cf1\f51\fs16\ql 40-storey building to be
constructed by DYPSA on plot 1e within 36 months or less. As guarantee for this
transaction, DYPSA set up a first degree\plain\cf1\f51\fs16\ql mortgage on plot 1e
in our favor for the original value of the respective transaction. On November\~2,
2007, we and the developer decided to replace the\plain\cf1\f51\fs16\ql barter
agreement for plot 1e for a payment of US$18.2 million, US$4.6 million of which
were paid on that date and the balance of which will be paid
to\plain\cf1\f51\fs16\ql us over the next six months. The income resulting from
this transaction amounts to approximately US$4.7
million.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 40
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Solares de Santa Mar\u237?a,
City of Buenos Aires (ex Santa Mar\u237?a del
Plata).\par\pard\plain\sb88\cf1\f51\fs16\i\ql
Background\par\pard\plain\sb88\cf1\f51\fs16\ql In 1997, we acquired the property
which the National Executive Branch declared would be used as the athletic
residences for the Olympic Games if\plain\cf1\f51\fs16\ql Buenos Aires was
selected to host the Olympic Games (former Boca Juniors Football Club sports town),
currently owned by our subsidiary Solares de\plain\cf1\f51\fs16\ql Santa Mar\u237?
a S.A. Since purchasing the property, we have sought approval for a mixed use
development project (hereinafter the Project) to be built\plain\cf1\f51\fs16\ql in
the lot, including filing the dossier and meeting all the requirements set forth in
the Rule passed by the Legislative Branch of the City of Buenos
Aires\plain\cf1\f51\fs16\ql in 1992 (Ordinance 45,665/92). This rule passed by the
City Council of the City of Buenos Aires provides general urban standards in
relation to the\plain\cf1\f51\fs16\ql development of a lot and requires that the
site design be submitted to the approval of the Urban Planning Council (Consejo de
Planificaci\u243?n\plain\cf1\f51\fs16\ql Urbana\u8212?COPUA) (Executive
Branch).\par\pard\plain\sb198\cf1\f51\fs16\ql The Project met the requirements
under the Rule and was recently approved under Decree 1584/2007, issued by the
Executive Branch of the Government\plain\cf1\f51\fs16\ql of the City of Buenos
Aires. Under the Planning Code 50% of the Lot shall be donated for public use and
convenience, (357,975m2)\~inside which a\plain\cf1\f51\fs16\ql common, nautical
and recreation areas, roads, pedestrian lanes and so forth will be
found.\par\pard\plain\sb286\cf1\f51\fs16\i\ql Evolution of Approval
Instances\par\pard\plain\sb88\cf1\f51\fs16\ql Since commencing the Project, we have
made various changes and filed an application for final approval, in response to
changes in the building\plain\cf1\f51\fs16\ql regulations and the interpretation
of other legal requirements by the various authorities in office since commencing
the Project. We have been dealing with\plain\cf1\f51\fs16\ql a different of
authorities and regulatory bodies in order to obtain the final authorization of the
Project. For example:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In 2000, we filed a Master Plan for Santa
Mar\u237?a del Plata site, which was assessed by COPUA and submitted to the
Town\plain\intbl\cf1\f51\fs16\ql Treasurer\u8217?s Office, who takes part in the
process to grant final approve of the Project.\cell{
{\trowd\clvertalc\cellx540\cellx1097\cellx1205\cellx10800\trrh412\row}}}
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In 2002, by Decree 405/02, the government
issued a notice of public hearing to be held in June 2002, which was carried out
with\plain\intbl\cf1\f51\fs16\ql presence of several professional and private
entities and assessed by all Competent Agencies.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In June 2003, we prepared an environmental
impact statement in accordance with Resolution 1004- SSEPyDU-03.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql On August\~12, 2003, we filed a plan to
amend the Project in response to the recommendations made by the public
hearing.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In December 2005, the Hydraulic General
Bureau gave its consent to the project.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In July 2006, COPUA made some
recommendations in relation to the project.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql On December\~13, 2006, we filed an
amendment to the Project to adjust it to the recommendations made by COPUA, that
included the\plain\intbl\cf1\f51\fs16\ql following:\cell{
{\trowd\clvertalc\cellx540\cellx1097\cellx1205\cellx10800\trrh413\row}}}\pard\plain
\cf1\f51\fs9\ql \~
\par\pard\plain
{\trowd\clvertalc\cellx864\cellx1403\cellx8395\trrh206
1.\cell\pard\plain\intbl\cf1\f51\fs16\ql The project met the Guidelines of the
Environmental Urban Plan\cell{
{\trowd\clvertalc\cellx864\cellx1403\cellx8395\trrh206\row}}}\pard\plain\cf1\f51\fs
9\ql \~
\par\pard\plain
2.\cell\pard\plain\intbl\cf1\f51\fs16\ql The project was comprised within the
proposals for the strategic development of the City\u8217?s Southern Area.\cell{
{\trowd\clvertalc\cellx864\cellx1403\cellx10669\trrh206\row}}}\pard\plain\cf1\f51\f
s9\ql \~
\par\pard\plain
3.\cell\pard\plain\intbl\cf1\f51\fs16\ql A perimetrical pedestrian lane was
designed along the entire site on the\plain\intbl\cf1\f51\fs16\i\ql R\u237?o de la
Plata\plain\intbl\cf1\f51\fs16\ql bank.\cell{
9\ql \~
\par\pard\plain
4.\cell\pard\plain\intbl\cf1\f51\fs16\ql Maximum integration with the city was
planned, continuing with the surrounding urban landscape, designing a shore park
on\plain\intbl\cf1\f51\fs16\i\ql R\u237?o de la Plata\plain\intbl\cf1\f51\fs16\ql
bank and providing vehicle access to the avenues surrounding the site.\cell{
s9\ql \~
\par\pard\plain
5.\cell\pard\plain\intbl\cf1\f51\fs16\ql Donation of 50% of the Lot to the GCBA was
proposed for Public Use and Convenience, which is the maximum amount set forth
in\plain\intbl\cf1\f51\fs16\ql the Planning Code.\cell{
s9\ql \~
\par\pard\plain
6.\cell\pard\plain\intbl\cf1\f51\fs16\ql The specific ruling within the scope of
Ordinance N\u186? 45,665/92, Law 23,738/89 and Decree 5783/92 was proposed.\cell{
s9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql On March\~29, 2007, COPUAM, an advisory
body of government composed of advisors from the legislative and executive
branches)\plain\intbl\cf1\f51\fs16\ql released the 145-COPUAM-07 REPORT, in which
it states that it has no objections in relation to the Project and requested the
General\plain\intbl\cf1\f51\fs16\ql Treasury issue a decision concerning the
ruling scope proposed.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In May 2007, the Traffic Undersecretary
took part at the request of the General Treasury, requesting a new traffic study
for the area.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In July and November 2007, the General
Treasury carried out a comprehensive studies of the urban proposal and bill of
Decree\plain\intbl\cf1\f51\fs16\ql submitted for consideration, stating that there
is no legal challenge the Bill of Decree.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Prior to its enactment, the Decree was
reviewed and approved by the Minister of Planning and Public Works, the Traffic and
Transport\plain\intbl\cf1\f51\fs16\ql Undersecretary, the Treasury Department and
the General Technical Administrative and Legal Bureau of the Ministry of Planning
and\plain\intbl\cf1\f51\fs16\ql Public Works.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Having complied with all legal and
technical requirements during the last 11 years since dossier was prepared and
during 15 years, from\plain\intbl\cf1\f51\fs16\ql the date when the general ruling
on the site was passed by the Town Council, the Chief of Government of the City
passed Decree No\plain\intbl\cf1\f51\fs16\ql 1584/07 on November\~9, 2007, which
provides with the required approval for the Project.\cell{
\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 41
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql On December\~1, 2007, Decree No 1584 was
published in the Official Gazette No.2815, fulfilling all legal rules in
force.\cell{
\sb286\fi462\cf1\f51\fs16\i\ql Next steps\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Notwithstanding the issuance of Decree No.\~1584/07, other matters concerning
operation and implementation of the Project, under the
different\plain\cf1\f51\fs16\ql sectors of urban agencies of the City of Buenos
Aires, are still pending.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We have also
learned that the Decree has been judicially challenged on formal and procedural
grounds. At the time of this report, we have not been\plain\cf1\f51\fs16\ql duly
notified about any decision issued by the authorities concerning said
objections.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In that sense, and if
appropriate, we will eventually evaluate what measures to take in order to protect
the acquired rights.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Patio Olmos
Building.\plain\cf1\f51\fs16\ql On September\~25, 2007 we signed the transfer deed
to purchase the real estate in which the Patio Olmos commercial
center\plain\cf1\f51\fs16\ql is currently operating from the Government of the
Province of C\u243?rdoba. We also signed the transfer deed to purchase the related
concession contract\plain\cf1\f51\fs16\ql relating to the use the property. The
balance of Ps. 22.7\~million for the property and the concession was also paid on
this date.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Neuqu\u233?n
Project\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On September\~20, 2007 the
Municipality of Neuqu\u233?n declared the urban project and environmental impact
study are\plain\cf1\f51\fs16\ql feasible. Shopping Neuqu\u233?n S.A. has 150 days
to submit the work plans from the date of the declaration. See \u8220?\u8212?
Legal\plain\cf1\f51\fs16\ql Proceedings\u8212?Legal issues with the City Hall of
Neuqu\u233?n.\u8221?\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Torres Rosario, City of
Rosario\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql We own a plot of land
spanning a surface of approximately 50,000 square meters in the City of Rosario in
the\plain\cf1\f51\fs16\ql same place where our local Shopping Center, Alto
Rosario, is located.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On October\~11,
2007, we entered into a barter agreement with Condominios del Alto S.A. whereby
Condominios del Alto S.A. proposed to acquire\plain\cf1\f51\fs16\ql plot G,
located in the City of Rosario, Province of Santa Fe, Argentina, which belongs to
us, for the construction at its own expense and under its own\plain\cf1\f51\fs16\ql
responsibility of a housing building. As consideration for the barter over the
plot, Condominios de Alto S.A. agreed to deliver: (i)\~fifteen housing
units,\plain\cf1\f51\fs16\ql with an own constructed surface of 1,504.45 square
meters, which will represent upon completion in aggregate 14.85% of the area of
housing units to be\plain\cf1\f51\fs16\ql build in Plot G (ii)\~fifteen garages,
which will represent upon completion in aggregate 15% of the area of garage units
to be build in the same building.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As
additional consideration in our favor, Condominios del Alto S.A. will pay us
US$15,300 and guarantee its obligations: (i)\~Condominios del
Alto\plain\cf1\f51\fs16\ql S.A. granted a first degree mortgage in our favor on
plot G in the amount of US$1,100,000; (ii)\~established a security insurance of
which we will be\plain\cf1\f51\fs16\ql assigner of the insured amount of
US$1,600,000, and (iii)\~the shareholders of Condominios del Alto S.A. are the
guarantors of the obligations of the latter\plain\cf1\f51\fs16\ql up to the amount
of US$800,000.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Finally, we granted to
Condominios del Alto S.A. an option to enter into a barter agreement in relation to
Plot 2h, close to the transferred plot
G.\par\pard\plain\li88\sb198\cf1\f51\fs16\b\i\ql National Congress enacted the Law
No.\~26,313\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Recently enacted Law
No.\~26,313, established mandatory restructuring of certain mortgage loans granted
by the former Banco Hipotecario Nacional\plain\cf1\f51\fs16\ql prior to April\~1,
1991. Neither the Ministry of Economy nor the Central Bank have issued
corresponding regulations explaining the application of the
law\plain\cf1\f51\fs16\ql as yet. Our interpretation is that this law only applies
to non-performing mortgage loans granted before April\~1, 1991, which are
restructured convertibility\plain\cf1\f51\fs16\ql period.\~However, it is possible
that the regulations will provide for the restructuring of all mortgage loans
granted prior to April\~1, 1991, including\plain\cf1\f51\fs16\ql performing
loans.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Incorporation of
Financel\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On September\~25, 2007,
we formed a new company, Financel Communications S.A. (\u8220?Financel\u8221?),
with our\plain\cf1\f51\fs16\ql partner Prisma Investments S.A. with ownership of
80% and 20%, respectively. Financel\u8217?s purpose is to create innovative
solutions for collections\plain\cf1\f51\fs16\ql and payments in Argentina through
the use of mobile telephony. Financel, together with CTI M\u243?vil and Tarshop,
have set-up \u8220?Compra\plain\cf1\f51\fs16\ql M\u243?vil,\u8221? the first
shopping system for mobile telephones in Argentina which we believe will allow CTI
customers to expand their options in an\plain\cf1\f51\fs16\ql easy and secure way
for payments of consumer purchases through the use of their mobile
telephones.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Exercise of our Warrants
and Conversion of Convertible Notes.\plain\cf1\f51\fs16\ql On September\~30, 2007,
Cresud exercised 20.5\~million warrants to acquire an\plain\cf1\f51\fs16\ql
additional 37.6\~million of our common shares for a total cost of US$24.6 million.
Additionally, on October\~25, 2007, Cresud exercised
12.5\~million\plain\cf1\f51\fs16\ql warrants to acquire an additional
22.9\~million of our common shares for a total cost of US$ 15.0 million. On
September\~25, 2007, Cresud converted US$\plain\cf1\f51\fs16\ql 12.0\~million of
our convertible notes into 22.0\~million of our common shares. After this exercise
of warrants and conversion of convertible notes, Cresud\plain\cf1\f51\fs16\ql has
no outstanding warrants or convertible notes of our Company. The term for the
exercise of our outstanding warrants and the conversion of
our\plain\cf1\f51\fs16\ql outstanding convertible notes issued on November\~21,
2002 expired on November\~14, 2007. Throughout the conversion and exercise periods,
holders of\plain\cf1\f51\fs16\ql our warrants and convertible notes exercised an
aggregate of 99,896,806 warrants and converted an aggregate of 99,942,343
convertible notes,\plain\cf1\f51\fs16\ql respectively, increasing our capital
stock to 578,676,460 issued and outstanding shares. As of the date of this annual
report, there are no outstanding\plain\cf1\f51\fs16\ql warrants or convertible
notes to acquire our shares. As a result of these exercises and conversions,
Cresud\u8217?s investment in our common shares\plain\cf1\f51\fs16\ql increased
from 25% on June\~30, 2007 to 34.4% on November\~16,
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Prepayment of our Outstanding
Indebtedness\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On October\~21, 2007
we notified the holders of our secured floating rate notes due November
2009\plain\cf1\f51\fs16\ql and the lenders under our US$51 million syndicated bank
loan agreement of our intention to redeem such notes and repay such loans in full,
together with\plain\cf1\f51\fs16\ql interest accrued to the redemption and
repayment date, as applicable. On October\~29, 2007 we prepaid US$ 24.3\~million of
principal and US$0.35 million\plain\cf1\f51\fs16\ql of accrued interest under the
notes, and US$14.95 million of principal and US$0.21 million of accrued interest
under the loans.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc
43
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Capital
increase\plain\cf1\f51\fs16\ql . On our shareholders\u8217? meeting held on
October\~10, 2007, our shareholders approved a capital increase by a nominal
amount\plain\cf1\f51\fs16\ql of up to Ps.280,000,000, through the issuance of up
to 280,000,000 of new common shares, par value Ps.1.00 each.\~On September\~25,
2007, we filed a\plain\cf1\f51\fs16\ql Registration Statement with the SEC. As of
the date of this Form 20-F, the final terms of this rights offering are pending of
approval and we cannot give\plain\cf1\f51\fs16\ql any assurance in relation to the
proposed timing of the offering about the issue date of the new common shares.
tx46076_14}\par\pard\plain\sb286\cf1\f51\fs16\b\ql B. Business
Overview\par\pard\plain\sb88\cf1\f51\fs16\b\ql Operations and principal
activities\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We are one of Argentina\u8217?
s leading real estate companies in terms of total assets. We are engaged, directly
and indirectly through subsidiaries\plain\cf1\f51\fs16\ql and joint ventures, in a
range of diversified real estate related activities in Argentina,
including:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the acquisition, development and operation
of shopping centers,\cell{
{\trowd\clvertalc\cellx108\cellx665\cellx773\cellx7424\trrh206\row}}}\pard\plain\cf
1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the origination and securitization of
credit card loans,\cell{
{\trowd\clvertalc\cellx108\cellx665\cellx773\cellx6927\trrh206\row}}}\pard\plain\cf
1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the acquisition and development of
residential properties and undeveloped land reserves for future development and
sale,\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the acquisition, development and operation
of office and other non-shopping center properties primarily for rental purposes,
and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the acquisition and operation of luxury
hotels.\cell{
{\trowd\clvertalc\cellx108\cellx665\cellx773\cellx6401\trrh206\row}}}\pard\plain\sb
198\fi462\cf1\f51\fs16\ql As of June\~30, 2007, we had total assets of Ps.4,144.9
million and shareholders\u8217? equity of Ps.1,646.7 million. Our net income for
the fiscal\plain\cf1\f51\fs16\ql years ended June\~30, 2005, 2006, and 2007 was
Ps.103.2 million, Ps.96.6 million, Ps.107.1 million, respectively. We are the only
Argentine real estate\plain\cf1\f51\fs16\ql company whose shares are listed on the
Buenos Aires Stock Exchange and whose GDSs are listed on the New York Stock
Exchange.\par\pard\plain\sb286\cf1\f51\fs16\b\qc Consolidated Revenues by
Geographic Area\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
9036\clvertalc\cellx9676\clvertalb\cellx10236\clvertalc\cellx10797\trrh-66\trrh0
9036\clvertalc\cellx9676\clvertalb\cellx10236\clvertalc\cellx10797\trrh-
66\trrh0\row}}}
lx10798\trrh172
Revenues\~for\~fiscal\~years\~ended\~June\~30,\~(1)\~(2)\cell{
x10236\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10797\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc 2007\cell{
x10236\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10797\trrh172\row}}}
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in thousands of Pesos)\cell{
676\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10236\clvertalb\clshdng100\clcfpa
t12\clcbpat12\cellx10797\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Offices and other non-shopping
center leased properties:\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\cf1\f51\fs13\ql
t12\clcbpat12\cellx10797\trrh206\row}}}
talb\cellx9676\clvertalb\cellx10236\clvertalb\cellx10797\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql The City of Buenos
Aires\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 55,032\cell{
talb\cellx9676\clvertalb\cellx10236\clvertalb\cellx10797\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Buenos Aires
Province\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 29\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Shopping Centers and credit card
operations:\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Salta
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Santa Fe
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mendoza
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql C\u243?rdoba
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Sales and
Developments:\cell\pard\plain\intbl\cf1\f51\fs13\ql
talb\cellx9676\clvertalb\cellx10236\clvertalb\cellx10797\trrh206\row}}}\pard\plain\
\
\par\pard\plain
66\trrh0\row}}}
lx10798\trrh172
Revenues\~for\~fiscal\~years\~ended\~June\~30,\~(1)\~(2)\cell{
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in thousands of Pesos)\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql
Hotels:\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Rio Negro
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr \u8212?\~\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total The City of Buenos
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total Buenos Aires
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total Rio Negro
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total Santa Fe
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total Salta
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total C\u243?rdoba
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total Mendoza
Total\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\b\qr
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\b\qr 737,346\cell{
talb\cellx9597\clvertalb\cellx10157\clvertalb\cellx10797\trrh206\row}}}\pard\plain\
cf1\f51\fs18\ql
\par\pard\plain
Shopping centers do not include income for sales and developments.\cell{
\par\pard\plain
Revenues do not includes our income from \u8220?Financial operations and
others\u8221? segment.\cell{
{\trowd\cellx432\cellx9831\trrh206\row}}}\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql
Shopping Centers\plain\cf1\f51\fs16\ql . We are engaged in purchasing, developing
and managing shopping centers through our subsidiary Alto Palermo. Alto
Palermo\plain\cf1\f51\fs16\ql operates and owns majority interests in ten shopping
centers, six of which are located in the Buenos Aires metropolitan area, and the
other four of which\plain\cf1\f51\fs16\ql are located in the Provinces of Mendoza,
Rosario, C\u243?rdoba and Salta. Our Shopping Center segment had assets of
Ps.1,375.2 million as of June\~30,\plain\cf1\f51\fs16\ql 2007, representing 33.2%
of our consolidated assets at such date, and generated operating income of Ps.124.8
million during our 2007 fiscal year,\plain\cf1\f51\fs16\ql representing 62.9% of
our consolidated operating income for such
year.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Credit
Cards\plain\cf1\f51\fs16\ql . We operate a credit card consumer finance business
through our majority-owned subsidiary, Tarshop. Our credit card
operations\plain\cf1\f51\fs16\ql consist primarily of lending and servicing
activities relating to the credit card products we offer to consumers at shopping
centers, hypermarkets and street\plain\cf1\f51\fs16\ql stores. We finance a
substantial majority of our credit card activities through securitization of the
receivables underlying the accounts we originate. Our\plain\cf1\f51\fs16\ql
revenues from credit card transactions are derived from interest income generated
by financing and lending activities, merchants\u8217? fees,
insurance\plain\cf1\f51\fs16\ql charges for life and disability insurance, and
fees for processing and printing cardholders\u8217? account statements. Our Credit
Card segment had assets\plain\cf1\f51\fs16\ql of Ps.158.4 million as of June\~30,
2007, representing 3.8% of our consolidated assets at such date, and generated
operating income of Ps.32.6 million\plain\cf1\f51\fs16\ql during our 2007 fiscal
year, representing 16.4% of our consolidated operating income for such
year.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Residential
Properties\plain\cf1\f51\fs16\ql . The acquisition and development of residential
apartment complexes and residential communities for sale is another of
our\plain\cf1\f51\fs16\ql core activities. Our development of residential
apartment complexes consists of the construction of high-rise towers or the
conversion and renovation of\plain\cf1\f51\fs16\ql existing structures, such as
factories and warehouses. In residential communities, we acquire vacant land,
develop infrastructure such as roads, utilities and\plain\cf1\f51\fs16\ql common
areas, and sell plots of land for construction of single-family homes. Our
Development and Sale of Properties segment had assets of
Ps.539.3\plain\cf1\f51\fs16\ql million as of June\~30, 2007, representing 13.0% of
our consolidated assets at such date, and generated operating income of Ps.6.2
million during our 2007\plain\cf1\f51\fs16\ql fiscal year, representing 3.1% of
our consolidated operating income for such
year.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Office
Buildings\plain\cf1\f51\fs16\ql . In December 1994, we launched our office rental
business by acquiring three prime office towers in Buenos Aires: Libertador
498,\plain\cf1\f51\fs16\ql Maip\u250? 1300 and Madero 1020. As of June\~30, 2007,
we, directly and indirectly, owned interests in 24 offices and other non-shopping
center leased\plain\cf1\f51\fs16\ql properties in Argentina that in the aggregate
represented 234,320 square meters of gross leasable area. Our Offices and Other
Non-Shopping Center leased\plain\cf1\f51\fs16\ql properties segment had assets of
Ps.700.0 million as of June\~30, 2007, representing 16.9% of our consolidated
assets at such date, and generated operating\plain\cf1\f51\fs16\ql income of
Ps.19.6 million during our 2007 fiscal year, representing 9.9% of our consolidated
operating income for such year.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Hotels\plain\cf1\f51\fs16\ql . In
1997, we acquired the Hotel Llao Llao and an indirect controlling interest in the
Hotel Intercontinental in Buenos Aires. In March 1998,\plain\cf1\f51\fs16\ql we
acquired the Hotel Sheraton Libertador in Buenos Aires. During fiscal year 1999, we
sold a 20% interest in the Hotel Libertador to Hoteles
Sheraton\plain\cf1\f51\fs16\ql de Argentina S.A., and during the fiscal year 2000,
we sold 50% of our interest in the Hotel Llao Llao to the Sutton Group. Our Hotels
segment, which\plain\cf1\f51\fs16\ql consists of these three hotels, had assets of
Ps.208.4 million as of June\~30, 2007, representing 5.0% of our consolidated assets
at such date, and generated\plain\cf1\f51\fs16\ql income of Ps.14.7 million during
our 2007 fiscal year, representing 7.4% of our consolidated operating income for
such year.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Banco
Hipotecario\plain\cf1\f51\fs16\ql . We currently own 11.8% of Banco Hipotecario,
Argentina\u8217?s leading mortgage lender in terms of outstanding
mortgage\plain\cf1\f51\fs16\ql loans. We acquired 2.9% of Banco Hipotecario for
Ps.30.2 million when it was privatized in 1999. During 2003 and 2004, we increased
our investment in\plain\cf1\f51\fs16\ql Banco Hipotecario to 11.8% by acquiring
additional shares, and by acquiring and exercising warrants, for an aggregate
purchase price of Ps.33.4 million.\plain\cf1\f51\fs16\ql In May 2004, we sold
Class D shares representing 1.9% of Banco Hipotecario to IFISA, one of our
controlling shareholders, for Ps.6.0 million, generating\plain\cf1\f51\fs16\ql a
loss of Ps.1.6 million. Our 11.8% investment in Banco Hipotecario is held in the
form of Class D shares, which are currently entitled to three votes
per\plain\cf1\f51\fs16\ql share, affording us the right to vote approximately
18.36% of the total votes that can be cast at Banco Hipotecario\u8217?s
shareholders\u8217? meetings.\plain\cf1\f51\fs16\ql As of June\~30, 2007, our
investment in Banco Hipotecario represented 7.3% of our consolidated assets, and
during our fiscal years ended June\~30, 2005,\plain\cf1\f51\fs16\ql 2006 and 2007,
this investment generated gains of Ps.55.2 million, Ps.47.0 million and Ps.41.4
million, respectively.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Business
Strategy\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We seek to take advantage of our
position as a leading company in Argentina dedicated to owning, developing and
managing real estate. Our\plain\cf1\f51\fs16\ql business strategy seeks to
(i)\~generate stable cash flows through the operation of our real estate rental
assets (shopping centers, office buildings, hotels),\plain\cf1\f51\fs16\ql
(ii)\~achieve long-term appreciation of our asset portfolio by selectively
acquiring strategically located properties by taking advantage of
development\plain\cf1\f51\fs16\ql opportunities, and (iii)\~enhance the margins of
our sales and developments segment through timely transformation of our land
reserves into developed\plain\cf1\f51\fs16\ql residential and commercial
properties.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Shopping
centers\plain\cf1\f51\fs16\ql . In recent years, the Argentine shopping center
industry has benefited from improved macroeconomic conditions and a
significant\plain\cf1\f51\fs16\ql expansion in consumer credit. We believe that
the Argentine shopping center sector offers attractive prospects for long-term
growth due to, among other\plain\cf1\f51\fs16\ql factors, (i)\~a continuing
evolution of consumer preferences in favor of shopping malls (away from small
neighborhood shops) and (ii)\~a level of shopping\plain\cf1\f51\fs16\ql center
penetration that we consider low compared to many developed countries. We seek to
improve our leading position in the shopping center industry\plain\cf1\f51\fs16\ql
in Argentina by taking advantage of economies of scale to improve the operating
margins of our diversified portfolio of existing shopping centers and
by\plain\cf1\f51\fs16\ql developing new properties at strategic locations in
Buenos Aires and other important urban areas, including in Argentine provinces and
elsewhere in Latin\plain\cf1\f51\fs16\ql America. The shopping center business is
at present the strongest source of cash generation of our business
segments.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Credit
cards\plain\cf1\f51\fs16\ql . We believe that our credit card operations complement
our shopping center business and offer attractive prospects for long-
term\plain\cf1\f51\fs16\ql growth due to improved macroeconomic conditions and an
expansion in consumer credit. We seek to grow our credit card business and intend
to maintain\plain\cf1\f51\fs16\ql low levels of credit exposure through continuing
securitization of our credit card loans. From time to time we consider strategic
alternatives with respect\plain\cf1\f51\fs16\ql to our investment in Tarshop
which, due to its recent growth in size and profitability, competes increasingly
with domestic and international banks and\plain\cf1\f51\fs16\ql credit card
companies that are substantially larger than Tarshop. As a result, we are
considering alternatives to maximize the value of our investment
in\plain\cf1\f51\fs16\ql Tarshop including its possible merger with, or sale to,
another financial institution actively engaged in the Argentine credit card
industry. Although we are\plain\cf1\f51\fs16\ql actively considering a range of
such strategic alternatives, we cannot give you any assurance if or when any of
them will be in fact be implemented.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql
Residential property\plain\cf1\f51\fs16\ql . During the economic crisis in
Argentina in 2001 and 2002 and its aftermath, a scarcity of mortgage financing
restrained\plain\cf1\f51\fs16\ql growth in middle class home purchases. As a
result, we decided to focus on projects for affluent individuals who do not need to
finance their home\plain\cf1\f51\fs16\ql purchases. We believe that there are
attractive opportunities in the residential segment, as construction costs have
remained low and property values\par\pard\plain\cf1\f51\fs13\ql
\
have recovered significantly. We seek to take advantage of this opportunity, as
well as of improvements in highway and other transportation
infrastructure\plain\cf1\f51\fs16\ql in and around Buenos Aires, by focusing on
the development of residential properties for medium- and high-income individuals.
In urban areas, we seek\plain\cf1\f51\fs16\ql to purchase undeveloped properties
in densely-populated areas and build apartment complexes offering \u8220?
greenspace\u8221? for recreational\plain\cf1\f51\fs16\ql activities. We recently
entered into a partnership with Cyrela Brazil Realty S.A. Empreendimentos e
Participa\u231?\u417?es, a leading Brazilian developer\plain\cf1\f51\fs16\ql of
residential real estate, to develop residential real estate projects in Argentina
and to increase our presence in such business. In suburban areas, we
seek\plain\cf1\f51\fs16\ql to develop residential communities by acquiring
undeveloped properties with convenient access to Buenos Aires, developing roads and
other basic\plain\cf1\f51\fs16\ql infrastructure such as power and water, and then
selling lots for the construction of residential
units.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Office
buildings\plain\cf1\f51\fs16\ql . During the Argentine economic crisis in 2001 and
2002, little new investment was made in high-quality office buildings
in\plain\cf1\f51\fs16\ql Buenos Aires and, as a result, we believe there is
currently substantial demand for desirable office space in Buenos Aires. We seek to
purchase, develop\plain\cf1\f51\fs16\ql and operate premium office buildings in
strategically-located business districts in the City of Buenos Aires and other
locations that we believe offer\plain\cf1\f51\fs16\ql potential for rental income
and long-term capital gain. We expect to continue our focus on attracting premium
corporate tenants to our office buildings\plain\cf1\f51\fs16\ql and will consider
opportunities to acquire existing properties or construct new buildings depending
on the location and circumstances.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql
Hotels\plain\cf1\f51\fs16\ql . We believe our portfolio of three luxury hotels is
positioned to take advantage of future growth in tourism and business travel in
Argentina.\plain\cf1\f51\fs16\ql We seek to continue our strategy of investing in
high-quality properties which are operated by leading international hotel companies
to capitalize on their\plain\cf1\f51\fs16\ql operating experience and
international reputation. We currently intend to renovate and expand Hotel Llao
Llao and to remodel the Hotel Sheraton\plain\cf1\f51\fs16\ql
Libertador.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Banco
Hipotecario\plain\cf1\f51\fs16\ql . We believe that our investment in Banco
Hipotecario has attractive prospects for long-term appreciation. After the
2002\plain\cf1\f51\fs16\ql economic crisis in Argentina mortgage loan originations
have increased, and we believe they are likely to continue to increase as salaries,
consumer\plain\cf1\f51\fs16\ql purchasing power and investments in residential
construction grow. We believe that, unlike certain other countries in Latin
America, Argentina has a low\plain\cf1\f51\fs16\ql level of mortgages outstanding,
particularly if measured in terms of GDP and believe that Banco Hipotecario is
currently valued at a level that is attractive\plain\cf1\f51\fs16\ql compared to
most other Argentine listed banks. Finally, we believe that the mortgage
origination business and our real estate development business
(which\plain\cf1\f51\fs16\ql we expect to be bolstered through our recent
partnership with Cyrela mentioned above) may potentially experience synergies that
enhance operational\plain\cf1\f51\fs16\ql efficiencies and cross selling
opportunities that may promote the development of our undeveloped land
reserves.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Land
reserves\plain\cf1\f51\fs16\ql . We continuously seek to acquire undeveloped land
at locations we consider attractive inside and outside Buenos Aires. In all
cases,\plain\cf1\f51\fs16\ql our intention is to purchase land with significant
development or appreciation potential for subsequent sale. We believe that holding
a portfolio of\plain\cf1\f51\fs16\ql desirable undeveloped plots of land enhances
our ability to make strategic long-term investments and affords us a valuable
\u8220?pipeline\u8221? of new\plain\cf1\f51\fs16\ql development projects for
upcoming years.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql
International\plain\cf1\f51\fs16\ql . In the past, we have made significant real
estate investments outside of Argentina, including investments in Brazil Realty
S.A. in\plain\cf1\f51\fs16\ql Brazil and Fondo de Valores Inmobiliarios in
Venezuela which we disposed of in 2002 and 2001, respectively. Although we cannot
assure you that we\plain\cf1\f51\fs16\ql will make further investments outside of
Argentina, we believe that Brazil and certain other Latin American countries offer
certain interesting real estate\plain\cf1\f51\fs16\ql opportunities. We expect to
continue to evaluate actively such regional opportunities as they
arise.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Shopping
Centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql
Overview\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We are engaged in purchasing,
developing and managing shopping centers through our subsidiary Alto Palermo. As of
June\~30, 2007, Alto Palermo\plain\cf1\f51\fs16\ql operated and owned majority
interests in ten shopping centers, five of which are located in the City of Buenos
Aires, one of which is located in the\plain\cf1\f51\fs16\ql greater Buenos Aires
metropolitan area and the remaining are located in the interior Argentine cities of
Salta, Rosario, Mendoza and C\u243?rdoba.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql As of September\~30, 2007, we owned
approximately 62.5% of Alto Palermo, and Parque Arauco S.A. (\u8220?Parque
Arauco\u8221?) owned\plain\cf1\f51\fs16\ql 29.6%. The remaining shares are held by
the public and traded on the\plain\cf1\f51\fs16\i\ql Bolsa de Comercio de Buenos
Aires\plain\cf1\f51\fs16\ql and on the Nasdaq National Market
(USA)\plain\cf1\f51\fs16\ql under the symbol \u8220?APSA.\u8221? In addition, as
of September\~30, 2007, we owned US$31.7 million of Alto Palermo\u8217?s
convertible notes due\plain\cf1\f51\fs16\ql 2014. If we and all other holders of
such convertible Notes were to exercise our option to convert the convertible notes
into shares of Alto\plain\cf1\f51\fs16\ql Palermo\u8217?s common stock, our
shareholding in Alto Palermo would increase to 65.6% of its fully diluted
capital.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql At June\~30, 2007, Alto
Palermo\u8217?s shopping centers comprised a total of 224,138 square meters of
gross leasable area (excluding certain space\plain\cf1\f51\fs16\ql occupied by
hypermarkets which are not Alto Palermo\u8217?s tenants and the surface area of the
Panamerican Mall that includes several projects one of\plain\cf1\f51\fs16\ql which
is the construction of a shopping center). For the year ended June\~30, 2007, the
average occupancy rate of Alto Palermo\u8217?s shopping
center\plain\cf1\f51\fs16\ql portfolio was approximately
97.0%.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In December 2006, Alto Palermo
acquired a 100% of Empalme S.A. which owns C\u243?rdoba Shopping, a shopping center
covering 35,000 square\plain\cf1\f51\fs16\ql meters of surface area, having 160
commercial stores, 12 movie theatres and parking lot for 1,500 vehicles, located in
the Villa Cabrera neighborhood of\plain\cf1\f51\fs16\ql C\u243?rdoba
City.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As a result of our acquisition of
several shopping centers and a corporate reorganization of Alto Palermo, we
recently centralized management of\plain\cf1\f51\fs16\ql our shopping centers in
Alto Palermo. Alto Palermo is responsible for providing common area electrical
power, a main telephone switchboard, central air\plain\cf1\f51\fs16\ql
conditioning and other basic common area
services.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The following table shows
certain information concerning our shopping centers.\par\pard\plain\cf1\f51\fs18\ql
\~
\par\pard\plain
4042\clvertalc\cellx4831\clvertalb\cellx4994\clvertalc\cellx6052\clvertalc\cellx623
0\clvertalb\cellx6379\clvertalc\cellx7062\clvertalc\cellx7240\clvertalb\cellx7389\c
lvertalc\cellx7950\clvertalb\cellx8377\clvertalc\cellx8938\clvertalb\cellx9365\clve
rtalc\cellx9926\clvertalb\cellx10089\clvertalc\cellx10775\cellx10788\trrh-66\trrh0
rtalc\cellx9926\clvertalb\cellx10089\clvertalc\cellx10775\cellx10788\trrh-
66\trrh0\row}}}
{\trowd\clvertalb\clvmgf\cellx3017\clvertalb\cellx3180\clvertalb\clvmgf\cellx3879\c
lvertalb\cellx4042\clvertalb\clvmgf\cellx4831\clvertalb\cellx4994\clvertalb\clvmgf\
cellx6052\clvertalb\clvmgf\cellx6230\clvertalb\cellx6379\clvertalb\clvmgf\cellx7062
\clvertalb\clvmgf\cellx7240\clvertalb\cellx7389\clbrdrb\brdrs\brdrcf1\clvertalb\cel
lx9929\clvertalb\cellx10092\clvertalb\clvmgf\cellx10778\cellx10791\trrh344
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Date of
Acquisition\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Leaseable
Area\~sqm\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Alto
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Palermo\u8217?s
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Effective
Interest\plain\intbl\cf1\f51\fs11\b\qc\super
Occupancy
Rate\plain\intbl\cf1\f51\fs11\b\qc\super (2)\cell\pard\plain\intbl\cf1\f51\fs13\ql
Annual\~Rental\~Income\~for\~the\~fiscal
years\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Book
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Value (in
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc thousands
Ps.)\plain\intbl\cf1\f51\fs11\b\qc\super (5)\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
lvertalb\cellx4042\clvertalb\clvmgf\cellx4831\clvertalb\cellx4994\clvertalb\clvmgf\
cellx6052\clvertalb\clvmgf\cellx6230\clvertalb\cellx6379\clvertalb\clvmgf\cellx7062
\clvertalb\clvmgf\cellx7240\clvertalb\cellx7389\clbrdrb\brdrs\brdrcf1\clvertalb\cel
lx9929\clvertalb\cellx10092\clvertalb\clvmgf\cellx10778\cellx10791\trrh344\row}}}
{\trowd\clvertalb\clvmrg\cellx3017\clvertalb\cellx3180\clbrdrb\brdrs\brdrcf1\clvert
alb\clvmrg\cellx3879\clvertalb\cellx4042\clbrdrb\brdrs\brdrcf1\clvertalb\clvmrg\cel
lx4831\clvertalb\cellx4994\clbrdrb\brdrs\brdrcf1\clvertalb\clvmrg\cellx6052\clverta
lb\clvmrg\cellx6230\clvertalb\cellx6379\clbrdrb\brdrs\brdrcf1\clvertalb\clvmrg\cell
x7062\clvertalb\clvmrg\cellx7240\clvertalb\cellx7389\clbrdrb\brdrs\brdrcf1\clvertal
b\cellx7950\clvertalb\cellx8377\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8938\clvertalb
\cellx9365\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9926\clvertalb\cellx10089\clbrdrb\b
rdrs\brdrcf1\clvertalb\clvmrg\cellx10775\clvertalc\cellx10776\clvertalc\cellx10777\
clvertalc\cellx10778\clvertalc\cellx10779\clvertalc\cellx10780\clvertalc\cellx10781
\clvertalc\cellx10782\trrh172
2007\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
lx4831\clvertalb\cellx4994\clbrdrb\brdrs\brdrcf1\clvertalb\clvmrg\cellx6052\clverta
lb\clvmrg\cellx6230\clvertalb\cellx6379\clbrdrb\brdrs\brdrcf1\clvertalb\clvmrg\cell
x7062\clvertalb\clvmrg\cellx7240\clvertalb\cellx7389\clbrdrb\brdrs\brdrcf1\clvertal
\cellx9365\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9926\clvertalb\cellx10089\clbrdrb\b
rdrs\brdrcf1\clvertalb\clvmrg\cellx10775\clvertalc\cellx10776\clvertalc\cellx10777\
\clvertalc\cellx10782\trrh172\row}}}
4042\clvertalb\cellx4831\clvertalb\cellx4994\clvertalb\cellx6052\clvertalb\cellx623
0\clvertalb\cellx6379\clvertalb\cellx7062\clvertalb\cellx7240\clvertalb\cellx7389\c
lvertalb\cellx9929\clvertalb\cellx10092\clvertalb\cellx10778\clvertalc\cellx10779\c
lvertalc\cellx10780\clvertalc\cellx10781\clvertalc\cellx10782\clvertalc\cellx10783\
clvertalc\cellx10784\clvertalc\cellx10785\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs13\ql
(in thousands Ps.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\f0\fs16\ql
lvertalb\cellx9929\clvertalb\cellx10092\clvertalb\cellx10778\clvertalc\cellx10779\c
clvertalc\cellx10784\clvertalc\cellx10785\trrh172\row}}}
089\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10775\clvertalc\clshdng100\clcfpa
t12\clcbpat12\cellx10776\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10777\clvert
alc\clshdng100\clcfpat12\clcbpat12\cellx10778\clvertalc\clshdng100\clcfpat12\clcbpa
t12\cellx10779\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10780\clvertalc\clshdn
g100\clcfpat12\clcbpat12\cellx10781\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx1
0782\trrh206
Centers\plain\intbl\cf1\f51\fs11\ql\super (6)\cell\pard\plain\intbl\cf1\f51\fs13\ql
0782\trrh206\row}}}
x9926\clvertalb\cellx10089\clvertalb\cellx10775\clvertalc\cellx10776\clvertalc\cell
x10777\clvertalc\cellx10778\clvertalc\cellx10779\clvertalc\cellx10780\clvertalc\cel
lx10781\clvertalc\cellx10782\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto
Palermo\cell\pard\plain\intbl\cf1\f51\fs13\ql
12/23/97\cell\pard\plain\intbl\cf1\f51\fs13\ql
100.0\cell\pard\plain\intbl\cf1\f51\fs16\ql %\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 175,517\cell\pard\plain\intbl\f0\fs16\ql
lx10781\clvertalc\cellx10782\trrh206\row}}}
0782\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Abasto de Buenos
0782\trrh206\row}}}
Avellaneda\cell\pard\plain\intbl\cf1\f51\fs13\ql
89,664\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql
0782\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Paseo
Alcorta\cell\pard\plain\intbl\cf1\f51\fs13\ql
0782\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Patio
Bullrich\cell\pard\plain\intbl\cf1\f51\fs13\ql
0782\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto NOA
Shopping\cell\pard\plain\intbl\cf1\f51\fs13\ql
0782\trrh206\row}}}
Design\cell\pard\plain\intbl\cf1\f51\fs13\ql
0782\trrh206
Rosario\cell\pard\plain\intbl\cf1\f51\fs13\ql
0782\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mendoza Plaza
0782\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql C\u243?rdoba Shopping Villa
Cabrera\cell\pard\plain\intbl\cf1\f51\fs13\ql
N/A\cell\pard\plain\intbl\cf1\f51\fs13\ql
0782\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Panamerican Mall
S.A.\plain\intbl\cf1\f51\fs11\ql\super
0782\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fibesa and
others\plain\intbl\cf1\f51\fs11\b\ql\super (\plain\intbl\cf1\f51\fs11\ql\super
7)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr N/A\cell\pard\plain\intbl\f0\fs16\ql
0782\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Income from Tarjeta
0782\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Neuqu\u233?
n\plain\intbl\cf1\f51\fs11\ql\super (8)\cell\pard\plain\intbl\cf1\f51\fs13\ql
0782\trrh206\row}}}
Total\plain\intbl\cf1\f51\fs11\ql\super
\~\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr
1,091,873\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql
lx10781\clvertalc\cellx10782\trrh206\row}}}\pard\plain\cf1\f51\fs18\ql
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql Total
leaseable area in each property. Excludes common areas and parking spaces.\cell{
\par\pard\plain
Calculated dividing occupied square meters by leaseable area.\cell{
\par\pard\plain
Effective participation of Alto Palermo in each business unit. We have a 62.48% in
Alto Palermo.\cell{
\
\par\pard\plain
Represents the total consolidated leases according to the RT21 method.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (5)\cell\pard\plain\intbl\cf1\f51\fs16\ql Cost of
acquisition plus improvements, less accumulated depreciation, plus adjustment for
inflation, less allowance for impairment in value, plus\plain\intbl\cf1\f51\fs16\ql
recovery of allowances if applicable.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (6)\cell\pard\plain\intbl\cf1\f51\fs16\ql Owned
through our subsidiary Alto Palermo.\cell{
\par\pard\plain
Includes revenues from Fibesa S.A.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (8)\cell\pard\plain\intbl\cf1\f51\fs16\ql Parcel
of land for developing a shopping center.\cell{
\par\pard\plain
project includes the construction of a shopping center, a hypermarket, a movie
theater complex and an office and/or dwelling building.\cell{
\par\pard\plain
Corresponds to the \u8220?Shopping Centers\u8221? business unit mentioned in Note 4
to the consolidated financial statements. Includes profits
for\plain\intbl\cf1\f51\fs16\ql the Tarshop credit card.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (11)\cell\pard\plain\intbl\cf1\f51\fs16\ql Meters
represent only the land surface.\cell{
{\trowd\cellx432\cellx7378\trrh206\row}}}\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\q
l Tenant Retail Sales\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table
sets forth the total approximate tenant retail sales in Pesos at the shopping
centers in which we had an interest for the periods\plain\cf1\f51\fs16\ql
shown.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
lx10740\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Fiscal Year Ended June
30,\plain\intbl\cf1\f51\fs11\b\qc\super (1)\cell{
Ps.\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Ps.\cell{
12\clcbpat12\cellx10737\trrh206
Abasto\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 573,814,588\cell{
12\clcbpat12\cellx10737\trrh206\row}}}
Noa\cell\pard\plain\intbl\cf1\f51\fs13\ql
Plaza\cell\pard\plain\intbl\cf1\f51\fs13\ql
{\trowd\clvertalb\cellx7236\clvertalb\cellx7343\clbrdrt\brdrs\brdrcf1\clvertalb\cel
lx8437\clvertalb\cellx8544\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9638\clvertalb\cell
x9745\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10737\trrh29
\~\~\cell\pard\plain\intbl\cf1\f51\fs1\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs1\ql \~\cell{
x9745\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10737\trrh29\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total retail
sales\plain\intbl\cf1\f51\fs11\ql\super
1,697,890,519\cell\pard\plain\intbl\cf1\f51\fs13\ql
2,275,075,212\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 2,825,762,272\cell{
talb\cellx9638\clvertalb\cellx9745\clvertalb\cellx10737\trrh206\row}}}\pard\plain\f
0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\f
s4\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
1\clvertalb\cellx8107\clvertalc\cellx8960\clvertalb\cellx9440\clvertalc\cellx10617\
clvertalc\cellx10795\trrh-66\trrh0
1\clvertalb\cellx8107\clvertalc\cellx8960\clvertalb\cellx9440\clvertalc\cellx10617\
clvertalc\cellx10795\trrh-66\trrh0\row}}}
x6394\clbrdrb\brdrs\brdrcf1\clvertalb\cellx7463\clvertalb\cellx7641\clvertalb\cellx
8107\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8960\clvertalb\cellx9440\clbrdrb\brdrs\br
drcf1\clvertalb\cellx10617\clvertalb\cellx10795\trrh688
\pard\plain\intbl\brdrb\brdrs\cf1\f51\fs13\b\ql Lease expirations as of
June\~30,\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Number\~of
leases\~expiring\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Square\~Meters
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Subject to
Expiring\~Leases\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Percentage\~of
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Total Square
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Meters\~Subject\~to
Expiration\cell\pard\plain\intbl\cf1\f51\fs13\ql
Annual Base
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Rent Under
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Expiring
Leases(1)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Percentage\~of\~Total
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Base Rent Under
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Expiring
Leases\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
drcf1\clvertalb\cellx10617\clvertalb\cellx10795\trrh688\row}}}
1\clvertalb\cellx8107\clvertalb\cellx8960\clvertalb\cellx9440\clvertalb\cellx10617\
clvertalb\cellx10795\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (square
meters)\cell\pard\plain\intbl\cf1\f51\fs13\ql
(%)\cell\pard\plain\intbl\cf1\f51\fs13\ql
(Ps.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
(%)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
clvertalb\cellx10795\trrh172\row}}}
lcfpat12\clcbpat12\cellx10617\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10795\t
rrh206
2008(2)\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\cell{
rrh206\row}}}
b\cellx8107\clvertalb\cellx8960\clvertalb\cellx9440\clvertalb\cellx10617\clvertalb\
cellx10795\trrh206
%\cell{
cellx10795\trrh206\row}}}
rrh206
%\cell{
rrh206\row}}}
cellx10795\trrh206
%\cell{
x6394\clbrdrt\brdrs\brdrcf1\clvertalb\cellx7463\clvertalc\cellx7641\clvertalb\cellx
8107\clbrdrt\brdrs\brdrcf1\clvertalb\cellx8960\clvertalb\cellx9440\clbrdrt\brdrs\br
drcf1\clvertalb\cellx10617\clvertalc\cellx10795\trrh29
\~\cell\pard\plain\intbl\cf1\f51\fs1\ql \~\cell\pard\plain\intbl\cf1\f51\fs1\ql
\~\cell\pard\plain\intbl\cf1\f51\fs1\ql \~\cell{
drcf1\clvertalb\cellx10617\clvertalc\cellx10795\trrh29\row}}}
rrh206
100\cell\pard\plain\intbl\cf1\f51\fs16\ql %\cell{
rrh206\row}}}\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql Retail
sales based upon information provided to us by retailers and prior owners. The
amounts shown reflect 100% of the retail sales of each\plain\intbl\cf1\f51\fs16\ql
shopping center, although in certain cases we own less than 100% of such shopping
centers.\cell{
{\trowd\cellx432\cellx10800\trrh412\row}}}\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\
ql Lease Expirations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table
shows a schedule of lease expirations for our shopping center properties in place
as of June\~30, 2007, assuming that none of the\plain\cf1\f51\fs16\ql tenants
exercise renewal options or terminate their lease
early.\par\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdr
sp0\par\pard\plain\f0\fs4\par
\par\pard\plain
Includes only the basic rental income amount. Does not give effect to our ownership
interest.\cell{
\par\pard\plain
Includes stores which contracts have not been renewed yet and vacant stores at
June\~30, 2007.\cell{
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Occupancy
Rate\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table shows the
average occupancy rate of each shopping center during fiscal years ended June\~30,
2005, 2006 and 2007:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
lx10799\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Occupancy Percentage\cell{
lx10799\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Fiscal\~year\~ended\~June\~30,\cell{
lx9376\clvertalb\cellx9692\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10087\clvertalb\cel
lx10403\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10798\trrh172
lx10403\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10798\trrh172\row}}}
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (%)\cell{
0087\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10403\clvertalb\clshdng100\clcfp
at12\clcbpat12\cellx10798\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Abasto de Buenos
at12\clcbpat12\cellx10798\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto Palermo
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mendoza Plaza
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql C\u243?rdoba Shopping Villa
Cabrera\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Average occupancy
rate\cell\pard\plain\intbl\cf1\f51\fs13\ql
at12\clcbpat12\cellx10798\trrh206\row}}}\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql
Rental Price\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table shows
the annual/period average income per square meter for the fiscal years ended
June\~30, 2004, 2005, 2006 and 2007:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
lx10798\trrh344
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Fiscal Year
Ended\plain\intbl\cf1\f51\fs13\b\qc June\~30,(1)\cell{
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in Ps. per square meter)\cell{
Abasto\cell\pard\plain\intbl\cf1\f51\fs13\ql
1,021.5\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 1,273.2\cell{
at12\clcbpat12\cellx10798\trrh206\row}}}\pard\plain\f0\fs4\par\pard\plain\f0\fs2\br
drt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
Annual / six month rental price per gross leasable square meter reflects the sum of
base rent, percentage rent, stands and revenues from
admission\plain\intbl\cf1\f51\fs16\ql rights (excluding any applicable tax on
sales) divided by gross leasable square meters.\cell{
ql Principal Terms of our Leases\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Under
Argentine Law, terms of commercial leases must be between three to ten years, with
most leases in the shopping center business having\plain\cf1\f51\fs16\ql terms of
no more than five years. Our lease agreements are generally denominated in
Pesos.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Leasable space in our shopping
centers is marketed through an exclusive arrangement with our real estate broker
Fibesa S.A. We have a standard\plain\cf1\f51\fs16\ql lease agreement, the terms
and conditions of which are described below, which we use for most tenants.
However, our largest tenants generally negotiate\plain\cf1\f51\fs16\ql better
terms for their respective leases. No assurance can be given that lease terms will
be as set forth in the standard lease agreement.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql We charge our tenants a rent which
consists of the higher of (i)\~a monthly base rent (the \u8220?Base Rent\u8221?)
and (ii)\~a specified percentage\plain\cf1\f51\fs16\ql of the tenant\u8217?s
monthly gross sales in the store (the \u8220?Percentage Rent\u8221?) (which
generally ranges between 4% and 8% of\plain\cf1\f51\fs16\ql tenant\u8217?s gross
sales). Furthermore, pursuant to the rent escalation clause in most leases, a
tenant\u8217?s Base Rent generally increases between 4%\plain\cf1\f51\fs16\ql and
7% each year during the term of the lease. Although many of our lease agreements
contain readjustment clauses, these are not based on an
official\plain\cf1\f51\fs16\ql index nor do they reflect the inflation index. In
the event of litigation, there can be no assurance that we may be able to enforce
such clauses contained in\plain\cf1\f51\fs16\ql our lease agreements. See \u8220?
Risk Factors\u8212?Risks Related to Our Business\u8221? for a more detailed
discussion.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In addition to rent, we
charge most of our tenants an admission right, which is required to be paid upon
entering into a lease agreement and upon a\plain\cf1\f51\fs16\ql lease agreement
renewal. The admission right is normally paid in one lump sum or in a small number
of monthly installments. If the tenant pays this fee\plain\cf1\f51\fs16\ql in
installments, it is the tenant\u8217?s responsibility to pay for the balance of any
such amount unpaid in the event the tenant terminates its lease prior
to\plain\cf1\f51\fs16\ql its expiration. In the event of unilateral termination
and/or resolution for breach of duties by the tenant, a tenant will not be refunded
its admission right\plain\cf1\f51\fs16\ql without our
consent.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We are responsible for
supplying each shopping center with the electrical power connection and provision,
a main telephone switchboard, central air\plain\cf1\f51\fs16\ql conditioning
connection and a connection to a general fire detection system. Each rental unit is
connected to these systems. We also provide the food\plain\cf1\f51\fs16\ql court
tenants with sanitation and with gas systems connections. Each tenant is
responsible for completing all the necessary installations within its
own\plain\cf1\f51\fs16\ql rental unit, in addition to the direct expenses
generated by these items within each rental unit. These direct expenses generally
include: electricity, water,\plain\cf1\f51\fs16\ql gas, telephone and air
conditioning. Tenants must also pay for a percentage of total charges and general
taxes related to the maintenance of the common\plain\cf1\f51\fs16\ql areas. We
determine this percentage based on the tenant\u8217?s gross leasable area and the
location of its store. The common area expenses include,\plain\cf1\f51\fs16\ql
among others, administration, security, operations, maintenance, cleaning and
taxes.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We carry out promotional and
marketing activities to increase attendance to our shopping centers. These
activities are paid for with the\plain\cf1\f51\fs16\ql tenants\u8217?
contributions to the Common Promotional Fund (\u8220?CPF\u8221?), which is
administered by us. Every month tenants contribute to the\plain\cf1\f51\fs16\ql
CPF an amount equal to approximately 15% of their rent (Base Rent plus Percentage
Rent), in addition to rent and expense payments. We may
increase\plain\cf1\f51\fs16\ql the percentage that tenants must contribute to the
CPF, but the increase cannot exceed 25% of the original amount set forth in the
corresponding lease\plain\cf1\f51\fs16\ql agreement for the contributions to the
CPF. We may also require tenants to make extraordinary contributions to the CPF to
fund special promotional and\plain\cf1\f51\fs16\ql marketing campaigns or to cover
the costs of special promotional events that benefit all tenants. We may require
tenants to make these extraordinary\plain\cf1\f51\fs16\ql contributions up to four
times a year provided that each such extraordinary contribution may not exceed 25%
of the preceding monthly rental payment of\plain\cf1\f51\fs16\ql the
tenant.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Each tenant leases its rental
unit as a shell without any fixtures. Each tenant is responsible for the interior
design of its rental unit. Any\plain\cf1\f51\fs16\ql modifications and additions
to the rental units must be pre-approved by us. We have the option to decide
tenants\u8217? responsibility for all costs\plain\cf1\f51\fs16\ql incurred in
remodeling the rental units and for removing any additions made to the rental unit
when the lease expires. Furthermore, tenants are responsible\plain\cf1\f51\fs16\ql
for obtaining adequate insurance for their rental units, which must include, among
other things, coverage for fire, glass breakage, theft, flood, civil
liability\plain\cf1\f51\fs16\ql and workers\u8217?
compensation.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 51
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Sources of Shopping Center
Revenues\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Set forth below is a breakdown
of the sources of our shopping center revenues for our fiscal years ended June\~30,
2005, 2006 and 2007.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
lx10799\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Fiscal Year ended June\~30,\cell{
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in Pesos)\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fixed monthly minimum
rent\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Variable rent dependent on
sales\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Stand and kiosk
rentals\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Admission
fees\cell\pard\plain\intbl\cf1\f51\fs13\ql
Various\cell\pard\plain\intbl\cf1\f51\fs13\ql
Parking\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Total rent and
services\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Tarjeta Shopping
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Other revenues from other
segments\cell\pard\plain\intbl\cf1\f51\fs13\ql
0\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr
133,848\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total shopping center
talb\cellx9716\clvertalb\cellx9829\clvertalb\cellx10797\trrh206\row}}}\pard\plain\s
b198\fi462\cf1\f51\fs16\b\i\ql Description of Each Shopping
Center\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Set forth below is information
regarding our principal shopping
centers.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Alto Palermo Shopping, City
of Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Alto Palermo
Shopping is a 150-store shopping center that opened in 1990 and is located in
the\plain\cf1\f51\fs16\ql well known and densely populated neighborhood of Palermo
in the City of Buenos Aires. Alto Palermo Shopping is located only a few minutes
from\plain\cf1\f51\fs16\ql downtown Buenos Aires and with nearby subway access.
Alto Palermo Shopping has a total constructed area of 64,574 square meters that
consists of\plain\cf1\f51\fs16\ql 18,210 square meters of gross leasable area. The
shopping center has a food court with 21 restaurants. Alto Palermo Shopping is
spread out over four\plain\cf1\f51\fs16\ql levels and has a 647 car-parking lot.
Tenants in this shopping center generated average estimated monthly retail sales of
approximately Ps.2,298 per\plain\cf1\f51\fs16\ql square meter for the fiscal year
ended June\~30, 2007. Principal tenants currently include Zara, Fr\u225?vega,
Garbarino, Just For Sport and Musimundo.\plain\cf1\f51\fs16\ql Alto Palermo
Shopping\u8217?s five largest tenants (in terms of sales in this shopping center)
accounted for approximately 15.4% of its gross leasable\plain\cf1\f51\fs16\ql area
at June\~30, 2007 and approximately 9.6% of its annual base rent for the fiscal
year ended on such date.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Alto
Avellaneda, Avellaneda, Greater Buenos Aires\plain\cf1\f51\fs16\i\ql
.\plain\cf1\f51\fs16\ql Alto Avellaneda is a 145-store shopping center that opened
in October 1995 and is located in\plain\cf1\f51\fs16\ql the densely populated
neighborhood known as Avellaneda, on the southern border of Buenos Aires. Alto
Avellaneda has a total constructed area of 97,655\plain\cf1\f51\fs16\ql square
meters that includes 27,336 square meters of gross leasable area. Alto Avellaneda
includes several anchor stores, a six-screen multiplex movie\plain\cf1\f51\fs16\ql
theatre, a Wal-Mart superstore, an entertainment area, a bowling alley, a 16-
restaurant food court and an outdoor parking lot. Wal-Mart purchased
the\plain\cf1\f51\fs16\ql space it now occupies. Tenants in this shopping center
generated average estimated monthly retail sales of approximately Ps.1,275 per
square meter for the\plain\cf1\f51\fs16\ql fiscal year ended June\~30, 2007.
Principal tenants currently include Fr\u225?vega, Rodo, Bingo, Garbarino and
Compumundo. Alto Avellaneda\u8217?s\plain\cf1\f51\fs16\ql five largest tenants (in
terms of sales in this shopping center) accounted for approximately 14.4% of its
gross leasable area at June\~30, 2007 and\plain\cf1\f51\fs16\ql approximately
12.4% of its annual base rent for the fiscal year ended on such
date\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Paseo Alcorta, City of Buenos
Aires\plain\cf1\f51\fs16\ql . Paseo Alcorta is a 113-store shopping center that
opened in 1992 and is located in the residential\plain\cf1\f51\fs16\ql
neighborhood of Palermo Chico, one of the most exclusive areas in the City of
Buenos Aires, within a short drive from downtown Buenos Aires.
Paseo\plain\cf1\f51\fs16\ql Alcorta has a total constructed area of approximately
54,728 square meters that consists of 14,403 square meters of gross leasable area.
The three-level\plain\cf1\f51\fs16\ql shopping center includes a four-screen
multiplex movie theatre, a 17 restaurant food court, a Carrefour hypermarket, and a
free parking lot with\plain\cf1\f51\fs16\ql approximately 1,300 spaces. Carrefour
purchased the space it now occupies but it pays a share of the expenses of the
shopping center. Tenants in this\plain\cf1\f51\fs16\ql shopping center generated
average estimated monthly retail sales of approximately Ps.1,863 per square meter
for the fiscal year ended June\~30, 2007.\plain\cf1\f51\fs16\ql Principal tenants
currently include Zara, Fr\u225?vega, Musimundo, Kartun and Etiqueta
Negra\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Paseo Alcorta\u8217?s five
largest tenants (in terms of\plain\cf1\f51\fs16\ql sales in this shopping center)
accounted for approximately 17.3% of Paseo Alcorta\u8217?s gross leasable area at
June\~30, 2007 and approximately 9.3%\plain\cf1\f51\fs16\ql of its annual base
rent for the fiscal year ended on such date.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Abasto Shopping, City of Buenos
Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Shopping is a 171-store
shopping center located in the City Buenos Aires. Abasto Shopping is
directly\plain\cf1\f51\fs16\ql accessible by subway, railway and highway. Abasto
Shopping opened in November 1998. The principal building is a landmark building
which during the\plain\cf1\f51\fs16\ql period 1889 to 1984 operated as the primary
fresh produce market for the City of Buenos Aires. The property was converted into
a 115,905 square meter\plain\cf1\f51\fs16\ql shopping center, with approximately
39,683 square meters of gross leasable area. Abasto Shopping is located across from
Torres de Abasto residential\plain\cf1\f51\fs16\ql apartment development. The
shopping center includes a food court with 24 restaurants covering an area of 5,600
square meters, a 12-screen multiplex\plain\cf1\f51\fs16\ql movie theatre,
entertainment facilities and the \u8220?Museo de los Ni\u241?os Abasto,\u8221? a
museum for children. Abasto Shopping is spread out\plain\cf1\f51\fs16\ql over five
levels and has a 1,200-car parking lot. Tenants in this shopping center generated
estimated average monthly sales of approximately Ps.1,205 per\plain\cf1\f51\fs16\ql
square meter for the fiscal year ended June\~30, 2007. Principal tenants currently
include Zara, Hoyts Cinemas\plain\cf1\f51\fs16\i\ql ,\plain\cf1\f51\fs16\ql
Fr\u225?vega, Hiper Rodo and Garbarino\plain\cf1\f51\fs16\i\ql
.\plain\cf1\f51\fs16\ql Abasto Shopping Center\u8217?s five largest tenants (in
terms of sales in this shopping center) accounted for approximately 11.3% of the
annual base rent\plain\cf1\f51\fs16\ql for the fiscal year ended on June\~30,
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Patio Bullrich, City of Buenos
Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Patio Bullrich is an 83-
store shopping center located in Recoleta, a popular tourist zone in City of
Buenos\plain\cf1\f51\fs16\ql Aires a short distance from the Caesar Park, Four
Seasons and Hyatt hotels. Patio Bullrich has a total constructed area of 28,211
square meters that\plain\cf1\f51\fs16\ql consists of 10,978 square meters of gross
leasable area. The four-story shopping center includes a 14 restaurant food court,
an entertainment area, a\plain\cf1\f51\fs16\ql six-screen multiplex movie theatre
and a parking lot with 212 spaces. Tenants in this shopping center generated
estimated average monthly sales of\plain\cf1\f51\fs16\ql approximately Ps.1,717
per square meter for the fiscal year ended June\~30, 2007. Principal tenants
currently include Etiqueta Negra, Rapsodia, Christian\plain\cf1\f51\fs16\ql Dior,
Casa L\u243?pez and Rouge International. Patio Bullrich\u8217?s five largest
tenants (in terms of sales in the shopping center) accounted
for\plain\cf1\f51\fs16\ql approximately 14.9% of Patio Bullrich\u8217?s gross
leasable area at June\~30, 2007, and approximately 9.4% of its annual base rent for
the fiscal year\plain\cf1\f51\fs16\ql ended on such
date.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Alto Noa, Salta, Province of
Salta\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Alto Noa is an 84 store
shopping center located in the City of Salta, the capital of the Province of Salta.
The\plain\cf1\f51\fs16\ql shopping center consists of approximately 41,700 square
meters of total constructed area that consists of 18,831 square meters of gross
leasable area and\plain\cf1\f51\fs16\ql includes a 13-restaurant food court, a
large entertainment center, a supermarket, an eight-screen movie theatre and
parking facilities for 551 cars. Tenants\plain\cf1\f51\fs16\ql in this shopping
center generated estimated average monthly sales of approximately Ps.577 per square
meter for the fiscal year ended June\~30, 2007.\plain\cf1\f51\fs16\ql Principal
tenants currently include Supermercado Norte, Fr\u225?vega, Garbarino, Y.P.F. and
Slots. Alto Noa\u8217?s five largest tenants (in terms of\plain\cf1\f51\fs16\ql
sales in this shopping center) accounted for approximately 32.8% of Alto Noa\u8217?
s gross leasable area at June\~30, 2007, and approximately 8.0% of
its\plain\cf1\f51\fs16\ql annual base rent for the fiscal year ended on such
date.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Buenos Aires Design, City of
Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Buenos Aires Design
is a 61-store shopping center intended for specialty interior, home
decorating\plain\cf1\f51\fs16\ql and restaurants that opened in 1993. Alto Palermo
owns Buenos Aires Design through a 54% interest in Emprendimientos Recoleta, which
owns the\plain\cf1\f51\fs16\ql concession to operate the shopping center. Buenos
Aires Design is located in Recoleta, one of the most popular tourist zone in Buenos
Aires City. Buenos\plain\cf1\f51\fs16\ql Aires Design has a total constructed area
of 31,645 square meters that consists of 13,988 square meters of gross leasable
area. The shopping center has 6\plain\cf1\f51\fs16\ql restaurants, is divided into
two floors and has a 174-car parking lot. Tenants in this shopping center generated
estimated average monthly sales of\plain\cf1\f51\fs16\ql approximately Ps.1,660
per square meter for the fiscal year ended June\~30, 2007. Principal tenants
currently include Morph, Barugel Azulay, Garbarino,\plain\cf1\f51\fs16\ql Hard
Rock Caf\u233? and Prima Fila. Buenos Aires Design\u8217?s five largest tenants (in
terms of sales in this shopping center) accounted for\plain\cf1\f51\fs16\ql
approximately 29.5% of Buenos Aires Design\u8217?s gross leasable area and 17.6% of
its annual base rent for the fiscal year ended on such
date.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Alto Rosario, Santa Fe, City
of Rosario\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Alto Rosario is a
shopping center of 146 stores, located in City of Rosario, Province of Santa Fe. It
was\plain\cf1\f51\fs16\ql inaugurated in November 2004 and has 105,809 square
meters of fully covered surface, and 30,261 square meters of gross leasable area.
This center is\plain\cf1\f51\fs16\ql primarily devoted to clothing and
entertainment and includes a food patio with 18 stores, a childrens\u8217?
entertainment area, a 14-cinema complex and\plain\cf1\f51\fs16\ql parking lot for
almost 1,736 vehicles. Tenants in this shopping center generated average monthly
sales of approximately Ps.563 per square meter, for\plain\cf1\f51\fs16\ql fiscal
year ended June\~30, 2007. Principal tenants are Fr\u225?vega, Sport 78,
McDonald\u8217?s, Compumundo and Red Megatone. Alto Rosario\u8217?
s\plain\cf1\f51\fs16\ql five largest tenants (in terms of sales in this shopping
center) accounted for approximately 6.5% of Alto Rosario\u8217?s gross leasable
area and 6.9% of\plain\cf1\f51\fs16\ql its annual base rent for the fiscal year
ended on such date.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Mendoza Plaza, Mendoza,
Province of Mendoza\plain\cf1\f51\fs16\ql . Mendoza Plaza is a 148-store shopping
center located in the City Mendoza in the Province of\plain\cf1\f51\fs16\ql
Mendoza. It consists of 39,392 square meters of gross leasable area. Mendoza Plaza
has a multiplex movie theatre covering an area of
approximately\plain\cf1\f51\fs16\ql 3,659 square meters, the Chilean department
store Falabella, a food court, with 23 stores, an entertainment center and a
supermarket which is also a\plain\cf1\f51\fs16\ql tenant. Tenants in this shopping
center generated estimated average monthly sales of approximately Ps.715 per square
meter for the fiscal year 2007.\plain\cf1\f51\fs16\ql During the year 2005 a 68.8%
interest was acquired to P\u233?rez Cuesta, increasing up to 85.4%. Principal
tenants currently include Falabella, Super\plain\cf1\f51\fs16\ql Plaza Vea,
Fr\u225?vega, Garbarino and Red Megatone. Mendoza Plaza\u8217?s five largest
tenants (in terms of sales in this shopping center) accounted\plain\cf1\f51\fs16\ql
for approximately 33.7% of Mendoza Plaza\u8217?s gross leasable area at June\~30,
2007, and approximately 22.3% of its annual base rent for the
fiscal\plain\cf1\f51\fs16\ql year ended on such
date.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql C\u243?rdoba Shopping, Villa
Cabrera, C\u243?rdoba\plain\cf1\f51\fs16\ql . C\u243?rdoba Shopping is a 106 shops
commercial center located in Villa Cabrera,\plain\cf1\f51\fs16\ql Province of
C\u243?rdoba. It covers 11,056 square meters of gross locative area. The C\u243?
rdoba Shopping has a movie theatre complex with 12 units\plain\cf1\f51\fs16\ql and
approximately 6,929 square meters, a food patio and an entertainment area. Tenants
in this shopping center generated estimated average monthly
sales\plain\cf1\f51\fs16\ql of approximately Ps.115 per square meter for the
fiscal year 2007. Principal lessees are New Sport, Musimundo, Dexter,
McDonald\u8217?s and Plenty.\par\pard\plain\sb198\sa44\fi462\cf1\f51\fs16\b\i\ql Ex
Escuela Gobernador Vicente de Olmos, C\u243?rdoba, Province of C\u243?
rdoba\plain\cf1\f51\fs16\ql . In November 2006 we participated in a public bidding
of\plain\cf1\f51\fs16\ql the Corporaci\u243?n Inmobiliaria C\u243?rdoba S.A. for
the sale of the building known as Ex Escuela Gobernador Vicente de Olmos, located
in the City\plain\cf1\f51\fs16\ql of C\u243?rdoba. The building has 5,147 square
meters of surface area. Inside the building there is a part of the Patio Olmos
shopping center, which\plain\cf1\f51\fs16\ql operates in four commercial plants
and two underground parking lots. This shopping center also includes two neighbor
buildings with cinemas and a\plain\cf1\f51\fs16\ql commercial annex connected to
the bidding sector and legally related through easement contracts. The building is
under a concession contract, effective\plain\cf1\f51\fs16\ql for a 40-year term
expiring in February 2032, in which we act as grantor. Such contract establishes a
monthly payment which is increased by Ps.2,513\plain\cf1\f51\fs16\ql every 47
months. As of the date of this annual report (i)\~the concession is in its
181\plain\cf1\f51\fs11\ql\super st\plain\cf1\f51\fs16\ql month with a monthly
payment of Ps.10,052, being the next\plain\cf1\f51\fs16\ql monthly increase in the
186\plain\cf1\f51\fs11\ql\super th\plain\cf1\f51\fs16\ql month to Ps.12,565, and
(ii)\~the transfer deed document is not yet effective. Our offer bid was for
Ps.32.5 million, of which\plain\cf1\f51\fs16\ql Ps.9.7 million was paid on the
awarding of the building and Ps.22.8 million was paid on the date of the execution
of the transfer deed. On November\~20,\plain\cf1\f51\fs16\ql 2006, we were
notified that the bid was awarded to us, and we paid the 30% of the offer bid in
accordance with the terms and conditions established in\plain\cf1\f51\fs16\ql the
bid.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We were ordered by the
Corporaci\u243?n Inmobiliaria C\u243?rdoba S.A. to execute the deed documents on
May\~15, 2007. We answered such\plain\cf1\f51\fs16\ql order by indicating our
willingness to sign the related deed documents for the purchase and sale agreement
and the assignment of the concession\plain\cf1\f51\fs16\ql agreement,
respectively, provided the bidding terms are
respected.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On January\~15, 2007 we were
notified of two claims filed against us before the Argentine Antitrust Authority,
one by a private individual and the\plain\cf1\f51\fs16\ql other one by the
licensee of the shopping center, both opposing this transaction. On February\~1,
2007 we responded the claims.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On
June\~26, 2007, we were advised that the Argentine Antitrust Authority initiated a
summary proceeding to determine whether their prior consent\plain\cf1\f51\fs16\ql
was required to complete this transaction. As of the date of this annual report the
result of this proceeding is yet to be
determined.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On September\~25, 2007, we
purchased the building known as Ex Escuela Gobernador Vicente de Olmos from the
Corporaci\u243?n Inmobiliaria\plain\cf1\f51\fs16\ql C\u243?rdoba S.A., pursuant to
the terms and conditions of \u8220?Bid No.\~10/06 for the sale of the property
located in the Province of Cordoba\u8221?.\plain\cf1\f51\fs16\ql The aggregate
purchase price was Ps.32.5 million. As part of this transaction, the Province of
Cordoba has also assigned us its rights and obligations\plain\cf1\f51\fs16\ql
under the concession contract.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Panamerican Mall
Project\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql In December 2006 we
entered into a series of agreements for the construction, marketing and management
of a new\plain\cf1\f51\fs16\ql shopping center to be developed in the neighborhood
of Saavedra, City of Buenos Aires, by Panamerican Mall S.A., a recently formed
company in which\plain\cf1\f51\fs16\ql our subsidiary Alto Palermo has an 80%
shareholding. The project includes the construction of a shopping center, a
hypermarket, a cinema complex and\plain\cf1\f51\fs16\ql an office building and/or
housing building. This is currently one of our most significant development
projects. We have started the construction of this\plain\cf1\f51\fs16\ql shopping
center and currently seek to complete it during our fiscal year ending June\~30,
2009.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Credit Card
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Through our 80% owned
subsidiary Tarshop, we are engaged in the credit card business through the issuance
of our\plain\cf1\f51\fs16\i\ql Tarjeta Shopping\plain\cf1\f51\fs16\ql
and\plain\cf1\f51\fs16\i\ql Tarjeta\plain\cf1\f51\fs16\i\ql Shopping
Metroshop\plain\cf1\f51\fs16\ql credit cards which have a strong presence in our
shopping centers and nearby hypermarkets and street stores. In addition
to\plain\cf1\f51\fs16\ql increasing sales and traffic in our shopping centers, we
also seek to achieve a financial return by facilitating access to credit for an
underbanked segment\plain\cf1\f51\fs16\ql of the Argentine
population.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We target all customers of
our shopping centers as well as customers in nearby hypermarkets and street stores.
We attract customers by offering a\plain\cf1\f51\fs16\ql credit card which is easy
to obtain and use and by promotions suited to the commercial needs of our tenants
and that are also regarded by customers as\plain\cf1\f51\fs16\ql more convenient
than other means of payment. One of the most important benefits granted to
customers is the\plain\cf1\f51\fs16\i\ql welcome discount\plain\cf1\f51\fs16\ql
which provides a 10%\plain\cf1\f51\fs16\ql discount on all purchases made on the
customer\u8217?s first day. One of the most aggressive promotions includes offering
up to a 20% discount at stores\plain\cf1\f51\fs16\ql designated at random, and as
a result, affording accessible prices to a wide range of customers. Many of Tarjeta
Shopping\u8217?s customers also have\plain\cf1\f51\fs16\ql access to the Banelco
and Link ATM networks, allowing them to make cash withdrawals from any ATM in
Argentina.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We are currently considering
strategic alternatives with respect to our investment in Tarshop which, due to its
recent growth in size and\plain\cf1\f51\fs16\ql profitability, competes
increasingly with credit card companies that are substantially larger. As a result,
we are currently considering alternatives to\plain\cf1\f51\fs16\ql maximize the
value of our investment in Tarshop, including its possible merger with, or sale to,
another entity engaged in the credit card
industry.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql History of our Credit Card
Business\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The credit card business in
Argentina started in the 1960s, but its development was limited until companies
such as Visa and Mastercard entered the\plain\cf1\f51\fs16\ql Argentine market in
the early 1980s. During this first stage, and as a consequence of an inflationary
economy, the surcharges imposed by merchants for\plain\cf1\f51\fs16\ql credit card
sales were high, burdensome and curtailed the growth of the credit card business in
Argentina. With the implementation of the Convertibility\plain\cf1\f51\fs16\ql
Plan in April 1991 the inflation was curbed, and the consumer financing market, in
pesos as well as in dollars, rapidly
developed.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Our\plain\cf1\f51\fs16\i\ql
Tarjeta Shopping\plain\cf1\f51\fs16\ql card was introduced in 1996 mainly to
develop a private credit card that would be offered to customers of the
Alto\plain\cf1\f51\fs16\ql Avellaneda shopping center and accepted at all its
stores, including the Wal-Mart Avellaneda superstore located next to Alto
Avellaneda. In light of the\plain\cf1\f51\fs16\ql initial success of
the\plain\cf1\f51\fs16\i\ql Tarjeta Shopping\plain\cf1\f51\fs16\ql card in Alto
Avellaneda, we determined to use it as our platform for expanding our credit card
business to our\plain\cf1\f51\fs16\ql other shopping
centers.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In late 2004, we introduced
our\plain\cf1\f51\fs16\i\ql Tarjeta Shopping Metroshop\plain\cf1\f51\fs16\ql
credit card through a 50.0% owned joint venture with Metronec S.A., a
company\plain\cf1\f51\fs16\ql which issues the\plain\cf1\f51\fs16\i\ql Tarjeta
Subtecard\plain\cf1\f51\fs16\ql credit card. The\plain\cf1\f51\fs16\i\ql
Tarjeta Shopping Metroshop\plain\cf1\f51\fs16\ql credit card has the same
characteristics and benefits as our\plain\cf1\f51\fs16\i\ql
Tarjeta\plain\cf1\f51\fs16\i\ql Shopping\plain\cf1\f51\fs16\ql card as well as
the\plain\cf1\f51\fs16\i\ql Tarjeta Subtecard\plain\cf1\f51\fs16\ql .
The\plain\cf1\f51\fs16\i\ql Tarjeta Shopping Metroshop\plain\cf1\f51\fs16\ql
credit card allows us access to the users of the subway of the City
of\plain\cf1\f51\fs16\ql Buenos Aires and the General Urquiza Railway. Holders of
the\plain\cf1\f51\fs16\i\ql Tarjeta Shopping Metroshop\plain\cf1\f51\fs16\ql
credit card can pay credit card bills at Metroshop\u8217?s\plain\cf1\f51\fs16\ql
branches, subway stations ticket counters and through other collection agents, and
are entitled to participate in exclusive promotions and specially
designed\plain\cf1\f51\fs16\ql financing plans. This alliance allows us to develop
a consumer credit business using the captive customer base, experience and
know\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 55
\
how in the marketing of financial products in high-transit areas and its use in the
more than 30,000 participating stores, the best chains and the
Banelco\plain\cf1\f51\fs16\ql and Link ATM
networks.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Metroshop currently has 11
branches distributed in the main stations of the A, B, C, and D and E subway lines
in the City of Buenos Aires, one in\plain\cf1\f51\fs16\ql the City of Mar del
Plata and more than twenty outsourced participating points of sale located in the
subway network of the City of Buenos
Aires.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Since 2003, our credit card
business has expanded its customer base and its area of influence, particularly in
the south area of Buenos Aires and in\plain\cf1\f51\fs16\ql other provinces. For
the fiscal years ended June\~30, 2000, 2003, 2006 and 2007 the evolution of
Tarshop\u8217?s customers base was as follows:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
{\trowd\trqc\clvertalc\cellx5025\clvertalb\cellx6051\clvertalc\cellx7132\clvertalc\
cellx7310\clvertalb\cellx8327\clvertalc\cellx9754\clvertalc\cellx9932\trrh-66\trrh0
cellx7310\clvertalb\cellx8327\clvertalc\cellx9754\clvertalc\cellx9932\trrh-
66\trrh0\row}}}
{\trowd\trqc\clvertalb\cellx5025\clvertalb\cellx6051\clbrdrb\brdrs\brdrcf1\clvertal
b\cellx7132\clvertalb\cellx7310\clvertalb\cellx8327\clbrdrb\brdrs\brdrcf1\clvertalb
\cellx9754\clvertalb\cellx9932\trrh516
\pard\plain\intbl\brdrb\brdrs\cf1\f51\fs13\b\ql Fiscal year ended
Shopping\~Centers\cell\pard\plain\intbl\cf1\f51\fs13\ql
Street\~Stores\~and\~Other
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Non-Shopping Center
Stores\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
\cellx9754\clvertalb\cellx9932\trrh516\row}}}
{\trowd\trqc\clshdng100\clcfpat12\clcbpat12\cellx5025\clvertalb\clshdng100\clcfpat1
2\clcbpat12\cellx6051\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx7132\clvertalb\
clshdng100\clcfpat12\clcbpat12\cellx7310\clvertalb\clshdng100\clcfpat12\clcbpat12\c
ellx8327\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx9754\clvertalb\clshdng100\cl
cfpat12\clcbpat12\cellx9932\trrh206
13.0\cell\pard\plain\intbl\cf1\f51\fs16\ql %\cell{
cfpat12\clcbpat12\cellx9932\trrh206\row}}}
{\trowd\trqc\cellx5025\clvertalb\cellx6051\clvertalb\cellx7132\clvertalb\cellx7310\
clvertalb\cellx8327\clvertalb\cellx9754\clvertalb\cellx9932\trrh206
clvertalb\cellx8327\clvertalb\cellx9754\clvertalb\cellx9932\trrh206\row}}}
clvertalb\cellx8327\clvertalb\cellx9754\clvertalb\cellx9932\trrh206\row}}}\pard\pla
in\sb198\fi462\cf1\f51\fs16\ql Our\plain\cf1\f51\fs16\i\ql Tarjeta
Shopping\plain\cf1\f51\fs16\ql card has become one of the main credit cards in
Alto Avellaneda shopping center with more than 33% of the credit
card\plain\cf1\f51\fs16\ql sales made, and in Abasto de Buenos Aires with a share
exceeding 15%. In addition, we have increased our\plain\cf1\f51\fs16\i\ql Tarjeta
Shopping\plain\cf1\f51\fs16\ql customer base to almost\plain\cf1\f51\fs16\ql
600,000 accounts by the end of 2006, with an activation of more than 70%, sales of
almost $1 billion in the year and more than 30,000
participating\plain\cf1\f51\fs16\ql
stores.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The table below sets forth
information with respect to the growth of our credit card business during the
periods indicated:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
{\trowd\trqc\clvertalc\cellx7454\clvertalb\cellx7920\clvertalc\cellx8591\clvertalb\
cellx9262\clvertalc\cellx9933\trrh-66\trrh0
{\trowd\trqc\clvertalc\cellx7454\clvertalb\cellx7920\clvertalc\cellx8591\clvertalb\
cellx9262\clvertalc\cellx9933\trrh-66\trrh0\row}}}
b\cellx9934\trrh172
For\~the\~fiscal\~year\~ended\~June\~30,\cell{
b\cellx9934\trrh172\row}}}
b\cellx8591\clvertalb\cellx9262\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9933\trrh172
b\cellx8591\clvertalb\cellx9262\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9933\trrh172\r
ow}}}
{\trowd\trqc\clvertalb\cellx7454\clvertalb\cellx7920\clvertalb\cellx9934\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in millions of Ps.)\cell{
{\trowd\trqc\clvertalb\cellx7454\clvertalb\cellx7920\clvertalb\cellx9934\trrh172\ro
w}}}
ellx9933\trrh206
ellx9933\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Interest
ellx9933\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Merchants\u8217?
commissions\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other fees and
ellx9933\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Compensatory, punitive and other
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Account maintenance
charges\cell\pard\plain\intbl\cf1\f51\fs13\ql
ellx9933\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Charges for life and disability
insurance\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Income from
Metroshop\cell\pard\plain\intbl\cf1\f51\fs13\ql
ellx9933\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Credit cards
reissued\cell\pard\plain\intbl\cf1\f51\fs13\ql
{\trowd\trqc\clvertalb\cellx7454\clvertalb\cellx7920\clbrdrt\brdrs\brdrcf1\clvertal
b\cellx8591\clvertalb\cellx9262\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9933\trrh29
b\cellx8591\clvertalb\cellx9262\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9933\trrh29\ro
w}}}
ellx9933\trrh206
receivables\plain\intbl\cf1\f51\fs11\ql\super
ellx9933\trrh206
issued\cell\pard\plain\intbl\cf1\f51\fs13\ql
Branches\plain\intbl\cf1\f51\fs11\ql\super
ellx9933\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Participating
stores\plain\intbl\cf1\f51\fs11\ql\super
ellx9933\trrh206\row}}}\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15
\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
Including the securitized portion.\cell{
\par\pard\plain
constant Ps.\cell{
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The table below sets forth
information with respect to the growth of our credit card business during fiscal
year 2007, considering the last\plain\cf1\f51\fs16\ql classification of revenues
in Tarshop\u8217?s financial statements:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
{\trowd\trqc\clvertalc\cellx5401\clvertalb\cellx7057\clvertalc\cellx9071\trrh-
66\trrh0
66\trrh0\row}}}
b\cellx9071\trrh344
For\~the\~fiscal\~year\~ended\~June\~30,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc 2007\cell{
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in million of Ps.)\cell{
w}}}
2\clcbpat12\cellx7057\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx9071\trrh206
2\clcbpat12\cellx7057\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx9071\trrh206\ro
w}}}
{\trowd\trqc\cellx5401\clvertalb\cellx7057\clvertalb\cellx9071\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Merchants\u8217?
{\trowd\trqc\cellx5401\clvertalb\cellx7057\clvertalb\cellx9071\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Income for
w}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other fees and
w}}}
reissued\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Account maintenance
charges\cell\pard\plain\intbl\cf1\f51\fs13\ql
w}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Income from
Metroshop\cell\pard\plain\intbl\cf1\f51\fs13\ql
b\cellx9071\trrh29
w}}}
b\cellx9071\trrh29
receivables\plain\intbl\cf1\f51\fs11\ql\super
b\cellx9071\trrh29
w}}}
b\cellx9071\trrh29
Branches\plain\intbl\cf1\f51\fs11\ql\super
b\cellx9071\trrh29
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Participating
stores\plain\intbl\cf1\f51\fs11\ql\super
w}}}\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
Including the securitized portion.\cell{
\par\pard\plain
units.\cell{
l Distribution Network\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Today,\plain\cf1\f51\fs16\i\ql Tarjeta Shopping\plain\cf1\f51\fs16\ql has 22
branches, including in our Alto Avellaneda, Alto Palermo, Abasto and Paseo Alcorta
shopping centers, as well as\plain\cf1\f51\fs16\ql street offices such as the ones
located in the Avellaneda District, in the downtown area of Buenos Aires, and in
the cities of Lomas de Zamora,\plain\cf1\f51\fs16\ql Mor\u243?n and Quilmes, among
others. This growth has been accompanied by the significant expansion throughout
the rest of the country by the\plain\cf1\f51\fs16\ql opening of branches in the
provinces of C\u243?rdoba, Tucum\u225?n, Salta and San Salvador de Jujuy. In
addition, we have stands for promotion,\plain\cf1\f51\fs16\ql opening of accounts
and distribution of cards at the Wal-Mart Avellaneda superstore and the Coto
supermarkets located in the cities of Lan\u250?s,\plain\cf1\f51\fs16\ql
Sarand\u237? and Temperley. We have also entered into strategic alliances at the
point of sale of certain important household appliance and
motorcycle\plain\cf1\f51\fs16\ql stores where it is possible to obtain instant
credit through the so-called \u8220?First Transaction\u8221? scheme where no card
is needed for the first\plain\cf1\f51\fs16\ql
purchase.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Each branch is organized as an
autonomous and independent business unit that handles the resources necessary to
achieve its business goals, such as\plain\cf1\f51\fs16\ql invoicing and number of
accounts opened. In addition,\plain\cf1\f51\fs16\i\ql Tarjeta
Shopping\plain\cf1\f51\fs16\ql has its own ATM structure for payment of bills and
extension of automatic cash\plain\cf1\f51\fs16\ql loans to customers in its
branches, applying facilities and procedures for the management and movement of
cash comparable to those used by bank\plain\cf1\f51\fs16\ql
branches.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Credit Risk
Management\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql Credit Approval
Process\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Applications for issue of credit
cards submitted are subjected to an evaluation process that undergoes various
controls. First, the applicant\u8217?s\plain\cf1\f51\fs16\ql identity is verified
and its credit information is collected from credit bureau agencies. Based on the
information filed by the applicant and the credit\plain\cf1\f51\fs16\ql bureau
data obtained, in the absence of any negative background, the applicant is given a
card with a provisional limit set according to its score
level.\plain\cf1\f51\fs16\ql Simultaneously, the data provided by the applicant
himself are verified directly and by cross-checking by means of inquiries to credit
databases and\plain\cf1\f51\fs16\ql governmental agencies, and if necessary,
telephone verifications and validations are made at the relevant
domicile.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 57
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Credit
Limits\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The credit limit assigned to each
card applicant is determined on the basis of the family income and other
requirements established by Tarshop\plain\cf1\f51\fs16\ql based on its experience
up to a maximum of Ps.20,000. The credit limit is the maximum amount of unmatured
installment payments available to the client\plain\cf1\f51\fs16\ql and its
additional cardholders to make purchases, services and cash advances, after having
analyzed the client\u8217?s indebtedness to other financial\plain\cf1\f51\fs16\ql
institutions.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Applications to increase
credit limits are evaluated on the basis of the applicant\u8217?s seniority and
payment behavior and financial condition\plain\cf1\f51\fs16\ql vis-\u224?-vis
other financial institutions. In addition, Tarshop from time to time reviews the
card\u8217?s limit based on the card holder\u8217?s\plain\cf1\f51\fs16\ql payment
behavior.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Payment
Plans\par\pard\plain\sb88\sa44\fi462\cf1\f51\fs16\ql Tarshop handles a single
billing cycle that matures on the 25\plain\cf1\f51\fs11\ql\super
th\plain\cf1\f51\fs16\ql day of each month. The bill contemplates a grace period
for non-interest accruing\plain\cf1\f51\fs16\ql payments that expires on the
9\plain\cf1\f51\fs11\ql\super th\plain\cf1\f51\fs16\ql day of the following
month, and a second due date subject to delayed payment charges on the
20\plain\cf1\f51\fs11\ql\super th\plain\cf1\f51\fs16\ql day of the
following\plain\cf1\f51\fs16\ql month. Bills are payable at any Tarshop office and
in our major collection facilities.\par\pard\plain\sb198\sa44\fi462\cf1\f51\fs16\ql
Accounts with unpaid bills as of the 20th day of each month fall in arrears, and
are blocked until payment is effected. During the first 30 days
of\plain\cf1\f51\fs16\ql arrears, the client receives automatic and manual calls
and letters of reminder. As from the 31\plain\cf1\f51\fs11\ql\super
st\plain\cf1\f51\fs16\ql day of arrears, telephone collection officers arrange
an\plain\cf1\f51\fs16\ql interview with the delinquent client at the branches, so
as to continue collection activities in
person.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Credit Monitoring and
Collection Procedures\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Delinquent
collection management proceedings start with a reminder call sent to clients who
have failed to pay on the first due date, by using an\plain\cf1\f51\fs16\ql
automatic call system. Approximately 40 to 120 days after the due date, the actions
involve a combination of telephone calls, interviews with
collection\plain\cf1\f51\fs16\ql officers at the Tarshop\u8217?s branches and home
visits, aimed at obtaining a discharge of the debt or a payment rescheduling,
accompanied by the\plain\cf1\f51\fs16\ql execution of a debt acknowledgment
instrument by the client. Finally, accounts with arrears of more than 120 days are
transferred to the attorneys for the\plain\cf1\f51\fs16\ql filing of legal
actions, unless there is evidence of the debtor\u8217?s
insolvency.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Tarshop\u8217?s collection
procedures are similar to those established in the trust, see \u8220?Funding and
Securitization Activities\u8221? below.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
As concerns loan loss provisions, the policies we apply are similar to those
established by the Argentine Central Bank. We make provisions
in\plain\cf1\f51\fs16\ql relation to the credit portfolio category based on the
following:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
cellx7990\trrh-66\trrh0
cellx7990\trrh-66\trrh0\row}}}
b\cellx7812\clvertalb\cellx7990\trrh228
\pard\plain\intbl\brdrb\brdrs\cf1\f51\fs13\b\ql
Performing\cell\pard\plain\intbl\cf1\f51\fs13\ql
Provision\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
b\cellx7812\clvertalb\cellx7990\trrh228\row}}}
clshdng100\clcfpat12\clcbpat12\cellx7990\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Past
due:\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
clshdng100\clcfpat12\clcbpat12\cellx7990\trrh206\row}}}
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql 0-30
days\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
trrh206
trrh206\row}}}
clshdng100\clcfpat12\clcbpat12\cellx7990\trrh206\row}}}\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The table below sets forth
information with respect to the credit card receivables (including the securitized
portion):\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
\clvertalc\cellx10795\trrh-66\trrh0
\clvertalc\cellx10795\trrh-66\trrh0\row}}}
lx10799\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc As of June\~30,\cell{
\clvertalb\cellx10795\trrh172
%\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc %\cell{
\clvertalb\cellx10795\trrh172\row}}}
cellx9409\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10049\clvertalb\clshdng100\
clcfpat12\clcbpat12\cellx10155\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10795\
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Portfolio
Status\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
b\cellx9305\clvertalb\cellx9409\clvertalb\cellx10049\clvertalb\cellx10155\clvertalb
\cellx10795\trrh206
Performing\plain\intbl\cf1\f51\fs11\ql\super
\cellx10795\trrh206\row}}}
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Past
due:\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
trrh206\row}}}
\cellx10795\trrh206
trrh206
trrh206\row}}}
\cellx10795\trrh206
x7919\clbrdrt\brdrs\brdrcf1\clvertalb\cellx8559\clvertalb\cellx8665\clbrdrt\brdrs\b
rdrcf1\clvertalb\cellx9305\clvertalb\cellx9409\clbrdrt\brdrs\brdrcf1\clvertalb\cell
x10049\clvertalb\cellx10155\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10795\trrh29
x10049\clvertalb\cellx10155\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10795\trrh29\row}}
}
trrh206
trrh206\row}}}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Over 365 days and legal
proceedings\plain\intbl\cf1\f51\fs11\ql\super
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Loan loss allowance as % of past due
loans\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Loan loss allowance as % of all
\cellx10795\trrh206\row}}}\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdr
w15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
Performing loans not past due more than 30 days.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (2)\cell\pard\plain\intbl\cf1\f51\fs16\ql These
claims are subject to a 100% loan loss allowance.\cell{
l Funding and Securitization Activities\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Tarshop\u8217?s main liquidity needs and capital resources include: payment of
sales made by retail stores, working capital needs, investment
in\plain\cf1\f51\fs16\ql new technology, the opening and improvement of branches
and holding of cash to take advantage of opportunities that may arise. Tarshop
has\plain\cf1\f51\fs16\ql significantly expanded its business by securitizing its
credit card receivables pursuant to the Tarjeta Shopping Trust Program. By
resorting to this\plain\cf1\f51\fs16\ql innovative financial engineering
mechanism, Tarjeta Shopping has led one of the largest issues in the market and
successfully placed 29 series for more\plain\cf1\f51\fs16\ql than Ps.1,250
million, and was assigned the highest rating by Standard\~& Poor\u8217?
s.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Throughout its history, Tarshop has
incurred liabilities mainly in local currency and to a lesser extent in foreign
currency, and leveraged twice the\plain\cf1\f51\fs16\ql coverage for its
commitments incurred in foreign
currency.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Receivables Portfolio
Securitization\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Tarshop has its own $450
million Trust Security Program. An application was filed with
Valores\plain\cf1\f51\fs16\ql to obtain\plain\cf1\f51\fs16\ql authorization for
extending this amount to $900 million in order to accompany the expected growth of
its business.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql To date, 29 series have
been issued aggregating Ps.1,265 million in bonds and certificates of
participation. In 2006, 9 series were issued for $\plain\cf1\f51\fs16\ql
348\~million, and in 2005 8 series were issued for $ 210 million. Total terms under
each issue range from 20 to 30 months. The applicable nominal\plain\cf1\f51\fs16\ql
interest rates for Class\~A and B Bonds are approximately 13% and 15%,
respectively. The interest accrued on both Bonds is subject to a floor and
ceiling\plain\cf1\f51\fs16\ql rates. Class\~A Bonds in both the revolving and non-
revolving structures have an AAA rating granted by
S&P.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Liquidity
Policies\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Tarshop\u8217?s policy is to
maintain cash and bank account balances for an average of approximately $
1.5\~million, and to invest any excess in\plain\cf1\f51\fs16\ql interest-accruing
accounts and in mutual investment funds redeemable upon request within 48 or 24
hours. All balances and reserves are denominated in\plain\cf1\f51\fs16\ql local
currency.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql
Technology\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Information systems are an
essential element for credit card companies, as the processing of a large number of
transactions in constant expansion is\plain\cf1\f51\fs16\ql required. This has
prompted Tarjeta Shopping to procure state-of-the art technology, and for this
reason the current data and transaction processing\plain\cf1\f51\fs16\ql systems
maintain all branches linked through its local intranet, allowing expediency and
confidentiality in the handling and transmission of data. In\plain\cf1\f51\fs16\ql
addition, its administrative headquarters are capable of being connected via
PosNetworks to the participating stores, ensuring the possibility of
adding\plain\cf1\f51\fs16\ql stores and carrying out transactions around the
clock.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The expansion of the call center
and our credit department required a significant investment in technology and
communications, resulting in an\plain\cf1\f51\fs16\ql aggressive growth in the
number of transactions and inquiries attended and increase in processing speed. The
Area has four sectors: Systems Development,\plain\cf1\f51\fs16\ql Technology, New
Projects and\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 59
\
Server Management and IT Security.\plain\cf1\f51\fs16\i\ql Tarjeta
Shopping\plain\cf1\f51\fs16\ql operates with proprietary information systems,
developed and suited to the company\u8217?s\plain\cf1\f51\fs16\ql business. Its
main systems are developed in 4GL language with Informix DS Data Base Engine,
currently, migrating to a new context developed under\plain\cf1\f51\fs16\ql .net
under Oracle DFG Data Base. The main systems\u8217? platform is composed of SUN
Spark servers, with Solaris 10 operating
system.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql All business processes, from
origination to account opening, issue of plastics, transaction validation, loan
management, customer management,\plain\cf1\f51\fs16\ql generation and printing of
bills, payments, collections, delinquency management and processing, are supported
by these system.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The systems allow the
on-line capturing and validation of purchases, receiving transactions through
Posnet, LaPos (Visa), and direct communication\plain\cf1\f51\fs16\ql with the
major Shopping Center, Hypermarket and Department Store chains, and cash withdrawal
transactions through Banelco and Link
ATMs.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Tarjeta Shopping\u8217?s equipment
and IT systems are comparable to those used by large-scale credit card companies,
which will allow it to\plain\cf1\f51\fs16\ql respect its current cost structure
while still maintaining the speed in the growth of accounts and portfolio it has
been showing so far.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Summary Balance
Sheet and Other Data\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table
sets forth certain balance sheet and other data for Tarshop as of June\~30, 2005,
2006 and 2007:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
lx10799\trrh172
(in\~million\~Ps.,\~except\~percentage)\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Balance Sheet
Data\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\i\ql Current
assets:\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cash and
banks\cell\pard\plain\intbl\cf1\f51\fs13\ql
Investments\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Accounts
receivable\cell\pard\plain\intbl\cf1\f51\fs13\ql
receivables\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\i\ql Non-current
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Property, plant and
equipment\cell\pard\plain\intbl\cf1\f51\fs13\ql
Investments\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Intangible Assets
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\i\ql Current
liabilities:\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Customer
advances\cell\pard\plain\intbl\cf1\f51\fs13\ql
debt\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Related
parties\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Salaries and social security
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Taxes
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\i\ql Non-current
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total liabilities and
shareholders\u8217? equity\cell\pard\plain\intbl\cf1\f51\fs13\ql
talb\cellx10027\clvertalb\cellx10320\clvertalb\cellx10798\trrh206\row}}}\pard\plain
\
\par\pard\plain
05\clvertalc\cellx10617\clvertalc\cellx10795\trrh-66\trrh0
05\clvertalc\cellx10617\clvertalc\cellx10795\trrh-66\trrh0\row}}}
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc As of
x9797\clvertalb\cellx9992\clvertalb\cellx10205\clbrdrb\brdrs\brdrcf1\clvertalb\cell
x10617\clvertalb\cellx10795\trrh172
x10617\clvertalb\cellx10795\trrh172\row}}}
{\trowd\clvertalb\cellx8363\clvertalb\cellx8565\clvertalb\cellx10619\clvertalb\cell
x10797\trrh172
(in\~million\~Ps.,\~except\~percentage)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
x10797\trrh172\row}}}
12\clcbpat12\cellx9992\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10205\clvertal
b\clshdng100\clcfpat12\clcbpat12\cellx10617\clvertalb\clshdng100\clcfpat12\clcbpat1
2\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Other Financial
2\cellx10795\trrh206\row}}}
talb\cellx9385\clvertalb\cellx9797\clvertalb\cellx9992\clvertalb\cellx10205\clverta
lb\cellx10617\clvertalb\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Return on
lb\cellx10617\clvertalb\cellx10795\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Return on shareholders\u8217?
%\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net interest
margin\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Non-performing loans as a percentage
of total loans\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Reserve for loan losses as a
percentage of total loans\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Reserve for loan losses as a
percentage of non-performing loans\cell\pard\plain\intbl\cf1\f51\fs13\ql
2\cellx10795\trrh206\row}}}\pard\plain\sb286\cf1\f51\fs16\b\ql Development and Sale
of Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The acquisition and
development of residential apartment complexes and residential communities for sale
is one of our core activities. Our\plain\cf1\f51\fs16\ql development of
residential apartment complexes consists of the new construction of high-rise
towers or the conversion and renovation of existing\plain\cf1\f51\fs16\ql
structures such as factories and warehouses. In connection with our development of
residential communities, we frequently acquire vacant land,
develop\plain\cf1\f51\fs16\ql infrastructure such as roads, utilities and common
areas, and sell plots of land for construction of single-family homes. We may also
develop or sell\plain\cf1\f51\fs16\ql portions of land for others to develop
complementary facilities such as shopping areas within residential
developments.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In our fiscal year ended
June\~30, 2007, revenues from our Sales and Development segment were Ps.75.8
million, compared to Ps.104.0 million in\plain\cf1\f51\fs16\ql fiscal year 2006.
The local currency remained stable throughout the 2007 fiscal year; the real estate
market was promoted by the increase in the demand\plain\cf1\f51\fs16\ql for all
types of properties, whether office buildings, housings, retail premises or other.
Likewise, the current framework provides incentives for the\plain\cf1\f51\fs16\ql
development of projects linked to our real estate activity. Therefore, during the
2008 fiscal year we expect to complete the projects under development,
as\plain\cf1\f51\fs16\ql well as to analyze new
undertakings.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Construction and
renovation works on our residential development properties is currently performed,
under our supervision, by independent\plain\cf1\f51\fs16\ql Argentine construction
companies that are selected through a bidding process. We enter into turnkey
contracts with the selected company for the\plain\cf1\f51\fs16\ql construction of
residential development properties pursuant to which the selected company agrees to
build and deliver the development for a fixed price\plain\cf1\f51\fs16\ql and at a
fixed date. We are generally not responsible for any additional costs based upon
the turnkey contract. All other aspects of the construction\plain\cf1\f51\fs16\ql
including architectural design are performed by third
parties.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Another modality for the
development of residential undertakings is the exchange of land for constructed
square meters. In this way, we deliver\plain\cf1\f51\fs16\ql undeveloped pieces of
land and another firm is in charge of building the project. Eventually, we receive
finished square meters for commercialization,\plain\cf1\f51\fs16\ql without taking
part in the construction works.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Prior to
the commencement of construction of a residential project, we conduct an
advertising program that continues after the launching of the\plain\cf1\f51\fs16\ql
sales of the units.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The following table shows certain
information and gives an overview regarding our sales and development
properties:\par\pard\plain\sb198\cf1\f51\fs16\b\qc Sales and Development
Properties\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
8\clvertalc\cellx4776\clvertalb\cellx4820\clvertalc\cellx5529\clvertalc\cellx5675\c
lvertalb\cellx5719\clvertalc\cellx6302\clvertalc\cellx6448\clvertalb\cellx6492\clve
rtalc\cellx7043\clvertalc\cellx7189\clvertalb\cellx7233\clvertalc\cellx8101\clverta
lb\cellx8145\clvertalc\cellx8667\clvertalb\cellx8820\clvertalc\cellx9342\clvertalb\
cellx9495\clvertalc\cellx10033\clvertalb\cellx10077\clvertalc\cellx10786\trrh-
66\trrh0
lvertalb\cellx5719\clvertalc\cellx6302\clvertalc\cellx6448\clvertalb\cellx6492\clve
rtalc\cellx7043\clvertalc\cellx7189\clvertalb\cellx7233\clvertalc\cellx8101\clverta
lb\cellx8145\clvertalc\cellx8667\clvertalb\cellx8820\clvertalc\cellx9342\clvertalb\
cellx9495\clvertalc\cellx10033\clvertalb\cellx10077\clvertalc\cellx10786\trrh-
66\trrh0\row}}}
x3566\clbrdrb\brdrs\brdrcf1\clvertalb\cellx4194\clvertalb\cellx4238\clbrdrb\brdrs\b
rdrcf1\clvertalb\cellx4776\clvertalb\cellx4820\clbrdrb\brdrs\brdrcf1\clvertalb\cell
01\clvertalb\cellx8145\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10035\clvertalb\cellx10
079\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10788\trrh417
Date\par\pard\plain\intbl\cf1\f51\fs10\b\qc of
acquisition\cell\pard\plain\intbl\cf1\f51\fs10\ql
Estimated\par\pard\plain\intbl\cf1\f51\fs10\b\qc Cost / Real
Cost\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell\pard\plain\intbl\cf1\f51\fs10\b\qc Area
intended\par\pard\plain\intbl\cf1\f51\fs10\b\qc for
sale\cell\pard\plain\intbl\cf1\f51\fs10\ql
Total\par\pard\plain\intbl\cf1\f51\fs10\b\qc Units\~or
Lots\plain\intbl\cf1\f51\fs8\b\qc\super
\~\cell\pard\plain\intbl\cf1\f51\fs10\b\qc IRSA\u8217?s
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs10\b\qc Effective
Interest\cell\pard\plain\intbl\cf1\f51\fs10\ql
Percentage\par\pard\plain\intbl\cf1\f51\fs10\b\qc
constructed\cell\pard\plain\intbl\cf1\f51\fs10\ql
Percentage\par\pard\plain\intbl\cf1\f51\fs10\b\qc
sold\plain\intbl\cf1\f51\fs8\b\qc\super
Accumulated
Sales\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell\pard\plain\intbl\cf1\f51\fs10\b\qc Sales\~for
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs10\b\qc the\~year
ended\~June,\~30,\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell\pard\plain\intbl\cf1\f51\fs10\b\qc Book\~Value
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs10\b\qc 2007\cell{
079\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10788\trrh417\row}}}
lvertalb\cellx5719\clvertalb\cellx6302\clvertalb\cellx6448\clvertalb\cellx6492\clve
rtalb\cellx7043\clvertalb\cellx7189\clvertalb\cellx7233\clvertalb\cellx8101\clverta
lb\cellx8145\clvertalb\cellx8667\clvertalb\cellx8820\clvertalb\cellx9342\clvertalb\
cellx9495\clvertalb\cellx10033\clvertalb\cellx10077\cellx10786\trrh284
(Ps.\~thousand)\plain\intbl\cf1\f51\fs8\b\qc\super
\~\cell\pard\plain\intbl\cf1\f51\fs10\b\qc (sqm)\plain\intbl\cf1\f51\fs8\b\qc\super
(Ps.\~thousand)\plain\intbl\cf1\f51\fs8\b\qc\super
(Ps.\par\pard\plain\intbl\cf1\f51\fs10\b\qc
thousand)\cell\pard\plain\intbl\cf1\f51\fs10\ql
(Ps.\~thousand)\cell{
lb\cellx8145\clvertalb\cellx8667\clvertalb\cellx8820\clvertalb\cellx9342\clvertalb\
cellx9495\clvertalb\cellx10033\clvertalb\cellx10077\cellx10786\trrh284\row}}}
lb\cellx8145\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8667\clvertalb\cellx8820\clbrdrb\
brdrs\brdrcf1\clvertalb\cellx9342\clvertalb\cellx9495\clbrdrb\brdrs\brdrcf1\clverta
lb\cellx10033\clvertalb\cellx10077\clvertalb\cellx10786\trrh133
\~\cell{
brdrs\brdrcf1\clvertalb\cellx9342\clvertalb\cellx9495\clbrdrb\brdrs\brdrcf1\clverta
lb\cellx10033\clvertalb\cellx10077\clvertalb\cellx10786\trrh133\row}}}
89\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx7233\clvertalb\clshdng100\clcfpat1
cfpat12\clcbpat12\cellx9495\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10033\clv
ertalb\clshdng100\clcfpat12\clcbpat12\cellx10077\clvertalb\clshdng100\clcfpat12\clc
bpat12\cellx10786\trrh160
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\b\ul\ql
Residential\~Apartment\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell{
bpat12\cellx10786\trrh160\row}}}
x7043\clvertalb\cellx7189\clvertalb\cellx7233\clvertalb\cellx8101\clvertalb\cellx81
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Torres Jard\u237?
n\cell\pard\plain\intbl\cf1\f51\fs10\ql \~\cell\pard\plain\intbl\cf1\f51\fs12\qr
490\cell\pard\plain\intbl\cf1\f51\fs10\ql \~\cell\pard\plain\intbl\cf1\f51\fs12\qr
472\cell{
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Torres de
Abasto\plain\intbl\cf1\f51\fs8\ql\super
(8)\cell\pard\plain\intbl\cf1\f51\fs10\ql \~\cell\pard\plain\intbl\cf1\f51\fs12\qr
622\cell{
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Edificios
Cruceros\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell\pard\plain\intbl\cf1\f51\fs12\qr 487\cell{
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Barrio
Chico\cell\pard\plain\intbl\cf1\f51\fs10\ql
03/2003\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell\pard\plain\intbl\cf1\f51\fs12\qr 3,929\cell{
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Concepci\u243?n
Arenal\cell\pard\plain\intbl\cf1\f51\fs10\ql
Park\plain\intbl\cf1\f51\fs8\ql\super (9)\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell\pard\plain\intbl\cf1\f51\fs12\qr \u8212?\~\~\cell{
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Torre Caballito Mz
36\plain\intbl\cf1\f51\fs8\ql\super (15)\cell\pard\plain\intbl\cf1\f51\fs10\ql
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Torres
Renoir\plain\intbl\cf1\f51\fs8\ql\super
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Torres Renoir
II\plain\intbl\cf1\f51\fs8\ql\super (15)\cell\pard\plain\intbl\cf1\f51\fs10\ql
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Other Residential
Apartments\plain\intbl\cf1\f51\fs8\ql\super
(10)\cell\pard\plain\intbl\cf1\f51\fs10\ql \~\cell\pard\plain\intbl\f0\fs16\ql
drcf1\clvertalb\cellx4194\clvertalb\cellx4238\clbrdrt\brdrs\brdrcf1\clvertalb\cellx
4776\clvertalb\cellx4820\clbrdrt\brdrs\brdrcf1\clvertalb\cellx5529\clvertalc\cellx5
9\clvertalb\cellx7233\clbrdrt\brdrs\brdrcf1\clvertalb\cellx8101\clvertalb\cellx8145
\clbrdrt\brdrs\brdrcf1\clvertalb\cellx8667\clvertalb\cellx8820\clbrdrt\brdrs\brdrcf
1\clvertalb\cellx9342\clvertalb\cellx9495\clbrdrt\brdrs\brdrcf1\clvertalb\cellx1003
3\clvertalb\cellx10077\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10786\trrh26
\~\cell{
3\clvertalb\cellx10077\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10786\trrh26\row}}}
Subtotal\~Residential\~Apartments\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell\pard\plain\intbl\cf1\f51\fs12\b\qr
N/A\cell\pard\plain\intbl\cf1\f51\fs12\b\ql
\~\cell\pard\plain\intbl\cf1\f51\fs10\ql \~\cell\pard\plain\intbl\cf1\f51\fs12\b\qr
\~\cell\pard\plain\intbl\cf1\f51\fs12\b\qr 42\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell\pard\plain\intbl\cf1\f51\fs12\b\qr 109,934\cell{
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\b\ul\ql Residential
Communities\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell{
Abril/Baldovinos\plain\intbl\cf1\f51\fs8\ql\super
95,50\cell\pard\plain\intbl\cf1\f51\fs12\ql %\cell\pard\plain\intbl\cf1\f51\fs10\ql
Benavidez\plain\intbl\cf1\f51\fs8\ql\super
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Villa Celina I, II y
III\cell\pard\plain\intbl\cf1\f51\fs10\ql \~\cell\pard\plain\intbl\cf1\f51\fs12\qr
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Villa Celina IV y
V\cell\pard\plain\intbl\cf1\f51\fs10\ql \~\cell\pard\plain\intbl\cf1\f51\fs12\qr
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Other Residential
Communities\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell{
Subtotal\~Residential\~Communities\cell\pard\plain\intbl\cf1\f51\fs10\ql
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\b\ul\ql Land
Reserves\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell{
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Puerto
Retiro\plain\intbl\cf1\f51\fs8\ql\super
Caballito\cell\pard\plain\intbl\cf1\f51\fs10\ql
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Santa Mar\u237?a del
Plata\cell\pard\plain\intbl\cf1\f51\fs10\ql
Pereiraola\plain\intbl\cf1\f51\fs8\ql\super
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Canteras Natal
Crespo\cell\pard\plain\intbl\cf1\f51\fs10\ql
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Terrenos
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Vicente L\u243?
pez\cell\pard\plain\intbl\cf1\f51\fs10\ql \~\cell\pard\plain\intbl\cf1\f51\fs12\qr
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Other Land
Reserves\plain\intbl\cf1\f51\fs8\ql\super
20\clbrdrt\brdrs\brdrcf1\clvertalb\cellx5529\clvertalc\cellx5675\clvertalb\cellx571
\clbrdrt\brdrs\brdrcf1\clvertalb\cellx7043\clvertalc\cellx7189\clvertalb\cellx7233\
clbrdrt\brdrs\brdrcf1\clvertalb\cellx8101\clvertalb\cellx8145\clbrdrt\brdrs\brdrcf1
\clvertalb\cellx8667\clvertalb\cellx8820\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9342\
clvertalb\cellx9495\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10033\clvertalb\cellx10077
\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10786\trrh26
\~\cell{
\clbrdrt\brdrs\brdrcf1\clvertalb\cellx7043\clvertalc\cellx7189\clvertalb\cellx7233\
clbrdrt\brdrs\brdrcf1\clvertalb\cellx8101\clvertalb\cellx8145\clbrdrt\brdrs\brdrcf1
\clvertalb\cellx8667\clvertalb\cellx8820\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9342\
clvertalb\cellx9495\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10033\clvertalb\cellx10077
\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10786\trrh26\row}}}
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\b\ql Subtotal Land
Reserves\cell\pard\plain\intbl\cf1\f51\fs10\ql
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\b\ul\ql
Other\cell\pard\plain\intbl\cf1\f51\fs10\ql \~\cell\pard\plain\intbl\f0\fs16\ql
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Alsina
\~\cell\pard\plain\intbl\cf1\f51\fs12\qr 1\cell\pard\plain\intbl\cf1\f51\fs10\ql
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Madero
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\ql Dique
Properties\plain\intbl\cf1\f51\fs8\ql\super
\~\cell{
\pard\plain\intbl\li176\fi-132\cf1\f51\fs12\b\ql Subtotal
Other\cell\pard\plain\intbl\cf1\f51\fs10\ql \~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell\pard\plain\intbl\cf1\f51\fs12\b\qr 73\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell{
Total\plain\intbl\cf1\f51\fs8\b\ql\super (14)\cell\pard\plain\intbl\cf1\f51\fs10\ql
\~\cell{
3\clvertalb\cellx10077\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10786\trrh26\row}}}\par
d\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 62
\
Notes:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
acquisition plus total investment made and/or planned if the project has not been
completed, adjusted for inflation until 02/28/03.\cell{
\par\pard\plain
area devoted to sales upon completion of the development or acquisition and before
the sale of any of the units (including parking and
storage\plain\intbl\cf1\f51\fs16\ql spaces, but excluding common areas). In the
case of Land Reserves the land area was considered.\cell{
\par\pard\plain
Represents the total units or plots upon completion of the development or
acquisition (excluding parking and storage spaces).\cell{
\par\pard\plain
percentage sold is calculated dividing the square meters sold by the total saleable
square meters.\cell{
\par\pard\plain
Includes only the cumulative sales consolidated by the RT21 method adjusted for
inflation until 02.28.03.\cell{
\par\pard\plain
Corresponds to our total sales consolidated by the RT4 method adjusted for
inflation until 02.28.03. Excludes turnover tax deduction.\cell{
\par\pard\plain
acquisition plus improvement, plus activated interest of properties consolidated in
portfolio at June\~30, 2007, adjusted for inflation at\plain\intbl\cf1\f51\fs16\ql
02/28/03.\cell{
\par\pard\plain
Indirectly owned through Alto Palermo.\cell{
\par\pard\plain
Indirectly owned through Inversora Bolivar.\cell{
\par\pard\plain
Includes the following properties: Dorrego 1916 through IRSA, Yerbal 855 and Arcos
2343 through Baldovinos (fully sold).\cell{
\par\pard\plain
Directly through IRSA and indirectly through Inversora Bolivar. Includes sale of
Abril shares.\cell{
\par\pard\plain
Includes the following land reserves: Torre Jard\u237?n IV, Padilla 902 and Terreno
Pilar (through IRSA), Pontevedra, Mariano Acosta,
Merlo,\plain\intbl\cf1\f51\fs16\ql Intercontinental Plaza II and Isla Sirgadero
(through Inversora Bolivar) and Caballito, Torres Rosario and the Coto Project
(through Alto Palermo).\cell{
\par\pard\plain
Includes the following properties: Puerto Madero Dock XIII and Dique II, Sarmiento
517, Income from Termination, Alto Palermo\u8217?s Real\plain\intbl\cf1\f51\fs16\ql
Properties Sales and Rivadavia 2768 (fully sold through IRSA).\cell{
\par\pard\plain
Corresponds to the \u8220?Sales and Developments\u8221? business unit mentioned in
Note 4 to our consolidated financial statements.\cell{
\par\pard\plain
Corresponds to receivables from swaps disclosed as \u8220?Inventories\u8221? in the
consolidated financial statements.\cell{
ql Residential Apartments\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In the
apartment building market, we acquire undeveloped properties strategically located
in densely populated areas of the City of Buenos Aires,\plain\cf1\f51\fs16\ql
particularly properties located next to shopping centers and hypermarkets or those
to be constructed. We then develop multi-building high-rise
complexes\plain\cf1\f51\fs16\ql targeting the middle-income market. These are
equipped with modern comforts and services, such as open \u8220?green areas,\u8221?
swimming pools,\plain\cf1\f51\fs16\ql sports and recreation facilities and 24-hour
security. In the loft buildings market, our strategy is to acquire old buildings no
longer in use located in areas\plain\cf1\f51\fs16\ql with a significant middle and
upper-income population. The properties are then renovated into unfinished lofts
allowing buyers the opportunity to design\plain\cf1\f51\fs16\ql and decorate them
according to their preferences.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql
Apartment Projects Under Development\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql
Torre Caballito, City of Buenos Aires.\plain\cf1\f51\fs16\ql This undeveloped 1.8
hectare property is situated in the northern area of Caballito\u8217?s
residential\plain\cf1\f51\fs16\ql neighborhood in the City of Buenos Aires. On
May\~4, 2006, we and Koad S.A. (\u8220?Koad\u8221?), an Argentine developer,
entered into an asset\plain\cf1\f51\fs16\ql exchange agreement valued at US$7.5
million pursuant to which we sold to Koad plot number 36 of \u8220?Terrenos de
Caballito\u8221? in exchange for\plain\cf1\f51\fs16\ql Koad\u8217?s agreement to
construct, at its sole expense, a residential complex to be named \u8220?Caballito
Nuevo.\u8221? Koad has agreed to develop\plain\cf1\f51\fs16\ql a residential
complex consisting of two 34-story towers containing 220 apartments each,
consisting of one, two and three bedroom residential units
with\plain\cf1\f51\fs16\ql surface areas ranging from 40 to 85 square meters. The
proposed apartment complex is currently expected to offer a wide variety of
amenities and\plain\cf1\f51\fs16\ql services. The total area of this apartment
complex that will be for sale is estimated to be approximately 28,000 square
meters. On August 2009, we will\plain\cf1\f51\fs16\ql be entitled to ownership of
26.7% of the total square meters and 25% of the parking lots of the entire complex,
representing 118 apartments and 55\plain\cf1\f51\fs16\ql parking lots located in
Tower 1. As a result of an incentive scheme agreed to with Koad, the number of
square meters we will receive could vary\plain\cf1\f51\fs16\ql according to the
project\u8217?s date of completion. As a result of this transaction, Koad granted
to us a first lien mortgage on the property to secure up\plain\cf1\f51\fs16\ql to
US$7.4 million of its obligations to us and posted a surety bond in our favor
supporting an additional US$2.0 million of Koad\u8217?s obligations
to\plain\cf1\f51\fs16\ql us.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Dock IV, City of Buenos
Aires.\plain\cf1\f51\fs16\ql This luxury office building has a total surface area
of approximately 22,000 square meters, and will offer 11,000\plain\cf1\f51\fs16\ql
square meters of large and versatile office space for lease. The building\u8217?s
layout welcomes both companies requiring smaller office
space,\plain\cf1\f51\fs16\ql averaging 200 square meters, and corporations in need
of an entire floor. The building\u8217?s development is currently at its first
stage, bid submission\plain\cf1\f51\fs16\ql for the foundations and lobby. The
building will have nine floors with offices and commercial shops on the first
floor. Paper work seeking permits for bid\plain\cf1\f51\fs16\ql submissions for
the second stage is still
pending.\par\pard\plain\sb198\sa44\fi462\cf1\f51\fs16\b\i\ql Torres Renoir, Dock
III\plain\cf1\f51\fs16\ql . On November\~25, 2004 a deed of conveyance of title for
a certain plot known as plot 1.c. was executed in favor of\plain\cf1\f51\fs16\i\ql
Desarrollos y Proyectos Sociedad An\u243?nima\plain\cf1\f51\fs16\ql (\u8220?
DYPSA\u8221?). This deed establishes in kind consideration for the sale, and at the
same time\plain\cf1\f51\fs16\ql granted DYPSA the option to acquire in barter
another plot known as plot 1.e. This option acts as an alternative to the
construction of the 13\plain\cf1\f51\fs11\ql\super th\plain\cf1\f51\fs16\ql
floor of\plain\cf1\f51\fs16\ql the building to be developed on plot 1.c. As a
guaranty for this transaction, DYPSA established a first lien mortgage for US$8.03
on plot 1.c. and for\plain\cf1\f51\fs16\ql US$10.8 on plot 1.e. DYPSA contracted
an obligation to transfer 4.642 square meters at the building constructed on
certain plot known as plot 1c,\plain\cf1\f51\fs16\ql representing 28.5% of the
apartment surface of such building, and 6.421 square meters at the building
constructed on certain plot known as plot 1e,\plain\cf1\f51\fs16\ql representing
31.5% of the total apartment surface of that building. During December 2006 we
began the sales of the available units.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
On May\~18, 2005, Buenos Aires Trade\~& Finance Center S.A. (\u8220?Trade\u8221?)
signed a purchase agreement relating to certain plot known as\plain\cf1\f51\fs16\ql
plot 1.d., with then owner of this plot, DYPSA. On that date Trade paid DYPSA
US$2.15 million. On January\~19, 2006, a partial payment of
the\plain\cf1\f51\fs16\ql outstanding balance of US$1.0 million was
made.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On July\~17, 2006 the balance of
price was received and the transfer deed was signed together with the taking
possession of plot 1d with Alvear\plain\cf1\f51\fs16\ql Palace Hotel S.A. and
Desarrollos Premium Plus S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql To provide
for the sustained increase in the demand for residential apartments in the Puerto
Madero area, during fiscal year 2006 we entered into\plain\cf1\f51\fs16\ql
bartering contracts allowing to start the construction of these two exclusive
dwelling towers of 37 and 40-storey. In line with the boom of
developments\plain\cf1\f51\fs16\ql in the area, the market has great expectations
on the project given its exceptional features. On September\~30, 2006 due to the
interest shown in this\plain\cf1\f51\fs16\ql project, the marketing of plot 1c was
launched as the rate of progress was 78.3%. During fiscal year 2007 preliminary
sales contracts were signed for\plain\cf1\f51\fs16\ql 76.4% of the units
available. In respect of plot 1e works started and the percentage of work completed
is 4.5%. On November\~2, 2007, the Company and\plain\cf1\f51\fs16\ql the developer
decided to replace the swap agreement for plot 1e for a payment of US$18.2 million,
US$4.6 million of which were paid on that date and\plain\cf1\f51\fs16\ql the
balance will be received by the Company over the next six months. The income
resulting from this transaction amounts to approximately
US$4.7\plain\cf1\f51\fs16\ql
million.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Completed Apartment
Projects\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Torres Jard\u237?n, City of
Buenos Aires\plain\cf1\f51\fs16\ql . Torres Jard\u237?n is a high-rise residential
complex located in the Buenos Aires neighborhood of\plain\cf1\f51\fs16\ql Villa
Crespo, approximately five minutes from Abasto Shopping. Torres Jard\u237?n I, II
and III have been completed and consist of 490 one, two and\plain\cf1\f51\fs16\ql
three-bedroom residential apartments. The complex also includes 295 spaces of
underground parking. As of June\~30, 2007 there is one apartment and
35\plain\cf1\f51\fs16\ql parking spaces pending sale. The project originally
included four 23-story towers targeting the middle-income market, but we decided
not to construct\plain\cf1\f51\fs16\ql Torres Jard\u237?n IV and may consider a
barter transaction with a third party for its
construction.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 64
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Torres de Abasto, City of
Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Torres de Abasto is a
545-apartment high-rise residential apartment complex developed through
our\plain\cf1\f51\fs16\ql subsidiary Alto Palermo, located one block from Abasto
Shopping. The project consists of three 28-story buildings and one 10-story
building targeted to\plain\cf1\f51\fs16\ql the middle-income market. The
apartments were completed in May 1999. The complex has a swimming pool, a terrace,
24-hour security, four retail\plain\cf1\f51\fs16\ql stores on the ground floor of
one of the buildings and 310 underground parking spaces. As of June\~30, 2007, 100%
of the units in the complex had been\plain\cf1\f51\fs16\ql
sold.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Edificios Cruceros, City of
Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql \u8220?Edificios
Cruceros\u8221? is a project located in the Puerto Madero area. This dwelling
building\plain\cf1\f51\fs16\ql covers 6,400 square meters of surface area of which
3,633 belong to us, and it is close to the \u8220?Edificios Costeros\u8221? office
building. This\plain\cf1\f51\fs16\ql project targets the high-income segment of
the population and all its common areas have views of the river. This development
was partially financed\plain\cf1\f51\fs16\ql through the anticipated sale of its
apartments. Works are 100% finished and as of June\~30, 2007 more than 90% of the
units had been sold.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Barrio Chico,
City of Buenos Aires\plain\cf1\f51\fs16\ql . In March 2003 we purchased a plot of
land on San Martin de Tours Street in the district of Barrio Parque,
an\plain\cf1\f51\fs16\ql exclusive residential zone in the City of Buenos Aires.
At the time the sales contract was signed, US$0.08 million were prepaid. In June
2003 at the time\plain\cf1\f51\fs16\ql the deed of title was transferred, US$0.23
million were paid. At that time, the property was mortgaged to Providence for
US$0.75 million, to guarantee\plain\cf1\f51\fs16\ql 25% of the housing units we
were obligated to deliver upon the building\u8217?s completion. We financed with
its own working capital the construction\plain\cf1\f51\fs16\ql of this luxury
residential complex designed for high-income customers. This is a unique Project
located in Barrio Parque, an exclusive residential zone in\plain\cf1\f51\fs16\ql
the City of Buenos Aires. During May 2006 the successful marketing of this project
was launched. The image of the product was previously
developed\plain\cf1\f51\fs16\ql with the name of \u8220?Barrio Chico\u8221? with
advertisements in the most important media. As of June\~30 2007 the project is
finished and only 3\plain\cf1\f51\fs16\ql units remain to be
sold.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Palacio Alcorta, City of
Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Palacio Alcorta is a
191-loft units residential property that we converted from a former Chrysler
factory in\plain\cf1\f51\fs16\ql the residential neighborhood of Palermo Chico,
one of the most exclusive areas of Buenos Aires City, located just a ten-minute
drive from downtown\plain\cf1\f51\fs16\ql Buenos Aires. The loft units range from
60 to 271 square meters. This development project targets the upper-income market.
Palacio Alcorta also has\plain\cf1\f51\fs16\ql seven retail units and 165 parking
spaces. As of June\~30, 2007, all of the loft units in the complex had been
sold.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Concepci\u243?n Arenal 3000,
City of Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql
Concepci\u243?n Arenal 3000 is a 70-loft residential property located in the north-
central\plain\cf1\f51\fs16\ql area of the City of Buenos Aires. Each loft unit has
a salable area of 86 square meters and a parking space. Lofts in this building are
targeted towards the\plain\cf1\f51\fs16\ql middle-income market. As of June\~30,
2007, 98.9% of the units had been
sold.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Alto Palermo Park and Plaza,
City of Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Alto Palermo
Park is one of two 34-story apartment buildings located two blocks from
Alto\plain\cf1\f51\fs16\ql Palermo Shopping in the exclusive neighborhood of
Palermo. Apartments in this building are targeted primarily towards the upper-
income market. Alto\plain\cf1\f51\fs16\ql Palermo Park is located next to its twin
building, Alto Palermo Plaza. Both buildings are comprised of three- and four-
bedroom apartments with an\plain\cf1\f51\fs16\ql average area of 158 square meters
in the case of Alto Palermo Park and of 294.5 square meters, in the case of Alto
Palermo Plaza. Each unit includes an\plain\cf1\f51\fs16\ql average of 18 and 29
square meter parking/storage space, respectively. These buildings were included in
the assets we acquired in November 1997 from\plain\cf1\f51\fs16\ql P\u233?rez
Companc S.A. As of June\~30, 2007, 100% of Alto Palermo Plaza was sold and there
was only one unit to be sold in the Alto Palermo
Park.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 65
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Villa Celina, Greater Buenos
Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Villa Celina is a 400-plot
residential community for the construction of single family homes located in
the\plain\cf1\f51\fs16\ql residential neighborhood of Villa Celina on the
southwestern edge of the City of Buenos Aires. We have been developing this
property in several stages\plain\cf1\f51\fs16\ql since 1994. The first three
stages involved 219 lots, each measuring on average 347 square meters and the last
two stages involve 181 lots. As of June\~30,\plain\cf1\f51\fs16\ql 2007, 100% of
the residential community had been
sold.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Residential
Communities\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In the residential
communities market, we acquire undeveloped properties located in suburban areas or
neighborhoods near the large cities to\plain\cf1\f51\fs16\ql develop private
neighborhoods and country clubs in which to sell vacant lots for the construction
of single family homes. In these properties we build\plain\cf1\f51\fs16\ql streets
and roads and arrange for the provision of basic municipal services and amenities
such as open spaces, sports facilities and security. We seek
to\plain\cf1\f51\fs16\ql capitalize on improvements in transportation and
communication around the City of Buenos Aires, the growing suburbanization of the
region and the shift\plain\cf1\f51\fs16\ql of the population moving to
countryside-type residential
communities.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql An important factor in the
trend towards living in suburban areas has been the improvements and additions to
the Autopista Panamericana, Avenida\plain\cf1\f51\fs16\ql General Paz and Acceso
Oeste highways, which significantly reduce traveling time, encouraging a
significant number of families to move to the new\plain\cf1\f51\fs16\ql
residential neighborhoods. Furthermore, improvements in public train, subway and
bus transportation since their privatization has also influenced the
trend\plain\cf1\f51\fs16\ql to adopt this
lifestyle.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of June\~30, 2007, our
residential communities for the construction of single-family homes for sale in
Argentina had a total of 62,990 square\plain\cf1\f51\fs16\ql meters of salable
area in the Abril, residential communities located in the province of Buenos
Aires.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Abril, Hudson, Greater Buenos
Aires\plain\cf1\f51\fs16\ql . Abril is a 312-hectare private residential community
located near Hudson City, approximately 34 kilometers\plain\cf1\f51\fs16\ql south
of the City of Buenos Aires. We have developed this property into a private
residential community for the construction of single family
homes\plain\cf1\f51\fs16\ql targeting the upper-middle income market. The project
includes 20 neighborhoods subdivided into 1,273 lots of approximately 1,107 square
meters each.\plain\cf1\f51\fs16\ql Abril also includes an 18-hole golf course, 130
hectares of woodlands, a 4,000 square meter mansion and entertainment facilities. A
bilingual school,\plain\cf1\f51\fs16\ql horse stables and sports centers and the
construction of the shopping center were concluded in 1999. The neighborhoods have
been completed, and as of\plain\cf1\f51\fs16\ql June\~30, 2007, 95.5% of the
property had been sold for an aggregate of Ps.217.41 million, with 62,900 square
meters left to be sold.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Benavidez,
Tigre\plain\cf1\f51\fs16\ql . In the district of Benavidez, Municipality of Tigre,
35 km north from downtown Buenos Aires, we are developing a 99.8
hectare\plain\cf1\f51\fs16\ql gated residential complex known as \u8220?El
Encuentro\u8221?, which will have a privileged front access to Highway No.\~9,
allowing an easy way to\plain\cf1\f51\fs16\ql and from the city. On May\~21, 2004
an exchange deed was signed whereby DEESA agreed to pay US$3.98 million to
Inversora Bol\u237?var, of which\plain\cf1\f51\fs16\ql US$0.98 million were paid
and the balance of US$3.0 million will be paid through the exchange of 110
residential plots already chosen and identified in\plain\cf1\f51\fs16\ql the
option contract signed in December\~3, 2003. Furthermore, through the same act,
DEESA set up a first mortgage in favor of Inversora Bol\u237?var
on\plain\cf1\f51\fs16\ql real property\par\pard\plain\cf1\f51\fs13\ql
\
amounting to US$3.0 million in guarantee of compliance with the operation and
delivered US$0.5 million to Inversora Bol\u237?var corresponding to
a\plain\cf1\f51\fs16\ql deposit in guarantee of performance on the obligations
undertaken. This balance will not accrue interest in favor of DEESA, and will be
returned as\plain\cf1\f51\fs16\ql follows: 50% of the outstanding balance at the
time of certification of 50% of the progress of work and the remaining upon
certification of 90% of work\plain\cf1\f51\fs16\ql progress. Considering the high
price of the plots in the north of the province of Buenos Aires, mostly in the
place in which this enterprise is placed, IRSA\plain\cf1\f51\fs16\ql has great
expectations for marketing the land through the bartering system. We estimate that
the sale of the units may be launched in early 2008. As of\plain\cf1\f51\fs16\ql
June\~30, 2007, the work progress degree is
90%.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Land
Reserves\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We have acquired large
undeveloped properties as land reserves located in strategic areas for the future
development of office and apartment\plain\cf1\f51\fs16\ql buildings, shopping
centers and single family housing. We have acquired what we believe to be two of
the largest and most important undeveloped river\plain\cf1\f51\fs16\ql front plots
in Buenos Aires, Puerto Retiro and Santa Mar\u237?a del Plata, for the future
development of residential and office spaces. In addition, we\plain\cf1\f51\fs16\ql
have benefited from the improvement of land values during periods of economic
growth, As of June\~30, 2007, our land reserves totaled 17
properties\plain\cf1\f51\fs16\ql consisting of approximately 3079 hectares
(including Rosario, Caballito, Vicente Lopez and Coto C.I.C.S.A. (\u8220?
Coto\u8221?) air space owned by\plain\cf1\f51\fs16\ql Alto
Palermo).\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Land Reserves in the City
of Buenos Aires\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Solares de Santa
Mar\u237?a, City of Buenos Aires\plain\cf1\f51\fs16\b\ql
(\plain\cf1\f51\fs16\b\i\ql ex Santa Mar\u237?a del
Plata\plain\cf1\f51\fs16\b\ql )\plain\cf1\f51\fs16\ql . Solares de Santa Mar\u237?a
is a 70 hectares property\plain\cf1\f51\fs16\ql facing the R\u237?o de la Plata in
the South of Puerto Madero, 10 minutes from the National Government House. This is
an urbanization project\plain\cf1\f51\fs16\ql developed through our subsidiary
Solares de Santa Mar\u237?a S.A. (\u8220?Solares de Santa Mar\u237?a\u8221?), which
was recently incorporated. This\plain\cf1\f51\fs16\ql project has a residential
profile and mixed uses, it is currently expected to have offices, stores, hotels,
sport and nautical clubs, service areas with schools,\plain\cf1\f51\fs16\ql
supermarkets, parking lots, etc.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The
project ultimately submitted for approval to government authorities included
various proposals made by advisors of the Urban Environmental\plain\cf1\f51\fs16\ql
Plan Council (\plain\cf1\f51\fs16\i\ql Consejo del Plan Urbano
Ambiental\plain\cf1\f51\fs16\ql ) and contemplates the assignment of 358,000
square meters to become public parks including a 90,000\plain\cf1\f51\fs16\ql
square meter green sector, boulevards designated for access to and walking around
the neighborhood and the transference of all water areas (especially
the\plain\cf1\f51\fs16\ql zone in front of the commercial area) for public use.
The river presence in this part of the city has been reserved for general public
use, including space\plain\cf1\f51\fs16\ql for a marina which may be built in the
future.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql While we await the city
government approvals and authorizations, we have contacted national and
international investors with experience in this\plain\cf1\f51\fs16\ql type of real
state developments.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As part of the
project, we sold 31,491,932 shares for US$10.6 million to Mr.\~Israel Sutton
Dabbah, who is part of the Sutton Group. This sale\plain\cf1\f51\fs16\ql
represents the 10% of Solares de Santa Mar\u237?a capital stock and is to be paid
as follows: (i)\~an initial payment of US$1,500,000; and (ii)\~the
balance\plain\cf1\f51\fs16\ql of US$9,100,000 payable on December\~26, 2007. Under
the purchase agreement a first grade pledge on certain assets owned by the buyer
was granted to\plain\cf1\f51\fs16\ql us and our subsidiary Palermo Invest S.A.,
the sellers, in order to secure the payment
price.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Puerto
Retiro\plain\cf1\f51\fs16\ql . Puerto Retiro is an 8.3 hectare undeveloped
riverside property bounded by the Catalinas and Puerto Madero office zones to the
west,\plain\cf1\f51\fs16\ql the transportation hub Retiro to
the\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 67
\
north and the R\u237?o de la Plata to the south and east. One of the only two
significant privately owned waterfront properties in The City of
Buenos\plain\cf1\f51\fs16\ql Aires, Puerto Retiro may currently be utilized only
for port activities. We have initiated negotiations with municipal authorities in
order to rezone the area.\plain\cf1\f51\fs16\ql Our plan is to develop a 360,000
square meter financial center. The launching date has not been settled and
consequently, the estimated cost and financing\plain\cf1\f51\fs16\ql method are
not decided. We own a 50% interest in Puerto Retiro through our wholly-owned
subsidiary Inversora Bol\u237?var S.A. (\u8220?Inversora\plain\cf1\f51\fs16\ql
Bol\u237?var\u8221?). See \u8220?\u8211?Legal Proceedings \u8211?Puerto
Retiro.\u8221?\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Caballito, Ferro
Project\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql This is a property of
approximately 25,539 square meters in the City of Buenos Aires, neighborhood of
Caballito, one of\plain\cf1\f51\fs16\ql the most densely populated of the city,
which Alto Palermo purchased in October 1998. This plot would allow developing a
shopping center having\plain\cf1\f51\fs16\ql 30,000 square meters, a hypermarket,
a cinema complex, and several recreation and entertainment activity areas. We are
currently working to define the\plain\cf1\f51\fs16\ql commercial project. The
approval of the authorization of the government of the City of Buenos Aires for the
development of a shopping center, an office\plain\cf1\f51\fs16\ql building and a
private hospital in this plot has not been
granted.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Terreno Figueroa
Alcorta\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql With respect to the plot
located in the Figueroa Alcorta avenue, in front of Paseo Alcorta on December\~22,
2005, our\plain\cf1\f51\fs16\ql subsidiary Alto Palermo subscribed a preliminary
purchase contract with possession, by which Alto Palermo sold to RAGHSA S.A. the
plot denominated\plain\cf1\f51\fs16\ql Alcorta Plaza for a total price of US$7.7
million. The terms and conditions of payment agreed were determined in four
installments of US$1.9 million,\plain\cf1\f51\fs16\ql the first installment to be
due at the date of the preliminary sales contract and the second one collected on
March\~30, 2006, date on which the final deed\plain\cf1\f51\fs16\ql was signed.
The third installment was paid in March 2007 and the fourth installment is due in
March 2008.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Land Reserves in the
Province of Buenos Aires\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Pereiraola,
Hudson\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Through Inversora Bolivar,
we own a 100.0% interest in Pereiraola S.A., a company whose principal asset is a
130 hectare\plain\cf1\f51\fs16\ql undeveloped property adjacent to our Abril
community. We intend to use this property to develop a private community for the
construction of single\plain\cf1\f51\fs16\ql family homes targeted at the middle-
income market. We have not yet established the costs and financing method for this
proposed project, but we have\plain\cf1\f51\fs16\ql already obtained the necessary
municipal permits. The plot\u8217?s book value is estimated to be Ps.21.7 million
as of June\~30, 2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Pilar\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Pilar is a 74 hectare
undeveloped land reserve property located close to Pilar City, 55 kilometers
northwest of downtown of the City of\plain\cf1\f51\fs16\ql Buenos Aires. The
property is easily accessible due to its proximity to the Autopista del Norte. The
Pilar area is one of the most rapidly developing areas\plain\cf1\f51\fs16\ql of
the country. We are considering several alternatives for this property including
the development of a residential community or the sale of this
property\plain\cf1\f51\fs16\ql as it is and, therefore, we do not have a cost
estimate or a financing plan. The plot\u8217?s book value is estimated to be Ps.3.4
million as of June\~30,\plain\cf1\f51\fs16\ql
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Vicente L\u243?pez, Olivos,
Provincia de Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On
January\~16, 2007, we acquired the total shares of Rummaala
S.A.\plain\cf1\f51\fs16\ql (\u8220?\plain\cf1\f51\fs16\i\ql
Rummaala\plain\cf1\f51\fs16\ql \u8221?), the main asset of which is a plot of land
located in Vicente Lopez, Province of Buenos Aires. The purchase price
was\plain\cf1\f51\fs16\ql US$21.17 million, payable as follows: (i)\~US$4.25
million in cash and (ii)\~by delivering certain units of the building to be
constructed in the land owned\plain\cf1\f51\fs16\ql by Rummaala in the amount of
US$16.92 million, within a 4-year term as from the approval date of the plans by
the related authorities or when the\plain\cf1\f51\fs16\ql facilities be vacated,
whichever last occurs.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql As security for compliance with the
construction of the future building and transfer of the future units, the shares
acquired were pledged.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Simultaneously
with the former transaction, Rummaala acquired a plot of land adjacent to its own
property for a total consideration of US$15.00\plain\cf1\f51\fs16\ql million,
payable as follows: (i)\~US$0.50 million in cash; (ii)\~by delivering certain units
of buildings Cruceros I and II in the amount of US$1.25
million\plain\cf1\f51\fs16\ql and (iii)\~by delivering certain units of the
building to be constructed in the land acquired for a total consideration of
US$13.25 million, within a 40-month\plain\cf1\f51\fs16\ql term considered as from
the approval date of the plans by the related authorities or when the facilities be
vacated, whichever last occurs.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Other Undeveloped Plots in the City and Province of Buenos
Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Our land reserve portfolio
also includes nine land reserve properties located in\plain\cf1\f51\fs16\ql Buenos
Aires and its surrounding areas. These properties are projected for future
developments of offices, shopping centers, apartment buildings
and\plain\cf1\f51\fs16\ql residential communities. The main properties under this
category include Merlo, Mariano Acosta and
Pontevedra.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Land Reserves in Other
Provinces\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Torres Rosario Project,
City of Rosario, Province of Santa Fe.\plain\cf1\f51\fs16\ql IRSA\u8217?s
subsidiary Alto Palermo owns a plot of land covering
approximately\plain\cf1\f51\fs16\ql 50,000 square meters of surface area in the
city of Rosario, in the place in which the Alto Rosario Shopping Center is located.
A residential complex will\plain\cf1\f51\fs16\ql be built in this plot of
land.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Neuqu\u233?n Project, Province
of Neuqu\u233?n\plain\cf1\f51\fs16\ql . On July\~6, 1999, Alto Palermo acquired a
94.6% share in Shopping Neuqu\u233?n amounting\plain\cf1\f51\fs16\ql to Ps.4.2
million. Alto Palermo paid Ps.0.9 million on September\~1, 1999, and the remaining
Ps.3.3 million were to be paid on July\~5, 2001, or at the
time\plain\cf1\f51\fs16\ql of the opening of the shopping center to be constructed
in the building owned by Shopping Neuqu\u233?n, whichever happened first. As of
June\~30, 2007\plain\cf1\f51\fs16\ql the remaining was
paid.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The only asset of Shopping
Neuqu\u233?n is a plot of land of 50,000 square meters approximately, in which we
hope to build a shopping center.\plain\cf1\f51\fs16\ql On September\~20, 2007 the
study are feasible. Shopping\plain\cf1\f51\fs16\ql Neuqu\u233?n S.A. has 150 days
to submit the work plans from the date of the declaration. See \u8220?\u8212?Legal
Proceedings\u8212?Legal issues\plain\cf1\f51\fs16\ql with the City Hall of
Neuqu\u233?n.\u8221?\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Canteras Natal
Crespo, Province of C\u243?rdoba\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql
The first guidelines for development of this project are in process on the basis of
the Master\plain\cf1\f51\fs16\ql Plan of the Chilean architect firm called URBE.
Also, preliminary presentations have been submitted to the Municipality of La
Calera and to the\plain\cf1\f51\fs16\ql Provincial
Government.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql This undertaking is
characterized by an attractive and varied residential offer of land, dwelling areas
of low and medium density, and commercial\plain\cf1\f51\fs16\ql and social areas.
Each one of the quarters will have a full service infra-structure and will be
distinguished by the particularities of the land in the\plain\cf1\f51\fs16\ql
outstanding natural environment of the Sierras Chicas of the Province of C\u243?
rdoba.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Canteras Natal Crespo S.A. is a
company located in the Province of C\u243?rdoba that will have as main activity the
urbanization of own or third\plain\cf1\f51\fs16\ql parties plots of land, the so-
called countries, lots for sale or rent, production of quarries, real estate
business and construction of houses.\par\pard\plain\cf1\f51\fs13\ql
\
Offices and Other Non-shopping Center Leased
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql
Overview\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We are engaged in the
acquisition, development and management of offices and other rental properties in
Argentina. As of June\~30, 2007, we\plain\cf1\f51\fs16\ql directly and indirectly,
owned interests in 24 office and other rental properties in Argentina which
comprised 234,320 square meters of gross leaseable\plain\cf1\f51\fs16\ql area. Of
these properties, 17 were office properties which comprised 138,315 square meters
of gross leaseable area. For fiscal year 2007, we had
revenues\plain\cf1\f51\fs16\ql from office and non- shopping center leases
properties of Ps.55.7 million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql All our
office rental property in Argentina is located in Buenos Aires City. All of these
properties are rented to various different premium tenants.\plain\cf1\f51\fs16\ql
For the year ended June\~30, 2007 the average occupancy rate for all IRSA\u8217?s
properties in the Offices and other rental property segment
was\plain\cf1\f51\fs16\ql approximately 97.37%. Seven different tenants accounted
for approximately 26.75% of IRSA\u8217?s monthly office rental and 28.91% of
IRSA\u8217?s\plain\cf1\f51\fs16\ql total revenues for fiscal year 2007 for the
same concept. IRSA\u8217?s seven main office rental tenants are: Grupo Total
Austral, Finterbusch Pickenhayn\plain\cf1\f51\fs16\ql Sibille S.C. (KPMG),
Microsoft Argentina S.A., Techint Cia. Tecnica Int. SACeI, Occidental Argentina ,
Exploration and Production Inc., Marval\~&\plain\cf1\f51\fs16\ql O\u8217?Farrel
and Cisco Systems Argentina S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql
Management.\plain\cf1\f51\fs16\ql We generally act as the managing agent of the
office properties in which we own an interest. These interests consist primarily of
the\plain\cf1\f51\fs16\ql ownership of entire buildings or a substantial number of
floors in a building. The buildings in which we own floors are generally managed
pursuant to the\plain\cf1\f51\fs16\ql terms of a condominium agreement that
typically provides for control by a simple majority of the interests (based on the
area owned) in the building. As\plain\cf1\f51\fs16\ql the managing agent of
operations, we are responsible for handling services, such as security, maintenance
and housekeeping. These services are generally\plain\cf1\f51\fs16\ql contracted to
third party providers. The cost of the services are passed-through and paid for by
the tenants, except in the case of our units not rented, in\plain\cf1\f51\fs16\ql
which case we absorb the cost. Our leasable space is marketed through commissioned
brokers, the media and directly by us.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql
Leases.\plain\cf1\f51\fs16\ql We lease our offices and other properties pursuant
to contracts with an average term of three years, with the exception of a few
contracts\plain\cf1\f51\fs16\ql with terms of five years. These contracts are
renewable for two or three additional years at the tenant\u8217?s option. Contracts
for the rental of property\plain\cf1\f51\fs16\ql not located in shopping malls are
generally stated in U.S. dollars, and in accordance with Argentine law they are not
subject to inflation adjustment.\plain\cf1\f51\fs16\ql Rental rates for renewed
periods are negotiated at market value.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth
certain information regarding our direct and indirect ownership interest in offices
and other non-shopping center\plain\cf1\f51\fs16\ql leased
properties.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
rtalc\cellx9320\clvertalb\cellx9500\clvertalc\cellx9978\clvertalb\cellx10153\clvert
alc\cellx10775\cellx10788\trrh-66\trrh0
rtalc\cellx9320\clvertalb\cellx9500\clvertalc\cellx9978\clvertalb\cellx10153\clvert
alc\cellx10775\cellx10788\trrh-66\trrh0\row}}}
{\trowd\clvertalb\cellx3074\clvertalb\cellx3249\clvertalb\clvmgf\cellx3948\clvertal
b\cellx4123\clvertalb\clvmgf\cellx4912\clvertalb\cellx5087\clvertalb\clvmgf\cellx57
70\clvertalb\clvmgf\cellx5976\clvertalb\cellx6140\clvertalb\clvmgf\cellx7032\clvert
alb\clvmgf\cellx7210\clvertalb\cellx7374\clvertalb\clvmgf\cellx8009\clvertalb\cellx
8184\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9979\clvertalb\cellx10154\clvertalb\clvmg
f\cellx10776\cellx10789\trrh361
Date\par\pard\plain\intbl\cf1\f51\fs13\b\qc
of\par\pard\plain\intbl\cf1\f51\fs13\b\qc
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Leaseable
Area\~sqm\plain\intbl\cf1\f51\fs11\b\qc\super
Occupancy\par\pard\plain\intbl\cf1\f51\fs13\b\qc
Rate\plain\intbl\cf1\f51\fs11\b\qc\super
IRSA\u8217?S\par\pard\plain\intbl\cf1\f51\fs13\b\qc Effective
Monthly
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Rental
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Income
\par\pard\plain\intbl\fs16\par\pard\plain\intbl\cf1\f51\fs13\b\qc
Ps./000\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Annual Rental
Income\par\pard\plain\intbl\cf1\f51\fs13\b\qc for fiscal years
Book\par\pard\plain\intbl\cf1\f51\fs13\b\qc Value (in
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc thousands
pesos)\plain\intbl\cf1\f51\fs11\b\qc\super (5)\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
b\cellx4123\clvertalb\clvmgf\cellx4912\clvertalb\cellx5087\clvertalb\clvmgf\cellx57
70\clvertalb\clvmgf\cellx5976\clvertalb\cellx6140\clvertalb\clvmgf\cellx7032\clvert
alb\clvmgf\cellx7210\clvertalb\cellx7374\clvertalb\clvmgf\cellx8009\clvertalb\cellx
8184\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9979\clvertalb\cellx10154\clvertalb\clvmg
f\cellx10776\cellx10789\trrh361\row}}}
{\trowd\clvertalb\cellx3074\clvertalb\cellx3249\clbrdrb\brdrs\brdrcf1\clvertalb\clv
mrg\cellx3948\clvertalb\cellx4123\clbrdrb\brdrs\brdrcf1\clvertalb\clvmrg\cellx4912\
clvertalb\cellx5087\clbrdrb\brdrs\brdrcf1\clvertalb\clvmrg\cellx5770\clvertalb\clvm
rg\cellx5976\clvertalb\cellx6140\clbrdrb\brdrs\brdrcf1\clvertalb\clvmrg\cellx7032\c
lvertalb\clvmrg\cellx7210\clvertalb\cellx7374\clbrdrb\brdrs\brdrcf1\clvertalb\clvmr
g\cellx8009\clvertalb\cellx8184\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8662\clvertalb
\cellx8842\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9320\clvertalb\cellx9500\clbrdrb\br
drs\brdrcf1\clvertalb\cellx9978\clvertalb\cellx10153\clbrdrb\brdrs\brdrcf1\clvertal
b\clvmrg\cellx10775\clvertalc\cellx10776\clvertalc\cellx10777\clvertalc\cellx10778\
\trrh172
mrg\cellx3948\clvertalb\cellx4123\clbrdrb\brdrs\brdrcf1\clvertalb\clvmrg\cellx4912\
clvertalb\cellx5087\clbrdrb\brdrs\brdrcf1\clvertalb\clvmrg\cellx5770\clvertalb\clvm
rg\cellx5976\clvertalb\cellx6140\clbrdrb\brdrs\brdrcf1\clvertalb\clvmrg\cellx7032\c
lvertalb\clvmrg\cellx7210\clvertalb\cellx7374\clbrdrb\brdrs\brdrcf1\clvertalb\clvmr
g\cellx8009\clvertalb\cellx8184\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8662\clvertalb
\cellx8842\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9320\clvertalb\cellx9500\clbrdrb\br
drs\brdrcf1\clvertalb\cellx9978\clvertalb\cellx10153\clbrdrb\brdrs\brdrcf1\clvertal
b\clvmrg\cellx10775\clvertalc\cellx10776\clvertalc\cellx10777\clvertalc\cellx10778\
\trrh172\row}}}
c\clshdng100\clcfpat12\clcbpat12\cellx10776\clvertalc\clshdng100\clcfpat12\clcbpat1
2\cellx10777\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10778\clvertalc\clshdng1
00\clcfpat12\clcbpat12\cellx10779\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx107
80\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10781\clvertalc\clshdng100\clcfpat
Offices\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
0775\clvertalc\cellx10776\clvertalc\cellx10777\clvertalc\cellx10778\clvertalc\cellx
10779\clvertalc\cellx10780\clvertalc\cellx10781\clvertalc\cellx10782\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Intercontinental
Plaza\plain\intbl\cf1\f51\fs11\b\ql\super (6)\cell\pard\plain\intbl\cf1\f51\fs13\ql
10779\clvertalc\cellx10780\clvertalc\cellx10781\clvertalc\cellx10782\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Dock Del
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Libertador
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Maip\u250?
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Laminar
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Reconquista
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Suipacha
Costeros\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Costeros Dique
IV\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Bouchard
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Works in progress Dique
IV\plain\intbl\cf1\f51\fs11\b\ql\super
Others\plain\intbl\cf1\f51\fs11\b\ql\super
drcf1\clvertalb\cellx5770\clvertalc\cellx5976\clvertalb\cellx6140\clvertalb\cellx70
75\clvertalc\cellx10776\clvertalc\cellx10777\clvertalc\cellx10778\clvertalc\cellx10
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Subtotal
99.36\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
%\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\f0\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other rental
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Commercial
properties\plain\intbl\cf1\f51\fs11\b\ql\super
Thames\plain\intbl\cf1\f51\fs11\b\ql\super
11//01/97\cell\pard\plain\intbl\cf1\f51\fs13\ql
properties\plain\intbl\cf1\f51\fs11\b\ql\super
Subtotal\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\b\qr
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Related
drcf1\clvertalb\cellx5770\clvertalc\cellx5976\clvertalb\cellx6140\clbrdrt\brdrs\brd
rcf1\clvertalb\cellx7032\clvertalc\cellx7210\clvertalb\cellx7374\clbrdrt\brdrs\brdr
cf1\clvertalb\cellx8009\clvertalb\cellx8184\clbrdrt\brdrs\brdrcf1\clvertalb\cellx86
0\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9978\clvertalb\cellx10153\clbrdrt\brdrs\brdr
cf1\clvertalb\cellx10775\clvertalc\cellx10776\clvertalc\cellx10777\clvertalc\cellx1
10782\trrh29
cf1\clvertalb\cellx8009\clvertalb\cellx8184\clbrdrt\brdrs\brdrcf1\clvertalb\cellx86
0\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9978\clvertalb\cellx10153\clbrdrt\brdrs\brdr
cf1\clvertalb\cellx10775\clvertalc\cellx10776\clvertalc\cellx10777\clvertalc\cellx1
10782\trrh29\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total offices and
other\plain\intbl\cf1\f51\fs11\b\ql\super
%\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\b\qr
\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql Notes:\cell\pard\plain\intbl\f0\fs16\ql \~\cell{
\par\pard\plain
leaseable area for each property. Excludes common areas and parking.\cell{
\par\pard\plain
Calculated dividing occupied square meters by leaseable area.\cell{
\par\pard\plain
Agreements in force as of 06/30/07 for each property were computed.\cell{
\par\pard\plain
consolidated leases, according to the RT21 method.\cell{
\par\pard\plain
acquisition, plus improvements, less accumulated depreciation, plus adjustment for
inflation, less allowance for impairment.\cell{
\par\pard\plain
Indirectly owned through Inversora Bolivar.\cell{
\par\pard\plain
Includes the following properties: Madero 942, Av. de Mayo 595, Av. Libertador 602,
Rivadavia 2774, Dock 5 Puerto Madero and Sarmiento 517\plain\intbl\cf1\f51\fs16\ql
(through IRSA)\cell{
\par\pard\plain
Includes the following properties: Constituci\u243?n 1111, Alsina 934/44 (fully
sold), Crucero I; Retail stores in Abril and Casona in Abril
(through\plain\intbl\cf1\f51\fs16\ql IRSA and Inversora Bolivar).\cell{
\par\pard\plain
Includes the following properties: one unit in Alto Palermo Park (through IBSA) and
Constituci\u243?n 1159 (through IRSA).\cell{
\par\pard\plain
Corresponds to the \u8220?Offices and Other Rental Properties\u8221? business unit
mentioned in Note 4 to our audited consolidated
financial\plain\intbl\cf1\f51\fs16\ql statements included elsewhere in this annual
report.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (11)\cell\pard\plain\intbl\cf1\f51\fs16\ql Work
in progress of an AAA office building in Puerto Madero.\cell{
The following table shows a schedule of the lease expirations of IRSA\u8217?s
office and other properties for leases outstanding as of
June\~30,\plain\cf1\f51\fs16\ql 2007, assuming that none of the tenants exercise
renewal options or terminate their lease early. Most tenants have renewal clauses
in their leases.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
\clvertalb\cellx7507\clvertalc\cellx8395\clvertalb\cellx9485\clvertalc\cellx10615\c
lvertalc\cellx10793\trrh-66\trrh0
\clvertalb\cellx7507\clvertalc\cellx8395\clvertalb\cellx9485\clvertalc\cellx10615\c
lvertalc\cellx10793\trrh-66\trrh0\row}}}
{\trowd\clbrdrb\brdrs\brdrcf1\clvertalb\cellx629\clvertalb\cellx1719\clbrdrb\brdrs\
brdrcf1\clvertalb\cellx2267\clvertalb\cellx3357\clbrdrb\brdrs\brdrcf1\clvertalb\cel
x6427\clvertalb\cellx7507\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8395\clvertalb\cellx
9485\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10615\clvertalb\cellx10793\trrh0
\par\pard\plain\intbl\fs16\pard\plain\intbl\cf1\f51\fs13\b\qc Fiscal
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc year of
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc lease
expiration\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Number
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc of\~leases
expiring\~\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Square\~meters
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc subject to
expiring\~leases\~\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Percentage\~of
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc total square
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc meters\~subject
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc to
Annual\~rental
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc income under
expiring\~leases\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Percentage\~of\~total
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc rental\~income
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc under expiring
leases\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
brdrcf1\clvertalb\cellx2267\clvertalb\cellx3357\clbrdrb\brdrs\brdrcf1\clvertalb\cel
9485\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10615\clvertalb\cellx10793\trrh0\row}}}
{\trowd\clvertalb\cellx629\clvertalb\cellx1719\clvertalb\cellx2267\clvertalb\cellx3
\clvertalb\cellx7507\clvertalb\cellx8395\clvertalb\cellx9485\clvertalb\cellx10615\c
lvertalb\cellx10793\trrh344
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in square
meters)\cell\pard\plain\intbl\cf1\f51\fs13\ql
(Ps.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
(%)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
{\trowd\clvertalb\cellx629\clvertalb\cellx1719\clvertalb\cellx2267\clvertalb\cellx3
\clvertalb\cellx7507\clvertalb\cellx8395\clvertalb\cellx9485\clvertalb\cellx10615\c
lvertalb\cellx10793\trrh344\row}}}
{\trowd\clshdng100\clcfpat12\clcbpat12\cellx629\clvertalb\clshdng100\clcfpat12\clcb
cfpat12\clcbpat12\cellx10615\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10793\tr
rh206
\pard\plain\intbl\cf1\f51\fs16\ql 2008\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\cell{
rh206\row}}}
{\trowd\cellx629\clvertalb\cellx1719\clvertalb\cellx2267\clvertalb\cellx3357\clvert
alb\cellx4279\clvertalb\cellx5369\clvertalb\cellx6249\clvertalb\cellx6427\clvertalb
\cellx7507\clvertalb\cellx8395\clvertalb\cellx9485\clvertalb\cellx10615\clvertalb\c
ellx10793\trrh206
%\cell{
rh206
%\cell{
rh206\row}}}
ellx10793\trrh206
\pard\plain\intbl\cf1\f51\fs16\ql 2011+\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\cell{
{\trowd\clvertalb\cellx629\clvertalb\cellx1719\clbrdrt\brdrs\brdrcf1\clvertalb\cell
x2267\clvertalb\cellx3357\clbrdrt\brdrs\brdrcf1\clvertalb\cellx4279\clvertalb\cellx
507\clbrdrt\brdrs\brdrcf1\clvertalb\cellx8395\clvertalb\cellx9485\clbrdrt\brdrs\brd
rcf1\clvertalb\cellx10615\clvertalc\cellx10793\trrh29
rcf1\clvertalb\cellx10615\clvertalc\cellx10793\trrh29\row}}}
rh206
\pard\plain\intbl\cf1\f51\fs16\ql Total\cell\pard\plain\intbl\cf1\f51\fs13\ql
100\cell\pard\plain\intbl\cf1\f51\fs16\ql %\cell{
rh206\row}}}
rcf1\clvertalb\cellx10615\clvertalc\cellx10793\trrh29
rcf1\clvertalb\cellx10615\clvertalc\cellx10793\trrh29\row}}}\pard\plain\f0\fs4\par\
pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
Includes Offices which contract has not been renewed and vacant stores as of
June\~30, 2007.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (2)\cell\pard\plain\intbl\cf1\f51\fs16\ql Does
not include vacant leased square meters.\cell{
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The following table shows our
offices occupancy percentage during fiscal years ended June\~30, 2005, 2006 and
2007:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
lx10798\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Occupancy Percentage\cell{
lx10798\trrh172
Fiscal\~year\~ended\~June\~30,\plain\intbl\cf1\f51\fs11\b\qc\super (1)\cell{
(in\~percentage)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Dock del
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Maipu
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Costeros Dock
Others\plain\intbl\cf1\f51\fs11\ql\super
\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0
\fs4\par
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql Leased
square meters in accordance with lease agreements in effect as of June\~30, 2007,
2006 and 2005 considering the total leaseable office
area\plain\intbl\cf1\f51\fs16\ql for each year.\cell{
\par\pard\plain
Includes the following buildings: Madero 942, Av. De Mayo 595, Av. Libertador 602,
Sarmiento 517 and Rivadavia 2768.\cell{
The following table sets forth the annual average income per square meter for our
offices during fiscal years ended June\~30, 2007, 2006 and
\par\pard\plain
66\trrh0\row}}}
lx10798\trrh172
Fiscal\~year\~ended\~June\~30,\plain\intbl\cf1\f51\fs11\b\qc\super (1)\cell{
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (Ps. per square meter)\cell{
bpat12\cellx8555\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10798\trrh206
\~\cell{
bpat12\cellx8555\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10798\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Maipu
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Costeros Dock
Others\plain\intbl\cf1\f51\fs11\ql\super
\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0
\fs4\par
\par\pard\plain
Calculated considering Annual Leases to total leaseable office area, in accordance
with IRSA\u8217?s percentage of ownership in each building.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (2)\cell\pard\plain\intbl\cf1\f51\fs16\ql Lease
agreement beginning in the fourth quarter of fiscal year 2005.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (3)\cell\pard\plain\intbl\cf1\f51\fs16\ql Lease
agreement beginning in the third quarter of fiscal year 2007, consequently income
is for only three months.\cell{
\par\pard\plain
Includes the following buildings: Madero 942, Av. De Mayo 595, Av. Libertador 602,
Sarmiento 517 and Rivadavia 2768.\cell{
{\trowd\cellx432\cellx10463\trrh206\row}}}\pard\plain\sb286\cf1\f51\fs16\b\ql
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Set forth below you will find
information regarding our principal currently owned office properties, including
the names of the tenants occupying\plain\cf1\f51\fs16\ql 5% or more of the gross
leasable area of each property.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Intercontinental Plaza, City of Buenos Aires\plain\cf1\f51\fs16\i\ql
.\plain\cf1\f51\fs16\ql Intercontinental Plaza is a modern 24-story building
located next to the Intercontinental Hotel in the\plain\cf1\f51\fs16\ql historic
neighborhood of Monserrat in downtown City of Buenos Aires. We own the entire
building which has floors averaging 900\par\pard\plain\cf1\f51\fs13\ql
\
square meters with 324 parking spaces. The principal tenants currently include
Total Austral S.A., Danone Argentina S.A., Occidental
Argentina\plain\cf1\f51\fs16\ql Exploration and Production Inc, IRSA, Alto Palermo
and Cresud.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Bouchard 710, City of
Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Bouchard 710 is an
office building acquired by us in June 2005, located in the Retiro area. The
building is a\plain\cf1\f51\fs16\ql 12-story tower, with an average area per floor
of 1,251 square meters, with 180 units for car parking. Tenants are Unilever de
Argentina S.A.,\plain\cf1\f51\fs16\ql Finterbusch Pickenhayn Sibille S.C. (KPMG),
and Microsoft de Argentina S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Bouchard 551, City of Buenos Aires.\plain\cf1\f51\fs16\ql Bouchard 551 is a
Class\~A office building we acquired in March 2007, for a total price of US$84.1
million,\plain\cf1\f51\fs16\ql located in the Retiro area close to the
intersection of the Leandro N. Alem and C\u243?rdoba avenues and the Plaza Roma.
The building is a 23-story\plain\cf1\f51\fs16\ql tower covering a surface area of
2,900 square meters in the low floors that becomes smaller as it goes higher up to
900 square meters approximately, and\plain\cf1\f51\fs16\ql parking for 177 units.
Principal lessees include La Naci\u243?n S.A., Price Waterhouse\~& Co., AS. EM.
S.R.L. and Techint C\u237?a. T\u233?cnica\plain\cf1\f51\fs16\ql Internacional
S.A.C.e I.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Dock del Plata, City of
Buenos Aires\plain\cf1\f51\fs16\ql . Dock del Plata is a Class\~A office building
we acquired in November 2006, for a total purchase price of\plain\cf1\f51\fs16\ql
US$8.8 million, located in the Puerto Madero area at Alicia Moreau de Justo 400.
The building is 4-story high, with an average surface per plant
of\plain\cf1\f51\fs16\ql 1,500 square meters and parking lot for 309 units. The
principal lessees are Veco S.A., Davila 380 S.A., Farmacity S.A., Rosso Alba,
Francia y Ruiz\plain\cf1\f51\fs16\ql Romero, Converse Argentina S.A., AT\~& T
Communications Serv. S.R.L., MCO LEX S.R.L., Garfin Agropecuaria S.A., CA Argentina
S.A. and Dell\plain\cf1\f51\fs16\ql Am\u233?rica Latina
Corp.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Libertador 498, City of Buenos
Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Libertador 498 is a 27-story
office tower located at the intersection of three of the most important
fares\plain\cf1\f51\fs16\ql thorough of the City of Buenos Aires, making it
accessible from the north, west and south of the city. We own 17 floors with an
average area per floor\plain\cf1\f51\fs16\ql of 620 square meters and 281 parking
spaces. The building has a singular cylindrical design and a highly visible
circular neon billboard that makes it a\plain\cf1\f51\fs16\ql landmark in the
Buenos Aires skyline. The principal tenants in this building currently include MTV
Networks Argentina S.R.L., Epson Argentina S.A.,\plain\cf1\f51\fs16\ql
Cervecer\u237?a y Malter\u237?a Quilmes, Yara Argentina S.A., Alfaro Abogados S.C.,
Julius Baer Financial Consultancy S.A., LG Electronics
Argentina\plain\cf1\f51\fs16\ql S.A., Eastman Chemical Argentina S.R.L., Allergan
Productos Farmaceuticos S.A. and Alto Palermo\u8217?s subsidiary, Tarshop
S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Maip\u250? 1300, City of Buenos
Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Maip\u250? 1300 is a 23-
story office tower located on the San Mart\u237?n Plaza, a prime office
zone.\plain\cf1\f51\fs16\ql The building is also located within walking distance
of the Retiro commuter train station, Buenos Aires\u8217? most important public
transportation hub,\plain\cf1\f51\fs16\ql connecting rail, subway and bus transit.
We own the entire building which has an average area per floor of 440 square
meters. The building\u8217?s\plain\cf1\f51\fs16\ql principal tenants currently
include Allende\~& Brea, Carlson Wagonlint Travel Argentina S.A. and PPD Argentina
S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Laminar Plaza, City of Buenos
Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Laminar Plaza is a 20-story
office building located in Catalinas, the City of Buenos Aires\u8217?
most\plain\cf1\f51\fs16\ql exclusive office district. Each floor has an average
area of 1,453 square meters, including common areas. We own 5 floors and 66 parking
spaces. The\plain\cf1\f51\fs16\ql main tenants, among others, are as follows:
Cisco Systems, Telef\u243?nica Moviles de Argentina S.A., Chubb Argentina de
Seguros S.A., Hewitt\plain\cf1\f51\fs16\ql Associates S.A., Apache Petrolera
Argentina S.A., Natural Energy S.A. and Bank Hapoalim
B.M.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 73
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Madero 1020, City of Buenos
Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Madero 1020 is a 25-story
office tower located in the center of Catalinas, an important office area,
with\plain\cf1\f51\fs16\ql views of the Port of Buenos Aires, the R\u237?o de la
Plata and the city\u8217?s downtown area. As of June\~30, 2007, we own a 215-square
meter\plain\cf1\f51\fs16\ql lockup.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Suipacha 652/64, City of Buenos Aires\plain\cf1\f51\fs16\i\ql
.\plain\cf1\f51\fs16\ql Suipacha 652/64 is a 7-story office building located in
the office district of the City of Buenos Aires. We\plain\cf1\f51\fs16\ql own the
entire building and 70 parking spaces. The building has unusually large floor, most
measuring 1,580 square meters. This property underwent\plain\cf1\f51\fs16\ql
substantial renovations shortly after we acquired the deed in 1991 to prepare the
building for rental. The building\u8217?s principal tenants
currently\plain\cf1\f51\fs16\ql include Gameloft Argentina S.A., Monitor de Medios
Publicitarios S.A, Organizaci\u243?n de Servicios Director Empresarios (OSDE) and
Alto\plain\cf1\f51\fs16\ql Palermo\u8217?s subsidiary, Tarshop
S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Reconquista 823/41, City of
Buenos Aires\plain\cf1\f51\fs16\ql . Reconquista 823/41 is a 15-story office tower
located in the Catalina\plain\cf1\f51\fs16\i\ql s\plain\cf1\f51\fs16\ql area. We
own the entire building\plain\cf1\f51\fs16\ql which is made up of three basements,
space for 52 cars in the car parks, the ground floor and 15 floors of office space.
The building has floors with an\plain\cf1\f51\fs16\ql average area of 540 square
meters. As of June\~30, 2007, we have an occupancy rate of 100.0%. The
building\u8217?s principal tenants include Marval\~&\plain\cf1\f51\fs16\ql
O\u8217?Farrel and Tracker S.R.L.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Edificios Costeros, Dique II, City of Buenos Aires\plain\cf1\f51\fs16\ql . Costeros
A and B are two four-story buildings developed by us and located in the
Puerto\plain\cf1\f51\fs16\ql Madero area. We own the two buildings which have a
gross leasable area of 6,319 square meters. In September 1999 we completed their
construction and\plain\cf1\f51\fs16\ql in April 2000 began to market the office
spaces and 147 parking spaces. The main tenants of these properties are as follows:
Leo Burnett Worldwide\plain\cf1\f51\fs16\ql Invest. Inc., Reckitt Benchiser
Argentina S.A., Martina Di Trento S.A., Loyalty Marketing Group S.A., Italcred
S.A., Minera Agua Rica L.L.C. and Somos\plain\cf1\f51\fs16\ql Tres
S.R.L.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Edificios Costeros, Dique IV,
City of Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On
August\~29, 2001, we signed the deed of purchase of \u8220?Section C\u8221? of the
office\plain\cf1\f51\fs16\ql complex known as Puerto del Centro that includes
buildings \u8220?5\u8221? and \u8220?6.\u8221? The property is located in the
Puerto Madero area\plain\cf1\f51\fs16\ql and has approximately 5,500 square meters
of gross leasable area and 50 parking spaces. The building\u8217?s principal
tenants currently include Nextel\plain\cf1\f51\fs16\ql Argentina S.A., Consultora
de Estudios Bonaerense S.R.L., London Supply S.A.C.I.F.I., Techint C\u237?a.
T\u233?cnica Internacional S.A.C.I. and\plain\cf1\f51\fs16\ql Trafigura Argentina
S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Other office
properties\plain\cf1\f51\fs16\ql . We also have interests in three smaller office
properties, all of which are located in the City of Buenos Aires.
These\plain\cf1\f51\fs16\ql properties are either entire buildings or portions of
buildings, none of which contributed more than Ps.0.8 million in annual rental
income for fiscal year\plain\cf1\f51\fs16\ql 2006. Among these properties are
Madero 942, Libertador 602, Av. de Mayo 595, Rivadavia 2768 and Sarmiento
517.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Retail and other
properties\plain\cf1\f51\fs16\ql . Our portfolio of non-shopping center leased
properties includes nine non-shopping center leased properties that
are\plain\cf1\f51\fs16\ql leased as street retail, a warehouse, two leased
undeveloped plots of land and various other uses. Most of these properties are
located in the City of\plain\cf1\f51\fs16\ql Buenos Aires, although some are
located in other cities in Argentina. These properties include Constituci\u243?n
1111, Edificio Crucero I,\plain\cf1\f51\fs16\ql \u8220?Abril\u8221? commercial
stores, Thames and Santa Mar\u237?a del Plata.\par\pard\plain\cf1\f51\fs13\ql
\
Hotels\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql At the end of the 1997 fiscal
year, we acquired the Hotel Llao Llao, our first luxury hotel. Some months later,
as part of the acquisition from\plain\cf1\f51\fs16\ql P\u233?rez Companc of the
Old Alto Palermo, we acquired an indirect 50% interest in the Hotel
Intercontinental in Buenos Aires which we own through\plain\cf1\f51\fs16\ql our
subsidiary Inversora Bol\u237?var. In March 1998, we acquired the Hotel Libertador.
During fiscal year 1999, we sold a 20% interest in the Hotel\plain\cf1\f51\fs16\ql
Libertador to Hoteles Sheraton de Argentina S.A., (\u8220?Hoteles Sheraton de
Argentina\u8221?) and during the fiscal year 2000, we sold 50% of
our\plain\cf1\f51\fs16\ql interest in the Hotel Llao Llao to the Sutton Group.
During fiscal year 2007 we increased our share in Inversora Bolivar by 100% and
obtained an\plain\cf1\f51\fs16\ql indirect share in the Hotel Intercontinental of
76.34%.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ql The following chart shows
certain information regarding our hotels:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
2\clvertalc\cellx6383\clvertalb\cellx6553\clvertalc\cellx7236\clvertalb\cellx7406\c
rtalc\cellx9397\clvertalb\cellx9583\clvertalc\cellx10061\clvertalb\cellx10231\clver
talc\cellx10792\trrh-66\trrh0
rtalc\cellx9397\clvertalb\cellx9583\clvertalc\cellx10061\clvertalb\cellx10231\clver
talc\cellx10792\trrh-66\trrh0\row}}}
x7919\clvertalb\cellx8089\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10064\clvertalb\cell
Hotel\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc IRSA\u8217?s
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc effective
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Number
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc of
rooms\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Average
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Occupancy
%\plain\intbl\cf1\f51\fs11\b\qc\super (1)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc price
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc per
room\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Sales in Ps.000 as of June\~30 of
fiscal\plain\intbl\cf1\f51\fs11\b\qc\super
(3)\par\pard\plain\intbl\cf1\f51\fs13\b\qc (in thousands
Ps.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Book
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc value as
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc of
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc 06/30/07\cell{
x7919\clvertalb\cellx8089\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10064\clvertalb\cell
\clvertalb\cellx8089\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8650\clvertalb\cellx8836\
clbrdrb\brdrs\brdrcf1\clvertalb\cellx9397\clvertalb\cellx9583\clbrdrb\brdrs\brdrcf1
\clvertalb\cellx10061\clvertalb\cellx10231\clvertalb\cellx10792\trrh172
Ps.\plain\intbl\cf1\f51\fs11\b\qc\super
\clvertalb\cellx8089\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8650\clvertalb\cellx8836\
clbrdrb\brdrs\brdrcf1\clvertalb\cellx9397\clvertalb\cellx9583\clbrdrb\brdrs\brdrcf1
\clvertalb\cellx10061\clvertalb\cellx10231\clvertalb\cellx10792\trrh172\row}}}
Intercontinental\plain\intbl\cf1\f51\fs11\ql\super
69.4%\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Sheraton
Libertador\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Llao
Llao\plain\intbl\cf1\f51\fs11\ql\super (5)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Plots in
Bariloche\plain\intbl\cf1\f51\fs11\ql\super
N/A\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\
fs4\par
\par\pard\plain
Accumulated average in the twelve-month period.\cell{
\par\pard\plain
Accumulated average in the twelve-month period.\cell{
\par\pard\plain
Indirectly owned through Nuevas Fronteras S.A.(Subsidiary of Inversora Bol\u237?var
S.A.).\cell{
\par\pard\plain
Indirectly owned through Hoteles Argentinos S.A.\cell{
\par\pard\plain
Indirectly owned through Llao Llao Resorts S.A.\cell{
l Hotel Llao Llao, San Carlos de Bariloche, Province of Rio
Negro\plain\cf1\f51\fs16\ql . In June 1997 we acquired the Hotel Llao Llao from
Llao Llao Holding S.A.\plain\cf1\f51\fs16\ql 50% is currently owned by the Sutton
Group. The Hotel Llao Llao is located on the Llao Llao pen\u237?nsula, 25
kilometers from San Carlos de\plain\cf1\f51\fs16\ql Bariloche and is one of the
most important tourist hotels in Argentina. Surrounded by mountains and lakes, this
hotel was designed and built by the\plain\cf1\f51\fs16\ql famous architect
Bustillo in a traditional alpine style and first opened in 1938. The hotel was
renovated between 1990 and 1993 and has a total\plain\cf1\f51\fs16\ql constructed
surface area of 15,000 square meters and 158 rooms. The hotel-resort also includes
an 18-hole golf course, tennis courts, health club, spa,\plain\cf1\f51\fs16\ql
game room and swimming pool. The hotel is a member of The Leading Hotels of the
World, Ltd., a prestigious luxury hospitality organization\plain\cf1\f51\fs16\ql
representing 430 of the world\u8217?s finest hotels, resorts and spas. The Hotel
Llao Llao is currently being managed by Compa\u241?\u237?a de\plain\cf1\f51\fs16\ql
Servicios Hoteleros S.A. which manages the Alvear Palace Hotel, a luxury hotel
located in the Recoleta neighborhood of Buenos
Aires.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Currently, the hotel is being
expanded at an expected cost of approximately US$12.7 million. The number of suites
in the hotel is being increased\plain\cf1\f51\fs16\ql to 200 rooms, improvements
are being made in the kitchen and laundry room, and a high technology water
purifying plant is to be constructed. The first\plain\cf1\f51\fs16\ql stage of
construction is in the final process, and the second stage of the construction,
which includes reinforced concrete, masonry and facilities, started
in\plain\cf1\f51\fs16\ql December 2005. As of June\~30, 2007 the progress of the
works is 70.68% and works are estimated to be\par\pard\plain\cf1\f51\fs13\ql
\
completed by the first quarter of fiscal year 2008. 18 rooms have been opened to
the public and 25 more are expected to be available by the end
of\plain\cf1\f51\fs16\ql December
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Hotel Intercontinental, City
of Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql In November 1997,
we acquired 51% of the Hotel Intercontinental from the P\u233?rez
Companc\plain\cf1\f51\fs16\ql S.A. The Hotel Intercontinental is located in the
downtown City of Buenos Aires neighborhood of Monserrat, adjacent to the
Intercontinental Plaza office\plain\cf1\f51\fs16\ql building. Intercontinental
Hotels Corporation, a United States corporation, currently owns 25% of the Hotel
Intercontinental. The hotel\u8217?s meeting\plain\cf1\f51\fs16\ql facilities
include eight meeting rooms, a convention center and a divisible 588 square meter
ballroom. Other amenities include a restaurant, a business\plain\cf1\f51\fs16\ql
center, a spa and a fitness facility with swimming pool. The hotel was completed in
December 1994 and has 309 rooms. The hotel is managed by the\plain\cf1\f51\fs16\ql
Intercontinental Hotels Corporation.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Hotel Sheraton Libertador, City of Buenos Aires\plain\cf1\f51\fs16\i\ql
.\plain\cf1\f51\fs16\ql In March 1998 we acquired 100% of the Hotel Sheraton
Libertador from Citicorp Equity\plain\cf1\f51\fs16\ql Investment for an aggregate
purchase price of US$23 million. This hotel is located in downtown Buenos Aires.
The hotel contains 193 rooms and 7\plain\cf1\f51\fs16\ql suites, eight meeting
rooms, a restaurant, a business center, a spa and fitness facilities with a
swimming pool. In March 1999, we sold 20% of our interest\plain\cf1\f51\fs16\ql in
the Sheraton Libertador Hotel for US$4.7 million to Hoteles Sheraton de Argentina.
The hotel is currently managed by Sheraton Overseas
Management\plain\cf1\f51\fs16\ql Corporation, a United States
corporation.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The hotel is currently
under renovation. We are upgrading the hotel\u8217?s guest rooms and meeting rooms,
and are soliciting bids for the\plain\cf1\f51\fs16\ql improvement of its
elevators. In addition, we are improving the hotel\u8217?s corridors and the lobby
bar and are replacing the carpets in the main\plain\cf1\f51\fs16\ql reception
area. We currently believe that the total cost of these improvements is likely to
be approximately US$5.0 million works are estimated to be\plain\cf1\f51\fs16\ql
completed by the end of year 2008.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Terreno Bariloche, \u8220?El Rancho,\u8221? San Carlos de Bariloche, Province of
R\u237?o Negro\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On December\~14,
2006, through our hotel\plain\cf1\f51\fs16\ql operator subsidiary, Llao Llao
Resorts S.A., we acquired a land covering 129,533 square meters of surface area in
the City of San Carlos de Bariloche in\plain\cf1\f51\fs16\ql the Province of
R\u237?o Negro. The total price of the transaction was US$7.0 million, of which
US$4.2 million were paid cash and the balance of\plain\cf1\f51\fs16\ql US$2.8
million was financed by means of a mortgage to be paid in 36 monthly, equal and
consecutive installments of US$0.086 million each. The land
is\plain\cf1\f51\fs16\ql in the border of the Lago Guti\u233?rrez, close to the
Hotel Llao Llao in an outstanding natural environment and it has a large cottage
covering 1,000\plain\cf1\f51\fs16\ql square meters of surface area designed by the
architect Ezequiel Bustillo.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Our Investment
in Banco Hipotecario\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We have a
significant investment in Banco Hipotecario which represented 7.3% of our
consolidated assets as of June\~30, 2007. Established in 1886\plain\cf1\f51\fs16\ql
by the Argentine government and privatized in 1999, Banco Hipotecario has
historically been Argentina\u8217?s leading mortgage lender, provider
of\plain\cf1\f51\fs16\ql mortgage-related insurance and mortgage loan services.
All of its operations and customers are located in Argentina where it operates a
nationwide\plain\cf1\f51\fs16\ql network of 33 branches and 47 sales
offices.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Banco Hipotecario is a full-
service commercial bank offering a wide variety of banking activities and related
financial services to individuals,\plain\cf1\f51\fs16\ql small- and medium-sized
companies and large corporations. As of June\~30, 2007, Banco Hipotecario ranked
second in the Argentine financial system in\plain\cf1\f51\fs16\ql terms of
shareholders\u8217? equity, second in terms of net income and ninth in terms of
total assets. As of June\~30, 2007, Banco Hipotecario\u8217?s\plain\cf1\f51\fs16\ql
shareholders\u8217? equity was\par\pard\plain\cf1\f51\fs13\ql
\
Ps.2,711.3 million, its assets were Ps.10,167.6 million, and its net income for the
first six months of 2007 was Ps.149.8 million. Since 1999,
Banco\plain\cf1\f51\fs16\ql Hipotecario\u8217?s shares have been listed on the
Buenos Aires Stock Exchange in Argentina, and since 2006 it has had a Level I GDR
program.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Banco Hipotecario\u8217?s
business strategy is focused on leveraging its financial position and developing a
diversified banking business built on\plain\cf1\f51\fs16\ql its existing mortgage
franchise. Since its debt restructuring in 2004, it began to make progress in this
diversification strategy, growing its lending business\plain\cf1\f51\fs16\ql and
developing new business lines, implementing integrated technological solutions to
enable its entry into retail banking, extending its marketing
network\plain\cf1\f51\fs16\ql and creating back-office services to support its new
operations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In 2004, as part of its
business diversification strategy, Banco Hipotecario expanded its product offerings
and began offering personal loans,\plain\cf1\f51\fs16\ql resumed mortgage lending
and launched asset-backed loans. It expanded its corporate loan product offerings
and implemented certain customer loyalty\plain\cf1\f51\fs16\ql strategies. In
response to demand for retail and wholesale time deposits and savings accounts,
Banco Hipotecario started offering personal checking\plain\cf1\f51\fs16\ql
accounts and launched the Visa Banco Hipotecario credit card which has steadily
grown in terms of market penetration and transaction size.
Banco\plain\cf1\f51\fs16\ql Hipotecario also continued its strategy of expanding
the offering of non-mortgage related insurance products it offers, including
combined family, life,\plain\cf1\f51\fs16\ql unemployment, health, personal
accident and ATM theft insurance.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of
June 2007, it continued expanding these business lines, as non-financial private
sector loans increased to Ps.748.6 million, principally as a\plain\cf1\f51\fs16\ql
result of retail and consumer loan originations which more than doubled compared to
June 2006. Commercial loans to the private sector also
increased\plain\cf1\f51\fs16\ql 55.7% during the same
period.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Banco Hipotecario seeks to
achieve a balanced portfolio of mortgage loans, consumer financing and corporate
credit lines, while maintaining an\plain\cf1\f51\fs16\ql adequate risk management
policy. As of June\~30, 2007, its portfolio of non-mortgage loans increased to
51.2% of its total loan portfolio compared to\plain\cf1\f51\fs16\ql 36.9% as of
June\~30, 2006.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql During 2006 and 2007,
Banco Hipotecario also experienced continued growth in deposits, including savings
accounts and time deposits.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The
following table sets forth Banco Hipotecario\u8217?s sources of funding as of the
dates indicated.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
lx9769\clvertalb\cellx9979\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10797\trrh172
As\~of\~December\~31,\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc As\~of\~June\~30\cell{
lx9769\clvertalb\cellx9979\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10797\trrh172\row}}
}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Checking
accounts\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Ps.
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Ps.
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Ps. 39.3\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Saving
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Time
deposits\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other deposit
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Accrued interest
Ps.\~527.7\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Ps.\~868.6\cell{
talb\cellx9767\clvertalb\cellx9977\clvertalb\cellx10795\trrh206\row}}}\pard\plain\s
b286\cf1\f51\fs16\b\ql Seasonality\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our
business unit of \u8220?shopping centers\u8221? is directly related to the
seasonality which affects the level of sales of our tenants. During
the\plain\cf1\f51\fs16\ql summer holiday season (January and February) our tenants
experience their minimum sales levels, compared to the winter holiday season (July)
and\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 77
\
December (Christmas) when our tenants tend to reach their peak sales figures.
Clothing and footwear tenants tend to change their collections in the
spring\plain\cf1\f51\fs16\ql and fall. This has a positive effect on the sales of
stores. Discount sales at the end of each season are also a major source of impact
on our business.\par\pard\plain\sb286\cf1\f51\fs16\b\ql
Competition\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Shopping
centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In the shopping center sector we
compete through our subsidiary Alto Palermo. Because most of our shopping centers
are located in developed and\plain\cf1\f51\fs16\ql highly populated areas, there
are competing shopping centers within, or in close proximity to, our targeted
areas. The number of shopping centers in a\plain\cf1\f51\fs16\ql particular area
could have a material effect on our ability to lease space in our shopping centers
and on the amount of rent that we are able to charge. We\plain\cf1\f51\fs16\ql
believe that due to the limited availability of large plots of land and zoning
restrictions in the City of Buenos Aires, it will be difficult for
other\plain\cf1\f51\fs16\ql companies to compete with us in areas through the
development of new shopping center properties. Our principal competitor is Cencosud
S.A. which\plain\cf1\f51\fs16\ql owns and operates Unicenter shopping center and
the Jumbo hypermarket chain, among
others.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The following chart shows
certain information relating to the most important owners and operators of shopping
centers in Argentina:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
lvertalb\cellx9927\clvertalc\cellx10616\clvertalc\cellx10794\trrh-66\trrh0
lvertalb\cellx9927\clvertalc\cellx10616\clvertalc\cellx10794\trrh-66\trrh0\row}}}
\pard\plain\intbl\brdrb\brdrs\cf1\f51\fs13\b\qc
Company\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\ql Shopping
Center\cell\pard\plain\intbl\cf1\f51\fs13\ql
Location\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Leasable
gross\~area\cell\pard\plain\intbl\cf1\f51\fs13\ql
Shops\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc %\~Overall
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc national
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc leasable
area\plain\intbl\cf1\f51\fs11\b\qc\super (2)\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\~Shop\plain\intbl\cf1\f51\fs11\b\qc\super
(2)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
Alto\~Palermo\cell\pard\plain\intbl\cf1\f51\fs13\ql
ellx9927\clvertalb\cellx10616\clvertalb\cellx10794\trrh206
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto
Avellaneda\plain\intbl\cf1\f51\fs11\ql\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc
GBA\cell\pard\plain\intbl\cf1\f51\fs13\ql
ellx9927\clvertalb\cellx10616\clvertalb\cellx10794\trrh206\row}}}
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Abasto de Buenos
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc BA\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mendoza Plaza
Shopping\plain\intbl\cf1\f51\fs11\ql\super (3)
Mendoza\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Paseo
Alcorta\plain\intbl\cf1\f51\fs11\ql\super (5)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto Palermo
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Buenos Aires
Design\plain\intbl\cf1\f51\fs11\ql\super
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Patio
Noa\plain\intbl\cf1\f51\fs11\ql\super (5)\cell\pard\plain\intbl\cf1\f51\fs13\ql
Salta\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql C\u243?rdoba
Shopping\plain\intbl\cf1\f51\fs11\ql\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc C\u243?
rdoba\cell\pard\plain\intbl\cf1\f51\fs13\ql
Rosario\plain\intbl\cf1\f51\fs11\ql\super (5)\cell\pard\plain\intbl\cf1\f51\fs13\ql
7\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10616\clvertalc\cellx10794\trrh29
\~\cell{
7\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10616\clvertalc\cellx10794\trrh29\row}}}
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql
Cencosud\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Unicenter
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Plaza Oeste
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Quilmes
Factory\plain\intbl\cf1\f51\fs11\ql\super (5)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Lomas Center
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql San Martin
Factory\plain\intbl\cf1\f51\fs11\ql\super (5)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Parque Brown
Factory\plain\intbl\cf1\f51\fs11\ql\super
(5).\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Las Palmas del Pilar
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Jumbo Palermo Centro
Comercial\plain\intbl\cf1\f51\fs11\ql\super
bpat12\cellx10794\trrh206\row}}}\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
lvertalb\cellx9895\clvertalc\cellx10584\clvertalc\cellx10790\trrh-66\trrh0
lvertalb\cellx9895\clvertalc\cellx10584\clvertalc\cellx10790\trrh-66\trrh0\row}}}
\pard\plain\intbl\brdrb\brdrs\cf1\f51\fs13\b\qc
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\ql Shopping
Location\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Leasable
gross\~area\cell\pard\plain\intbl\cf1\f51\fs13\ql
Shops\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc %\~Overall
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc national
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc leasable
area\plain\intbl\cf1\f51\fs11\b\qc\super (2)\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\~Shop\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql El Portal de la
Patagonia\plain\intbl\cf1\f51\fs11\ql\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Neuqu\u233?
n\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql El Portal de
Escobar\plain\intbl\cf1\f51\fs11\ql\super (5)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql El Portal de los
Andes\plain\intbl\cf1\f51\fs11\ql\super
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Portal de
Madryn\plain\intbl\cf1\f51\fs11\ql\super
Chubut\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql El Portal de
\pard\plain\intbl\cf1\f51\fs16\b\ql
Other\~Operators\cell\pard\plain\intbl\cf1\f51\fs13\ql
100\cell\pard\plain\intbl\cf1\f51\fs16\b\ql %\cell\pard\plain\intbl\cf1\f51\fs13\ql
100\cell\pard\plain\intbl\cf1\f51\fs16\b\ql %\cell{
bpat12\cellx10790\trrh206\row}}}\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdr
s\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par\pard\plain\cf1\f51\fs16\ql
Source: Argentine Chamber of Shopping Centers.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql \u8220?
GBA\u8221? means Gran Buenos Aires, the Buenos Aires metropolitan area, and \u8220?
BA\u8221? means the city of Buenos Aires.\cell{
\par\pard\plain
Percentage over total shopping centers in Argentina. Figures may not sum due to
rounding.\cell{
\par\pard\plain
effective interest of Alto Palermo in Mendoza Plaza Shopping is 85.4%.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (4)\cell\pard\plain\intbl\cf1\f51\fs16\ql Alto
Palermo has an effective interest of 54% in ERSA, a company that operates the
concession of this building.\cell{
\par\pard\plain
Includes total leaseable area occupied by supermarkets and hypermarkets.\cell{
l Credit Card Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The credit card
market in Argentina is highly competitive due to (i)\~the active participation in
this market of substantially all international and\plain\cf1\f51\fs16\ql domestic
banks conducting business in Argentina, most of which have substantially greater
financial resources than we do and (ii)\~the strong market\plain\cf1\f51\fs16\ql
position of both Visa and Mastercard in Argentina. Our principal competitors in
various segments of the credit card market
include:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\i\ql International and domestic
Cards:\plain\intbl\cf1\f51\fs16\ql Visa, Master, AMEX, Cabal, Diners and Carta
Franca.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\i\ql Regional
cards:\plain\intbl\cf1\f51\fs16\ql Naranja, Provencred, Efectivo S\u237? and
Credilogros.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\i\ql Zonal
cards\plain\intbl\cf1\f51\fs16\ql : Italcred, Carta Sur, Cr\u233?dito Actual and
Credial.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\i\ql Closed
cards:\plain\intbl\cf1\f51\fs16\ql Falabella, Garbarino, Fr\u225?vega, Musimundo,
Carrefour and Century.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\i\ql Banks:\plain\intbl\cf1\f51\fs16\ql
Columbia, Ita\u250?, Comafi, Privado and others.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\i\ql International financial
companies:\plain\intbl\cf1\f51\fs16\ql GE Capital and Cetelem.\cell{
{\trowd\clvertalc\cellx432\cellx988\cellx1096\cellx7430\trrh206\row}}}\pard\plain\s
b286\fi462\cf1\f51\fs16\b\i\ql Development and Sale of
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql A large number of companies
are currently competing with us in the development and sale of properties in
Argentina. This segment is highly\plain\cf1\f51\fs16\ql fragmented, and an
increasing number of\par\pard\plain\cf1\f51\fs13\ql
\
companies are taking advantage of low construction costs and attractive property
values, making this segment highly competitive. In addition, there is
a\plain\cf1\f51\fs16\ql substantial supply of comparable properties in the
vicinity of our developed properties which may adversely affect our ability to sell
our developed\plain\cf1\f51\fs16\ql properties at prices that generate a positive
return on our investment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Offices
and Other Non-Shopping Center Rentals\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Substantially all of our office and other non-shopping center rentals are located
in developed urban areas. There is a great number of office\plain\cf1\f51\fs16\ql
buildings, shopping malls, retail and residential premises in the areas where our
properties are located. This is a highly fragmented market, and
the\plain\cf1\f51\fs16\ql abundance of comparable properties in our vicinity may
adversely affect our ability to rent or sell office space and other real estate and
may affect the\plain\cf1\f51\fs16\ql sale and lease price of our
premises.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In the future, both national
and foreign companies may participate in Argentina\u8217?s real estate development
market, competing with us for\plain\cf1\f51\fs16\ql business opportunities.
Moreover, in the future we may participate in the development of real estate in
foreign markets, potentially encountering well\plain\cf1\f51\fs16\ql established
competitors.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql
Hotels\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We own three luxury hotels in
Argentina which are managed through strategic alliances by international operators
including Sheraton Overseas\plain\cf1\f51\fs16\ql Management Corporation,
Intercontinental Hotels Corporation and the local operator Compa\u241?\u237?a de
Servicios Hoteleros S.A. which manages the\plain\cf1\f51\fs16\ql Hotel Alvear. The
Hotel Llao Llao is unique for its landscape and beauty, and our other two hotels,
Hotel Intercontinental and Hotel Sheraton Libertador,\plain\cf1\f51\fs16\ql are
located in the City of Buenos Aires. We compete with many other leading luxury
hotels in the City of Buenos Aires including, among others:
Abasto\plain\cf1\f51\fs16\ql Plaza, Alvear Palace, Caesar Park, Claridge,
Emperador, Feir\u8217?s Park, Four Seasons, Hilton, Loi Suites, Marriot Plaza,
Meli\u225?, NH City,\plain\cf1\f51\fs16\ql Panamericano, Sheraton, Sofitel,
Madero, MayFlower, Etoile, Faena, and Regal
Pacific.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Regulation and Government
Supervision\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The laws and regulations
governing the acquisition and transfer of real estate, as well as municipal zoning
ordinances, are applicable to the\plain\cf1\f51\fs16\ql development and operation
of our properties.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Currently, Argentine
law does not specifically regulate shopping center lease agreements. Since our
shopping center leases generally differ from\plain\cf1\f51\fs16\ql ordinary
commercial leases, we have created standard provisions that govern the relationship
with our shopping center tenants.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql
Leases\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Argentine law imposes certain
restrictions on landlords, including:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql a
prohibition to include price adjustment clauses based on inflation increases in
lease agreements; and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the imposition of a
three-year minimum lease term for retail property, except in the case of stands
and/or spaces in markets and fairs.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Although our lease agreements were
U.S. dollar-denominated, Decree No.\~214/2002, Decree No.\~762/2002 and Law N\u176?
25,820 that amended\plain\cf1\f51\fs16\ql the Public Emergency Law, provided that
monetary obligations in force as of January\~7, 2002 arising from agreements
governed by private law and which\plain\cf1\f51\fs16\ql provided for payments in
U.S. dollars were subject to the following rules:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql financial obligations were to be paid in
Pesos at the exchange rate of Ps.1.00 = US$1.00 plus the CER for commercial
leases;\cell{
li176\sb88\cf1\f51\fs16\ql from October\~1, 2002 and until March\~31, 2004 for
residential leases, the obligations where the tenant is an individual and the
dwelling is\plain\cf1\f51\fs16\ql used as the family residence of permanent use
were to be paid in Pesos at the exchange rate of Ps.1.00 = US$1.00 plus the
CVS;\par\pard\plain\li176\sb88\cf1\f51\fs16\ql if because of the application of
these provisions, the amount of the installment were higher or lower than the
amount at the moment of the\plain\cf1\f51\fs16\ql payment, any of the parties
could require an equitable adjustment of the price. If the parties did not reach an
agreement, the judicial courts\plain\cf1\f51\fs16\ql could decide about the
difference in each particular case; and\par\pard\plain\li176\sb88\cf1\f51\fs16\ql
pursuant to Decree No.\~117/2004 and Law No.\~25,796 that amends Law No.\~25,713,
the CVS became unenforceable since April\~1,
2004.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Under the Argentine Civil Code and
the Lease Law No.\~23,091, lease terms may not exceed ten years, except for leases
regulated by Law\plain\cf1\f51\fs16\ql No.\~25,248 (which provides that real
estate leases containing purchase options \u8211?\plain\cf1\f51\fs16\i\ql leasing
inmobiliario-\plain\cf1\f51\fs16\ql are not subject to term limitations).
Generally,\plain\cf1\f51\fs16\ql terms in our lease agreements go from 3 to 10
years.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Lease Law No.\~23,091, as amended
by Law No.\~24,808 provides that tenants may rescind commercial lease agreements
after the first six months by\plain\cf1\f51\fs16\ql sending a written notice at
least 60 days before the termination of the contract. Such rescission is subject to
penalties which range from one to one and a\plain\cf1\f51\fs16\ql half months of
rent. If the tenant rescinds during the first year of the lease the penalty is one
and a half month\u8217?s rent and if the rescission occurs\plain\cf1\f51\fs16\ql
after the first year of lease the penalty is one month\u8217?s
rent.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql While current argentine government
policy discourages government regulation of lease agreements, there can be no
assurance that additional\plain\cf1\f51\fs16\ql regulations will not be imposed in
the future by the Argentine Congress, including regulations similar to those
previously in place. Furthermore, most of\plain\cf1\f51\fs16\ql our leases provide
that the tenants pay all costs and taxes related to the property in proportion to
their respective leasable areas. In the event of a\plain\cf1\f51\fs16\ql
significant increase in the amount of such costs and taxes, the argentine
government may respond to political pressure to intervene by regulating
this\plain\cf1\f51\fs16\ql practice, thereby negatively affecting our rental
income. On August\~16, 2006, economy minister Felisa Miceli announced a loosening
of requirements on\plain\cf1\f51\fs16\ql mortgage loans up to Ps.300,000. Banks
were enabled to finance 100 percent of house purchases on property valued at up to
Ps.200,000 and 90 percent of\plain\cf1\f51\fs16\ql purchases of property worth up
to Ps.300,000. The duration of these loans will be up to 30 years. These measures
were taken in response to the escalating\plain\cf1\f51\fs16\ql cost of leases and
the difficulties in accessing the mortgage loan market. These measures became
effective in September, 2006.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The Argentine Civil and Commercial
Procedure Code enables the lessor to pursue what is known as an \u8220?executory
proceeding\u8221? where\plain\cf1\f51\fs16\ql lessees fail to pay rent. In
executory proceedings debtors have fewer defenses available to prevent foreclosure,
making these proceedings substantially\plain\cf1\f51\fs16\ql shorter than ordinary
ones. In executory proceedings the origin of the debt is not under discussion; the
trial focuses on the instrument of the debt itself.\plain\cf1\f51\fs16\ql The
aforementioned code also permits special eviction proceedings, which are carried
out in the same way as ordinary proceedings. The Argentine
Civil\plain\cf1\f51\fs16\ql Code enables judges to summon tenants who fall two
months in arrears to vacate the property they are renting within 10 days of having
received notice to\plain\cf1\f51\fs16\ql such effect. However, historically, large
court dockets and numerous procedural hurdles have resulted in significant delays
to evictions proceedings, which\plain\cf1\f51\fs16\ql generally last from six
months to two years from the date of filing of the suit to the time of actual
eviction.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On February\~4, 2003, the
Argentine government enacted Decree No.\~204/2003 establishing a mediation
procedure for a limited period of 90 days.\plain\cf1\f51\fs16\ql On May 2003, the
Argentine Congress enacted Law No.\~25,737 which suspended foreclosures for an
additional period of 90 days, which ended in May\plain\cf1\f51\fs16\ql 2003. On
September 2003, several financial institutions voluntarily agreed not to foreclose
on their mortgage loans. On November 2005, the Argentine\plain\cf1\f51\fs16\ql
congress enacted Law No.\~26,062 that extended the foreclosures suspension for an
additional 120 days period, which was extended for 90 days more
by\plain\cf1\f51\fs16\ql Law No.\~26,084 and for 180 days more by Law No.\~26,103.
Pursuant to these successive extensions, foreclosure on mortgaged property will be
suspended\plain\cf1\f51\fs16\ql until December
2006.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On November\~6, 2003 Law
No.\~25,798 was enacted. It established a mechanism to reschedule debts resulting
from unpaid mortgages, by creating a\plain\cf1\f51\fs16\ql trust by means of which
the Executive Branch will refinance the mortgage debts and reschedule the maturity
date. Financial institutions were given until a\plain\cf1\f51\fs16\ql period of 60
business days from the enactment of the law to accept said terms. This law was
partially modified by Law No.\~25,908 (enacted on July\~13,\plain\cf1\f51\fs16\ql
2004) which included various conditions referring to the incorporation into this
system of the mortgage loans that were in judicial or private
execution\plain\cf1\f51\fs16\ql proceedings. The parties to secured loan
agreements were given a term to express their adhesion System. The term for
financial institutions to accept the\plain\cf1\f51\fs16\ql mechanism was extended
in several occasions by Decree No.\~352/2004, Law No.\~26,062, Decree
No.\~352/2004, Law No.\~26,062, Law No.\~26,084 and Law\plain\cf1\f51\fs16\ql
No.\~26,103.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql This term was however
extended twice first by Decree No.\~352/2004 and then by Law No.\~26,062 effective
as of November\~4, 2005. The above\plain\cf1\f51\fs16\ql mentioned law extends the
term 120 days as of the day of its publication and suspends foreclosure proceedings
for an additional 120 days period. In\plain\cf1\f51\fs16\ql addition, Law
No.\~26,103 extended the duration of these measures to 180 days from the expiration
of the extension established by Law 26,062. Recently\plain\cf1\f51\fs16\ql enacted
Law No.\~26,167 established a special proceeding to replace ordinary trials for the
enforcement of some mortgage loans. Such special proceedings\plain\cf1\f51\fs16\ql
give creditors ten days to inform to the debtor the amounts owed to them and
thereafter agree with the debtor on the amount and terms of payment.
In\plain\cf1\f51\fs16\ql case of failure by the parties to reach an agreement,
payment conditions are to be determined by the
judge.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Development and Land
Use\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql Buenos Aires Urban Planning
Code\plain\cf1\f51\fs16\ql .\~Our real estate activities are subject to several
municipal zoning, building and environmental regulations. In
the\plain\cf1\f51\fs16\ql city of Buenos Aires, where the vast majority of our
real estate properties are located, the Buenos Aires Urban Planning Code
(\plain\cf1\f51\fs16\i\ql C\u243?digo de\plain\cf1\f51\fs16\i\ql Planeamiento
Urbano de la Ciudad de Buenos Aires\plain\cf1\f51\fs16\ql ) generally restricts
the density and use of property and controls physical features of improvements
on\plain\cf1\f51\fs16\ql property, such as
height,\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 82
\
design, set-back and overhang, consistent with the city\u8217?s urban landscape
policy. The administrative agency in charge of the Urban Planning
Code\plain\cf1\f51\fs16\ql is the Secretary of Urban Planning of the City of
Buenos Aires.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Buenos Aires Building
Code\plain\cf1\f51\fs16\ql .\~The Buenos Aires Building Code
(\plain\cf1\f51\fs16\i\ql C\u243?digo de la Edificaci\u243?n de la Ciudad de Buenos
Aires\plain\cf1\f51\fs16\ql ) complements\plain\cf1\f51\fs16\ql the Buenos Aires
Urban Planning Code and regulates the structural use and development of property in
the city of Buenos Aires. The Buenos Aires\plain\cf1\f51\fs16\ql Building Code
requires builders and developers to file applications for building permits,
including the submission to the Secretary of Work and Public\plain\cf1\f51\fs16\ql
Services\plain\cf1\f51\fs16\i\ql (Secretar\u237?a de Obras y Servicios P\u250?
blicos)\plain\cf1\f51\fs16\ql of architectural plans for review, to assure
compliance therewith.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We believe that
all of our real estate properties are in material compliance with all relevant
laws, ordinances and regulations.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql
Sales and Ownership\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql Real Estate
Installment Sales Law.\plain\cf1\f51\fs16\ql The Real Estate Installment Sales Law
No.\~14,005, as amended by Law No.\~23,266 and Decree
No.\~2015/1985,\plain\cf1\f51\fs16\ql imposes a series of requirements on
contracts for the sale of subdivided plots of land regarding, for example, the sale
price which is paid in installments\plain\cf1\f51\fs16\ql and the deed, which is
not conveyed until final payment. The provisions of this law require, among other
things:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the registration of the intention
to sell the property in subdivided plots in the Real Estate Registry
(\plain\cf1\f51\fs16\i\ql Registro de la Propiedad
Inmueble\plain\cf1\f51\fs16\ql )\plain\cf1\f51\fs16\ql corresponding to the
jurisdiction of the property. Registration will only be possible with regards to
unencumbered property. Mortgaged property may\plain\cf1\f51\fs16\ql only be
registered where creditors agree to divide the debt in accordance with the
subdivided plots. However, creditors may be judicially
compelled\plain\cf1\f51\fs16\ql to agree to the
division.\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the preliminary registration
with the Real Estate Registry of the purchase instrument within 30 days of
execution of the agreements.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Once the
property is registered, the installment sale may not occur in a manner inconsistent
with the Real Estate Installment Sales Act, unless seller\plain\cf1\f51\fs16\ql
registers his decision to desist from the sale in installments with the Real Estate
Registry. In the event of a dispute over the title between the
purchaser\plain\cf1\f51\fs16\ql and third-party creditors of the seller, the
installment purchaser who has duly registered the purchase instrument will obtain
the deed to the plot. Further,\plain\cf1\f51\fs16\ql the purchaser can demand
conveyance of title after at least 25% of the purchase price has been paid,
although the seller may demand a mortgage to\plain\cf1\f51\fs16\ql secure payment
of the balance of the purchase price.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
After payment of 25% of the purchase price or the construction of improvements on
the property equal to at least 50% of the property value, the\plain\cf1\f51\fs16\ql
Real Estate Installment Sales Act prohibits the rescission of the sales contract
for failure by the purchaser to pay the balance of the purchase
price.\plain\cf1\f51\fs16\ql However, in such event the seller may take action
under any mortgage on the property.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Consumer Protection Law
No.\~24,240, as amended, regulates several issues concerning the protection of
consumers in the arrangement and execution\plain\cf1\f51\fs16\ql of contracts. The
Consumer Protection Law purports to prevent potential abuses deriving from the
strong bargaining position of sellers of goods and\plain\cf1\f51\fs16\ql services
in a mass-market economy where standard form contracts are widespread. As a result,
the Consumer Protection Law deems void and\plain\cf1\f51\fs16\ql unenforceable
certain contractual provisions in consumer contracts, including those
which:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql warranty and liability
disclaimers;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql waiver of consumer
rights;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql extension of seller rights;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql shifting of the burden of proof
against consumers.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In addition, the
Consumer Protection Law imposes penalties ranging from fines to closing down of
establishments in order to induce compliance\plain\cf1\f51\fs16\ql from
sellers.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Consumer Protection Law
defines consumers or users, as the individuals or legal entities that contract for
a price for final use or that of their\plain\cf1\f51\fs16\ql own benefit or their
family or social group:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the acquisition or
rental of movable property;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the supply of
services; and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the acquisition of new real
estate intended for housing, including plots of land acquired with the same
purpose, when the offer is public and\plain\cf1\f51\fs16\ql directed to
undetermined persons.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql It also
establishes that those who acquire, store, utilize or consume goods or services to
integrate them into a production, transformation,\plain\cf1\f51\fs16\ql
commercialization or supplying to third parties process will not be considered
consumers or users.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In addition, the
Consumer Protection Law defines the suppliers of goods and services as the
individuals or legal entities, either public or private that\plain\cf1\f51\fs16\ql
in a professional way, even occasionally, produce, import, distribute or
commercialize goods or supply services to consumers or
users.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The following are excluded from
the application of the Consumer Protection
Law:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql services supplied by professionals
that require a college degree and registration in officially recognized
professional organizations or by a\plain\cf1\f51\fs16\ql governmental authority;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql contracts involving used assets,
executed between consumers.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Consumer
Protection Law determines that the information contained in the offer addressed to
undetermined prospective consumers, binds the\plain\cf1\f51\fs16\ql offeror during
the period in which\par\pard\plain\cf1\f51\fs13\ql
\
the offer takes place and until its public revocation. Further, it determines that
specifications included in advertisements, announcements,
prospectuses,\plain\cf1\f51\fs16\ql circulars or other media bind the offeror and
are considered part of the contract entered into by the consumer. On June 2005,
Resolution No.\~104/05,\plain\cf1\f51\fs16\ql which complements the Consumer
Protection Law, adopted MERCOSUR\u8217?s Resolution on which requires that those
who engage in commerce over\plain\cf1\f51\fs16\ql the Internet (E-Business) to
disclose in a precise and clear manner the characteristics of the products and/or
services offered and the sale terms.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql
Buildings Law\plain\cf1\f51\fs16\ql .\~Buildings Law No.\~19,724, as amended, sets
forth a regime for the construction of buildings for later subdivision into
condominium\plain\cf1\f51\fs16\ql (\plain\cf1\f51\fs16\i\ql Propiedad
Horizontal\plain\cf1\f51\fs16\ql ). Under this law, developers must inform
potential purchasers of their intention to sell the building as a condominium, as
well as\plain\cf1\f51\fs16\ql of all sale conditions, and the size of each unit in
relation to the whole building. The sale of these units is subject to subdivision
approval and in order to\plain\cf1\f51\fs16\ql be included in Buildings Law regime
must be registered with the Real Estate Registry (\plain\cf1\f51\fs16\i\ql
Registro de la Propiedad Inmueble\plain\cf1\f51\fs16\ql ). This law also states
that, in\plain\cf1\f51\fs16\ql the event that construction is not completed, all
amounts already deposited must be repaid to the
purchasers.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Mortgage
Regulation.\plain\cf1\f51\fs16\ql \~The Argentine Civil Code regulates mortgages
both as a contract and as a right over property. There are no special
provisions\plain\cf1\f51\fs16\ql in the Civil Code aimed at protecting mortgagors.
Any agreement entered into by a mortgagor and a mortgagee at time of execution of
the mortgage or\plain\cf1\f51\fs16\ql prior to the default of the mortgagor
allowing the mortgagee to recover the property without a public auction of the
property will not be enforced by the\plain\cf1\f51\fs16\ql courts as contrary to
Argentine public policy.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Until the
enactment of Trust Law No.\~24,441, the only procedure available to collect unpaid
amounts secured by a mortgage was a proceeding\plain\cf1\f51\fs16\ql regulated by
the Civil and Commercial Procedure Code. The heavy caseload on the courts that hear
such matters usually delays the proceeding, which\plain\cf1\f51\fs16\ql currently
takes 1 to 2 years to complete.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Chapter
V of Trust Law No.\~24,441 institutes a new procedure which may expedite collection
of unpaid amounts secured by a mortgage. To be\plain\cf1\f51\fs16\ql applicable,
the new rules, which allow an out-of-court auction, need to be expressly agreed to
by the parties in the mortgage contract.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Currently, we include in our mortgages a clause enabling the enforcement of Law
No.\~24,441. However, there can be no assurance that such\plain\cf1\f51\fs16\ql
collection provisions will accelerate the recovery of unpaid amounts under mortgage
guarantees.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On the other hand, the
Public Emergency Law, as amended, established the suspension for the term of 270
days from the enactment of that law, of\plain\cf1\f51\fs16\ql all the judicial or
non-judicial enforcement procedures, including the enforcement of mortgages and
pledges, regardless of their origin. On February\~14,\plain\cf1\f51\fs16\ql 2002,
Law No.\~25,563 amending the Bankruptcy Law (the \u8220?New Bankruptcy Law\u8221?)
was enacted. Under the New Bankruptcy Law, certain\plain\cf1\f51\fs16\ql
bankruptcies and foreclosures (including foreclosures on mortgage loans) were
suspended for a period of 180 days from the law\u8217?s effective
date.\plain\cf1\f51\fs16\ql Such period was extended for 90 days more by Law
No.\~25,640 dated September 2002, expiring on February,
2003.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On February\~4, 2003, the
Executive Branch enacted Decree No.\~204/2003 creating a mediation proceeding, for
a limited period of 90 days, to be\plain\cf1\f51\fs16\ql conducted through the
Legal Emergency Units (\plain\cf1\f51\fs16\i\ql Unidades de Emergencias
Legales\plain\cf1\f51\fs16\ql ) depending from the Ministry of
Labor,\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 85
\
Employment and Social Security and the Ministry of Production. Such Legal Emergency
Units shall intervene at the request of debtors or creditors
in\plain\cf1\f51\fs16\ql foreclosure
cases.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The mediation proceeding is
voluntary and free. Proposals and negotiations made by the parties during the
mediation proceedings are subject to the\plain\cf1\f51\fs16\ql confidentiality of
ordinary mediations. No mediation proceeding will result in the suspension or
interruption of the legal terms running in judicial or\plain\cf1\f51\fs16\ql out-
of-court foreclosure proceedings.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The
Legal Emergency Units will attempt to facilitate an agreement between the parties,
enabling the debtor the performance of his obligations\plain\cf1\f51\fs16\ql
without lessening the creditor\u8217?s rights. The intervention of the Legal
Emergency Units shall conclude with an agreement or with the
impossibility\plain\cf1\f51\fs16\ql of reaching such agreement. The Decree
establishes that the conciliation proceeding shall be in force from the day of its
publication in the Official\plain\cf1\f51\fs16\ql Gazette and will have a term of
force of 90 days.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Most mortgages
executed by us provide that we are empowered to declare the anticipated expiration
of the loan upon non-payment of an\plain\cf1\f51\fs16\ql installment. This enables
us to recover the unpaid amounts through the sale of the relevant property pursuant
to the Civil and Commercial Procedure Code\plain\cf1\f51\fs16\ql and Law
No.\~24,441.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Pursuant to Argentine law,
fees and expenses related to collection procedures must be borne by the debtor, and
the proceeds from any auction of\plain\cf1\f51\fs16\ql the property may be used
for the settlement of such obligation.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Although our mortgages are U.S. dollar-denominated, Decree No.\~214/2002 and Decree
No.\~762/2002 that amend the Public Emergency Law\plain\cf1\f51\fs16\ql provide
that monetary obligations in force as of January\~7, 2002, resulting from
agreements governed by private law and which provide for payments
in\plain\cf1\f51\fs16\ql U.S. dollars are subject to the following
rules:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql financial obligations were to be
paid in Pesos at the exchange rate of Ps.1.00 = US$1.00 plus the CER for commercial
leases;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql from October\~1, 2002 and until
March\~31, 2004 for residential leases, the obligations where the tenant is an
individual and the dwelling is used as\plain\cf1\f51\fs16\ql the family residence
of permanent use were to be paid in Pesos at the exchange rate of Ps.1.00 = US$1.00
plus the CVS;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql if because of the
application of these provisions, the amount of the installment were higher or lower
than the amount at the moment of the payment,\plain\cf1\f51\fs16\ql any of the
parties could require an equitable adjustment of the price. If the parties did not
reach an agreement, the judicial courts could decide\plain\cf1\f51\fs16\ql about
the difference in each particular case;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql pursuant to Decree No.\~117/2004 and
Law No.\~25,796 that amends Law No.\~25,713, the CVS became unenforceable since
April\~1, 2004.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 86
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Protection for the Disabled
Law\plain\cf1\f51\fs16\ql .\~The Protection for the Disabled Law No.\~22,431,
enacted on March\~20, 1981, as amended, provides that in\plain\cf1\f51\fs16\ql
connection with the construction and renovation of buildings, obstructions to
access must be eliminated in order to enable access by
handicapped\plain\cf1\f51\fs16\ql individuals. In the construction of public
buildings, entrances, transit pathways and adequate facilities for mobility
impaired individuals must be provided.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Buildings constructed before the enforcement of the Protection for the Disabled Law
must be adapted to provide accesses, transit pathways and\plain\cf1\f51\fs16\ql
adequate facilities for mobility-impaired individuals. Those pre-existing
buildings, which due to their architectural design may not be adapted to the
use\plain\cf1\f51\fs16\ql by mobility-impaired individuals, are exempted from the
fulfillment of these requirements. The Protection for the Disabled Law provides
that residential\plain\cf1\f51\fs16\ql buildings must ensure access by mobility
impaired individuals to elevators and
aisles.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Credit Cards
Law.\plain\cf1\f51\fs16\ql \~Law No.\~25,065, amended by Law No.\~26,010, regulates
different aspects of the business known as \u8220?credit card\plain\cf1\f51\fs16\ql
system.\u8221? The regulations impose minimum contractual contents and the approval
thereof by the Industry, Commerce and Mining Secretary\plain\cf1\f51\fs16\ql
(\plain\cf1\f51\fs16\i\ql Secretar\u237?a de Industria, Comercio y Miner\u237?a de
la Naci\u243?n\plain\cf1\f51\fs16\ql ), as well as the limitations on the interest
to be collected by users and the\plain\cf1\f51\fs16\ql commissions to the stores
adhering to the system. The Credit Card Law applies to banking and non-banking
cards, such as \u8220?Tarjeta\plain\cf1\f51\fs16\ql Shopping,\u8221? issued by
Tarshop S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Antitrust
Law.\plain\cf1\f51\fs16\ql \~Law No.\~25,156 prevents trust practices and requires
administrative authorization for transactions that according to the Antitrust
Law\plain\cf1\f51\fs16\ql constitute an economic concentration. According to this
law, mergers, transfers of goodwill, acquisitions of property or rights over
shares, capital or other\plain\cf1\f51\fs16\ql convertible securities, or similar
operations by which the acquirer controls or substantially influences a company,
are considered as an economic\plain\cf1\f51\fs16\ql concentration. Whenever an
economic concentration involves a company or companies (i)\~which hold 25% or more
of the relevant market or (ii)\~which\plain\cf1\f51\fs16\ql exceed the accumulated
sales volume by approximately Ps.200.0 million in Argentina or Ps.2,500 million
worldwide; then the respective concentration\plain\cf1\f51\fs16\ql should be
submitted for approval to the\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Defensa de la Competencia\plain\cf1\f51\fs16\ql , or Antitrust Authority. The
request for approval may be\plain\cf1\f51\fs16\ql filed, either prior to the
transaction or within a week after its
completion.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Antitrust Law provides
that economic concentrations in which the transaction amount and the value of the
assets absorbed, acquired, transferred\plain\cf1\f51\fs16\ql or controlled in
Argentina, do not exceed Ps.20.0 million are exempted from the administrative
authorization. Notwithstanding the foregoing, when the\plain\cf1\f51\fs16\ql
transactions effected during the prior 12-month period exceed in total Ps.20.0
million or Ps.60.0 million in the last 36 months, these transactions must
be\plain\cf1\f51\fs16\ql notified to the Antitrust Authority. As the consolidated
annual sales volume of Alto Palermo and IRSA exceed Ps.200.0 million, IRSA should
give notice\plain\cf1\f51\fs16\ql to the Antitrust Authority of any concentration
provided for by the Antitrust Law. After our acquisition of Bouchard 557, we asked
the Argentine\plain\cf1\f51\fs16\ql Antitrust Authority whether it was necessary
to notify it of such acquisition. The Antitrust Authority advised us that we were
in fact required to so notify\plain\cf1\f51\fs16\ql it, and we challenged such
opinion in the local courts. We filed a new request for the Antitrust
Authority\u8217?s opinion regarding our acquisition of\plain\cf1\f51\fs16\ql Bank
Boston Tower on August\~30, 2007, and it advised us that we were in fact required
to so notify it, and we challenged such opinion in the local\plain\cf1\f51\fs16\ql
courts.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 87
\
{\*\bkmkend tx46076_15}\par\pard\plain\cf1\f51\fs16\b\ql C. Organizational
Structure\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following is our
organizational chart and our principal subsidiaries as of June\~30,
2007:\par\qc\sb198{\*\shppict{\pict\jpegblip\picw450\pich820\picscalex75\picscaley7
5\bliptag-1969461108
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\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 88
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The following table presents
information relating to our ownership interest and the percentage of our
consolidated total net revenues represented by\plain\cf1\f51\fs16\ql our
subsidiaries as of June\~30, 2007.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
lvertalc\cellx10613\clvertalc\cellx10791\trrh-66\trrh0
lvertalc\cellx10613\clvertalc\cellx10791\trrh-66\trrh0\row}}}
8168\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9030\clvertalb\cellx9208\clvertalb\cellx9
Subsidiary\cell\pard\plain\intbl\cf1\f51\fs13\ql
Activity\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Country of
Incorporation\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Ownership
percentage\plain\intbl\cf1\f51\fs11\b\qc\super
Voting\~power
percentage\plain\intbl\cf1\f51\fs11\b\qc\super
Total\~net\~income
percentage\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
lcfpat12\clcbpat12\cellx9578\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10613\cl
vertalb\clshdng100\clcfpat12\clcbpat12\cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Ritelco
S.A.\cell\pard\plain\intbl\cf1\f51\fs13\ql
Investment\cell\pard\plain\intbl\cf1\f51\fs13\ql
Uruguay\cell\pard\plain\intbl\cf1\f51\fs13\ql
vertalb\clshdng100\clcfpat12\clcbpat12\cellx10791\trrh206\row}}}
ellx10613\clvertalb\cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Patagonian Investment
Argentina\cell\pard\plain\intbl\cf1\f51\fs13\ql
ellx10613\clvertalb\cellx10791\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Palermo Invest
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Rummaala
S.A\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Real
estate\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Solares de Santa Mar\u237?a
90\cell\pard\plain\intbl\cf1\f51\fs16\ql %\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\cell{
CYRSA\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Pereiraola
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Inversora Bolivar
S.A\plain\intbl\cf1\f51\fs11\ql\super (4)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Hoteles Argentinos
%\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Llao Llao Resorts
%\cell{
S.A.\plain\intbl\cf1\f51\fs11\ql\super (2)\cell\pard\plain\intbl\cf1\f51\fs13\ql
Shopping\~Centers\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Canteras Natal Crespo
S.A.\plain\intbl\cf1\f51\fs11\ql\super (3)\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\cell{
ellx10613\clvertalb\cellx10791\trrh206\row}}}\pard\plain\f0\fs4\par\pard\plain\f0\f
s2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql It does
not contemplate irrevocable contributions.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (2)\cell\pard\plain\intbl\cf1\f51\fs16\ql Alto
Palermo\u8217?s Consolidated Information.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (3)\cell\pard\plain\intbl\cf1\f51\fs16\ql We have
joint control of Canteras Natal Crespo S.A., a land reserve for a future
development, with ECIPSA. See Note 2.6 to our audited\plain\intbl\cf1\f51\fs16\ql
consolidated financial statements.\cell{
\par\pard\plain
Percentage of total net income based upon Inversora Bolivar\u8217?s consolidated
results which include those of Nuevas Fronteras S.A.\cell{
We have a significant interest in Banco Hipotecario, an Argentine company organized
under Argentine Law engaged in banking activity. As of\plain\cf1\f51\fs16\ql
June\~30, 2007, we owned 11.76% of Banco Hipotecario, and 5.0% of such ownership
was through our subsidiary Ritelco S.A. Also, as of June\~30,
2007,\plain\cf1\f51\fs16\ql the voting power held by IRSA and Ritelco S.A. in
Banco Hipotecario was 18.4%.{\*\bkmkstart tx46076_16}{\*\bkmkend
tx46076_16}\par\pard\plain\sb286\cf1\f51\fs16\b\ql D. Property, Plant and
Equipment\par\pard\plain\sb88\cf1\f51\fs16\b\ql
Property\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As of June\~30, 2007, all of our
property (consisting of rental properties in the office and retail real estate
sectors, development properties primarily\plain\cf1\f51\fs16\ql in the residential
real estate sector, and shopping centers) was located in Argentina. We lease our
headquarters, located at Bol\u237?var 108, C1066AAD\plain\cf1\f51\fs16\ql and
Moreno 877, piso 22, C1091AAQ Buenos Aires, Argentina, pursuant to two lease
agreements that expire on February\~28, 2014 and
November\~30,\plain\cf1\f51\fs16\ql 2008, respectively. We do not currently lease
any material properties other than our headquarters.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The following table sets forth
certain information about our properties:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
rtalc\cellx8767\clvertalb\cellx8849\clvertalc\cellx9489\clvertalb\cellx9571\clverta
lc\cellx10026\clvertalb\cellx10108\clvertalc\cellx10791\trrh-66\trrh0
lc\cellx10026\clvertalb\cellx10108\clvertalc\cellx10791\trrh-66\trrh0\row}}}
drcf1\clvertalb\cellx8767\clvertalb\cellx8849\clbrdrb\brdrs\brdrcf1\clvertalb\cellx
9489\clvertalb\cellx9571\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10026\clvertalb\cellx
\pard\plain\intbl\cf1\f51\fs13\b\ql
Property\plain\intbl\brdrb\brdrs\cf1\f51\fs11\b\ql\super
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Date of
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Leaseable/
Salem2\plain\intbl\cf1\f51\fs11\b\qc\super
Location\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Net\plain\intbl\cf1\f51\fs13\b\qc Book
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Value
Encumbrance\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Outstanding
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc principal
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc amount Ps./
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Maturity
Date\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Balance
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc due at
maturity\cell\pard\plain\intbl\cf1\f51\fs13\ql
Rate\cell\pard\plain\intbl\cf1\f51\fs13\ql
Use\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Occupancy
rate\plain\intbl\cf1\f51\fs11\b\qc\super (13)\cell{
9489\clvertalb\cellx9571\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10026\clvertalb\cellx
bpat12\cellx2851\clshdng100\clcfpat12\clcbpat12\cellx3550\clvertalb\clshdng100\clcf
pat12\clcbpat12\cellx3632\clshdng100\clcfpat12\clcbpat12\cellx4277\clvertalb\clshdn
g100\clcfpat12\clcbpat12\cellx4359\clshdng100\clcfpat12\clcbpat12\cellx4903\clverta
lb\clshdng100\clcfpat12\clcbpat12\cellx4985\clshdng100\clcfpat12\clcbpat12\cellx554
6\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx5628\clshdng100\clcfpat12\clcbpat12
\cellx6481\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx6563\clshdng100\clcfpat12\
clcbpat12\cellx7323\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx7405\clshdng100\c
lcfpat12\clcbpat12\cellx8045\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx8127\cls
hdng100\clcfpat12\clcbpat12\cellx8767\clvertalb\clshdng100\clcfpat12\clcbpat12\cell
x8849\clshdng100\clcfpat12\clcbpat12\cellx9489\clvertalb\clshdng100\clcfpat12\clcbp
at12\cellx9571\clshdng100\clcfpat12\clcbpat12\cellx10026\clvertalb\clshdng100\clcfp
at12\clcbpat12\cellx10108\clshdng100\clcfpat12\clcbpat12\cellx10791\trrh619
Plaza\plain\intbl\cf1\f51\fs11\ql\super
(3)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qc
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc City of
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc Buenos
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Office
Rental\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc 100.0%\cell{
at12\clcbpat12\cellx10108\clshdng100\clcfpat12\clcbpat12\cellx10791\trrh619\row}}}
{\trowd\cellx2769\clvertalb\cellx2851\cellx3550\clvertalb\cellx3632\cellx4277\clver
talb\cellx4359\cellx4903\clvertalb\cellx4985\cellx5546\clvertalb\cellx5628\cellx648
1\clvertalb\cellx6563\cellx7323\clvertalb\cellx7405\cellx8045\clvertalb\cellx8127\c
ellx8767\clvertalb\cellx8849\cellx9489\clvertalb\cellx9571\cellx10026\clvertalb\cel
lx10108\cellx10791\trrh619
lx10108\cellx10791\trrh619\row}}}
710\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qc
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Mortgage\plain\intbl\cf1\f51\fs11\qc\super
14.8\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qc
May-08\cell\pard\plain\intbl\cf1\f51\fs13\ql
Fixed
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc Rate
8.5%\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qc
Office
41,061\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qc
Office
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Maip\u250?
Office
City of
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Mortgage\plain\intbl\cf1\f51\fs11\qc\super
Abr-10\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc 41.1\cell\pard\plain\intbl\cf1\f51\fs13\ql
at12\clcbpat12\cellx10108\clshdng100\clcfpat12\clcbpat12\cellx10791\trrh619\row}}}\
pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 90
\
\par\pard\plain
lc\cellx9811\clvertalb\cellx9928\clvertalc\cellx10611\clvertalc\cellx10789\trrh-
66\trrh0
66\trrh0\row}}}
\pard\plain\intbl\cf1\f51\fs13\b\ql Property
\plain\intbl\brdrb\brdrs\cf1\f51\fs11\b\ql\super
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Net\~Book
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc rate
\plain\intbl\cf1\f51\fs11\b\qc\super (13)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
2\cellx4732\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx4849\clshdng100\clcfpat12
\clcbpat12\cellx5702\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx5819\clshdng100\
clcfpat12\clcbpat12\cellx6579\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx6696\cl
shdng100\clcfpat12\clcbpat12\cellx7336\clvertalb\clshdng100\clcfpat12\clcbpat12\cel
lx7453\clshdng100\clcfpat12\clcbpat12\cellx8093\clvertalb\clshdng100\clcfpat12\clcb
pat12\cellx8210\clshdng100\clcfpat12\clcbpat12\cellx8850\clvertalb\clshdng100\clcfp
at12\clcbpat12\cellx8967\clshdng100\clcfpat12\clcbpat12\cellx9811\clvertalb\clshdng
100\clcfpat12\clcbpat12\cellx9928\clshdng100\clcfpat12\clcbpat12\cellx10611\clshdng
100\clcfpat12\clcbpat12\cellx10789\trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Costeros
Dique\~IV\cell\pard\plain\intbl\cf1\f51\fs13\ql
Office
%\cell{
100\clcfpat12\clcbpat12\cellx10789\trrh619\row}}}
talb\cellx3432\clvertalb\cellx4044\clvertalb\cellx4161\cellx4732\clvertalb\cellx484
9\cellx5702\clvertalb\cellx5819\cellx6579\clvertalb\cellx6696\cellx7336\clvertalb\c
ellx7453\cellx8093\clvertalb\cellx8210\cellx8850\clvertalb\cellx8967\cellx9811\clve
rtalb\cellx9928\cellx10611\cellx10789\trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Works in
progress\plain\intbl\cf1\f51\fs16\ql Dique
IV\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
N/A\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qc
City of
N/A\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell{
rtalb\cellx9928\cellx10611\cellx10789\trrh619\row}}}
City of
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Av. De Mayo
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Av. Libertador
City of
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Rivadavia
City of
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Sarmiento
City of
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Constituci\u243?n
City of
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Commercial
%\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Santa Mar\u237?a
del\plain\intbl\cf1\f51\fs16\ql Plata\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Others
Rentals\cell\pard\plain\intbl\cf1\f51\fs13\ql
Thames\plain\intbl\cf1\f51\fs11\ql\super
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Province
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc of
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Constituci\u243?n
Properties\plain\intbl\cf1\f51\fs11\ql\super
N/A\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
City and
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc Province
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc of Bs.
As.\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
rtalb\cellx9928\cellx10611\cellx10789\trrh825\row}}}\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
lvertalb\cellx5996\clvertalc\cellx6741\clvertalb\cellx6794\clvertalc\cellx7421\clve
rtalb\cellx7474\clvertalc\cellx8101\clvertalb\cellx8154\clvertalc\cellx8781\clverta
lc\cellx8956\clvertalb\cellx9009\clvertalc\cellx9890\clvertalb\cellx9943\clvertalc\
cellx10612\clvertalc\cellx10787\trrh-66\trrh0
lvertalb\cellx5996\clvertalc\cellx6741\clvertalb\cellx6794\clvertalc\cellx7421\clve
rtalb\cellx7474\clvertalc\cellx8101\clvertalb\cellx8154\clvertalc\cellx8781\clverta
lc\cellx8956\clvertalb\cellx9009\clvertalc\cellx9890\clvertalb\cellx9943\clvertalc\
cellx10612\clvertalc\cellx10787\trrh-66\trrh0\row}}}
474\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8101\clvertalb\cellx8154\clbrdrb\brdrs\brd
rcf1\clvertalb\cellx8781\clvertalb\cellx8956\clvertalb\cellx9009\clbrdrb\brdrs\brdr
cf1\clvertalb\cellx9890\clvertalb\cellx9943\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10
Outstanding
Rate\cell\pard\plain\intbl\cf1\f51\fs12\ql \~\cell\pard\plain\intbl\cf1\f51\fs12\ql
\~\cell{
474\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8101\clvertalb\cellx8154\clbrdrb\brdrs\brd
\clcbpat12\cellx5772\clshdng100\clcfpat12\clcbpat12\cellx5943\clvertalb\clshdng100\
clcfpat12\clcbpat12\cellx5996\clshdng100\clcfpat12\clcbpat12\cellx6741\clvertalb\cl
shdng100\clcfpat12\clcbpat12\cellx6794\clshdng100\clcfpat12\clcbpat12\cellx7421\clv
ertalb\clshdng100\clcfpat12\clcbpat12\cellx7474\clshdng100\clcfpat12\clcbpat12\cell
x8101\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx8154\clshdng100\clcfpat12\clcbp
at12\cellx8781\clshdng100\clcfpat12\clcbpat12\cellx8956\clvertalb\clshdng100\clcfpa
t12\clcbpat12\cellx9009\clshdng100\clcfpat12\clcbpat12\cellx9890\clvertalb\clshdng1
00\clcfpat12\clcbpat12\cellx9943\clshdng100\clcfpat12\clcbpat12\cellx10612\clshdng1
Shopping\plain\intbl\cf1\f51\fs10\ql\super (5)
Shopping
%\cell{
6\cellx5772\cellx5943\clvertalb\cellx5996\cellx6741\clvertalb\cellx6794\cellx7421\c
lvertalb\cellx7474\cellx8101\clvertalb\cellx8154\cellx8781\cellx8956\clvertalb\cell
x9009\cellx9890\clvertalb\cellx9943\cellx10612\cellx10787\trrh576
Abasto\plain\intbl\cf1\f51\fs10\ql\super
Shopping
%\cell{
x9009\cellx9890\clvertalb\cellx9943\cellx10612\cellx10787\trrh576\row}}}
Avellaneda\plain\intbl\cf1\f51\fs10\ql\super
Shopping
%\cell{
Alcorta\plain\intbl\cf1\f51\fs10\ql\super (4)\cell\pard\plain\intbl\cf1\f51\fs12\ql
Shopping
%\cell{
Bullrich\plain\intbl\cf1\f51\fs10\ql\super
Shopping
Noa\plain\intbl\cf1\f51\fs10\ql\super (4)\cell\pard\plain\intbl\cf1\f51\fs12\ql
Salta\cell\pard\plain\intbl\cf1\f51\fs12\ql
Shopping
Design\plain\intbl\cf1\f51\fs10\ql\super
Shopping
Shopping
%\cell{
Plaza\plain\intbl\cf1\f51\fs10\ql\super
Shopping
%\cell{
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs15\qc C\u243?
Mortgage\cell\pard\plain\intbl\cf1\f51\fs10\ql\super
16.3\cell\pard\plain\intbl\cf1\f51\fs12\ql \~\cell\pard\plain\intbl\cf1\f51\fs15\qr
Oct-37\cell\pard\plain\intbl\cf1\f51\fs12\ql
\~\cell\pard\plain\intbl\cf1\f51\fs15\qr Libor\~+
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs15\qr
1.5\cell\pard\plain\intbl\cf1\f51\fs15\ql \~
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs15\ql
%\cell\pard\plain\intbl\cf1\f51\fs12\ql \~\cell\pard\plain\intbl\cf1\f51\fs15\qc
Shopping
%\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs15\ql Panamerican
Mall\plain\intbl\cf1\f51\fs10\ql\super (4)\cell\pard\plain\intbl\cf1\f51\fs12\ql
Shopping
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs15\qc Center (in
construction)\cell\pard\plain\intbl\cf1\f51\fs12\ql
00\clcfpat12\clcbpat12\cellx10787\trrh576\row}}}\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
66\trrh0
66\trrh0\row}}}
\~\cell{
at12\clcbpat12\cellx8945\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx9844\clverta
lb\clshdng100\clcfpat12\clcbpat12\cellx9928\clvertalb\clshdng100\clcfpat12\clcbpat1
2\cellx10611\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10789\trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Neuqu\u233?
n\plain\intbl\cf1\f51\fs11\ql\super (4)\cell\pard\plain\intbl\cf1\f51\fs13\ql
N/A\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qc
Province
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc Neuqu\u233?
n\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Shopping
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc Center (in
construction)\cell\pard\plain\intbl\cf1\f51\fs13\ql
2\cellx10611\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10789\trrh619\row}}}
ellx7497\cellx8137\clvertalb\cellx8221\cellx8861\clvertalb\cellx8945\clvertalb\cell
x9844\clvertalb\cellx9928\clvertalb\cellx10611\clvertalb\cellx10789\trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Puerto
Retiro\plain\intbl\cf1\f51\fs11\ql\super
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Land
Reserve\cell\pard\plain\intbl\cf1\f51\fs13\ql
x9844\clvertalb\cellx9928\clvertalb\cellx10611\clvertalb\cellx10789\trrh619\row}}}
Caballito\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Santa Mar\u237?a
del\plain\intbl\cf1\f51\fs16\ql Plata\cell\pard\plain\intbl\cf1\f51\fs13\ql
Pereiraola\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Canteras
Natal\plain\intbl\cf1\f51\fs16\ql Crespo\cell\pard\plain\intbl\cf1\f51\fs13\ql
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc C\u243?
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Vicente L\u243?
pez\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Others Reserves
of\plain\intbl\cf1\f51\fs16\ql Land\plain\intbl\cf1\f51\fs11\ql\super
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc City and
Bs.As.\cell\pard\plain\intbl\cf1\f51\fs13\ql
Residential\plain\intbl\cf1\f51\fs16\ql apartments,\plain\intbl\cf1\f51\fs16\ql
communities and\plain\intbl\cf1\f51\fs16\ql
others\plain\intbl\cf1\f51\fs11\ql\super
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc City and
Bs.As.\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Residential
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc apartments
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc and
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Hotel Llao
Llao\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
Bariloche\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\cell{
Intercontinental\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\cell{
2\cellx10611\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10789\trrh619\row}}}\par
d\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 93
\
\par\pard\plain
66\trrh0
66\trrh0\row}}}
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Leaseable/
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Net
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Book
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Ps./
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Outstanding
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Maturity
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Balance
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Occupancy
\~\cell{
Libertador\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc City of
Mortgage\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Mar-
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Libor
3M+450bps\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Terrenos
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Province
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc of Rio
Negro\cell\pard\plain\intbl\cf1\f51\fs13\ql
Mortgage\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Dic-
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Libor
Rate+700Bps\cell\pard\plain\intbl\cf1\f51\fs13\ql
rtalb\cellx9933\cellx10616\cellx10794\trrh619\row}}}\pard\plain\f0\fs4\par\pard\pla
in\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
leaseable area for each property. Excludes common areas and parking spaces.\cell{
\par\pard\plain
acquisition or development (adjusted as discussed in Note 2.c to the consolidated
financial statements), plus improvements, less
accumulated\plain\intbl\cf1\f51\fs16\ql depreciation, less allowances.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (3)\cell\pard\plain\intbl\cf1\f51\fs16\ql Through
IBSA.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (4)\cell\pard\plain\intbl\cf1\f51\fs16\ql Through
Alto Palermo. We own a 54% interest in ERSA. Currently our shares of Emprendimiento
Recoleta S.A. are pledged.\cell{
\par\pard\plain
Shopping Alto Palermo (\u8220?SAPSA\u8221?) is owned by Alto Palermo. On
January\~18, 2001, (i)\~Alto Palermo issued Series A Senior Notes
for\plain\intbl\cf1\f51\fs16\ql US$40 million and (ii)\~Alto Palermo and SAPSA co-
issued Series B Senior Notes for US$80 million that will be severally paid by Alto
Palermo\plain\intbl\cf1\f51\fs16\ql and SAPSA. The Series A and B Senior Notes
(the \u8220?Senior Notes\u8221?) are due in 2005. The payment of the total amount
of the Senior\plain\intbl\cf1\f51\fs16\ql Notes is guaranteed by a Trust Agreement
pursuant to which all of Alto Palermo\u8217?s shares of SAPSA were transferred to a
trust. The Trust\plain\intbl\cf1\f51\fs16\ql Agreement was entered into on
January\~16, 2001 between Alto Palermo and Ritelco, as shareholders of SAPSA and as
Trustors, R\u237?o Trust\plain\intbl\cf1\f51\fs16\ql S.A., as Trustee, and the
holders of the Senior Notes as beneficiaries. At June\~30, 2005, we fully cancelled
the Senior Notes outstanding.\cell{
\par\pard\plain
Directly through IRSA and indirectly through IBSA.\cell{
\par\pard\plain
Includes the following land reserves: Terrenos Pilar, Padilla 902 and Terreno Torre
Jard\u237?n IV (through IRSA), Terreno Pontevedra; Isla\plain\intbl\cf1\f51\fs16\ql
Sirgadero; Mariano Acosta, Intercontinental Plaza II and Merlo (through IBSA), and
Terreno Rosario, Terreno Caballito and the Coto project\plain\intbl\cf1\f51\fs16\ql
(through Alto Palermo).\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (8)\cell\pard\plain\intbl\cf1\f51\fs16\ql As
security for compliance with the construction of the future building to be
constructed in a plot of land in Vicente Lopez, Province or
Buenos\plain\intbl\cf1\f51\fs16\ql Aires and transfer of the future units, the
company\u8217?s property located at Suipacha 652 was mortgaged.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (9)\cell\pard\plain\intbl\cf1\f51\fs16\ql Right
over real property granted by a debtor to a creditor whereby the creditor is
authorized to receive the income from such property to
cancel\plain\intbl\cf1\f51\fs16\ql interest and/or principal under existing
debt.\cell{
\par\pard\plain
Includes the following properties: retail stores in Abril (through IRSA and
Inversora Bolivar) and Crucero I (through IRSA).\cell{
\par\pard\plain
Includes the following properties: Torre Jard\u237?n, Edificios Cruceros; Barrio
Chico, Concepci\u243?n Arenal, Torre Caballito, Torre Renoir I
and\plain\intbl\cf1\f51\fs16\ql II, Lotes de Abril, Villa Celina I, II and III;
Rivadavia 2768, Dock XIII and Sarmiento 517 (through IRSA).\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (12)\cell\pard\plain\intbl\cf1\f51\fs16\ql All
assets are owned by IRSA or through any our subsidiary.\cell{
\par\pard\plain
Percentage of occupation of each property. The land reserves are assets that the
company remains in the portfolio for future development.\cell{
On October\~29, 2007 we paid US$ 24.3\~million of principal and US$ 0.35\~million
of accrued interest of our secured floating rate notes due\plain\cf1\f51\fs16\ql
November 2009 and US$ 14.95\~million of principal and US$ 0.21\~million of accrued
interest of our unsecured loan agreement. The payment of such
debt\plain\cf1\f51\fs16\ql produced the cancellation of the mortgages that we had
in connection with the issuance of the collateralized notes (13 functional units at
Libertador 498,\plain\cf1\f51\fs16\ql 71 complementary units in Laminar Plaza and
19 complementary units in Dique IV).\par\pard\plain\sb286\cf1\f51\fs16\b\ql
Insurance\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We carry insurance policies
with insurance companies we consider to be financially sound. We employ multi-risk
insurance for our shopping\plain\cf1\f51\fs16\ql centers, which covers fire damage
and negligence liability, electrical and water damages, theft and business
interruption. We have had to make a limited\plain\cf1\f51\fs16\ql number of claims
under our shopping centers\u8217? insurance, including a claim for a fire at Alto
Avellaneda Shopping on March\~5, 2006 and to date\plain\cf1\f51\fs16\ql we have
been able to recover substantially all of those claims from our
insurers.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 94
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql In our Development and Sale of
properties segment, we only maintain insurance when we retain ownership of the land
under development or when\plain\cf1\f51\fs16\ql we develop the property ourselves.
Our liability and fire insurance policies cover potential risks such as property
damages, business interruption, fire, falls,\plain\cf1\f51\fs16\ql collapse,
lightning and gas explosion. Such insurance policies have specifications, limits
and deductibles which we believe are customary. We maintain\plain\cf1\f51\fs16\ql
insurance policies for our properties after the end of construction only if we
retain ownership, primarily in the Offices and Other Non-Shopping
Center\plain\cf1\f51\fs16\ql Rental Properties
segment.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We carry directors and
officers\u8217? insurance covering management\u8217?s civil liability, as well as
legally mandated insurance, including\plain\cf1\f51\fs16\ql employee personal
injury. We do not provide life or disability insurance for our key employees as
benefits. We believe our insurance policies are adequate\plain\cf1\f51\fs16\ql to
protect us against the risks for which we are covered. However, no assurances can
be given that the amount of insurance we carry will be sufficient
to\plain\cf1\f51\fs16\ql protect us from material loss. See \u8220?Risk
Factors\u8212?Risks Related to our Business\u8212?Some potential losses are not
covered by insurance,\plain\cf1\f51\fs16\ql and certain kinds of insurance
coverage may become prohibitively
expensive.\u8221?\par\pard\plain\cf1\f51\fs27\ql \~{\*\bkmkstart item_1_3_9}
\par\pard\plain
Item\~4A.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Unresolved Staff Comments.\cell{
This section is not applicable.\par\pard\plain\cf1\f51\fs27\ql \~{\*\bkmkstart
\par\pard\plain
ITEM\~5.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Operating and Financial Review and
Prospects\cell{
tx46076_19}\pard\plain\sb88\cf1\f51\fs16\b\ql A. Operating
Results\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following Operating and
Financial Review and Prospects should be read in conjunction with Item\~3: \u8220?
Key Information-Selected Financial\plain\cf1\f51\fs16\ql Data\u8221? and our
audited consolidated financial statements and related notes appearing elsewhere in
this annual report. This \u8220?Operating and\plain\cf1\f51\fs16\ql Financial
Review and Prospects\u8221? discussion contains forward-looking statements that
involve risks, uncertainties and assumptions. These\plain\cf1\f51\fs16\ql forward-
looking statements include, among others, those statements including the words
\u8220?will,\u8221? \u8220?expects,\u8221?\plain\cf1\f51\fs16\ql \u8220?
anticipates,\u8221? \u8220?intends,\u8221? \u8220?believes\u8221? and similar
language. Our actual results may differ materially from those\plain\cf1\f51\fs16\ql
anticipated in these forward-looking statements as a result of many risk factors,
including those set forth elsewhere in this annual
report.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql For purposes of the following
discussion, unless otherwise specified, references to fiscal years 2007, 2006 and
2005 relate to our fiscal years ended\plain\cf1\f51\fs16\ql June\~30, 2007, 2006
and 2005, respectively.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We maintain our
financial books and records in Pesos. We prepare our consolidated financial
statements in conformity with Argentine GAAP and\plain\cf1\f51\fs16\ql the
regulations of the\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\cf1\f51\fs16\ql which differ in significant respects from U.S.
GAAP. These differences involve methods of\plain\cf1\f51\fs16\ql measuring the
amounts shown in the financial statements as well as additional disclosures
required by U.S. GAAP and Regulation S-X of the SEC. See\plain\cf1\f51\fs16\ql
Note 17 to our audited consolidated financial statements included elsewhere in this
annual report herein for a description of the principal
differences\plain\cf1\f51\fs16\ql between Argentine GAAP and U.S. GAAP, as they
relate to us, and a reconciliation to U.S. GAAP of our net income and
shareholders\u8217? equity.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In order to
comply with regulations of the Comisi\u243?n Nacional de Valores, we recognized
deferred income tax assets and liabilities on an\plain\cf1\f51\fs16\ql
undiscounted basis. This accounting practice represented a departure from Argentine
GAAP for the years ended June\~30, 2006 and 2005.\par\pard\plain\cf1\f51\fs13\ql
\
However, such departure had not had a material effect on our consolidated financial
statements. As further discussed below, the CPCECABA issued\plain\cf1\f51\fs16\ql
revised accounting standards, one of which required companies to account for
deferred income taxes on an undiscounted basis, thus aligning its
accounting\plain\cf1\f51\fs16\ql practices with that of the Comisi\u243?n Nacional
de Valores. Since the Comisi\u243?n Nacional de Valores adopted the CPCECABA
standards effective\plain\cf1\f51\fs16\ql for our fiscal year beginning July\~1,
2006, there is no longer a difference on this subject between Argentine GAAP and
the Comisi\u243?n Nacional de\plain\cf1\f51\fs16\ql Valores
regulations.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Our Results of
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql
Overview\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our historical financial results
have been, and are expected to continue to be, materially affected by the general
level of economic activity and\plain\cf1\f51\fs16\ql growth of per capita
disposable income in Argentina (and in particular in the Buenos Aires metropolitan
area where our activities and investments are\plain\cf1\f51\fs16\ql concentrated).
From December 2001 through most of 2002, Argentina experienced a crisis that
virtually paralyzed its economy and led to radical changes\plain\cf1\f51\fs16\ql
in government policies. Argentina\u8217?s trade and fiscal deficits and the
rigidity of its fixed exchange rate system (known as the convertibility
regime),\plain\cf1\f51\fs16\ql combined with the country\u8217?s excessive
reliance on foreign capital and with its mounting external debt, resulted in a deep
contraction of the\plain\cf1\f51\fs16\ql economy and in banking and fiscal crises
when capital started to leave the
country.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In response to the political
and economic crisis, the Argentine government undertook a number of far-reaching
initiatives that significantly changed\plain\cf1\f51\fs16\ql the monetary and
foreign exchange regime and the regulatory framework for conducting business in
Argentina. Between December 2001 and January\plain\cf1\f51\fs16\ql 2002, Argentina
abolished the fixed parity between the Peso and the U.S. dollar, rescheduled bank
deposits, asymmetrically pesified debts and suspended\plain\cf1\f51\fs16\ql
payment on a significant portion of its public
debt.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Most sectors of the Argentine
economy were severely affected by the crisis and regulatory changes. In April 2002,
the economy started its path to\plain\cf1\f51\fs16\ql stabilization and realized a
clear improvement of economic variables during the second half of the year, mainly
as a result of expanding exports and\plain\cf1\f51\fs16\ql decreasing imports.
While the devaluation of the Peso had significant adverse consequences, it did
result in a positive balance for Argentina\u8217?s\plain\cf1\f51\fs16\ql current
account, which fostered a reactivation of domestic production. The sharp decline in
the Peso\u8217?s value against foreign currencies, together\plain\cf1\f51\fs16\ql
with a decline in production costs in U.S. dollar terms, made Argentine products
relatively inexpensive in the export markets. At the same time, the
costs\plain\cf1\f51\fs16\ql of imported goods increased significantly due to the
devaluation of the Peso, forcing Argentine consumers to substitute their purchase
of foreign goods\plain\cf1\f51\fs16\ql with domestic products, substantially
boosting domestic demand for domestic
products.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql During the second half of
2002, Argentina\u8217?s GDP increased 4.4%, and the consumer price index inflation
was 8.0% for the six-month period\plain\cf1\f51\fs16\ql ended December\~31, 2002,
compared to 30.5% for the six-month period ended June\~30, 2002. The improving
economic conditions, particularly the\plain\cf1\f51\fs16\ql reduction of capital
outflows from the Argentine economy and the banking system, allowed the government
to begin lifting restrictions on bank\plain\cf1\f51\fs16\ql withdrawals in
November 2002.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Despite the improvement
in economic conditions during the second half of 2002, Argentina\u8217?s overall
GDP contracted 10.9% for the full year,\plain\cf1\f51\fs16\ql receding to 1993
values, investment collapsed (with, for example, negative growth of 43% in the
second quarter compared to the\par\pard\plain\cf1\f51\fs13\ql
\
second quarter of 2001), and inflation increased sharply. The main impact of the
crisis was the tremendous social hardship. Unemployment rose
from\plain\cf1\f51\fs16\ql 12.9% to 19.7% between 1998 and 2002, real wages
declined 24% in 2002, and the poverty index increased from 29% of the population in
2000 to 52%\plain\cf1\f51\fs16\ql in
2002.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In May 2003, Argentina\u8217?s
political environment was reorganized when Dr.\~N\u233?stor Kirchner took office as
president. The economy\plain\cf1\f51\fs16\ql continued to show indications of
recovery, as GDP grew 8.8% in 2003. A combination of sound fiscal and monetary
policies kept consumer price\plain\cf1\f51\fs16\ql inflation under control at 3.5%
in 2003. During 2003, Argentina moved towards normalizing its relationship with the
IMF, withdrew all the national and\plain\cf1\f51\fs16\ql provincial
governments\u8217? quasi-money securities from circulation (amounting to Ps.7.8
billion), and eliminated all deposit restrictions. The trade\plain\cf1\f51\fs16\ql
balance experienced a sustained surplus, aided by the rise in commodity prices and
export volumes. Social indicators also improved. The
unemployment\plain\cf1\f51\fs16\ql rate decreased to 17.3% in 2003 and real wages
began to recover.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql During 2004 and 2005,
the Argentine economy continued to grow. GDP grew 9.0% in 2004 and 9.0% in 2005
according to the Central\plain\cf1\f51\fs16\ql Bank\u8217?s survey of independent
forecasting firms. Inflation remained relatively low in 2004 although it almost
doubled to 6.1% from 2003, and it\plain\cf1\f51\fs16\ql increased to 12.3% during
2005 and 9.8% during 2006.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In June 2005,
the Argentine government completed a restructuring of the federal government\u8217?
s public debt, which had been in default since\plain\cf1\f51\fs16\ql December
2001. Argentina reduced the outstanding principal amount of its public debt from
US$191.3 billion to US$126.6 billion and negotiated lower\plain\cf1\f51\fs16\ql
interest rates and extended payment terms. Approximately US$19.5 billion of
defaulted bonds held by creditors who did not participate in the
exchange\plain\cf1\f51\fs16\ql offer remain
outstanding.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Over the past four years,
the Argentine economy has recovered significantly from the crisis, and the business
environment has largely stabilized. We\plain\cf1\f51\fs16\ql believe that the
current recovery has led to significant improvements and sets the stage for growth
opportunities. Nevertheless, we cannot assure you that\plain\cf1\f51\fs16\ql the
favorable economic conditions that Argentina has experienced in recent years will
continue. See \u8220?Risk Factors\u8212?Risks Related to\plain\cf1\f51\fs16\ql
Argentina.\u8221?\par\pard\plain\sb286\cf1\f51\fs16\b\ql Economic Recovery and
Improvements in our Business Segments\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql
Shopping centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The profitability of our
shopping center business is highly sensitive to consumer spending, overall GPD
growth in Argentina and availability of\plain\cf1\f51\fs16\ql financing. The
contraction in consumer spending and the greater reliance on informal and low
quality products that characterized the Argentine economy\plain\cf1\f51\fs16\ql
during the crisis has been significantly lessened along with an increase in GPD
growth. This economic reactivation has significantly increased the
revenues\plain\cf1\f51\fs16\ql of Alto Palermo, our subsidiary engaged in shopping
center ownership and operation. During the fiscal years ended June\~30, 2005, 2006
and 2007, our\plain\cf1\f51\fs16\ql shopping center revenues were Ps.165.5
million, Ps.215.0 million and Ps.270.3 million
respectively.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Credit card
operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Tarshop S.A. is a subsidiary
of Alto Palermo through which we have rolled out a credit card business. Economic
reactivation and the consequent\plain\cf1\f51\fs16\ql increase in consumer
spending have been fueling the growth in this business as in the case of the
shopping center segment. Conceived\par\pard\plain\cf1\f51\fs13\ql
\
originally as a marketing tool intended to stimulate sales at our shopping centers,
Tarshop\u8217?s credit card business has extended beyond our
shopping\plain\cf1\f51\fs16\ql centers, becoming one of the fastest growing credit
card businesses in the consumer credit industry in Argentina. As of June\~30, 2007,
Tarshop had\plain\cf1\f51\fs16\ql 712,000 outstanding credit card accounts with
more than Ps.700 million in outstanding loans most of which had been securitized as
of such date. During\plain\cf1\f51\fs16\ql the fiscal years ended June\~30, 2005,
2006 and 2007, the revenues of our credit card operations were Ps.64.6 million,
Ps.123.0 million and Ps.213.0\plain\cf1\f51\fs16\ql million,
respectively.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Development and sale
of properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Demand for new residential
units is influenced by a number of factors, including employment rates, short-term
and long-term interest rates,\plain\cf1\f51\fs16\ql availability of government-
sponsored and private mortgage financing programs and products, consumer
confidence, governmental policies, demographic\plain\cf1\f51\fs16\ql factors and,
to a lesser extent, changes in property taxes, energy costs and federal income tax
rates. In addition, the feasibility of developing and\plain\cf1\f51\fs16\ql
marketing new residential units depends on a number of factors such as the
inventory of existing units, zoning restrictions, government policies, cost
and\plain\cf1\f51\fs16\ql availability of land, construction and sales costs and
the availability of financing on reasonable terms, among other factors. At the time
of the crisis,\plain\cf1\f51\fs16\ql residential sales came to a virtual
standstill and real estate prices fell sharply. During the last four years, the
market has begun to recover, making gradual\plain\cf1\f51\fs16\ql progress. This
continuing market stabilization accounts for much of the revenue increase in our
development and sale of properties segment. During the\plain\cf1\f51\fs16\ql
fiscal years ended June\~30, 2005, 2006 and 2007, our development and sale of
properties segment had revenues of Ps.32.3 million, Ps.104.0 million
and\plain\cf1\f51\fs16\ql Ps.75.8 million,
respectively.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Offices and other non-
shopping center rental properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The
profitability of offices and other non-shopping center rental properties segment is
similarly affected by the macroeconomic factors described\plain\cf1\f51\fs16\ql
above. Favorable market conditions and the incidence of bankruptcy are also closely
related to levels of vacancy and to the price at which we can
lease\plain\cf1\f51\fs16\ql our premises which in turn adversely affect our
revenues in this segment. During the 2001 Argentine economic crisis and its
aftermath, few development\plain\cf1\f51\fs16\ql projects were built in Argentina.
However, demand for office space and rental properties has increased substantially
during the last four years, significantly\plain\cf1\f51\fs16\ql raising prices.
During the fiscal years ended June\~30, 2005, 2006 and 2007, our offices and other
non-shopping center rental properties segment had\plain\cf1\f51\fs16\ql revenues
of Ps.19.4 million, Ps.30.6 million and Ps.55.7 million,
respectively.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Hotel
operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The revenues from our hotel
business are also highly sensitive to market conditions. For example, the
devaluation of the Peso following the repeal\plain\cf1\f51\fs16\ql of the
Convertibility Law made Argentina a less expensive, and therefore a more
attractive, tourist destination, significantly increasing the influx
of\plain\cf1\f51\fs16\ql foreign tourists. The appreciation of foreign currency
also rendered domestic travel destinations more appealing to the Argentines, many
of whom replaced\plain\cf1\f51\fs16\ql foreign travel with local travel. During
fiscal years ended June\~30, 2005, 2006 and 2007, our Hotel operations segment had
revenues of Ps.87.1 million,\plain\cf1\f51\fs16\ql Ps.103.8 million and Ps.122.7
million, respectively.\par\pard\plain\cf1\f51\fs13\ql
\
Factors Affecting Comparability of Results of
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Described below are certain
considerations that will facilitate an understanding of our overall operating
results. These factors are based upon the\plain\cf1\f51\fs16\ql information which
is currently available to us and do not represent all of the factors that are
relevant to an understanding of our current and future
results\plain\cf1\f51\fs16\ql of
operations.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Recent gains on equity
investees\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We currently own 11.8% of Banco
Hipotecario, Argentina\u8217?s leading mortgage lender in terms of mortgage loans
granted and provider of\plain\cf1\f51\fs16\ql mortgage-related insurance and
mortgage loan services. Banco Hipotecario consummated a restructuring of its
financial indebtedness in 2004 and since\plain\cf1\f51\fs16\ql that time has
recorded improving results of operations. For fiscal years ended June\~30, 2006 and
2007, our investment in Banco Hipotecario generated a\plain\cf1\f51\fs16\ql gain
of Ps.47.0 million and Ps.41.4 million respectively. The gains we recorded in our
2006 and 2007 fiscal years represented 48.7% and 38.6%,\plain\cf1\f51\fs16\ql
respectively, of our consolidated net income for such years. We cannot give you any
assurance that our investment in Banco Hipotecario will continue
to\plain\cf1\f51\fs16\ql generate similar gains, if any, in the
future.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Variability of results due
to substantial property acquisitions and
dispositions\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The development and sale of
large residential and other properties does not yield a stable, recurring stream of
revenue. On the contrary, large\plain\cf1\f51\fs16\ql acquisitions and sales
significantly affect revenues for a reporting period, making it difficult to
compare our year-to-year results. For example, the Ps.31.0\plain\cf1\f51\fs16\ql
million sale to a third party of 10% of the plot known as Santa Mar\u237?a de Plata
and the Ps.26.2 million sale of plot Z of Dique III have
significantly\plain\cf1\f51\fs16\ql impacted our results for our 2007 fiscal year.
Our historical revenues have varied from period to period depending upon the timing
of sales of properties,\plain\cf1\f51\fs16\ql and our future period-on-period
results of operations are likely to continue to vary, perhaps significantly, as a
result of periodic acquisitions and\plain\cf1\f51\fs16\ql dispositions of
properties.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Critical Accounting Policies and
Estimates\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In connection with the
preparation of the our consolidated financial statements included in this annual
report, we have relied on variables and\plain\cf1\f51\fs16\ql assumptions derived
from historical experience and various other factors that we deemed reasonable and
relevant. Although we review these estimates and\plain\cf1\f51\fs16\ql assumptions
in the ordinary course of business, the portrayal of our financial condition and
results of operation often requires our management to make\plain\cf1\f51\fs16\ql
judgments regarding the effects of matters that are inherently uncertain on the
carrying value of our assets and liabilities. Actual results may differ
from\plain\cf1\f51\fs16\ql those estimated under different variables, assumptions
or conditions. In order to provide an understanding about how management forms our
judgments\plain\cf1\f51\fs16\ql about future events, including the variables and
assumptions underlying the estimates, and the sensitivity of those judgments to
different variables and\plain\cf1\f51\fs16\ql conditions, we have included
comments related to each critical accounting policy described as
follows:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql revenue
recognition;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql purchase accounting of real
estate assets;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql useful lives of real estate
assets;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql provision for allowances and
contingencies;\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 99
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\ql impairment of long-lived
assets;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql debt
restructuring;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql deferred income tax;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql minimum presumed income
tax.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Revenue
recognition\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We primarily derive our
revenues from domestic office space and shopping center leases and services
operations, from the development and sale of\plain\cf1\f51\fs16\ql properties,
from credit card operations and from hotel
operations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\ql Accounting for real estate
barter transactions\plain\cf1\f51\fs16\ql .\~During the years ended June\~30, 2007,
2006 and 2005 we entered into certain non-monetary\plain\cf1\f51\fs16\ql
transactions with third parties pursuant to which we sold plots of land in the
ordinary course of business in exchange for cash and/or other real
estate\plain\cf1\f51\fs16\ql properties. Under Argentine GAAP, these transactions
were recorded based on the fair value of the assets involved and, as a result, a
gain or loss was\plain\cf1\f51\fs16\ql recognized at the time of the exchange. We
believe that this accounting policy is a \u8220?critical accounting policy\u8221?
because the impact of\plain\cf1\f51\fs16\ql accounting for real estate barter
transactions under this method could have a material effect on our consolidated
balance sheet as well as on our results of\plain\cf1\f51\fs16\ql
operations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\ql Recognition of inventories
at net realizable value\plain\cf1\f51\fs16\ql .\~Inventories, on which we received
payments in advance that establishes the sales price and the\plain\cf1\f51\fs16\ql
terms and conditions of the contract assuring the closing of the transaction and
the realization of the gain, are valued at net realizable value. At
June\~30,\plain\cf1\f51\fs16\ql 2007, payments for Ps.20.7 million were valued
according to these criteria, which was principally applied to the following
developments: \u8220?Dock III\plain\cf1\f51\fs16\ql \u8211? Plot X\u8221? for
Ps.18.4 million and \u8220?San Mart\u237?n de Tours\u8221? for Ps.1.5 million. We
believe that the accounting policy related\plain\cf1\f51\fs16\ql to recognition of
inventories at net realizable value is a \u8220?critical accounting policy\u8221?
because the impact of accounting under this method\plain\cf1\f51\fs16\ql could
have a material effect on our consolidated balance sheet as well as on our results
of operations. The performance of a sensitivity analysis,
which\plain\cf1\f51\fs16\ql reduced the market value of the properties by 5%,
would have resulted in a smaller \u8220?Gain from recognition of inventories at net
realizable\plain\cf1\f51\fs16\ql value\u8221? by Ps.2.3 million for our fiscal
year ended June\~30, 2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\ql Leases and
services from shopping center operations\plain\cf1\f51\fs16\ql .\~We account for
our leases with tenants as operating leases. We generally charge tenants
a\plain\cf1\f51\fs16\ql rent which consists of the higher of (i)\~a monthly base
rent (the \u8220?Base Rent\u8221?) and (ii)\~a specified percentage of the
tenant\u8217?s monthly\plain\cf1\f51\fs16\ql gross retail sales (the \u8220?
Percentage Rent\u8221?) (which generally ranges between 4% and 8% of tenant\u8217?s
gross sales). Furthermore, pursuant\plain\cf1\f51\fs16\ql to the rent escalation
clause in most leases, the tenant\u8217?s Base Rent generally increases between 4%
and 7% each year during the term of the lease.\plain\cf1\f51\fs16\ql Certain of
our lease agreements contain provisions which provide for rents based on a
percentage of sales or based on a percentage of sales volume
above\plain\cf1\f51\fs16\ql a specified threshold. We determine the compliance
with specific targets and calculate the additional rent on a monthly basis as
provided for in the\plain\cf1\f51\fs16\ql contracts. Thus, we do not recognize
contingent rents until the required thresholds are
exceeded.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Our lease agreements vary from
36 to 120 months. Law No.\~24,808 provides that tenants may rescind commercial
lease agreements after the initial\plain\cf1\f51\fs16\ql six months, upon not less
than 60 days\u8217? written notice, subject to penalties of one and a half months
rent if the tenant rescinds during the first year\plain\cf1\f51\fs16\ql of its
lease, and one month of rent if the tenant rescinds after the first year of its
lease.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 100
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql We also charge our tenants a
monthly administration fee, prorated among the tenants according to their leases,
which varies from shopping center to\plain\cf1\f51\fs16\ql shopping center,
relating to the administration and maintenance of the common area and the
administration of contributions made by tenants to finance\plain\cf1\f51\fs16\ql
promotional efforts for the overall shopping centers operations. We recognize
administration fees monthly when earned. In addition to rent, we
generally\plain\cf1\f51\fs16\ql charge tenants admission rights. Admission rights
are non-refundable admission fees that tenants may be required to pay upon entering
into a lease or\plain\cf1\f51\fs16\ql upon lease renewal. An admission right is
normally paid in one lump sum or in a small number of monthly installments. We
recognize admission rights\plain\cf1\f51\fs16\ql using the straight-line method
over the life of the respective lease agreements. Furthermore, the lease agreements
generally provide for the reimbursement\plain\cf1\f51\fs16\ql of real estate
taxes, insurance, advertising and certain common area maintenance costs. These
additional rents and tenant reimbursements are accounted for\plain\cf1\f51\fs16\ql
on the accrual basis.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We also derive
revenues for parking lot fees charged to visitors. We recognize parking revenues as
services are performed.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\ql Leases and
services from office and other buildings\plain\cf1\f51\fs16\i\ql
.\plain\cf1\f51\fs16\ql We account for our leases with tenants as operating
leases. We charge tenants a base rent\plain\cf1\f51\fs16\ql on a monthly basis. We
recognize rental income on a straight-line basis over the term of the
leases.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\ql Development and sale of
properties\plain\cf1\f51\fs16\ql .\~We record revenue from the sale of properties
when all of the following criteria are met: (a)\~the sale has\plain\cf1\f51\fs16\ql
been consummated (a sale is not considered consummated until (i)\~the parties are
bound by the terms of a contract, (ii)\~all consideration has
been\plain\cf1\f51\fs16\ql exchanged, (iii)\~any permanent financing for which the
seller is responsible has been arranged and (iv)\~all conditions precedent to the
closing have been\plain\cf1\f51\fs16\ql performed); (b)\~we determine that the
buyer\u8217?s initial and continuing investments are adequate to demonstrate a
commitment to pay for the property\plain\cf1\f51\fs16\ql (the adequacy of a
buyer\u8217?s initial investment is measured by (i)\~its composition and (ii)\~its
size compared with the sales value of the property);\plain\cf1\f51\fs16\ql
(c)\~our receivable is not subject to future subordination (our receivable will not
be placed in or occupy a lower rank, class or position with respect
to\plain\cf1\f51\fs16\ql other obligations of the buyer); and (d)\~we have
transferred to the buyer the risk and rewards of ownership and does not have a
continuing involvement in\plain\cf1\f51\fs16\ql the
property.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We generally enter into
purchase and sale agreements with purchasers of units in our residential
development properties prior to the commencement\plain\cf1\f51\fs16\ql of
construction. Pursuant to this practice, we initiate our marketing and sales
efforts on the basis of already-commissioned architectural designs and
model\plain\cf1\f51\fs16\ql units. As a general rule, purchasers pay a booking
charge for the units and subsequently enter into fixed price purchase and sale
agreements. The balance\plain\cf1\f51\fs16\ql of the purchase price is due upon
delivery of the constructed and completed
unit.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Construction of such residential
development properties is done pursuant to \u8220?turn-key\u8221? contracts with
major Argentine and South\plain\cf1\f51\fs16\ql American construction companies
that provide for construction to be completed within a prescribed period and
budget, subject to customary exceptions.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
We use the percentage-of-completion method of accounting with respect to sales of
development properties under construction effected under\plain\cf1\f51\fs16\ql
fixed-priced contracts. Under this method, revenue is recognized based on the ratio
of costs incurred to total estimated costs applied to the total
contract\plain\cf1\f51\fs16\ql price. We do not commence revenue and cost
recognition until such time as the decision to proceed with the project is made and
construction activities\plain\cf1\f51\fs16\ql have
begun.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 101
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The percentage-of-completion method
of accounting requires management to prepare budgeted costs (i.e., the estimated
costs of completion) in\plain\cf1\f51\fs16\ql connection with sales of properties
and/or units. All changes to estimated costs of completion are incorporated into
revised estimates during the contract\plain\cf1\f51\fs16\ql
period.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Under this method of accounting,
revenues for work completed may be recognized in the statement of income prior to
the period in which actual\plain\cf1\f51\fs16\ql cash proceeds from the sale are
received. In this situation, a deferred asset is recorded. Alternatively, and as is
more common for us, where property\plain\cf1\f51\fs16\ql and/or unit purchasers
pay us an advance down-payment and monthly cash installments prior to the
commencement of construction, a liability is recorded.\plain\cf1\f51\fs16\ql This
is recorded as a customer advance in the financial
statements.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Credit card
operations.\plain\cf1\f51\fs16\ql We derive revenues from credit card transactions
which primarily are comprised of (i)\~merchant discount fees which
are\plain\cf1\f51\fs16\ql recognized when transactional information is received
and processed by the Company; (ii)\~data processing services which consist of
processing and\plain\cf1\f51\fs16\ql printing cardholders account statements, and
which are recognized as services are provided; and (iii)\~life and disability
insurance charges to cardholders\plain\cf1\f51\fs16\ql which are recognized on an
accrual basis.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Hotel
operations\plain\cf1\f51\fs16\ql We recognize revenues from occupation of rooms,
catering, and restaurant facilities as earned on the close of each business
day.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Purchase accounting of real
estate assets\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We allocate the purchase
price to assets acquired and liabilities assumed on a gross basis based on their
fair values at the date of acquisition\plain\cf1\f51\fs16\ql pursuant to the
provisions of Technical Resolution No.\~18 Specific Considerations for the
Preparation of Financial Statements (\u8220?RT
No.\~18\u8221?).\plain\cf1\f51\fs16\ql In estimating the fair value of the
tangible and intangible assets and liabilities acquired, we consider information
obtained about each property as a result\plain\cf1\f51\fs16\ql of our due
diligence, marketing and leasing activities. It applies various valuation methods,
such as estimated cash flow projections utilizing appropriate\plain\cf1\f51\fs16\ql
discount and capitalization rates, estimates of replacement costs net of
depreciation, and available market information. Depending upon the size of
the\plain\cf1\f51\fs16\ql acquisition, we may engage an outside appraiser to
perform a valuation of the tangible and intangible assets acquired. We are required
to make subjective\plain\cf1\f51\fs16\ql estimates in connection with these
valuations and allocations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql When the sum
of the individual fair values of the identifiable tangible and intangible assets
exceeds the purchase price paid, negative goodwill\plain\cf1\f51\fs16\ql exists.
Under Argentine GAAP, when negative goodwill exists after an acquiring entity
initially assigns values to all assets acquired and
liabilities\plain\cf1\f51\fs16\ql assumed, RT No.\~18 states that the entity must
first reassess whether all acquired assets and assumed liabilities have been
identified and properly valued.\plain\cf1\f51\fs16\ql If an amount of negative
goodwill still results after this reassessment, intangible assets acquired
(including above and below market leases, in-place leases\plain\cf1\f51\fs16\ql
and tenant relationships, as applicable), are subject to reduction. If after all of
these intangible assets are reduced to zero and an amount of
negative\plain\cf1\f51\fs16\ql goodwill still remains, the remaining unallocated
negative goodwill is amortized under the straight-line method over the weighted
average useful life of\plain\cf1\f51\fs16\ql the main tangible assets
acquired.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Useful lives of real
estate assets\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We are required to make
subjective assessments as to the useful lives of our properties for purposes of
determining the amount of depreciation to\plain\cf1\f51\fs16\ql reflect on an
annual basis with respect to\par\pard\plain\cf1\f51\fs13\ql
\
those properties. These assessments have a direct impact on our net income. If we
would lengthen or shorten the expected useful life of a particular
asset,\plain\cf1\f51\fs16\ql it would be depreciated over more or less years and
result in less or more depreciation expense and higher or lower net
income.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Provisions for allowances
and contingencies\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We provide for losses
relating to mortgage, lease and other accounts receivable. The allowance for losses
is recognized when, based on current\plain\cf1\f51\fs16\ql information and events,
it is probable that we will be unable to collect all amounts due according to the
terms of our agreements. Allowances are\plain\cf1\f51\fs16\ql determined on a
case-by-case basis, where applicable, by considering the present value of expected
future cash flow or the fair market value of collateral\plain\cf1\f51\fs16\ql if
the loan is securitized. Determinations that an allowance should be recognized are
dependent on information available at the time of the
determination.\plain\cf1\f51\fs16\ql As a result, future adjustments to the
allowance may be necessary if future economic conditions differ substantially from
the assumptions used at the time\plain\cf1\f51\fs16\ql of the determination. We
have considered all events and/or transactions subject to reasonable and standard
estimation procedures. The consolidated\plain\cf1\f51\fs16\ql financial statements
reflect these considerations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We have
certain contingent liabilities with respect to existing or potential claims,
lawsuits and other proceedings, including those involving
labor\plain\cf1\f51\fs16\ql and other matters. We accrue liabilities when it is
probable that future costs will be incurred and such costs can be reasonably
estimated. Such accruals\plain\cf1\f51\fs16\ql are based on developments to date,
our estimate of the outcomes of these matters and our lawyers\u8217? experience in
contesting, litigating and settling\plain\cf1\f51\fs16\ql other matters. As the
scope of the liabilities becomes better defined, there may be changes in the
estimates of future costs, which could have a material\plain\cf1\f51\fs16\ql
effect on our future results of operations and financial condition or
liquidity.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Impairment of long-lived
assets\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We periodically evaluate the
carrying value of our long-lived assets for impairment. We consider the carrying
value of a long-lived asset to be\plain\cf1\f51\fs16\ql impaired when the expected
cash flows, undiscounted and without interest, from such asset is separately
identifiable and less than its carrying value. We\plain\cf1\f51\fs16\ql determine
the fair market value of a long-lived asset primarily using independent appraisals
and utilizing anticipated cash flows discounted at a rate\plain\cf1\f51\fs16\ql
commensurate with the risk involved. The reposition value is mainly determined
using independent appraisals or projections of future cash flows. In
that\plain\cf1\f51\fs16\ql event, a loss would be recognized based on the amount
by which the carrying value exceeds the fair market value of the long-lived asset.
Impairments\plain\cf1\f51\fs16\ql are allocated to the results of the
period.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Under Argentine GAAP a
previously recognized impairment loss is reversed when there is a subsequent change
in estimates used to compute the\plain\cf1\f51\fs16\ql fair market value of the
asset. In that event, the new carrying value of the asset is the lower of its fair
market value or the net carrying value the asset\plain\cf1\f51\fs16\ql would have
had if no impairment had been recognized. Both the impairment charge and the
impairment reversal are recognized in earnings. U.S. GAAP\plain\cf1\f51\fs16\ql
prohibits the reversal of a previously recognized impairment
charge.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We believe that the accounting
estimate related to asset impairment is a \u8220?critical accounting
estimate\u8221? because:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql it is highly susceptible to change from
period to period because it requires company management and/or\cell{
f1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 103
\
\par\pard\plain
{\trowd\clvertalc\cellx864\cellx10800\trrh429
independent appraisers to make assumptions such as, future sales and cost of sale,
future vacancy rates and future prices, which requires\plain\intbl\cf1\f51\fs16\ql
significant adjustments because actual prices and vacancy rates have fluctuated in
the past and are expected to continue to do so; and\cell{
{\trowd\clvertalc\cellx864\cellx10800\trrh429\row}}}\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the impact that recognizing an impairment
would have on assets reported on our balance sheet as well as on the results of our
operations\plain\intbl\cf1\f51\fs16\ql could be material. Independent appraisals
about future sales prices and future vacancy rates require significant judgment
because actual\plain\intbl\cf1\f51\fs16\ql sales prices and vacancy rates have
fluctuated in the past and are expected to continue to do so.\cell{
sb198\fi462\cf1\f51\fs16\ql As of June\~30, 2002 we had reviewed our assets in all
segments for impairments due to the continued deterioration of the Argentine
economy. As a\plain\cf1\f51\fs16\ql result, as of June\~30, 2002, we had
recognized an impairment of Ps.140.6 million. During fiscal years 2003 and 2005, we
also recognized, impairment\plain\cf1\f51\fs16\ql losses totaling Ps.14.0 million
and Ps.0.2 million, respectively. As a result of increases in the fair market
values of the assets for which we had recognized\plain\cf1\f51\fs16\ql impairment
losses, we partially reversed those impairment losses, recognizing gains of Ps.25.4
million, Ps.63.0 million, Ps.28.2 million , Ps.12.6 million\plain\cf1\f51\fs16\ql
and Ps.2.6 million, for the years ended June\~30, 2003, 2004, 2005, 2006 and 2007
respectively. Assets related to our business segments
represented\plain\cf1\f51\fs16\ql approximately 98.5% of our total long-lived
assets as of June\~30, 2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The fair
market value of our office and rental properties was determined following the rent
value method, taking into consideration each\plain\cf1\f51\fs16\ql property\u8217?
s future cash flow, its comparability with other properties in the market and its
historic vacancy rates. The price per square meter of our\plain\cf1\f51\fs16\ql
properties varies according to the category and type of building, and to each
property\u8217?s idiosyncratic traits. Vacancy rates are the lowest in
history\plain\cf1\f51\fs16\ql with rates below 2%. Moreover, we currently believe
that a significant amount of new office space, comparable to our existing
buildings, is not likely to\plain\cf1\f51\fs16\ql become available in the City of
Buenos Aires during our next two or three fiscal years. We applied an assumed 5%
vacancy rate in preparing our cash\plain\cf1\f51\fs16\ql flow analyses. For
buildings we consider to be Class\~A (those having the best location and condition)
the average price per square meter used was\plain\cf1\f51\fs16\ql between Ps.68
and Ps.74 per square meter per month, while for buildings we consider to be Class
A/B (having very good location and/or condition) the\plain\cf1\f51\fs16\ql average
price was between Ps.37 and Ps.49 per square meter per month, and for buildings we
consider Class B/C (those having good location and/or\plain\cf1\f51\fs16\ql
condition) it was Ps.31 per square meter per month. The performance of a
sensitivity analysis, which would have reduced the fair market value of
these\plain\cf1\f51\fs16\ql properties by 5%, would have resulted in a smaller
reversal of impairment losses of Ps.0.4 million, as of June\~30,
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql With respect to our Hotel
Operations segment, the discounted cash flows methodology was applied by taking the
forecasts of each hotel in a\plain\cf1\f51\fs16\ql 10-year flow and discounting
such estimated amounts at rates according to risk, location and other relevant
factors. The cash flows to be discounted\plain\cf1\f51\fs16\ql considered revenues
per room, per guest, per additional charge as well as the fixed and variable
expenditures related to the transaction. Rate increases and\plain\cf1\f51\fs16\ql
occupancy variations were estimated based on the information supplied by each
hotel\u8217?s management and comparing them to industry-specific
data\plain\cf1\f51\fs16\ql in the local market. We believe that tourism activities
and related industries in Argentina have grown in the range of 13% to 18% over the
last 12\plain\cf1\f51\fs16\ql months, well above worldwide figures, according to
inbound traveling and spending statistics provided by the National Tourism
Agency.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 104
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Shopping centers were valued
according to the rent value method. We calculated discount rates considering each
property\u8217?s location, its\plain\cf1\f51\fs16\ql comparability with other
properties in the market, its historic rental income, vacancy rates and cash flow.
The average discount rates we used ranged\plain\cf1\f51\fs16\ql between 10.0% and
10.4%, and the average price per leasable square meter was Ps.7,043 and the average
vacancy rate was calculated taking into\plain\cf1\f51\fs16\ql consideration the
real vacancy.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We used the open market
method for determining the fair market value of our land reserves and inventories.
We estimated the value of each site by\plain\cf1\f51\fs16\ql taking into
consideration the value of the property according to its surface area and location,
as well as the availability of inventory. The performance of
a\plain\cf1\f51\fs16\ql sensitivity analysis, which would have reduced the fair
market value of these properties by 5% would have resulted in increased recognition
of impairment\plain\cf1\f51\fs16\ql losses as of June\~30, 2007, of Ps.0.7
million.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Debt
restructuring\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql Extension of the maturity
date of Alto Palermo\u8217?s Convertible Notes.\plain\cf1\f51\fs16\ql \~On
August\~20, 2002, Alto Palermo issued an aggregate amount of\plain\cf1\f51\fs16\ql
US$50.0 million of unsecured convertible notes in exchange for cash and the
settlement of certain liabilities. These convertible notes accrue interest at
a\plain\cf1\f51\fs16\ql fixed annual interest rate of 10% (payable semiannually),
are convertible at any time at the option of the holder into common shares (at a
conversion ratio\plain\cf1\f51\fs16\ql of US$0.3240 per share) and originally
matured on July\~19, 2006. On May\~2, 2006, Alto Palermo\u8217?s noteholders
resolved to extend the maturity date\plain\cf1\f51\fs16\ql of these convertible
notes through July\~19, 2014, the remaining terms and conditions remained
unchanged.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Under Argentine GAAP, an
exchange or modification of debt instruments is deemed to result in a substantially
different debt instrument if the\plain\cf1\f51\fs16\ql present value of the cash
flows under the terms of the new debt instrument is at least 10% different from the
present value of the remaining cash flows\plain\cf1\f51\fs16\ql under the terms of
the original instrument. The new debt instrument should be initially recorded at
fair value, and that amount should be used to\plain\cf1\f51\fs16\ql determine the
extinguishment gain or loss to be
recognized.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Fair value should be
determined by the present value of the future cash flows to be paid under the terms
of the new debt instrument discounted at a\plain\cf1\f51\fs16\ql rate commensurate
with the risks of the debt instrument and time value of money. If it is determined
that the original and new debt instrument are not\plain\cf1\f51\fs16\ql
substantially different, then a new effective interest rate is to be determined
based on the carrying amount of the original debt instrument and the
revised\plain\cf1\f51\fs16\ql cash
flows.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We believe that the accounting
policy related to the extension of Alto Palermo\u8217?s convertible notes\u8217?
maturity date is a \u8220?critical\plain\cf1\f51\fs16\ql accounting policy\u8221?
because it required our management to make an estimate of the present value of the
future cash flows, using an estimated\plain\cf1\f51\fs16\ql discount rate which is
highly susceptible to changes from period to period. The impact on the fair market
value of our debt instruments could be material.\plain\cf1\f51\fs16\ql Based on
the analysis performed, we concluded that the instruments were not substantially
different and accordingly the old instrument was not\plain\cf1\f51\fs16\ql
extinguished.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Deferred income
tax\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We recognize income tax using the
liability method. Accordingly, deferred tax assets and liabilities are recognized
for the future tax consequences\plain\cf1\f51\fs16\ql attributable to differences
between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax\plain\cf1\f51\fs16\ql assets and
liabilities are measured using enacted tax rates expected to apply
to\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 105
\
taxable income in the years in which those temporary differences are expected to be
recorded or settled. The effect on deferred tax assets and liabilities
of\plain\cf1\f51\fs16\ql a change in tax rates is recognized in income in the
period that includes the enactment date. Technical Resolution No.\~17 requires
companies to record a\plain\cf1\f51\fs16\ql valuation allowance for that component
of net deferred tax assets which is not
recoverable.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We believe that the
accounting estimate related to deferred income tax is a \u8220?critical accounting
estimate\u8221? because:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql it is highly
susceptible to change from period to period because it requires company management
to make assumptions, such as future revenues and\plain\cf1\f51\fs16\ql expenses,
exchange rates and inflation among others;
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the impact that calculating income tax
using this method would have on assets or liabilities reported on our consolidated
balance sheet as well as on\plain\cf1\f51\fs16\ql the income tax result reported
in our consolidated statement of income could be
material.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Minimum presumed income
tax\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We calculate the minimum presumed
income tax provision by applying the current 1% rate on computable assets at the
end of the year. This tax\plain\cf1\f51\fs16\ql complements the income tax. Our
tax obligation each year will coincide with the highest amount due under either of
these two taxes. However, if the\plain\cf1\f51\fs16\ql minimum presumed income tax
provision exceeds income tax in a given year, the amount in excess of income tax
can be offset against income tax arising\plain\cf1\f51\fs16\ql in any of the
following ten years.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We have recognized
the minimum presumed income tax provision paid in previous years as a credit as we
estimate that it will offset future\plain\cf1\f51\fs16\ql years\u8217? income
tax.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We believe that the accounting
policy relating to the minimum presumed income tax provision is a \u8220?critical
accounting policy\u8221? because\plain\cf1\f51\fs16\ql it requires management to
make estimates and assumptions with respect to our future results that are highly
susceptible to change from period to period,\plain\cf1\f51\fs16\ql and as such the
impact on our financial position and results of operations could be
material.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Business Segment
Reporting\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We have determined that our
reportable segments are those based on our method of internal reporting.
Accordingly, we have six reportable\plain\cf1\f51\fs16\ql segments. These segments
are \u8220?shopping centers,\u8221? \u8220?credit card operations,\u8221? \u8220?
development and sale of properties,\u8221?\plain\cf1\f51\fs16\ql \u8220?offices
and other non-shopping center rental properties,\u8221? \u8220?hotel
operations\u8221? and \u8220?financial operations and
others.\u8221?\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql A general description of
each segment follows:\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Shopping
centers.\plain\cf1\f51\fs16\ql This segment includes the operating results of our
shopping centers principally consisting of lease and service revenues
from\plain\cf1\f51\fs16\ql tenants.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql
Credit card operations.\plain\cf1\f51\fs16\ql We operate a credit card consumer
finance business through Alto Palermo\u8217?s majority-owned subsidiary Tarshop.
Our\plain\cf1\f51\fs16\ql Credit card operations consist primarily
of\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 106
\
lending and servicing activities relating to the credit card products we offer to
consumers at shopping centers, hypermarkets and street stores. We
finance\plain\cf1\f51\fs16\ql a substantial majority of our credit card activities
through securitization of the receivables underlying the accounts we originate. Our
revenues from credit\plain\cf1\f51\fs16\ql card transactions are derived from
interest income generated by financing and lending activities, merchants\u8217?
fees, insurance charges for life and\plain\cf1\f51\fs16\ql disability insurance
and fees for data processing which consist of processing and printing
cardholder\u8217?s account statement.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql
Development and sale of properties.\plain\cf1\f51\fs16\ql This segment includes
the operating results of our construction and/or sale of residential buildings
business.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Offices and other non-
shopping center rental properties.\plain\cf1\f51\fs16\ql This segment includes the
operating results from our lease and service revenues for
office\plain\cf1\f51\fs16\ql space and other non-retail building
properties.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Hotel
operations.\plain\cf1\f51\fs16\ql This segment includes the operating results of
our hotels principally comprised of room, catering and restaurant
revenues.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Financial operations and
others.\plain\cf1\f51\fs16\ql This segment primarily includes revenues and
associated costs generated from the sale of equity securities,
other\plain\cf1\f51\fs16\ql securities-related transactions and other non-core
activities.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We measure our reportable
segments based on net income. Inter-segment transactions, if any, are accounted for
at current market prices. We\plain\cf1\f51\fs16\ql evaluate performance and
allocate our resources to each segment based on net income. We do not depend on any
one customer for the majority of our\plain\cf1\f51\fs16\ql
business.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Allocation of expenses and
other gains to business segments\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql
Allocation of selling expenses to business
segments\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses directly
attributable to the shopping centers, credit card operations and hotel operations
segments are directly allocated to these\plain\cf1\f51\fs16\ql segments. These
expenses are incurred individually by these segments. All other selling expenses
are allocated appropriately among the remaining\plain\cf1\f51\fs16\ql segments
based on the specific segment which incurred the
expenses.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Allocation of administrative
expenses to business segments\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Administrative expenses directly attributable to the shopping centers, credit card
operations and hotel operations segments are directly allocated
to\plain\cf1\f51\fs16\ql these segments. These expenses are incurred individually
by these segments. All other administrative expenses are prorated among the
Development and\plain\cf1\f51\fs16\ql sale of properties segment and the offices
and other non-shopping center rental properties segments based on the percentage of
the operating assets and\plain\cf1\f51\fs16\ql revenues generated by each segment.
Accordingly, 53.1% and 46.9% of administrative expenses (excluding expenses
directly attributable to the shopping\plain\cf1\f51\fs16\ql centers, credit card
operations and hotel operations segments) are allocated to the development and sale
of properties segment and the offices and other\plain\cf1\f51\fs16\ql non-shopping
center rental properties segments, respectively.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Allocation of results from
retained interest in securitized receivables to business
segments\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Alto Palermo\u8217?s profits
from its interest in Tarjeta Shopping are allocated to our credit card operations
segment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Allocation of results from
operations and holdings of real estate assets,
net\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql These results are allocated to the
segment that generates them, which are shopping centers, development and sales of
properties, offices and other\plain\cf1\f51\fs16\ql non-shopping center rental
properties and hotel operations.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql
Allocation of the amortization of
goodwill\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Includes, principally, the
amortization of goodwill generated from (i)\~the acquisition of Alto Palermo,
(ii)\~the acquisition of Alto Palermo\u8217?s\plain\cf1\f51\fs16\ql subsidiaries,
(iii)\~the purchase of Alto Palermo\u8217?s Convertible Notes and (iv)\~the
acquisition of 33% interest in Palermo Invest. The amortization
is\plain\cf1\f51\fs16\ql allocated to the segment that generates the corresponding
goodwill.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Allocation of financial
results to business segments\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql Financial
results, net\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Includes interest income,
interest on discounting of assets and liabilities, gain on financial operations,
financial expenses, exchange gain (loss) and\plain\cf1\f51\fs16\ql other financial
results allocated to each segment, as described
below.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Gain (loss) on financial
operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The Shopping centers, Credit
card operations and Hotel operations segments each manage their financial
operations individually. The results\plain\cf1\f51\fs16\ql generated on such
operations are directly allocated to these segments. The remaining financial gains
or losses are shown in the Financial operations and\plain\cf1\f51\fs16\ql others
segment since they are not specifically generated by any other separate
segment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Interest income, interest on
discounting of assets and liabilities and financial
expenses\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Only the results generated by
Alto Palermo, Tarjeta Shopping and our hotels are recorded in the Shopping centers,
Credit card operations and Hotel\plain\cf1\f51\fs16\ql operations segments,
respectively. The remaining results are prorated among Development and sale of
properties, Offices and other non-shopping center\plain\cf1\f51\fs16\ql rental
properties, Shopping centers, Credit card operations, Hotel operations and
Financial operations and others in proportion to the corresponding
assets\plain\cf1\f51\fs16\ql to each
segment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Exchange gain (loss) and
other financial results\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In the case of
Shopping centers, Credit card operations and Hotel operations, exchange gains
(losses) and other financial results are attributed to the\plain\cf1\f51\fs16\ql
segments giving rise to them. The remaining items are recorded in Financial
Operations and Others as they are not directly related to any
segment.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 108
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Allocation of (Loss) gain on
equity investees\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql (Loss) gain on equity
investees is allocated to the corresponding segments. (Loss) gain on equity
investees carrying out activities not falling under\plain\cf1\f51\fs16\ql any of
our segments of activity are recorded under Financial operations and
Others.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Allocation of other expenses,
net\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The Shopping centers, Credit card
operations and Hotel operations segments each manage their expenses individually.
The results generated by such\plain\cf1\f51\fs16\ql operations are directly
allocated to these segments. The remaining expenses are shown in the Financial
operations and others segment since they are not\plain\cf1\f51\fs16\ql
specifically generated by any other separate
segment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Allocation of minority
interest\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Minority interests are allocated
among our respective segments that generate
them.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Allocation of income tax and
minimum presumed income tax\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The
corresponding income tax is allocated to the segment that generates it and minimum
presumed income tax is prorated among the Development\plain\cf1\f51\fs16\ql and
sale of properties, the Offices and other non-shopping center rental properties and
the Financial Operations and Others
segments.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The following tables show
certain operating data by business activity:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
rtalb\cellx9168\clvertalc\cellx9816\clvertalc\cellx9911\clvertalb\cellx10077\clvert
alc\cellx10694\clvertalc\cellx10789\trrh-66\trrh0
alc\cellx10694\clvertalc\cellx10789\trrh-66\trrh0\row}}}
\pard\plain\intbl\brdrb\brdrs\cf1\f51\fs13\b\ql As of and for year ended June\~30,
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Development
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc and sale of
Offices\~and
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc other
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc non-shopping
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc center rental
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc properties
(a)\cell\pard\plain\intbl\cf1\f51\fs13\ql
Shopping
Hotel
Credit
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc card
Financial
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc operations
and\~others\cell\pard\plain\intbl\cf1\f51\fs13\ql
Total\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
x10798\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in thousands
Ps.)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
x10798\trrh172\row}}}
b\clshdng100\clcfpat12\clcbpat12\cellx10789\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Income Statement
b\clshdng100\clcfpat12\clcbpat12\cellx10789\trrh206\row}}}
lx5047\clvertalc\cellx5142\clvertalb\cellx5308\clbrdrt\brdrs\brdrcf1\clvertalb\cell
x6194\clvertalc\cellx6289\clvertalb\cellx6455\clbrdrt\brdrs\brdrcf1\clvertalb\cellx
7095\clvertalc\cellx7190\clvertalb\cellx7356\clbrdrt\brdrs\brdrcf1\clvertalb\cellx8
94\clvertalc\cellx10789\trrh29
94\clvertalc\cellx10789\trrh29\row}}}
at net realizable\plain\intbl\cf1\f51\fs16\ql
value\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net income from retained interest in
securitized\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql (Loss) gain from operations and
holdings of real estate\plain\intbl\cf1\f51\fs16\ql assets,
~\cell\pard\plain\intbl\cf1\f51\fs16\qr 1,845\cell\pard\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Operating
\~\cell\pard\plain\intbl\cf1\f51\fs16\qr (412\cell\pard\plain\intbl\cf1\f51\fs16\ql
)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other income (expenses),
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr (4\cell\pard\plain\intbl\cf1\f51\fs16\ql
0694\clvertalb\cellx10789\trrh206\row}}}\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
5335\clvertalb\cellx5536\clvertalc\cellx6422\clvertalb\cellx6626\clvertalc\cellx731
2\clvertalb\cellx7516\clvertalc\cellx8161\clvertalb\cellx8365\clvertalc\cellx9010\c
lvertalb\cellx9214\clvertalc\cellx9900\clvertalb\cellx10104\clvertalc\cellx10790\tr
rh-66\trrh0
rh-66\trrh0\row}}}
9900\clvertalb\cellx10104\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10790\trrh859
Offices and
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Shopping
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Hotel
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Credit
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Financial
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc and
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Total\cell{
9900\clvertalb\cellx10104\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10790\trrh859\row}}}
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in thousands Ps.)\cell{
pat12\cellx10104\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10790\trrh206
margin(b)\cell\pard\plain\intbl\cf1\f51\fs13\ql
pat12\cellx10104\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10790\trrh206\row}}}
ellx9214\clvertalb\cellx9900\clvertalb\cellx10104\clvertalb\cellx10790\trrh206
margin(c)\cell\pard\plain\intbl\cf1\f51\fs13\ql
ellx9214\clvertalb\cellx9900\clvertalb\cellx10104\clvertalb\cellx10790\trrh206\row}
}}
margin(d)\cell\pard\plain\intbl\cf1\f51\fs13\ql
(0.17\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell\pard\plain\intbl\cf1\f51\fs13\ql
amortization(e)\cell\pard\plain\intbl\cf1\f51\fs13\ql
}}
}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Non operating
}}
}}
\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pa
rd\plain\f0\fs4\par
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (a)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Includes offices, commercial and residential premises.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (b)\cell\pard\plain\intbl\cf1\f51\fs16\ql Gross
profit divided by revenues.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (c)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Operating income divided by revenues.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (d)\cell\pard\plain\intbl\cf1\f51\fs16\ql Net
income divided by revenues.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (e)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Included in operating income.\cell{
\
\par\pard\plain
Offices and
Shopping
Hotel
Credit
Financial
x10798\trrh172
x10798\trrh172\row}}}
at net realizable\plain\intbl\cf1\f51\fs16\ql
value\cell\pard\plain\intbl\cf1\f51\fs13\ql
real estate assets,\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other expenses,
margin(2)\cell\pard\plain\intbl\cf1\f51\fs13\ql
amortization(5)\cell\pard\plain\intbl\cf1\f51\fs13\ql
b\clshdng100\clcfpat12\clcbpat12\cellx10791\trrh206\row}}}\pard\plain\f0\fs4\par\pa
rd\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (2)\cell\pard\plain\intbl\cf1\f51\fs16\ql Gross
\par\pard\plain
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (4)\cell\pard\plain\intbl\cf1\f51\fs16\ql Net
\par\pard\plain
\
\par\pard\plain
Offices
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc and\~non-
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc shopping
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc center
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc rental
Shopping
Hotel
Credit
Financial
x10798\trrh172
x10798\trrh172\row}}}
real estate assets,\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Operating income
(loss)\cell\pard\plain\intbl\cf1\f51\fs13\ql
l \~\cell\pard\plain\intbl\cf1\f51\fs16\qr 96\cell\pard\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other (expenses) income,
\~\cell{
\~\cell{
amortization(5)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Non-operating
b\clshdng100\clcfpat12\clcbpat12\cellx10791\trrh206\row}}}\pard\plain\f0\fs4\par\pa
rd\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (2)\cell\pard\plain\intbl\cf1\f51\fs16\ql Gross
\par\pard\plain
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (4)\cell\pard\plain\intbl\cf1\f51\fs16\ql Net
\par\pard\plain
\
Results of Operations for the Fiscal Years ended June\~30, 2006 and
2007.\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql
Revenues\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues increased 27.9% from
Ps.577.7 million in fiscal year 2006 to Ps.738.8 million in fiscal year 2007,
primarily due to increases in the\plain\cf1\f51\fs16\ql revenues of each of our
credit card operations, shopping centers, offices and other non-shopping center
rental properties and hotel operations segments,\plain\cf1\f51\fs16\ql partially
offset by a decrease in the revenues of our development and sale of properties
segment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Shopping
Centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from our shopping
centers segment increased 25.7% from Ps.215.0 million in fiscal year 2006 to
Ps.270.3 million in fiscal year 2007.\plain\cf1\f51\fs16\ql This increase was
principally due to a Ps.55.3 million increase in revenues from rentals and
admission rights as a consequence of: (i)\~an 18.0% increase
in\plain\cf1\f51\fs16\ql the average rental price per square meter and (ii)\~a
24.3% increase in the total sales of our lessees, from Ps.2,273.3 million during
fiscal year 2006 to\plain\cf1\f51\fs16\ql Ps.2,825.8 million during fiscal year
2007, resulting in a Ps.552.5 million increase in revenues from variable rental
payments. The average occupancy rate\plain\cf1\f51\fs16\ql of our shopping centers
decreased from 99.1% in fiscal year 2006 to 97.0%in fiscal year
2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Credit Card
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from our Credit Card
segment increased 73.2% from Ps.123.0 million during fiscal year 2006 to Ps.213.0
million during fiscal year 2007.\plain\cf1\f51\fs16\ql This increase resulted
from:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql favorable macroeconomic conditions
in fiscal year 2007, which showed a general increase in
consumption;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql an increase of 201,114 in the
number of newly issued credit cards;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql the
opening of four new branches;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql a 90.5%
increase in sales made with our shopping card and a 49% increase in the number of
stores accepting our card; and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql an increase
of income from financial operations and
others.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Revenues from our Financial
Operations and Others segment remained stable with respect to fiscal year 2006.
Revenues included in this segment\plain\cf1\f51\fs16\ql represents fees for
services unrelated to our Others
segments.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Development and Sale of
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from our development
and sale of properties segment decreased 27.1% from Ps.104.0 million in fiscal year
2006 to Ps.75.8 million in\plain\cf1\f51\fs16\ql fiscal year 2007. This business
segment generally does not show consistently recurring revenues due to the nature
of our business. As a result,\plain\cf1\f51\fs16\ql period-on-period comparisons
may vary significantly depending on the projects that we are developing and their
degree of completion. The decrease of\plain\cf1\f51\fs16\ql the revenues of this
segment in fiscal year 2006 was principally due to the absence in fiscal year 2007
of Ps.104.0 million of revenues which were\plain\cf1\f51\fs16\ql recognized during
fiscal year 2006 principally arising from the following
operations:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql Ps.41.8 million from the sale
of parcel Y, Dock III;\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\ql Ps.23.0 million from the sale by our
subsidiary Alto Palermo of a parcel of land near its Paseo Alcorta shopping
center;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql Ps.22.8 million from the sale of
block 36 of the parcel called \u8220?Terrenos de Caballito;\u8221?
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql Ps.10.0 million from the sale of
Edificios Cruceros units.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The absence in
fiscal year 2007 of the Ps.104.0 million of revenues mentioned above was partially
offset by the following revenues recognized\plain\cf1\f51\fs16\ql during fiscal
year 2007:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql Ps.31.0 million from the sale
to third parties of 10% of our Santa Mar\u237?a del Plata land
reserve;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql Ps.26.2 million from the sale of
plot \u8220?Z,\u8221? Dock III;\par\pard\plain\li88\sb88\cf1\f51\fs16\ql Ps.8.6
million from the sale of units in San Mart\u237?n de Tours
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql Ps.8.4 million from the sale of
Edificios Cruceros units.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Offices and
Other Non-Shopping Center Rental
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from our Offices and
Other Non-Shopping Center Rental Properties increased 82.2% from Ps.30.6 million in
fiscal year 2006 to Ps.55.7\plain\cf1\f51\fs16\ql million in fiscal year 2007.
This increase was primarily due to a Ps.25.5 million increase in the revenues from
office rentals, from Ps.27.4 million in fiscal\plain\cf1\f51\fs16\ql year 2006 to
Ps.52.9 million in fiscal year 2007. This increase in revenues from office rentals
was due to:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql an increase, from 94.0% in
fiscal year 2006 to 99.1% in fiscal year 2007, in our average occupancy rates in
offices for lease due to our inclusion in\plain\cf1\f51\fs16\ql fiscal year 2007
of Dock del Plata and Bouchard 551 and Reconquista 823 (which were 100.0%
occupied);\par\pard\plain\li88\sb88\cf1\f51\fs16\ql a 93.3% increase in annual
rentals from offices for lease arising principally from (i)\~price increases in the
following buildings which increased our\plain\cf1\f51\fs16\ql total leasable area
of Class\~A buildings by 53% from 78.115 to 119.360 square meters: Intercontinental
Plaza resulting in higher rents of Ps.5.5\plain\cf1\f51\fs16\ql million, Bouchard
710 resulting in higher rents of Ps.3.1 million, Maip\u250? 1300 resulting in
higher rents of Ps.2.5 million and Libertador 498\plain\cf1\f51\fs16\ql resulting
in higher rents of Ps.2.4 million (ii)\~the acquisition of two new premium
buildings: Bouchard 551 (acquired in March 2007) which\plain\cf1\f51\fs16\ql
generated rental revenues in fiscal year 2007 of Ps.3.9 million and Dock del Plata
(acquired in November 2006) which generated rental revenues
in\plain\cf1\f51\fs16\ql fiscal year 2007of Ps.3.1 million;
and\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 114
\
Contents}}\par\pard\plain\li88\cf1\f51\fs16\ql The occupancy rate of the offices
and other non-shopping center rental properties segment increased from 96.9% in
fiscal year 2006 to 97.4%\plain\cf1\f51\fs16\ql during fiscal year
2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Hotel
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from our hotel
operations increased 18.2% from Ps.103.8 million in fiscal year 2006 to Ps.122.7
million in fiscal year 2007, principally\plain\cf1\f51\fs16\ql due a 23.7%
increase in the average price per room in our hotels, from Ps.379.0 in fiscal year
2006 to Ps.469.0 in fiscal year 2007. In fiscal year 2007,\plain\cf1\f51\fs16\ql
revenues from the Hotel Llao Llao increased Ps.8.9 million, revenues from the Hotel
Intercontinental increased Ps.6.0 million and revenues from the
Hotel\plain\cf1\f51\fs16\ql Sheraton Libertador increased Ps.4.0 million, in each
case compared to fiscal year 2006. These improvements in fiscal year 2007 were
partially offset by a\plain\cf1\f51\fs16\ql decrease in average occupancy rates
from 78.7% in fiscal year 2006 to 74.0% during fiscal year
2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql
Costs\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our costs increased 27.8% from
Ps.243.8 million in fiscal year 2006 to Ps.311.6 million in fiscal year 2007 as a
result of an increase in costs of\plain\cf1\f51\fs16\ql each of our business
segments during fiscal year 2007 other than Financial Operations and Others. Our
total costs as a percentage of our revenues\plain\cf1\f51\fs16\ql remained flat at
42.2% for each of fiscal year 2006 and
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Cost of the Credit card
operations segment increased 73.6%, from Ps.43.9 million during fiscal year ended
June\~30, 2006 to Ps.76.3 million during\plain\cf1\f51\fs16\ql fiscal year ended
June\~30, 2007. This increase, which reflected the expansion of our credit card
operations in fiscal year 2007, was primarily due to:\par\pard\plain\cf1\f51\fs9\ql
\~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.11.0 million increase in the cost of
salaries and social security charges;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.9.8 million increase in expenses for
interest and commissions;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.5.7 million increase in charges for
taxes, rates, contributions and services; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.2.8 million increase in fees and
services payable to third parties.\cell{
b198\fi462\cf1\f51\fs16\ql The cost of Credit card operations as percentage of
revenues from such segment remained flat at 35.8% in each of fiscal years 2006 and
2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Financial Operations and
Others\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The cost of the Financial
Operations and Others segment decreased Ps.0.6 million, from Ps.1.4 million in
fiscal year 2006 to Ps.0.8 million in fiscal\plain\cf1\f51\fs16\ql year 2007.
Costs included in this line represent expenses unrelated to our other
segments.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Shopping
Centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Costs of the Shopping Centers
segment increased 17.7%, from Ps.77.4 million in fiscal year 2006 to Ps.91.1
million in fiscal year 2007. This\plain\cf1\f51\fs16\ql increase was primarily due
to:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.6.6 million increase in costs related
to renovation of shopping centers\u8217? common areas;\cell{
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.4.7 million increase in depreciation
and amortization charges due to the depreciation of fixed assets; and\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.2.3 million increase in costs for
unrecovered expenses.\cell{
b198\fi462\cf1\f51\fs16\ql The cost of the Shopping Centers segment as percentage
of the revenues from such segment decreased from 36.0% in fiscal year 2006 to
33.7%\plain\cf1\f51\fs16\ql during fiscal year
2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Development and Sale of
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Costs related to Development
and Sale of Properties increased 6.7%, from Ps.54.2 million in fiscal year 2006 to
Ps.57.8 million in fiscal year 2007.\plain\cf1\f51\fs16\ql This business segment
generally does not show consistently recurring costs due to the nature of our
business. As a result, period-on-period comparisons\plain\cf1\f51\fs16\ql may vary
significantly depending on the projects that we are developing and their degree of
completion. The increase in costs of this segment was\plain\cf1\f51\fs16\ql
principally due to the following costs incurred in fiscal year
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.26.2 million related to the sale of
plot \u8220?Z\u8221? of Dock III;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.12.9 million related to the sale of 10%
of the Santa Mar\u237?a del Plata land reserve;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.8.2 million related to the sale of San
Mart\u237?n de Tours units; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.3.2 million related to the sale of
Edificio Cruceros units.\cell{
b198\fi462\cf1\f51\fs16\ql The foregoing cost increases in fiscal year 2007 were
partially offset by the non-recurrence in fiscal year 2007 of the following costs
which were\plain\cf1\f51\fs16\ql incurred in fiscal year
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.18.4 million in costs related to the
sale of Alcorta Plaza (through Alto Palermo);\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.11.3 million of costs related to the
sale of block 36 of the plot called \u8220?Terrenos de Caballito\u8221?;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
sale of plot \u8220?Y,\u8221? Dock III; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
sale of Edificios Cruceros units.\cell{
b198\fi462\cf1\f51\fs16\ql Costs included in this segment as percentage of revenues
from such segment increased from 52.1% in fiscal year 2006 to 76.3% in fiscal year
2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Offices and Other Non-Shopping
Center Rental Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Costs of the
Offices and Other Non-Shopping Center Rental Properties segment increased 85.5%,
from Ps.9.0 million in fiscal year 2006 to Ps.16.7\plain\cf1\f51\fs16\ql million
in fiscal year 2007. The principal cost component in this office segment is the
depreciation of buildings rented, and the increase in fiscal
year\plain\cf1\f51\fs16\ql 2007 was principally due to (i)\~Ps.3.1 million higher
depreciation in fiscal year 2007 as a result of the addition of two new rental
properties, Dock del\plain\cf1\f51\fs16\ql Plata and Bouchard 551 and (ii)\~Ps.5.9
million higher depreciation as a result of a change in the determination of
remaining useful life of our rental\plain\cf1\f51\fs16\ql buildings, which
decreased from an average of 496 months in fiscal year 2006 to an average of 253
months in fiscal year 2007.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Hotel
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Costs of Hotel Operations
increased 19.0%, from Ps.58.0 million in fiscal year 2006 to Ps.69.0 million in
fiscal year 2007 principally due to\plain\cf1\f51\fs16\ql increases in
depreciation of assets, fees for commissions and services, food and beverages and
salaries and social security charges in each case related to\plain\cf1\f51\fs16\ql
increasing revenues from such segment. Costs of Hotel Llao Llao increased Ps.6.0
million, those of Hotel Intercontinental increased Ps.2.6 million
and\plain\cf1\f51\fs16\ql those of Hotel Sheraton Libertador increased Ps.2.4
million. Costs of hotel operations as percentage of revenues of such segment
increased from 55.9% in\plain\cf1\f51\fs16\ql fiscal year 2006 to 56.2% in fiscal
year 2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Gross
profit\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As a result of the above, gross
profit increased 27.9% from Ps.333.8 million in fiscal year 2006 to Ps.427.1
million in fiscal year 2007. Our gross\plain\cf1\f51\fs16\ql margin, calculated as
our gross profit divided by our revenues, remained at 57.8% in fiscal years 2006
and 2007 primarily as a result of improvements in\plain\cf1\f51\fs16\ql the gross
margin of our Shopping Centers and Financial Operations and Others segments,
partially offset by a decrease in the gross margin of our\plain\cf1\f51\fs16\ql
Development and Sale of Properties, Offices and Other Non-Shopping Center Rental
Properties, Hotel Operations and Credit card operations
segments.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Gain from recognition of
inventories at net realizable value\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This
line reflects the valuation at net realization value of inventories in respect of
which we received prepayments of rentals pursuant to
contractual\plain\cf1\f51\fs16\ql terms which establish the consummation of the
sales and the resulting profits. This business segment generally does not show
consistently recurring gains,\plain\cf1\f51\fs16\ql and as a result, period-on-
period comparisons may vary significantly depending on the projects that we are
developing and their degree of completion.\plain\cf1\f51\fs16\ql During fiscal
year 2007, we recognized Ps.20.7 million gain which was principally applied to the
following developments:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql \u8220?Dock III - Plot X\u8221? in an
amount equal to Ps.18.4 million; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql \u8220?San Mart\u237?n de Tours\u8221? in
an amount equal to Ps.1.5 million.\cell{
b198\fi462\cf1\f51\fs16\ql During fiscal year 2006, we recognized a gain of Ps.9.1
million primarily in respect of: \u8220?Edificios Cruceros\u8221? in an amount
equal to\plain\cf1\f51\fs16\ql Ps.4.6 million, \u8220?Torres Rosario\u8221? in an
amount equal to Ps.3.5 million, \u8220?Dock III \u8211? Plot Z\u8221? in an amount
equal to Ps.1.6\plain\cf1\f51\fs16\ql million and \u8220?San Mart\u237?n de
Tours\u8221? in an amount equal to Ps.(0.6)
million.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Selling
expenses\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses increased 89.2%
from Ps.60.1 million in fiscal year 2006 to Ps.113.7 million in fiscal year 2007
principally due to an increase in\plain\cf1\f51\fs16\ql the selling expenses of
the Credit card operations and Shopping Centers segments of Ps.31.1 million and
Ps.6.6 million, respectively. Selling expenses as a\plain\cf1\f51\fs16\ql
percentage of revenues increased from 10.4% in fiscal year 2006 to 15.4% in fiscal
year 2007.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 117
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Shopping
Centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses for the Shopping
Centers segment increased 42.3%, from Ps.15.7 million in fiscal year 2006 to
Ps.22.3 million in fiscal year 2007\plain\cf1\f51\fs16\ql due to: (i)\~a Ps.2.0
million increase in the costs of salaries and social security charges; (ii)\~a
Ps.1.4 million increase in the charge for turnover tax; and\plain\cf1\f51\fs16\ql
(iii)\~a Ps.1.2 million increase in the charge for bad debts. Selling expenses
related to Shopping Centers as a percentage of revenues from such
segment\plain\cf1\f51\fs16\ql increased from 7.3% in fiscal year 2006 to 8.3% in
fiscal year 2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Credit Card
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses for the
Credit Card Operations segment increased 100.5%, from Ps.30.9 million in the fiscal
year ended June\~30, 2006 to Ps.62.0\plain\cf1\f51\fs16\ql million in the fiscal
year ended June\~30, 2007 principally due to:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.11.7 million increase in advertising
expenses;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.11.8 million increase in the charge
for bad debts; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.5.8 million increase in the charge
for turnover tax.\cell{
b198\fi462\cf1\f51\fs16\ql Selling expenses of Credit Card Operations as a
percentage of the revenues from such segment increased from 25.1% in the fiscal
year 2006 to\plain\cf1\f51\fs16\ql 29.1% in fiscal year
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses for this
segment consist of commissions and expenses derived from sales, stamp tax and on
gross sales (gross revenues). Selling\plain\cf1\f51\fs16\ql expenses for
Development and Sale of Properties increased Ps.11.0 million in fiscal year 2007
principally due to a higher turnover tax charge during such\plain\cf1\f51\fs16\ql
fiscal year as a result of our sale of Solares de Santa Mar\u237?
a.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Offices and Other Non-Shopping
Center Rental Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses
for the Offices and Other Non-Shopping Center Rental Properties segment increased
Ps.3.4 million, from Ps.1.0 million in fiscal\plain\cf1\f51\fs16\ql year 2006 to
Ps.4.4 million in fiscal year 2007 due to a Ps.1.9 million higher charge for bad
debtors by our subsidiary Inversora Bol\u237?var, and higher\plain\cf1\f51\fs16\ql
charges for turnover tax and real estate
commissions.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Hotel
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses for the Hotel
segment increased 13.9% from Ps.10.7 million in fiscal year 2006 to Ps.12.2 million
in fiscal year 2007 principally\plain\cf1\f51\fs16\ql due to increases in turnover
tax, salaries and social security charges and commissions for tourism agencies, in
each case reflecting an increase in the\plain\cf1\f51\fs16\ql revenues of the
segment in line with higher
activity.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Administrative
expenses\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Administrative expenses
increased 46.0% from Ps.96.9 million in fiscal year 2006 to Ps.141.4 million in
fiscal year 2007 primarily due to an\plain\cf1\f51\fs16\ql increase in
administrative expenses in the Credit card operations segment and, to a lesser
extent, increases in each of the remaining segments.
Principal\plain\cf1\f51\fs16\ql components of administrative expenses are salaries
and social security\par\pard\plain\cf1\f51\fs13\ql
\
charges, directors\u8217? fees, fees and remunerations for services and
depreciation of fixed assets. Administrative expenses as a percentage of
revenues\plain\cf1\f51\fs16\ql increased from 16.8% in fiscal year 2006 to 19.1%
in fiscal year 2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Shopping
Centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Administrative expenses of the
Shopping Centers segment increased 26.6%, from Ps.25.8 million in fiscal year 2006
to Ps.32.7 million in fiscal year\plain\cf1\f51\fs16\ql 2007 principally due to
(i)\~a Ps.3.7 million increase in expenses for fees and third parties\u8217?
services; (ii)\~a Ps.2.0 million increase in the charge for\plain\cf1\f51\fs16\ql
directors\u8217? fees and (iii)\~a Ps.1.3 million increase in expenses for taxes,
rates and contributions mostly due to the tax on bank debits and
credits.\plain\cf1\f51\fs16\ql Administrative expenses of the Shopping Centers
segment as a percentage of the revenues from such segment remained essentially
flat, increasing from\plain\cf1\f51\fs16\ql 12.0% in fiscal year 2006 to 12.1% in
fiscal year 2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Credit Card
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Administrative expenses of the
Credit card operations segment increased 75.0%, from Ps.25.9 million in fiscal year
2006 to Ps.45.4 million in fiscal\plain\cf1\f51\fs16\ql year 2007. This increase
was primarily due to:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
salaries, compensation, social security charges and personnel;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
rentals, taxes, rates and contributions; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
fees and third parties services.\cell{
b198\fi462\cf1\f51\fs16\ql Administrative expenses of Credit card operations as a
percentage of revenues from such segment increased from 21.1% in fiscal year ended
2006\plain\cf1\f51\fs16\ql to 21.3% during fiscal year 2007 as a result of a
higher proportional average of these expenses in respect of the revenues increase
of this segment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Development and Sale
of Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Administrative expenses of
the Development and Sale of Properties segment increased 53.2%, from Ps.12.8
million in fiscal year 2006 to Ps.19.6\plain\cf1\f51\fs16\ql million in fiscal
year 2007 due to: (i)\~a Ps.4.5 million increase for salaries, bonds and social
security charges and directors\u8217? fees and (ii)\~a Ps.2.1\plain\cf1\f51\fs16\ql
million increase in bank expenses. Administrative expenses of Development and Sale
of Properties as a percentage of revenues from this segment\plain\cf1\f51\fs16\ql
increased from 12.3% in fiscal year 2006 to 25.9% in fiscal year
Center Rental Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Administrative
expenses of the Offices and Other Non-Shopping Center Rental Properties segment
increased 48.7% from Ps.11.3 million in fiscal\plain\cf1\f51\fs16\ql year 2006 to
Ps.16.8 million in fiscal year 2007. The increase is principally due to an increase
of Ps.4.0 million in salaries, bonds and social security\plain\cf1\f51\fs16\ql
charges and fees to directors and to a Ps.1.8 million increase in bank expenses.
Administrative expenses of Offices and Other Non-Shopping
Center\plain\cf1\f51\fs16\ql Rental Properties as a percentage of revenues from
such segment decreased from 37.0% in fiscal year 2006 to 30.2% in fiscal year
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Hotel
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Administrative expenses of the
Hotel segment increased 28.1% from Ps.21.0 million in fiscal year 2006 to Ps.26.9
million in fiscal year 2007,\plain\cf1\f51\fs16\ql principally due to: (i)\~a
Ps.1.7 million increase in administrative expenses of Hotel Intercontinental mostly
due to an increase in salaries and social security\plain\cf1\f51\fs16\ql charges,
commissions and depreciation of fixed assets, (ii)\~a Ps.1.4 million increase in
administrative expenses of Hotel Sheraton Libertador principally
due\plain\cf1\f51\fs16\ql to an increase in fees for services and in salaries and
social security charges and (iii)\~a Ps.2.8 million increase in administrative
expenses of Hotel Llao\plain\cf1\f51\fs16\ql Llao principally due to increases in
salaries and social security charges, fees for services due to higher sales and
taxes, rates and contributions.\plain\cf1\f51\fs16\ql Administrative expenses of
Hotel Operations as a percentage of revenues from such segment increased from 20.2%
in fiscal year 2006 to 21.9% in fiscal\plain\cf1\f51\fs16\ql year
2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Net income from retained
interest in securitized receivables (Tarjeta
Shopping)\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This gain reflects the result
generated by Alto Palermo\u8217?s participation in the Tarjeta Shopping credit card
trusts. This gain increased 24.0% ,\plain\cf1\f51\fs16\ql from Ps.2.6 million in
fiscal year 2006 to Ps.3.3 million in fiscal year 2007, primarily due to the
creation in fiscal year 2007 of new credit card trusts in\plain\cf1\f51\fs16\ql
connection with new securitizations in such
year.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Results from the operations and
holdings of real estate assets, net\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This
line reflects the impairment losses and gains associated with the reversal of
previously recognized impairment charges. Results from the\plain\cf1\f51\fs16\ql
operation and holding of real estate assets decreased 79.6%, from a gain of Ps.12.6
million in fiscal year 2006 to a gain of Ps.2.6 million in fiscal
year\plain\cf1\f51\fs16\ql 2007, principally recorded in Neuqu\u233?n Project for
Ps.2.2. million, Suipacha 652 for Ps.0.9 million, Avenida de Mayo 589 for Ps.0.7
million and\plain\cf1\f51\fs16\ql Torres de Abasto for Ps.0.1 million, partially
offset by a loss of Ps.1.5 million corresponding to Torres Rosario. During fiscal
year 2006 the gain of\plain\cf1\f51\fs16\ql Ps.12.6 million had been attributable
to Caballito for Ps.6.5 million, Alto Rosario for Ps.3.5 million, Espacio Aereo
Coto for Ps.1.4 million, Torre\plain\cf1\f51\fs16\ql Constituci\u243?n for Ps.0.7
million and Reconquista 823 for Ps.0.6
million.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Operating
income\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income decreased
1.3%\~million from Ps.201.2 million in fiscal year 2006 to Ps.198.5 million in
fiscal year 2007 mainly due to a decrease\plain\cf1\f51\fs16\ql in the operating
income of the Development and Sale of Properties segment that was partially offset
by increases in operating income of each of our other\plain\cf1\f51\fs16\ql
segments. Our operating margin, calculated as our operating income divided by our
revenues, decreased from 34.8% for fiscal year 2006 to 26.9%
for\plain\cf1\f51\fs16\ql fiscal year 2007 primarily as a result of decreases in
the operating margins of our Development and Sale of Properties, Offices and other
non-Shopping\plain\cf1\f51\fs16\ql Center Rental Properties, Shopping Centers, and
Credit Card segments, partially offset by an increase in the operating margin of
our Financial Operations\plain\cf1\f51\fs16\ql and Others
segment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Shopping
Centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income of Shopping
Centers increased 18.2%, from Ps.105.6 million in fiscal year 2006 to Ps.124.8
million in fiscal year 2007 mostly\plain\cf1\f51\fs16\ql due to a 25.7% increase
in the revenues from this segment that was partially offset by increases of 17.7%
in costs, 42.3% in selling expenses and 26.6%\plain\cf1\f51\fs16\ql in
administrative expenses. The operating income of this segment as a percentage of
revenues from such segment decreased from 49.1% during fiscal
year\plain\cf1\f51\fs16\ql 2006 to\par\pard\plain\cf1\f51\fs13\ql
\
46.2% during fiscal year 2007 primarily as a result of a decrease during fiscal
year 2007 in the gain generated by the reversal of previously
recognized\plain\cf1\f51\fs16\ql impairment charges which was only Ps.0.7 million
in fiscal year 2007 compared to Ps.9.5 million in fiscal year
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income of the Credit
Card segment increased 31.4%, from Ps.24.8 million in fiscal year 2006 to Ps.32.6
million in fiscal year 2007\plain\cf1\f51\fs16\ql primarily due to a 73.2%
increase in revenues from this segment that were partially offset by increases of
73.6% in costs, 100.5% in selling expenses and\plain\cf1\f51\fs16\ql 75.0% in
administrative expenses. The operating income of this segment as a percentage of
the revenues from such segment decreased from 20.2% during\plain\cf1\f51\fs16\ql
fiscal year 2006 to 15.3% during fiscal year 2007 primarily as a result of the
increase in selling expenses of almost 101% while the revenues from
this\plain\cf1\f51\fs16\ql segment increased 73.2%. Our selling expenses in this
segment increased at a greater rate than our revenues from this segment as a result
of a Ps.11.9\plain\cf1\f51\fs16\ql million increase in the charge for bad
debts.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Development and Sale of
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income from the
Development and Sale of Properties segment decreased 86.0% from Ps.44.3 million in
fiscal year 2006 to Ps.6.2 million\plain\cf1\f51\fs16\ql in fiscal year 2007
primarily due to a decrease in the revenues from this segment and increases in
selling and administrative expenses, partially offset by\plain\cf1\f51\fs16\ql
higher gain from recognition of inventories at their net realizable value during
fiscal year 2007. The operating income of this segment as a percentage
of\plain\cf1\f51\fs16\ql the revenues from such segment decreased from 42.6%
during fiscal year 2006 to 8.2% during fiscal year
Center Rental Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income
from the Offices and Other Non-Shopping Center Rental Properties segment increased
65.5%, from Ps.11.9 million in fiscal year\plain\cf1\f51\fs16\ql 2006 to Ps.19.6
million in fiscal year 2007 primarily due to an 82.2% increase in the revenues from
this segment. The operating income of this segment\plain\cf1\f51\fs16\ql as a
percentage of the revenues from such segment decreased from 38.8% during fiscal
year 2006 to 35.2% during the fiscal year 2007 primarily as a\plain\cf1\f51\fs16\ql
result of the effect during fiscal year 2007 of the adjustment in the remaining
useful life of our rental buildings which generated a loss of Ps.5.9
million\plain\cf1\f51\fs16\ql reflected in the cost of this segment. Without
considering this effect our operating income as a percentage of our revenues would
have been 45.8% instead\plain\cf1\f51\fs16\ql of
35.2%.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Hotel
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income of Hotel
Operations increased from Ps.14.6 million in fiscal year 2006 to Ps.14.7 million in
fiscal year 2007 mostly due to an\plain\cf1\f51\fs16\ql increase in revenues from
this segment that was partially offset by increases in costs and expenses. The
operating income of this segment as a percentage\plain\cf1\f51\fs16\ql of the
revenues from such segment decreased from 14.0% during fiscal year 2006 to 11.9%
during fiscal year 2007, primarily as a Ps.2.4 million
increase\plain\cf1\f51\fs16\ql in depreciation due to a change in the
determination of the remaining useful life of our three hotels, which decreased
from an average of 408 months in\plain\cf1\f51\fs16\ql fiscal year 2006 to an
average of 207 months in fiscal year 2007.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Financial Operations and
Others\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income of the Financial
Operations and other operations segment increased Ps.0.5 million from Ps.0.1
million in fiscal year 2006 to\plain\cf1\f51\fs16\ql Ps.0.6 million in fiscal year
2007. Operating revenues of this segment as a percentage of the revenues from such
segment increased from 4.0% in fiscal\plain\cf1\f51\fs16\ql year 2006 to 43.1% in
fiscal year 2007 primarily as a result of a 40.9% decrease in the costs of this
segment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Amortization of
goodwill\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The amortization of the goodwill
includes: (i)\~amortization of the goodwill of the following subsidiaries of Alto
Palermo: Shopping Alto Palermo\plain\cf1\f51\fs16\ql S.A., FIBESA, Tarshop, ERSA
and Empalme and (ii)\~of our own negative goodwill generated by our purchase of
Alto Palermo and Palermo Invest S.A.\plain\cf1\f51\fs16\ql shares. Amortization of
goodwill increased (Ps.0.4 million), from a charge of Ps.1.1 million in fiscal year
2006 to a charge of Ps.1.5 million in fiscal year\plain\cf1\f51\fs16\ql
2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Financial results,
net\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Financial results, net increased
Ps.45.0 million, from a net loss of Ps.40.9 million in fiscal year 2006 to a net
gain of Ps.4.1 million in fiscal year\plain\cf1\f51\fs16\ql 2007. The principal
causes for this variation were:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the increase of Ps.40.4 million in results
of financial operations mainly due to an increase of Ps.46.9 million in the fair
market value of\plain\intbl\cf1\f51\fs16\ql our investment in the mutual
investment fund, Dolphin Fund Plc.;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.12.1 million positive exchange
difference compared to fiscal year 2006 due to a lower depreciation during fiscal
year 2007 of the\plain\intbl\cf1\f51\fs16\ql Peso versus the US dollar; and\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.9.9 million due to higher interest
income in fiscal year 2007 of which Ps.7.6 million resulted from financial
investments.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql These improvements were partially offset
by a Ps.16.5 million increase in financial expenses in fiscal year 2007,
principally due to higher\plain\intbl\cf1\f51\fs16\ql interest expense resulting
from the issuance of bonds by us and Alto Palermo during fiscal year 2007.\cell{
sb286\fi462\cf1\f51\fs16\b\i\ql Gain on equity
investees\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Gain from related companies
decreased 3.9% from a gain of Ps.41.7 million in fiscal year 2006 to a gain of
Ps.40.0 million in fiscal year 2007.\plain\cf1\f51\fs16\ql This decrease
principally resulted from a Ps.5.7 million decrease in the gain of Banco
Hipotecario, from Ps.47.0 million in fiscal year 2006 to
Ps.41.4\plain\cf1\f51\fs16\ql million in fiscal year 2007. This decrease was
partially offset by the absence in fiscal year 2007 of the Ps.4.0 million loss
incurred in fiscal year 2006\plain\cf1\f51\fs16\ql from our investment in Abril
S.A.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Other income and expenses,
net\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Other income and expenses, net,
decreased 22.8%, from a net expense of Ps.18.3 million in fiscal year 2006 to a net
expense of Ps.14.1 million in\plain\cf1\f51\fs16\ql fiscal year 2007 principally
due to: (i)\~a Ps.7.5 million decrease in the allowance for uncollectible loans and
(ii)\~a Ps.3.1 million increase for the recovery\plain\cf1\f51\fs16\ql of
allowances, which were partially offset in fiscal year 2007 by: (i)\~a Ps.4.5
million increase in charges for donations and (ii)\~a Ps.2.7 million increase
in\plain\cf1\f51\fs16\ql contingencies for
lawsuits.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 122
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Income before taxes and
minority interest\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As a result of the
above mentioned issue, income before taxes and minority interest increased 24.4%
passing for an income of Ps.182.6 million in\plain\cf1\f51\fs16\ql fiscal year
2006 to an income of Ps.227.1 million in fiscal year
2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Income tax and minimum
presumed income tax\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Income tax and
minimum presumed income tax increased 48.9%, from Ps.58.8 million in fiscal year
2006 to Ps.87.5 million in fiscal year 2007. We\plain\cf1\f51\fs16\ql applied the
deferred tax method to calculate our income tax for the two fiscal years,
recognizing the temporary differences in the accounting and in
tax\plain\cf1\f51\fs16\ql assets and liabilities. Our effective tax rate in the
fiscal year 2007 was 38.5% compared to 32.2% in fiscal year
2006.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Ps.28.7 million variation was
principally caused by the net impact of:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.23.6 million increase in the expense
for income tax for our company, from Ps.4.0 million during fiscal year 2006 to
Ps.27.6 million\plain\intbl\cf1\f51\fs16\ql during fiscal year 2007 due to the
charge during fiscal year 2007 for Ps.11.6 million of deferred tax mostly caused by
the sale of Santa\plain\intbl\cf1\f51\fs16\ql Mar\u237?a del Plata;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.12.9 million allowance for income tax
in fiscal year 2007 mostly caused by the sale of shares in Banco Hipotecario and
ownership\plain\intbl\cf1\f51\fs16\ql units in Dolphin Fund Plc.;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a of Ps.7.8 million increase in the
expense for income tax of Alto Palermo, from Ps.48.5 million in fiscal year 2006 to
Ps.56.3 million in\plain\intbl\cf1\f51\fs16\ql fiscal year 2007; and\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.0.5 million increase in the expense
for income tax of Nuevas Fronteras S.A.\cell{
b286\fi462\cf1\f51\fs16\b\i\ql Minority
interest\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The negative result caused by
third parties\u8217? participation in subsidiaries increased 19.3% from a charge of
Ps.27.2 million in fiscal year 2006\plain\cf1\f51\fs16\ql to a charge of Ps.32.4
million in fiscal year 2007 as a consequence of an increase in the income accounts
of related companies in which we have a\plain\cf1\f51\fs16\ql minority interest
(principally in the Shopping Centers and Credit card operations
segments).\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Net
income\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Due to the above-mentioned issues,
net income increased 10.9% from Ps.96.6 million in fiscal year 2006 to Ps.107.1
million in fiscal year 2007.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Results of
Operations for the Fiscal Years ended June\~30, 2006 and
2005.\par\pard\plain\li44\sb88\cf1\f51\fs16\b\i\ql
Revenues\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our revenues increased 56.2%
from Ps.369.9 million for our 2005 fiscal year to Ps.577.7 million for our 2006
fiscal year, primarily as a result of\plain\cf1\f51\fs16\ql increases in revenues
in our Shopping Center and Development and Sale of Properties
segments.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 123
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Credit Card
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from credit card
operations increased 90.5% from Ps.64.6 million in fiscal year 2005 to Ps.123.0
million in fiscal year 2006, reflecting\plain\cf1\f51\fs16\ql improved
macroeconomic conditions and a related increase in the level of private consumption
which enabled us to open new branches, increase the\plain\cf1\f51\fs16\ql number
of credit cards issued and expand the number of shops that accept our credit
cards.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Shopping
Centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from our Shopping Center
segment increased 29.9% from Ps.165.5 million for our 2005 fiscal year to Ps.215.0
million for our 2006 fiscal\plain\cf1\f51\fs16\ql year. The increase is attributed
principally to an increase of Ps.48.1 million in revenues from leases and admission
rights of our Shopping Centers, as a\plain\cf1\f51\fs16\ql consequence of the
33.9% increase in sales by our tenants from Ps.1,698.1 million for our 2005 fiscal
year to Ps.2,273.3 million for our 2006 fiscal year.\plain\cf1\f51\fs16\ql The
average occupancy rate in our shopping centers was 99.1% for our 2006 fiscal year
similar to 99% in our 2005 fiscal
year.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Development and Sale of
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from our Development
and Sale of Properties segment increased 221.8% from Ps.32.3 million for our 2005
fiscal year to Ps.104.0 million\plain\cf1\f51\fs16\ql for our 2006 fiscal year.
The increase in revenues from this segment was attributable principally to:
(i)\~Ps.23.0 million of revenues from Alto\plain\cf1\f51\fs16\ql Palermo\u8217?s
sale of Alcorta Plaza, a plot of land by Paseo Alcorta shopping center;
(ii)\~Ps.22.7 million of revenues from the sale of block 36 of
the\plain\cf1\f51\fs16\ql plot named \u8220?Terrenos de Caballito\u8221? in our
2006 fiscal year; (iii)\~Ps.41.8 million of revenues from the sale of plot Y of
Dock III during our\plain\cf1\f51\fs16\ql 2006 fiscal year; and (iv)\~Ps.10.0
million of revenues from our sale of units of Edificios Cruceros in our 2006 fiscal
year, partially offset by the absence\plain\cf1\f51\fs16\ql in our 2006 fiscal
year of Ps.23.6 million of revenues from the sale of a plot of Dock III and Ps.3.5
million of revenues from the sale of Madero 1020,\plain\cf1\f51\fs16\ql both of
which we sold during our 2005 fiscal
year.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Offices and Other Non-Shopping
Center Rental Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from
our Offices and Other Non-Shopping Center Rental Properties segment increased
57.3%, from Ps.19.4 million for our 2005 fiscal\plain\cf1\f51\fs16\ql year to
Ps.30.6 million for our 2006 fiscal year. This increase was mainly due to: (i)\~a
52.1% increase in revenues from office rents, from Ps.18.0
million\plain\cf1\f51\fs16\ql in our 2005 fiscal year, to Ps.27.4 million for our
2006 fiscal year. This increase in revenues is attributed to a 3.0% increase in
average occupancy rates\plain\cf1\f51\fs16\ql in our 2006 fiscal year and a 41.5%
increase in average monthly rates of the majority of the buildings, principally due
to the increase in accumulated\plain\cf1\f51\fs16\ql annual rents in Bouchard 710
for Ps.5.4 million, Libertador 498 for 0.8\~million, Maip\u250? 1300 for Ps.0.7
million, Laminar Plaza for Ps.0.7 million,\plain\cf1\f51\fs16\ql Suipacha 652 for
Ps.0.4 million and Edificios Costeros Dock IV for Ps.0.5 million; and (ii)\~a
135.8% increase in revenues of other properties from Ps.0.9\plain\cf1\f51\fs16\ql
million in our 2005 fiscal year to Ps 2.1\~million for our 2006 fiscal year, mainly
due to Santa Mar\u237?a del Plata for an amount of Ps.1.2 million.
The\plain\cf1\f51\fs16\ql rate of occupancy in this segment increased 3.2% from
94.0% in June 2005 to 97.0% in June
2006.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Hotel
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from our hotel
operations increased 19.1% from Ps.87.1 million for our 2005 fiscal year to
Ps.103.8 million for our 2006 fiscal year,\plain\cf1\f51\fs16\ql mainly due to an
18.2% increase in average price per room of our hotels from Ps.320 in 2005 to
Ps.379.0 in 2006. On the other hand, our\par\pard\plain\cf1\f51\fs13\ql
\
average occupancy rates remained stable at 78.7% during our fiscal year 2006
compared to 75.4% in our 2005 fiscal year. Revenues from
Hotel\plain\cf1\f51\fs16\ql Intercontinental increased by Ps.6.1 million, revenues
from the Hotel Llao Llao increased by Ps.5.8 million and revenues from Hotel
Sheraton Libertador\plain\cf1\f51\fs16\ql increased by Ps.4.7
million.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Financial Operations and
Others\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from our Financial
Operations and Others segment increased 50.4% from Ps.0.9 million for our 2005
fiscal year, to Ps.1.4 million for our\plain\cf1\f51\fs16\ql 2006 fiscal year.
Revenues included in this segment represent fees for services with no specific
allocation to any of the previous
segments.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql
Costs\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our costs increased 45.1% from
Ps.168.1 million for our 2005 fiscal year to Ps.243.8 million for our 2006 fiscal
year, reflecting an increase in costs\plain\cf1\f51\fs16\ql in each of our
business segments during our 2006 fiscal year. Total costs as a percentage of
revenues decreased from 45.4% for our 2005 fiscal year to\plain\cf1\f51\fs16\ql
42.2% for our 2006 fiscal year.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Credit
Card Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The cost of sales
relating to Credit Card operations rose 90.2% from Ps.23.1 million for our 2005
fiscal year to Ps.43.9 million for our 2006 fiscal\plain\cf1\f51\fs16\ql year,
mainly due to (i)\~a cost increase of Ps.6.2 million in salaries and social
security charges, Ps.3.0 million in taxes, dues and contributions and
Ps.1.3\plain\cf1\f51\fs16\ql million of electricity and telephone expenses mainly
as a result of the expansion of our operations, (ii)\~a higher charge in
commissions and interest by a\plain\cf1\f51\fs16\ql margin of Ps.5.6 million and
(iii)\~an increase in fees and services of Ps.2.3 million mainly due to the new
issues under the securitization
program.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Shopping
Centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Costs related to Shopping Centers
increased 10.9% from Ps.69.8 million for our 2005 fiscal year to Ps.77.4 million
for our 2006 fiscal year. This\plain\cf1\f51\fs16\ql increase was primarily due to
an increase in depreciation and amortization expenses of Ps.4.5 million and an
increase in the charges of unrecoverable\plain\cf1\f51\fs16\ql expenses of Ps.2.6
million.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Development and Sale of
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Costs related to Development
and Sale of Properties increased 209.0%, from Ps.17.5 million for our 2005 fiscal
year to Ps.54.2 million for our 2006\plain\cf1\f51\fs16\ql fiscal year. The
increase in costs from this segment is mainly due to the following occurring:
(i)\~Ps.18.4 million in costs related to the sale of Alcorta\plain\cf1\f51\fs16\ql
Plaza (through Alto Palermo); (ii)\~Ps.11.3 million in costs related to the sale of
block 36 of the plot named \u8220?Terrenos de
Caballito\u8221?;\plain\cf1\f51\fs16\ql (iii)\~Ps.9.7 million in costs related to
the sale of plot Y of Dock III; (iv)\~of Ps.8.8 million in costs related to the
sale of units of Edificios Cruceros, (v)\~a\plain\cf1\f51\fs16\ql decrease due to
the sale of a plot of Dock III during our 2005 fiscal year for Ps.23.6 million and
(vi)\~a decrease of Ps.3.5 million in connection with the\plain\cf1\f51\fs16\ql
sale of Madero 1020 during the previous fiscal year. Costs relating to Development
and Sale of Properties as a percentage of revenues from this
segment\plain\cf1\f51\fs16\ql decreased from 54.3% for our 2005 fiscal year to
52.1% for our 2006 fiscal year.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Offices and Other Non-Shopping
Center Rental Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Costs of Offices
and Other Non-Shopping Center Rental Properties increased by 16.0% from Ps.7.7
million for our 2005 fiscal year to Ps.9.0\plain\cf1\f51\fs16\ql million for our
2006 fiscal year, mainly due to the amortization in our 2006 fiscal year of
Bouchard 710 which we acquired in June 2005. The main\plain\cf1\f51\fs16\ql
component of cost for offices is the depreciation of leased
properties.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Hotel
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Costs from hotel operations
increased 18.5% from Ps.48.9 million for our 2005 fiscal year to Ps.58.0 million
for our 2006 fiscal year, primarily due\plain\cf1\f51\fs16\ql to revenue
increases. Higher costs for Hotel Operations are primarily due to an increase in
the depreciation of the assets, salaries and social security\plain\cf1\f51\fs16\ql
contributions. Costs from Llao Llao Hotel increased Ps.5.3 million, costs from
Hotel Intercontinental increased Ps.2.3 million and costs from
Hotel\plain\cf1\f51\fs16\ql Sheraton Libertador increased Ps.1.8 million. Costs
from hotel operations as a percentage of revenues from this segment decreased from
56.2% in our\plain\cf1\f51\fs16\ql 2005 fiscal year to 55.9% in our 2006 fiscal
year.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Financial Operations and
Others\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Costs from the Financial
Operations and Others segment increased by Ps.0.4 million from Ps.1.0 million for
our\u8217?s 2005 fiscal year to Ps.1.4\plain\cf1\f51\fs16\ql million for our 2006
fiscal year. Costs included in this line represent expenses incurred for the
rendering of services that generate
revenues.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Gross
profit\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As a result of the foregoing, the
gross profit increased by 65.4%, from Ps.201.8 million during the fiscal year ended
June\~30, 2005 to Ps.333.8\plain\cf1\f51\fs16\ql million during the fiscal year
ended June\~30, 2006.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Gain from
recognition of inventories at net realizable
value\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This line is generated as a result
of valuing at the net realizable value those inventories for which we have received
purchase price or lease\plain\cf1\f51\fs16\ql advances that fix prices, and the
contract terms and conditions of the transactions that we signed state the
consummation of the sale and the gain. Ps.9.1\plain\cf1\f51\fs16\ql million were
valued according to this criteria, which was principally applied to the following
developments: \u8220?Cruceros\u8221? for Ps.4.6 million,\plain\cf1\f51\fs16\ql
\u8220?Torres Rosario,\u8221? for Ps.3.5 million, and \u8220?Dock III \u8211? Plot
Z,\u8221? for Ps.1.6 million and \u8220?San Mart\u237?n de\plain\cf1\f51\fs16\ql
Tours\u8221? for Ps.0.6 million in
losses.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Selling
expenses\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses increased 63.2%
from Ps.36.8 million for our 2005 fiscal year to Ps.60.1 million for our 2006
fiscal year primarily due to an\plain\cf1\f51\fs16\ql increase in selling expenses
in our Credit Card, Shopping Center and Hotel segments. Selling expenses as a
percentage of revenues increased from 10.0%\plain\cf1\f51\fs16\ql for our 2005
fiscal year to 10.4% for our 2006 fiscal
year.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Credit Card
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses of the Credit
Card segment increased 129.0%, from Ps.13.5 million for our 2005 fiscal year to
Ps.30.9 million for our 2006 fiscal\plain\cf1\f51\fs16\ql year, mainly due to an
increase of Ps.6.7 million in advertising expenses, a higher charge of Ps.3.8
million in gross sales taxes as a result of our higher\plain\cf1\f51\fs16\ql
revenues, and an increase in the charge for bad debts of Ps.6.2 million in line
with the growth of our credit portfolio.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Shopping
Centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses relating to
Shopping Centers increased 47.3% from Ps.10.7 million for our 2005 fiscal year to
Ps.15.7 million for our 2006 fiscal\plain\cf1\f51\fs16\ql year. The increase was
mainly due to an increase of Ps.2.0 million in the charge for gross sales taxes in
line with our higher revenues, an increase of\plain\cf1\f51\fs16\ql Ps.1.1 million
in the charge for provision of bad debts and an increase of Ps.0.5 million in the
charge of advertising.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Development and
Sale of Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses from
Development and Sale of Properties decreased 8.4% from Ps.2.0 million for our 2005
fiscal year to Ps.1.8 million for our\plain\cf1\f51\fs16\ql 2006 fiscal year.
Selling expenses for Development and Sale of Properties are mainly commissions and
expenses from sales, sealing and gross sales
tax.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Offices and Other Non-Shopping
Center Rental Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses
relating to Offices and Other Non-Shopping Center Rental Properties increased 10.6%
from Ps.0.9 million for our 2005 fiscal year\plain\cf1\f51\fs16\ql 2005 to Ps.1.0
million for our 2006 fiscal year.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql
Hotel Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Selling expenses
relating to our Hotel Operations increased 9.2% from Ps.9.8 million for our 2005
fiscal year to Ps.10.7 million for our 2006 fiscal\plain\cf1\f51\fs16\ql year,
mainly due to an increase in the gross sales tax, salaries and social security
charges and the tourism agencies commissions due to an increase
in\plain\cf1\f51\fs16\ql revenues in the segment in line with higher levels of
activity.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Administrative
expenses\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Administrative expenses
increased 37.1%, from Ps.70.7 million for our 2005 fiscal year to Ps.96.9 million
for our 2006 fiscal year, due to an\plain\cf1\f51\fs16\ql increase in
administrative expenses for our Shopping Center segment and, to a lesser extent,
each of our other business segments. The main components\plain\cf1\f51\fs16\ql of
administrative expenses are salaries and social security charges, Directors\u8217?
fees, fees and compensation for services, and depreciation
and\plain\cf1\f51\fs16\ql
amortization.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Credit Card
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Administrative expenses from
the Credit Card segment increased 74.7%, from Ps.14.8 million in our 2005 fiscal
year to Ps.25.9 million in our 2006\plain\cf1\f51\fs16\ql fiscal year, basically
due to a Ps.5.9 million increase in salaries, bonuses and social security charges,
Ps.2.4 million increase in fees and compensations for\plain\cf1\f51\fs16\ql
services, Ps.1.3 million increase in taxes and rent, and of Ps.1.6 million in
insurance, amortization and others due to an expansion and increase of
our\plain\cf1\f51\fs16\ql operations.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql
Shopping Centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Administrative expenses
of our Shopping Centers increased 56.1%, from Ps.16.5 million for our 2005 fiscal
year to Ps.25.8 million for our 2006\plain\cf1\f51\fs16\ql fiscal year primarily
as a result of an\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc
127
\
increase in directors\u8217? fees of Ps.3.4 million, an increase in the fees and
services of third parties of Ps.3.2 million, an increase in salaries,
bonuses\plain\cf1\f51\fs16\ql and social security charges of Ps.1.9 million, and
an increase in taxes, rates and assessments of Ps.0.6 million, mainly due to the
financial transactions tax.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql
Development and Sale of Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Administrative expenses of Development and Sale of Properties increased 27.1%, from
Ps.10.1 million for our 2005 fiscal year to Ps.12.8 million\plain\cf1\f51\fs16\ql
for our 2006 fiscal year, primarily due to (i)\~increases in expenses related to
the design and implementation of our new system; (ii)\~an increase of
Ps.0.8\plain\cf1\f51\fs16\ql million in salaries and social security charges, and
(iii)\~an increase in directors\u8217? fees of Ps.0.3 million. Administrative
expenses for Development\plain\cf1\f51\fs16\ql and Sale of Properties as a
percentage of revenues from this segment decreased from 31.2% for our 2005 fiscal
year to 12.3% for our 2006 fiscal
year.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Offices and Other Non-Shopping
Center Rental Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Administrative
expenses of Offices and Other increased 15.8%, from Ps.9.8 million for our 2005
fiscal year to Ps.11.3 million for our 2006 fiscal\plain\cf1\f51\fs16\ql year. The
increase is mainly due to an increase of Ps.0.7 million in salaries and social
security charges and a Ps.0.3 million increase in
directors\u8217?\plain\cf1\f51\fs16\ql
fees.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Hotel
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Administrative expenses of our
Hotel Operations increased 8.0%, from Ps.19.4 million for our 2005 fiscal year to
Ps.21.0 million for our 2006 fiscal\plain\cf1\f51\fs16\ql year, primarily due to
(i)\~a Ps.1.0 million increase from Hotel Intercontinental mainly due to an
increase of Ps.0.7 million of fees and services to third\plain\cf1\f51\fs16\ql
parties, of Ps.0.1 million of salaries and social security charges and Ps.0.1
million of depreciations; (ii)\~an increase of Ps.1.0 million in Hotel
Sheraton\plain\cf1\f51\fs16\ql Libertador mainly due to an increase of Ps.0.5
million in fees and compensation for services and of Ps.0.4 million in salaries and
social security charges;\plain\cf1\f51\fs16\ql and due to (iii)\~a decrease of
Ps.0.4 million in Hotel Llao Llao mainly due to a decrease of Ps.1.5 million
related to lawsuits and to an increase of Ps.0.4\plain\cf1\f51\fs16\ql million in
salaries and social security charges, an increase of Ps.0.3 million in taxes,
duties and contributions, an increase of Ps.0.2 million in fees
and\plain\cf1\f51\fs16\ql compensation for services and an increase of Ps.0.1
million in depreciation and amortization. Administrative expenses of Hotel
Operations as a percentage\plain\cf1\f51\fs16\ql of revenues from hotel operations
decreased from 22.3% for our 2005 fiscal year to 20.2% for our 2006 fiscal
year.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Net income from retained
interest in securitized receivables\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This
gain results from the interest held by Alto Palermo in the Tarjeta Shopping Credit
Card Trusts. The results of these credit card trusts
increased\plain\cf1\f51\fs16\ql 520.6% from Ps.0.4 million for our 2005 fiscal
year to Ps.2.6 million for our 2006 fiscal year as a result of the expansion of our
credit card business\plain\cf1\f51\fs16\ql segment through Tarshop, Alto
Palermo\u8217?s subsidiary.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Gain
from operations and holdings of real estate assets,
net\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The results from operations and
holdings of real estate assets, net, decreased 54.8%, from a gain of Ps.27.9
million for our 2005 fiscal year to a\plain\cf1\f51\fs16\ql gain of Ps.12.6
million for our 2006 fiscal year. The decrease in income from the previous year is
due to a lower amount of recovery on the allowance\plain\cf1\f51\fs16\ql for
impairment of long lived assets.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Operating
income\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our operating income increased
43.7% from Ps.140.0 million for our 2005 fiscal year to Ps.201.2 million for our
2006 fiscal year primarily as a\plain\cf1\f51\fs16\ql result of increases in our
Shopping centers, Developments and sale of properties, Credit card operations and
Hotel Operations segments, partially offset by\plain\cf1\f51\fs16\ql a small
decrease in our Offices and Other Non-Shopping Center Rental Properties segment.
Operating income as a percentage of revenues increased from\plain\cf1\f51\fs16\ql
37.8% from our 2005 fiscal year to 34.8% for our 2006 fiscal
year.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Shopping
Centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income from Shopping
Centers increased 29.3% from Ps.81.6 million for our 2005 fiscal year to Ps.105.6
million for our 2006 fiscal year\plain\cf1\f51\fs16\ql primarily due to a 29.9%
increase in revenues, accompanied by an increase of 10.9% in costs and an increase
of 56.1% and 47.3% in selling and\plain\cf1\f51\fs16\ql administrative expenses
for this segment, respectively.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Credit
Cards Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income from
the Credit Card segment increased 83.3%, from Ps.13.5 million in fiscal year 2005
to Ps.24.8 million in fiscal year 2006.\plain\cf1\f51\fs16\ql Operating income
from the Credit Card segment as a percentage of revenue from this segment decreased
from 21.0% from fiscal year 2005 to 20.2% in\plain\cf1\f51\fs16\ql fiscal year
Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income from
Development and Sales of properties increased 115.3%, from Ps.20.6 million for our
2005 fiscal year to Ps.44.3 million for\plain\cf1\f51\fs16\ql our 2006 fiscal
year. Operating income from the Development and Sale of Properties segment as a
percentage of revenues from this segment decreased\plain\cf1\f51\fs16\ql from
63.7% for our 2005 fiscal year to 42.6% for our 2006 fiscal year primarily as a
result of an increase of 209.0% in costs which was accompanied
by\plain\cf1\f51\fs16\ql an increase of 221.8% in revenues for this
segment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Offices and Other Non-
Shopping Center Rental Properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Operating income from Offices and Other Non-Shopping Center Rental Properties
decreased 10.3% from Ps.13.2 million for our 2005 fiscal year
to\plain\cf1\f51\fs16\ql Ps.11.9 million for our 2006 fiscal year. Operating
income from Offices and Other Non-Shopping Center Rental Properties as a percentage
of revenues\plain\cf1\f51\fs16\ql from this segment decreased from 68.0% for our
2005 fiscal year to 38.8% in our 2006 fiscal year primarily as a result of an
increase of 57.3% in\plain\cf1\f51\fs16\ql revenues accompanied with an increase
of 16.0% in costs from this segment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql
Hotel Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income from
Hotel Operations increased 31.5% from Ps.11.1 million for our 2005 fiscal year to
Ps.14.6 million for our 2006 fiscal year.\plain\cf1\f51\fs16\ql Operating income
from Hotel Operations as a percentage of revenues from this segment increased from
12.7% for fiscal year 2005 to 14.0% in fiscal year\plain\cf1\f51\fs16\ql 2006
primarily as a result of a 18.5% increase in costs compared to a 19.1% increase in
revenues.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 129
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Financial Operations and
Others\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Operating income from Financial
Operations and Others segment increased 243.6% from a loss of Ps.0.04 million for
our 2005 fiscal year to a gain\plain\cf1\f51\fs16\ql of Ps.0.1 million for our
2006 fiscal year. Operating income from Financial Operations and Other as a
percentage of revenues from this segment increased\plain\cf1\f51\fs16\ql from a
loss of 4.1% for our 2005 fiscal year to a gain of 4.0% for our 2006 fiscal year.
This is mainly attributable to an increase of 50.4% in
revenues\plain\cf1\f51\fs16\ql accompanied with an increase of 38.7% in costs from
this segment.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Amortization of
goodwill\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Amortization of goodwill mainly
includes: (i)\~the amortization of goodwill during this fiscal year, for the
goodwill from the following subsidiaries\plain\cf1\f51\fs16\ql of Alto Palermo:
Shopping Alto Palermo S.A., Fibesa S.A., Tarshop S.A. and Emprendimiento Recoleta
S.A., with no significant variation and (ii)\~the\plain\cf1\f51\fs16\ql
depreciation, during this year, of our own negative goodwill due to the purchase of
Alto Palermo stock. Amortization of goodwill decreased 35.1% from
a\plain\cf1\f51\fs16\ql loss of Ps.1.7 million for fiscal year 2005 to a loss of
Ps.1.1 million for fiscal year 2006, as a result of the incorporation of new
negative goodwill as\plain\cf1\f51\fs16\ql described in point
(ii)\~above.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Financial results,
net\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Financial results, net showed a
variation of 245.4%, from a loss of Ps.11.8 million for our 2005 fiscal year to a
loss of Ps.40.9 million for our 2006\plain\cf1\f51\fs16\ql fiscal year. The main
reasons for this variation were: (i)\~a Ps.21.7 million increase in our loss
attributable to variation in exchange rates, owing to the\plain\cf1\f51\fs16\ql
depreciation of the Peso to the U.S. dollar from Ps.2.887 in our 2005 fiscal year
to Ps.3.086 in our 2006 fiscal year; (ii)\~the non-recurrence of
Ps.2.2\plain\cf1\f51\fs16\ql million of discounts obtained in 2006 due to the
cancellation with discount of financial loans owed by Mendoza Plaza Shopping S.A.;
(iii)\~a loss with\plain\cf1\f51\fs16\ql respect to the previous fiscal year of
Ps.2.6 million of financial results mainly due to interest and other expenses in
connection with the loan of Hoteles\plain\cf1\f51\fs16\ql Argentinos S.A. and
financial expenses from Alto Palermo, and (iv)\~the decrease of Ps.10.6 million in
income from financial operations, due to Dolphin\plain\cf1\f51\fs16\ql Fund PLC
decrease in profits by Ps.16.3 million and NCH Development Partner Fund increase in
profits by Ps.4.6 million and the gains from the interest\plain\cf1\f51\fs16\ql
rate swap agreement entered into with Deutsche Bank AG for Ps.1.2 million, and
(v)\~the increase of Ps.7.4 million on interest gain as a result of
the\plain\cf1\f51\fs16\ql refinancing of the Hoteles Argentinos
loan.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Gain on equity
investees\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our gain on equity investments
decreased 38.0% from a gain of Ps.67.2 million for our 2005 fiscal year to a gain
of Ps.41.7 million for our 2006\plain\cf1\f51\fs16\ql fiscal year. This lower gain
is mainly due to: (i)\~a lower gain by Banco Hipotecario of Ps.8.2 million from
Ps.55.2 million to Ps.47.0 million as a result of\plain\cf1\f51\fs16\ql a lower
gain from Banco Hipotecario\u8217?s investment in Sovereign Bonds (BODEN), (ii)\~a
gain of Ps.12.2 million corresponding to the Hotel segment,\plain\cf1\f51\fs16\ql
and (iii)\~the negative impact of the dilution of our interest in Alto Palermo
amounting to Ps.0.9 million.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Other
expenses, net\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Other expenses, net
increased 29.6% from net expenses of Ps.14.1 million for our 2005 fiscal year to
net expenses of Ps.18.3 million for our 2006\plain\cf1\f51\fs16\ql fiscal year,
primarily due to the effect of (i)\~an increase of Ps.7.5 million in the allowance
for doubtful accounts; (ii)\~an increase of Ps.1.9 million
from\plain\cf1\f51\fs16\ql non recoverable value added tax, (iii)\~a gain of
Ps.2.4 million due to the accelerated accrual of unrealized revenues, (iv)\~a
decrease of Ps.1.3 million in\plain\cf1\f51\fs16\ql donation charges and (v)\~a
lower charge of Ps.1.1 million for minimum presumed income
tax.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 130
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Income before taxes and
minority interest\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As a result of the
foregoing, income before taxes and minority interest increased 1.6%, from a gain of
Ps.179.6 million for our 2005 fiscal year, to\plain\cf1\f51\fs16\ql a gain of
Ps.182.6 million for our 2006 fiscal
year.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Minority
interest\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Minority interest increased
17.4% from a loss of Ps.23.2 million for our 2005 fiscal year to a loss of Ps.27.2
million for our 2006 fiscal year,\plain\cf1\f51\fs16\ql mainly as a result of an
increase in net income from the Shopping Centers segment that generated an increase
in the results of minority interest.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql
Income tax and minimum presumed income
tax\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Income tax and minimum presumed
income tax expense increased 10.5%, from Ps.53.2 million for our 2005 fiscal year,
to Ps.58.8 million for our\plain\cf1\f51\fs16\ql 2006 fiscal year. The deferred
tax allocation method was used to calculate the income tax corresponding to the two
fiscal years, thus recognizing the\plain\cf1\f51\fs16\ql temporary differences in
the accounting and tax assets and liabilities. The variation of Ps.5.6 million was
mainly due to the net impact of:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.14.8 million increase in Alto
Palermo\u8217?s income tax expense, from Ps.33.6 million for our 2005 fiscal year
to Ps.48.5 million\plain\intbl\cf1\f51\fs16\ql for our 2006 fiscal year, due to an
increase in taxable income resulting from our 57.0% increase in revenues during
fiscal year 2006;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql increased income tax expense of Nuevas
Fronteras S.A., Baldovinos S.A., Inversora Bol\u237?var S.A. and Llao Llao Resorts
S.A. which\plain\intbl\cf1\f51\fs16\ql during our 2006 fiscal year were Ps.1.9
million, Ps.1.0 million, Ps.2.7 million and Ps.0.5 million higher, respectively,
than during our 2005\plain\intbl\cf1\f51\fs16\ql fiscal year;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a Ps.1.1 million decrease in our income
tax expense, and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the variation in income tax expense for
Buenos Aires Trade\~& Finance Center S.A. which changed from a Ps.12.6 million
expense for our\plain\intbl\cf1\f51\fs16\ql 2005 fiscal year to a Ps.0.2 million
expense for our 2006 fiscal year, as a result of the swap agreement entered into in
connection with\plain\intbl\cf1\f51\fs16\ql plot 1.c) of Dock III and the purchase
agreement entered into in connection with plot 1.d) of Dock III.\cell{
sb198\fi462\cf1\f51\fs16\ql Our effective tax rate increased to 32.2% in fiscal
year 2006 from 29.6% in fiscal year 2005.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Net
income\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As a result of the foregoing, net
income decreased 6.5% from a gain of Ps.103.2 million for our 2005 fiscal year to a
gain of Ps.96.6 million for\plain\cf1\f51\fs16\ql our 2006 fiscal
year.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Banco Hipotecario SA \u8216?s Results
of Operations\par\pard\plain\sb88\cf1\f51\fs16\b\ql
Overview\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We do not consolidate the
consolidated financial statements of our investee Banco Hipotecario. However,
according to Rule 3-09 of Regulation\plain\cf1\f51\fs16\ql S-X, we are required to
file separate financial statements of significant investees. This Management\u8217?
s Discussion and Analysis of Financial\plain\cf1\f51\fs16\ql Condition and Results
of Operations should be read together with Banco Hipotecario\u8217?s consolidated
financial statements contained elsewhere in this\plain\cf1\f51\fs16\ql annual
report. This discussion contains forward-looking statements that involve risks,
uncertainties and assumptions. These forward-looking
statements\plain\cf1\f51\fs16\ql include, among others, those statements including
the words \u8220?expects,\u8221? \u8220?anticipates,\u8221? \u8220?
intends,\u8221?\plain\cf1\f51\fs16\ql \u8220?believes\u8221? and similar language.
The actual results may differ materially and adversely from those anticipated in
these forward-looking\plain\cf1\f51\fs16\ql statements as a result of many
factors, including those set forth elsewhere in this annual
report.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Banco Hipotecario maintains its
financial books and records in Pesos and prepares its financial statements in
conformity with the polices of the\plain\cf1\f51\fs16\ql Argentine Central Bank
which prescribes the reporting and disclosure requirements for banks and financial
institutions in Argentina (\u8220?Central Bank\plain\cf1\f51\fs16\ql accounting
rules\u8221?). These rules differ in certain respects from generally accepted
accounting principles in Argentina (\u8220?Argentine\plain\cf1\f51\fs16\ql
GAAP\u8221?). A description of significant differences between Central Bank
accounting rules and Argentine GAAP are set forth in Note 6 to
Banco\plain\cf1\f51\fs16\ql Hipotecario\u8217?s consolidated financial statements.
Central Bank accounting rules and Argentine GAAP also differ in certain significant
respects from\plain\cf1\f51\fs16\ql U.S. GAAP. Such differences involve methods of
measuring the amounts shown in the consolidated financial statements, as well as
additional disclosures\plain\cf1\f51\fs16\ql required by U.S. GAAP and regulations
of the SEC. See Note 37 to the consolidated financial statements of Banco
Hipotecario included elsewhere in this\plain\cf1\f51\fs16\ql annual report for a
description of the principal differences between Central Bank accounting rules and
U.S. GAAP, as they relate to Banco Hipotecario,\plain\cf1\f51\fs16\ql and a
reconciliation to U.S. GAAP of Banco Hipotecario\u8217?s net income (loss) and
shareholder\u8217?s equity.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Events in
Argentina and Their Adverse Impact on Banco
Hipotecario\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipotecario\u8217?s
business and results of operations are dependent on, and significantly impacted by,
the macroeconomic situation\plain\cf1\f51\fs16\ql prevailing in Argentina. As
such, its business and results of operations were materially and adversely
affected. Argentine economic crisis began in 2001\plain\cf1\f51\fs16\ql and
prevailed throughout most of 2002. Since 2003, the Argentine economy has shown
signs of recovery compared to 2001 and 2002 and GDP has grown\plain\cf1\f51\fs16\ql
in each of 2003, 2004, 2005 and 2006. In addition, interest rates have fallen and
the foreign exchange market has stabilized. The financial system
has\plain\cf1\f51\fs16\ql gradually recovered its liquidity levels, recording a
significant increase in deposits and the level of loan originations began to grow,
especially in 2005 and\plain\cf1\f51\fs16\ql 2006. Based on current data, the
Argentine economy during 2004, 2005 and 2006, GDP increased by 9.0%, 9.0% and 8.5%
according to INDEC\plain\cf1\f51\fs16\ql estimates. Based on INDEC estimates, in
US dollar terms GDP increased from US$69.8 billion in 2002 to US$208.1 billion
estimated in 2006, and\plain\cf1\f51\fs16\ql unemployment decreased to 8.7% as of
the fourth quarter of 2006. As of December\~31, 2006, approximately 30% of the
population was below the poverty\plain\cf1\f51\fs16\ql line according to INDEC.
In\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 132
\
2004, 2005, and 2006 Argentina posted a fiscal surplus of approximately Ps.11,657.8
million and 19,661.0\~million, and Ps.23,158.0 million
respectively.\plain\cf1\f51\fs16\ql After the settlement of its exchange offer,
Argentina\u8217?s sovereign debt outstanding amounted to US$126,466.0 million,
representing approximately\plain\cf1\f51\fs16\ql 60% of the GDP estimated for the
year ending December\~31, 2006.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql During
2005 and 2006 inflation increased by 10.7 and 7.1 as measured by the WPI, and
12.3%, and 9.8% as measured by the CPI. The preceding\plain\cf1\f51\fs16\ql
information is based on data published by the Ministry of Economy and the Central
Bank.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Banco Hipotecario\u8217?s Response to
the Crisis\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The economic crisis of 2001
and 2002 had devastating effects on the Argentine financial system and particularly
on its mortgage business as the\plain\cf1\f51\fs16\ql pesification of its assets
without the corresponding reduction in the portfolio of its foreign-currency
denominated liabilities resulted in a severe mismatch\plain\cf1\f51\fs16\ql of its
asset and liability positions. In response to the crisis, Banco Hipotecario
undertook various measures designed to shore up its business.
These\plain\cf1\f51\fs16\ql included the following key
initiatives:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
(i)\cell\pard\plain\intbl\cf1\f51\fs16\ql Recovering financial stability and
strengthening liquidity,\cell{
{\trowd\clvertalc\cellx432\cellx864\cellx7563\trrh206\row}}}\pard\plain\cf1\f51\fs9
\ql \~
\par\pard\plain
(ii)\cell\pard\plain\intbl\cf1\f51\fs16\ql Maximizing the present value of the loan
assets in its loan portfolio,\cell{
\ql \~
\par\pard\plain
(iii)\cell\pard\plain\intbl\cf1\f51\fs16\ql Improving operating efficiency,\cell{
\ql \~
\par\pard\plain
(iv)\cell\pard\plain\intbl\cf1\f51\fs16\ql Reconstituting financial brokerage and
service businesses,\cell{
\ql \~
\par\pard\plain
(v)\cell\pard\plain\intbl\cf1\f51\fs16\ql Strengthening financial position
and\cell{
\ql \~
\par\pard\plain
(vi)\cell\pard\plain\intbl\cf1\f51\fs16\ql Minimizing interest rate, maturity and
currency mismatch risks.\cell{
{\trowd\clvertalc\cellx432\cellx864\cellx7763\trrh206\row}}}\pard\plain\sb198\fi462
\cf1\f51\fs16\ql The success Banco Hipotecario achieved in implementing its plan
has allowed it to:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Restructure all its financial liabilities,
amounting to approximately US$1,208.4 million, thus aligning principal and interest
payments with\plain\intbl\cf1\f51\fs16\ql its cash flow, thus becoming the first
financial institution in Argentina to achieve this objective.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Reduce its debt by US$361.0 million,
extending the average life of its outstanding debt, and reducing average interest
rates, thus matching\plain\intbl\cf1\f51\fs16\ql the term of lending and borrowing
transactions, achieving proper financial intermediation margins and full hedging of
foreign\plain\intbl\cf1\f51\fs16\ql currency-denominated liabilities.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Improve its liquidity levels.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Position itself as one of the leading
private banks in terms of equity in Argentina, with full provisioning of non-
performing loans.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Reduce its exposure to the public sector
risk.\cell{
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Improve profitability by controlling
operating expenses and generating stable operating results.\cell{
b286\cf1\f51\fs16\b\ql Factors Affecting Comparability of Financial
Data\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipotecario\u8217?s
consolidated results of operations for the twelve month periods ended June\~30,
2007, 2006 and 2005 and its financial\plain\cf1\f51\fs16\ql condition at those
dates reflect significant ongoing changes in the nature of its business, the
composition of its loan and investment portfolios, changes in\plain\cf1\f51\fs16\ql
its sources of funding and in the regulatory environment. Subsequent to the
economic crisis in Argentina, Banco Hipotecario has complemented
its\plain\cf1\f51\fs16\ql traditional mortgage lending with other types of banking
services. As a result, its results of operations for the periods ended June\~30,
2007, 2006 and 2005\plain\cf1\f51\fs16\ql are not comparable in many important
respects to its results for preceding periods and are not necessarily indicative of
its future results.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Argentina
experienced a high rate of inflation in 2002. Therefore, on July\~17, 2002, through
Decree No.\~1269/02, the Argentine Government\plain\cf1\f51\fs16\ql reestablished
the practice of restating financial information to account for inflation for
periods beginning on or after January\~1, 2002. This was
regulated\plain\cf1\f51\fs16\ql by Communiqu\u233? \u8220?A\u8221? 3702 of the
Argentine Central Bank, Resolution No.\~415/02 of the\plain\cf1\f51\fs16\i\ql
Comisi\u243?n Nacional de Valores\plain\cf1\f51\fs16\ql .
Starting\plain\cf1\f51\fs16\ql on January\~1, 2002, Banco Hipotecario began to
adjust its financial statements for inflation based on changes in the wholesale
price index published by\plain\cf1\f51\fs16\ql the National Institute of
Statistics and Census, or \u8220?INDEC.\u8221? Through Decree No.\~664/03,
Argentine Central Bank\u8217?s Communiqu\u233?\plain\cf1\f51\fs16\ql \u8220?
A\u8221? 3921 and Resolution No.\~441/03 of the\plain\cf1\f51\fs16\i\ql
Comisi\u243?n Nacional de Valores\plain\cf1\f51\fs16\ql , dated April\~8, 2003,
the Government eliminated the\plain\cf1\f51\fs16\ql requirement that financial
statements be prepared in constant currency, effective for financial periods ending
on or after March\~1, 2003.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Critical
Accounting Policies\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipotecario
believes that the following are the critical accounting policies under Central Bank
accounting rules and U.S. GAAP, as they are\plain\cf1\f51\fs16\ql important to the
portrayal of its financial condition and results of operations and require its most
difficult, subjective and complex judgment and the need\plain\cf1\f51\fs16\ql to
make estimates about the effect of matters that are inherently
uncertain.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Reserve for Loan
Losses\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipotecario\u8217?s reserve
for loan losses are maintained in accordance with Central Bank accounting rules.
Under such regulations, a\plain\cf1\f51\fs16\ql minimum reserve for loan losses is
calculated primarily based upon the classification of Banco Hipotecario\u8217?s
commercial loan borrowers and the\plain\cf1\f51\fs16\ql past due status of Banco
Hipotecario\u8217?s individual loan borrowers. Although the Banco Hipotecario is
required to follow the methodology and\plain\cf1\f51\fs16\ql guidelines for
determining its reserve for loan loss as set forth by the Central Bank, is allowed
to provide additional allowances for loan loss
reserves.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Banco Hipotecario classifies
individual loans based upon their past due status, pursuant to the requirements of
the Central Bank. Minimum loss\plain\cf1\f51\fs16\ql percentages required by the
Central Bank are also applied to the totals in each loan classification. Balances
of loans and reserves are charged-off and\plain\cf1\f51\fs16\ql reflected on its
balance sheets three months from the date on which the loans were fully covered by
its loan loss reserves.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql For commercial
loans, Banco Hipotecario is required to classify all of its commercial loan
borrowers. In order to perform the classification, Banco\plain\cf1\f51\fs16\ql
Hipotecario must consider the\par\pard\plain\cf1\f51\fs13\ql
\
management and operating history of the borrower, the present and projected
financial situation of the borrower, the borrower\u8217?s payment
history\plain\cf1\f51\fs16\ql and ability to service the debt, the capability of
the borrower\u8217?s internal information and control systems and the risk in the
sector in which the\plain\cf1\f51\fs16\ql borrower operates. Banco Hipotecario
applies the minimum loss percentages required by the Central Bank to Banco
Hipotecario\u8217?s commercial loan\plain\cf1\f51\fs16\ql borrowers based on the
loan classification and the nature of the collateral, or guarantees, of the loan.
In addition, based on the overall risk of the\plain\cf1\f51\fs16\ql portfolio,
Banco Hipotecario considers whether or not additional loan loss reserves in excess
of the minimum required are warranted.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Under U.S. GAAP reserve for loan losses represents the estimate of probable losses
in the loan portfolio. Determining the reserve for loan
losses\plain\cf1\f51\fs16\ql requires significant management judgments and
estimates including, among others, identifying impaired loans, determining
customers\u8217? ability to pay\plain\cf1\f51\fs16\ql and estimating the fair
value of underlying collateral or the expected future cash flows to be received.
Actual events are likely to differ from the estimates\plain\cf1\f51\fs16\ql and
assumptions used in determining the allowance for loan losses. Additional
provisions for loan losses could be required in the
future.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Fair Value
Estimates\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipotecario prepares its
financial statements in accordance with the rules of the Central Bank related
thereto, which differ from U.S. GAAP\plain\cf1\f51\fs16\ql in valuing financial
instruments.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql U.S. GAAP requires
financial instruments to be valued at fair value. Banco Hipotecario estimated the
fair value as the amount at which a financial\plain\cf1\f51\fs16\ql instrument
could be exchanged in a current transaction between willing parties, other than in
a forced sale or liquidation, and such value was best\plain\cf1\f51\fs16\ql
evidenced by a quoted market price, if one existed. In cases where quoted market
prices were not available, fair value estimation was based on the
quoted\plain\cf1\f51\fs16\ql market price of a financial instrument with similar
characteristics, the present value of expected future cash flows, or other
valuation techniques, all of\plain\cf1\f51\fs16\ql which were significantly
affected by the assumptions used.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql For a
detailed description of the applicable accounting principles, please see Note 5 to
Banco Hipotecario\u8217?s consolidated financial statements\plain\cf1\f51\fs16\ql
included elsewhere in this annual
report.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Government Securities
\u8211? BODEN\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Central Bank accounting
rules regarding investments in government securities allow banks to classify their
portfolio of government securities into\plain\cf1\f51\fs16\ql two balance sheet
categories: trading and investing securities. Trading securities are marked to
market daily with the resulting gain or loss reflected in the\plain\cf1\f51\fs16\ql
statements of income. Investing securities are carried at cost plus accretion of
discount or amortization of premiums and accrued interest, as
applicable.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The compensatory and hedge
bonds Banco Hipotecario receives are classified as \u8220?Investing
securities\u8221? at par value based on Central\plain\cf1\f51\fs16\ql Bank
accounting rules, notwithstanding that the estimated market value of such bonds is
lower than such par value. As of June\~30, 2006 the BODEN
were\plain\cf1\f51\fs16\ql trading in the secondary market at a price of
approximately US$94.5 for every US$100 of nominal value. As market conditions
change, adjustments to the\plain\cf1\f51\fs16\ql estimated market value of the
BODEN are not reflected in its financial position. Future sales or settlements of
the BODEN will reflect the market\plain\cf1\f51\fs16\ql conditions at the time and
may result in a significant gain or loss that represents the difference between the
settlement amount and the then carrying\plain\cf1\f51\fs16\ql value. See note to
its audited financial statements.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Its right to receive BODEN that are
issued in hedge transactions is classified as \u8220?Other receivables from
financial transactions\u8221? and is\plain\cf1\f51\fs16\ql being recognized at par
value of the BODEN to be issued, notwithstanding that the estimated market value of
the BODEN linked to such right is\plain\cf1\f51\fs16\ql significantly below such
carrying value. As of June\~30, 2007, the BODEN were trading in the secondary
market at a price of approximately US$95.15 for\plain\cf1\f51\fs16\ql every US$100
of nominal value.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of the date of this
information Banco Hipotecario had subscribed additional BODEN due 2012 in principal
amount of US$403.7 million, for\plain\cf1\f51\fs16\ql cash in aggregate principal
amount of Ps.1,247.9 million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Under U.S.
GAAP compensatory and hedge bonds are valued at fair value. See \u8220?Fair Value
Estimates\u8221? above.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Other
Receivables from Financial Transactions and Miscellaneous
Receivables,\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipotecario carries
other receivables from financial transactions and miscellaneous receivables net of
allowances for uncollectible amounts. Its\plain\cf1\f51\fs16\ql judgment regarding
the ultimate collectibility is performed on an account-by-account basis and
considers its assessment of the borrower\u8217?s ability to\plain\cf1\f51\fs16\ql
pay based on factors such as the borrower\u8217?s financial condition, past payment
history, guarantees and past-due
status.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Minimum Presumed Income
Tax\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipotecario recognized the
minimum presumed income tax accrued as of June\~30, 2007 and paid in prior years as
an asset as of June\~30,\plain\cf1\f51\fs16\ql 2007, because Banco Hipotecario
started to generate taxable income and Banco Hipotecario expects to be able to
compute it as a payment on account of\plain\cf1\f51\fs16\ql income tax in future
years. Recognition of this asset arises from the ability to generate sufficient
taxable income in future years to absorb the asset before\plain\cf1\f51\fs16\ql it
expires. Management\u8217?s determination of the likelihood that deferred tax
assets can be realized is subjective, and involves estimates
and\plain\cf1\f51\fs16\ql assumptions about matters that are inherently uncertain.
The realization of deferred tax assets arises from levels of future taxable income
and the\plain\cf1\f51\fs16\ql achievement of tax planning
strategies.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Underlying estimates and
assumptions can change over time, influencing its overall tax positions, as a
result of unanticipated events or\plain\cf1\f51\fs16\ql
circumstances.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Twelve month periods ended
June\~30, 2007 and 2006\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql
General\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth
the principal components of its net income for the twelve-month periods ended
June\~30, 2006 and 2007.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
\trrh-66\trrh0
\trrh-66\trrh0\row}}}
Twelve\~months\~ended\~June\~30,\cell\pard\plain\intbl\cf1\f51\fs13\ql
%\~Change\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
2006/2007\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
x10797\trrh172
(in\~millions\~of\~pesos,\~except\~for\~percentages)\cell\pard\plain\intbl\cf1\f51\
fs13\ql \~\cell{
x10797\trrh172\row}}}
clcfpat12\clcbpat12\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Financial
Ps.\cell\pard\plain\intbl\cf1\f51\fs16\qr
\~733.8\cell\pard\plain\intbl\cf1\f51\fs16\ql
clcfpat12\clcbpat12\cellx10794\trrh206\row}}}
b\cellx9526\clvertalb\cellx9964\clvertalb\cellx10616\clvertalb\cellx10794\trrh206
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
(412.2\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell\pard\plain\intbl\cf1\f51\fs13\q
l \~\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
(9.1\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell{
b\cellx9526\clvertalb\cellx9964\clvertalb\cellx10616\clvertalb\cellx10794\trrh206\r
ow}}}
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Net financial
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for losses on
ow}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net contribution from
insurance\plain\intbl\cf1\f51\fs11\ql\super
\~\cell{
clcfpat12\clcbpat12\cellx10794\trrh206\row}}}\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
\trrh-66\trrh0
\trrh-66\trrh0\row}}}
x10799\trrh172
fs13\ql \~\cell{
x10799\trrh172\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other income from
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other expenses on
ow}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Miscellaneous income,
net\plain\intbl\cf1\f51\fs11\ql\super (2)\cell\pard\plain\intbl\cf1\f51\fs13\ql
ow}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Income
tax\cell\pard\plain\intbl\cf1\f51\fs13\ql
ow}}}
lx7418\clbrdrt\brdrs\brdrcf1\clvertalb\cellx7874\clvertalc\cellx8184\clvertalb\cell
x8674\clbrdrt\brdrs\brdrcf1\clvertalb\cellx8984\clbrdrt\brdrs\brdrcf1\clvertalb\cel
x10617\clvertalc\cellx10795\trrh29
x10617\clvertalc\cellx10795\trrh29\row}}}
clcfpat12\clcbpat12\cellx10795\trrh206\row}}}\pard\plain\f0\fs4\par\pard\plain\f0\f
s2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
Insurance premiums minus insurance claims paid.\cell{
\par\pard\plain
Miscellaneous income minus miscellaneous expenses.\cell{
l Net Income\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipotecario\u8217?s
net income for the twelve-month period ended June\~30, 2007 of Ps.357.9 million was
higher than Ps.309.1 for the\plain\cf1\f51\fs16\ql twelve-month period ended
June\~30, 2006, principally due to:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher financial income principally as a
result of higher income from government and private securities, hedging
transactions and the\plain\intbl\cf1\f51\fs16\ql increase of new consumer
products.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher net contributions from insurance as
a result of an increase in new loan origination and an expansion on insurance
products offered.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher income from services as a result of
higher bank activity.\cell{
b198\fi462\cf1\f51\fs16\ql These factors were partially offset
by:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher administrative expenses mainly
related to social security contributions, and fees related to actions adopted by
Banco Hipotecario in\plain\intbl\cf1\f51\fs16\ql developing its retail banking
business.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher expenses on services mainly to
commissions related to Visa Credit Cards, scoring and origination of personal loans
and\plain\intbl\cf1\f51\fs16\ql higher structuring and underwriting
expenses.\cell{
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Financial
Income\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth the
principal components of its financial income for the twelve-month periods ended
\par\pard\plain
lx10796\trrh172
x9962\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10618\clvertalb\cellx10796\trrh172
x9962\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10618\clvertalb\cellx10796\trrh172\row}}
}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\clshdng100\clcfpat12\clcbpat12\cellx10616\clvertalb\clshdng100\clcfpat12\clcbpat12
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage loans and other financial
transactions\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Government guaranteed
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Government and Private
Securities\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Compensatory and other
BODEN\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Buyback of restructured
Hedges\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage-backed
securities\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Credit Cards
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Personal
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Advance
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Effects of changes in exchange
rates\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cash and due from
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Interbank
Loans\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10794\trrh206
Others\cell\pard\plain\intbl\cf1\f51\fs13\ql
lx7747\clbrdrt\brdrs\brdrcf1\clvertalb\cellx8183\clvertalb\cellx8692\clbrdrt\brdrs\
brdrcf1\clvertalb\cellx9067\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9503\clvertalb\cel
lx9960\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10616\clvertalc\cellx10794\trrh29
lx9960\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10616\clvertalc\cellx10794\trrh29\row}}
}
b\cellx10616\clvertalb\cellx10794\trrh206\row}}}\pard\plain\sb198\fi462\cf1\f51\fs1
6\ql Banco Hipotecario\u8217?s financial income increase 20.2% to Ps.882.2 million
for the twelve-month period ended June\~30, 2007 as compared
to\plain\cf1\f51\fs16\ql Ps.733.8 million for the twelve-month period ended
June\~30, 2006 primarily as a result of:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher income from some government and
private securities as a result of higher market prices.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher income from the increase of LIBOR
rate accrued during this period on the stock of BODEN US$2012 recorded in
investment\plain\intbl\cf1\f51\fs16\ql account.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher income from credit cards, personal
loans and new consumer products as a result of a significant increase in the volume
of such\plain\intbl\cf1\f51\fs16\ql loans granted during 2007.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher income from derivate operations
resulting from hedging transactions including its total return swap.\cell{
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Lower income from hedge bond, as a result
of the subscription made.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Lower income from the repurchase of
restructured financial debts at market prices.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Lower income from Secured loans as a
consequence of the reduction of the stock.\cell{
\
Expenses\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth
information regarding its financial expenses for the twelve-month periods ended
\par\pard\plain
lx10797\trrh172
}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Bonds and similar
obligations\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Borrowings from Central
Bank\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Borrowings from
\cellx10795\trrh206
Other\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Contributions and taxes on financial
lx9905\clvertalb\cellx10561\clvertalb\cellx10795\trrh29
\~\~\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql \~\cell{
lx9905\clvertalb\cellx10561\clvertalb\cellx10795\trrh29\row}}}
\cellx10795\trrh206
(9.1\cell\pard\plain\intbl\cf1\f51\fs16\ql )%\cell{
\cellx10795\trrh206\row}}}\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdr
w15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
Includes interest and other amounts payable on savings accounts, checking accounts,
and other deposits.\cell{
Banco Hipotecario\u8217?s financial expenses for the twelve-month period ended
June\~30, 2007 decreased 9.1% to Ps.374.7 million from
Ps.412.2\plain\cf1\f51\fs16\ql million for the twelve-month period ended June\~30,
2006 primarily as a result of lower financial expenditures principally due to the
substantial reduction\plain\cf1\f51\fs16\ql of borrowings from the Central Bank
and other Banks. This effect was partially offset by higher interest liabilities
resulting from increased average\plain\cf1\f51\fs16\ql balances on savings
accounts and time deposits, related to the growth of the private
sector.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Provision for Losses on
Loans\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth its
provision for loan losses for the twelve month periods ended June\~30, 2006 and
2007.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
lx10797\trrh172
}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for loan
losses\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Charge-
offs\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\ql Banco Hipotecario\u8217?s provision for loan losses for the twelve-month
period ended June\~30, 2007 increased to Ps.43.7 million from
Ps.10.5\plain\cf1\f51\fs16\ql million in the twelve-month period ended on
June\~30, 2006 in connection with the significant increase in the volume of the
loans granted during 2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Banco
Hipotecario\u8217?s Risk and Credit Committee decided to maintain a maximum 100%
coverage of the loan loss reserve, relative to the total\plain\cf1\f51\fs16\ql
amount of those loans classified as non-performing, consequently a recovery of
Ps.100 million was recorded. Reserves and funds created in
connection\plain\cf1\f51\fs16\ql with the special reserve envisaged by Section\~13
of Law 24,143 and the Special fund created by a resolution of the board of
directors of Banco\plain\cf1\f51\fs16\ql Hipotecario dated December\~12, 2001,
shall not be included in the total amount used for calculating such
coverage.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 139
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Net Contribution from
Insurance\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth
the principal components of its net contribution from insurance for the twelve-
month periods ended June\~30, 2006\plain\cf1\f51\fs16\ql and
\par\pard\plain
lx10797\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc %
Change\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Insurance premiums
earned:\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
Life\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Property
damage\cell\pard\plain\intbl\cf1\f51\fs13\ql
Unemployment\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
Other\cell\pard\plain\intbl\cf1\f51\fs13\ql
Ps.3.7\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Total premiums
earned\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Insurance claims
paid:\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\cellx10795\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Total claims
paid\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\cellx10795\trrh206\row}}}\pard\plain\sb198\fi462\cf1\f51\fs16\ql Banco
Hipotecario\u8217?s net contribution from insurance activities of Ps.69.8 million
during the twelve-month period ended June\~30, 2007\plain\cf1\f51\fs16\ql
increased 55.6% from Ps.44.9 million, compared to the twelve-month period ended
June\~30, 2006. This increased was primarily a consequence of
higher\plain\cf1\f51\fs16\ql premiums resulted from an increase in new loan
origination and an expansion of insurance products
offered.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Other Income from
Services\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table includes the
principal components of its other income from services for the twelve-month periods
ended June\~30, 2006 and\plain\cf1\f51\fs16\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Other Income from
principal components of its other income from services for the twelve-month periods
\par\pard\plain
lx10796\trrh172
}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Loan servicing fees from third
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql FONAVI
\cellx10794\trrh206
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Saving accounts
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Current accounts
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Commissions for technological
services (MSI)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr NM\cell\pard\plain\intbl\cf1\f51\fs16\ql
\~\cell{
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Recovery of loan
\cellx10794\trrh206
Hipotecario\u8217?s income from services increased to Ps.83.4 million for the
twelve-month period ended June\~30, 2007 from Ps.47.6\plain\cf1\f51\fs16\ql
million in the same period of 2006, as a result of higher commissions derived from
credit cards, origination of mortgage loans and new consumer\plain\cf1\f51\fs16\ql
products. This higher income was attributable not only to the greater number of
credit cards, but also to the greater average purchases made with
such\plain\cf1\f51\fs16\ql cards recorded during the
period.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Other Expenses on
principal components of its other expenses on services for the twelve-month periods
\par\pard\plain
lx9489\clvertalb\cellx10046\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10702\clvertalb\ce
llx10797\trrh172
x10044\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10700\clvertalb\cellx10795\trrh172\row}
}}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Structuring and underwriting
fee\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Banking
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Commissions on third party
originations\cell\pard\plain\intbl\cf1\f51\fs13\ql
Collections\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Commissions on
Visa\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Commissions on saving
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Commissions on
scoring\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Commissions paid to real estate
agents\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Contributions and taxes on income
from services\cell\pard\plain\intbl\cf1\f51\fs13\ql
2\cellx10795\trrh206\row}}}\pard\plain\sb198\fi462\cf1\f51\fs16\ql Banco
Hipotecario\u8217?s other expenses on services increased 121.6% to Ps.67.8 million
for the twelve-month period ended June\~30, 2007 from\plain\cf1\f51\fs16\ql
Ps.30.6 million in the period ended June\~30, 2006. This increase was mainly to
commissions recorded in other expenditures on services related to
the\plain\cf1\f51\fs16\ql VISA credit card and scoring, in connection with the
higher number of credit cards
managed.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Administrative
the principal components of its administrative expenses for the twelve-month
periods ended June\~30, 2006 and 2007.\par\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
llx10796\trrh172
}}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
contributions\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fees and external administrative
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Maintenance and
repair\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Advertising and
publicity\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Nonrecoverable VAT and other
taxes\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Electricity and
communications\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Depreciation of bank premises and
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Amortization of organizational
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Corporate personnel
benefits\cell\pard\plain\intbl\cf1\f51\fs13\ql
2\cellx10794\trrh206\row}}}\pard\plain\sb198\fi462\cf1\f51\fs16\ql Administrative
expenses for the twelve-month period ended June\~30, 2007 increased 46.2% to
Ps.270.8 million from Ps.185.2 million for the\plain\cf1\f51\fs16\ql twelve-month
period ended June\~30, 2006. The main reasons for this increase were higher
salaries and social security contributions required under\plain\cf1\f51\fs16\ql
applicable regulations in Argentina, higher advertising expenses related to the
launch of its new products and an increase in other fees related to
the\plain\cf1\f51\fs16\ql actions adopted by Banco Hipotecario in developing its
retail banking business.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Miscellaneous Income\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table
sets forth its miscellaneous income for the twelve-month periods ended June\~30,
2006 and 2007.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
llx10797\trrh172
}}
x10798\trrh172
(in\~millions\~of\~pesos\~as,\~except\~for\~percentages)\cell\pard\plain\intbl\cf1\
f51\fs13\ql \~\cell{
x10798\trrh172\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Penalty
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Loan loss
recoveries\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Capitalization of presumed income
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Reversal of reserve for loan
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Reversal of provision for
contingencies\cell\pard\plain\intbl\cf1\f51\fs13\ql
2\cellx10796\trrh206\row}}}\pard\plain\sb198\fi462\cf1\f51\fs16\ql Banco
Hipotecario\u8217?s miscellaneous income increased 33.5% to Ps.231.8 million for
the twelve-month period ended June\~30, 2007 from\plain\cf1\f51\fs16\ql Ps.173.7
million for the twelve-month ended June\~30, 2006 primarily as a result of a
reversal of reserve for loan losses of the restructured loans and
for\plain\cf1\f51\fs16\ql the result of the two sales of a portion of non
performing portfolio recorded in memorandum accounts for approximately Ps.120
million.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 142
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Miscellaneous
the principal components of its miscellaneous expenses for the twelve-month periods
ended June\~30, 2006 and 2007:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
lx10796\trrh172
}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for lawsuit
NM\cell\pard\plain\intbl\cf1\f51\fs11\ql\super (1)\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for miscellaneous
receivables and others\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision StAR granted creditors
under guaranteed debt\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision
SAR\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for insurance
contingence\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for administrative
organization\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Bogar and Guarantee loans
adjustment\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Contingency related to the sale of
non-performing mortgage portfolio\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\cellx10794\trrh206
\cellx10794\trrh206\row}}}\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql Not
material\cell{
Banco Hipotecario\u8217?s miscellaneous expenses increased 205.8% to Ps.150.4
million for the twelve-month period ended June\~30, 2007 from\plain\cf1\f51\fs16\ql
Ps.49.2 million for 2006 primarily as a result of:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher provisions related to the
appreciation in the trading price of its Class D shares, which is designed to
account for the higher value\plain\intbl\cf1\f51\fs16\ql attributable to the stock
appreciation rights issued with and attached to its Medium Term Guaranteed Debt due
2010 and its management\plain\intbl\cf1\f51\fs16\ql compensation plan.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher provision for: Stock Appreciation
Compensation plan, Lawsuits contingences, administrative organization and for
the\plain\intbl\cf1\f51\fs16\ql sale of a portion of its non performing
portfolio.\cell{
sb198\fi462\cf1\f51\fs16\ql These increases were partially offset by an
extraordinaire adjust on changes in the valuation of public sector assets given as
collateral for Central\plain\cf1\f51\fs16\ql Bank borrowings (BOGAR and Secured
loans).\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 143
\
Twelve month periods ended June\~30, 2005 and
2006\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql
General\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth
the principal components of its net income for the periods ended June\~30, 2005 and
\par\pard\plain
4\trrh-66\trrh0
4\trrh-66\trrh0\row}}}
lx9508\clvertalb\cellx9603\clvertalb\cellx10049\clbrdrb\brdrs\brdrcf1\clvertalb\cel
lx9508\clvertalb\cellx9603\clvertalb\cellx10049\clbrdrb\brdrs\brdrcf1\clvertalb\cel
x10797\trrh172
fs13\ql \~\cell{
x10797\trrh172\row}}}
cellx10047\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10699\clvertalb\clshdng100
\clcfpat12\clcbpat12\cellx10794\trrh206
\clcfpat12\clcbpat12\cellx10794\trrh206\row}}}
b\cellx9601\clvertalb\cellx10047\clvertalb\cellx10699\clvertalb\cellx10794\trrh206\
row}}}
lx9506\clvertalc\cellx9601\clvertalb\cellx10047\clvertalb\cellx10699\clvertalb\cell
x10794\trrh29
x10794\trrh29\row}}}
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Net financial
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for losses on
row}}}
insurance\plain\intbl\cf1\f51\fs11\ql\super
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other income from
row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other expenses on
row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Miscellaneous income,
net\plain\intbl\cf1\f51\fs11\ql\super (2)\cell\pard\plain\intbl\cf1\f51\fs13\ql
NM\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell{
row}}}
x10794\trrh29
x10794\trrh29\row}}}
row}}}\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\
\par\pard\plain
Insurance premiums minus insurance claims paid.\cell{
\par\pard\plain
Miscellaneous income minus miscellaneous expenses.\cell{
l Net Income\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipotecario\u8217?s
net income for the twelve-month period ended June\~30, 2006 of Ps.309.1 million was
higher than Ps.151.0 for the\plain\cf1\f51\fs16\ql twelve-month period ended
June\~30, 2005, principally due to:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher financial income principally as a
result of higher income from government and private securities, and\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher miscellaneous income as a result of
reversal of certain provisions and a capitalization of minimum presumed income
tax.\cell{
sb198\fi462\cf1\f51\fs16\ql These factors were partially offset
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher financial expenses as a result of
higher financial expenses from foreign currency denominated liabilities,\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql An extraordinaire adjust on changes in the
valuation of public sector assets given as collateral for Central Bank borrowings
(Bogar and\plain\intbl\cf1\f51\fs16\ql Guarantee loans) and,\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher administrative expenses mainly
related to advertising campaigns and higher salaries and social security
contributions.\cell{
\
Income\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth the
principal components of its financial income for the twelve month periods ended
\par\pard\plain
llx10796\trrh172
}}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage loans and other financial
transactions\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Government-guaranteed
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Government and private
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Compensatory and other
BODEN\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Buyback of restructured
Hedges\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage-backed
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Credit Cards
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Personal
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Advance
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cash and due from
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Interbank
lb\cellx10699\clvertalb\cellx10794\trrh206\row}}}\pard\plain\sb198\fi462\cf1\f51\fs
16\ql Banco Hipotecario\u8217?s financial income increased 7.7% to Ps.733.8 million
for the twelve-month period ended June\~30, 2006 as compared
to\plain\cf1\f51\fs16\ql Ps.681.5 million for the twelve-month period ended
June\~30, 2005 primarily as a result of:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher income from government and private
securities as a result of higher market prices and higher libor rate accrued during
this period\plain\intbl\cf1\f51\fs16\ql on the stock of BODEN US$2012 recorded in
investment account,\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher income of credit cards, origination
of personal loans and new consumer products as a result of higher bank activity,
and\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher income as a result of effect of
changes in exchange rates during the year ended on June 2006.\cell{
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql lower income from compensatory and
additional BODEN, resulting from the receipt of BODEN US$2012 a compensation
granted to\plain\intbl\cf1\f51\fs16\ql financial institutions,\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Lower income from the buyback of
restructured financial debts at market prices, and\cell{
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Lower income from hedges, as a result of
lower impact in derivatives adjusted by CER.\cell{
b286\fi462\cf1\f51\fs16\b\i\ql Financial
information regarding its financial expenses for the twelve-month periods ended
\par\pard\plain
llx10797\trrh172
}}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Bonds and similar
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Borrowings from
\~\cell{
Other\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Contributions and taxes on financial
lb\cellx10700\clvertalb\cellx10795\trrh206\row}}}\pard\plain\cf1\f51\fs18\ql
\par\pard\plain
Includes interest and other amounts payable on savings accounts, checking accounts,
and other deposits.\cell{
Banco Hipotecario\u8217?s financial expenses for the twelve-month period ended
June\~30, 2006 increased 6.0% to Ps.412.2 million from
Ps.388.9\plain\cf1\f51\fs16\ql million for the twelve-month period ended June\~30,
2005 primarily as a result of:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql higher financial expenses from foreign
currency-denominated liabilities due to new external financing mainly due to higher
interest paid\plain\intbl\cf1\f51\fs16\ql on bonds resulting from newly issued
notes and strengthening Banco Hipotecario\u8217?s position in the international
capital markets, and\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher interest liabilities resulting from
increased average balances on savings accounts and time deposits, related to the
growth of private\plain\intbl\cf1\f51\fs16\ql sector.\cell{
sb198\fi462\cf1\f51\fs16\ql This effect was partially offset by lower financial
expenditures principally as result of the substantial reduction of Central Bank
borrowings.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 146
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Provision for Losses on
Loans\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth its
provision for loan losses for the twelve-month periods ended June\~30, 2005 and
\par\pard\plain
llx10797\trrh172
}}
x10799\trrh172
fs13\ql \~\cell{
x10799\trrh172\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for loan
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Charge-
offs\cell\pard\plain\intbl\cf1\f51\fs13\ql
lb\cellx10700\clvertalb\cellx10795\trrh206\row}}}\pard\plain\sb198\fi462\cf1\f51\fs
16\ql Banco Hipotecario\u8217?s provision for loan losses for the period ended
June\~30, 2006 decreased to Ps.10.5 million from Ps.16.7 million in
the\plain\cf1\f51\fs16\ql period ended on June\~30, 2005. This decreased provision
reflects the improvement in the portfolio of performing loans. As of result of this
improvement,\plain\cf1\f51\fs16\ql the Risk and Credit Committee decided to
maintain a maximum 100% coverage of the loan loss reserve, relative to the total
amount of those loans\plain\cf1\f51\fs16\ql classified as non-performing. Reserves
and funds created in connection with the special reserve envisaged by Section\~13
of Law 24,143 and the Special\plain\cf1\f51\fs16\ql fund created by a resolution
of the board of Directors of Banco Hipotecario dated December\~12, 2001, shall not
be included in the total amount used for\plain\cf1\f51\fs16\ql calculating such
coverage.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Net Contribution from
Insurance\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth
the principal components of its net contribution from insurance for the twelve-
month periods ended June\~30, 2005\plain\cf1\f51\fs16\ql and
\par\pard\plain
llx10796\trrh172
Twelve\~months\~ended\~June\~30\cell\pard\plain\intbl\cf1\f51\fs13\ql
}}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Insurance premiums
earned:\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Total premiums
earned\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Insurance claims
paid:\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Total claims
2\cellx10795\trrh206\row}}}\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Banco Hipotecario\u8217?s net
contribution from insurance activities of Ps.44.9 million during the twelve-month
period ended June\~30, 2006\plain\cf1\f51\fs16\ql increased 21.3% from Ps.37.0
million, compared to the twelve-month period ended June\~30, 2005. This increased
was primarily a consequence of higher\plain\cf1\f51\fs16\ql premiums resulted from
an increase in new loan origination and an expansion or insurance products offered.
However, these effects were partially offset\plain\cf1\f51\fs16\ql by higher
claims paid during the quarter.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Other Income from Services\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following
table includes the principal components of its other income from services for the
periods ended June\~30, 2005 and 2006.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
0796\trrh-66\trrh0
llx10797\trrh172
}}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
t12\clcbpat12\cellx10701\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10796\trrh20
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Loan servicing fees from third
6\row}}}
talb\cellx9639\clvertalb\cellx10041\clvertalb\cellx10701\clvertalb\cellx10796\trrh2
06
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql FONAVI
06\row}}}
6
Commissions\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\row}}}
06
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Commissions for technological
services (MSI)\cell\pard\plain\intbl\cf1\f51\fs13\ql
06\row}}}
6
6\row}}}
06
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Recovery of loan
06\row}}}
6
6\row}}}
x10041\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10701\clvertalc\cellx10796\trrh29
x10041\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10701\clvertalc\cellx10796\trrh29\row}}
}
06
06\row}}}\pard\plain\sb198\fi462\cf1\f51\fs16\ql Banco Hipotecario\u8217?s income
from services increased to Ps.47.6 million for the twelve-month period ended
June\~30, 2006 from Ps.43.7\plain\cf1\f51\fs16\ql million in the same period of
2005, as a result of higher commissions derived from credit cards, origination of
mortgage loans and new consumer\plain\cf1\f51\fs16\ql products, due to higher bank
activity. These effects were partially offset by commissions for technological
services in Banco Hipotecario\u8217?s\plain\cf1\f51\fs16\ql subsidiary
MSI.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Other Expenses on
principal components of its other expenses on services for the periods ended
June\~30, 2005 and 2006:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
795\trrh-66\trrh0
lx10796\trrh172
}
x10797\trrh172
fs13\ql \~\cell{
x10797\trrh172\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Structuring and underwriting
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Banking
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Commissions on third party
originations\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
6
Collections\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\row}}}
\row}}}
x9957\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10617\clvertalc\cellx10795\trrh29\row}}}
6
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Contributions and taxes on income
from services\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
x9957\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10617\clvertalc\cellx10795\trrh29\row}}}
6
6\row}}}\pard\plain\sb198\fi462\cf1\f51\fs16\ql Banco Hipotecario\u8217?s other
expenses on services increased 106.3% to Ps.30.6 million for the twelve-month
period ended June\~30, 2006 from\plain\cf1\f51\fs16\ql Ps.14.8 million in the
twelve-month period ended June\~30, 2005. This increase was mainly to commissions
recorded in other expenditures on services\plain\cf1\f51\fs16\ql related to the
VISA credit card as a consequence of higher credit card financings and increased
customer base, and higher structuring and underwriting\plain\cf1\f51\fs16\ql
expenses associated with the issue of bonds and financial
trusts.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 148
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Administrative
the principal components of its administrative expenses for the periods ended
\par\pard\plain
lx10796\trrh172
}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fees and external administrative
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Maintenance and
repair\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Advertising and
publicity\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Nonrecoverable VAT and other
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Electricity and
communications\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Depreciation of bank premises and
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Amortization of organizational
\cellx10794\trrh206
}
6\ql Administrative expenses for the twelve-month period ended June\~30, 2006
increased 26.0% to Ps.185.2 million from Ps.147.0 million for the
twelve\plain\cf1\f51\fs16\ql month period ended June\~30, 2005. The main reasons
for this increase were higher salaries and social security contributions required
under applicable\plain\cf1\f51\fs16\ql regulations in Argentina, higher
advertising expenses related to the launch of its new products and an increase in
other fees related to the actions adopted\plain\cf1\f51\fs16\ql by Banco
Hipotecario in developing its retail banking
business.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Miscellaneous
Income\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth its
miscellaneous income for the twelve-month periods ended June\~30, 2005 and
\par\pard\plain
lx10797\trrh172
}
x10798\trrh172
(in\~millions\~of\~pesos\~as,\~except\~for\~percentages)\cell\pard\plain\intbl\cf1\
f51\fs13\ql \~\cell{
x10798\trrh172\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Penalty
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Loan loss
recoveries\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Capitalization of presumed income
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Reversal of reserve for loan
\~\cell{
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Reversal of provision for
\~\cell{
\cellx10796\trrh206
Hipotecario\u8217?s miscellaneous income increased 106.7% to Ps.173.7 million for
the twelve-month period ended June\~30, 2006 from\plain\cf1\f51\fs16\ql Ps.84.0
million for the twelve-month period ended June\~30, 2005 primarily as a result
of:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql A reversal of reserve for loan losses and
higher income from recovered loans due to the continued improvement in its loan
portfolio.\cell{
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql A capitalization of minimum presumed
income tax paid for the fiscal years 1999, 2000 and 2001, resulting from Banco
Hipotecario\plain\intbl\cf1\f51\fs16\ql intention to charge the minimum presumed
income tax credit held by it against future income tax liabilities.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql A reversal of provision for contingences
principally as a result of recovery of reserves for director\u8217?s fees
established in compliance\plain\intbl\cf1\f51\fs16\ql with shareholder resolutions
and recovery of stock appreciation rights.\cell{
sb198\fi462\cf1\f51\fs16\b\i\ql Miscellaneous
the principal components of its miscellaneous expenses for the twelve month periods
ended June\~30, 2005 and 2006:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
lx10796\trrh172
}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for lawsuit
\~\u8212?\~\~\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for miscellaneous
receivables and others\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision StAR granted creditors
under guaranteed debt\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision
SAR\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for administrative
organization\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Bogar and Guarantee loans
adjustment\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\cellx10795\trrh206
6\ql Banco Hipotecario\u8217?s miscellaneous expenses decreased 61.1% to Ps.49.2
million for the twelve-month period ended June\~30, 2006 from\plain\cf1\f51\fs16\ql
Ps.126.4 million for 2005 primarily as a result
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Higher provisions recorded in the twelve-
month period ended June\~30, of 2005 related to the appreciation in the trading
price of its Class\plain\intbl\cf1\f51\fs16\ql D shares, which is designed to
account for the higher value attributable to the stock appreciation rights issued
with and attached to its\plain\intbl\cf1\f51\fs16\ql Medium Term Guaranteed Debt
due 2010 and its management compensation plan.\cell{
sb198\fi462\cf1\f51\fs16\ql This effect was partially offset by an extraordinary
adjustment on changes in the valuation of public sector assets given as collateral
for central\plain\cf1\f51\fs16\ql Bank borrowings (Bogar and Guarantee
loans).\par\pard\plain\sb286\cf1\f51\fs16\b\ql Exchange Rate
Sensitivity\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Exchange-rate sensitivity is
the relationship between the fluctuations of exchange rates and Banco
Hipotecario\u8217?s net financial income\plain\cf1\f51\fs16\ql resulting from the
revaluation of Banco Hipotecario\u8217?s assets and liabilities denominated in
foreign currency. The impact of variations in the\plain\cf1\f51\fs16\ql exchange
rate on Banco Hipotecario\u8217?s net financial income depends on whether Banco
Hipotecario has a net asset foreign currency position (the\plain\cf1\f51\fs16\ql
amount by which foreign currency denominated assets exceed foreign currency
denominated liabilities) or a short foreign currency\par\pard\plain\cf1\f51\fs13\ql
\
position (the amount by which foreign currency denominated liabilities exceed
foreign currency denominated assets). In the first case an
increase/decrease\plain\cf1\f51\fs16\ql in the exchange rate derives in a
gain/loss, respectively. In the second case, an increase/decrease derives in a
loss/gain, respectively.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql At June\~30,
2007 and June\~30, 2006 its total foreign currency-denominated liabilities were
Ps.4,850 million and 5,210\~million, respectively, all of\plain\cf1\f51\fs16\ql
which were US dollar-and Euro-denominated obligations. At June\~30, 2007, its US
dollar-denominated assets (including BODEN) were Ps.3,349
million,\plain\cf1\f51\fs16\ql and its Euro-denominated assets were Ps.1,097
million, while its US dollar-denominated liabilities were Ps.3,862 million, and its
Euro-denominated\plain\cf1\f51\fs16\ql liabilities were Ps.988
million\plain\cf1\f51\fs16\b\ql .\par\pard\plain\sb286\cf1\f51\fs16\b\ql
Liquidity\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Its general policy has been to
maintain liquidity adequate to meet its operational needs and financial
obligations. At June\~30, 2007, its liquid assets\plain\cf1\f51\fs16\ql consisted
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.327.6 million of cash and due from
banks;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.330.9 million of Argentine government
and corporate securities classified as held for trading, and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.403.9 million of Argentine Central Bank
Bills.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql At June\~30, 2006, its liquid assets
consisted of:\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.327.9 million of cash and due from
banks;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.387.1 million of Argentine government
and corporate securities classified as held for trading; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.87.9 million of Argentine Central Bank
Bills.\cell{
b198\fi462\cf1\f51\fs16\i\ql Cash Flows from Operating
Activities\plain\cf1\f51\fs16\ql . The changes in cash flows from operating
activities were principally due to the change in:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
(i)\cell\pard\plain\intbl\cf1\f51\fs16\ql Provision for losses on loans and for
contingencies and miscellaneous receivables, net of reversals,\cell{
\ql \~
\par\pard\plain
(ii)\cell\pard\plain\intbl\cf1\f51\fs16\ql Net (gain) loss on government
securities,\cell{
\ql \~
\par\pard\plain
(iii)\cell\pard\plain\intbl\cf1\f51\fs16\ql Net indexing of loans, deposits and
other debt, and\cell{
\ql \~
\par\pard\plain
(iv)\cell\pard\plain\intbl\cf1\f51\fs16\ql Net change in other assets and
liabilities.\cell{
\cf1\f51\fs16\i\ql Cash Flows from Investing Activities\plain\cf1\f51\fs16\ql . The
changes in cash flow from investing activities were due to subscription of
Argentine Government Hedge\plain\cf1\f51\fs16\ql
BODENs.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Cash Flows from Financing
Activities\plain\cf1\f51\fs16\ql . The changes in cash flows from financing
activities were principally due to the issuance of notes Series
IV\plain\cf1\f51\fs16\ql partially offset by payments on Central Bank debt, Bonds,
Notes and Long Term debts, as a result of the changes in its restructuring
financial debt in\plain\cf1\f51\fs16\ql 2004 and
\
Funding\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Historically, Banco Hipotecario
financed its lending operations mainly through:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the issuance of fixed and floating rate
securities in the international capital markets,\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql other financing arrangements with
international and domestic financial institutions,\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql securitizations of mortgage loans,\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql cash flow from existing loans,\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql deposits, and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Central Bank long term loans.\cell{
b198\fi462\cf1\f51\fs16\ql At June\~30, 2006 and 2007, Banco Hipotecario had four
principal funding sources: bonds, Central Bank, other liabilities from financial
institutions\plain\cf1\f51\fs16\ql and deposits. The table below sets forth its
liabilities outstanding with respect to each of its sources of funding as of the
dates indicated.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
lx10797\trrh344
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc %
Change\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
}
x10798\trrh172
fs13\ql \~\cell{
x10798\trrh172\row}}}
\cellx10794\trrh206
Bonds(1)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~3,253.8\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Borrowings from banks and
international entities\cell\pard\plain\intbl\cf1\f51\fs13\ql
Deposits\cell\pard\plain\intbl\cf1\f51\fs13\ql
}
\cellx10794\trrh206
\cellx10794\trrh206\row}}}\pard\plain\cf1\f51\fs18\ql
\par\pard\plain
Excludes accrued interest.\cell{
l Non-performing Mortgage Loans\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On
June\~29, 2007, Banco Hipotecario accepted the offer for the creation of a Private
Financial Trust, with the purpose of assigning certain\plain\cf1\f51\fs16\ql non-
performing mortgage loans originated by Banco Hipotecario S.A. As of March\~31,
2007, such loan portfolio had a book value of Ps.124,743,918
and\plain\cf1\f51\fs16\ql such loans were mainly registered in memorandum
accounts.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 152
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql
Bonds\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The principal amount values of the
different series of notes Banco Hipotecario has issued and outstanding is as
follows:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
9\clvertalb\cellx10019\clvertalc\cellx10795\trrh-66\trrh0
9\clvertalb\cellx10019\clvertalc\cellx10795\trrh-66\trrh0\row}}}
x8847\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9719\clvertalb\cellx10019\clbrdrb\brdrs\
brdrcf1\clvertalb\cellx10795\trrh704
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Outstanding
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc principal amount
at\par\pard\plain\intbl\cf1\f51\fs13\b\qc
June\~30,\~2007\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Date of\plain\intbl\cf1\f51\fs13\b\qc
Issue\cell\pard\plain\intbl\cf1\f51\fs13\ql
Maturity\~Date\cell\pard\plain\intbl\cf1\f51\fs13\ql
Annual\par\pard\plain\intbl\cf1\f51\fs13\b\qc Interest\~rate\cell{
x8847\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9719\clvertalb\cellx10019\clbrdrb\brdrs\
brdrcf1\clvertalb\cellx10795\trrh704\row}}}
(millions\~of\~pesos)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (%)\cell{
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Bonds issued prior to
restructuring\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql GMTN
(US$1,200,000,000)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Notes Issued in
Restructuring:\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Guaranteed bonds
(US$107,941,000)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Libor\~+\~2.5\cell{
\cellx10795\trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Long term bonds
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 3.0\plain\intbl\cf1\f51\fs16\qr
\u8211?\plain\intbl\cf1\f51\fs16\qr 6.0\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Long term bonds (Euro
278,367,000)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 3.0\plain\intbl\cf1\f51\fs16\qr
\u8211?\plain\intbl\cf1\f51\fs16\qr 6.0\cell{
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Series 4-9.75% Notes due 2010
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Series 4 Tranche II (US$100.000
miles)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Series 5 (US$250.000
miles)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Series
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Accrued
82.3\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
lx6828\clbrdrt\brdrs\brdrcf1\clvertalb\cellx7468\clvertalb\cellx7768\clvertalb\cell
0795\trrh29
lx6828\clbrdrt\brdrs\brdrcf1\clvertalb\cellx7468\clvertalb\cellx7768\clvertalb\cell
0795\trrh29\row}}}\pard\plain\cf1\f51\fs18\ql
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql Banco
Hipotecario S.A. has 10 series of bonds issued prior to the restructuring that have
outstanding amounts that were not tendered in the\plain\intbl\cf1\f51\fs16\ql
restructuring process consummated in January 2004.\cell{
On January 2006, Banco Hipotecario repurchased the remaining stock of its medium
term guaranteed bonds for a face value of US$36.8 million\plain\cf1\f51\fs16\ql
issued in connection with its restructuring in January
2004.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On May\~03, 2006, Banco
Hipotecario repurchased in cash, through an offer commenced on April\~04, 2006, US
dollar denominated Negotiable\plain\cf1\f51\fs16\ql Obligations due in 2013 for a
capital amount of US$129,763,869 and Euro denominated Negotiable Obligations due in
2013 for a capital amount of Euro\plain\cf1\f51\fs16\ql
20,626,433.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On June\~30, 2006, Banco
Hipotecario commenced an offer to purchase, in cash, all currently non-performing
securities. The offer was intended to\plain\cf1\f51\fs16\ql repurchase all
securities that failed to be exchanged within the framework of the exchange offer
commenced by Banco Hipotecario in January, 2004, after\plain\cf1\f51\fs16\ql the
economic crisis in Argentina. Banco Hipotecario will pay 108% on the principal
amount of the securities and no additional amounts will be paid
with\plain\cf1\f51\fs16\ql respect to accrued and unpaid interest or due interest.
The due date of the offer, which was originally July\~31, 2006, was extended to
September\~18, 2006.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As a result of this
transaction, securities were bought back for US$ 5.51\~million (19.4%)\~and Euro
1.42\~million (13.7%). As an integral part of the\plain\cf1\f51\fs16\ql offer
described above and pursuant to Section\~102 of Legislative Decree No.\~58 of 1998
of the Republic of Italy, on December\~12, 2006 an offer was\plain\cf1\f51\fs16\ql
made to residents of Italy to repurchase defaulted bonds. On January\~19, 2007, the
offer expired and securities were repurchased for US$ 0.1\~million
and\plain\cf1\f51\fs16\ql Euro 3.41
million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On June\~21, 2007 Banco
Hipotecario issued an ARS- Linked US$150 mm bond due 2010. The notes accrue
interest at a fixed rate equal to 11.25%\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Borrowings from Banks and
International Entities\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipoetcario
incurred the following indebtedness, which have been already fully paid with the
proceeds obtained from other financings:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Banco Hipotecario obtained interbank loans
in pesos in an aggregate principal amount of pesos 190.7 million.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Banco Hipotecario obtained a loan from
Warehousing Credit Line Agreement with IFC in an aggregate principal amount of
Pesos 40.9\plain\intbl\cf1\f51\fs16\ql million.\cell{
sb286\fi462\cf1\f51\fs16\b\i\ql Borrowings from the Central
Bank\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On November\~11 and December\~1,
2004, Banco Hipotecario pre-paid the financial assistance loans granted by the
Central Bank in amounts totaling\plain\cf1\f51\fs16\ql Ps.10.0 million and Ps.30.0
million, respectively, in order to settle in advance restructured foreign debt. On
January\~20, 2005 and February\~25, 2005,\plain\cf1\f51\fs16\ql Banco Hipotecario
took part in the tender offer established by the Central Bank in accordance with
the guidelines of Communications \u8220?A\u8221?\plain\cf1\f51\fs16\ql 4268 and
4282, the amount of Ps.63.8 million and Ps.16.9 million, respectively, having been
accepted in settlement of the previously refinanced debt. On\plain\cf1\f51\fs16\ql
May\~3, 2005 Banco Hipotecario fully prepaid all outstanding balances due on this
indebtedness of approximately Ps.233.5 million. As of June\~30,
2007,\plain\cf1\f51\fs16\ql Banco Hipotecario recorded in its financial statements
borrowings from the Central Bank totaling Ps.218 million, respectively, in respect
of advances\plain\cf1\f51\fs16\ql Banco Hipotecario expects to incur in the future
for its right to subscribe additional
BODEN.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Loan Securitization
Program\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipotecario has various
series of bonds under its securitization program that existed and that were issued
prior to its restructuring. These\plain\cf1\f51\fs16\ql bonds remain outstanding
under its off-balance sheet securitization program. For each mortgage trust, Banco
Hipotecario transferred a portfolio of its\plain\cf1\f51\fs16\ql loans to a
trustee, which then issued senior bonds, subordinated bonds and certificates of
participation. The payment obligations of these instruments
are\plain\cf1\f51\fs16\ql secured by the trust assets consisting of the portfolio
of individual residential mortgage loans and any reserve fund established by us for
such purpose.\plain\cf1\f51\fs16\ql The holders of the securities have no recourse
against us if the trustee defaults in its payment obligations. Notwithstanding this
fact, certain holders of\plain\cf1\f51\fs16\ql bonds issued by the mortgage trusts
have sued us for the effects of the devaluation of the peso and its impact on the
value of the trust assets. See\plain\cf1\f51\fs16\ql \u8220?Business\u8212?Legal
Proceedings.\u8221?\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On June\~25, 2004,
Banco Hipotecario led the sale of the first series of \u8220?C\u233?dulas
Hipotecarias Argentinas\u8221? in the local capital\plain\cf1\f51\fs16\ql market.
The aggregate amount of the offering was Ps.50 million, consisting of Ps.40 million
of Senior Bonds and Ps.10 million of Subordinated and\plain\cf1\f51\fs16\ql
Certificates of Participation issued under the Ps.500 million Program. On
November\~17, 2004, Banco Hipotecario closed a second series of C\u233?
dulas\plain\cf1\f51\fs16\ql Hipotecarias in the local capital market for an
aggregate amount of Ps.50 million, issued under the Ps.500 million Program. The
bonds accrue variable\plain\cf1\f51\fs16\ql interest at the higher of CER + 3% and
the interest rate for time deposits between Ps.100.000 and Ps.500.000, up to 59
days, reported by Central Bank +\plain\cf1\f51\fs16\ql 4% subject to a floor of
8%\~per annum and a ceiling of 15%\~per annum. On April\~7, 2005, Banco Hipotecario
closed a third series of C\u233?dulas\plain\cf1\f51\fs16\ql Hipotecarias for an
aggregate amount of Ps.62.5 million. On June\~16, 2005, Banco Hipotecario closed a
fourth series of C\u233?dulas Hipotecarias market\plain\cf1\f51\fs16\ql for an
aggregate amount of Ps.64.6 million. On October\~20, 2005, Banco Hipotecario closed
a fifth series of\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc
154
\
C\u233?dulas Hipotecarias for an aggregate amount of Ps.65.0 million. These last
three series of bonds accrue variable interest at the higher of CER +
1%\plain\cf1\f51\fs16\ql and the interest rate for time deposits between Ps100.000
and Ps.500.000, up to 59 days, reported by Central Bank + 2% subject to a floor of
9%\~per\plain\cf1\f51\fs16\ql annum and a ceiling of 16%\~per annum. On March\~27,
2006, Banco Hipotecario began offering a new series VI of C\u233?dulas Hipotecarias
of up to\plain\cf1\f51\fs16\ql Ps.69.0 million in aggregate principal amount. This
new series of bonds accrues variable interest at the higher of CER + 1% and the
interest rate for time\plain\cf1\f51\fs16\ql deposits between Ps.100,000 and
Ps.500,000, up to 59 days, reported by Central Bank + 2% subject to a floor of
9%\~per annum and a ceiling of 19%\~per\plain\cf1\f51\fs16\ql annum. On
September\~22, 2006 closed a seventh series of C\u233?dulas Hipotecarias for an
aggregate amount of Ps.71.4 million. This series of bonds\plain\cf1\f51\fs16\ql
accrue variable interest at the higher of CER + 2,5% and the interest rate for time
deposits between Ps100.000 and Ps.500.000, up to 59 days, reported
by\plain\cf1\f51\fs16\ql Central Bank + 2,5% subject to a floor of 9%\~per annum
and a ceiling of 23%\~per annum. All series are collateralized by residential
mortgage loans and\plain\cf1\f51\fs16\ql were rated \u8220?ra\~AAA\u8221? on a
local scale by Standard and Poor\u8217?s. On March\~26, 2007, Series VIII Savings
Mortgage Bonds (CHA) was\plain\cf1\f51\fs16\ql issued for a face value of
Ps.74.497.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql
Deposits\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Banco Hipotecario did not
historically rely upon deposits as a principal source of funding, Banco Hipotecario
engaged in limited deposit taking\plain\cf1\f51\fs16\ql activities. Its other
deposits consist of checking accounts maintained by different provincial housing
funds and agencies representing Argentine government\plain\cf1\f51\fs16\ql
contributions from the collection of federal taxes which have been set aside for
use by the provinces for special purposes and transferred to
these\plain\cf1\f51\fs16\ql accounts.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
In December 2001 Banco Hipotecario received authorization from the Central Bank to
accept time deposits for individuals as well as institutions\plain\cf1\f51\fs16\ql
and amended its by-laws accordingly, with approval of a majority of its
shareholders as required by Argentine Corporate Law. At June\~30, 2006 and
2007\plain\cf1\f51\fs16\ql its total deposits consisted of the
following:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
At\~June\~30,\cell\pard\plain\intbl\cf1\f51\fs13\ql
At\~June\~30,\cell\pard\plain\intbl\cf1\f51\fs13\ql
%Change\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Checking
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Saving
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other deposits
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Accrued interest
\~\cell{
}
6\ql Banco Hipotecario\u8217?s current strategy is to increase deposits
significantly over time in order to achieve significant liquidity to maintain
and\plain\cf1\f51\fs16\ql further develop its financing
activities.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 155
\
Contractual Obligations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In connection
with its operating activities, Banco Hipotecario enters into certain contractual
obligations. The following table shows the principal\plain\cf1\f51\fs16\ql amounts
plus accrued interests of its contractual obligations and their contractual
interest rates as of June\~30, 2007:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
lvertalc\cellx9303\clvertalb\cellx9407\clvertalc\cellx10047\clvertalb\cellx10151\cl
vertalc\cellx10791\trrh-66\trrh0
vertalc\cellx10791\trrh-66\trrh0\row}}}
lvertalb\cellx9303\clvertalb\cellx9407\clvertalb\cellx10047\clvertalb\cellx10151\cl
vertalb\cellx10791\trrh344
Annual\cell\pard\plain\intbl\cf1\f51\fs13\ql
Past\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Less
than\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc 1 to
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc 3 to
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Over 5\cell{
vertalb\cellx10791\trrh344\row}}}
9407\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10047\clvertalb\cellx10151\clbrdrb\brdrs\
Maturity\cell\pard\plain\intbl\cf1\f51\fs13\ql
Interest\~Rate\cell\pard\plain\intbl\cf1\f51\fs13\ql
Due\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc 1
year\cell\pard\plain\intbl\cf1\f51\fs13\ql
years\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc years\cell{
pat12\cellx10047\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10151\clvertalb\clsh
dng100\clcfpat12\clcbpat12\cellx10791\trrh206
Bonds\cell\pard\plain\intbl\cf1\f51\fs13\ql
dng100\clcfpat12\clcbpat12\cellx10791\trrh206\row}}}
ellx9303\clvertalb\cellx9407\clvertalb\cellx10047\clvertalb\cellx10151\clvertalb\ce
llx10791\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Defaulted bonds
US$(1)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Defaulted bonds
EURO(1)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
llx10791\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Serie 4
i\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr
Nov-2010\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Serie 4
II\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr
Nov-2010\cell\pard\plain\intbl\cf1\f51\fs13\ql
llx10791\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Serie
Apr-2016\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Serie
Jun-2010\cell\pard\plain\intbl\cf1\f51\fs13\ql
llx10791\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Long term bond
US$\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Dec-
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 3% -
6%\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Long term bond
EURO\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Dec-
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 3% -
llx10791\trrh206
Loans\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Repurchase Agreement, Deutsche
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Aug-
Libor\~180d\~+\~1.2%\cell\pard\plain\intbl\cf1\f51\fs13\ql
llx10791\trrh206
Libor\~180d\~+\~1.15%\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Jul-
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Libor 180d +
llx10791\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Repurchase Agreement, DEPFA
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Feb-
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Repurchase Agreement, DEPFA
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Feb-
llx10791\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Repurchase Agreement, Credit
Suisse\cell\pard\plain\intbl\cf1\f51\fs13\ql
llx10791\trrh206
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr Mar-
llx10791\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Repurchase Agreement, Merrill
Lynch\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr May-
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Repurchase Agreement,
Barclays\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr May-
llx10791\trrh206
IFC\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Argentine Central
Bank\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
llx10791\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Acquisition of the Hedge
Bond\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr CER +
TOTAL\cell\pard\plain\intbl\cf1\f51\fs13\ql
dng100\clcfpat12\clcbpat12\cellx10791\trrh206\row}}}\pard\plain\cf1\f51\fs18\ql
\par\pard\plain
Includes debtors who did not accept the restructuring process\cell{
tx46076_20}\pard\plain\sb286\cf1\f51\fs16\b\ql B. Liquidity and Capital
Resources\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our principal sources of
liquidity have historically been:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql cash generated by operations;\cell{
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql cash from borrowings and financings
arrangements; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql cash proceeds from the sale of real
estate.\cell{
b198\fi462\cf1\f51\fs16\ql Our principal cash requirements or uses (other than in
connection with our operating activities) have historically
been:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql capital expenditures for property, plant
and equipment;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql interest payments and repayments of short-
term and long-term debt;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql payments of dividends; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql acquisitions or purchases of real
estate.\cell{
b198\fi462\cf1\f51\fs16\ql Our liquidity and capital resources include our cash and
cash equivalents, proceeds from bank borrowings and long-term debt, capital
financing and\plain\cf1\f51\fs16\ql sales of real estate
investments.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of June\~30, 2007, we
had a working capital of Ps.523.7 million. At the same date, we had cash and cash
equivalents totaling Ps.708.5 million,\plain\cf1\f51\fs16\ql an increase of 332.2%
from the Ps.163.9 million of cash and cash equivalents held as of June\~30,
2006.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of June\~30, 2006, we had a
working capital of Ps.62.6 million. At the same date, we had cash and cash
equivalents totaling Ps.163.9 million, an\plain\cf1\f51\fs16\ql increase of 15.0%
from the Ps.142.6 million of cash and cash equivalents held as of June\~30,
2005.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of June\~30 2005, we had a
working capital of Ps.78.8 million. At the same date, we had cash and cash
equivalents totaling Ps.142.6 million, an\plain\cf1\f51\fs16\ql increase of 16.0%
from Ps.122.9 million of cash and cash equivalents held as of June\~30,
2004.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Cash Flow
Information\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql Operating
Activities\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql 2007 Fiscal
Year.\plain\cf1\f51\fs16\ql Our operating activities resulted in net cash inflows
of Ps.163.1 million for fiscal year 2007 primarily as a result of
operating\plain\cf1\f51\fs16\ql gains of Ps.276.0 million, an increase in trade
accounts payable of Ps.65.1 million, a decrease in inventories of Ps.29.0 million,
and an increase in accrued\plain\cf1\f51\fs16\ql interest of Ps.21.5 million
partially offset by an increase in mortgages and leases receivables of Ps.79.7
million, and increase in Other receivables and\plain\cf1\f51\fs16\ql prepaid
expenses of Ps.79.6 million, an increase in non-current investments of Ps.35.6
million and an increase in current investments of Ps.29.8
of Ps.194.7 million for fiscal year 2006 primarily as a result of
operating\plain\cf1\f51\fs16\ql gains of Ps.218.5 million, an increase in trade
accounts payable of Ps.56.0 million, a decrease in inventories of Ps.25.1 million,
an increase in accrued\plain\cf1\f51\fs16\ql interest of Ps.14.0 million and a
decrease in current investments of Ps.10.3 million partially offset by an increase
in mortgages and leases receivables of\plain\cf1\f51\fs16\ql Ps.80.3 million, a
decrease in customer advances, salaries and social security payable and taxes
payable of Ps.28.4 million and an increase in non-current\plain\cf1\f51\fs16\ql
investments of Ps.26.4 million.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql 2005 Fiscal
of Ps.93.5 million for fiscal years 2005. The operating cash inflows for
fiscal\plain\cf1\f51\fs16\ql year 2005 primarily resulted from operating gains of
Ps.127.2 million, an increase in customer advances, salaries and social security
payable and taxes\plain\cf1\f51\fs16\ql payable of Ps.12.0 million and an increase
in trade accounts payable of Ps.21.0 million partially offset by an increase in
mortgages and leases receivables\plain\cf1\f51\fs16\ql for Ps.49.2 million and a
decrease in other liabilities of Ps.17.7
million.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Investment
Activities\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql 2007 Fiscal
Year.\plain\cf1\f51\fs16\ql Our investing activities resulted in net cash outflows
of Ps.510.8 million for fiscal year 2007, primarily as a result of
investments\plain\cf1\f51\fs16\ql in fixed assets of Ps.410.1 million due to
(i)\~the acquisition of Bouchard 551 for Ps.243.2 million, (ii)\~Ps.96.4 million
thorough Alto Palermo primarily for\plain\cf1\f51\fs16\ql improvements made in
shopping centers (iii)\~improvements in the Hotel Operations segment for Ps.57.1
million, principally in Llao Llao for Ps.49.4\plain\cf1\f51\fs16\ql million, and
as a result of a decrease in minority interest of Ps.40.4 million principally due
to the increase in our ownership in Palermo Invest and in
Alto\plain\cf1\f51\fs16\ql Palermo for Ps.27.5 million and Ps.7.2 million,
respectively.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On December\~12, 2006 we
purchased from different holders 34,710 shares of Canteras Natal Crespo for a total
amount of Ps.1.8 million. After this\plain\cf1\f51\fs16\ql transaction, our
interest on Canteras (jointly with our partner ECIPSA) increased up to
98.45%.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql 2006 Fiscal
investments\plain\cf1\f51\fs16\ql in fixed assets of Ps.54.1 million due to
(i)\~improvements made in shopping centers amounting to Ps.33.6 million and
(ii)\~improvements in the Hotel\plain\cf1\f51\fs16\ql Operations segment for
Ps.20.1 million. We also invested Ps.62.1 million in undeveloped parcels of land
primarily through our subsidiary Alto Palermo.\plain\cf1\f51\fs16\ql We also made
investments of Ps.4.3 million to increase our ownership interest in Alto Palermo,
and Ps.4.2 million in the acquisition of 43.2% of Canteras\plain\cf1\f51\fs16\ql
Natal Crespo S.A. Additionally, we posted a guaranty deposit for Ps.8.6 million at
Deustche Bank guaranteeing our obligations to Argentimo S.A.
relating\plain\cf1\f51\fs16\ql to an agreement entered into between Alto Palermo,
Argentimo S.A. and Constructora San Jos\u233? Argentina S.A. for the acquisition of
land for the\plain\cf1\f51\fs16\ql development of a shopping center and a dwelling
and/or office building.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql 2005 Fiscal
investments\plain\cf1\f51\fs16\ql in fixed assets of Ps.79.3 million, due to
(i)\~the development of Alto Rosario Shopping and improvements made in other
shopping centers totaling Ps.50.9\plain\cf1\f51\fs16\ql million, and (ii)\~partial
payment for the acquisition of Bouchard 710 for Ps.20.4 million. We also invested
Ps.35.0 million in the acquisition of an\plain\cf1\f51\fs16\ql additional
ownership interest of 49.9% in Mendoza Plaza Shopping and we also made a payment of
US$4 million (Ps.11.7 million) in connection with a\plain\cf1\f51\fs16\ql contract
entered into with Credit Suisse in June 2005, pursuant to which, subject to the
satisfaction of certain conditions, we expect to take out a loan
for\plain\cf1\f51\fs16\ql US$10.0 million, establishing a mortgage on an office
building in the City of Buenos Aires.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql
Financing Activities\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql 2007 Fiscal
Year.\plain\cf1\f51\fs16\ql Our financing activities resulted in net cash inflows
of Ps.892.2 million. Our net cash provided by financing activities for
fiscal\plain\cf1\f51\fs16\ql year 2007 was primarily related to (i)\~the proceeds
from short-term and long-term debt for Ps.1,199.7 million, primarily due to the
issuance of our notes\plain\cf1\f51\fs16\ql and Alto Palermo notes (ii)\~our
issuance of common shares as a result of the exercise of warrants for Ps.26.0
million, partially offset by (i)\~the payment of\plain\cf1\f51\fs16\ql short-term
and long-term debt for Ps.292.2 million, (ii)\~the payment of dividends to minority
shareholders for Ps.23.2 million and (iii)\~a the partial\plain\cf1\f51\fs16\ql
repayment of Ps.18.0 million of a mortgage
payable.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 158
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql 2006 Fiscal
Year.\plain\cf1\f51\fs16\ql Our financing activities resulted in net cash outflows
of Ps.36.8 million. Our net cash spent on financing activities for fiscal
year\plain\cf1\f51\fs16\ql 2006 was primarily related to the payment of short-term
and long-term debt for Ps.82.5 million, the payment of dividends by our
subsidiaries to minority\plain\cf1\f51\fs16\ql shareholders totaling Ps.12.7
million, the repayment of debt owed to minority shareholders for Ps.5.2 million and
a partial repayment of Ps.25.6 million of\plain\cf1\f51\fs16\ql a mortgage
payable, partially offset by our issuance of common shares as a result of the
exercise of warrants for Ps.43.6 million and proceeds from\plain\cf1\f51\fs16\ql
issuance of short-term and long-term debt totaling Ps.45.1
Year\plain\cf1\f51\fs16\ql . Our financing activities resulted in net cash inflows
of Ps.52.9 million. Our net cash provided by financing activities for
fiscal\plain\cf1\f51\fs16\ql year 2005 relates to our issuance of common shares as
a result of the exercise of warrants for Ps.105.7 million, proceeds from issuance
of short-term and\plain\cf1\f51\fs16\ql long-term debt totaling Ps.117.2 million
and proceeds from the settlement of a swap agreement for Ps.15.8 million, partially
offset by the payment of\plain\cf1\f51\fs16\ql short-term and long-term debt for
Ps.167.3 million, the payment of dividends by our subsidiaries to minority
shareholders totaling Ps.10.3 million, and\plain\cf1\f51\fs16\ql the payment of
Ps.5.8 million to Credit Suisse, establishing a guarantee for the debt of our
subsidiary Hoteles Argentinos.\par\pard\plain\sb286\cf1\f51\fs16\b\ql
Indebtedness\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets
forth the scheduled maturities of our outstanding debt as of June\~30,
\par\pard\plain
lvertalc\cellx8726\clvertalc\cellx8821\clvertalb\cellx8915\clvertalc\cellx9555\clve
rtalb\cellx9658\clvertalc\cellx10178\clvertalb\cellx10281\clvertalc\cellx10794\trrh
-66\trrh0
lvertalc\cellx8726\clvertalc\cellx8821\clvertalb\cellx8915\clvertalc\cellx9555\clve
rtalb\cellx9658\clvertalc\cellx10178\clvertalb\cellx10281\clvertalc\cellx10794\trrh
-66\trrh0\row}}}
15\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9555\clvertalb\cellx9658\clbrdrb\brdrs\brdr
cf1\clvertalb\cellx10178\clvertalb\cellx10281\clbrdrb\brdrs\brdrcf1\clvertalb\cellx
10794\trrh688
Currency\cell\pard\plain\intbl\cf1\f51\fs13\ql
than\plain\intbl\cf1\f51\fs13\b\qc 1
year\plain\intbl\cf1\f51\fs11\b\qc\super (1)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc From 1
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc to 2
From 2
From
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc 3 to 4
More
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc than 4
Total\plain\intbl\cf1\f51\fs11\b\qc\super (2)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc annual
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc interest
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc rate\cell{
cf1\clvertalb\cellx10178\clvertalb\cellx10281\clbrdrb\brdrs\brdrcf1\clvertalb\cellx
10794\trrh688\row}}}
vertalb\cellx10795\trrh172
(in\~millions\~of\~Pesos)\plain\intbl\cf1\f51\fs11\b\qc\super
vertalb\cellx10795\trrh172\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Bank and other
debt\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Unsecured bank
loans\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Secured floating rate notes
due\plain\intbl\cf1\f51\fs11\ql\super (5)\plain\intbl\cf1\f51\fs16\ql
\~2009\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Hoteles Argentinos secured
loan\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto Palermo 10% convertible notes
due 2014\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql IRSA 8% convertible notes due
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto Palermo 11% Series II
notes\plain\intbl\cf1\f51\fs11\ql\super
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto Palermo 7.875% Series I notes
due 2017\plain\intbl\cf1\f51\fs11\ql\super
\~\cell\pard\plain\intbl\cf1\f51\fs16\qr (0.8\cell\pard\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql IRSA 8.5% notes due
\~\cell\pard\plain\intbl\cf1\f51\fs16\qr (0.9\cell\pard\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Debt related to purchase of
subsidiaries\cell\pard\plain\intbl\cf1\f51\fs13\ql
cf1\clvertalb\cellx8726\clvertalc\cellx8821\clvertalb\cellx8915\clbrdrt\brdrs\brdrc
f1\clvertalb\cellx9555\clvertalb\cellx9658\clbrdrt\brdrs\brdrcf1\clvertalb\cellx101
cf1\clvertalb\cellx8726\clvertalc\cellx8821\clvertalb\cellx8915\clbrdrt\brdrs\brdrc
f1\clvertalb\cellx9555\clvertalb\cellx9658\clbrdrt\brdrs\brdrcf1\clvertalb\cellx101
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total bank and other
1,414.5\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 159
\
\par\pard\plain
vertalc\cellx10792\trrh-66\trrh0
vertalc\cellx10792\trrh-66\trrh0\row}}}
Currency\cell\pard\plain\intbl\cf1\f51\fs13\ql
than\plain\intbl\cf1\f51\fs13\b\qc 1
year\plain\intbl\cf1\f51\fs11\b\qc\super (1)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc From
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc 3 to 4
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc More
Total\plain\intbl\cf1\f51\fs11\b\qc\super (2)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc annual
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc interest
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc rate\cell{
lvertalb\cellx10083\clvertalb\cellx10279\clvertalb\cellx10792\trrh172
(in\~millions\~of\~Pesos)\plain\intbl\cf1\f51\fs11\b\qc\super
lvertalb\cellx10083\clvertalb\cellx10279\clvertalb\cellx10792\trrh172\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Mortgages
payable\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
llx10792\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage payable Bouchard
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage payable Terrenos
rcf1\clvertalb\cellx10083\clvertalb\cellx10279\clvertalb\cellx10792\trrh29
\~\cell{
rcf1\clvertalb\cellx10083\clvertalb\cellx10279\clvertalb\cellx10792\trrh29\row}}}
llx10792\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Total mortgages
payable\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
1,436.6\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
dng100\clcfpat12\clcbpat12\cellx10792\trrh206\row}}}\pard\plain\cf1\f51\fs18\ql
\par\pard\plain
Includes accrued interest.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (2)\cell\pard\plain\intbl\cf1\f51\fs16\ql Figures
may not sum due to rounding.\cell{
\par\pard\plain
Exchange rate as of June\~30, 2007: US$1.00 = Ps.3.093.\cell{
\par\pard\plain
Includes issuance expenses (under Argentine GAAP expenses incurred in connection
with the issuance of debt are classified as short-term
or\plain\intbl\cf1\f51\fs16\ql long-term debts, as appropriate).\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (5)\cell\pard\plain\intbl\cf1\f51\fs16\ql Repaid
on October\~29, 2007.\cell{
{\trowd\cellx432\cellx7093\trrh206\row}}}\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql
Hoteles Argentinos secured loan\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On
March\~23, 2005, Credit Suisse First Boston International acquired the US$11.1
million indebtedness incurred by Hoteles Argentinos which had\plain\cf1\f51\fs16\ql
been in default since January 2002. On April\~21, 2006, Hoteles Argentinos reduced
the outstanding principal amount to US$6.0 million with a\plain\cf1\f51\fs16\ql
prepayment, and the unpaid balance was restructured to mature in March 2010 with
scheduled amortization payments as described
below:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0
66\trrh0\row}}}
b\cellx9070\trrh228
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Amount due\cell{
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (US$\~thousands)\cell{
w}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql March 15,
w}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql September 15,
w}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql September 15,
w}}}\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 160
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Interest accrues on the unpaid
principal of this loan at six-month LIBOR plus
7.0%.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In addition, we entered into a
credit default swap agreement with Credit Suisse International which, among other
stipulations, secures payment of\plain\cf1\f51\fs16\ql Hoteles Argentinos\u8217?
indebtedness and provides that, in the event of default, we will be required to
acquire the loan. Simultaneously with the\plain\cf1\f51\fs16\ql amendment of
Hoteles Argentinos\u8217? loan agreement, we amended the credit default swap with
Credit Suisse International. Thus, we would only\plain\cf1\f51\fs16\ql assume
80.0% of Hoteles Argentinos\u8217? indebtedness in the event of default. The
remaining 20.0% was assumed by Starwood Hotels and Resorts\plain\cf1\f51\fs16\ql
Worldwide Inc. (Starwood), an indirect minority shareholder in Hoteles Argentinos,
which has also been instrumented through a credit default swap.
To\plain\cf1\f51\fs16\ql secure performance of our obligations under the agreement
with Credit Suisse International, we made an escrow deposit of US$1.2
million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The loan agreement of Hoteles
Argentinos provides that it may not declare or pay any dividends or make any
distribution on our capital stock, or\plain\cf1\f51\fs16\ql purchase, redeem,
retire, defease or otherwise acquire any of our own shares, or make any
distribution of assets, capital stock, warrants, rights,
options,\plain\cf1\f51\fs16\ql obligations or securities to our shareholders,
except in an amount not to exceed the lesser of (i)\~Hoteles Argentino\u8217?s
excess cash flow for the\plain\cf1\f51\fs16\ql preceding year, or (ii)\~our
consolidated retained earnings and consolidated profits earned; and then only if,
after giving pro forma effect to such action, no\plain\cf1\f51\fs16\ql default or
event of default would occur as a consequence
thereof.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Alto Palermo 10% convertible
notes due 2014\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On August\~20, 2002 Alto
Palermo issued US$50.0 million unsecured convertible notes in exchange for cash and
the liquidation of determined\plain\cf1\f51\fs16\ql liabilities owed to our
shareholders. These convertible notes mature on July\~19, 2014, in accordance with
the extension of the initially scheduled maturity\plain\cf1\f51\fs16\ql date
approved at a meeting of holders of such convertible notes on May\~2, 2006. Such
securities accrue interest payable biannually at a fixed annual
rate\plain\cf1\f51\fs16\ql of 10% and are convertible at any time at the option of
the holder into common shares, face value of Ps.0.10 per share. The conversion rate
per US dollar\plain\cf1\f51\fs16\ql is the lesser of (i)\~30.8642 and (ii)\~the
result obtained by dividing the rate of exchange effective on the date of
conversion by the face value of the\plain\cf1\f51\fs16\ql common shares of Alto
Palermo. As of June\~30, 2007, as a result of conversions previously made, the
outstanding principal amount of Alto\plain\cf1\f51\fs16\ql Palermo\u8217?s
convertible notes was US$47.2 million. In the event all the bondholders exercise
their conversion rights, Alto Palermo\u8217?s common\plain\cf1\f51\fs16\ql shares
would increase from 782.0\~million shares (having a face value of Ps.78.2 million)
to 223.5\~million shares (having a face value of Ps.223.9
million).\plain\cf1\f51\fs16\ql As of June\~30, 2007, we held US$31.7 million of
Alto Palermo\u8217?s convertible
notes.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Our 8% convertible notes due
2007\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On November\~21, 2002, we issued
US$100.0 million of convertible notes due November 2007. The convertible notes
accrue interest at 8%\~per\plain\cf1\f51\fs16\ql annum, payable on a semi-annual
basis. The conversion price is US$0.545 per common share, which means that each
US$1.00 principal\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc
161
\
amount of such convertible note may be exchanged for 1.8347 common shares.
Additionally, each convertible note contains a warrant attached that
grants\plain\cf1\f51\fs16\ql its holder an option to acquire 1.8347 shares at a
price of US$0.6541 each.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql From the date
of issuance through June\~30, 2007, the holders of our convertible notes exercised
their conversion rights for a total of 81.1\~million\plain\cf1\f51\fs16\ql units
with a face value of US$1.0 each, issuing 148.8\~million common shares with a face
value of Ps.1.0 each. In addition, from the date of issuance\plain\cf1\f51\fs16\ql
through June\~30, 2007, warrants issued by us were exercised for a total amount of
US$56.8 million, and 104.2\~million shares were issued in exchange.
We\plain\cf1\f51\fs16\ql received funds aggregating US$68.1
million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of June\~30, 2007, the
outstanding amount of our convertible notes and warrants was US$18.9 million and
43.2\~million, respectively, and the\plain\cf1\f51\fs16\ql amount of our
outstanding shares was 464,969,156. After this date, 18.85\~million convertible
notes were converted and 43.12\~million of warrants were\plain\cf1\f51\fs16\ql
exercised. As a result of the expiration of the conversion of convertible notes and
exercises of warrants, our outstanding capital stock increased
from\plain\cf1\f51\fs16\ql 464,969,156 at June\~30, 2007 to 578,676,460 as of the
date of this annual report.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Alto
Palermo series I and series II notes\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On
May\~11, 2007, Alto Palermo issued two new series of notes in an aggregate
principal amount of US$170 million. Series I consists of
US$120\plain\cf1\f51\fs16\ql million of notes due on May\~11, 2017, which accrue
interest at a fixed rate of 7.875% payable semi-annually on May\~11 and
November\~11 of each year,\plain\cf1\f51\fs16\ql commencing on November\~11, 2007.
The Series I notes mature in a single installment on May\~11,
2017.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Series II consists of Ps.154
million (equivalent to US$50 million) of notes which mature in seven, equal and
consecutive semi-annual installments\plain\cf1\f51\fs16\ql commencing on June\~11,
2009, and which accrue interest at 11%\~per annum, payable on June\~11 and
December\~11 of each year commencing on\plain\cf1\f51\fs16\ql December\~11,
2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Our 8.5% notes due
2017\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On February\~2, 2007, we issued our
2017 fixed rate notes for a total amount of US$150.0 million, which accrue interest
at an annual interest rate of\plain\cf1\f51\fs16\ql 8.5% payable semi-annually and
which mature in a single installment on February\~2,
2017.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql This bond also contains a covenant
limiting our ability to pay dividends which may not exceed the sum
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql 50% of our cumulative consolidated net
income; or\cell{
f1\f51\fs9\ql \~
\par\pard\plain
income if our consolidated interest coverage ratio for our most recent four
consecutive fiscal\plain\intbl\cf1\f51\fs16\ql quarters is at least 3.0 to 1;
or\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql 100% of cumulative consolidated net income
if our consolidated interest coverage ratio for our most recent four consecutive
fiscal quarters\plain\intbl\cf1\f51\fs16\ql is at least 4.0 to 1; or\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql 100% of the aggregate net cash proceeds
received by us or\plain\intbl\cf1\f51\fs16\ql by our restricted subsidiaries from
(a)\~any contribution to our equity capital or to the capital stock of its
restricted subsidiaries or\cell{
\
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\ql issuance
and sale of our qualified capital stock or the qualified capital stock of its
restricted subsidiaries subsequent to the issue of our
notes\plain\intbl\cf1\f51\fs16\ql due 2017, or (b)\~issuance and sale subsequent
to the issuance of our notes due 2017 of our indebtedness or of the indebtedness of
its\plain\intbl\cf1\f51\fs16\ql restricted subsidiaries that has been converted
into or exchanged for its qualified capital stock.\cell{
{\trowd\clvertalc\cellx864\cellx10800\trrh636\row}}}\pard\plain\sb286\cf1\f51\fs16\
b\ql Capital Expenditures\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql 2007 Fiscal
assets\plain\cf1\f51\fs16\ql of Ps.410.1 million primarily in the acquisition of
Bouchard 551 for Ps.243.2 million, Ps.96.4 million thorough Alto Palermo primarily
for the\plain\cf1\f51\fs16\ql improvement of Shopping Centers and Ps.57.1 million
in the Hotel Segment, primarily in Llao Llao for Ps.49.4 million. We also invested
Ps.9.3 million in\plain\cf1\f51\fs16\ql undeveloped plots of
land.\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql 2006 Fiscal
assets\plain\cf1\f51\fs16\ql of Ps.54.1 million primarily in shopping centers
totaling Ps.33.6 million and in Hotel segment of Ps.20.1
assets\plain\cf1\f51\fs16\ql of Ps.79.3 million, primarily in shopping centers
totaling Ps.50.9 million and in the acquisition of Bouchard 710 for Ps.20.4
million. We also invested\plain\cf1\f51\fs16\ql Ps.0.7 million in undeveloped
plots of land.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Principal differences between
Argentine GAAP and U.S. GAAP\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The
principal differences, other than inflation accounting, between Argentine GAAP and
U.S. GAAP are related to the following:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the impact of certain U.S. GAAP
adjustments on equity investees;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the accounting for marketable
securities;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the application of different useful lives
for depreciation purposes;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the deferral of certain preoperating and
organization expenses under Argentine GAAP which are expensed as incurred under
U.S. GAAP;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the accounting for a mortgage payable with
no stated interest;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the accounting for securitization
programs;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the application of certain U.S. GAAP
adjustments to the estimation of the fair value of net assets acquired;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the present-value accounting;\cell{
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the restoration of previously recognized
impairment losses accounting;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the accounting for convertible
notes;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the accounting for troubled debt
restructuring;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the accounting for real estate barter
transactions;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the accounting for the appraisal
revaluation of fixed assets;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the revenue recognition of deferred
brokerage commissions over the term of the respective leases;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the escalation rental revenue under
straight-line method over the term of the leases;\cell{
{\trowd\clvertalc\cellx432\cellx988\cellx1096\cellx8800\trrh206\row}}}\pard\plain\l
i176\sb88\cf1\f51\fs16\ql the deferral of certain revenues from life and disability
insurance and origination fees;\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the amortization of fees related to the
Senior Notes;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the accounting for software obtained for
internal use;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the accounting for increasing rate
debt;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the accounting for certain inventories to
which we have received advance payments that fix sales price and the contractual
terms assure the\plain\intbl\cf1\f51\fs16\ql closing of the sale and the
realization of the gain;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the differences between the price-level
restated amounts of assets and liabilities and their historical basis, that under
Argentine GAAP, are\plain\intbl\cf1\f51\fs16\ql treated as permanent differences
in accounting for deferred income tax calculation purposes while under U.S. GAAP
are treated as\plain\intbl\cf1\f51\fs16\ql temporary differences;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the effect of the reversal of gain from
recognition of financial receivables at net realizable value.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the effect of the reversal of capitalized
exchange differences.\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the effects on deferred income tax of the
foregoing taxes of the above-mentioned reconciling items, as appropriate;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the effect on minority interest of the
above-mentioned reconciling items, as appropriate; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the cumulative effect of initial
application of SAB 108.\cell{
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql In addition, certain other
disclosures required under U.S. GAAP have been included in the U.S. GAAP
reconciliation. See note 17 to our audited\plain\cf1\f51\fs16\ql consolidated
financial statements included elsewhere in this annual
report.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Net income under Argentine GAAP
for the years ended June\~30, 2005, 2006 and 2007 was approximately Ps.103.2
million, Ps.96.6 million and\plain\cf1\f51\fs16\ql Ps.107.1 million, respectively,
compared to approximately Ps.129.4 million, Ps.89.9 million and Ps.103.2 million,
respectively, under U.S. GAAP.\plain\cf1\f51\fs16\ql Shareholders\u8217? equity
under Argentine GAAP as of June\~30, 2006 and 2007, was Ps.1,485.8 million and
Ps.1,646.7 million, respectively, compared\plain\cf1\f51\fs16\ql to Ps.1,158.4
million and Ps.1,358.7 million, respectively, under U.S. GAAP.{\*\bkmkstart
tx46076_21}{\*\bkmkend tx46076_21}\par\pard\plain\sb286\cf1\f51\fs16\b\ql C.
Research and Development, Patents and Licenses,
etc.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We do not have any research,
development, patents or licenses that are material for the conduct of our business.
tx46076_22}\par\pard\plain\sb286\cf1\f51\fs16\b\ql D. Trend
Information\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Subsequent to the strong
progress shown during calendar year 2006, the economy activity continued its
growing path during the current calendar\plain\cf1\f51\fs16\ql year principally
pushed by the internal expense and the favorable evolution of the price of
commodities. Although operating income decreased 1.3% from\plain\cf1\f51\fs16\ql
Ps. 201.6\~million in fiscal year 2006 to Ps. 198.5\~million in 2007, if we exclude
the Sales and Developments segment from the computation and take
into\plain\cf1\f51\fs16\ql account only those activities that generate continued
cash flow (office leases, shopping centers and hotels) operating income amounts to
Ps. 192.4\~million,\plain\cf1\f51\fs16\ql 22.6% higher than in the previous fiscal
year.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Consumption has continued on the
rise. Considering the average for the first 10 months of 2007, shopping center
sales have shown a positive\plain\cf1\f51\fs16\ql development in the whereabouts
of 28.1% (source INDEC) compared to the same period of the previous year. The
positive expansion of these indicators\plain\cf1\f51\fs16\ql is testament to the
good momentum of our tenants\u8217? stores in the various shopping centers.
Construction rates have shown increasing costs (the\plain\cf1\f51\fs16\ql
construction cost rate projects a 20% annual increase for 2007) and the growth rate
of the summary indicator of construction activities (ISAC in
Spanish),\plain\cf1\f51\fs16\ql although positive, is lower than the one recorded
in the past years. This shows the higher competition recently observed in the
industry, a factor that\plain\cf1\f51\fs16\ql weighted in our decision to make
progress in the organization of IRSA-Cyrela, an alliance through which we seek to
take advantage of our\plain\cf1\f51\fs16\ql partners\u8217? know-how of the
building industry and develop our future projects even more efficiently. The hotel
segment, and five stars hotels in\plain\cf1\f51\fs16\ql particular, have been
favored in the last five years by the increase in the number of tourists with high
purchasing power. According to data released by\plain\cf1\f51\fs16\ql the INDEC,
the inflow of foreign tourists to Argentina increased 14% during the first six
months of calendar 2007 compared to the same period of the\plain\cf1\f51\fs16\ql
previous year, resulting in a 25.8% growth in the tourists\u8217? total spending
during the period. In addition, the demand for four and five star
hotels\plain\cf1\f51\fs16\ql increased 8.3%, whereas high category hotel
guests\u8217? spending reached 9.4%.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Although we expect the positive economic trends to continue, we cannot assure this
will occur. Our business is largely affected by economic\plain\cf1\f51\fs16\ql
downturns. Any decrease in investment and consumption decisions could cause a
reduction in retail sales, sales of real state and demand for office
and\plain\cf1\f51\fs16\ql commercial
space.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We have an asset portfolio of
Ps.4,145 million book value in attractive locations and with top-level lessees.
Cash flow generation from our business\plain\cf1\f51\fs16\ql is growing at
different paces according\par\pard\plain\cf1\f51\fs13\ql
\
to each segment. The shopping center segment is our largest cash flow generator
while reaching high occupancy levels. The credit card business
segment\plain\cf1\f51\fs16\ql is growing at a significant pace, being the second
segment in sales during 2007 fiscal year. Rentals in the Offices segment has
experienced a substantial\plain\cf1\f51\fs16\ql increase in income due to the
addition of new properties as well as sustained increases in occupancy rates and
rising prices included in lease agreements\plain\cf1\f51\fs16\ql to match
increasing market demand. Hotels have also shown an improvement in both tariffs and
occupancy levels. The sales value of property in the\plain\cf1\f51\fs16\ql
locations where our developments are located has been escalating, and there has
been considerable increase in the demand for such properties.
This\plain\cf1\f51\fs16\ql activity, however, has not been fully reflected in
terms of value, yet, because of revenue recognition accounting principles. We
believe our assets have a\plain\cf1\f51\fs16\ql great intrinsic value that makes
them attractive due to their potential for
growth.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Development and sale of
properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In our fiscal year ended
June\~30, 2007, revenues from our Sales and Development segment were Ps.75.8
million, compared to Ps.104.0 million in\plain\cf1\f51\fs16\ql fiscal year
2006.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Likewise, the current scenario
provides incentives for the development of projects linked to our real estate
activity. Therefore, during the 2008 fiscal\plain\cf1\f51\fs16\ql year we expect
to complete the projects under development, as well as to analyze new
undertakings.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Apartment Projects
Under Development\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Torre Caballito,
City of Buenos Aires\plain\cf1\f51\fs16\ql . This undeveloped 1.8 hectare property
is situated in the northern area of Caballito\u8217?s
residential\plain\cf1\f51\fs16\ql neighborhood in the City of Buenos Aires. On
May\~4, 2006, we and Koad S.A. (\u8220?Koad\u8221?), an Argentine developer,
entered into an asset\plain\cf1\f51\fs16\ql exchange agreement valued at US$7.5
million pursuant to which we sold to Koad plot number 36 of \u8220?Terrenos de
Caballito\u8221? in exchange for\plain\cf1\f51\fs16\ql Koad\u8217?s agreement to
construct, at its sole expense, a residential complex to be named \u8220?Caballito
Nuevo.\u8221? Koad has agreed to develop\plain\cf1\f51\fs16\ql a residential
complex consisting of two 34-story towers containing 220 apartments each,
consisting of one, two and three bedroom residential units
with\plain\cf1\f51\fs16\ql surface areas ranging from 40 to 85 square meters. The
proposed apartment complex is currently expected to offer a wide variety of
amenities and\plain\cf1\f51\fs16\ql services. The total area of this apartment
complex that will be for sale is estimated to be approximately 28,000 square
meters. On August 2009, we will\plain\cf1\f51\fs16\ql be entitled to ownership of
26.7% of the total square meters and 25% of the parking lots of the entire complex,
representing 118 apartments and 55\plain\cf1\f51\fs16\ql parking lots located in
Tower 1. As a result of an incentive scheme agreed to with Koad, the number of
square meters we will receive could vary\plain\cf1\f51\fs16\ql according to the
project\u8217?s date of completion. As a result of this transaction, Koad granted
to us a first lien mortgage on the property to secure up\plain\cf1\f51\fs16\ql to
US$7.4 million of its obligations to us and posted a surety bond in our favor
supporting an additional US$2.0 million of Koad\u8217?s obligations
to\plain\cf1\f51\fs16\ql us.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Dock
IV, City of Buenos Aires\plain\cf1\f51\fs16\ql . This luxury office building has a
total surface area of approximately 22,000 square meters, and will offer
11,000\plain\cf1\f51\fs16\ql square meters of large and versatile office space for
lease. The building\u8217?s layout welcomes both companies requiring smaller office
space,\plain\cf1\f51\fs16\ql averaging 200 square meters, and corporations in need
of an entire floor. The building\u8217?s development is currently at its first
stage, bid submission\plain\cf1\f51\fs16\ql for the foundations and lobby. The
building will have nine floors with offices and commercial shops on the first
floor. Paper work seeking permits for bid\plain\cf1\f51\fs16\ql submissions for
the second stage is still pending.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Torres Renoir, Dock III\plain\cf1\f51\fs16\ql . On November\~25, 2004 a deed of
conveyance of title for a certain plot known as plot 1.c. was executed in favor
of\plain\cf1\f51\fs16\i\ql Desarrollos y Proyectos
Sociedad\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 166
\
Contents}}\par\pard\plain\sa44\cf1\f51\fs16\i\ql An\u243?nima\plain\cf1\f51\fs16\ql
(\u8220?DYPSA\u8221?). This deed establishes in kind consideration for the sale,
and at the same time granted DYPSA the option to\plain\cf1\f51\fs16\ql acquire in
barter another plot known as plot 1.e. This option acts as an alternative to the
construction of the 13\plain\cf1\f51\fs11\ql\super th\plain\cf1\f51\fs16\ql
floor of the building to be developed on\plain\cf1\f51\fs16\ql plot 1.c. As a
guaranty for this transaction, DYPSA established a first lien mortgage for US$8.03
on plot 1.c. and for US$10.8 on plot 1.e. DYPSA\plain\cf1\f51\fs16\ql contracted
an obligation to transfer 4.642 square meters at the building constructed on
certain plot known as plot 1c, representing 28.5% of the
apartment\plain\cf1\f51\fs16\ql surface of such building, and 6.421 square meters
at the building constructed on certain plot known as plot 1e, representing 31.5% of
the total apartment\plain\cf1\f51\fs16\ql surface of that building. During
December 2006 we began the sales of the available
units.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On May\~18, 2005, Buenos Aires
Trade\~& Finance Center S.A. (\u8220?Trade\u8221?) signed a purchase agreement
relating to certain plot known as\plain\cf1\f51\fs16\ql plot 1.d., with then owner
of this plot, DYPSA. On that date Trade paid DYPSA US$2.15 million. On January\~19,
2006, a partial payment of the\plain\cf1\f51\fs16\ql outstanding balance of US$1.0
million was made.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On July\~17, 2006,
Trade paid the outstanding balance and the parties signed the transfer deed. On
this date, Trade took possession of plot 1d with\plain\cf1\f51\fs16\ql Alvear
Palace Hotel S.A. and Desarrollos Premium Plus
S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql To provide for the sustained
increase in the demand for residential apartments in the Puerto Madero area, during
fiscal year 2006 we entered into\plain\cf1\f51\fs16\ql bartering contracts
allowing to start the construction of these two exclusive dwelling towers of 37 and
40-storey. In line with the boom of developments\plain\cf1\f51\fs16\ql in the
area, the market has great expectations on the project given its exceptional
features. On September\~30, 2006 due to the interest shown in
this\plain\cf1\f51\fs16\ql project, the marketing of plot 1c was launched as the
rate of progress was 78.3%. During fiscal year 2007 preliminary sales contracts
were signed for\plain\cf1\f51\fs16\ql 76.4% of the units available. In respect of
plot 1e works started and the percentage of work completed is 4.5%. On November\~2,
2007, the Company and\plain\cf1\f51\fs16\ql the developer decided to replace the
swap agreement for plot 1e for a payment of US$18.2 million, US$4.6 million of
which were paid on that date and\plain\cf1\f51\fs16\ql the balance will be
received by the Company over the next six months. The income resulting from this
transaction amounts to approximately US$4.7\plain\cf1\f51\fs16\ql
million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Completed Apartment
Projects\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Edificios Cruceros, City of
Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql \u8220?Edificios
Cruceros\u8221? is a project located in the Puerto Madero area. This dwelling
building\plain\cf1\f51\fs16\ql covers 6,400 square meters of surface area of which
3,633 belong to us, and it is close to the \u8220?Edificios Costeros\u8221? office
building. This\plain\cf1\f51\fs16\ql project targets the high-income segment of
the population and all its common areas have views of the river. This development
was partially financed\plain\cf1\f51\fs16\ql through the anticipated sale of its
apartments. Works are 100% finished and as of June\~30, 2007 more than 90% of the
units had been sold.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Barrio Chico,
City of Buenos Aires.\plain\cf1\f51\fs16\ql In March 2003 we purchased a plot of
land on San Martin de Tours Street in the district of Barrio Parque,
an\plain\cf1\f51\fs16\ql exclusive residential zone in the City of Buenos Aires.
At the time the sales contract was signed, US$0.08 million were prepaid. In June
2003 at the time\plain\cf1\f51\fs16\ql the deed of title was transferred, US$0.23
million were paid. At that time, the property was mortgaged to Providence for
US$0.75 million, to guarantee\plain\cf1\f51\fs16\ql 25% of the housing units we
were obligated to deliver upon the building\u8217?s completion. We financed with
its own working capital the construction\plain\cf1\f51\fs16\ql of this luxury
residential complex designed for high-income customers. This is a unique Project
located in Barrio Parque, an exclusive residential zone in\plain\cf1\f51\fs16\ql
the City of Buenos Aires. During May 2006 the successful marketing of this project
was launched. The image of the product was previously
developed\plain\cf1\f51\fs16\ql with the name of \u8220?Barrio Chico\u8221? with
advertisements in the most important media. As of June\~30 2007 the project is
finished and only 3\plain\cf1\f51\fs16\ql units remain to be
sold.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 167
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Villa Celina, Greater Buenos
Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Villa Celina is a 400-plot
residential community for the construction of single family homes located in
the\plain\cf1\f51\fs16\ql residential neighborhood of Villa Celina on the
southeastern edge of the City of Buenos Aires. We have been developing this
property in several stages\plain\cf1\f51\fs16\ql since 1994. The first three
stages involved 219 lots, each measuring on average 347 square meters and the last
two stages involve 181 lots. As of June\~30,\plain\cf1\f51\fs16\ql 2007, 100% of
the residential community had been
sold.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Residential
Communities\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In the residential
communities market, we acquire undeveloped properties located in suburban areas or
neighborhoods near the large cities to\plain\cf1\f51\fs16\ql develop private
neighborhoods and country clubs in which to sell vacant lots for the construction
of single family homes. In these properties we build\plain\cf1\f51\fs16\ql streets
and roads and arrange for the provision of basic municipal services and amenities
such as open spaces, sports facilities and security. We seek
to\plain\cf1\f51\fs16\ql capitalize on improvements in transportation and
communication around the City of Buenos Aires, the growing suburbanization of the
region and the shift\plain\cf1\f51\fs16\ql of the population moving to
countryside-type residential
communities.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql An important factor in the
trend towards living in suburban areas has been the improvements and additions to
the Autopista Panamericana, Avenida\plain\cf1\f51\fs16\ql General Paz and Acceso
Oeste highways, which significantly reduce traveling time, encouraging a
significant number of families to move to the new\plain\cf1\f51\fs16\ql
residential neighborhoods. Furthermore, improvements in public train, subway and
bus transportation since their privatization has also influenced the
trend\plain\cf1\f51\fs16\ql to adopt this
lifestyle.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of June\~30, 2007, our
residential communities for the construction of single-family homes for sale in
Argentina had a total of 62,990 square\plain\cf1\f51\fs16\ql meters of salable
area in the Abril, residential communities located in the province of Buenos
Aires.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Benavidez,
Tigre\plain\cf1\f51\fs16\ql . In the district of Benavidez, Municipality of Tigre,
35 km north from downtown Buenos Aires, we are developing a 99.8
hectare\plain\cf1\f51\fs16\ql gated residential complex known as \u8220?El
Encuentro\u8221?. On May\~21, 2004 an exchange deed was signed whereby DEESA agreed
to pay\plain\cf1\f51\fs16\ql US$3.98 million to Inversora Bol\u237?var, of which
US$0.98 million were paid and the balance of US$3.0 million will be paid through
the exchange of\plain\cf1\f51\fs16\ql 110 residential plots already chosen and
identified in the option contract signed in December\~3, 2003. Furthermore, through
the same act, DEESA set up a\plain\cf1\f51\fs16\ql first mortgage in favor of
Inversora Bol\u237?var on real property amounting to US$3.0 million in guarantee of
compliance with the operation and\plain\cf1\f51\fs16\ql delivered US$0.5 million
to Inversora Bol\u237?var corresponding to a deposit in guarantee of performance on
the obligations undertaken. This balance\plain\cf1\f51\fs16\ql will not accrue
interest in favor of DEESA, and will be returned as follows: 50% of the outstanding
balance at the time of certification of 50% of the\plain\cf1\f51\fs16\ql progress
of work and the remaining upon certification of 90% of work progress. Within this
property, a closed quarter called \u8220?El Encuentro\u8221?\plain\cf1\f51\fs16\ql
is developed, with a direct access to highway 9 that facilitates the way into and
out of the city. Considering the high price of the plots in the north of
the\plain\cf1\f51\fs16\ql province of Buenos Aires, mostly in the place in which
this enterprise is placed, IRSA has great expectations for marketing the land
through the bartering\plain\cf1\f51\fs16\ql system. We estimate that the sale of
the units may be launched in early 2008. As of June\~30, 2007, the work progress
degree is 90%.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 168
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Land
Reserves\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We have acquired large
undeveloped properties as land reserves located in strategic areas for the future
development of office and apartment\plain\cf1\f51\fs16\ql buildings, shopping
centers and single family housing. We have acquired what we believe to be two of
the largest and most important undeveloped river\plain\cf1\f51\fs16\ql front plots
in Buenos Aires, Puerto Retiro and Santa Mar\u237?a del Plata, for the future
development of residential and office spaces. In addition, we\plain\cf1\f51\fs16\ql
have benefited from the improvement of land values during periods of economic
growth, As of June\~30, 2007, our land reserves totaled 17
properties\plain\cf1\f51\fs16\ql consisting of approximately 3079 hectares
(including Rosario, Caballito, Vicente Lopez and Coto C.I.C.S.A. (\u8220?
Coto\u8221?) air space owned by\plain\cf1\f51\fs16\ql Alto
Palermo).\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Land Reserves in the City
of Buenos Aires\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Solares de Santa
Mar\u237?a, City of Buenos Aires\plain\cf1\f51\fs16\b\ql
(\plain\cf1\f51\fs16\b\i\ql ex Santa Mar\u237?a del
Plata\plain\cf1\f51\fs16\b\ql ).\plain\cf1\f51\fs16\ql Solares de Santa Mar\u237?a
is a 70 hectares property\plain\cf1\f51\fs16\ql facing the R\u237?o de la Plata in
the South of Puerto Madero, 10 minutes from the National Government House. This is
an urbanization project\plain\cf1\f51\fs16\ql developed through our subsidiary
Solares de Santa Mar\u237?a S.A. (\u8220?Solares de Santa Mar\u237?a\u8221?), which
was recently incorporated. This\plain\cf1\f51\fs16\ql project has a residential
profile and mixed uses, it is currently expected to have offices, stores, hotels,
sport and nautical clubs, service areas with schools,\plain\cf1\f51\fs16\ql
supermarkets, parking lots, etc.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The
project ultimately submitted for approval to government authorities included
various proposals made by advisors of the Urban Environmental\plain\cf1\f51\fs16\ql
Plan Council (\plain\cf1\f51\fs16\i\ql Consejo del Plan Urbano
Ambiental\plain\cf1\f51\fs16\ql ) and contemplates the assignment of 358,000
square meters to become public parks including a 90,000\plain\cf1\f51\fs16\ql
square meter green sector, boulevards designated for access to and walking around
the neighborhood and the transference of all water areas (especially
the\plain\cf1\f51\fs16\ql zone in front of the commercial area) for public use.
The river presence in this part of the city has been reserved for general public
use, including space\plain\cf1\f51\fs16\ql for a marina which may be built in the
future.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql While we await the city
government approvals and authorizations, we have contacted national and
international investors with experience in this\plain\cf1\f51\fs16\ql type of real
state developments.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As part of the
project, we sold 31,491,932 shares for US$10.6 million to Mr.\~Israel Sutton
Dabbah, who is part of the Sutton Group. This sale\plain\cf1\f51\fs16\ql
represents the 10% of Solares de Santa Mar\u237?a capital stock and is to be paid
as follows: (i)\~an initial payment of US$1,500,000; and (ii)\~the
balance\plain\cf1\f51\fs16\ql of US$9,100,000 payable on December\~26, 2007. Under
the purchase agreement a first grade pledge on certain assets owned by the buyer
was granted to\plain\cf1\f51\fs16\ql us and our subsidiary Palermo Invest S.A.,
the sellers, in order to secure the payment
price.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Puerto
Retiro\plain\cf1\f51\fs16\ql . Puerto Retiro is an 8.3 hectare undeveloped
riverside property bounded by the Catalinas and Puerto Madero office zones to the
west,\plain\cf1\f51\fs16\ql the transportation hub Retiro to the north and the
R\u237?o de la Plata to the south and east. One of the only two significant
privately owned waterfront\plain\cf1\f51\fs16\ql properties in The City of Buenos
Aires, Puerto Retiro may currently be utilized only for port activities. We have
initiated negotiations with municipal\plain\cf1\f51\fs16\ql authorities in order
to rezone the area. Our plan is to develop a 360,000 square meter financial center.
The launching date has not been settled and\plain\cf1\f51\fs16\ql consequently,
the estimated cost and financing method are not decided. We own a 50% interest in
Puerto Retiro through our wholly-owned subsidiary\plain\cf1\f51\fs16\ql Inversora
Bol\u237?var S.A. (\u8220?Inversora Bol\u237?var\u8221?). See \u8220?\u8211?Legal
Proceedings \u8211?Puerto
Retiro.\u8221?\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Caballito, Ferro
Project\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql This is a property of
approximately 25,539 square meters in the City of Buenos Aires, neighborhood of
Caballito, one of\plain\cf1\f51\fs16\ql the most densely populated of the
city,\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 169
\
which Alto Palermo purchased in October 1998. This plot would allow developing a
shopping center having 30,000 square meters, a hypermarket, a\plain\cf1\f51\fs16\ql
cinema complex, and several recreation and entertainment activity areas. We are
currently working to define the commercial project. The approval of
the\plain\cf1\f51\fs16\ql authorization of the government of the City of Buenos
Aires for the development of a shopping center, an office building and a private
hospital in this\plain\cf1\f51\fs16\ql plot has not been
granted.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Land Reserves in the
Province of Buenos Aires\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Pereiraola,
Hudson\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Through Inversora Bolivar,
we own a 100.0% interest in Pereiraola S.A., a company whose principal asset is a
130 hectare\plain\cf1\f51\fs16\ql undeveloped property adjacent to our Abril
community. We intend to use this property to develop a private community for the
construction of single\plain\cf1\f51\fs16\ql family homes targeted at the middle-
income market. We have not yet established the costs and financing method for this
proposed project, but we have\plain\cf1\f51\fs16\ql already obtained the necessary
municipal permits. The plot\u8217?s book value is estimated to be Ps.21.7 million
as of June\~30, 2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Pilar\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql Pilar is a 74 hectare
undeveloped land reserve property located close to Pilar City, 55 kilometers
northwest of downtown of the City of\plain\cf1\f51\fs16\ql Buenos Aires. The
property is easily accessible due to its proximity to the Autopista del Norte. The
Pilar area is one of the most rapidly developing areas\plain\cf1\f51\fs16\ql of
the country. We are considering several alternatives for this property including
the development of a residential community or the sale of this
property\plain\cf1\f51\fs16\ql as it is and, therefore, we do not have a cost
estimate or a financing plan. The plot\u8217?s book value is estimated to be Ps.3.4
million as of June\~30,\plain\cf1\f51\fs16\ql
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Vicente L\u243?pez, Olivos,
Provincia de Buenos Aires\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On
January\~16, 2007, we acquired 90% and 10%, respectively, of the total shares
of\plain\cf1\f51\fs16\ql Rummaala S.A. (\u8220?\plain\cf1\f51\fs16\i\ql
Rummaala\plain\cf1\f51\fs16\ql \u8221?), the main asset of which is a plot of land
located in Vicente Lopez, Province of Buenos Aires. The
purchase\plain\cf1\f51\fs16\ql price was US$21.17 million, payable as follows:
(i)\~US$4.25 million in cash and (ii)\~by delivering certain units of the building
to be constructed in the\plain\cf1\f51\fs16\ql land owned by Rummaala in the
amount of US$16.92 million, within a 4-year term as from the approval date of the
plans by the related authorities or\plain\cf1\f51\fs16\ql when the facilities be
vacated, whichever last occurs.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As
security for compliance with the construction of the future building and transfer
of the future units, the shares acquired were
pledged.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Simultaneously with the former
transaction, Rummaala acquired a plot of land adjacent to its own property for a
total consideration of US$15.00\plain\cf1\f51\fs16\ql million, payable as follows:
(i)\~US$0.50 million in cash; (ii)\~by delivering certain units of buildings
Cruceros I and II in the amount of US$1.25 million\plain\cf1\f51\fs16\ql and
(iii)\~by delivering certain units of the building to be constructed in the land
acquired for a total consideration of US$13.25 million, within a 40-
month\plain\cf1\f51\fs16\ql term considered as from the approval date of the plans
by the related authorities or when the facilities be vacated, whichever last
occurs.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Other Undeveloped Plots in
the City and Province of Buenos Aires\plain\cf1\f51\fs16\i\ql
.\plain\cf1\f51\fs16\ql Our land reserve portfolio also includes nine land reserve
properties located in\plain\cf1\f51\fs16\ql Buenos Aires and its surrounding
areas. These properties are projected for future developments of offices, shopping
centers, apartment buildings and\plain\cf1\f51\fs16\ql residential communities.
The main properties under this category include Merlo, Mariano Acosta and
Pontevedra.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 170
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Land Reserves in Other
Provinces\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Torres Rosario Project,
City of Rosario, Province of Santa Fe.\plain\cf1\f51\fs16\ql IRSA\u8217?s
subsidiary Alto Palermo owns a plot of land covering
approximately\plain\cf1\f51\fs16\ql 50,000 square meters of surface area in the
city of Rosario, in the place in which the Alto Rosario Shopping Center is located.
A residential complex will\plain\cf1\f51\fs16\ql be built in this plot of
land.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Neuqu\u233?n Project, Province
of Neuqu\u233?n\plain\cf1\f51\fs16\ql . On July\~6, 1999, Alto Palermo acquired a
94.6% share in Shopping Neuqu\u233?n amounting\plain\cf1\f51\fs16\ql to Ps.4.2
million. Alto Palermo paid Ps.0.9 million on September\~1, 1999, and the remaining
Ps.3.3 million were to be paid on July\~5, 2001, or at the
time\plain\cf1\f51\fs16\ql of the opening of the shopping center to be constructed
in the building owned by Shopping Neuqu\u233?n, whichever happened first. As of
June\~30, 2007\plain\cf1\f51\fs16\ql the remaining was
paid.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The only asset of Shopping
Neuqu\u233?n is a plot of land of 50,000 square meters approximately, in which we
hope to build a shopping center.\plain\cf1\f51\fs16\ql On September\~20, 2007 the
study are feasible. Shopping\plain\cf1\f51\fs16\ql Neuqu\u233?n S.A. has 150 days
to submit the work plans from the date of the declaration. See \u8220?\u8212?Legal
Proceedings\u8212?Legal issues\plain\cf1\f51\fs16\ql with the City Hall of
Neuqu\u233?n.\u8221?\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Canteras Natal
Crespo, Province of C\u243?rdoba\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql
The first guidelines for development of this project are in process on the basis of
the Master\plain\cf1\f51\fs16\ql Plan of the Chilean architect firm called URBE.
Also, preliminary presentations have been submitted to the Municipality of La
Calera and to the\plain\cf1\f51\fs16\ql Provincial
Government.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql This undertaking is
characterized by an attractive and varied residential offer of land, dwelling areas
of low and medium density, and commercial\plain\cf1\f51\fs16\ql and social areas.
Each one of the quarters will have a full service infra-structure and will be
distinguished by the particularities of the land in the\plain\cf1\f51\fs16\ql
outstanding natural environment of the Sierras Chicas of the Province of C\u243?
rdoba.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Canteras Natal Crespo S.A. is a
company located in the Province of C\u243?rdoba that will have as main activity the
urbanization of own or third\plain\cf1\f51\fs16\ql parties plots of land, the so-
called countries, lots for sale or rent, production of quarries, real estate
business and construction of houses.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql
Offices and other non-shopping center rental
properties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We are engaged in the
acquisition, development and management of offices and other rental properties in
Argentina. As of June\~30, 2007, we\plain\cf1\f51\fs16\ql directly and indirectly,
owned interests in 24 office and other rental properties in Argentina which
comprised 234,320 square meters of gross leaseable\plain\cf1\f51\fs16\ql area. Of
these properties, 17 were office properties which comprised 138,315 square meters
of gross leaseable area. For fiscal year 2007, we had
revenues\plain\cf1\f51\fs16\ql from office and non- shopping center leases
properties of Ps.55.7 million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql All our
office rental property in Argentina is located in Buenos Aires City. All of these
properties are rented to various different premium tenants.\plain\cf1\f51\fs16\ql
For the year ended June\~30, 2007 the average occupancy rate for all IRSA\u8217?s
properties in the Offices and other rental property segment
was\plain\cf1\f51\fs16\ql approximately 97.37%. Seven different tenants accounted
for approximately 26.75% of IRSA\u8217?s monthly office rental and 28.91% of
IRSA\u8217?s\plain\cf1\f51\fs16\ql total revenues for fiscal year 2007 for the
same concept. IRSA\u8217?s seven main office rental tenants are: Grupo Total
Austral, Finterbusch Pickenhayn\plain\cf1\f51\fs16\ql Sibille S.C. (KPMG),
Microsoft Argentina S.A., Techint Cia. Tecnica Int. SACeI, Occidental Argentina ,
Exploration and Production Inc., Marval\~&\plain\cf1\f51\fs16\ql O\u8217?Farrel
and Cisco Systems Argentina S.A.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\ql Credit Card
Operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Revenues from our Credit Card
segment increased 73.2% from Ps.123.0 million in fiscal year 2006 to Ps.213.0
million in fiscal year 2007.\~This\plain\cf1\f51\fs16\ql increase was caused by a
number of factors, including: favorable macroeconomic conditions in fiscal year
2007, which showed a general increase in\plain\cf1\f51\fs16\ql consumption;\~an
increase of 201,114 in the number of newly issued credit cards;\~the opening of
four new branches; an increase og 90.5% in sales made\plain\cf1\f51\fs16\ql with
our shopping card and an increase of 49% in the number of stores accepting our
card; and an increase of income from financial operations and\plain\cf1\f51\fs16\ql
others.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We are currently considering
strategic alternatives with respect to our investment in Tarshop which, due to its
recent growth in size and\plain\cf1\f51\fs16\ql profitability, competes
increasingly with credit card companies that are substantially larger. As a result,
we are currently considering alternatives to\plain\cf1\f51\fs16\ql maximize the
value of our investment in Tarshop, including its possible merger with, or sale to,
another entity engaged in the credit card
industry.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Shopping
centers\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We are engaged in purchasing,
developing and managing shopping centers through our subsidiary Alto Palermo. As of
June\~30, 2007, Alto Palermo\plain\cf1\f51\fs16\ql operated and owned majority
interests in ten shopping centers, five of which are located in the City of Buenos
Aires, one of which is located in the\plain\cf1\f51\fs16\ql greater Buenos Aires
metropolitan area and the remaining are located in the interior Argentine cities of
Salta, Rosario, Mendoza and C\u243?
rdoba.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql At June\~30, 2007, Alto
Palermo\u8217?s shopping centers comprised a total of 224,138 square meters of
gross leasable area (excluding certain space\plain\cf1\f51\fs16\ql occupied by
hypermarkets which are not Alto Palermo\u8217?s tenants and the surface area of the
Panamerican Mall that includes several projects one of\plain\cf1\f51\fs16\ql which
is the construction of a shopping center). For the year ended June\~30, 2007, the
average occupancy rate of Alto Palermo\u8217?s shopping
center\plain\cf1\f51\fs16\ql portfolio was approximately
97.0%.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In December 2006, Alto Palermo
acquired a 100% of Empalme S.A. which owns C\u243?rdoba Shopping, a shopping center
covering 35,000 square\plain\cf1\f51\fs16\ql meters of surface area, having 160
commercial stores, 12 movie theatres and parking lot for 1,500 vehicles, located in
the Villa Cabrera neighborhood of\plain\cf1\f51\fs16\ql C\u243?rdoba
City.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As a result of our acquisition of
several shopping centers and a corporate reorganization of Alto Palermo, we
recently centralized management of\plain\cf1\f51\fs16\ql our shopping centers in
Alto Palermo. Alto Palermo is responsible for providing common area electrical
power, a main telephone switchboard, central air\plain\cf1\f51\fs16\ql
conditioning and other basic common area
services.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Hotels
operations\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql At the end of the 1997 fiscal
year, we acquired the Hotel Llao Llao, our first luxury hotel. Some months later,
as part of the acquisition from\plain\cf1\f51\fs16\ql P\u233?rez Companc of the
Old Alto Palermo, we acquired an indirect 50% interest in the Hotel
Intercontinental in Buenos Aires which we own\par\pard\plain\cf1\f51\fs13\ql
\
through our subsidiary Inversora Bol\u237?var. In March 1998, we acquired the Hotel
Libertador. During fiscal year 1999, we sold a 20% interest in
the\plain\cf1\f51\fs16\ql Hotel Libertador to Hoteles Sheraton de Argentina S.A.,
(\u8220?Hoteles Sheraton de Argentina\u8221?) and during the fiscal year 2000, we
sold 50% of\plain\cf1\f51\fs16\ql our interest in the Hotel Llao Llao to the
Sutton Group. During fiscal year 2007 we increased our share in Inversora Bolivar
by 100% and obtained an\plain\cf1\f51\fs16\ql indirect share in the Hotel
Intercontinental of 76.34%.{\*\bkmkstart tx46076_23}{\*\bkmkend
tx46076_23}\par\pard\plain\sb286\cf1\f51\fs16\b\ql E. Off-Balance Sheet
Arrangements\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql At June\~30, 2007, we did
not have any off-balance sheet transactions, arrangements or obligations with
unconsolidated entities or others that are\plain\cf1\f51\fs16\ql reasonably likely
to have a material effect on our financial condition, results of operations or
liquidity.{\*\bkmkstart tx46076_24}{\*\bkmkend
tx46076_24}\par\pard\plain\sb286\cf1\f51\fs16\b\ql F. Tabular Disclosure of
Contractual Obligations\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
6\clvertalb\cellx8746\clvertalc\cellx9738\clvertalc\cellx9833\clvertalb\cellx10133\
clvertalc\cellx10791\trrh-66\trrh0
6\clvertalb\cellx8746\clvertalc\cellx9738\clvertalc\cellx9833\clvertalb\cellx10133\
clvertalc\cellx10791\trrh-66\trrh0\row}}}
lx10799\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Payments due by period\cell{
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Less\~than
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc 1
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc 1\u8211?
3\~years\cell\pard\plain\intbl\cf1\f51\fs13\ql
3\u8211?5\~years\cell\pard\plain\intbl\cf1\f51\fs13\ql
More\~than
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc 5 years\cell{
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (Ps. millions)\cell{
rrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Short term debt
\u8212?\~\~\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
\u8212?\~\~\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
\u8212?\~\~\cell{
rrh206\row}}}
cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Long term debt
rrh206
loans\plain\intbl\cf1\f51\fs11\ql\super
rrh206\row}}}
cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Secured floating rate notes due
rrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Hoteles Argentinos S.A. secured
loan\plain\intbl\cf1\f51\fs11\ql\super (3)\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh206\row}}}
cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto Palermo 10% convertible notes
rrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql IRSA 8% convertible notes due
rrh206\row}}}
cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto Palermo 11% Series II
notes\plain\intbl\cf1\f51\fs11\ql\super
rrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto Palermo 7.875% Series I notes
369\cell{
rrh206\row}}}
cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql IRSA 8.5% notes due
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr (2\cell\pard\plain\intbl\cf1\f51\fs16\ql
0133\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10791\trrh29
\~\cell{
0133\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10791\trrh29\row}}}
rrh206
461\cell{
rrh206\row}}}
cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Purchase
Obligations\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Seller financing for acquisition of
Palermo Invest S.A.\plain\intbl\cf1\f51\fs11\ql\super
rrh206\row}}}
cellx10791\trrh206
Empalme\plain\intbl\cf1\f51\fs11\ql\super
rrh206
Rummaala\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh206\row}}}
cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Debt for the purchase of
Rummaala\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh206
Suppliers\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh206\row}}}
cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage payable \u8211? Bouchard
rrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage payable \u8211? Llao
Llao\plain\intbl\cf1\f51\fs11\ql\super
rrh206\row}}}
cellx10791\trrh206
\~\cell{
0133\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10791\trrh29\row}}}
rrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Other long term
rrh206\row}}}
cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Guarantee
rrh206
1\cell{
rrh206\row}}}
cellx10791\trrh206
1\cell{
rrh206
462\cell{
rrh206\row}}}
\~\cell{
0133\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10791\trrh29\row}}}\pard\plain\f0\fs4\par
\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql Accrued
interest at Libor rate + 200 bps\cell{
\
\par\pard\plain
\par\pard\plain
\par\pard\plain
interest at fixed rate of 10%\~per annum\cell{
\par\pard\plain
\par\pard\plain
\par\pard\plain
interest at fixed rate of 7.875%\~per annum\cell{
\par\pard\plain
interest at fixed rate of 8.5%\~per annum\cell{
\par\pard\plain
interest at fixed rate of 8%\~per annum.\cell{
\par\pard\plain
Accrued interest at fixed rate of 6%\~per annum.\cell{
\par\pard\plain
Accrued interest at fixed rate of 8.50%\~per annum.\cell{
\par\pard\plain
Accrued interest at fixed rate of 7%\~per annum.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (13)\cell\pard\plain\intbl\cf1\f51\fs16\ql Not
including unaccrued interest.\cell{
tx46076_25}\pard\plain\sb286\cf1\f51\fs16\b\ql G. Safe
Harbor\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql See the discussion at the
beginning of this Item\~5 and \u8220?Forward Looking Statements\u8221? in the
introduction of this annual report for the\plain\cf1\f51\fs16\ql forward looking
safe harbor provisions.\par\pard\plain\cf1\f51\fs27\ql \~{\*\bkmkstart item_1_3_11}
\par\pard\plain
ITEM\~6.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Directors, Senior Management and
Employees\cell{
tx46076_27}\pard\plain\sb88\cf1\f51\fs16\b\ql A. Directors and Senior
Management\par\pard\plain\sb88\cf1\f51\fs16\b\ql Composition of the Board of
Directors\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We are managed by a board of
directors. Our by-laws provide that our board of directors will consist of a
minimum of eight and a maximum of\plain\cf1\f51\fs16\ql fourteen full directors
and eight to fourteen alternate directors. Currently our board of directors is
composed of twelve directors and six alternate directors.\plain\cf1\f51\fs16\ql
Our directors and alternate directors are elected for three-year terms by a
majority vote of our shareholders at a general ordinary
shareholders\u8217?\plain\cf1\f51\fs16\ql meeting. Our directors and alternate
directors may be reelected indefinitely.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Alternate directors will be summoned to exercise their functions in case of
absence, vacancy of death of a full director up to a new director
were\plain\cf1\f51\fs16\ql designated.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The table below shows information
about our directors and alternate directors:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
rdrcf1\clvertalb\cellx9998\clvertalb\cellx10292\clbrdrb\brdrs\brdrcf1\clvertalb\cel
lx10797\trrh688
Name\cell\pard\plain\intbl\cf1\f51\fs13\ql
birth\cell\pard\plain\intbl\cf1\f51\fs13\ql
Position\cell\pard\plain\intbl\cf1\f51\fs13\ql
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc current
appointment\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Term
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Current
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc position
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc held
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc since\cell{
b\cellx9998\clvertalb\cellx10292\clvertalb\cellx10797\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Eduardo S.
Elsztain\cell\pard\plain\intbl\cf1\f51\fs13\ql
Chairman\cell\pard\plain\intbl\cf1\f51\fs13\ql
b\cellx9998\clvertalb\cellx10292\clvertalb\cellx10797\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Sa\u250?l
Zang\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql First Vice-
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alejandro G.
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Second\~Vice-
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Oscar P.
Bergotto\cell\pard\plain\intbl\cf1\f51\fs13\ql
Director\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fernando A.
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Ricardo
Esteves\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cedric D.
Bridger\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Marcos
Fischman\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fernando Rub\u237?
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gary S.
Gladstein\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mario
Blejer\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mauricio
Wior\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Juan C. Quintana Ter\u225?
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Alternate
director\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Emilio C\u225?
rdenas\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Salvador D.
Bergel\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Enrique
Antonini\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Daniel Ricardo
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gabriel Adolfo Gregorio
Reznik\cell\pard\plain\intbl\cf1\f51\fs13\ql
b\cellx9998\clvertalb\cellx10292\clvertalb\cellx10797\trrh206\row}}}\pard\plain\sb1
98\fi462\cf1\f51\fs16\ql Ricardo Esteves, Cedric Bridger, Mario Blejer, Mauricio
Wior, Emilio C\u225?rdenas, Gabriel Adolfo Gregorio Reznik and Enrique Antonini
are\plain\cf1\f51\fs16\ql independent directors, pursuant
to\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\cf1\f51\fs16\ql \u8217? Resolution
No.\~400/2002.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The following is a brief
biographical description of each member of our board of
directors:\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Eduardo S.
Elsztain.\plain\cf1\f51\fs16\ql \~Mr.\~Elsztain studied economic sciences at the
Universidad de Buenos Aires. He has been engaged in the real estate
business\plain\cf1\f51\fs16\ql for more than twenty years. He is the chairman of
the board of directors of Alto Palermo, Shopping Alto Palermo S.A., Cresud,
Consultores Asset\plain\cf1\f51\fs16\ql Management and BACS Banco de Cr\u233?
dito\~& Securitizaci\u243?n among others. He is also vice-chairman of Banco
Hipotecario, E-Commerce Latina\plain\cf1\f51\fs16\ql S.A. and Director of
BrasilAgro, among other companies. He is Fernando A. Elsztain\u8217?s cousin and
Alejandro G. Elsztain\u8217?s
brother.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Sa\u250?l
Zang.\plain\cf1\f51\fs16\ql \~Mr.\~Zang obtained a law degree from the Universidad
de Buenos Aires. He is a member of the International Bar Association
and\plain\cf1\f51\fs16\ql the Interamerican Federation of Lawyers. He is a
founding partner of Zang, Bergel\~& Vi\u241?es law firm. He is also vice-chairman
of Alto Palermo, the\plain\cf1\f51\fs16\ql first vice-chairman of Shopping Alto
Palermo S.A. and Cresud and vice-chairman of Puerto Retiro, Alto Palermo and
Fibesa, and a director of Banco\plain\cf1\f51\fs16\ql Hipotecario, Nuevas
Fronteras S.A., Tarshop, Palermo Invest S.A. and
BrasilAgro.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Alejandro G.
Elsztain.\plain\cf1\f51\fs16\ql \~Mr.\~Elsztain obtained a degree in agricultural
engineering from the Universidad de Buenos Aires. Currently he is chairman
of\plain\cf1\f51\fs16\ql BrasilAgro, second vice-chairman of Cresud and executive
vice-chairman of Alto Palermo and SAPSA. He is also vice-chairman of Nuevas
Fronteras\plain\cf1\f51\fs16\ql and Hoteles Argentinos and director of IBOSA. He
is the brother of Chairman Eduardo S. Elsztain and a cousin of Director Fernando A.
Elsztain.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 175
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Oscar P.
Bergotto.\plain\cf1\f51\fs16\ql \~Mr.\~Bergotto has been our Chief Treasury Officer
since 1991. He has also worked in various other real estate companies. He
is\plain\cf1\f51\fs16\ql director of Alto
Palermo.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Fernando A.
Elsztain.\plain\cf1\f51\fs16\ql \~Mr.\~Elsztain studied architecture at the
Universidad de Buenos Aires. He has been engaged in the real estate business as
a\plain\cf1\f51\fs16\ql consultant and as managing officer of a family-owned real
estate company. He is chairman of the board of directors of Llao Llao Resorts S.A.,
Palermo\plain\cf1\f51\fs16\ql Invest S.A. and Nuevas Fronteras S.A. He is also a
director of Alto Palermo, SAPSA, Hoteles Argentinos and Tarshop and an alternate
director of Banco\plain\cf1\f51\fs16\ql Hipotecario and Puerto Retiro, among
others. He is Alejandro Elsztain\u8217?s and Eduardo S. Elsztain\u8217?s
cousin.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Ricardo
Esteves.\~\plain\cf1\f51\fs16\ql He has a degree in Political Science from the
Universidad El Salvador. He was a member of the Boards of Directors of
Banco\plain\cf1\f51\fs16\ql Franc\u233?s del R\u237?o de la Plata, Bunge\~& Born
Holding, Armstrong Laboratories, Banco Velox and Supermercados Disco. He was one of
the\plain\cf1\f51\fs16\ql founders of CEAL (\plain\cf1\f51\fs16\i\ql Consejo
Empresario de Am\u233?rica Latina\plain\cf1\f51\fs16\ql ) and is a member of the
board of directors of Encuentro de Empresarios de\plain\cf1\f51\fs16\ql Am\u233?
rica Latina (padres e hijos) and is co-President of Foro
Iberoamericano.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Cedric D.
Bridger.\plain\cf1\f51\fs16\ql \~Mr.\~Bridger is qualified as a certified public
accountant in the United Kingdom. From 1992 through 1998, he served as
chief\plain\cf1\f51\fs16\ql financial officer of YPF S.A. Mr.\~Bridger was also
financial director of Hughes Tool Argentina, chief executive officer of Hughes Tool
in Brazil and\plain\cf1\f51\fs16\ql Hughes\u8217? corporate vice-president for
South American operations. He is also a director of Banco
Hipotecario.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Marcos
Fischman\plain\cf1\f51\fs16\ql .\~Mr.\~Fischman studied at the Hebrew University of
Jerusalem. He is a pioneer in individual and corporate coaching in
Argentina.\plain\cf1\f51\fs16\ql He provides consulting services to businessmen,
scholars and artists. Since 1993, he has provided us with consulting services in
organizational\plain\cf1\f51\fs16\ql communication and
development.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Fernando Rub\u237?
n\plain\cf1\f51\fs16\ql .\~Mr.\~Rubin has a degree in psychology from the
Universidad de Buenos Aires and attended a post-graduate course
in\plain\cf1\f51\fs16\ql Human Resources and Organizational Analysis at E.P.S.O.
Since July 2001, he has been the manager of organizational development at Banco
Hipotecario.\plain\cf1\f51\fs16\ql He served as corporate manager of human
resources for IRSA, director of human resources for Moet Hennessy Louis Vuitton
(\u8220?LVMH\u8221?) in\plain\cf1\f51\fs16\ql Argentina and Bodegas Chandon in
Argentina and Brazil. He also served as manager of the human resources division for
the international consulting firm\plain\cf1\f51\fs16\ql Roland Berger\~& Partners-
International Management
Consultants.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Gary S.
Gladstein.\plain\cf1\f51\fs16\ql \~Mr.\~Gladstein has a degree in economics from
the University of Connecticut and a master\u8217?s degree in
business\plain\cf1\f51\fs16\ql administration from Columbia University. He was
operations manager in Soros Fund Management LLC and is currently a senior
consultant of Soros Fund\plain\cf1\f51\fs16\ql Management
LLC.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Mario
Blejer.\~\plain\cf1\f51\fs16\ql Dr.\~Blejer obtained a degree from Hebrew
University and a Ph.D. from the University of Chicago. He lectured courses at
Hebrew\plain\cf1\f51\fs16\ql University, Boston University and New York
University. He has published several articles on macroeconomic and financial
stability subjects. He served\plain\cf1\f51\fs16\ql for twenty years in different
departments of the IMF. In 2002, he was appointed chairman of the Central Bank and
during 2003 was appointed director of\plain\cf1\f51\fs16\ql the Center for Studies
of Central Banks of the Bank of
England.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Mauricio
Wior.\~\plain\cf1\f51\fs16\ql Mr.\~Wior obtained a masters degree in finance, as
well as a bachelors degree in economics and accounting from Tel
Aviv\plain\cf1\f51\fs16\ql University in Israel. Mr.\~Wior is currently
a\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 176
\
director of Ertach S.A. and Banco Hipotecario. He has held positions at Bellsouth
were he was Vice President for Latin America from 1995 to
2004.\plain\cf1\f51\fs16\ql Mr.\~Wior was also CEO of Movicom Bellsouth from 1991
to 2004. In addition, he led the operations of various cellular phone companies in
Uruguay,\plain\cf1\f51\fs16\ql Chile, Peru, Ecuador and Venezuela. He was
president of the\plain\cf1\f51\fs16\i\ql Asociaci\u243?n Latinoamericana de
Celulares\plain\cf1\f51\fs16\ql (ALCACEL); U.S. Chamber of Commerce
in\plain\cf1\f51\fs16\ql Argentina and the Israeli-Argentine Chamber of Commerce.
He was a director of\plain\cf1\f51\fs16\i\ql Insituto para el Desarrollo
Empresarial de la Argentina\plain\cf1\f51\fs16\ql (IDEA),\plain\cf1\f51\fs16\i\ql
Fundaci\u243?n de Investigaciones Econ\u243?micas
Latinoamericanas\plain\cf1\f51\fs16\ql (FIEL) and
Tzedaka.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Juan C. Quintana Ter\u225?
n.\plain\cf1\f51\fs16\ql \~Mr.\~Quintana Ter\u225?n obtained a law degree from the
Universidad of de Buenos Aires. He is a consultant at\plain\cf1\f51\fs16\ql Zang,
Bergel\~& Vi\u241?es law firm. He has been chairman and Judge of the National
Commercial Court of Appeals of the City of Buenos Aires\plain\cf1\f51\fs16\ql
(\plain\cf1\f51\fs16\i\ql C\u225?mara Nacional de Apelaciones en lo
Comercial\plain\cf1\f51\fs16\ql ). He is an alternate director of Cresud, Alto
Palermo and Nuevas Fronteras S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Emilio J. C\u225?rdenas.\~\plain\cf1\f51\fs16\ql Mr.\~C\u225?rdenas obtained a law
degree from the Universidad de Buenos Aires and a Ph.D. from University
of\plain\cf1\f51\fs16\ql Michigan. He has been a member of our board of directors
since 1996. He was chairman of ABRA, founding partner of C\u225?rdenas,
Cassagne\~&\plain\cf1\f51\fs16\ql Asociados law firm, Argentina\u8217?s Permanent
Representative to the United Nations, member of United Nations Security Council and
is currently a\plain\cf1\f51\fs16\ql member of the board of directors of HSBC Bank
S.A (Bank Roberts).\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Salvador D.
Bergel.\plain\cf1\f51\fs16\ql \~Mr.\~Bergel obtained a law degree and a PhD from
the Universidad del Litoral. He is a founding partner of Zang,
Bergel\~&\plain\cf1\f51\fs16\ql Vi\u241?es law firm and a consultant at Repsol YPF
S.A. He is also an alternate director of
Cresud.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Enrique
Antonini.\plain\cf1\f51\fs16\ql Mr. Antonini holds a degree in law from the
University of Buenos Aires. He is currently a member of the board of directors
of\plain\cf1\f51\fs16\ql Banco Mariva S.A. (since 1992), Mariva Burs\u225?til S.A.
(since 1997). He also served as a director of Inversiones y Representaciones S.A.
from 1993\plain\cf1\f51\fs16\ql to 2002. He is a member of the Banking Lawyers
Committee and the International Bar
Association.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Daniel R.
Elsztain.\plain\cf1\f51\fs16\ql \~Mr. Elsztain graduated with a major in Economic
Sciences from the Torcuato Di Tella University and has a Masers in
Business\plain\cf1\f51\fs16\ql Administration. He has been our Commercial Director
since 1998. Mr.\~Elsztain is the brother of both the Chairman of the Board of
Directors,\plain\cf1\f51\fs16\ql Mr.\~Eduardo\~S. Elzstain, and of the Vice-
Chairman, Mr.\~Alejandro\~G. Elzstain and cousin of the Director Fernance A.
Elzstain.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Gabriel A. G.
Reznik.\plain\cf1\f51\fs16\ql \~Mr. Reznik obtained a degree in Civil Engineering
from University of Buenos Aires (\plain\cf1\f51\fs16\i\ql Universidad deBuenos
Aires\plain\cf1\f51\fs16\ql ). He\plain\cf1\f51\fs16\ql worked for IRSA from 1992
until May 2005 when he resigned. He has also worked for an independent construction
company in Argentina. He is an\plain\cf1\f51\fs16\ql alternate director of Puerto
Retiro S.A., Tarshop S.A. and Fibesa, as well as member of the board of Banco
Hipotecario, and a number of other\plain\cf1\f51\fs16\ql
companies.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Executive
Committee\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Pursuant to our by-laws, our
day-to-day business is managed by an executive committee consisting of five
directors and one alternative director,\plain\cf1\f51\fs16\ql among which there
should be the chairman, first vice-chairman and second vice-chairman of the board
of directors. The current members of the\plain\cf1\f51\fs16\ql Executive Committee
are Messrs. Eduardo S. Elsztain, Sa\u250?l Zang, Alejandro Elsztain and Fernando
Elsztain as members, and Mr.\~Oscar\~P. Bergotto\plain\cf1\f51\fs16\ql as
alternative member.\par\pard\plain\cf1\f51\fs13\ql
\
The executive committee meets as needed by our business, or at the request of one
or more of its members.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The executive
committee is responsible for the management of the day to day business delegated by
the Board of Directors in accordance with\plain\cf1\f51\fs16\ql applicable law and
our by-laws. Our by-laws authorize the executive committee
to:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql designate the managers and establish the
duties and compensation of such managers;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql grant and revoke powers of attorney on
behalf of us;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql hire, discipline and fire personnel and
determine wages, salaries and compensation of personnel;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql enter into contracts related to our
business;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql manage our assets;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql enter into loan agreements for our
business and set up liens to secure our obligations; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql perform any other acts necessary to manage
our day-to-day business.\cell{
b286\cf1\f51\fs16\b\ql Supervisory
Committee\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our supervisory committee
(\plain\cf1\f51\fs16\i\ql Comisi\u243?n Fiscalizadora\plain\cf1\f51\fs16\ql ) is
responsible for reviewing and supervising our administration and affairs and
verifying\plain\cf1\f51\fs16\ql compliance with our by-laws and resolutions
adopted at the shareholders\u8217? meetings. The members of the supervisory
committee are appointed at\plain\cf1\f51\fs16\ql our annual general ordinary
shareholders\u8217? meeting for a one-year term. The supervisory committee is
composed of three members and three\plain\cf1\f51\fs16\ql alternate members and
pursuant to Section\~294 of the Argentine Corporations Law No.\~19,550, as amended,
must meet at least every three months.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
The following table shows information about the members of our supervisory
committee, who were elected at the ordinary and extraordinary\plain\cf1\f51\fs16\ql
shareholders\u8217? meeting, held on October\~10,
\par\pard\plain
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Expiration
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Current
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc position
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc held
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc since\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Jos\u233? D.
Abelovich\cell\pard\plain\intbl\cf1\f51\fs13\ql
Member\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Marcelo H.
Fuxman\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Roberto
Murmis\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Silvia De
Feo\cell\pard\plain\intbl\cf1\f51\fs13\ql
Alternate\~member\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Sergio
Kolaczyk\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Alternate\plain\intbl\cf1\f51\fs16\ql
member\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alicia
Rigueira\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Alternate\plain\intbl\cf1\f51\fs16\ql
alb\cellx10796\trrh413\row}}}\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Set forth below is a brief
biographical description of each member of our supervisory
committee:\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Jos\u233? D.
Abelovich.\plain\cf1\f51\fs16\ql \~Mr.\~Abelovich obtained a degree in accounting
from the Universidad de Buenos Aires. He is a founding member
and\plain\cf1\f51\fs16\ql partner of Abelovich, Polano\~& Asociados/SC
International, a public accounting firm in Argentina. Formerly, he had been a
manager of Harteneck,\plain\cf1\f51\fs16\ql L\u243?pez y C\u237?a/Coopers\~&
Lybrand and has served as a senior advisor in Argentina for the United Nations and
the World Bank. He is a member\plain\cf1\f51\fs16\ql of the supervisory committees
of Alto Palermo, Cresud, SAPSA, Hoteles Argentinos and Inversora Bol\u237?var,
among other companies.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Marcelo H.
Fuxman.\plain\cf1\f51\fs16\ql \~Mr.\~Fuxman obtained a degree in accounting from
the Universidad de Buenos Aires. He is a partner of Abelovich,
Polano\plain\cf1\f51\fs16\ql and Associates/SC International, a public accounting
firm in Argentina. He is also a member of the supervisory committee of Alto
Palermo, Cresud,\plain\cf1\f51\fs16\ql SAPSA and Inversora Bol\u237?
var.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Roberto
Murmis.\plain\cf1\f51\fs16\ql \~Mr.\~Murmis holds a degree in accounting from the
Universidad de Buenos Aires. Mr.\~Murmis is a partner at Abelovich,
Polano\~&\plain\cf1\f51\fs16\ql Asociados / SC International. Mr.\~Murmis worked
as an advisor to the Secretar\u237?a de Ingresos P\u250?blicos. Furthermore, he is
a member of the\plain\cf1\f51\fs16\ql supervisory committee of SAPSA, Cresud,
Futuros y Opciones S.A. and Llao Llao Resorts
S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Silvia De
Feo.\plain\cf1\f51\fs16\ql \~Mrs.\~De Feo obtained a degree in accounting from the
University of Belgrano. She is a manager at Abelovich, Polano\~&
Asociados/\plain\cf1\f51\fs16\ql SC International, an accounting firm in Argentina
and former manager at Harteneck, Lopez\~& C\u237?a./Coopers\~& Lybrand. She is also
a member of the\plain\cf1\f51\fs16\ql supervisory committees of SAPSA, Cresud,
Inversora Bolivar S.A. and Baldovinos
S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Sergio Leonardo
Kolaczyk\plain\cf1\f51\fs16\b\ql .\~\plain\cf1\f51\fs16\ql Mr.\~Kolaczyk obtained a
degree in accounting from the Universidad de Buenos Aires. He is a professional
of\plain\cf1\f51\fs16\ql Abelovich, Polano\~& Asociados SC International. He is
also an alternate member of the supervisory committee of Alto Palermo and
Cresud.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Alicia Graciela
Rigueira.\plain\cf1\f51\fs16\ql \~Mrs.\~Rigueira holds a degree in accounting from
the Universidad de Buenos Aires. Since 1998 she has been a manager
at\plain\cf1\f51\fs16\ql Estudio Abelovich, Polano\~& Asociados, affiliated with
SC International. From 1974 to 1998, Mrs.\~Rigueira performed several functions in
Harteneck,\plain\cf1\f51\fs16\ql Lopez y Cia affiliated with Coopers\~& Lybrand.
Mrs.\~Rigueira lectured at the Facultad de Ciencias Econ\u243?micas de la
Universidad de Lomas de\plain\cf1\f51\fs16\ql
Zamora.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Senior
Management\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The Board of Directors
appoints and removes senior management. Senior management performs its duties in
accordance with the instructions of the\plain\cf1\f51\fs16\ql Board of Directors.
The following table shows information about our current senior
management:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Current\~position
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc held since\cell{
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Chief\~Executive
Officer\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gabriel
Blasi\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Chief Financial
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fernando
Barenboim\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Chief Commercial
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql David A.
Perednik\cell\pard\plain\intbl\cf1\f51\fs13\ql
Chief\~Administrative\~Officer\cell\pard\plain\intbl\cf1\f51\fs13\ql
talb\cellx9371\clvertalb\cellx9787\clvertalb\cellx10798\trrh206\row}}}\pard\plain\c
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The following is a description of
each of our senior managers who are not
directors:\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Gabriel
Blasi.\plain\cf1\f51\fs16\ql \~Mr.\~Blasi obtained a degree in business
administration and carried out post graduate studies in Finance at CEMA
University\plain\cf1\f51\fs16\ql (\plain\cf1\f51\fs16\i\ql Universidad del
CEMA\u8212?Centro de Estudios Macroecon\u243?micos Argentinos\plain\cf1\f51\fs16\ql
\u8212?) and in the IAE (\plain\cf1\f51\fs16\i\ql Universidad
Austral\plain\cf1\f51\fs16\ql ). He formerly\plain\cf1\f51\fs16\ql worked as a
senior securities trader in Citibank. He also held several management positions
related to investment banking and capital markets at Banco\plain\cf1\f51\fs16\ql
R\u237?o (BSCH) and was financial director of the Argentine Carrefour Group and
Goyaique SACIFIA (Grupo Perez Companc). Currently, he also
serves\plain\cf1\f51\fs16\ql as chief financial officer of Alto Palermo and
Cresud.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Fernando
Barenboim.\plain\cf1\f51\fs16\ql Mr.\~Barenboim studied architecture at
Universidad de Buenos Aires. He also attended post-graduate courses in the
same\plain\cf1\f51\fs16\ql university and the UNESCO. He has a master\u8217?s
degree from the Universidad Cat\u243?lica Argentina. He joined us in 1991 and is
manager of the\plain\cf1\f51\fs16\ql real estate portfolio of Banco
Hipotecario.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql David A.
Perednik.\plain\cf1\f51\fs16\ql \~Mr.\~Perednik obtained a degree in accounting
from the Universidad de Buenos Aires. He has worked for several
companies\plain\cf1\f51\fs16\ql such as Marifran Internacional S.A., a subsidiary
of Louis Dreyfus Amateurs where he worked as financial manager from 1986 to 1997.
He also worked\plain\cf1\f51\fs16\ql as a senior consultant in the administration
and systems department of Deloitte\~& Touche. He also serves as chief
administrative officer of Alto Palermo\plain\cf1\f51\fs16\ql and Cresud.
tx46076_28}\par\pard\plain\sb286\cf1\f51\fs16\b\ql B.
Compensation\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql
Directors\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Under Argentine law, if the
compensation of the members of the board of directors is not established in the by-
laws of the company, it should be\plain\cf1\f51\fs16\ql determined by the
shareholders\u8217? meeting. The maximum amount of total compensation to the
members of the board of directors, including\plain\cf1\f51\fs16\ql compensation
for technical or administrative permanent activities, cannot exceed 25% of the
earnings of the company. That amount should be limited to\plain\cf1\f51\fs16\ql 5%
when there is no distribution of dividends to shareholders and will be increased
proportionally to the distribution.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql When
one or more directors perform special commissions or technical or administrative
activities, and there are no earnings to distribute, or they
are\plain\cf1\f51\fs16\ql reduced, the shareholders meeting may approve
compensation in excess of the above mentioned limits. The compensation of our
directors for each fiscal\plain\cf1\f51\fs16\ql year is determined pursuant to
Argentine Law and taking into consideration whether the directors performed
technical or administrative activities and our\plain\cf1\f51\fs16\ql fiscal
year\u8217?s results. Once the amount is determined, they are considered at the
shareholders\u8217? meeting.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql At our
shareholders meeting held on October\~10, 2007, the shareholders approved an
aggregate compensation of Ps.8.2 million for all of our\plain\cf1\f51\fs16\ql
directors for the fiscal year ended June\~30,
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Under the executive employment
agreements entered into with Messrs. Eduardo S. Elsztain, Sa\u250?l Zang and Oscar
P. Bergotto, if we terminate\plain\cf1\f51\fs16\ql any of these executive
employment agreements without cause, we will be liable to the relevant executive
for two years of compensation.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We do not
have written contracts with our directors. However, Mr.\~Eduardo Elsztain, Sa\u250?
l Zang, Alejandro Elsztain, Fernando Elsztain, Oscar\plain\cf1\f51\fs16\ql
Bergoto, Marcos Fischman and Fernando Rub\u237?n are employed by us under the Labor
Contract Law No.\~20.744. This law governs certain conditions\plain\cf1\f51\fs16\ql
of the labor relationship, including remuneration, protection of wages, hours of
work, holidays, paid leave, maternity protection, minimum age\plain\cf1\f51\fs16\ql
requirements, protection of young workers and suspension and termination of the
contract.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 180
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Senior
Management\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We pay our senior management
pursuant to a fixed amount, established by taking into consideration their
background, capacity and experience and\plain\cf1\f51\fs16\ql an annual bonus
which varies according to their individual performance and our overall results. The
total and aggregate cash compensation of our senior\plain\cf1\f51\fs16\ql
management for the fiscal year ended June\~30, 2007 was Ps.4.05
million.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Supervisory
Committee\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The shareholders meeting held
on October\~10, 2007, approved by majority vote the decision not to pay any
compensation to our Supervisory\plain\cf1\f51\fs16\ql
Committee.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Benefit
Plans\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql Compensation plan for executive
management\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql During fiscal year 2007 we
developed a special compensation plan for our key managers (the \u8220?Plan\u8221?)
by means of contributions to be\plain\cf1\f51\fs16\ql made by the employees and by
us. Such Plan is directed to key managers and aims to retain them by increasing
their total compensation package, granted\plain\cf1\f51\fs16\ql to those who have
met certain conditions. Participation and contributions under the Plan are
voluntary. Once the invitation to participate has been
accepted\plain\cf1\f51\fs16\ql by the employee (the \u8220?Participant\u8221?), he
or she is required to make two kinds of contributions: monthly contributions
(salary based) and\plain\cf1\f51\fs16\ql extraordinary contribution (annual bonus
based). The suggested contribution to be made by Participants is: up to 2.5% of
their monthly salary and up to\plain\cf1\f51\fs16\ql 15.0% of their annual
bonus.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql This Plan is intended to improve
the compensation benefits of the key management employees who are encouraged to
increase his or her\plain\cf1\f51\fs16\ql compensation package by receiving
extraordinary reward at the end of the Plan for those who have met certain
conditions mentioned below.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Our
contribution will be 200% of the employees\u8217? monthly contributions and 300% of
the extraordinary employees\u8217? contributions. The\plain\cf1\f51\fs16\ql funds
collected as a result of the Participants\u8217? contributions are transferred to a
special independent vehicle created in Argentina as an
Investment\plain\cf1\f51\fs16\ql Fund approved by the\plain\cf1\f51\fs16\i\ql
Comisi\u243?n Nacional de Valores\plain\cf1\f51\fs16\ql . Such funds (including
the rents derived thereof) are freely redeemable upon request of
the\plain\cf1\f51\fs16\ql Participants. Contributions made by us under the Plan
are transferred to another separate and independent vehicle (e.g., trust
fund).\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Participants or their assignees,
as the case may be, will have access to 100% of the benefits of the Plan (that is,
our contributions made on the\plain\cf1\f51\fs16\ql Participants\u8217? behalf to
the specially created vehicle) under the following
circumstances:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql ordinary retirement in accordance with
applicable labor regulations;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql total or permanent incapacity or
disability; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql death.\cell{
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql In case of resignation or
termination without legal justification, the Participant may redeem amounts
contributed by us only if he or she has\plain\cf1\f51\fs16\ql participated in the
Plan for at least 5 years.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of
June\~30, 2007 we and our subsidiaries contributions amounted to Ps.0.9
million.\par\pard\plain\sb286\cf1\f51\fs16\b\ql C.{\*\bkmkstart tx46076_29}
{\*\bkmkend tx46076_29}\plain\cf1\f51\fs16\b\ql Board
Practices\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\ql Benefits upon Termination of
Employment\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Under the executive employment
agreements entered into with Messrs. Eduardo S. Elsztain, Sa\u250?l Zang and Oscar
P. Bergotto, if we terminate\plain\cf1\f51\fs16\ql any of these executive
employment agreements without cause, we will be liable to the relevant executive
for two years of compensation.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Audit
Committee\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Pursuant to the System
governing the Transparency of Public Offers established through Decree
No.\~677/2001, the rules of the\plain\cf1\f51\fs16\i\ql Comisi\u243?
n\plain\cf1\f51\fs16\i\ql Nacional de Valores\plain\cf1\f51\fs16\ql , its
Resolution No.\~400 and 402, the board of directors established that the Audit
Committee shall be a committee of the board of\plain\cf1\f51\fs16\ql directors.
The main function of the Audit Committee is to assist the board of directors in
performing its duty of exercising due care, diligence and\plain\cf1\f51\fs16\ql
competence in issues relating to us, specifically in the enforcement of the
accounting policy and in the issue of accounting and financial information,
the\plain\cf1\f51\fs16\ql management of business risk and of internal control
systems, the conduct and ethical soundness of the company\u8217?s business, the
supervision of the\plain\cf1\f51\fs16\ql integrity of our financial statements,
the compliance by our company with the legal provisions, the independence and
capability of the independent auditor\plain\cf1\f51\fs16\ql and the performance of
the internal audit function of our company and of the external
auditors.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On December\~4, 2006, our
board of directors appointed Cedric Bridger, Mauricio Wior, and Mario Blejer, all
of them independent members, as\plain\cf1\f51\fs16\ql members of the audit
committee. The board of directors named Cedric Bridger as the financial expert in
accordance with the relevant SEC rules. We have\plain\cf1\f51\fs16\ql a fully
independent audit committee as per the standard provided in Rule 10(A)-3(b)
(1).\par\pard\plain\sb286\cf1\f51\fs16\b\ql Compensation of Audit
Committee\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The members of our Audit
Committee do not receive compensation in addition to that received for their
service as members of our board of\plain\cf1\f51\fs16\ql
directors.\par\pard\plain\sb286\cf1\f51\fs16\b\ql D.{\*\bkmkstart tx46076_30}
{\*\bkmkend tx46076_30}\plain\cf1\f51\fs16\b\ql
Employees\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As of June\~30, 2007, we had
3,298 employees. Our employees are not represented by any union other than our
hotel workers who are members of\plain\cf1\f51\fs16\i\ql Uni\u243?n de
Trabajadores del Turismo, Hoteleros y Gastron\u243?micos de la Rep\u250?blica
Argentina\plain\cf1\f51\fs16\ql (UTHGRA). We have not experienced a
strike\plain\cf1\f51\fs16\ql or significant work stoppage in the last ten years
and believe that our relations with our employees are
good.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 182
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The following table sets forth the
number of employees in our various businesses at the dates
indicated:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
x10054\clvertalb\cellx10401\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10796\trrh516
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Argentine
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Real
Estate\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Shopping
Centers\plain\intbl\cf1\f51\fs11\b\qc\super
Hotels\plain\intbl\cf1\f51\fs11\b\qc\super
Telecommunication\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Credit
Cards\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Total\cell{
x10054\clvertalb\cellx10401\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10796\trrh516\row}
}}
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql As of June\~30,
trrh206\row}}}
\cellx10796\trrh206
trrh206
trrh206\row}}}
\cellx10796\trrh206
trrh206
trrh206\row}}}\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\
brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
Argentine Real Estate includes IRSA, Inversora Bol\u237?var, Baldovinos, Madero,
Libertador 498.\cell{
\par\pard\plain
Starting June 2000, Shopping Centers includes Altocity (e-commerce) and does not
include Mendoza Plaza prior to fiscal year 2005.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (3)\cell\pard\plain\intbl\cf1\f51\fs16\ql Hotels
include Intercontinental, Sheraton, Libertador and Llao Llao.\cell{
\par\pard\plain
Telecommunications include Red Alternativa and Alternativa Gratis.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (5)\cell\pard\plain\intbl\cf1\f51\fs16\ql Credit
cards include Tarshop.\cell{
{\trowd\cellx432\cellx7016\trrh206\row}}}\pard\plain\sb286\cf1\f51\fs16\b\ql E.
{\*\bkmkstart tx46076_31}{\*\bkmkend tx46076_31}\plain\cf1\f51\fs16\b\ql Share
Ownership\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\ql Share ownership of directors,
members of the Supervisory Committee, members of the executive committee and senior
management as of\plain\cf1\f51\fs16\b\ql November\~30,
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The following table sets forth the
amount and percentage of our shares beneficially owned by our directors, members of
the executive committee,\plain\cf1\f51\fs16\ql Supervisory Committee senior
management and members of the audit committee as of November\~30,
\par\pard\plain
797\trrh-66\trrh0
Number\~of\~Shares\cell\pard\plain\intbl\cf1\f51\fs13\ql
Percentage\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
}
Directors\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
6
Elsztain\plain\intbl\cf1\f51\fs11\ql\super
6\row}}}
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc First Vice-
\row}}}
6
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Second Vice-
6\row}}}
\row}}}
6
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Ricardo
Esteves\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cedric D.
Bridger\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Marcos
Fischman\cell\pard\plain\intbl\cf1\f51\fs13\ql
<0.01\cell\pard\plain\intbl\cf1\f51\fs16\ql %\cell{
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fernando Rub\u237?
n\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gary S.
Gladstein\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mario
Blejer\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mauricio
Wior\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Juan C. Quintana Ter\u225?
n\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc
Alternate director\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Emilio C\u225?
rdenas\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Alternate
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Salvador D.
Bergel\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Enrique
Antonini\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Daniel Ricardo
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gabriel Adolfo Gregorio
Reznik\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 183
\
\par\pard\plain
797\trrh-66\trrh0
Percentage\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Senior
Management\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
6
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Chief executive
officer\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gabriel
Blasi\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Chief financial
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fernando
Barenboim\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Chief commercial
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql David A.
Perednik\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Chief administrative
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Supervisory
Committee\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Jos\u233? D.
Abelovich\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Marcelo H.
Fuxman\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Roberto
Murmis\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Silvia C. De
Feo\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Sergio
Kolaczyk\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
6
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alicia
Rigueira\cell\pard\plain\intbl\cf1\f51\fs13\ql
6\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Executive
Committee\cell\pard\plain\intbl\cf1\f51\fs13\ql
\row}}}
6
6\row}}}
\row}}}
6
6\row}}}
\row}}}
6
6\row}}}\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs11\ql\super (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Includes (i)\~7,998,522 common shares beneficially owned by Inversiones Financieras
del Sur S.A., for which Mr.\~Eduardo\~S. Elsztain may
be\plain\intbl\cf1\f51\fs16\ql deemed beneficial owner by virtue of his voting
power to control Inversiones Financieras del Sur S.A. and (ii)\~311,367 common
shares owned\plain\intbl\cf1\f51\fs16\ql directly by Eduardo S. Elsztain\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\b\ql ITEM\~7.\cell{\*\bkmkstart tx46076_32}
{\*\bkmkend tx46076_32}\pard\plain\intbl\cf1\f51\fs16\b\ql Major Shareholders and
Related Party Transactions\cell{
{\trowd\cellx972\cellx8412\trrh206\row}}}\pard\plain\sb88\cf1\f51\fs16\b\ql A.
{\*\bkmkstart tx46076_33}{\*\bkmkend tx46076_33}\plain\cf1\f51\fs16\b\ql Major
Shareholders\par\pard\plain\sb88\cf1\f51\fs16\b\ql Information about Major
Shareholders\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\ql Share
Ownership\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following table sets forth
information regarding ownership of our capital stock by each person known to us to
own beneficially at least 5% of\plain\cf1\f51\fs16\ql our common shares and all
our directors and officers as a group.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
Share\~Ownership\~as\~of\~November\~30,\~2007\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
lx10797\trrh228
Shareholder\cell\pard\plain\intbl\cf1\f51\fs13\ql
Percentage\plain\intbl\cf1\f51\fs11\b\qc\super
Cresud\plain\intbl\cf1\f51\fs11\ql\super
talb\cellx10619\clvertalb\cellx10797\trrh206
IFISA\plain\intbl\cf1\f51\fs11\ql\super
talb\cellx10619\clvertalb\cellx10797\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Directors and officers including
Eduardo Elsztain\plain\intbl\cf1\f51\fs11\ql\super
talb\cellx10619\clvertalb\cellx10797\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Argentine pension funds in the
aggregate\plain\intbl\cf1\f51\fs11\ql\super
talb\cellx10619\clvertalb\cellx10797\trrh206\row}}}
lx8912\clvertalb\cellx9773\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10619\clvertalc\cel
lx10797\trrh29
lx8912\clvertalb\cellx9773\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10619\clvertalc\cel
f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\
fs4\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql Eduardo
S. Elsztain is the beneficial owner of 102,013,754 shares of Cresud, representing
31.8% of its total share capital. As a result of his
31.8%\plain\intbl\cf1\f51\fs16\ql interest in Cresud, Mr.\~Elsztain has an 11.0%
indirect economic interest in us. Although Mr.\~Elsztain does not own a majority of
the shares of\plain\intbl\cf1\f51\fs16\ql Cresud, he exercises substantial
influence over Cresud. If Mr.\~Elsztain were considered the beneficial owner of
Cresud due to his substantial\plain\intbl\cf1\f51\fs16\ql influence over it, he
would be the beneficial owner of 31.9% of our shares by virtue of his investment in
Cresud, without taking into account his\plain\intbl\cf1\f51\fs16\ql indirect
interest in us through IFISA.\cell{
\
\par\pard\plain
S. Elsztain is the Chairman of the board of directors of IFIS Limited (\u8220?
IFIS\u8221?), a corporation organized under the laws of\plain\intbl\cf1\f51\fs16\ql
Bermuda and IFISA, a corporation organized under the laws of Uruguay.
Mr.\~Elsztain, by virtue of his position and voting power in IFIS, is
the\plain\intbl\cf1\f51\fs16\ql beneficial owner of 43.5% of the shares of IFIS.
Although Mr.\~Elsztain does not own a majority of shares of IFIS, he exercises
effective control\plain\intbl\cf1\f51\fs16\ql over IFIS, which in turn controls
IFISA. As a result, Mr.\~Elsztain may be deemed to be the beneficial owner of an
additional 1.4% of our shares\plain\intbl\cf1\f51\fs16\ql due to IFISA\u8217?s
1.4% interest in us, without taking into account his indirect interest in us
through Cresud.\cell{
\par\pard\plain
described in notes (1)\~and (2)\~above, Mr.\~Elsztain may be deemed to be the
beneficial owner of 35.8% of our outstanding shares consisting
of\plain\intbl\cf1\f51\fs16\ql (i)\~199,312,028 shares held by Cresud and
(ii)\~7,998,522 shares held by IFISA. In addition, Mr.\~Elsztain is the beneficial
owner of an additional\plain\intbl\cf1\f51\fs16\ql 0.4% of our outstanding shares
consisting of (i)\~586,000 shares held by Consultores Venture Capital Limited, a
stock corporation organized under\plain\intbl\cf1\f51\fs16\ql the laws of Cayman
Islands, (ii)\~1,154,279 held by Dolphin Fund PLC, a limited liability company
organized under the laws of Isle of Man and\plain\intbl\cf1\f51\fs16\ql
(iii)\~311,367 shares held directly by Eduardo Elsztain. As a result,
Mr.\~Elsztain\u8217?s aggregate beneficial ownership of our outstanding
shares\plain\intbl\cf1\f51\fs16\ql may be as high as 209,362,196 common shares,
representing 36.2% of our outstanding shares, without taking into account any
increase in his\plain\intbl\cf1\f51\fs16\ql beneficial ownership that would result
from the exercise by Cresud of its holdings of warrants to purchase additional
common shares.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (4)\cell\pard\plain\intbl\cf1\f51\fs16\ql Based
on estimates from the Superintendency of AFJP
(\u8220?\plain\intbl\cf1\f51\fs16\i\ql Administradora de Fondos de Jubilaciones y
Pensiones\plain\intbl\cf1\f51\fs16\ql \u8221?). None of
the\plain\intbl\cf1\f51\fs16\ql pension funds individually own more than 3.9% of
our common stock. The highest percentage owners of the shares
are\plain\intbl\cf1\f51\fs16\i\ql Consolidar\plain\intbl\cf1\f51\fs16\ql
with\plain\intbl\cf1\f51\fs16\ql approximately 0.8%, Met with approximately 0.71%
and Or\u237?genes with approximately 0.6%.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (5)\cell\pard\plain\intbl\cf1\f51\fs16\ql As of
November\~30, 2007, the number of outstanding was 578,676,460. The term for the
exercise of our outstanding warrants and the conversion
of\plain\intbl\cf1\f51\fs16\ql our outstanding convertible notes issued on
November\~21, 2002 expired on November\~14, 2007. Throughout the conversion and
exercise periods,\plain\intbl\cf1\f51\fs16\ql holders of our warrants and
convertible notes exercised an aggregate of 99,896,806 warrants and converted an
aggregate of 99,942,343 convertible\plain\intbl\cf1\f51\fs16\ql notes,
respectively, increasing our capital stock to 578,676,460 issued and outstanding
shares. As of the date of this annual report, there are
no\plain\intbl\cf1\f51\fs16\ql outstanding warrants or convertible notes to
acquire our shares. As a result of these exercises and conversions, Cresud\u8217?s
investment in our\plain\intbl\cf1\f51\fs16\ql common shares increased from 25% on
June\~30, 2007 to 34.4% on November\~16, 2007.\cell{
Cresud is a leading Argentine producer of basic agricultural products.
Cresud\u8217?s shares began trading on the\plain\cf1\f51\fs16\i\ql Bolsa de
Comercio de Buenos\plain\cf1\f51\fs16\i\ql Aires\plain\cf1\f51\fs16\ql on
December\~12, 1960, under the trading symbol \u8220?CRES\u8221? and on March 1997
its ADSs began trading on the Nasdaq Stock Market\plain\cf1\f51\fs16\ql under the
trading symbol \u8220?CRESY.\u8221?\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Between June\~30, 2007 and November\~30, 2007, Cresud converted all of our 8%
convertible notes that it owned and exercised all of its
warrants\plain\cf1\f51\fs16\ql entitling it to purchase additional common shares.
As a result of these conversions and exercises, Cresud\u8217?s shareholding in us
increased from 25.0%\plain\cf1\f51\fs16\ql at June\~30, 2007 to
34.4%.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of November\~30, 2007, IFISA
had exercised all of its warrants and owned 1.4% of our
shares.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Parque Arauco is a significant
shareholder in our subsidiary Alto Palermo. Parque Arauco is a Chilean commercial
real estate developer engaged in\plain\cf1\f51\fs16\ql the acquisition,
development and operation of shopping centers, and its shares are listed and traded
on the Santiago Stock Exchange.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\ql Changes in Share
Ownership\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
lx10799\trrh172
\pard\plain\intbl\cf1\f51\fs13\b\ql Changes in Share
Ownership\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Share Ownership as of
\plain\intbl\cf1\f51\fs11\b\qc\super (5)\cell{
lx10798\trrh361
Shareholder\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Nov.\~30,
2007(%)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc June\~30,
June\~30,\par\pard\plain\intbl\cf1\f51\fs13\b\qc
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc 2004(%)\cell{
cellx10269\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10798\trrh206
Cresud\plain\intbl\cf1\f51\fs11\ql\super
cellx10269\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10798\trrh206\row}}}\pard\
plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
\cellx10383\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10789\trrh206
IFISA\plain\intbl\cf1\f51\fs11\ql\super
\cellx10383\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10789\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Directors and officers including
Eduardo Elsztain\plain\intbl\cf1\f51\fs11\ql\super
<\~0.01\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr <0.01\cell{
\cellx10383\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10789\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Argentine pension funds in the
aggregate\plain\intbl\cf1\f51\fs11\ql\super
\cellx10383\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10789\trrh206\row}}}
b\cellx10275\clvertalb\cellx10383\clvertalb\cellx10789\trrh206\row}}}\pard\plain\cf
1\f51\fs9\ql \~
\par\pard\plain
S. Elsztain is the beneficial owner of 102,013,754 shares of Cresud, representing
31.8% of its total share capital. As a result of his
31.8%\plain\intbl\cf1\f51\fs16\ql interest in Cresud, Mr.\~Elsztain has an 11.0%
indirect economic interest in us. Although Mr.\~Elsztain does not own a majority of
the shares of\plain\intbl\cf1\f51\fs16\ql Cresud, he exercises substantial
influence over Cresud. If Mr.\~Elsztain were considered the beneficial owner of
Cresud due to his substantial\plain\intbl\cf1\f51\fs16\ql influence over it, he
would be the beneficial owner of 31.9% of our shares by virtue of his investment in
Cresud, without taking into account his\plain\intbl\cf1\f51\fs16\ql indirect
interest in us through IFISA.\cell{
\par\pard\plain
S. Elsztain is the Chairman of the board of directors of IFIS Limited (\u8220?
IFIS\u8221?), a corporation organized under the laws of\plain\intbl\cf1\f51\fs16\ql
Bermuda and IFISA, a corporation organized under the laws of Uruguay.
Mr.\~Elsztain, by virtue of his position and voting power in IFIS, is
the\plain\intbl\cf1\f51\fs16\ql beneficial owner of 43.5% of the shares of IFIS.
Although Mr.\~Elsztain does not own a majority of shares of IFIS, he exercises
effective control\plain\intbl\cf1\f51\fs16\ql over IFIS, which in turn controls
IFISA. As a result, Mr.\~Elsztain may be deemed to be the beneficial owner of an
additional 1.4% of our shares\plain\intbl\cf1\f51\fs16\ql due to IFISA\u8217?s
1.4% interest in us, without taking into account his indirect interest in us
through Cresud.\cell{
\par\pard\plain
described in notes (1)\~and (2)\~above, Mr.\~Elsztain may be deemed to be the
beneficial owner of 35.8% of our outstanding shares consisting
of\plain\intbl\cf1\f51\fs16\ql (i)\~199,312,028 shares held by Cresud and
(ii)\~7,998,522 shares held by IFISA. In addition, Mr.\~Elsztain is the beneficial
owner of an additional\plain\intbl\cf1\f51\fs16\ql 0.4% of our outstanding shares
consisting of (i)\~586,000 shares held by Consultores Venture Capital Limited, a
stock corporation organized under\plain\intbl\cf1\f51\fs16\ql the laws of Cayman
Islands, (ii)\~1,154,279 held by Dolphin Fund PLC, a limited liability company
organized under the laws of Isle of Man and\plain\intbl\cf1\f51\fs16\ql
(iii)\~311,367 shares held directly by Eduardo Elsztain. As a result,
Mr.\~Elsztain\u8217?s aggregate beneficial ownership of our outstanding
shares\plain\intbl\cf1\f51\fs16\ql may be as high as 209,362,196 common shares,
representing 36.2% of our outstanding shares, without taking into account any
increase in his\plain\intbl\cf1\f51\fs16\ql beneficial ownership that would result
from the exercise by Cresud of its holdings of warrants to purchase additional
common shares.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (4)\cell\pard\plain\intbl\cf1\f51\fs16\ql Based
on estimates from the Superintendency of AFJP
(\u8220?\plain\intbl\cf1\f51\fs16\i\ql Administradora de Fondos de Jubilaciones y
Pensiones\plain\intbl\cf1\f51\fs16\ql \u8221?). None of
the\plain\intbl\cf1\f51\fs16\ql pension funds individually own more than 3.9% of
our common stock. The highest percentage owners of the shares
are\plain\intbl\cf1\f51\fs16\i\ql Consolidar\plain\intbl\cf1\f51\fs16\ql
with\plain\intbl\cf1\f51\fs16\ql approximately 0.8%, Met with approximately 0.71%
and Or\u237?genes with approximately 0.6%.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (5)\cell\pard\plain\intbl\cf1\f51\fs16\ql As of
November\~30, 2007, the number of outstanding was 578,676,460. The term for the
exercise of our outstanding warrants and the conversion
of\plain\intbl\cf1\f51\fs16\ql our outstanding convertible notes issued on
November\~21, 2002 expired on November\~14, 2007. Throughout the conversion and
exercise periods,\plain\intbl\cf1\f51\fs16\ql holders of our warrants and
convertible notes exercised an aggregate of 99,896,806 warrants and converted an
aggregate of 99,942,343 convertible\plain\intbl\cf1\f51\fs16\ql notes,
respectively, increasing our capital stock to 578,676,460 issued and outstanding
shares. As of the date of this annual report, there are
no\plain\intbl\cf1\f51\fs16\ql outstanding warrants or convertible notes to
acquire our shares. As a result of these exercises and conversions, Cresud\u8217?s
nvestment in our\plain\intbl\cf1\f51\fs16\ql common shares increased from 25% on
June\~30, 2007 to 34.4% on November\~16, 2007.\cell{
Except as set forth above, we are not aware of the existence of other shareholders
owning more than 5% of our capital stock. The voting rights
of\plain\cf1\f51\fs16\ql our principal shareholders are not different from those
of the remaining shareholders.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql
Differences in Voting Rights\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our major
shareholders do not have different voting
rights.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Arrangements for change in
control\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql There are no arrangements that
may at a subsequent date result in a change in
control.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Securities held in the host
country\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As of November\~30, 2007, there
were approximately 32,234,059 Global Depositary Shares (representing 322,340,590 of
our common shares, or\plain\cf1\f51\fs16\ql 60.9% of all of our outstanding
shares) held in the United States. Additionally, as of such date, there were
approximately 90 registered holders represented\plain\cf1\f51\fs16\ql by American
Depositary Shares in the United States.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql On October\~15, 2002, we initiated
a preemptive rights offering of rights to subscribe for 100,000,000 units
consisting of US$100.0 million of 8%\plain\cf1\f51\fs16\ql Convertible Notes due
2007 and non-detachable warrants to purchase shares of our common stock. The
Convertible Notes may be converted into shares\plain\cf1\f51\fs16\ql of our common
stock at an exercise price of US$ 0.545. Existing shareholders have subscribed
through the exercise of their preemptive rights for US$\plain\cf1\f51\fs16\ql
66.7\~million and they have exercised their accretion rights for US$ 10.7\~million,
amounting to a total of US$ 77.4 million. During the allocation of
the\plain\cf1\f51\fs16\ql remainder new investors have subscribed the remaining
22.6\~million units completing the US$ 100\~million
offering.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of the maturity date on
November\~14, 2007, as a a result of the conversion of convertible notes and the
exercise of warrants, the debt related to\plain\cf1\f51\fs16\ql the convertible
notes has been totally cancelled and the company\u8217?s capital stock has been
fixed in the amount of Ps. 578,676,460, representing\plain\cf1\f51\fs16\ql
578,676,460 common shares face value Ps. 1 and with a right to one vote
each.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of November\~30, 2007 our
directors and senior officers controlled, directly or indirectly, approximately
36.4% of our common shares. As a\plain\cf1\f51\fs16\ql result, these shareholders
have, and will continue to have, significant influence on the election of our
directors and the outcome of any action requiring\plain\cf1\f51\fs16\ql
shareholder approval.\par\pard\plain\sb286\cf1\f51\fs16\b\ql B.{\*\bkmkstart
tx46076_34}{\*\bkmkend tx46076_34}\plain\cf1\f51\fs16\b\ql Related Party
Transactions\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql For convenience of the
reader only, we disclose certain intercompany transactions which have been
eliminated in consolidation. Therefore, those\plain\cf1\f51\fs16\i\ql transactions
are not shown in our consolidated financial
statements.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql We increased our
investment in Banco Hipotecario in fiscal year
2004\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Several of our directors are also
directors of Banco Hipotecario.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On
December\~30, 2003, we purchased 4,116,267 shares of Banco Hipotecario at US$2.3868
per share and 37,537 warrants at US$33.86 each with\plain\cf1\f51\fs16\ql the
right to purchase 3,753,700 additional shares. We paid US$11.1 million for such
securities. On February\~2, 2004, we exercised a substantial portion
of\plain\cf1\f51\fs16\ql the warrants acquired. As a result, we acquired 4,774,000
shares of Banco Hipotecario for a total consideration of Ps.33.4 million. During
the last quarter\plain\cf1\f51\fs16\ql of fiscal year 2004, we sold 2,487,571
shares of Banco Hipotecario to IFIS (indirect shareholders) for a total
consideration of US$6.1 million (market\plain\cf1\f51\fs16\ql value equivalent to
Ps.7.0 per share). We recognized a loss in connection with the sale amounting to
Ps.1.6 million. See Note 3.c. to our consolidated\plain\cf1\f51\fs16\ql financial
statements for details on the accounting for this
investment.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of June\~30, 2007, we
owned directly and indirectly Class D shares representing 11.8% of Banco
Hipotecario, currently affording us the right to\plain\cf1\f51\fs16\ql cast 18.4%
of the total votes that may be cast at a shareholders\u8217? meeting of Banco
Hipotecario.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of June\~30, 2007, other
companies affiliated with our chairman, Eduardo Elsztain (including IFIS, to which
IFISA is a wholly owned subsidiary),\plain\cf1\f51\fs16\ql owned Class D shares
representing 13.7% of Banco Hipotecario and currently affording such holders the
right to cast 21.3% of the total votes that may be\plain\cf1\f51\fs16\ql cast at a
shareholders\u8217? meeting of Banco Hipotecario. As a result, as of June\~30,
2007, we and other affiliated companies owned in the
aggregate\plain\cf1\f51\fs16\ql Class D shares representing 25.4% of Banco
Hipotecario\u8217?s shares, currently affording us and such other affiliated
companies the right to cast, in the\plain\cf1\f51\fs16\ql aggregate, 39.7% of the
total votes that may be cast at a shareholders meeting and to nominate 6 of Banco
Hipotecario\u8217?s 12 directors.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Free space for Fundaci\u243?n
IRSA and Fundaci\u243?n Museo de los Ni\u241?
os\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On October\~31, 1997, our subsidiary
Alto Palermo approved the execution of an agreement granting Fundaci\u243?n IRSA
the free right to use\plain\cf1\f51\fs16\ql 3,800 square meters of constructed
area in the Abasto Shopping Center for a 30-year
period.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Moreover, on November\~29, 2005,
Alto Palermo approved the execution of an agreement granting Fundaci\u243?n Museo
de los Ni\u241?os, the\plain\cf1\f51\fs16\ql free right to use approximately
2,670.11 square meters of constructed area in the Shopping Rosario for a 30-year
period.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Fundaci\u243?n IRSA is a
charitable, non-profit organization whose Chairman is Eduardo S. Elsztain and whose
Secretary, is Mariana Carmona de\plain\cf1\f51\fs16\ql Elsztain,
Mr.\~Elsztain\u8217?s wife. Fundaci\u243?n IRSA has used the available area to
house a museum called \u8220?Museo de los Ni\u241?os,\plain\cf1\f51\fs16\ql
Abasto,\u8221? an interactive learning center for children and adults, which opened
to the public in April 1999. On September\~27, 1999, Fundaci\u243?
n\plain\cf1\f51\fs16\ql IRSA assigned and transferred for free, the entirety of
Museo de los Ni\u241?os, as well as Abasto\u8217?s rights and obligations to
Fundaci\u243?n\plain\cf1\f51\fs16\ql Museo de los Ni\u241?
os.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Fundaci\u243?n Museo de los Ni\u241?
os is a charitable non-profit organization established by the same founders of
Fundaci\u243?n IRSA and run\plain\cf1\f51\fs16\ql by the same members of the
administration committee as Fundaci\u243?n IRSA. Fundaci\u243?n Museo de los
Ni\u241?os acts as special vehicle for the\plain\cf1\f51\fs16\ql development of
Museo de los Ni\u241?os, Abasto and Museo de los Ni\u241?os, Rosario. On
October\~29, 1999, Alto Palermo approved the assignment of\plain\cf1\f51\fs16\ql
Museo de los Ni\u241?os, Abasto\u8217?s agreement to Fundaci\u243?n Museo de los
Ni\u241?os. In addition, on December\~12, 2005, an agreement\plain\cf1\f51\fs16\ql
granting the free right to use of the space designated for Museo de los Ni\u241?os,
Rosario was signed.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Donations for
Fundaci\u243?n IRSA and Fundacion Museo de los
Ninos\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql During the fiscal years ended
June\~30, 2005, 2006 and 2007, we made donations to Fundaci\u243?n IRSA and
Fundaci\u243?n Museo de los\plain\cf1\f51\fs16\ql Ni\u241?os for a total amount of
Ps.4.1 million, Ps.4.3 million and Ps.2.5 million, respectively. Eduardo S.
Elsztain is the chairman of Fundaci\u243?n\plain\cf1\f51\fs16\ql IRSA and
Fundaci\u243?n Museo de los Ni\u241?
os.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Our
Shares\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As of November\~30, 2007, IFISA
converted all of its convertible notes and warrants. After this exercise of
warrants and conversion of convertible\plain\cf1\f51\fs16\ql notes, IFISA has no
outstanding warrants or convertible notes of our Company. As a result, IFISA owns
8.0\~million of our common shares, representing\plain\cf1\f51\fs16\ql 1.4% of our
total outstanding common shares.Cresud\u8217?s acquisition of our convertible notes
and warrants\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Eduardo S. Elsztain and
Sa\u250?l Zang are, respectively, Chairman and Vice Chairman of our board of
directors and are also shareholders of our\plain\cf1\f51\fs16\ql company. They are
also, respectively, chairman and vice-chairman of the board of directors of Cresud
and are also shareholders of Cresud.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
During November and December 2002, Cresud purchased US$49.7 million of our 8%
convertible notes due 2007 and during July and November\plain\cf1\f51\fs16\ql
2003, Cresud purchased an additional US$0.25 million of such convertible
notes.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 188
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Our convertible notes, which were
offered on October\~15, 2002 for 100\~million units consisting of US$100.0 million
of 8% convertible notes due\plain\cf1\f51\fs16\ql 2007, are convertible at any
time, at the option of the holder, into a fixed number of common shares. Once
converted, the holder has the right to acquire\plain\cf1\f51\fs16\ql an additional
equal number of shares at the exercise price of the
warrant.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In May 2004, Cresud decided to
exercise their option to convert 5.0\~million aggregate principal amount of our
Convertible Notes as part of our long\plain\cf1\f51\fs16\ql term strategy, in
order to revert the reduction of Cresud ownership percentage, which was diluted by
the conversion of notes and the exercise of warrants\plain\cf1\f51\fs16\ql by
third parties. As a result of this conversion, Cresud has received 9.2\~million of
our common shares.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In July 2004, Cresud
converted 0.35\~million of convertible notes issued by us for US$0.5 million. On
September\~30, 2004, Cresud exercised\plain\cf1\f51\fs16\ql 5.0\~million of our
Warrants for 9.2\~million ordinary shares at a total cost of US$6 million. In
February 2006, Cresud converted 5.0\~million of convertible\plain\cf1\f51\fs16\ql
notes issued by us for 9.2\~million ordinary shares. In April 2006, Cresud
converted 16.0\~million of convertible notes issued by us for 29.3\~million
ordinary\plain\cf1\f51\fs16\ql shares.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
As of June\~30, 2007 Cresud owned 25.01\~% of our common shares, 12.0\~million
convertible notes and 33.0\~million warrants. In the case all\plain\cf1\f51\fs16\ql
noteholders exercise their conversion rights Cresud would own 34.3% of our common
stock.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql After this date, 12.0\~million
convertible notes were converted and 33.0\~million warrants were exercised. After
this exercise of warrants and\plain\cf1\f51\fs16\ql conversion of convertible
notes, Cresud has no outstanding warrants or convertible notes of our Company. As a
result, Cresud owns 34.4\~% of our\plain\cf1\f51\fs16\ql common
shares.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Lease of our
Headquarters\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our headquarters are located
at Bol\u237?var 108, 1st floor, City of Buenos Aires. We lease this property from
Elsztain e Hijos S.C.A., a company\plain\cf1\f51\fs16\ql controlled by relatives
of Eduardo S. Elsztain, and from Hamonet S.A., a company controlled by Fernando A.
Elsztain, one of our directors, and several\plain\cf1\f51\fs16\ql of his
relatives. A lease agreement was signed among us, Alto Palermo, Cresud and Isaac
Elsztain e Hijos S.C.A., in March 2004. This lease establishes
a\plain\cf1\f51\fs16\ql term of 120 months and monthly rental payments of
Ps.8,490. We, Alto Palermo and Cresud each pay one-third, or Ps.2,830, of such
rent.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Office Space
Lease\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Cyrsa S.A., a company which is 50%
owned by us, leases from us the fourth floor of the building located at Libertador
498 for a monthly rent of\plain\cf1\f51\fs16\ql U$S 0.018
million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Llao Llao Resorts S.A., a
company which is 50% owned by us, leases from us part of the first floor and a
commercial unit, both at the building\plain\cf1\f51\fs16\ql located in Maipu 1300
for a monthly rent of U$S 0.004 million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
In December 2003, Alto Palermo, Fibesa S.A. (a wholly owned subsidiary of Alto
Palermo) and Cresud leased their administrative headquarters
in\plain\cf1\f51\fs16\ql the Intercontinental Plaza tower, located at Moreno 877,
City of Buenos Aires, from our subsidiary Inversora Bol\u237?var S.A. The
lease\plain\cf1\f51\fs16\ql agreements\u8217? initial term is 60 months, subject
to an optional extension for 36 additional months. Alto Palermo, Fibesa S.A. and
Cresud pay a\plain\cf1\f51\fs16\ql monthly rent of US$0.011 million, US$0.003
million and US$0.003 million, respectively, to Inversora Bolivar S.A. In addition,
IRSA, Cresud and Alto\plain\cf1\f51\fs16\ql Palermo split between them the rent
for the twenty-fourth floor of the above mentioned building, which amounts to
US$0.003 million per month.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Tarshop, a company which is 80%
owned by Alto Palermo, leases the second floor of the Intercontinental Plaza tower
from Inversora Bolivar S.A.\plain\cf1\f51\fs16\ql for a monthly rent of US$0.004
million. In addition, Tarshop leases from us floors five and seven of the building
located at Suipacha 664 for a monthly\plain\cf1\f51\fs16\ql rent of US$0.007
million.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Legal
Services\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql During the fiscal years ended
June\~30, 2005, 2006 and 2007 we paid the law firm Zang, Bergel\~& Vi\u241?es an
aggregate amount of\plain\cf1\f51\fs16\ql approximately Ps.1.1 million, Ps.1.9
million and Ps.3.3 million, respectively, as payments for legal services. Our
director, Sa\u250?l Zang, and our\plain\cf1\f51\fs16\ql alternate director,
Salvador D. Bergel, are partners of this law firm. Juan C. Quintana Ter\u225?n, our
alternate director, is of counsel of this law firm.\plain\cf1\f51\fs16\ql Ernesto
Manuel Vi\u241?es, a partner of the firm, is a member of the board of directors of
our equity investee Banco
Hipotecario.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Intercompany
Loans\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As of September\~30, 2007, we, as
lender, had two loan agreements with Llao Llao Resort S.A. (50% owned by us), as
borrower: (i)\~a loan\plain\cf1\f51\fs16\ql agreement for Ps.20.6 million, with an
annual interest rate of 12%, which is scheduled to mature on December\~19, 2007;
(ii)\~a loan agreement for up to\plain\cf1\f51\fs16\ql US$. 4.0\~million, with an
annual interest rate of 7%, which is scheduled to mature on October14, 2010. Both
loan agreements were granted for working\plain\cf1\f51\fs16\ql capital purposes in
the ordinary course of business. As of September\~30, 2007, the outstanding amounts
were Ps.20.6 million and US$ 1.3\~million,\plain\cf1\f51\fs16\ql
respectively.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As such date, we, as
borrower, also had a line of credit with Ritelco (100% owned by us), as lender, for
up to US$. 5.0\~million, with an interest\plain\cf1\f51\fs16\ql rate of Libor,
which is scheduled to mature on November\~28, 2008. The line of credit was granted
for working capital purposes in the ordinary course of\plain\cf1\f51\fs16\ql
business. As of September\~30, 2007, the outstanding amount was US$4.5
million.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Dolphin
Fund\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Since 1996, we have invested in
Dolphin Fund Plc, an open-ended investment fund which is related to our director
and principal shareholder\plain\cf1\f51\fs16\ql Eduardo Elsztain. These
investments are carried at market value as of year-end. Unrealized gains and losses
relating to investment funds are included in\plain\cf1\f51\fs16\ql financial
results, net, in the consolidated statements of income. The amounts relating to our
net gain on holding Dolphin Fund Plc. for the years ended\plain\cf1\f51\fs16\ql
June\~30, 2005, 2006 and 2007 are Ps.16.3 million, Ps.2.5 million and Ps.46.8
million, respectively.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Purchase of
E-Commerce Latina S.A. from Alto Palermo as part of its corporate
restructuring\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On November\~6, 2007, as
part of a corporate restructuring, Alto Palermo redefined its organizational
structure, with the purpose of optimizing its\plain\cf1\f51\fs16\ql operations.
Accordingly, Alto Palermo sold to us the interest it held in its controlled non-
operative company E-Commerce Latina S.A., which consisted\plain\cf1\f51\fs16\ql of
1,616,702 common shares for an aggregate price of Ps.
3,495,217.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 190
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Options to Purchase Shares of
Comercializadora Los Altos S.A. (formerly known as Altocity.com
S.A.)\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In January 2000, E-Commerce Latina,
a company owned 50% by us and 50% by Telef\u243?nica Argentina, granted Consultores
Internet Managers\plain\cf1\f51\fs16\ql Ltd. an option to purchase certain of its
class B shares of Comercializadora Los Altos S.A. (formerly known as Altocity.com
S.A.) Consultores Internet\plain\cf1\f51\fs16\ql Managers Ltd. is a special-
purpose Cayman Islands\u8217? corporation created to act on behalf of its
management and is represented by an independent\plain\cf1\f51\fs16\ql attorney-in-
fact.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The option granted to Consultores
Internet Managers represents 15% of the capital stock of Comercializadora Los Altos
S.A. (formerly known as\plain\cf1\f51\fs16\ql Altocity.com S.A.) and was granted
for a period of eight years.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Pursuant to
the terms of the agreement, the exercise price is equal to the quotient of (i)\~the
original value of class B shares at the time of the\plain\cf1\f51\fs16\ql
contribution to Comercializadora Los Altos S.A. (formerly known as Altocity.com
S.A.) by E-Commerce Latina, plus interest accrued at an annual
fixed\plain\cf1\f51\fs16\ql interest rate of 14% through the exercise date of the
option, over (ii)\~the total number of class B shares owned by E-Commerce Latina at
the exercise\plain\cf1\f51\fs16\ql date of the
option.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The option was granted to
Consultores Internet Managers Ltd. to be allocated by it among the management of
Comercializadora Los Altos S.A.\plain\cf1\f51\fs16\ql (formerly known as
Altocity.com S.A.) as an incentive compensation for their services, but as of
today, no individual awards have been determined for\plain\cf1\f51\fs16\ql
participating employees under this option. Upon exercise of the option, Consultores
Internet Managers Ltd.\u8217? sole asset will be its 15% interest
in\plain\cf1\f51\fs16\ql Comercializadora Los Altos S.A. (formerly known as
Altocity.com S.A.).\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On October\~24, 2006
Alto Palermo acquired 808,354 outstanding ordinary shares of E-commerce latina S.A.
and 11 outstanding ordinary shares of\plain\cf1\f51\fs16\ql Comercializadora Los
Altos S.A. (formerly known as Altocity.com S.A.) for a total amount of Ps.85,876.
Such agreement was subject to approval by the\plain\cf1\f51\fs16\ql Comisi\u243?n
Nacional de Defensa de la Competencia. By the end of December 2006, the commission
approved the transaction and in January 2007 the\plain\cf1\f51\fs16\ql agreed upon
price was settled and the shareholders duly transferred their
shares.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Through this operation, Alto
Palermo have obtained total share control of E-Commerce Latina. During January
2007, the total price agreed was\plain\cf1\f51\fs16\ql fully
paid.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of April\~17, 2007, Alto
Palermo\u8217?s subsidiary Altocity.com S.A. change its name to Comercializadora
Los Altos S.A.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On November\~6, 2007, E-
Commerce Latina sold its 90% equity interest in Comercializadora Los Altos S.A.
(formerly know as Altocity.com S.A.),\plain\cf1\f51\fs16\ql a 10% to Alto
Palermo\u8217?s subsidiary Shopping Alto Palermo S.A. and the remaining 80% to Alto
Palermo; and furthermore Alto Palermo sold their\plain\cf1\f51\fs16\ql 100% equity
interest in E-Commerce Latina, a 90% to us and the remaining 10% to Patagonian
Investment S.A.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Loan agreements with
members of the Senior Management of Banco
Hipotecario\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As of June\~30, 2007, several
members of the senior management of Banco Hipotecario had loans from Banco
Hipotecario for a total amount of\plain\cf1\f51\fs16\ql approximately Ps.0.021
million with an average interest rate of 25%. We believe that each of these loans
was made by Banco Hipotecario in the ordinary\plain\cf1\f51\fs16\ql course of its
consumer credit business, is of a type generally made available by Banco
Hipotecario to the public and was made on market
terms.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 191
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Agreement for Shared Corporate
Services with Cresud and Alto Palermo\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In
order to reduce administrative expenses and to achieve a more efficient allocation
of corporate resources, we entered into an Exchange of\plain\cf1\f51\fs16\ql
Operating Services Agreement with Cresud and Alto Palermo, on June\~30, 2004. This
agreement has a term of two years, which may be renewed for
an\plain\cf1\f51\fs16\ql equal term unless any of the parties decides to terminate
it. Pursuant to this agreement tasks are performed by one or more of the companies
for the\plain\cf1\f51\fs16\ql benefit of one or more of other companies in
exchange for a fee to be paid primarily through the provision of services in other
areas. Through this\plain\cf1\f51\fs16\ql agreement, each company continues to
maintain its strategic and commercial independence while increasing operating
efficiency. This agreement will not\plain\cf1\f51\fs16\ql affect the independence
of each company\u8217?s record and accounting systems or adversely affect internal
control systems or external audit tasks. Each\plain\cf1\f51\fs16\ql company will
continue to maintain separate assets and
liabilities.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Alejandro Gustavo Elsztain
is the General Coordinator of the program and the program is operated and
implemented by Cedric Bridger for us,\plain\cf1\f51\fs16\ql Gabriel Adolfo
Gregorio Reznik for Cresud and Abraham Perelman for Alto Palermo, all of whom are
directors and members of the Supervisory\plain\cf1\f51\fs16\ql Committees of their
respective companies. The main duties for implementation of the project are
(a)\~monitoring the project\u8217?s implementation in\plain\cf1\f51\fs16\ql
accordance with the agreement; (b)\~reviewing the billing report on a monthly basis
to analyze and check it against the provisions of the agreement, and,
in\plain\cf1\f51\fs16\ql the event of\u8217? discrepancies or deviations,
preparing a report to submit for the consideration of the General Coordinator, and
by each\plain\cf1\f51\fs16\ql company\u8217?s boards of directors and
(c)\~assessing, on a permanent basis, the results derived from the project\u8217?s
implementation and proposing\plain\cf1\f51\fs16\ql to the General Coordinator
changes in the event of a conflict with the agreement or, if appropriate, the
possibility of establishing cost or benefit allocation\plain\cf1\f51\fs16\ql
mechanisms or criteria more consistent with the goals of the
agreement.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The areas originally involved
were Human Resources, Finance, Institutional Relations, Administration, Systems,
Insurance, Purchasing, Messenger\plain\cf1\f51\fs16\ql Services, Contracts,
Operations and Directors\u8217? Assistants, among others. This program was
implemented to reduce operating costs by optimizing the\plain\cf1\f51\fs16\ql
individual administrative efficiencies of each
company.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Currently, the program includes
Internal Audit and the other Shared Corporate Services, while the sharing of
Directors\u8217? Assistants has been\plain\cf1\f51\fs16\ql
dropped.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In the future and in order to
continue our policy of achieving a more efficient allocation of corporate
resources, we may extend the areas in which\plain\cf1\f51\fs16\ql we share
corporate services with Cresud and Alto Palermo. Our chairman is also chairman of
Cresud and Alto Palermo and our vice-chairman is also\plain\cf1\f51\fs16\ql vice-
chairman of Cresud and Alto Palermo. We believe that the terms and conditions of
these transactions are consistent in all material respects
with\plain\cf1\f51\fs16\ql those prevailing in the market at the relevant time for
agreements between unaffiliated parties.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
The Share Services Agreement was filed with the SEC in a report on Form 6-K dated
July\~1, 2004 and an amendment to this agreement was filed\plain\cf1\f51\fs16\ql
in a report on Form 6-K dated September\~19, 2007. See Note 8 to our audited
consolidated financial statements contained elsewhere in this annual
report.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 192
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Convertible Notes of Alto
Palermo\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql At a noteholders\u8217? meeting
held on May\~2, 2006, the holders of Alto Palermo\u8217?s Series I convertible
notes unanimously approved an\plain\cf1\f51\fs16\ql extension to July\~19, 2014 of
the maturity date of such notes which had initially been scheduled to mature in
June 2006.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On November\~30, 2007, the
outstanding principal amount of such convertible notes was US$47.2 million, and we
owned US$31.7 million principal\plain\cf1\f51\fs16\ql amount of such convertible
notes on such date. If all the holders of Alto Palermo\u8217?s convertible notes
were to exercise their conversion rights, the\plain\cf1\f51\fs16\ql amount of Alto
Palermo\u8217?s shares outstanding would be increased from 782.0\~million to
2,239.7 million.\par\pard\plain\sb286\cf1\f51\fs16\b\ql C.{\*\bkmkstart tx46076_35}
{\*\bkmkend tx46076_35}\plain\cf1\f51\fs16\b\ql Interests of Experts and
Counsel\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This section is not
applicable\par\pard\plain\cf1\f51\fs27\ql \~{\*\bkmkstart item_1_3_13}{\*\bkmkend
item_1_3_13}
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\b\ql ITEM\~8.\cell{\*\bkmkstart tx46076_36}
{\*\bkmkend tx46076_36}\pard\plain\intbl\cf1\f51\fs16\b\ql Financial
information\cell{
{\*\bkmkstart tx46076_37}{\*\bkmkend tx46076_37}\plain\cf1\f51\fs16\b\ql
Consolidated Statements and Other Financial
Information\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql See Item\~18 for our
consolidated financial statements.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Legal or
Arbitration Proceedings\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Legal
Proceedings\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Set forth below is a
description of certain material legal proceedings to which we are a party. We are
not engaged in any other material litigation or\plain\cf1\f51\fs16\ql arbitration
and no other material litigation or claim is known to us to be pending or
threatened against us or our subsidiaries. Nevertheless, we may
be\plain\cf1\f51\fs16\ql involved in other litigation from time to time in the
ordinary course of business.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Puerto
Retiro\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On November\~18, 1997, in
connection with our acquisition of our subsidiary Inversora Bol\u237?var S.A.
(\u8220?Inversora Bol\u237?var\u8221?),\plain\cf1\f51\fs16\ql we indirectly
acquired 35.2% of the capital stock of Puerto Retiro. Inversora Bol\u237?var had
purchased such shares of Puerto Retiro from Redona\plain\cf1\f51\fs16\ql
Investments Ltd. N.V. in 1996. In 1999, we, through Inversora Bol\u237?var,
increased our interest in Puerto Retiro to 50.0% of its capital stock.
On\plain\cf1\f51\fs16\ql April\~18, 2000, Puerto Retiro received notice of a
complaint filed by the Argentine Government, through the Ministry of Defense,
seeking to extend the\plain\cf1\f51\fs16\ql bankruptcy of Inversora D\u225?rsena
Norte S.A. (\u8220?Indarsa\u8221?). Upon filing of the complaint, the bankruptcy
court issued an order restraining\plain\cf1\f51\fs16\ql the ability of Puerto
Retiro to dispose of, in any manner, the real property it had purchased in 1993
from Tandanor S.A. (\u8220?Tandanor\u8221?).\plain\cf1\f51\fs16\ql Puerto Retiro
appealed the restraining order which was confirmed by the Court on December\~14,
2000.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In 1991, Indarsa had purchased 90%
of Tandanor, a former government-owned company, which owned a piece of land near
Puerto Madero of\plain\cf1\f51\fs16\ql approximately 8 hectares, divided into two
parcels: Planta 1 and 2. After the purchase of Tandanor by Indarsa, in June 1993,
Tandanor sold \u8220?Planta\plain\cf1\f51\fs16\ql 1\u8221? to Puerto Retiro, for a
sum of US$18 million pursuant to a valuation performed by J.L. Ramos, a well-known
real estate brokerage firm in\plain\cf1\f51\fs16\ql Argentina. Indarsa failed to
pay to the\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 193
\
Argentine government the price for its purchase of the stock of Tandanor, and as a
result the Ministry of Defense requested the bankruptcy of
Indarsa.\plain\cf1\f51\fs16\ql Since the only asset of Indarsa was its holding in
Tandanor, the Argentine government is seeking to extend Indarsa\u8217?s bankruptcy
to other\plain\cf1\f51\fs16\ql companies or individuals which, according to its
view, acted as a single economic group. In particular, the Argentine government has
requested the\plain\cf1\f51\fs16\ql extension of Indarsa\u8217?s bankruptcy to
Puerto Retiro which acquired Planta 1 from
Tandanor.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The deadline for producing
evidence in relation to these legal proceedings has expired. The parties have
submitted their closing arguments and are\plain\cf1\f51\fs16\ql awaiting a final
judgment. However, the judge has delayed his decision until a final judgment in the
criminal proceedings against the former Defense\plain\cf1\f51\fs16\ql Minister and
former directors of Indarsa has been delivered. We cannot give you any assurance
that we will prevail in this proceeding, and if the\plain\cf1\f51\fs16\ql
plaintiff\u8217?s claim is upheld by the courts, all of the assets of Puerto Retiro
would likely be used to pay Indarsa\u8217?s debts and our investment
in\plain\cf1\f51\fs16\ql Puerto Retiro, valued at Ps.54.9 million as of June\~30,
2007, would be lost. As of June\~30, 2007, we had not established any reserve in
respect of this\plain\cf1\f51\fs16\ql
contingency.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Llao Llao
Holding\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Llao Llao Holding S.A. purchased
Hotel Llao Llao in November, 1997, from the Argentine National Parks
Administration. Llao Llao Holding S.A.,\plain\cf1\f51\fs16\ql the predecessor of
Llao Llao Resorts S.A., was sued in 1997 by the National Parks Administration to
collect the unpaid balance of the purchase price in\plain\cf1\f51\fs16\ql
Argentine sovereign debt securities amounting to US$2.9 million. The trial court
ruled in favor of the plaintiff. The ruling was appealed, and the court
of\plain\cf1\f51\fs16\ql appeals confirmed the judgment ordering the payment of
US$2.9\~million in Argentine sovereign debt securities available at the date of the
ruling, plus\plain\cf1\f51\fs16\ql compensatory and punitive interest and
attorneys\u8217? fees. On March\~2, 2004, Llao Llao Resorts S.A. deposited a
payment of Ps.7.2\~million with\plain\cf1\f51\fs16\ql Banco de la Ciudad de Buenos
Aires in favor of the National Parks Administration and deposited Argentine
sovereign debt securities class FRB \u8211?\plain\cf1\f51\fs16\ql FRB L+13/16 2005
having a total principal amount of US$4.1 million. The aggregate amount deposited
on that date was Ps.9.2 million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On
June\~30, 2004, the plaintiff filed a brief rejecting Llao Llao Holding Resorts
payment on the grounds that it was a partial payment and\plain\cf1\f51\fs16\ql
requesting the court to determine the term for the deposit of funds amounting to
final payment of the total debt. The trial court pesified the
outstanding\plain\cf1\f51\fs16\ql amount of plaintiff\u8217?s ruling against Llao
Llao Resorts S.A., as well as the unpaid fee of the plaintiff\u8217?s attorneys.
The plaintiff appealed this\plain\cf1\f51\fs16\ql decision. The court of appeals
ruled in favor of the plaintiff maintaining the unpaid amounts were payable in U.S.
dollars. Llao Llao Resorts S.A. filed an\plain\cf1\f51\fs16\ql appeal, which was
rejected. Llao Llao Resorts S.A. subsequently filed an additional appeal in
response to the refusal to allow the appeal and this action
is\plain\cf1\f51\fs16\ql still pending.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
The plaintiff filed a petition requesting that the above mentioned deposit amount
be transferred to a savings account. Llao Llao Holding S.A.
did\plain\cf1\f51\fs16\ql not oppose this petition maintaining that its
obligations would be cancelled upon such payment. Notwithstanding the appeal the
complaint filed by Llao\plain\cf1\f51\fs16\ql Llao Resorts S.A., the plaintiff has
continued the procedure for the collection of the oustanding
amount.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of September\~30, 2007, Llao
Llao Resorts S.A. had established a reserve in the amount of Ps.4.78 million which
it determined by calculating the\plain\cf1\f51\fs16\ql difference between the
amount claimed for compensatory and punitive interest (US$3.8 million) and the
amount Llao Llao Resorts S.A. has deposited in\plain\cf1\f51\fs16\ql favor of the
National Parks Administration (Ps.7.2 million). In addition, as of such date Llao
Llao Resorts S.A. had established an additional reserve of\plain\cf1\f51\fs16\ql
Ps.1.12 million to cover its possible liability for the fees of the
plaintiff\u8217?s attorneys.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql Neuqu\u233?n
Project\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On July\~6, 1999, Alto Palermo
acquired 94.6% ownership of Shopping Neuqu\u233?n S.A. (\u8220?Shopping Neuqu\u233?
n\u8221?) for Ps.4.2\plain\cf1\f51\fs16\ql million. Shopping Neuqu\u233?n\u8217?s
sole asset is a parcel of land of approximately 50,000 square meters in which Alto
Palermo seek to develop a\plain\cf1\f51\fs16\ql shopping center. Alto Palermo paid
Ps.0.9\~million on September\~1, 1999, and the remaining Ps.3.3\~million were
originally scheduled to be paid on the\plain\cf1\f51\fs16\ql earlier to occur of
July\~5, 2001, and the completion of the construction of the shopping center. On
August\~15, 2003, the former holders of 85.8% of\plain\cf1\f51\fs16\ql Shopping
Neuqu\u233?n filed a complaint against Alto Palermo seeking recovery of the unpaid
balance of the purchase price, plus interest and legal costs.\plain\cf1\f51\fs16\ql
In September 2003, Alto Palermo answered the complaint and raised several defenses
including, plaintiffs\u8217? non-compliance with her duties
under\plain\cf1\f51\fs16\ql the contract and the pesification of the purchase
price balance pursuant to emergency legislation adopted in 2002. Alto Palermo also
filed a counterclaim\plain\cf1\f51\fs16\ql alleging there should be a readjustment
of the terms of the contract which became excessively burdensome given the 2001
economic, social and political\plain\cf1\f51\fs16\ql crisis. In November 2003, the
plaintiffs replied to Alto Palermo\u8217?s counterclaim alleging that the payment
under the purchase agreement was\plain\cf1\f51\fs16\ql overdue before the economic
and social crisis emerged and thus its contract readjustment claim was
inadmissible. On February\~2, 2007, Alto Palermo\plain\cf1\f51\fs16\ql reached an
agreement with Shopping Neuqu\u233?n S.A. former shareholders, in which both
parties decided to accept the judge\u8217?s ruling. On that\plain\cf1\f51\fs16\ql
date, and pursuant to the aforementioned agreement, Alto Palermo paid the amount of
US$3.45 million to the former shareholders of Shopping\plain\cf1\f51\fs16\ql
Neuqu\u233?n S.A., not having the latter anything else to claim to Alto
Palermo.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Legal issues with the City
Hall of Neuqu\u233?n\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In June 2001,
Shopping Neuqu\u233?n requested that the City Hall of Neuqu\u233?n allow it to
transfer certain parcels of land to third parties so\plain\cf1\f51\fs16\ql that
each participant in the commercial development to be constructed would be able to
build on its own land. The City Hall Executive Branch
previously\plain\cf1\f51\fs16\ql rejected this request under Decree No.\~1437/2002
which also established the expiration of the rights arising from Ordinance 5178,
including the loss of\plain\cf1\f51\fs16\ql any improvement and expenses incurred.
As a result, Shopping Neuqu\u233?n had no right to claim indemnity charges and
annulled its buy-sell land\plain\cf1\f51\fs16\ql
contracts.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Shopping Neuqu\u233?n
submitted a written appeal to this decision on January\~21, 2003. It also sought
permission to submit a revised schedule of\plain\cf1\f51\fs16\ql time terms,
taking account of the current situation and including reasonable short and medium
term projections. The City Hall Executive Branch rejected\plain\cf1\f51\fs16\ql
this request in Decree 585/2003. Consequently, on June\~25, 2003, Shopping
Neuqu\u233?n filed an \u8220?Administrative Procedural Action\u8221?
with\plain\cf1\f51\fs16\ql the High Court of Neuqu\u233?n requesting, among other
things, the annulment of Decrees 1,437/2002 and 585/2003 issued by the City Hall
Executive\plain\cf1\f51\fs16\ql Branch. On December\~21, 2004, the High Court of
Neuqu\u233?n communicated its decision that the administrative procedural action
that Shopping\plain\cf1\f51\fs16\ql Neuqu\u233?n had filed against the City Hall
of Neuqu\u233?n had expired. Shopping Neuqu\u233?n filed an extraordinary appeal
for the case to be sent\plain\cf1\f51\fs16\ql to the Argentine Supreme Court,
which is yet to be decided.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On
December\~13, 2006, Shopping Neuqu\u233?n signed an agreement with both the City
Hall and the Province of Neuqu\u233?n stipulating a new\plain\cf1\f51\fs16\ql
timetable for construction of the commercial and housing enterprises (the \u8220?
Agreement\u8221?). Also, Shopping Neuqu\u233?n was permitted
to\plain\cf1\f51\fs16\ql transfer certain parcels to third parties so that each
participant in the commercial development to be
constructed\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 195
\
would be able to build on its own land, with the exception of the land in which the
shopping center will be constructed. The Legislative Council of
the\plain\cf1\f51\fs16\ql City Hall of Neuqu\u233?n duly ratified the Agreement.
The City Hall Executive Branch promulgated the ordinance issued on February\~12,
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Agreement also provides that
Shopping Neuqu\u233?n will submit, within 120 days after the Agreement is signed, a
new urban project draft\plain\cf1\f51\fs16\ql with an adjustment of the
environmental impact survey, together with a map of the property subdivision, which
the City Hall of Neuqu\u233?n will\plain\cf1\f51\fs16\ql approve or disapprove
within 30 days after its presentation. If the project is approved, Shopping
Neuqu\u233?n will submit the final maps of the works to\plain\cf1\f51\fs16\ql the
City Hall within 150 days of this decision and construction must commence within a
maximum period of 90 days thereafter. The first stage of\plain\cf1\f51\fs16\ql
construction (including minimum construction of 21,000 square meters of the
shopping center and 10,000 square meters of the hypermarket) is expected
to\plain\cf1\f51\fs16\ql be completed within a maximum period of 22 months. The
Agreement is conditional upon the City Hall declaring the feasibility of the draft
project\plain\cf1\f51\fs16\ql submitted, and upon the terms and conditions of this
decision being accepted by Shopping Neuqu\u233?n S.A. The City Hall of Neuqu\u233?n
reserves its\plain\cf1\f51\fs16\ql right to rescind the Agreement and file the
legal actions it deems pertinent if its conditions are
contravened.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On March\~28, 2007,
Shopping Neuqu\u233?n submitted the new project draft and revised environmental
impact survey to the City Hall of\plain\cf1\f51\fs16\ql Neuqu\u233?n. On May\~10,
2007, the City Hall of Neuqu\u233?n, requested certain explanations and made
recommendations for our consideration before\plain\cf1\f51\fs16\ql issuing an
opinion on the feasibility of the draft project. On July\~17, 2007, Shopping
Neuqu\u233?n answered the City Hall\u8217?s requests and on\plain\cf1\f51\fs16\ql
September\~20, 2007, the City Hall approved the feasibility of the
project.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Other
Litigation\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql As of July\~5, 2006, the AFIP
filed a preliminary injunction with the Federal Court for Administrative
Proceedings for an aggregate amount of\plain\cf1\f51\fs16\ql Ps.3,689,485.5, plus
an added amount, provisionally estimated, of Ps.900,000 for legal fees and
interest. The main dispute is about the capital gains tax\plain\cf1\f51\fs16\ql
due for admission rights. In the first instance, AFIP pleaded for a general
restraining order. On November\~29, 2006, the Federal Court issued an
order\plain\cf1\f51\fs16\ql substituting such restraining order for an attachment
on the parcel of land located in Caballito neighborhood, City of Buenos Aires,
where Alto Palermo is\plain\cf1\f51\fs16\ql planning to develop a shopping
center.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql After our acquisition of
Bouchard 557, we requested that the Antitrust Authority indicate whether it was
necessary to notify it of such acquisition.\plain\cf1\f51\fs16\ql The Antitrust
Authority advised us that we were in fact required to so notify it, and we
challenged such opinion in the courts. The court (\plain\cf1\f51\fs16\i\ql C\u225?
mara\plain\cf1\f51\fs16\i\ql Nacional de Casaci\u243?n Penal\plain\cf1\f51\fs16\ql
) confirmed the opinion of the Antitrust Authority. We subsequently appealed such
confirmation and our appeal is still\plain\cf1\f51\fs16\ql
pending.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We are involved in other
litigation which derives from the ordinary course of our business. We accrue
liabilities when it is probable that future\plain\cf1\f51\fs16\ql costs will be
incurred and such costs can be reasonably estimated. Such accruals are based on
developments to date, our estimates of the outcomes of\plain\cf1\f51\fs16\ql these
matters and the lawyers\u8217? experience in contesting, litigating and settling
similar matters. As the scope of the liabilities becomes better
defined,\plain\cf1\f51\fs16\ql there will be changes in the estimates of future
costs, which could have a material effect on our future results of operations and
financial condition or\plain\cf1\f51\fs16\ql
liquidity.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 196
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\ql Dividend
Policy\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Pursuant to Argentine law, the
distribution and payment of dividends to shareholders is allowed only if they
result from realized and net earnings of\plain\cf1\f51\fs16\ql the company
pursuant to annual financial statements approved by the shareholders. The approval,
amount and payment of dividends are subject to the\plain\cf1\f51\fs16\ql approval
by our shareholders at our annual ordinary shareholders meeting. The approval of
dividends requires the affirmative vote of a majority of the\plain\cf1\f51\fs16\ql
shares entitled to vote at the meeting.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
In accordance with Argentine law and our by-laws, net and realized profits for each
fiscal year are allocated as follows:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql 5% of such net profits is allocated to our
legal reserve, until such reserve amounts to 20% of our capital stock;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a certain amount determined at a
shareholders\u8217? meeting is allocated to compensation of our directors and the
members of our\plain\intbl\cf1\f51\fs16\ql Supervisory Committee; and\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql additional amounts may be allocated for
the payment of dividends or to optional reserve funds, or to establish reserves or
for whatever\plain\intbl\cf1\f51\fs16\ql other purpose our shareholders
determine.\cell{
sb198\fi462\cf1\f51\fs16\ql According to rules issued by
Valores\plain\cf1\f51\fs16\ql , cash dividends must be paid to shareholders within
30 days of the resolution\plain\cf1\f51\fs16\ql approving their distribution. In
the case of stock dividends, the shares must be delivered to shareholders within
three months of the annual ordinary\plain\cf1\f51\fs16\ql shareholders\u8217?
meeting that approved them.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On
February\~2, 2007 we issued our 2017 fixed rate notes for a total amount of
US$150.0 million at an annual interest rate of 8.5% payable\plain\cf1\f51\fs16\ql
semi-annual and mature on February\~2, 2017. This bond limits our ability to pay
dividends which may not exceed the sum of:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
income; or\cell{
f1\f51\fs9\ql \~
\par\pard\plain
income if the consolidated interest coverage ratio is at least 3.0 to 1; or\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
income if the consolidated interest coverage ratio is at least 4.0 to 1.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
received by us or\plain\intbl\cf1\f51\fs16\ql by its restricted subsidiaries from
restricted subsidiaries or issuance\plain\intbl\cf1\f51\fs16\ql and sale of our
qualified capital stock or the qualified capital stock of its restricted
subsidiaries subsequent to the issue of our notes due\plain\intbl\cf1\f51\fs16\ql
2017, or (b)\~issuance and sale subsequent to the issuance of our notes due 2017 of
our indebtedness or of the indebtedness of its
restricted\plain\intbl\cf1\f51\fs16\ql subsidiaries that has been converted into
or exchanged for its qualified capital stock.\cell{
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The table below presents the
dividend payment ratio and the total amount of dividends paid for, each paid
entirely in common shares, for the\plain\cf1\f51\fs16\ql mentioned years. Amounts
in Pesos are stated in historical Pesos of their respective payment date. See
\u8220?Exchange Rates and Exchange\plain\cf1\f51\fs16\ql
Controls.\u8221?\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
\pard\plain\intbl\brdrb\brdrs\cf1\f51\fs13\b\ql Year
declared\cell\pard\plain\intbl\cf1\f51\fs13\ql
Cash\~dividends\plain\intbl\cf1\f51\fs11\b\qc\super
Stock\~dividends\plain\intbl\cf1\f51\fs11\b\qc\super
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Total\~per\~common\~share\cell{
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in Pesos)\cell{
talb\cellx8608\clvertalb\cellx9321\clvertalb\cellx10795\trrh206\row}}}\pard\plain\f
0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\f
s4\par
\par\pard\plain
Corresponds to payments per common share.\cell{
{\trowd\cellx432\cellx7671\trrh206\row}}}\pard\plain\sb286\cf1\f51\fs16\b\ql B.
{\*\bkmkstart tx46076_38}{\*\bkmkend tx46076_38}\plain\cf1\f51\fs16\b\ql
Significant Changes\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\i\ql Agreement with
Cyrela Brazil Realty\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On
August\~14, 2007, we signed an agreement with Cyrela Brazil Realty S.A.
Empreendimentos e\plain\cf1\f51\fs16\ql Participa\u231?\u417?es (\u8220?
Cyrela\u8221?) pursuant to which we and Cyrela propose to develop residential
projects in Argentina targeted to diverse\plain\cf1\f51\fs16\ql market segments.
We and Cyrela formed a new company, Cyrsa S.A., to carry out the proposed
development projects, and have each agreed to make an\plain\cf1\f51\fs16\ql
initial investment of US$30 million in such company. Cyrela is a public company in
Brazil and is one of the largest developers of residential real
estate\plain\cf1\f51\fs16\ql in the cities of Sao Paulo and Rio de Janeiro. We and
our principal shareholder Cresud have a long-standing commercial relationship with
Cyrela as\plain\cf1\f51\fs16\ql reflected by our substantial investment in Brazil
Realty S.A. from 1994 to 2002 and Cresud\u8217?s recent investment in BrasilAgro, a
company focused\plain\cf1\f51\fs16\ql on agricultural opportunities in Brazil that
was founded by, among others, Cresud and another company owned by Mr.\~Elie Horn,
Cyrela\u8217?s\plain\cf1\f51\fs16\ql controlling shareholder and current chief
executive officer.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Cyrsa is currently
developing a parcel of land in Vicente Lopez, province of Buenos
Aires.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Acquisition of BankBoston
Tower\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On August\~27, 2007, we
signed a deed that entitles us to an undivided 50% ownership interest in an
office\plain\cf1\f51\fs16\ql building known as the BankBoston Tower, located at
265 Carlos Maria Della Paolera in the City of Buenos Aires. This modern property
was designed by\plain\cf1\f51\fs16\ql the recognized Architect Cesar Pelli and has
a gross leasable area of 31,670 square meters. The transaction was consummated for
an aggregate purchase\plain\cf1\f51\fs16\ql price of US$108 million (including
taxes), of which we paid US$54
million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Torres Renoir, Dock
III.\plain\cf1\f51\fs16\ql On September\~7, 2004, we entered into a barter and
option agreement with DYPSA under which we (i)\~exchanged an\plain\cf1\f51\fs16\ql
undeveloped parcel of land which forms part of our property, Dock III (identified
as plot 1c) for the future delivery of residential units, parking lots
and\plain\cf1\f51\fs16\ql storage spaces representing an aggregate of 28.5% of the
housing area of a 37-storey building to\par\pard\plain\cf1\f51\fs13\ql
\
be constructed by DYPSA on plot 1c within 36 months or less and (ii)\~granted an
option to DYPSA to acquire an undeveloped plot of land of Dique
III\plain\cf1\f51\fs16\ql (identified as plot 1e) of its property within 548 days
or less from the date of signing the deed of conveyance for plot 1c and subject to
the completion of\plain\cf1\f51\fs16\ql certain work-in-progress in the 37-storey
building. As a result, we signed the deed of conveyance of plot 1c at a price of
US$8.0 million and the option\plain\cf1\f51\fs16\ql for plot 1e at US$10.8 million
in November 2004. As guarantee for the first transaction, DYPSA set up a first
degree mortgage on plot 1c in our favor\plain\cf1\f51\fs16\ql for the total value
of the property. In May 2006, DYPSA exercised the option to acquire plot 1e and
both parties increased their valuation of the barter\plain\cf1\f51\fs16\ql
agreement to US$ 13.5 million. As consideration for plot 1e, DYPSA would deliver
housing units, individual storage spaces and parking lots
representing\plain\cf1\f51\fs16\ql an aggregate 31.5% of the housing area of a 40-
storey building to be constructed by DYPSA on plot 1e within 36 months or less. As
guarantee for this\plain\cf1\f51\fs16\ql transaction, DYPSA set up a first degree
mortgage on plot 1e in our favor for the original value of the respective
transaction. On November\~2, 2007, we\plain\cf1\f51\fs16\ql and the developer
decided to replace the barter agreement for plot 1e for a payment of US$18.2
million, US$4.6 million of which were paid on that date\plain\cf1\f51\fs16\ql and
the balance of which will be paid to us over the next six months. The income
resulting from this transaction amounts to approximately
US$4.7\plain\cf1\f51\fs16\ql
million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Solares de Santa Mar\u237?
a, City of Buenos Aires (ex Santa Mar\u237?a del
Plata).\par\pard\plain\sb88\cf1\f51\fs16\i\ql
Background\par\pard\plain\sb88\cf1\f51\fs16\ql In 1997, we acquired the property
which the National Executive Branch declared would be used as the athletic
residences for the Olympic Games if\plain\cf1\f51\fs16\ql Buenos Aires was
selected to host the Olympic Games (former Boca Juniors Football Club sports town),
currently owned by our subsidiary Solares de\plain\cf1\f51\fs16\ql Santa Mar\u237?
a S.A. Since purchasing the property, we have sought approval for a mixed use
development project (hereinafter the Project) to be built\plain\cf1\f51\fs16\ql in
the lot, including filing the dossier and meeting all the requirements set forth in
the Rule passed by the Legislative Branch of the City of Buenos
Aires\plain\cf1\f51\fs16\ql in 1992 (Ordinance 45,665/92). This rule passed by the
City Council of the City of Buenos Aires provides general urban standards in
relation to the\plain\cf1\f51\fs16\ql development of a lot and requires that the
site design be submitted to the approval of the Urban Planning Council (Consejo de
Planificaci\u243?n\plain\cf1\f51\fs16\ql Urbana\u8212?COPUA) (Executive
Branch).\par\pard\plain\sb198\cf1\f51\fs16\ql The Project met the requirements
under the Rule and was recently approved under Decree 1584/2007, issued by the
Executive Branch of the Government\plain\cf1\f51\fs16\ql of the City of Buenos
Aires. Under the Planning Code 50% of the Lot shall be donated for public use and
convenience, (357,975m2)\~inside which a\plain\cf1\f51\fs16\ql common, nautical
and recreation areas, roads, pedestrian lanes and so forth will be
found.\par\pard\plain\sb286\cf1\f51\fs16\i\ql Evolution of Approval
Instances\par\pard\plain\sb88\cf1\f51\fs16\ql Since commencing the Project, we have
made various changes and filed an application for final approval, in response to
changes in the building\plain\cf1\f51\fs16\ql regulations and the interpretation
of other legal requirements by the various authorities in office since commencing
\
Project. We have been dealing with a different of authorities and regulatory bodies
in order to obtain the final authorization of the Project. For
example:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In 2000, we filed a Master Plan for Santa
Mar\u237?a del Plata site, which was assessed by COPUA and submitted to the
Town\plain\intbl\cf1\f51\fs16\ql Treasurer\u8217?s Office, who takes part in the
process to grant final approve of the Project.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In 2002, by Decree 405/02, the government
issued a notice of public hearing to be held in June 2002, which was carried out
with\plain\intbl\cf1\f51\fs16\ql presence of several professional and private
entities and assessed by all Competent Agencies.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In June 2003, we prepared an environmental
impact statement in accordance with Resolution 1004- SSEPyDU-03.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql On August\~12, 2003, we filed a plan to
amend the Project in response to the recommendations made by the public
hearing.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In December 2005, the Hydraulic General
Bureau gave its consent to the project.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In July 2006, COPUA made some
recommendations in relation to the project.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql On December\~13, 2006, we filed an
amendment to the Project to adjust it to the recommendations made by COPUA, that
included the\plain\intbl\cf1\f51\fs16\ql following:\cell{
\cf1\f51\fs9\ql \~
\par\pard\plain
1.\cell\pard\plain\intbl\cf1\f51\fs16\ql The project met the Guidelines of the
Environmental Urban Plan\cell{
9\ql \~
\par\pard\plain
2.\cell\pard\plain\intbl\cf1\f51\fs16\ql The project was comprised within the
proposals for the strategic development of the City\u8217?s Southern Area.\cell{
s9\ql \~
\par\pard\plain
3.\cell\pard\plain\intbl\cf1\f51\fs16\ql A perimetrical pedestrian lane was
designed along the entire site on the\plain\intbl\cf1\f51\fs16\i\ql R\u237?o de la
Plata\plain\intbl\cf1\f51\fs16\ql bank.\cell{
9\ql \~
\par\pard\plain
4.\cell\pard\plain\intbl\cf1\f51\fs16\ql Maximum integration with the city was
planned, continuing with the surrounding urban landscape, designing a shore park
on\plain\intbl\cf1\f51\fs16\i\ql R\u237?o de la Plata\plain\intbl\cf1\f51\fs16\ql
bank and providing vehicle access to the avenues surrounding the site.\cell{
s9\ql \~
\par\pard\plain
5.\cell\pard\plain\intbl\cf1\f51\fs16\ql Donation of 50% of the Lot to the GCBA was
proposed for Public Use and Convenience, which is the maximum amount set forth
in\plain\intbl\cf1\f51\fs16\ql the Planning Code.\cell{
s9\ql \~
\par\pard\plain
6.\cell\pard\plain\intbl\cf1\f51\fs16\ql The specific ruling within the scope of
Ordinance N\u186? 45,665/92, Law 23,738/89 and Decree 5783/92 was proposed.\cell{
s9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql On March\~29, 2007, COPUAM, an advisory
body of government composed of advisors from the legislative and executive
branches)\plain\intbl\cf1\f51\fs16\ql released the 145-COPUAM-07 REPORT, in which
it states that it has no objections in relation to the Project and requested the
General\plain\intbl\cf1\f51\fs16\ql Treasury issue a decision concerning the
ruling scope proposed.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In May 2007, the Traffic Undersecretary
took part at the request of the General Treasury, requesting a new traffic study
for the area.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In July and November 2007, the General
Treasury carried out a comprehensive studies of the urban proposal and bill of
Decree\plain\intbl\cf1\f51\fs16\ql submitted for consideration, stating that there
is no legal challenge the Bill of Decree.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Prior to its enactment, the Decree was
reviewed and approved by the Minister of Planning and Public Works, the Traffic and
Transport\plain\intbl\cf1\f51\fs16\ql Undersecretary, the Treasury Department and
the General Technical Administrative and Legal Bureau of the Ministry of Planning
and\plain\intbl\cf1\f51\fs16\ql Public Works.\cell{
\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Having complied with all legal and
technical requirements during the last 11 years since dossier was prepared and
during 15 years, from\plain\intbl\cf1\f51\fs16\ql the date when the general ruling
on the site was passed by the Town Council, the Chief of Government of the City
passed Decree No\plain\intbl\cf1\f51\fs16\ql 1584/07 on November\~9, 2007, which
provides with the required approval for the Project.\cell{
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql On December\~1, 2007, Decree No 1584 was
published in the Official Gazette No.2815, fulfilling all legal rules in
force.\cell{
\sb286\fi462\cf1\f51\fs16\i\ql Next steps\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Notwithstanding the issuance of Decree No.\~1584/07, other matters concerning
operation and implementation of the Project, under the
different\plain\cf1\f51\fs16\ql sectors of urban agencies of the City of Buenos
Aires, are still pending.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We have also
learned that the Decree has been judicially challenged on formal and procedural
grounds. At the time of this report, we have not been\plain\cf1\f51\fs16\ql duly
notified about any decision issued by the authorities concerning said
objections.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In that sense, and if
appropriate, we will eventually evaluate what measures to take in order to protect
the acquired rights.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Patio Olmos
Building.\plain\cf1\f51\fs16\ql On September\~25, 2007 we signed the transfer deed
to purchase the real estate in which the Patio Olmos commercial
center\plain\cf1\f51\fs16\ql is currently operating from the Government of the
Province of C\u243?rdoba. We also signed the transfer deed to purchase the related
concession contract\plain\cf1\f51\fs16\ql relating to the use the property. The
balance of Ps. 22.7\~million for the property and the concession was also paid on
this date.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Neuqu\u233?n
Project\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On September\~20, 2007 the
study are\plain\cf1\f51\fs16\ql feasible. Shopping Neuqu\u233?n S.A. has 150 days
to submit the work plans from the date of the declaration. See \u8220?\u8212?
Legal\plain\cf1\f51\fs16\ql Proceedings\u8212?Legal issues with the City Hall of
Neuqu\u233?n.\u8221?.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Torres
Rosario, City of Rosario\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql We own a
plot of land spanning a surface of approximately 50,000 square meters in the City
of Rosario in the\plain\cf1\f51\fs16\ql same place where our local Shopping
Center, Alto Rosario, is located.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On
October\~11, 2007, we entered into a barter agreement with Condominios del Alto
S.A. whereby Condominios del Alto S.A. proposed to acquire\plain\cf1\f51\fs16\ql
plot G, located in the City of Rosario, Province of Santa Fe, Argentina, which
belongs to us, for the construction at its own expense and under its
own\plain\cf1\f51\fs16\ql responsibility of a housing building. As consideration
for the barter over the plot, Condominios de Alto S.A. agreed to deliver:
(i)\~fifteen (15)\~housing\plain\cf1\f51\fs16\ql units, with an own constructed
surface of 1,504.45 square meters, which will represent upon completion in
aggregate 14.85% of the area of housing units\plain\cf1\f51\fs16\ql to be build in
Plot G (ii)\~fifteen garages, which will represent upon completion in aggregate 15%
of the area of garage units to be build in the same\plain\cf1\f51\fs16\ql
building.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As additional consideration in
our favor, Condominios del Alto S.A. will pay us US$15,300 and guarantee its
obligations: (i)\~Condominios del Alto\plain\cf1\f51\fs16\ql S.A. granted a first
degree mortgage in our favor on plot G in the amount of US$1,100,000;
(ii)\~established a security insurance of which we will be\plain\cf1\f51\fs16\ql
assigner of the insured amount of US$1,600,000, and (iii)\~the shareholders of
Condominios del Alto S.A. are the guarantors of the obligations of the
latter\plain\cf1\f51\fs16\ql up to the amount of
US$800,000.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Finally, we granted to
Condominios del Alto S.A. an option to enter into a barter agreement in relation to
Plot 2h, close to the transferred plot G.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\i\ql The National Congress enacted
the Law No.\~26,313.\plain\cf1\f51\fs16\ql Recently enacted Law No.\~26,313,
established mandatory restructuring of certain mortgage\plain\cf1\f51\fs16\ql
loans granted by the former Banco Hipotecario Nacional prior to April\~1, 1991.
Neither the Ministry of Economy nor the Central Bank have
issued\plain\cf1\f51\fs16\ql corresponding regulations explaining the application
of the law as yet. Banco Hipotecario\u8217?s management interpretation is that this
law only applies\plain\cf1\f51\fs16\ql to non-performing mortgage loans granted
before April\~1, 1991, which are restructured convertibility period.\~However, it
is possible that the regulations\plain\cf1\f51\fs16\ql will provide for the
restructuring of all mortgage loans granted prior to April\~1, 1991, including
performing loans.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Incorporation of
Financel\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On September\~25, 2007,
we formed a new company, Financel Communications S.A. (\u8220?Financel\u8221?),
with our\plain\cf1\f51\fs16\ql partner Prisma Investments S.A. with ownership of
80% and 20%, respectively. Financel\u8217?s purpose is to create innovative
solutions for collections\plain\cf1\f51\fs16\ql and payments in Argentina through
the use of mobile telephony. Financel, together with CTI M\u243?vil and Tarshop,
have set-up \u8220?Compra\plain\cf1\f51\fs16\ql M\u243?vil,\u8221? the first
shopping system for mobile telephones in Argentina which we believe will allow CTI
customers to expand their options in an\plain\cf1\f51\fs16\ql easy and secure way
for payments of consumer purchases through the use of their mobile
telephones.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Exercise of our Warrants
and Conversion of Convertible Notes.\plain\cf1\f51\fs16\ql On September\~30, 2007,
Cresud exercised 20.5\~million warrants to acquire an\plain\cf1\f51\fs16\ql
additional 37.6\~million of our common shares for a total cost of US$24.6 million.
Additionally, on October\~25, 2007, Cresud exercised
12.5\~million\plain\cf1\f51\fs16\ql warrants to acquire an additional
22.9\~million of our common shares for a total cost of US$ 15.0 million. On
September\~25, 2007, Cresud converted US$\plain\cf1\f51\fs16\ql 12.0\~million of
our convertible notes into 22.0\~million of our common shares. After this exercise
of warrants and conversion of convertible notes, Cresud\plain\cf1\f51\fs16\ql has
no outstanding warrants or convertible notes of our Company. The term for the
exercise of our outstanding warrants and the conversion of
our\plain\cf1\f51\fs16\ql outstanding convertible notes issued on November\~21,
2002 expired on November\~14, 2007. Throughout the conversion and exercise periods,
holders of\plain\cf1\f51\fs16\ql our warrants and convertible notes exercised an
aggregate of 99,896,806 warrants and converted an aggregate of 99,942,343
convertible notes,\plain\cf1\f51\fs16\ql respectively, increasing our capital
stock to 578,676,460 issued and outstanding shares. As of the date of this annual
report, there are no outstanding\plain\cf1\f51\fs16\ql warrants or convertible
notes to acquire our shares. As a result of these exercises and conversions,
Cresud\u8217?s investment in our common shares\plain\cf1\f51\fs16\ql increased
from 25% on June\~30, 2007 to 34.4% on November\~16,
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Prepayment of our Outstanding
Indebtedness\plain\cf1\f51\fs16\i\ql .\plain\cf1\f51\fs16\ql On October\~21, 2007
we notified the holders of our secured floating rate notes due November
2009\plain\cf1\f51\fs16\ql and the lenders under our US$51 million syndicated bank
loan agreement of our intention to redeem such notes and repay such loans in full,
together with\plain\cf1\f51\fs16\ql interest accrued to the redemption and
repayment date, as applicable. On October\~29, 2007 we prepaid US$ 24.3\~million of
principal and US$0.35 million\plain\cf1\f51\fs16\ql of accrued interest under the
notes, and US$14.95 million of principal and US$0.21 million of accrued interest
under the loans.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql Capital
increase\plain\cf1\f51\fs16\ql . On our shareholders\u8217? meeting held on
October\~10, 2007, our shareholders approved a capital increase by a nominal
amount\plain\cf1\f51\fs16\ql of up to Ps.280,000,000, through the issuance of up
to 280,000,000 of new common shares, par value Ps.1.00 each.\~On September\~25,
2007, we filed a\plain\cf1\f51\fs16\ql Registration Statement with the SEC. As of
the date of this Form 20-F, the final terms of this rights offering are pending of
approval and we cannot give\plain\cf1\f51\fs16\ql any assurance in relation to the
proposed timing of the offering about the issue date of the new common
shares.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 202
\
}{\*\fldrslt\cf3\f52\fs16\b\ql Table of Contents}}{\*\bkmkstart item_1_3_14}
\par\pard\plain
ITEM\~9.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql The Offer and Listing\cell{
tx46076_40}\pard\plain\sb88\cf1\f51\fs16\b\ql A. Offer and Listing
Details\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following summary provides
information concerning our share
capital.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\ql Stock Exchanges in which our
securities are listed\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our common shares
are listed on the\plain\cf1\f51\fs16\i\ql Buenos Aires Stock
Exchange\plain\cf1\f51\fs16\ql and our Global Depositary Shares on the
NYSE.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The following description of the
material terms of our capital stock is subject to our certificate of incorporation
and bylaws, which are included as\plain\cf1\f51\fs16\ql exhibits to this Form 20-F
, and the provisions of applicable Argentine
Law.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\ql Price history of our stock on the
Bolsa de Comercio de Buenos Aires and
NYSE\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our common shares are traded in
Argentina on the Buenos Aires Stock Exchange, under the trading symbol \u8220?
IRSA.\u8221? Since 1994, our\plain\cf1\f51\fs16\ql GDSs, each presenting 10 common
shares, have been listed on the NYSE under the trading symbol \u8220?IRS.\u8221?
The Bank of New York is the\plain\cf1\f51\fs16\ql depositary with respect to the
GDSs.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The table below shows the high and
low daily closing prices of our common shares in Pesos and the quarterly trading
volume of our common\plain\cf1\f51\fs16\ql shares on the Buenos Aires Stock
Exchange for the first quarter of 2002 through December\~17, 2007. The table also
shows the high and low daily closing\plain\cf1\f51\fs16\ql prices of our GDSs in
U.S. dollars and the quarterly trading volume of our GDSs on the NYSE for the first
quarter of 2002 through December\~17, 2007.\plain\cf1\f51\fs16\ql Each GDS
represents ten common shares.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
\clvertalc\cellx10789\cellx10792\trrh-66\trrh0
\clvertalc\cellx10789\cellx10792\trrh-66\trrh0\row}}}
lx8981\clvertalb\cellx9088\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10792\cellx10795\tr
rh344
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Buenos Aires
Stock\~Exchange\cell\pard\plain\intbl\cf1\f51\fs13\ql
NYSE\cell\pard\plain\intbl\f0\fs16\ql \~\cell{
lx8981\clvertalb\cellx9088\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10792\cellx10795\tr
rh344\row}}}
b\cellx8086\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8981\clvertalb\cellx9088\clvertalb
\clvmgf\cellx9858\clvertalb\cellx9965\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10791\ce
llx10794\trrh344
Share\par\pard\plain\intbl\cf1\f51\fs13\b\qc
Volume\cell\pard\plain\intbl\cf1\f51\fs13\ql
Ps.\~per\~Share\cell\pard\plain\intbl\cf1\f51\fs13\ql
GDS\par\pard\plain\intbl\cf1\f51\fs13\b\qc
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc US$ per\plain\intbl\cf1\f51\fs13\b\qc
GDS\cell\pard\plain\intbl\f0\fs16\ql \~\cell{
b\cellx8086\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8981\clvertalb\cellx9088\clvertalb
\clvmgf\cellx9858\clvertalb\cellx9965\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10791\ce
mrg\cellx7893\clvertalb\cellx8086\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8399\clverta
brdrs\brdrcf1\clvertalb\clvmrg\cellx9857\clvertalb\cellx9964\clbrdrb\brdrs\brdrcf1\
clvertalb\cellx10358\clvertalb\cellx10478\clbrdrb\brdrs\brdrcf1\clvertalb\cellx1078
9\clvertalc\cellx10790\clvertalc\cellx10791\trrh172
High\cell\pard\plain\intbl\cf1\f51\fs13\ql
Low\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
Low\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql \~\cell{
mrg\cellx7893\clvertalb\cellx8086\clbrdrb\brdrs\brdrcf1\clvertalb\cellx8399\clverta
brdrs\brdrcf1\clvertalb\clvmrg\cellx9857\clvertalb\cellx9964\clbrdrb\brdrs\brdrcf1\
clvertalb\cellx10358\clvertalb\cellx10478\clbrdrb\brdrs\brdrcf1\clvertalb\cellx1078
9\clvertalc\cellx10790\clvertalc\cellx10791\trrh172\row}}}
clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10790\clvertalc\clshdng100\clcfpat12\
clcbpat12\cellx10791\trrh206
clcbpat12\cellx10791\trrh206\row}}}
\cellx10789\clvertalc\cellx10790\clvertalc\cellx10791\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql 1st
Quarter\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr 4.16\cell\pard\plain\intbl\f0\fs16\ql
\cellx10789\clvertalc\cellx10790\clvertalc\cellx10791\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql 2nd
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql 3rd
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql 4th
\cellx10789\clvertalc\cellx10790\clvertalc\cellx10791\trrh206\row}}}\pard\plain\cf1
\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 203
\
\par\pard\plain
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Buenos Aires Stock
Exchange\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc NYSE\cell{
}
Share\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Ps. per
Share\cell\pard\plain\intbl\cf1\f51\fs13\ql
GDS\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc US$ per GDS\cell{
x10246\clvertalb\cellx10366\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10794\trrh172
Low\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Low\cell{
x10246\clvertalb\cellx10366\clbrdrb\brdrs\brdrcf1\clvertalb\cellx10794\trrh172\row}
}}
trrh206
\~\cell{
trrh206\row}}}
\cellx10794\trrh206
trrh206
trrh206\row}}}
\cellx10794\trrh206
trrh206
trrh206\row}}}
\cellx10794\trrh206
trrh206
\~\cell{
trrh206\row}}}
\cellx10794\trrh206
trrh206
trrh206\row}}}
\cellx10794\trrh206
trrh206
trrh206\row}}}
\cellx10794\trrh206
trrh206
\~\cell{
trrh206\row}}}
\cellx10794\trrh206
trrh206
trrh206\row}}}
\cellx10794\trrh206
trrh206
trrh206\row}}}
\cellx10794\trrh206
trrh206
\~\cell{
trrh206\row}}}
\cellx10794\trrh206
trrh206
trrh206\row}}}
\cellx10794\trrh206
trrh206
trrh206\row}}}
\cellx10794\trrh206
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql June
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql July
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql August
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql September
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql October
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql November
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql December 2007 (through December 17,
trrh206\row}}}\pard\plain\sb198\fi462\cf1\f51\fs16\b\i\ql
Source:\plain\cf1\f51\fs16\b\ql Bloomberg\par\pard\plain\cf1\f51\fs13\ql
\
{\*\bkmkend tx46076_41}\par\pard\plain\cf1\f51\fs16\b\ql B. Plan of
Distribution\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This item is not applicable.
tx46076_42}\par\pard\plain\sb286\cf1\f51\fs16\b\ql C.
Markets\par\pard\plain\sb88\cf1\f51\fs16\b\ql Argentine Securities
Markets\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The\plain\cf1\f51\fs16\i\ql
Comisi\u243?n Nacional de Valores\plain\cf1\f51\fs16\ql is a separate governmental
entity with jurisdiction covering the territory of Argentina. Its main purpose
is\plain\cf1\f51\fs16\ql to ensure transparency of Argentina\u8217?s securities
markets, to watch over the market price formation process and to protect investors.
The\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\cf1\f51\fs16\ql supervises corporations authorized to issue
securities to the public, the secondary markets where these securities
are\plain\cf1\f51\fs16\ql traded, and all persons and corporations involved in any
capacity in the public offering and trading of these securities. Pension funds and
insurance\plain\cf1\f51\fs16\ql companies are regulated by separate government
agencies. The Argentine markets are governed generally by Law No.\~17,811, as
amended, which created\plain\cf1\f51\fs16\ql the\plain\cf1\f51\fs16\i\ql
Comisi\u243?n Nacional de Valores\plain\cf1\f51\fs16\ql and regulates stock
exchanges, stockbrokers, market operations and the public offerings of securities.
There is a\plain\cf1\f51\fs16\ql relatively low level of regulation of the market
for Argentine securities and of investors\u8217? activities in such market, and
enforcement of existing\plain\cf1\f51\fs16\ql regulatory provisions has been
extremely limited. Furthermore, there may be less publicly available information
about Argentine companies than is\plain\cf1\f51\fs16\ql regularly published by or
about companies in the United States and certain other countries. However, the
Argentine government and the\plain\cf1\f51\fs16\i\ql Comisi\u243?
n\plain\cf1\f51\fs16\i\ql Nacional de Valores\plain\cf1\f51\fs16\ql , taking into
consideration the deeper global awareness of the importance of having adequate
corporate governance practices and a\plain\cf1\f51\fs16\ql legal framework to
enforce principles such as \u8220?full information,\u8221? and \u8220?
transparency,\u8221? have issued decree No.\~677/2001. This\plain\cf1\f51\fs16\ql
decree has the objective of determining the rights of the \u8220?financial
consumer,\u8221? increasing market transparency and an adequate
legal\plain\cf1\f51\fs16\ql framework to increase the investor\u8217?s protection
within the capital market. Most of its reforms are in line with world trends
pertaining to corporate\plain\cf1\f51\fs16\ql governance practices that have
already been adopted by many emerging
markets.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In order to offer securities to
the public in Argentina, an issuer must meet certain requirements of
Valores\plain\cf1\f51\fs16\ql regarding\plain\cf1\f51\fs16\ql assets, operating
history, management and other matters, and only securities for which an application
for a public offering has been approved by the\plain\cf1\f51\fs16\i\ql
Comisi\u243?n Nacional de Valores\plain\cf1\f51\fs16\ql may be listed on the
Buenos Aires Stock Exchange . This approval does not imply any kind of
certification or\plain\cf1\f51\fs16\ql assurance related to the merits or the
quality of the securities, or the issuer\u8217?s solvency. Issuers of listed
securities are required to file unaudited\plain\cf1\f51\fs16\ql quarterly
financial statements and audited annual financial statements, as well as various
other periodic reports, with the\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional
de\plain\cf1\f51\fs16\i\ql Valores\plain\cf1\f51\fs16\ql and the Buenos Aires
Stock Exchange .\par\pard\plain\sb198\fi462\cf1\f51\fs16\i\ql Securities Exchange
in Argentina.\plain\cf1\f51\fs16\ql There are 10 securities exchanges in
Argentina, of which the principal exchange for the Argentine
securities\plain\cf1\f51\fs16\ql market is the Buenos Aires Stock Exchange, which
handles approximately 99% of all equity trading in the
country.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Buenos Aires Stock Exchange
is a complex, non-profit and self-regulated organization. Various markets require
different self-organizations of\plain\cf1\f51\fs16\ql brokers within the Buenos
Aires Stock Exchange, which is one of its particular characteristics. The most
important and traditional of such markets is\plain\cf1\f51\fs16\ql Mercado de
Valores S.A. (\u8220?MERVAL\u8221?).\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The securities that may be listed
on the Buenos Aires Stock Exchange are: Stocks, Corporate Bonds, Convertible
Corporate Bonds, Close-ended\plain\cf1\f51\fs16\ql Investment Funds, Financial
Trust, Indexes, Derivatives and Public Bonds. The Buenos Aires Stock Exchange is
legally qualified for admission,\plain\cf1\f51\fs16\ql suspension, and delisting
of securities according to its own rules approved by the\plain\cf1\f51\fs16\i\ql
Comisi\u243?n Nacional de Valores\plain\cf1\f51\fs16\ql . Furthermore, the Buenos
Aires\plain\cf1\f51\fs16\ql Stock Exchange works very closely with
Valores\plain\cf1\f51\fs16\ql in surveillance activities. Also under a special
agreement, registration\plain\cf1\f51\fs16\ql and listing applications are
directly filed with the Buenos Aires Stock Exchange for simultaneous
processing.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Buenos Aires Stock
Exchange\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The Buenos Aires Stock Exchange
is a complex, non-profit and self-regulated organization. Various markets require
different self-organizations of\plain\cf1\f51\fs16\ql brokers within the Buenos
Aires Stock Exchange , which is one of its particular characteristics. The most
important and traditional of such markets is\plain\cf1\f51\fs16\ql Mercado de
Valores S.A. (\u8220?MERVAL\u8221?).\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The
securities that may be listed on the Buenos Aires Stock Exchange are: Stocks,
Corporate Bonds, Convertible Corporate Bonds, Close-ended\plain\cf1\f51\fs16\ql
Investment Funds, Financial Trust, Indexes, Derivatives and Public Bonds. The
Buenos Aires Stock Exchange is legally qualified for
admission,\plain\cf1\f51\fs16\ql suspension, and delisting of securities according
to its own rules approved by the\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional
de Valores\plain\cf1\f51\fs16\ql . Furthermore, the Buenos
Aires\plain\cf1\f51\fs16\ql Stock Exchange works very closely with
Valores\plain\cf1\f51\fs16\ql in surveillance activities. Also under a special
agreement, registration\plain\cf1\f51\fs16\ql and listing applications are
directly filed with the Buenos Aires Stock Exchange for simultaneous
processing.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql
MERVAL\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The MERVAL is a corporation whose
133 shareholder members are the only individuals and entities authorized to trade,
either as principal or as\plain\cf1\f51\fs16\ql agent, in the securities listed on
the Buenos Aires Stock Exchange . Trading on the Buenos Aires Stock Exchange is
conducted by continuous open\plain\cf1\f51\fs16\ql outcry, or the traditional
auction system, from 11:00 a.m. to 5:00 p.m. each business trading day of the year.
Trading on the Buenos Aires Stock\plain\cf1\f51\fs16\ql Exchange is also conducted
through a\plain\cf1\f51\fs16\i\ql Sistema Integrado de Negociaci\u243?n Asistida
por Computaci\u243?n\plain\cf1\f51\fs16\ql (\u8220?SINAC\u8221?). SINAC is
a\plain\cf1\f51\fs16\ql computer trading system that permits trading in debt
securities and equity securities. SINAC is accessed by brokers directly from
workstations located at\plain\cf1\f51\fs16\ql their offices. Currently, all
transactions relating to listed notes and listed government securities can be
effected through SINAC.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Over the
Counter Market\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The Electronic Open Market
(\plain\cf1\f51\fs16\i\ql Mercado Abierto Electr\u243?nico or
\u8220?\plain\cf1\f51\fs16\ql MAE\plain\cf1\f51\fs16\i\ql
\u8221?\plain\cf1\f51\fs16\ql ) is an exchange organized under the laws of
Argentina,\plain\cf1\f51\fs16\ql which operates as a self-regulatory organization
under the supervision of the\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\cf1\f51\fs16\ql .\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The MAE
works as an electronic environment to process Over The Counter transactions. It is
an electronic exchange where both government\plain\cf1\f51\fs16\ql securities and
corporate bonds are traded through spot and forward
contracts.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The MAE has 90
brokers/dealers members, which include national banks, provincial banks, municipal
banks, private national banks, foreign banks,\plain\cf1\f51\fs16\ql cooperative
banks, financial institutions, foreign exchange entities and pure brokers/dealers
(exclusively engaged in brokerage activities). Both Argentine
or\plain\cf1\f51\fs16\ql foreign capital banks and financial institutions may be
the MAE\u8217?s brokers/dealers.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Securities to be traded must be
registered with the pertinent supervising authorities and may be traded in the
Mercado Abierto Electr\u243?nico, in\plain\cf1\f51\fs16\ql other exchanges or in
both of them concurrently.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql
Securities Central Depositary\par\pard\plain\sb88\fi462\cf1\f51\fs16\i\ql Caja de
Valores S.A.\plain\cf1\f51\fs16\ql is a corporation organized under the laws of
Argentina, totally private, which acts as central depositary of public bonds
and\plain\cf1\f51\fs16\ql private securities. It was established in 1974 by Act
20,643, and it is supervised by the\plain\cf1\f51\fs16\i\ql Comisi\u243?n
Nacional de Valores\plain\cf1\f51\fs16\ql
.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Those authorized to make deposits of
securities with the\plain\cf1\f51\fs16\i\ql Caja de Valores\plain\cf1\f51\fs16\ql
are stockbrokers, banking financial institutions, and mutual
funds.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The majority shareholders of
the\plain\cf1\f51\fs16\i\ql Caja de Valores S.A.\plain\cf1\f51\fs16\ql are the
Buenos Aires Stock Exchange and the MERVAL (49.98%
each).\par\pard\plain\sb286\cf1\f51\fs16\b\ql Certain information regarding
the\plain\cf1\f51\fs16\b\i\ql Buenos Aires Stock
Exchange\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
As\~of\~December\~31,\cell\pard\plain\intbl\cf1\f51\fs13\ql
}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Market capitalization (Ps.
billion)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Average daily trading volume (Ps.
million)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Number of listed
companies\cell\pard\plain\intbl\cf1\f51\fs13\ql
lb\clshdng100\clcfpat12\clcbpat12\cellx10797\trrh206\row}}}\pard\plain\sb198\fi462\
cf1\f51\fs16\ql Although companies may list all of their capital stock on the
Buenos Aires Stock Exchange , in many cases a controlling block is retained by
the\plain\cf1\f51\fs16\ql principal shareholders resulting in only a relatively
small percentage of many companies\u8217? stock being available for active trading
by the public on\plain\cf1\f51\fs16\ql the Buenos Aires Stock Exchange
.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of June\~30, 2007, approximately
107 companies had equity securities listed on the Buenos Aires Stock Exchange . As
of June\~30, 2007,\plain\cf1\f51\fs16\ql approximately 9.63% of the total market
capitalization of the Buenos Aires Stock Exchange was represented by the securities
of ten national companies.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Argentine
securities markets are substantially more volatile than the securities markets in
the United States and certain other developed\plain\cf1\f51\fs16\ql countries. The
MERVAL experienced a 13% increase in 1995, a 25% increase in 1996, a 6% increase in
1997, a 37% decrease in 1998, a 28% increase\plain\cf1\f51\fs16\ql in 1999, a 24%
decrease in 2000, a 29% decrease in 2001, a 77% increase in 2002, a 104% increase
in 2003, a 28% increase in 2004, a 13% increase in\plain\cf1\f51\fs16\ql 2005, a
34% increase in 2006 and a 5% increase for the six month period ended June\~30,
2007. In order to control price volatility, the MERVAL
operates\plain\cf1\f51\fs16\ql a system pursuant to which the negotiation of a
particular stock or debt security is suspended for a 15- minute period when the
price of the security\plain\cf1\f51\fs16\ql registers a variation on its price
between 10% and 15% and between 15% and 20%. Any additional 5% variation on the
price of the security after that\plain\cf1\f51\fs16\ql results in additional 10
\u8211? minute successive suspension periods.\par\pard\plain\cf1\f51\fs13\ql
\
The New York Stock Exchange\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our Global
Depositary Shares are listed on the New York Stock Exchange under the trading
symbol \u8220?IRS\u8221?.{\*\bkmkstart tx46076_43}{\*\bkmkend
tx46076_43}\par\pard\plain\sb286\cf1\f51\fs16\b\ql D. Selling
Shareholders\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This item is not applicable.
tx46076_44}\par\pard\plain\sb286\cf1\f51\fs16\b\ql E.
Dilution\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This item is not applicable.
tx46076_45}\par\pard\plain\sb286\cf1\f51\fs16\b\ql F. Expenses of the
Issue\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This item is not
applicable.\par\pard\plain\cf1\f51\fs27\ql \~{\*\bkmkstart item_1_3_15}{\*\bkmkend
item_1_3_15}
\par\pard\plain
ITEM\~10.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Additional Information\cell{
tx46076_47}\pard\plain\sb88\cf1\f51\fs16\b\ql A. Share
Capital\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql This item is not applicable.
tx46076_48}\par\pard\plain\sb286\cf1\f51\fs16\b\ql B. Memorandum and Articles of
Association\par\pard\plain\sb88\cf1\f51\fs16\b\ql Our corporate
purpose\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our legal name is IRSA
Inversiones y Representaciones Sociedad An\u243?nima. We were incorporated under
the laws of Argentina on April\~30,\plain\cf1\f51\fs16\ql 1943 as
a\plain\cf1\f51\fs16\i\ql sociedad an\u243?nima\plain\cf1\f51\fs16\ql (stock
corporation) and were registered with the Public Registry of Commerce of the City
of Buenos Aires\plain\cf1\f51\fs16\ql (\plain\cf1\f51\fs16\i\ql Inspecci\u243?n
General de Justicia\plain\cf1\f51\fs16\ql or \u8220?IGJ\u8221?) on June\~23, 1943
under number 284, on page 291, book 46 of volume A. Pursuant to
our\plain\cf1\f51\fs16\ql by-laws, our term of duration expires on April\~5,
2043.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Pursuant to article 4 of our by-
laws our purpose is to perform the following
activities:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Invest, develop and operate real estate
developments;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Invest, develop and operate personal
property, including securities;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Construct and operate works, services and
public property;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Manage real or personal property, whether
owned by us or by third parties;\cell{
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Build, recycle, or repair real property
whether owned by us or by third parties;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Advise third parties with respect to the
aforementioned activities;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Finance projects, undertakings, works
and/or real estate transactions of third parties.\cell{
b286\cf1\f51\fs16\b\ql Board of
Directors\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\ql Voting on proposals in which
directors have material interest\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Decree
No.\~677/01 establishes in Section\~8 that the directors, administrators and
members of the supervisory committee of companies whose\plain\cf1\f51\fs16\ql
securities are publicly offered, shall act in a loyal and diligent manner when
exercising their functions. In that sense, they must:\par\pard\plain\cf1\f51\fs9\ql
\~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql place the corporate interests of the
company and the common interest of the shareholders above any other interest,
including the\plain\intbl\cf1\f51\fs16\ql controlling shareholder\u8217?s
interests;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql refrain from obtaining a personal benefit
from the issuer other than the compensation paid for their functions;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql organize and implement preventive systems
and mechanisms to protect corporate interests, reducing the risk of conflicts of
interests, either\plain\intbl\cf1\f51\fs16\ql permanent or temporary, in their
personal relationships with the company or with persons related to the company.
This duty specifically\plain\intbl\cf1\f51\fs16\ql refers to competition with the
company, the use or imposition of a lien on corporate assets, the determination of
compensation or\plain\intbl\cf1\f51\fs16\ql proposals related thereto, the use of
non public information, the use of business opportunities for their own benefit or
for the benefit of\plain\intbl\cf1\f51\fs16\ql third parties and, in general, any
situation that may generate a conflict of interests affecting the issuer;\cell{
\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql make the necessary arrangements to perform
the company\u8217?s activities and implement the necessary internal control to
ensure a\plain\intbl\cf1\f51\fs16\ql careful management and avoid breaches of the
duties established by the applicable regulations; and\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql act with due diligence when preparing and
disclosing the information to the market, and maintain the independence of external
auditors.\cell{
sb198\fi462\cf1\f51\fs16\ql The Argentine Corporations Law No.\~19,550 establishes
in Section\~271 that directors may contract with the company when the contract is
related to\plain\cf1\f51\fs16\ql the regular activities of the company and its
terms and conditions are established on market terms. All other contracts with
directors should be approved\plain\cf1\f51\fs16\ql by the
shareholders.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Further, Section\~73 of
Decree No.\~677/01 establishes a specific procedure for transactions of a company
whose securities are publicly offered,\plain\cf1\f51\fs16\ql entered into with its
directors, members of the supervisory committee, or senior managers and which
involve a relevant amount. The transaction is\plain\cf1\f51\fs16\ql considered to
have a relevant amount when it exceeds: (i)\~one percent (1%)\~of the corporate
capital, measured pursuant to the last approved financial\plain\cf1\f51\fs16\ql
statements, and (ii)\~the equivalent of one hundred thousand Pesos (Ps.
100,000).\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 209
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The related person with an interest
in the transaction should submit all the relevant documentation to the approval of
the board of directors. The\plain\cf1\f51\fs16\ql directors must request a report
(i)\~of the audit committee stating if the conditions of the operation may be
reasonably considered adequate according to\plain\cf1\f51\fs16\ql normal market
conditions; or (ii)\~of two independent evaluating firms that shall have informed
about the same matter and about the other operation\plain\cf1\f51\fs16\ql
conditions. Immediately after being approved by the board of directors the
transaction has to be informed to the\plain\cf1\f51\fs16\i\ql Comisi\u243?n
Nacional de Valores\plain\cf1\f51\fs16\ql
.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Notwithstanding that, Section\~272 of
the Corporations Law No.19,550 provides that when a director has an opposite
interest to the one of the\plain\cf1\f51\fs16\ql company, he or she should notify
that situation to the board of directors and the supervisory committee and abstain
to vote in that respect. The violation\plain\cf1\f51\fs16\ql of this provision
results in the director being jointly and severally unlimitedly
liable.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In the event that the results of
the reports are not favorable to the transaction, its approval should be considered
by the shareholders\u8217?\plain\cf1\f51\fs16\ql
meeting.\par\pard\plain\sb198\fi462\cf1\f51\fs16\b\ql Approval of compensation of
the members of the Board of Directors, Senior Management and Supervisory
Committee\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our bylaws do not establish the
compensation to be paid to members of the board of directors and the supervisory
committee, and therefore\plain\cf1\f51\fs16\ql pursuant to Section\~261 of the
Corporations Law No.19,550, it should be approved by the shareholders. The maximum
amount that may be paid as\plain\cf1\f51\fs16\ql compensation to members of the
board of directors and the supervisory committee should not exceed 25% of the
realized and net earnings of the company\plain\cf1\f51\fs16\ql and 5% when there
is no distribution of dividends. If the company does not distribute the total
earnings, the amount of the compensation should be\plain\cf1\f51\fs16\ql
proportional to that distribution and within the mentioned limits. These limits may
only be surpassed by express approval of the
shareholders.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql At our shareholders
meeting held on October\~10, 2007, the shareholders approved an aggregate
compensation of Ps.8.2 million for all of our\plain\cf1\f51\fs16\ql directors for
the fiscal year ended June\~30, 2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
The total and aggregate cash compensation of our senior management for the fiscal
year ended June\~30, 2007 was Ps.4.05
million.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The shareholders meeting held
on October\~10, 2007, approved by majority vote the decision not to pay any
compensation to our Supervisory\plain\cf1\f51\fs16\ql
Committee.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Powers of
directors\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our bylaws establish, in
Section\~18, that the board of directors has full and broad powers to organize,
manage and direct us to fulfilling the\plain\cf1\f51\fs16\ql corporate
purpose.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Retirement of
directors\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our bylaws do not establish any
requirements or provisions regarding age limits for director\u8217?s retirement,
nor do they require a number of\plain\cf1\f51\fs16\ql shares a director must own
to qualify for the position.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\ql Rights, preferences and
restrictions attaching to the common
shares\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\ql Dividend
rights\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The Argentine Corporation Law
No.\~19,550 establishes that the distribution and payment of dividends to
shareholders is valid only if they result\plain\cf1\f51\fs16\ql from realized and
net earnings of the company pursuant to an annual balance sheet approved by the
shareholders. Our board of directors submits our\plain\cf1\f51\fs16\ql financial
statements for the previous financial year, together with the reports of our
Supervisory Committee, to the Annual Ordinary
Shareholders\u8217?\plain\cf1\f51\fs16\ql Meeting. This meeting must be held by
October\~30 of each year to approve the financial statements and decide on the
allocation of our net income for the\plain\cf1\f51\fs16\ql year under review. The
distribution, amount and payment of dividends, if any, must be approved by the
affirmative vote of the majority of the present\plain\cf1\f51\fs16\ql votes with
right to vote at the meeting.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The
shareholders\u8217? meeting may authorize payment of dividends on a quarterly basis
provided no applicable regulations are violated. In that\plain\cf1\f51\fs16\ql
case, all and each of the members of the board of directors and the supervisory
committee will be jointly and severally unlimitedly liable for the refund
of\plain\cf1\f51\fs16\ql those dividends if, as of the end of the respective
fiscal year, the realized and net earnings of the Company are not sufficient to
allow the payment of\plain\cf1\f51\fs16\ql
dividends.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql When we declare and pay
dividends on the common shares, the holders of our GDRs, each representing the
right to receive ten ordinary shares,\plain\cf1\f51\fs16\ql outstanding on the
corresponding registration date, are entitled to receive the dividends due on the
common shares underlying the GDRs, subject to the\plain\cf1\f51\fs16\ql terms of
the Deposit Agreement dated March\~18, 1997 executed by and between us, The Bank of
New York, as depositary and the eventual holders of\plain\cf1\f51\fs16\ql GDRs.
The cash dividends are to be paid in Pesos and, except under certain circumstances,
are to be converted by the Depositary into U.S. dollars at
the\plain\cf1\f51\fs16\ql exchange rate prevailing at the conversion date and are
to be paid to the holders of the GDRs net of any applicable fee on the dividend
distribution, costs\plain\cf1\f51\fs16\ql and conversion expenses, taxes and
public charges. Since January 2002 and due to the devaluation of the Peso, the
exchange rate for the dividends will\plain\cf1\f51\fs16\ql occur at a floating
market rate, which, as of the date of this Form 20-F is Ps.3.145.for each U.S.
dollar.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Our dividend policy is proposed
from time to time by our board of directors and is subject to shareholders\u8217?
approval at an ordinary\plain\cf1\f51\fs16\ql shareholders\u8217? meeting.
Declarations of dividends are based upon our results of operations, financial
condition, cash requirements and future\plain\cf1\f51\fs16\ql prospects, as well
as restrictions under debt obligations and other factors deemed relevant by our
board of directors and our shareholders.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Dividends may be lawfully paid only out of our retained earnings determined by
reference to the financial statements prepared in accordance
with\plain\cf1\f51\fs16\ql Argentine GAAP. In accordance with the Argentine
Companies Law, net income is allocated in the following order: (i)\~5% is retained
in a legal reserve\plain\cf1\f51\fs16\ql until the amount of such reserve equals
20% of the Company\u8217?s outstanding capital; (ii)\~dividends on preferred stock
or common shares or other\plain\cf1\f51\fs16\ql amounts may be retained as a
voluntary reserve, contingency reserve or new account, or (iii)\~for any other
purpose as determined by the\plain\cf1\f51\fs16\ql Company\u8217?s shareholders at
an ordinary shareholders\u8217? meeting.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Our legal reserve is not available for distribution. Under the applicable
regulations of the\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\cf1\f51\fs16\ql , dividends are\plain\cf1\f51\fs16\ql distributed
pro rata in accordance with the number of shares held by each holder within 30 days
of being declared by the shareholders for cash dividends\plain\cf1\f51\fs16\ql and
within 90 days of approval in the case of dividends distributed as shares. The
right to receive payment of dividends expires three years after the
date\plain\cf1\f51\fs16\ql on which they were made available to shareholders. The
shareholders\u8217? meeting may authorize payment of dividends on a quarterly basis
provided\plain\cf1\f51\fs16\ql no applicable regulations are violated. In such
case, all and each of the members of the board of directors and the supervisory
committee will be jointly\plain\cf1\f51\fs16\ql and severally liable for the
refund of those dividends if, at the end of the respective fiscal year, the
realized and net earnings of the Company are not\plain\cf1\f51\fs16\ql sufficient
to allow for the payment of dividends.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\ql Voting rights and staggered
elections\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our stock capital is composed
by book-entry common shares with face value of Ps. 1\~per share and entitled to one
vote each.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql All directors and alternate
directors are elected for a three-year
term.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Our by laws do not consider
staggered elections.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Rights to share
in IRSA\u8217?s profits\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The holders of
our common shares have the right to participate in our net and realized profits on
a\plain\cf1\f51\fs16\i\ql pro rata\plain\cf1\f51\fs16\ql basis of their
respective interests.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Pursuant to the
Corporations Law and Section\~29 of our bylaws, liquidated and realized profits of
each fiscal year shall be distributed as follows:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql allocate 5% of such net profits to legal
reserve, until the amount of such reserve equals 20% of our capital stock;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the sum established by the
shareholders\u8217? meeting as remuneration of the board of Directors and the
supervisory committee; and\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql dividends, additional dividends to
preferred shares if any, or to optional reserve funds or contingency reserves or to
a new account, or for\plain\intbl\cf1\f51\fs16\ql whatever purpose the
shareholders determine at the shareholders\u8217? meeting.\cell{
sb286\fi462\cf1\f51\fs16\b\ql Rights to share in any surplus in the event of
liquidation\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In the event of liquidation,
dissolution or winding-up of our company, our assets
are:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql to be applied to satisfy its liabilities;
and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql to be proportionally distributed among
holders of preferred stock in accordance with the terms of the preferred stock. If
any surplus\plain\intbl\cf1\f51\fs16\ql remains, our shareholders are entitled to
receive and share proportionally in all net assets available for distribution to
our shareholders,\plain\intbl\cf1\f51\fs16\ql subject to the order of preference
established by our by-laws.\cell{
sb286\fi462\cf1\f51\fs16\b\ql Provisions related to a shareholder\u8217?s ownership
of certain amount of shares\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Section\~9 of
our by-laws provides that the acquisition by any person or group, directly or
indirectly of our shares, convertible securities, rights to\plain\cf1\f51\fs16\ql
receive any of those securities that may grant that person the control of our
company or 35% or more of our capital stock may only be done
by\plain\cf1\f51\fs16\ql complying with certain tender offer rules for all of our
shares, except for:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql acquisitions by persons holding or
controlling shares or convertible securities in accordance to Decree No.\~677/2001,
notwithstanding the\plain\intbl\cf1\f51\fs16\ql provisions of
the\plain\intbl\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\intbl\cf1\f51\fs16\ql ; and\cell{
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql holdings of more than 35%, which derive
from the distribution of shares or dividends paid in shares approved by the
shareholders, or the\plain\intbl\cf1\f51\fs16\ql issuance of shares as a result of
a merger approved by the shareholders; in both cases, the excess holding shall be
disposed of within 180\plain\intbl\cf1\f51\fs16\ql days of its registration in the
relevant shareholder\u8217?s account, or prior to the holding of our shareholders
meeting, whatever occurs\plain\intbl\cf1\f51\fs16\ql first.\cell{
sb198\fi462\cf1\f51\fs16\ql Our shareholders modified the first of the above
exceptions in their shareholder meeting on October\~10, 2007, to include the
control concept under\plain\cf1\f51\fs16\ql Decree No.\~677/2001, which provides
for the effective control regularly held in addition to the legal
control.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Directors, senior managers,
executive officers, members of the supervisory committee, and controlling
shareholders of an Argentine company whose\plain\cf1\f51\fs16\ql securities are
publicly listed, should notify the\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional
de Valores\plain\cf1\f51\fs16\ql on a monthly basis, of their beneficial
ownership of shares, debt\plain\cf1\f51\fs16\ql securities, and call and put
options related to securities of such companies and their controlling, controlled
or affiliated companies.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In addition,
Valores\plain\cf1\f51\fs16\ql must be immediately notified of transactions which
cause a person\u8217?s holdings of capital\plain\cf1\f51\fs16\ql stock of an
Argentine company whose securities are publicly listed to hold 5% or more of the
voting power and of every change in the holdings of such\plain\cf1\f51\fs16\ql
person that represents a multiple of 5% of the voting power. Holders of more than
50% of the common shares of a company or who otherwise have\plain\cf1\f51\fs16\ql
voting control of a company, as well as directors, officers and members of the
supervisory committee, must provide the\plain\cf1\f51\fs16\i\ql Comisi\u243?n
Nacional de\plain\cf1\f51\fs16\i\ql Valores\plain\cf1\f51\fs16\ql with annual
reports setting forth their holdings in the capital stock of such companies and
monthly reports of any change in their
holdings.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Procedure to change the
rights of stockholders\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The rights of
holders of stock are established in the Corporations Law and in the bylaws. The
rights of shareholders provided for by the\plain\cf1\f51\fs16\ql Corporations Law
may not be diminished by the bylaws. Section\~235 of the Corporations Law
establishes that the amendment of the bylaws should be\plain\cf1\f51\fs16\ql
approved by the absolute majority of our shareholders at an extraordinary
shareholders meeting.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On October\~31,
2003 in the ordinary and extraordinary annual shareholders meeting, shareholders
decided not to adhere to the \u8220?\plain\cf1\f51\fs16\i\ql R\u233?
gimen\plain\cf1\f51\fs16\i\ql Estatutario Optativo de Oferta P\u250?blica de
Adquisici\u243?n Obligatoria\plain\cf1\f51\fs16\ql \u8221? (Optional Statutory
Body of Public Offering of Compulsory\plain\cf1\f51\fs16\ql Acquisition) provided
under Decree No.\~677/2001, consequently, shareholders decided to incorporate that
provision under Section\~1 of the by-
laws.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Ordinary and extraordinary
shareholders\u8217? meetings\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our by-laws
provide that shareholders\u8217? meetings may be called by our board of directors
or by our Supervisory Committee or at the request\plain\cf1\f51\fs16\ql of the
holders of shares representing no less than 5% of the common shares. Any meetings
called at the request of shareholders must be held within 30\plain\cf1\f51\fs16\ql
days after the request is made. Any shareholder may appoint any person as its duly
authorized representative at a shareholders meeting, by granting
a\plain\cf1\f51\fs16\ql proxy. Co-owners of shares must have single
representation.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc
213
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql In general, the following matters
can be considered only at a special shareholders\u8217? meeting
(\plain\cf1\f51\fs16\i\ql asamblea
extraordinaria\plain\cf1\f51\fs16\ql ):\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql matters that may not be approved at an
ordinary shareholders\u8217? meeting;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the amendment of our by-laws;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql reductions in our share capital;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql redemption, reimbursement and amortization
of our shares;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql mergers, and other corporate changes,
including dissolution and winding-up;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql limitations or suspensions to preemptive
rights to the subscription of the new shares; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql issuance of debentures, convertible
negotiable obligations and bonds that not qualify as notes (obligaciones
negociables).\cell{
sb198\fi462\cf1\f51\fs16\ql In addition, pursuant to Decree 677/2001, at an
ordinary shareholders\u8217? meeting, our shareholders must consider (i)\~the
disposition of, or\plain\cf1\f51\fs16\ql creation of any lien over, our assets as
long as such decision has not been performed under the ordinary course of business;
(ii)\~the execution of\plain\cf1\f51\fs16\ql administration or management
agreements; and (iii)\~whether to approve the payment of any agreement providing
assets or services to us as long as such\plain\cf1\f51\fs16\ql payment is material
when measured against the volume of the ordinary course of business and our
shareholders\u8217? equity.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In
accordance with our by-laws, ordinary and special shareholders\u8217? meetings
(\plain\cf1\f51\fs16\i\ql asamblea extraordinaria\plain\cf1\f51\fs16\ql ) are
subject to a first and second\plain\cf1\f51\fs16\ql quorum call, the second to
occur upon the failure of the first. The first and second notice of ordinary
shareholders\u8217? meetings may be made\plain\cf1\f51\fs16\ql simultaneously. In
the event that both are made on the same day, the second must occur at least one
hour after the first. If simultaneous notice was not\plain\cf1\f51\fs16\ql given,
the second notice must be given within 30 days after the failure to reach quorum at
the first. Such notices must be given in compliance with\plain\cf1\f51\fs16\ql
applicable regulations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql A quorum for an
ordinary shareholders\u8217? meeting on the first call requires the presence of a
number of shareholders holding a majority of the\plain\cf1\f51\fs16\ql shares
entitled to vote and, on the second call, the quorum consists of the number of
shareholders present, whatever that number. Decisions at
ordinary\plain\cf1\f51\fs16\ql shareholders\u8217? meetings must be approved by a
majority of the votes validly exercised by the
shareholders.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql A quorum for a special
shareholders\u8217? meeting (\plain\cf1\f51\fs16\i\ql asamblea
extraordinaria\plain\cf1\f51\fs16\ql ) on the first call requires the presence of
persons holding 60% of\plain\cf1\f51\fs16\ql the shares entitled to vote and, on
the second call, the quorum consists of the number of shareholders present,
whatever that number. Decisions at special\plain\cf1\f51\fs16\ql
shareholders\u8217? meeting (\plain\cf1\f51\fs16\i\ql asamblea
extraordinaria\plain\cf1\f51\fs16\ql ) generally must be approved by a majority of
the votes validly exercised.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql However, pursuant to the Argentine
Corporations Law No.\~19,550, all shareholders\u8217? meetings, whether convened on
a first or second quorum\plain\cf1\f51\fs16\ql call, require the affirmative vote
of the majority of shares with right to vote in order to approve the following
decisions:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql advanced winding-up of the company;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql transfer of the domicile of the company
outside of Argentina;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql fundamental change in the purpose of the
company;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql total or partial mandatory repayment by
the shareholders of the paid-in capital; and\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a merger or a spin-off, when our company
will not be the surviving company.\cell{
b198\fi462\cf1\f51\fs16\ql Holders of common shares are entitled to one vote per
share. Owners of common shares represented by GDRs exercise their voting rights
through\plain\cf1\f51\fs16\ql the GDR Depositary, who acts upon instructions
received from such shareholders and, in the absence of instructions, votes in the
same manner as our\plain\cf1\f51\fs16\ql majority of the shareholders present in
the shareholders\u8217? meeting.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The
holders of preferred stock are not entitled to voting rights. However, in the event
that no dividends are paid to such holders for their
preferred\plain\cf1\f51\fs16\ql stock, the holders of preferred stock are entitled
to voting rights. Holders of preferred stock are also entitled to vote on certain
special matters, such as a\plain\cf1\f51\fs16\ql transformation of the corporate
type, early dissolution, change to a foreign domicile, fundamental change in the
corporate purposes, total or partial\plain\cf1\f51\fs16\ql replacement of capital
losses, mergers in which our company is not the surviving entity, and spin-offs.
The same exemption will apply in the event the\plain\cf1\f51\fs16\ql preferred
stock is traded on any stock exchange and such trading is suspended or
canceled.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Limitations to own
securities by non-resident or foreign
shareholders\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql There are no legal
limitations on ownership of securities or exercise of voting rights, by non-
resident or foreign shareholders. However, foreign\plain\cf1\f51\fs16\ql
shareholders must fulfill certain requirements with the IGJ
(\plain\cf1\f51\fs16\i\ql \u8220?Inspecci\u243?n General de
Justicia\u8221?\plain\cf1\f51\fs16\ql ) in order to assure that they will be
able\plain\cf1\f51\fs16\ql to properly exercise their voting rights. General
Resolution No.\~7 passed in September 2003 by the IGJ, and other related
regulations set forth certain\plain\cf1\f51\fs16\ql requirements for foreign
entities registered with the IGJ. It provides, among other requirements, disclosure
of information related to their proprietary\plain\cf1\f51\fs16\ql interests in
assets located outside Argentina to be at least equivalent in value to those
located inside Argentina. The entities must comply with these\plain\cf1\f51\fs16\ql
requirements in order to (1)\~perform activities on a regular basis through their
Argentine branches (Section 118 Argentine Corporate Law), or
(2)\~exercise\plain\cf1\f51\fs16\ql their ownership rights in Argentine Companies
(Section 123 Argentine Corporate Law). In cases where the IGJ has concluded that
the entities (a)\~do not\plain\cf1\f51\fs16\ql have assets outside Argentina; or
(b)\~have non-current assets that are not materially significant compared to those
non-current assets which are owned by\plain\cf1\f51\fs16\ql them and located in
Argentina; or (c)\~the entity\u8217?s address in Argentina becomes the place where
this entity makes a majority of its decisions,\plain\cf1\f51\fs16\ql corporate or
otherwise, the entities may be required to amend and register their by-laws to
comply with Argentine law, thereby becoming an Argentine\plain\cf1\f51\fs16\ql
entity subject to Argentine law according to Section\~124 of Argentine Corporate
Law. In addition, Argentine companies with shareholders consisting
of\plain\cf1\f51\fs16\ql such entities that fail to comply with these requirements
may be subject to the following sanctions: (1)\~the IGJ may not register corporate
decisions\plain\cf1\f51\fs16\ql adopted by the Argentine Company when its off-
shore shareholder votes as a shareholder and when that vote
is\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 215
\
essential in attaining a majority. Any decisions made pursuant to such vote related
to the approval of its annual balance sheet may be declared null
and\plain\cf1\f51\fs16\ql void for administrative purposes; (2)\~whether or not
the vote of the off-shore entity is necessary for purposes of determining quorum or
majority, the IGJ\plain\cf1\f51\fs16\ql may register the decision without
considering that vote; and (3)\~the directors of the Argentine Company may be held
personally liable for actions taken by\plain\cf1\f51\fs16\ql the Argentine
Company.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Ownership threshold above
which ownership should be disclosed\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Directors, senior managers, executive officers, members of the supervisory
committee, and controlling shareholders of an Argentine company
whose\plain\cf1\f51\fs16\ql securities are publicly listed, should notify
Valores\plain\cf1\f51\fs16\ql on a monthly basis, of their beneficial ownership
of shares, debt\plain\cf1\f51\fs16\ql securities, and call and put options related
to securities of such companies and their controlling, controlled or affiliated
companies.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In addition,
Valores\plain\cf1\f51\fs16\ql must be immediately notified of transactions which
cause a person\u8217?s holdings of capital\plain\cf1\f51\fs16\ql stock of an
Argentine company whose securities are publicly listed to hold 5% or more of the
voting power and of every change in the holdings of such\plain\cf1\f51\fs16\ql
person that represents a multiple of 5% of the voting power. Holders of more than
50% of the common shares of a company or who otherwise have\plain\cf1\f51\fs16\ql
voting control of a company, as well as directors, officers and members of the
supervisory committee, must provide the\plain\cf1\f51\fs16\i\ql Comisi\u243?n
Nacional de\plain\cf1\f51\fs16\i\ql Valores\plain\cf1\f51\fs16\ql with annual
reports setting forth their holdings in the capital stock of such companies and
monthly reports of any change in their
holdings.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Recent amendments to our by-
laws\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On the shareholders\u8217? meeting
held on October\~10, 2007, our shareholders decided to amend the following sections
of the by-laws: (i)\~Section\plain\cf1\f51\fs16\ql Thirteen in order to adapt the
performance bonds granted by directors to current rules and regulations, and
(ii)\~Section Sixteen in order to incorporate the\plain\cf1\f51\fs16\ql
possibility of holding remote board meetings pursuant the provisions of section 65
of Decree 677/01. Such amendment is attached hereto as Exhibit
1.2.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Compliance with NYSE listing standards
on corporate governance\par\pard\plain\sb88\cf1\f51\fs16\b\ql New York Stock
Exchange and Argentine Corporate Governance
Requirements\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Our corporate governance
practices are governed by the applicable Argentine law; particularly, the
Corporations Law, Decree N\u176?677/01 and\plain\cf1\f51\fs16\ql the Standards of
Valores\plain\cf1\f51\fs16\ql , as well as by our corporate by-laws. We have
securities that are registered with the Securities\plain\cf1\f51\fs16\ql and
Exchange Commission and are listed on the New York Stock Exchange (the \u8220?
NYSE\u8221?), and is therefore subject to corporate
governance\plain\cf1\f51\fs16\ql requirements applicable to NYSE-listed non-US
companies (a \u8220?NYSE-listed\u8221?
company).\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql NYSE-listed non-US companies
that are categorized as \u8220?Foreign Private Issuers\u8221? may, in general,
follow their home country corporate\plain\cf1\f51\fs16\ql governance practices in
lieu of most of the new NYSE corporate governance requirements (the \u8220?NYSE
Sections\u8221?) codified in Section\~303A\plain\cf1\f51\fs16\ql of the
NYSE\u8217?s Listed Company Manual. However, Foreign Private Issuers must comply
with NYSE Sections 303A.06, 303A.11 and 303A.12(b)\plain\cf1\f51\fs16\ql and
303A.12(c). Foreign Private Issuers must comply with Section\~303A.06 prior to
July\~31, 2005 and with Sections 303A.11 and 303A.12(b) prior to
the\plain\cf1\f51\fs16\ql first annual meeting of shareholders held after
January\~15, 2004, or by October\~31, 2004.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql NYSE Section\~303A.11 requires that
Foreign Private Issuers disclose any significant ways in which their corporate
governance practices differ from\plain\cf1\f51\fs16\ql US companies under NYSE
standards. A Foreign Private Issuer is simply required to provide a brief, general
summary of such significant differences to\plain\cf1\f51\fs16\ql its US investors
either 1) on the company\u8217?s website (in English) or 2) in Form 20-F as
distributed to their U.S. investors. In order to comply with\plain\cf1\f51\fs16\ql
Section\~303A.11, we have prepared and have updated the comparison in the table
below.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The most relevant differences
between our corporate governance practices and NYSE standards for listed companies
are as follows:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
lx10799\trrh228
\pard\plain\intbl\brdrb\brdrs\cf1\f51\fs13\b\ql NYSE Standards for US companies
Listed Companies Manual Section 303.A\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\ql IRSA\u8217?s Corporate Practices\cell{
\pard\plain\intbl\cf1\f51\fs16\ql Section\~303A.01 A NYSE-listed company must have
a majority of\plain\intbl\cf1\f51\fs16\ql independent directors on its board of
directors.\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql IRSA follows Argentine law which does
not require that a majority of the\plain\intbl\cf1\f51\fs16\ql board of directors
be comprised of independent directors. Argentine law\plain\intbl\cf1\f51\fs16\ql
instead requires that public companies in Argentina have a
sufficient\plain\intbl\cf1\f51\fs16\ql number of independent directors to be able
to form an audit committee of\plain\intbl\cf1\f51\fs16\ql at least three members,
the majority of which must be independent\plain\intbl\cf1\f51\fs16\ql pursuant to
the criteria established by the\plain\intbl\cf1\f51\fs16\i\ql Comisi\u243?n
Nacional de\plain\intbl\cf1\f51\fs16\i\ql Valores\plain\intbl\cf1\f51\fs16\ql
.\cell{
\pard\plain\intbl\cf1\f51\fs16\ql Section\~303A.02 This section establishes general
standards to evaluate\plain\intbl\cf1\f51\fs16\ql directors\u8217? independence
(no director qualifies as\plain\intbl\cf1\f51\fs16\ql \u8220?independent\u8221?
unless the board of directors affirmatively\plain\intbl\cf1\f51\fs16\ql determines
that the director has no material relationship with the
listed\plain\intbl\cf1\f51\fs16\ql company (either directly or as a partner,
shareholder or officer of an\plain\intbl\cf1\f51\fs16\ql organization that has a
relationship with the company)), and emphasizes that\plain\intbl\cf1\f51\fs16\ql
the concern is independence from management. The board is also required
to\plain\intbl\cf1\f51\fs16\ql express an opinion with regard to the independence
or lack of independence,\plain\intbl\cf1\f51\fs16\ql on a case by case basis, of
each individual director.\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\u8217?\plain\intbl\cf1\f51\fs16\ql standards (General
Resolution\plain\intbl\cf1\f51\fs16\ql N\u186? 400) for purposes of identifying an
independent director are\plain\intbl\cf1\f51\fs16\ql substantially similar to
NYSE\u8217?s standards.\plain\intbl\cf1\f51\fs16\i\ql Comisi\u243?n
Nacional\plain\intbl\cf1\f51\fs16\i\ql de Valores\plain\intbl\cf1\f51\fs16\ql
standards provide that independence is required with respect
to\plain\intbl\cf1\f51\fs16\ql the Company itself and to its shareholders with
direct or indirect material\plain\intbl\cf1\f51\fs16\ql holdings (35% or more). To
qualify as an independent director, such\plain\intbl\cf1\f51\fs16\ql person must
not perform executive functions within the company.
Close\plain\intbl\cf1\f51\fs16\ql relatives of any persons who would not qualify
as \u8220?independent\plain\intbl\cf1\f51\fs16\ql directors\u8221? shall also not
be considered \u8220?independent.\u8221?\plain\intbl\cf1\f51\fs16\ql When
directors are appointed, each shareholder that nominates a
director\plain\intbl\cf1\f51\fs16\ql is required to report at the meeting whether
or not such director is\plain\intbl\cf1\f51\fs16\ql independent.\cell{
\pard\plain\intbl\cf1\f51\fs16\ql Section\~303A.03 Non-management directors must
meet at regularly scheduled\plain\intbl\cf1\f51\fs16\ql executive meetings not
attended by management.\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Neither Argentine law nor IRSA\u8217?s
by-laws require that any such\plain\intbl\cf1\f51\fs16\ql meetings be
held.\par\pard\plain\intbl\cf1\f51\fs9\ql \~\par\pard\plain\intbl\cf1\f51\fs16\ql
IRSA\u8217?s board of directors as a whole is responsible for
monitoring\plain\intbl\cf1\f51\fs16\ql the company\u8217?s affairs. In addition,
under Argentine law, the Board\plain\intbl\cf1\f51\fs16\ql of Directors may
approve the delegation of specific responsibilities to\plain\intbl\cf1\f51\fs16\ql
designated directors or non-director managers of the Company. Also, it
is\plain\intbl\cf1\f51\fs16\ql mandatory for public companies to form a
supervisory committee\plain\intbl\cf1\f51\fs16\ql (composed of syndics) which is
responsible for monitoring legal\plain\intbl\cf1\f51\fs16\ql compliance by the
Company under Argentine law and compliance with its\plain\intbl\cf1\f51\fs16\ql
by-laws.\cell{
\pard\plain\intbl\cf1\f51\fs16\ql Section 303A.05(a) Listed companies shall have
a \u8220?Compensation\plain\intbl\cf1\f51\fs16\ql Committee\u8221? comprised
entirely of independent directors.\cell\pard\plain\intbl\cf1\f51\fs13\ql
by-laws require the formation\plain\intbl\cf1\f51\fs16\ql of a \u8220?Compensation
Committee.\u8221? Under Argentine law, if\plain\intbl\cf1\f51\fs16\ql the
compensation of the members of the board of directors and
the\plain\intbl\cf1\f51\fs16\ql supervisory committee is not established in the
by-laws of a company, it\plain\intbl\cf1\f51\fs16\ql should be determined at the
shareholders meeting.\cell{
{\trowd\cellx5508\clvertalb\cellx5615\cellx10799\trrh1031\row}}}\pard\plain\cf1\f51
\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 217
\
\par\pard\plain
66\trrh0\row}}}
lx10799\trrh228
\pard\plain\intbl\brdrb\brdrs\cf1\f51\fs13\b\ql NYSE Standards for US companies
Listed Companies Manual Section 303.A\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\ql IRSA\u8217?s Corporate Practices\cell{
\pard\plain\intbl\cf1\f51\fs16\ql Section\~303A.05(b). The \u8220?Compensation
Committee\u8221? shall have a\plain\intbl\cf1\f51\fs16\ql written charter
addressing the committee\u8217?s purpose and certain\plain\intbl\cf1\f51\fs16\ql
minimum responsibilities as set forth in Section\~303A.05(b)(i) and
(ii).\cell\pard\plain\intbl\cf1\f51\fs13\ql
by-laws require the formation\plain\intbl\cf1\f51\fs16\ql of a \u8220?Compensation
Committee.\u8221?\cell{
\pard\plain\intbl\cf1\f51\fs16\ql Section\~303A.06 Listed companies must have an
\u8220?Audit\plain\intbl\cf1\f51\fs16\ql Committee\u8221? that satisfies the
requirements of Rule 10 A-3 under the\plain\intbl\cf1\f51\fs16\ql 1934 Exchange
Act (the \u8220?Exchange Act\u8221?). Foreign private
issuers\plain\intbl\cf1\f51\fs16\ql must satisfy the requirements of Rule 10 A-3
under the Exchange Act as of\plain\intbl\cf1\f51\fs16\ql July\~31,
2005.\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Pursuant to Decree N\u186? 677/01
and\plain\intbl\cf1\f51\fs16\i\ql Comisi\u243?n Nacional
de\plain\intbl\cf1\f51\fs16\i\ql Valores\plain\intbl\cf1\f51\fs16\ql Standards,
as from May 27, 2004 IRSA has appointed an\plain\intbl\cf1\f51\fs16\ql \u8220?
Audit Committee\u8221? composed of three of the members
of\plain\intbl\cf1\f51\fs16\ql the Board of Directors. Since December 21, 2005 all
of its members are\plain\intbl\cf1\f51\fs16\ql independent as per the criteria of
Rule 10 A-3 under the Exchange Act.\cell{
\pard\plain\intbl\cf1\f51\fs16\ql Section\~303A.07(a) The Audit Committee shall
consist of at least three\plain\intbl\cf1\f51\fs16\ql members. All of its members
shall be financially literate or must acquire such\plain\intbl\cf1\f51\fs16\ql
financial knowledge within a reasonable period and at least one of
its\plain\intbl\cf1\f51\fs16\ql members shall have experience in accounting or
financial administration.\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql In accordance with Argentine law, a
public Company must have an Audit\plain\intbl\cf1\f51\fs16\ql Committee with a
minimum of three members of the board of directors,\plain\intbl\cf1\f51\fs16\ql
the majority of which shall be independent pursuant to the
criteria\plain\intbl\cf1\f51\fs16\ql established by
the\plain\intbl\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\intbl\cf1\f51\fs16\ql . There is no\plain\intbl\cf1\f51\fs16\ql
requirement related to the financial expertise of the members of the
Audit\plain\intbl\cf1\f51\fs16\ql Committee. However, our Audit Committee has a
financial expert. The\plain\intbl\cf1\f51\fs16\ql committee creates it own written
internal code that addresses among\plain\intbl\cf1\f51\fs16\ql others: (i) its
purpose; (ii) an annual performance evaluation of the\plain\intbl\cf1\f51\fs16\ql
committee; and (iii) its duties and responsibilities.\cell{
{\trowd\cellx5508\clvertalb\cellx5615\cellx10799\trrh1856\row}}}\pard\plain\cf1\f51
\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 218
\
{\*\bkmkend tx46076_49}\par\pard\plain\cf1\f51\fs16\b\ql C. Material
Contracts\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We do not have any material
contract entered into outside the ordinary course of business other than some of
the operations previously described\plain\cf1\f51\fs16\ql under the Related Party
Transactions, the Recent Developments and Our Indebtedness sections.{\*\bkmkstart
tx46076_50}{\*\bkmkend tx46076_50}\par\pard\plain\sb286\cf1\f51\fs16\b\ql D.
Exchange Controls\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\ql Currency Exchange
Regulation\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql All foreign currency exchange
transactions must be carried out in the free exchange market, in which the
Argentine Central Bank participates by\plain\cf1\f51\fs16\ql purchasing and
selling foreign currency.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Import and
Export of Capital\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\ql Import of
Capital\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Currently, there are no laws,
executive orders or regulations nor any exchange controls in force in Argentina
which limits the import of capital.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Pursuant to the Argentine Foreign Investment Law No.\~21,382, and Decree
No.\~1,853/93, enacted in 1993, the purchase by foreign investors
(any\plain\cf1\f51\fs16\ql natural or legal person domiciled out of Argentina or
an Argentine company of \u8220?foreign capital\u8221?) of capital participation in
a company\plain\cf1\f51\fs16\ql existing in Argentina (according to the Foreign
Investment Act) shall constitute a foreign
investment.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql At present there are no
restrictions on foreign investments in industries other than public broadcasting
media, and no prior authorization is required\plain\cf1\f51\fs16\ql to make
foreign investments.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Therefore, no prior
authorization is required in order to purchase our
securities.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql See Item\~3: \u8220?Key
Information \u8211? Exchange
Rates\u8221?\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Export of Capital,
including the availability of cash or cash
equivalents\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql From 1989 to December\~3,
2001, there were no exchange controls restricting the peso-U.S.\~Dollar translation
or the remittance of U.S. Dollars\plain\cf1\f51\fs16\ql abroad. In compliance with
the economic measures set forth by the Government by means of Decree No.\~1570/01
dated December\~3, 2001 and subsequent\plain\cf1\f51\fs16\ql amendments thereto,
aimed at protecting the integrity of the Argentine financial system, money could
not be transferred abroad, unless expressly\plain\cf1\f51\fs16\ql authorized by
the Argentine Central Bank.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql For purposes
of accessing the funds deposited with financial institutions, clients were allowed
to make electronic transfers between accounts of the\plain\cf1\f51\fs16\ql same
institution or others and in favor of the same holder or other persons; pay
expenses by means of debit cards, checks, automatic debits and
credit\plain\cf1\f51\fs16\ql cards. Additionally, the Decree declared that new
foreign currency deposits can only be received as time deposits, and no demand
accounts denominated\plain\cf1\f51\fs16\ql in foreign currency may be opened. Such
restrictions were later relaxed and deposits of foreign currency in savings
accounts (\u8220?cajas de\plain\cf1\f51\fs16\ql ahorro\u8221?) by residents were
allowed. Law No.\~25,561 declared a public emergency in social, economic,
administrative, financial and foreign\plain\cf1\f51\fs16\ql exchange market
matters, delegating to the Argentine executive branch until December\~10, 2003, the
powers to\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 219
\
reorganize the financial, banking and foreign exchange system, reactivate the
performance of the economy and improve the employment level
and\plain\cf1\f51\fs16\ql distribution of income, focusing on a program for the
development of regional economies, creating the conditions for a sustainable
economic growth,\plain\cf1\f51\fs16\ql consistent with the public debt
restructuring, and restructuring outstanding obligations affected by the new
foreign exchange system. Such period was\plain\cf1\f51\fs16\ql extended until
December\~31, 2006 by Law No.\~26,077. Among other provisions, this law put an end
to the convertibility system that had been in effect\plain\cf1\f51\fs16\ql since
April 1991, whereby pesos were convertible to U.S. Dollars at a rate of Ps.
1.0\~per U.S Dollar.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As a consequence of
the enactment of Decree 260/02, as of February\~8, 2002 a single and free exchange
market was implemented, through which\plain\cf1\f51\fs16\ql all foreign currency
exchange transactions are made. Exchange transactions are freely entered into by
parties, but subject to the regulations and\plain\cf1\f51\fs16\ql requirements set
forth by the Central Bank. The Central Bank issued Communication \u8220?A\u8221?
3471, as amended, establishing restrictions or\plain\cf1\f51\fs16\ql special
requirements for exchange transactions. Lack of compliance with requirements and
conditions shall result in the application of sanctions
established\plain\cf1\f51\fs16\ql by the Criminal Law Exchange
Regime.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Such regulation has been
modified several times and, therefore, only the most important provisions currently
in force are mentioned below:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Argentine individuals and companies are
authorized to buy up to US$ 2,000,000\~per month;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the sale of foreign currency to non-
residents, with the exception of international organizations, in an aggregate
monthly amount exceeding\plain\intbl\cf1\f51\fs16\ql US$ 5,000 shall also be
previously authorized by the Central Bank, except when it is evidenced that the
amounts used to purchase foreign\plain\intbl\cf1\f51\fs16\ql currency (i)\~come
from the payment of a resident to the non-resident which orders the transfer; and
(ii)\~the payment is performed in\plain\intbl\cf1\f51\fs16\ql relation to import,
services, revenues or other commercial transfers for which the resident should have
accessed to the exchange market in\plain\intbl\cf1\f51\fs16\ql accordance to the
exchange rules that regulated payments abroad to commercial account;\cell{
\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql foreign currency exchange or arbitrage
transactions with financial institutions located abroad must be previously
authorized by the Central\plain\intbl\cf1\f51\fs16\ql Bank, except where such
financial institutions are located in countries which are members of the Basel
Committee and have an\plain\intbl\cf1\f51\fs16\ql international credit rating not
lower than \u8220?A\u8221? granted by international rating agencies registered with
the Central Bank, or\plain\intbl\cf1\f51\fs16\ql where such transactions are
entered into with branches of Argentine official banks located abroad;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql future operations in regulated markets,
options or forwards transactions and any other type of derivatives entered into and
cancelled in\plain\intbl\cf1\f51\fs16\ql Argentina and settled in local currency
are not subject to any restriction, provided, however, that: (i)\~such operations
do not contemplate\plain\intbl\cf1\f51\fs16\ql any payment or transfer obligation
of a resident to a foreign country; (ii)\~any inflow of foreign currency into the
local exchange market for\plain\intbl\cf1\f51\fs16\ql the purposes of such an
operation by a non resident who is party to such a transaction is subject to a non-
transferable deposit\plain\intbl\cf1\f51\fs16\ql denominated in U.S. Dollars for
an amount equal to 30% of the relevant transaction for a period of 365 days in
accordance to such further\plain\intbl\cf1\f51\fs16\ql conditions as indicated
bellow (the \u8220?Non- Transferable Deposit\u8221?); and (iii)\~transfer of
foreign currency abroad by a non\plain\intbl\cf1\f51\fs16\ql resident derived from
such transactions involving an aggregate monthly amount exceeding US$ 5,000 shall
also be previously authorized\plain\intbl\cf1\f51\fs16\ql by the Central
Bank.\cell{
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Communication \u8220?A\u8221? 4285 dated
January\~17, 2005, relaxed restrictions on foreign currency transactions by
abrogating the\plain\intbl\cf1\f51\fs16\ql requirement of prior approval of the
Central Bank for the execution of certain future and forward operations and for the
access to the\plain\intbl\cf1\f51\fs16\ql foreign exchange market for their
cancellation. These operations include: (i)\~transactions executed by the financial
system for the\plain\intbl\cf1\f51\fs16\ql acquisition of certain time deposits
having variable retribution; (ii)\~agreements for the coverage of foreign
currencies and interest rates,\plain\intbl\cf1\f51\fs16\ql (iii)\~agreements
executed by exporters or importers for the coverage of commodity prices, as long as
they are related to argentine foreign\plain\intbl\cf1\f51\fs16\ql trade
transactions; and (iv)\~the execution of external transactions in the form of Repos
provided that they are executed for a term of at\plain\intbl\cf1\f51\fs16\ql least
180 days. With the exception of inflows related to the external transactions in the
form of Repos mentioned in (iv), any other inflow\plain\intbl\cf1\f51\fs16\ql of
foreign currency devoted to future or forward operations mentioned in (i)\~to
(iii)\~is exempted from the obligation to constitute the
Non-\plain\intbl\cf1\f51\fs16\ql Transferable Deposit.\cell{
\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql financial institutions must obtain prior
authorization of the Central Bank in order to purchase any kind of asset, where the
payment for\plain\intbl\cf1\f51\fs16\ql such a transaction is made against
delivery of foreign currency or any other kind of foreign denominated asset that is
part of the General\plain\intbl\cf1\f51\fs16\ql Exchange Position (Posici\u243?n
General de Cambios) (the \u8220?GEP\u8221?) of these financial institutions;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql new imports of goods may be fully paid in
advance, without consideration of the kind of good, as well as debts for imports
with any\plain\intbl\cf1\f51\fs16\ql maturity date;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql access to the free and sole exchange
market is allowed for payment of expired capital services originated in financial
debts, except for\plain\intbl\cf1\f51\fs16\ql financial entities subject to
advance refinancings and rediscounts granted by the Central Bank and restructuring
of its foreign debt (Decree\plain\intbl\cf1\f51\fs16\ql No.\~739/03 and
Communication \u8220?A\u8221? 3940);\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql non-residents may have access to the
exchange market for purposes of transferring funds in foreign currency collected in
Argentina,\plain\intbl\cf1\f51\fs16\ql originated from the amortization
installments from national public bonds issued in foreign currency, to accounts in
foreign banks;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql there are no restrictions to make payments
abroad for services rendered by non-residents on any basis (freight, insurance,
royalties,\plain\intbl\cf1\f51\fs16\ql technical advise, fees, etc.);\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql transfers abroad for the payment of
indebtedness of private entities (comprising both financial and non-financial
institutions) and\plain\intbl\cf1\f51\fs16\ql government owned entities; provided
that they fulfill certain regulatory requirements?among others?such as (i)\~a sworn
statement affirming\plain\intbl\cf1\f51\fs16\ql the fulfillment of
Communication \u8220?A\u8221? 3602 informative requirements; (ii)\~the possession
of documents which evidence the\plain\intbl\cf1\f51\fs16\ql genuineness of the
operation being cancelled, i.e., the entry into the country of the finance proceed
and/or its use to cancel the financial or\plain\intbl\cf1\f51\fs16\ql commercial
debt, etc.; (iii)\~the amounts to be transferred have been adjusted, as the case
may be, in accordance to Decree 214/02 as\plain\intbl\cf1\f51\fs16\ql amended; and
(iv)\~the fact that the inflows have remained in the county for the legal minimum
term (180 days until May\~26, 2005 or 365\plain\intbl\cf1\f51\fs16\ql for funds
entered into after that date) has been verified;\cell{
\
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql effective as of January\~8, 2003,
Argentine companies may freely transfer corporate profits and dividends
corresponding to audited financial\plain\intbl\cf1\f51\fs16\ql statements of local
companies without prior Central Bank approval and transfers of funds abroad in
order to pay reinsurance premiums\plain\intbl\cf1\f51\fs16\ql will be subject only
to the issuance of a statement from the regulatory authority on insurance matters
Superintendencia de Seguros de la\plain\intbl\cf1\f51\fs16\ql Naci\u243?n (\u8220?
Superintendent of Insurance Board\u8221?), with respect to the reason and amount to
be transferred;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql there is an obligation to enter the funds
received as payment for the export of goods and services into the exchange market
and to convert\plain\intbl\cf1\f51\fs16\ql them into local currency within a time
limit established by the Ministry of Economy and Production;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql foreign currency obtained from the
collection of exports corresponding to bills of lading shall be sold at the
reference exchange rate when\plain\intbl\cf1\f51\fs16\ql the foreign currency so
obtained was not clear at the exchange market within the applicable legal terms, in
accordance with applicable\plain\intbl\cf1\f51\fs16\ql regulation.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql before September 2005, inflows of foreign
currency which would be applied to export advances and prefinancing were allowed
into the\plain\intbl\cf1\f51\fs16\ql local exchange market avoiding the non-
transferable deposit requirement established by Decree No.\~616/05, issued on
June\~10, 2005 by\plain\intbl\cf1\f51\fs16\ql providing a sworn statement stating
that foreign funds would be used for a specific purchase transaction entered into
with the buyer.\plain\intbl\cf1\f51\fs16\ql Subsequently, the BCRA by means of the
Communication \u8220?A\u8221? 4415 substituted the sworn statement requirement with
the\plain\intbl\cf1\f51\fs16\ql exhibition of the shipping contract involved in
said transaction. Later, on November\~22, 2005 BCRA\u8217?s
Communication\plain\intbl\cf1\f51\fs16\ql \u8220?A\u8221?4443 relaxed this
requirement exempting exporters from providing such documentary evidence if they
proved that the\plain\intbl\cf1\f51\fs16\ql inflow of funds would not exceed more
than 25% of the amount they received during the last year for similar
transactions.\cell{
\sb198\fi462\cf1\f51\fs16\ql The Government, through the Central Bank, holds
control over capital inflows and outflows, enacting the applicable rules in this
regard. Decree\plain\cf1\f51\fs16\ql No.\~616/05, issued on June\~10, 2005,
established that inflows and outflows of foreign currency into the local exchange
market, and indebtedness\plain\cf1\f51\fs16\ql transactions incurred by local
residents that may result in a foreign currency-denominated payment to non-
residents, need to be registered with the\plain\cf1\f51\fs16\ql Central Bank.
Furthermore, as from May\~26, 2005, the following situations will be subject to
certain requirements and conditions: (a)\~inflows of funds\plain\cf1\f51\fs16\ql
derived from foreign borrowing by the private financial and non financial sector,
and (b)\~inflows of foreign currency by non-residents for the purpose
of\plain\cf1\f51\fs16\ql (i)\~holding a position in local currency,
(ii)\~purchasing financial debt or assets and (iii)\~investing in government bonds
in the secondary market. In these\plain\cf1\f51\fs16\ql situations, the following
requirements must be met: (i)\~inflows must remain in Argentina for 365 days to be
computed as from the day they were\plain\cf1\f51\fs16\ql negotiated in the local
exchange market; (ii)\~the funds involved in the transactions covered by this
decree must be deposited in a local bank account; (iii)\~a\plain\cf1\f51\fs16\ql
non-transferable deposit denominated in U.S. Dollars for an amount equal to 30% of
the relevant transaction has to be made with the resulting
proceeds.\plain\cf1\f51\fs16\ql This deposit will only be reimbursed after the
expiration of a 365 term, cannot bear interest (nor yield any other type of profit)
and may not be used as\plain\cf1\f51\fs16\ql collateral in any credit transaction.
Such requirements do not apply to: (a)\~foreign direct investment, (b)\~primary
placement of publicly traded debt or\plain\cf1\f51\fs16\ql equity securities
listed in one or more exchange markets, and (c)\~foreign trade and export finance
debt related transactions.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Subsequently,
Resolution No.\~365/2005 from the Ministry of Economy and Production established
that non-resident capital inflows destined for the\plain\cf1\f51\fs16\ql primary
subscription of Argentine Central Bank notes and income derived from the sale by
residents of foreign assets for an amount greater than US$\plain\cf1\f51\fs16\ql
2\~million per month, will also be subject to the aforementioned
requirements.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 222
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql Moreover, said resolution provided
certain exemptions to the requirement of making the non-transferable deposit
requirement such as: (i)\~inflows\plain\cf1\f51\fs16\ql derived from borrowings
extended by multilateral and bilateral financial institutions and official credit
agencies, and (ii)\~inflows derived from financial\plain\cf1\f51\fs16\ql
borrowings extended by foreign creditors, so long as they are devoted to
investments in non-financial assets and the borrowed amounts are repaid at
least\plain\cf1\f51\fs16\ql 24 months after they were
granted.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In that sense, non-financial
assets include:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql (i) investments recorded
in the category \u8220?PP&E\u8221? of the financial statements (Notice
42303);\par\pard\plain\li88\sb88\cf1\f51\fs16\ql (ii) \u8220?intangible assets
related to mine cost\u8221? and/or \u8220?research, prospection and exploration
expenses\u8221? (Notice 42884);\par\pard\plain\li88\sb88\cf1\f51\fs16\ql (iii)
\u8220?acquisition of rights to use\u8221? that had been recorded for accounting
purposes in the category \u8220?intangible assets\u8221? of\plain\cf1\f51\fs16\ql
the company\u8217?s financial statements ( Notice 44670);
and\par\pard\plain\li88\sb88\cf1\f51\fs16\ql (iv) investments in assets that are
comparable to intellectual property rights, which are commercialized through the
assignment of rights to use and\plain\cf1\f51\fs16\ql should be recorded for
accounting purposes in the category \u8220?intangible assets\u8221? of the
company\u8217?s financial statements (Notice\plain\cf1\f51\fs16\ql
46394).\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql This exemption automatically
expires when the reported use is modified. In that case, the deposit established in
item 6 of Communication\plain\cf1\f51\fs16\ql \u8220?A\u8221? 4359 must be made
within 10 business days of such event.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Communications \u8220?A\u8221? 4554 and \u8220?A\u8221? 4711, both dated
September\~24, 2007, established certain requirements and terms
to\plain\cf1\f51\fs16\ql file the documentation evidencing the correct
classification of the transaction under the above mentioned
exemption.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql By contrast, according to
Communication \u8220?C\u8221? 43075 dated September\~26, 2005, inflows of foreign
currency caused by a non-resident\plain\cf1\f51\fs16\ql and devoted to the
cancellation of payment obligations under a purchase agreement (including
installment payments thereof) concerning a real estate\plain\cf1\f51\fs16\ql
property under construction may be registered as foreign direct investments
provided that certain conditions are
met.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Finally, Resolution No.\~637/2005
from the Ministry of Economy and Production dated November\~16, 2005 established
that any inflow of foreign\plain\cf1\f51\fs16\ql currency to the local exchange
market devoted to the primary subscription of notes, bonds or participation
certificates issued by the trustee of a trust,\plain\cf1\f51\fs16\ql regardless of
the channels in which they are traded (public or private offerings, or listings in
self-regulated markets) is subject to the non-transferable\plain\cf1\f51\fs16\ql
deposit requirement established by Decree 616/05 if such requirement would be
deemed applicable to the acquisition of the underlying assets of the
trust.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 223
\
}{\*\fldrslt\cf3\f52\fs16\b\ql Table of Contents}}\par\pard\plain\cf1\f51\fs16\i\ql
Reporting requirements on Direct
Investments\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On March\~4, 2005 the
Argentine Central Bank issued Communication \u8220?A\u8221? 4305 that regulates the
reporting system of direct\plain\cf1\f51\fs16\ql investments and real estate
investments carried out by non-residents in Argentina and by Argentine residents
abroad, which had been implemented\plain\cf1\f51\fs16\ql through Communication
\u8220?A\u8221? 4237 dated November\~10,
2004.\par\pard\plain\sb286\cf1\f51\fs16\i\ql Direct investments in Argentina of
non-Argentine residents\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Non-Argentine
residents are compelled to comply with the reporting regime if the value of their
investments in Argentina reaches or surpasses the\plain\cf1\f51\fs16\ql equivalent
of US$ 500,000 \u8211? measured in terms of the net worth of the company in which
they participate or fiscal value of the real estate owned.\plain\cf1\f51\fs16\ql
If the investments do not reach such amount, the compliance with such regime is
optional.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql According to Communication
\u8220?A\u8221? 4237, companies in which non-Argentine residents participate in and
administrators of real estate\plain\cf1\f51\fs16\ql pertaining to non-Argentine
residents are those obliged to comply with the reporting
regime.\par\pard\plain\sb286\cf1\f51\fs16\i\ql Direct investments made abroad by
Argentine residents\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Argentine investors
are compelled to comply with the reporting regime if the value of their investments
abroad reaches or surpasses the equivalent\plain\cf1\f51\fs16\ql of US$
1,000,000 \u8211? measured in terms of net worth of the company in which they
participate or the fiscal value of the real estate they
own.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql If the value of those investments
abroad does not exceed the equivalent of US$ 5,000,000, the declaration could be
carried out annually instead of\plain\cf1\f51\fs16\ql semiannually. If the
investments do not reach the equivalent of US$ 1,000,000, the compliance with such
regime is optional.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The first
declarations will correspond to the semester ended on December\~31, 2004, and will
have to be filed within 90 calendar days as of such\plain\cf1\f51\fs16\ql
date.\par\pard\plain\sb286\cf1\f51\fs16\i\ql
Conclusions:\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql While the foreign exchange
market system in Argentina has become increasingly flexible under recent
regulations, Decree No.\~616/05 severely\plain\cf1\f51\fs16\ql deters short term
inflows of foreign currency which are presumed to be of a speculative nature. Such
determination on the part of the government is\plain\cf1\f51\fs16\ql associated
also to another short term economic policy goal and combined measures aimed at
pegging or reasonably adjusting the United States Dollar\plain\cf1\f51\fs16\ql
value around Ps. 3.10\~per U.S. Dollar. We cannot assess whether these policies
will be maintained in the longer run and how changes made therein
may\plain\cf1\f51\fs16\ql affect the economy and our business perspectives.
Furthermore, we cannot predict how changes in the evolution of the world economy
and commodity\plain\cf1\f51\fs16\ql prices which constitutes an important part of
Argentina\u8217?s exports may influence exchange rates and control policies.
Moreover, failure of the\plain\cf1\f51\fs16\ql government to comply with financial
commitments with the IMF or failure to reach an agreement with said institution may
have an impact on the foreign\plain\cf1\f51\fs16\ql exchange system. No assurance
can be made as to the extent to which all such factors may lead to future
restrictions that might further tighten foreign\plain\cf1\f51\fs16\ql exchange
controls or otherwise change the current foreign exchange
system.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 224
\
{\*\bkmkend tx46076_51}\par\pard\plain\cf1\f51\fs16\b\ql E.
Taxation\par\pard\plain\sb88\fi462\cf1\f51\fs16\b\ql United States
Taxation\par\pard\plain\sb88\cf1\f51\fs16\b\ql Certain United States Federal Income
Tax Consequences\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following summary
describes certain United States federal income tax consequences of the ownership of
GDS rights, common share rights,\plain\cf1\f51\fs16\ql common shares, GDSs and
warrants (collectively, \u8220?Equity Securities\u8221?) by U.S. Holders (as
defined below) as of the date hereof. Except\plain\cf1\f51\fs16\ql where noted, it
deals only with Equity Securities held as capital assets and does not deal with
special situations, such as those of dealers in securities or\plain\cf1\f51\fs16\ql
currencies, financial institutions, regulated investment companies, real estate
investment trusts, tax-exempt entities, insurance companies, traders
in\plain\cf1\f51\fs16\ql securities that elect to use the mark-to-market method of
accounting for their securities, persons holding Equity Securities as part of a
hedging,\plain\cf1\f51\fs16\ql integrated, conversion or constructive sale
transaction or a straddle, persons owning 10% or more of our voting stock, persons
liable for alternative\plain\cf1\f51\fs16\ql minimum tax, investors in pass-
through entities or persons whose \u8220?functional currency\u8221? is not the U.S.
dollar.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As used herein, the term \u8220?
U.S. Holder\u8221? means a beneficial holder of an Equity Security that is for
United States federal income tax\plain\cf1\f51\fs16\ql
purposes:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql an individual citizen or resident of the
United States;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a corporation (or other entity treated as
a corporation for United States federal income tax purposes) created or organized
in or under the\plain\intbl\cf1\f51\fs16\ql laws of the United States, any state
thereof or the District of Columbia;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql an estate the income of which is subject
to United States federal income taxation regardless of its source; or\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql a trust:\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql if it is subject to the primary
supervision of a court within the United States and one or more United States
persons have the authority to\plain\intbl\cf1\f51\fs16\ql control all substantial
decisions of the trust; or\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql that has a valid election in effect under
applicable United States Treasury regulations to be treated as a United States
person.\cell{
sb198\fi462\cf1\f51\fs16\ql The discussion below is based upon the provisions of
the Internal Revenue Code of 1986, as amended (the \u8220?Code\u8221?), and
regulations,\plain\cf1\f51\fs16\ql rulings and judicial decisions thereunder as of
the date hereof, and such authorities may be repealed, revoked or modified so as to
result in United States\plain\cf1\f51\fs16\ql federal income tax consequences
different from those discussed below. In addition, this summary is based, in part,
upon representations made by the GDS\plain\cf1\f51\fs16\ql depositary to us and
assumes that the deposit agreement, and all other related agreements, will be
performed in accordance with their
terms.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql PERSONS CONSIDERING THE PURCHASE,
OWNERSHIP OR DISPOSITION OF EQUITY SECURITIES SHOULD CONSULT THEIR
OWN\plain\cf1\f51\fs16\ql TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR\plain\cf1\f51\fs16\ql SITUATIONS AS
WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING
JURISDICTION.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 225
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql If a partnership holds Equity
Securities, the tax treatment of a partner will generally depend upon the status of
the partner and the activities of the\plain\cf1\f51\fs16\ql partnership. U.S.
Holders that are partners of a partnership holding Equity Securities should consult
their own tax advisors.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Issuance of
GDS Rights, Common Share Rights or
Warrants\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql A U.S. Holder will not be
subject to United States federal income taxation with respect to the receipt of GDS
rights, common share rights or\plain\cf1\f51\fs16\ql
warrants.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Basis and Holding Period of
the GDS Rights and Common Share Rights\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Except as provided in the following sentence, the basis of the GDS rights or common
share rights distributed to a U.S. Holder will be zero.\plain\cf1\f51\fs16\ql
However, if either (i)\~the fair market value of the GDS rights or common share
rights is 15% or more of the fair market value (on the date of
distribution\plain\cf1\f51\fs16\ql ) of the GDSs or common shares with respect to
which they are distributed or (ii)\~the U.S. Holder of the GDS rights or common
share rights irrevocably\plain\cf1\f51\fs16\ql elects, in such holder\u8217?s
United States federal income tax return for the taxable year in which the GDS
rights or common share rights are received,\plain\cf1\f51\fs16\ql to allocate part
of the basis of such GDSs or common shares to such GDS rights or common share
rights, then upon exercise or sale of the GDS rights or\plain\cf1\f51\fs16\ql
common share rights the U.S. Holder\u8217?s basis in such GDSs or common shares
will be allocated between such GDSs or common shares and the\plain\cf1\f51\fs16\ql
GDS rights or common share rights in proportion to the fair market values of each
on the date of distribution of the GDS rights or common share
rights.\plain\cf1\f51\fs16\ql No basis will be allocated to any such GDS rights or
common share rights that lapse. A U.S. Holder will include its holding period in
GDSs or common\plain\cf1\f51\fs16\ql shares with respect to which the GDS rights
or common share rights were distributed in determining the holding period of the
GDS rights or common\plain\cf1\f51\fs16\ql share
rights.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Sale of Common Share
Rights\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Subject to the discussion under
\u8220?\u8212?Passive Foreign Investment Company\u8221? below, for United States
federal income tax purposes, a\plain\cf1\f51\fs16\ql U.S. Holder will recognize
taxable gain or loss upon the sale or other disposition of common share rights
(including the sale by the GDS rights agent of\plain\cf1\f51\fs16\ql common share
rights corresponding to unexercised GDS rights of a U.S. Holder) in an amount equal
to the difference between the amount realized for the\plain\cf1\f51\fs16\ql common
share rights (or, in the case of unexercised GDS rights, distributions by the
depositary with respect to the sale of the underlying common
share\plain\cf1\f51\fs16\ql rights) and the U.S. Holder\u8217?s tax basis in the
GDS rights or common share rights. Such gain or loss will generally be treated as
capital gain or\plain\cf1\f51\fs16\ql loss. Capital gain of individuals derived
with respect to capital assets held for more than one year are eligible for reduced
rates of taxation. The\plain\cf1\f51\fs16\ql deductibility of capital losses is
subject to limitations under the Code. Gain or loss recognized by a U.S. Holder on
a sale of common share rights\plain\cf1\f51\fs16\ql generally will be treated as
United States source gain or loss for United States foreign tax credit
purposes.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Exercise of the GDS Rights
or Common Share Rights\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql U.S. Holders of
GDS rights or common share rights will not recognize any gain or loss upon the
exercise of the GDS rights or common share\plain\cf1\f51\fs16\ql rights. The
aggregate basis of GDSs or common shares and warrants acquired upon exercise of GDS
rights or common share rights will be equal to the\plain\cf1\f51\fs16\ql sum of
such U.S. Holder\u8217?s basis in the GDS rights or common share rights exercised
and the amount paid upon exercise of those GDS rights or\plain\cf1\f51\fs16\ql
common share rights. The basis of the GDSs or common shares and warrants will be
determined by allocating such aggregate basis among the GDSs
or\plain\cf1\f51\fs16\ql common shares and the warrants received in proportion to
\
relative fair market values of these securities on the date the GDS rights or
common share rights are exercised. The holding period of GDSs or
common\plain\cf1\f51\fs16\ql shares and warrants acquired upon exercise of GDS
rights or common share rights will begin on the date the GDS rights or common share
rights are\plain\cf1\f51\fs16\ql
exercised.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql
GDSs\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql If you hold GDSs, for United States
federal income tax purposes, you generally will be treated as the owner of the
underlying common shares that\plain\cf1\f51\fs16\ql are represented by such GDSs.
Accordingly, deposits or withdrawals of common shares for GDSs will not be subject
to United States federal income tax.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The
United States Treasury has expressed concerns that intermediaries in the chain of
ownership between holders of GDSs and the issuer of the\plain\cf1\f51\fs16\ql
securities underlying the GDSs may be taking actions that are inconsistent with the
claiming of foreign tax credits for holders of GDSs. Such
actions\plain\cf1\f51\fs16\ql would also be inconsistent with the claiming of the
reduced rate of tax, described below, applicable to dividends received by certain
non-corporate\plain\cf1\f51\fs16\ql holders. Accordingly, the analysis of the
creditability of Argentinean taxes and the availability of the reduced rate of tax
for dividends received by certain\plain\cf1\f51\fs16\ql non-corporate holders,
each as described below, could be affected by actions taken by intermediaries in
the chain of ownership between the holder of an\plain\cf1\f51\fs16\ql GDS and our
company.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Taxation of
Dividends\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Subject to the discussion under
\u8220?\u8212?Passive Foreign Investment Company\u8221? below, distributions on our
common shares or GDSs\plain\cf1\f51\fs16\ql (including amounts withheld to reflect
Argentinean withholding taxes) will be taxable as dividends to the extent paid out
of our current or accumulated\plain\cf1\f51\fs16\ql earnings and profits, as
determined under United States federal income tax principles. Such dividends will
be includable in your gross profit as ordinary\plain\cf1\f51\fs16\ql income on the
day actually or constructively received by you, in the case of our common shares,
or by the depositary, in the case of our GDSs. Such\plain\cf1\f51\fs16\ql
dividends will not be eligible for the dividends received deduction allowed to
corporations. With respect to United States non-corporate investors,
certain\plain\cf1\f51\fs16\ql dividends received before January\~1, 2011 from a
qualified foreign corporation may be subject to reduced rates of taxation. A
foreign corporation is\plain\cf1\f51\fs16\ql treated as a qualified foreign
corporation with respect to dividends received from that corporation on common
shares (or GDSs backed by such common\plain\cf1\f51\fs16\ql shares) that are
readily tradable on an established securities market in the United States. United
States Treasury Department guidance indicates that our\plain\cf1\f51\fs16\ql GDSs
(which are listed on the NYSE), but not our common shares, are readily tradable on
an established securities market in the United States. Thus,
we\plain\cf1\f51\fs16\ql do not believe that dividends that we pay on our common
shares that do not underlie GDSs currently meet the conditions required for these
reduced tax\plain\cf1\f51\fs16\ql rates. Furthermore, there can be no assurance
that our GDSs will be considered readily tradable on an established securities
market in later years.\plain\cf1\f51\fs16\ql Non-corporate holders that do not
meet a minimum holding period requirement during which they are not protected from
the risk of loss or that elect to\plain\cf1\f51\fs16\ql treat the dividend income
as \u8220?investment income\u8221? pursuant to Section\~163(d)(4) of the Code will
not be eligible for the reduced rates of\plain\cf1\f51\fs16\ql taxation regardless
of our status as a qualified foreign corporation. In addition, the rate reduction
will not apply to dividends if the recipient of a dividend\plain\cf1\f51\fs16\ql
is obligated to make related payments with respect to positions in substantially
similar or related property. This disallowance applies even if the
minimum\plain\cf1\f51\fs16\ql holding period has been met. Non-corporate U.S.
Holders should consult their own tax advisors regarding the application of these
rules given their\plain\cf1\f51\fs16\ql particular
circumstances.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 227
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql The amount of any dividend paid in
Pesos will equal the U.S. dollar value of the Pesos received calculated by
reference to the exchange rate in\plain\cf1\f51\fs16\ql effect on the date the
dividend is actually or constructively received by you, in the case of our common
shares, or by the depositary, in the case of our\plain\cf1\f51\fs16\ql GDSs,
regardless of whether the Pesos are converted into U.S. dollars. If the Pesos
received as a dividend are not converted into U.S. dollars on the
date\plain\cf1\f51\fs16\ql of receipt, you will have a tax basis in the Pesos
equal to their U.S. dollar value on the date of receipt. Any gain or loss realized
on a subsequent\plain\cf1\f51\fs16\ql conversion or other disposition of the Pesos
will be treated as United States source ordinary income or
loss.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Subject to certain complex
conditions and limitations, Argentinean withholding taxes on dividends may be
treated as foreign taxes eligible for credit\plain\cf1\f51\fs16\ql against your
United States federal income tax liability. For purposes of calculating the foreign
tax credit, dividends paid on our common shares or GDSs\plain\cf1\f51\fs16\ql will
be treated as income from sources outside the United States and will generally
constitute passive income. If you do not elect to claim a credit for
any\plain\cf1\f51\fs16\ql foreign taxes paid during a taxable year, you may
instead claim a deduction in respect of such foreign taxes. Further, in certain
circumstances, if you:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql have held our common shares or GDSs for
less than a specified minimum period during which you are not protected from risk
of loss, or\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql are obligated to make payments related to
the dividends,\cell{
b198\cf1\f51\fs16\ql you will not be allowed a foreign tax credit for foreign taxes
imposed on dividends paid on our common shares or GDSs. The rules governing the
foreign\plain\cf1\f51\fs16\ql tax credit are complex. You are urged to consult
your tax advisors regarding the availability of the foreign tax credit under your
particular circumstances.\par\pard\plain\sb198\cf1\f51\fs16\ql To the extent that
the amount of any distribution (including amounts withheld to reflect Argentinean
withholding taxes) exceeds our current and\plain\cf1\f51\fs16\ql accumulated
earnings and profits for a taxable year, as determined under United States federal
income tax principles, the distribution will first be treated\plain\cf1\f51\fs16\ql
as a tax-free return of capital, causing a reduction in the adjusted basis of our
common shares or GDSs (thereby increasing the amount of gain,
or\plain\cf1\f51\fs16\ql decreasing the amount of loss, to be recognized by you on
a subsequent disposition of our common shares or GDSs), and thereafter as capital
gain\plain\cf1\f51\fs16\ql recognized on a sale or exchange (as discussed below
under \u8220?\u8212?Taxation of Capital Gains\u8221?). Consequently, such
distributions in excess\plain\cf1\f51\fs16\ql of our current and accumulated
earnings and profits would generally not give rise to foreign source income and you
would generally not be able to use\plain\cf1\f51\fs16\ql the foreign tax credit
arising from any Argentinean withholding tax imposed on such distributions unless
such credit can be applied (subject to applicable\plain\cf1\f51\fs16\ql
limitations) against United States federal income tax due on other foreign source
income in the appropriate category for foreign tax credit
purposes.\plain\cf1\f51\fs16\ql However, we do not expect to keep earnings and
profits in accordance with United States federal income tax principles. Therefore,
you should expect that\plain\cf1\f51\fs16\ql a distribution will generally be
treated as a dividend (as discussed
above).\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Distributions of our common
shares that are received as part of a pro rata distribution to all of our
shareholders generally will not be subject to\plain\cf1\f51\fs16\ql United States
federal income taxes.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Passive Foreign
Investment Company\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Based on the current
and projected composition of our income and the valuation of our assets, including
goodwill, we do not believe we were a\plain\cf1\f51\fs16\ql passive foreign
investment company (\u8220?PFIC\u8221?) for United States federal income tax
purposes for the taxable year ending June\~30, 2007, and\plain\cf1\f51\fs16\ql we
do not currently expect to become a PFIC, although there can be no assurance in
this regard.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 228
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql In general, we will be a PFIC for
any taxable year in which:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql at least 75% of our gross profit is
passive income; or\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql at least 50% of the value (determined
based on a quarterly average) of our assets is attributable to assets that produce
or are held for the\plain\intbl\cf1\f51\fs16\ql production of passive
income.\cell{
sb198\fi462\cf1\f51\fs16\ql For this purpose, cash is a passive asset and passive
income generally includes dividends, interest, royalties, and rents (other than
royalties and rents\plain\cf1\f51\fs16\ql derived in the active conduct of a trade
or business and not derived from a related person). If we own at least 25% by value
of the stock of another\plain\cf1\f51\fs16\ql corporation, we will be treated, for
purposes of the PFIC tests, as owning our proportionate share of that other
corporation\u8217?s assets and receiving\plain\cf1\f51\fs16\ql our proportionate
share of its income.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The determination
of whether we are a PFIC is made annually. Accordingly, it is possible that we may
become a PFIC in the current or any future\plain\cf1\f51\fs16\ql taxable year due
to changes in the fair market value of our assets or income composition. If we are
a PFIC for any taxable year during which you hold\plain\cf1\f51\fs16\ql our Equity
Securities, you will be subject to special tax rules discussed
below.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql If we are a PFIC for any taxable
year during which you hold any of our Equity Securities, you will be subject to
special tax rules with respect to\plain\cf1\f51\fs16\ql any gain realized from a
sale or other disposition, including a pledge, of such Equity Securities. If we are
a PFIC for any taxable year during which you\plain\cf1\f51\fs16\ql hold our common
shares or GDSs, you will also be subject to special tax rules with respect to
any \u8220?excess distribution\u8221? received.\plain\cf1\f51\fs16\ql
Distributions received in a taxable year that are greater than 125% of the average
annual distributions received during the shorter of the three
preceding\plain\cf1\f51\fs16\ql taxable years or your holding period for the
common shares or GDSs will be treated as excess distributions. Under these special
tax rules:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the gain will be allocated ratably over
your holding period for the Equity Securities;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the excess distribution will be allocated
ratably over your holding period for our common shares or GDSs;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the amount allocated to the current
taxable year, and any taxable year prior to the first taxable year in which we
become a PFIC, will be\plain\intbl\cf1\f51\fs16\ql treated as ordinary income;
and\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the amount allocated to each other year
will be subject to tax at the highest tax rate in effect for that year and the
interest charge\plain\intbl\cf1\f51\fs16\ql generally applicable to underpayments
of tax will be imposed on the resulting tax attributable to each such year.\cell{
sb198\fi462\cf1\f51\fs16\ql If we are a PFIC for any taxable year during which you
hold our Equity Securities and any of our non- United States subsidiaries is also a
PFIC, a\plain\cf1\f51\fs16\ql U.S. Holder would be treated as owning a
proportionate amount (by value) of the common shares of the lower tier PFIC for
purposes of the application\plain\cf1\f51\fs16\ql of these rules. You are urged to
consult your tax advisors about the application of the PFIC rules to any of our
subsidiaries.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 229
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql In addition, non-corporate U.S.
Holders will not be eligible for reduced rates of taxation on any dividends
received from us prior to January\~1,\plain\cf1\f51\fs16\ql 2011, if we are a PFIC
in the taxable year in which such dividends are paid or in the preceding taxable
year. You will be required to file Internal\plain\cf1\f51\fs16\ql Revenue Service
Form 8621 if you hold our Equity Securities in any year in which we are classified
as a PFIC.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In certain circumstances, in
lieu of being subject to the excess distribution rules discussed above, you may
make an election to include gain on our\plain\cf1\f51\fs16\ql common shares and
GDSs as ordinary income under a mark-to-market method, provided that our common
shares or GDSs are regularly traded on a\plain\cf1\f51\fs16\ql qualified exchange
or other market. Our common shares are listed on the Buenos Aires Stock Exchange ,
which must meet certain trading, listing,\plain\cf1\f51\fs16\ql financial
disclosure and other requirements to be treated as a qualified exchange under
applicable United States Treasury regulations for purposes of
the\plain\cf1\f51\fs16\ql mark-to-market election, and no assurance can be given
that the common shares are or will continue to be \u8220?regularly traded\u8221?
for purposes\plain\cf1\f51\fs16\ql of the mark-to-market election. Our GDSs are
currently listed on the NYSE, which constitutes a qualified market, although there
can be no assurance\plain\cf1\f51\fs16\ql that the GDSs are or will be \u8220?
regularly traded.\u8221? The mark to market election is currently not available
with respect to GDS rights, common\plain\cf1\f51\fs16\ql share rights and
warrants.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql If you make an effective mark-
to-market election, you will include in each year as ordinary income the excess of
the fair market value of our\plain\cf1\f51\fs16\ql common shares or GDSs at the
end of the year over your adjusted tax basis in our common shares or GDSs. You will
be entitled to deduct as an\plain\cf1\f51\fs16\ql ordinary loss each year the
excess of your adjusted tax basis in our common shares or GDSs over their fair
market value at the end of the year, but only\plain\cf1\f51\fs16\ql to the extent
of the net amount previously included in income as a result of the mark-to-market
election.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Your adjusted tax basis in our
common shares or GDSs will be increased by the amount of any income inclusion and
decreased by the amount of\plain\cf1\f51\fs16\ql any deductions under the mark-to-
market rules. If you make a mark-to market election, it will be effective for the
taxable year for which the election is\plain\cf1\f51\fs16\ql made and all
subsequent taxable years unless our common shares or GDSs are no longer regularly
traded on a qualified exchange or the Internal Revenue\plain\cf1\f51\fs16\ql
Service consents to the revocation of the election. You are urged to consult your
tax advisors about the availability of the mark-to-market election,
and\plain\cf1\f51\fs16\ql whether making the election would be advisable in your
particular circumstances.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In some cases,
holders of commons shares or GDSs (but not holders of GDS rights, common share
rights or warrants) in a PFIC may be able to\plain\cf1\f51\fs16\ql avoid the rules
described above by electing to treat the PFIC as a \u8220?qualified electing
fund\u8221? under Section\~1295 of the Code. This option will\plain\cf1\f51\fs16\ql
not be available to you because we do not intend to comply with certain calculation
and reporting requirements necessary to permit you to make
this\plain\cf1\f51\fs16\ql election.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
You are urged to consult your tax advisors concerning the United States federal
income tax consequences of holding our Equity Securities if we
are\plain\cf1\f51\fs16\ql considered a PFIC in any taxable
year.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 230
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\i\ql Taxation of Capital
Gains\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Subject to the discussion under
\u8220?\u8212?Passive Foreign Investment Company\u8221? above, for United States
federal income tax purposes,\plain\cf1\f51\fs16\ql you will recognize taxable gain
or loss on any sale, exchange, redemption or other taxable disposition of\~our
Equity Securities in an amount equal to the\plain\cf1\f51\fs16\ql difference
between the amount realized for the common shares or GDSs and your tax basis in the
common shares or GDSs. Such gain or loss will\plain\cf1\f51\fs16\ql generally be
treated as capital gain or loss. Capital gains of non-corporate shareholders
derived with respect to capital assets held for more than one
year\plain\cf1\f51\fs16\ql are eligible for reduced rates of taxation. The
deductibility of capital losses is subject to limitations under the Code. Any gain
or loss recognized by you\plain\cf1\f51\fs16\ql will generally be treated as
United States source gain or loss for United States foreign tax credit
purposes.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Information Reporting and
Backup Withholding\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In general,
information reporting will apply to dividends in respect of our Equity Securities
and the proceeds from the sale, exchange or\~redemption\plain\cf1\f51\fs16\ql of
our Equity Securities that are paid to you within the United States (and in certain
cases, outside the United States), unless you are an exempt
recipient\plain\cf1\f51\fs16\ql such as a corporation. A backup withholding tax
may apply to such payments if you fail to provide a taxpayer identification number
or certification of\plain\cf1\f51\fs16\ql other exempt status or fail to report in
full dividend and interest income.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Backup withholding is not an additional tax. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit\plain\cf1\f51\fs16\ql
against your United States federal income tax liability provided the required
information is timely furnished to the Internal Revenue
Service.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Argentine
Taxation\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The following discussion is a
summary of certain Argentine tax considerations associated with an investment in,
ownership or disposition of, the\plain\cf1\f51\fs16\ql shares or the GDSs by
(i)\~an individual holder that is resident in Argentina, (ii)\~an individual holder
that is neither domiciled nor resident in Argentina,\plain\cf1\f51\fs16\ql
(iii)\~a legal entity organized under the laws of Argentina and (iv)\~a legal
entity that is not organized under the laws of Argentina, that does not have
a\plain\cf1\f51\fs16\ql permanent establishment in Argentina and is not otherwise
doing business in Argentina on a regular basis. The discussion is for general
information only\plain\cf1\f51\fs16\ql and is based on current Argentine tax laws.
Moreover, while this summary is considered to be a correct interpretation of
existing laws in force as of the\plain\cf1\f51\fs16\ql date of this 20-F Form, no
assurance can be given that the courts or administrative authorities responsible
for the administration of such laws will agree\plain\cf1\f51\fs16\ql with this
interpretation or that changes in such laws or interpretations will not
occur.\plain\cf1\f51\fs16\b\ql PROSPECTIVE INVESTORS ARE URGED TO
CONSULT\plain\cf1\f51\fs16\b\ql THEIR OWN TAX ADVISOR REGARDING THE PARTICULAR TAX
CONSEQUENCES ARISING UNDER ANY TAXING JURISDICTION\plain\cf1\f51\fs16\ql
.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Taxation of
Dividends\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Dividends, either in cash,
shares or kind approved by our shareholders are currently exempt from Argentine
withholding or other taxes.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Notwithstanding the foregoing, according to Argentine law, income tax will be
applied to the amount of dividends distributed in excess of a\plain\cf1\f51\fs16\ql
company\u8217?s net taxable income determined in accordance with general income tax
regulations for the fiscal years preceding the date of the\plain\cf1\f51\fs16\ql
distribution of such dividends. The legislation requires that companies withhold
35% of the\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 231
\
amount of distributed dividends in excess of the net taxable income of such
distribution, as determined in accordance with the income tax law.
The\plain\cf1\f51\fs16\ql withholding would not be applied to the payment of
future dividends derived out of retained earnings obtained in the fiscal years
ended prior to\plain\cf1\f51\fs16\ql December\~30, 1998. Dividends distributed by
an Argentine company are not subject to this tax to the extent that those dividends
arise from dividend\plain\cf1\f51\fs16\ql income or other distributions received
by such company from other Argentine
companies.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\i\ql Taxation of Capital
Gains\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Due to certain amendments made to
the Argentine Income Tax Law, it is not entirely clear whether certain amendments
concerning payment of\plain\cf1\f51\fs16\ql income tax on capital gains arising
from the sale, exchange or other disposition of shares are in effect or not.
Although Opinion No.\~351 of the National\plain\cf1\f51\fs16\ql Treasury General
Attorney Office clarified the legal status of certain matters affecting the tax
treatment of capital gains certain issues still remain
unclear.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Resident
individuals\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Under what we believe to be a
reasonable interpretation of existing applicable tax laws and regulations:
(i)\~income derived from the sale, exchange\plain\cf1\f51\fs16\ql or other
disposition of shares or GDSs by resident individuals who do not sell or dispose of
Argentine shares on a regular basis would not be subject to\plain\cf1\f51\fs16\ql
Argentine income tax, and (ii)\~although there still exists uncertainty regarding
this issue, income derived from the sale, exchange or other disposition
of\plain\cf1\f51\fs16\ql shares or GDSs by resident individuals who sell or
disposes of Argentine shares on a regular basis should be exempt from Argentine
income tax.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Foreign
beneficiaries\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Capital gains obtained by
non residents or foreign entities from the sale, exchange or other disposition of
shares or GDSs are exempt from income\plain\cf1\f51\fs16\ql tax. Pursuant to a
reasonable interpretation of existing applicable laws and regulations, and although
the matter is not completely free from doubt, such\plain\cf1\f51\fs16\ql treatment
should also apply to those foreign beneficiaries that qualify as \u8220?offshore
entities\u8221? for Argentine tax law purposes, when the
shares\plain\cf1\f51\fs16\ql are not listed in Argentina or in other
jurisdictions. For this purpose, an offshore entity is any foreign legal entity
which pursuant to its by-laws or to the\plain\cf1\f51\fs16\ql applicable
regulatory framework: (i)\~its principal activity is to invest outside the
jurisdiction of its incorporation and/or (ii)\~cannot perform in
such\plain\cf1\f51\fs16\ql jurisdiction certain
transactions.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Local
entities\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Capital gains obtained by
Argentine entities (generally entities organized or incorporated under Argentine
law, certain traders and intermediaries,\plain\cf1\f51\fs16\ql local branches of
non Argentine entities, sole proprietorships and individuals carrying on certain
commercial activities in Argentina) derived from the sale,\plain\cf1\f51\fs16\ql
exchange or other disposition of shares or GDSs are subject to income tax at the
rate of 35%.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Losses arising from the
sale, exchange or other disposition of shares and GDSs can be applied only to
offset such capital gains arising from the\plain\cf1\f51\fs16\ql sale, exchange or
other disposition of these securities.\par\pard\plain\cf1\f51\fs13\ql
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\b\ql WE RECOMMEND PROSPECTIVE
INVESTORS TO CONSULT THEIR OWN TAX ADVISOR REGARDING THE
PARTICULAR\plain\cf1\f51\fs16\b\ql TAX CONSEQUENCES CONCERNING THE SALE OR OTHER
DISPOSITIONS OF SHARES AND GDSs.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Value
Added Tax\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The sale, exchange,
disposition, or transfer of shares or GDSs is not subject to Value Added
Tax.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Personal Assets
Tax\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Law No.\~25,585 issued on April\~24,
2002 and published in the Official Gazette on May\~15, 2002 (and applicable to
personal assets held as of\plain\cf1\f51\fs16\ql December\~31, 2002) introduces
amendments to Law No.\~23,966 and imposes the personal assets tax on shares and
GDSs held by individuals and\plain\cf1\f51\fs16\ql undivided estates domiciled or
located in Argentina or abroad and legal entities not domiciled in Argentina,
separately from other assets.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql This
amendment imposes the obligation to pay the personal assets tax on the Argentine
private issuer of the shares and GDSs, and authorizes it to\plain\cf1\f51\fs16\ql
seek recovery of the amount so paid, without limitation, by way of withholding or
by foreclosing on the assets that gave rise to such payment. The tax
is\plain\cf1\f51\fs16\ql levied on the proportional equity value of the shares as
reflected in the most recent balance sheet closed as of December\~31 of the taxable
year, at the rate\plain\cf1\f51\fs16\ql of 0.5% without any non-taxable minimum
being applicable.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The shareholders
approved the absorption of personal asset tax by the Company for the years 2002 to
2006. There can be no assurance that in the\plain\cf1\f51\fs16\ql future this tax
will be absorbed by the Company.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Tax
on Minimum Notional Income (Impuesto a la Ganancia M\u237?nima Presunta,
IGMP)\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Companies domiciled in Argentina,
partnerships, foundations, sole proprietorships, trusts, certain mutual funds
organized in Argentina, and\plain\cf1\f51\fs16\ql permanent business
establishments owned by foreign persons, among other taxpayers, shall apply a 1%
rate to the total value of assets held by such\plain\cf1\f51\fs16\ql persons,
above an aggregate nominal amount of Ps. 200,000. Nevertheless, shares and GDSs
issued by entities subject to such tax are exempt from paying\plain\cf1\f51\fs16\ql
the IGMP.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Gross Income
Tax\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The gross income tax is a local tax;
therefore, the rules of the relevant provincial jurisdiction should be considered,
which may levy this tax on the\plain\cf1\f51\fs16\ql customary purchase and sale,
exchange or other disposition of shares and GDSs, and/or the collection of
dividends at an average rate of 3%, unless an\plain\cf1\f51\fs16\ql exemption is
applicable. In the particular case of the City of Buenos Aires, any transaction
involving shares and/or the collection of dividends and\plain\cf1\f51\fs16\ql
revaluations is exempt from this tax.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
There is no gross income tax withholding system applicable to the payments made to
foreign beneficiaries.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Stamp
Tax\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The stamp tax is a local tax that is
generally levied on the instrumentation of onerous acts executed within a certain
territorial jurisdiction or outside\plain\cf1\f51\fs16\ql a certain territorial
jurisdiction but with effects in such
jurisdiction.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 233
\
Contents}}\par\pard\plain\fi462\cf1\f51\fs16\ql In the City of Buenos Aires, the
stamp tax has been repealed for all those acts that do not imply an onerous
conveyance of real property or the\plain\cf1\f51\fs16\ql lease of real property.
However, most provincial tax authorities maintain this tax in effect for all acts
in general; therefore, the instruments which\plain\cf1\f51\fs16\ql implement
onerous transactions (including issuance, subscription, placement and transfer)
involving the shares or GDSs, executed in other jurisdictions,
or\plain\cf1\f51\fs16\ql with effects in those jurisdictions, could be deemed to
be subject to this tax.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Tax on Credits
and Debits in Bank Accounts\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This tax is
levied upon debits and credits in bank accounts and upon other transactions which,
due to their special nature and characteristics, are\plain\cf1\f51\fs16\ql similar
or could be used in substitution for a checking account, such as payments on behalf
of or in the name of third parties, procedures for the\plain\cf1\f51\fs16\ql
collection of securities or documents, drafts and transfers of funds made by any
means, when these transactions are performed by local
banks.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The tax law and its regulations
provide several exemptions to this tax. For example, it does not apply to entities
recognized as exempt from income\plain\cf1\f51\fs16\ql tax, to debits and credits
relating to salaries, to retirement and pension emoluments credited directly by
banking means and withdrawals made in\plain\cf1\f51\fs16\ql connection with such
credits, to credits in checking accounts originating from bank loans, and to
transfers of checks by endorsement.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The
general rate of the tax is 0.6%. An increased rate of 1.2% applies in cases in
which there has been a substitution for the use of a checking\plain\cf1\f51\fs16\ql
account.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Pursuant to Argentine
Regulatory Decree 380/2001, as amended, 34% of the tax paid on credits levied at
the 0.6% rate and 17% of the tax paid on\plain\cf1\f51\fs16\ql transactions levied
at the 12% tax rate can be used, to its exhaustion, as a credit against income tax,
tax on minimum notional income and/or the special\plain\cf1\f51\fs16\ql
contribution on cooperatives capital.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql
Court and Other Taxes\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In the event that
it becomes necessary to institute legal actions in relation to the shares or
GDS\u8217?s in Argentina, a court tax (currently at a\plain\cf1\f51\fs16\ql rate
of 3.0%) will be imposed on the amount of any claim brought before the Argentine
courts sitting in the City of Buenos
Aires.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The City of Buenos Aires imposes
a special contribution to the Lawyers\u8217? Social Security System (\u8220?CASSABA
Contribution\u8221?),\plain\cf1\f51\fs16\ql in addition to the court tax of 3.0%.
The CASSABA Contribution will be equal to 3.0% of the amount of the court tax
imposed as a result of the claim.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Argentina imposes neither an estate nor gift tax on a decedent, donor, legatee or
donee. No Argentine tax is imposed on the deposit or
withdrawal\plain\cf1\f51\fs16\ql of shares in exchange for GDSs. Other than the
taxes discussed above, no other Argentine taxes are applicable to an investment in
shares or GDSs. At\plain\cf1\f51\fs16\ql present, there is no national tax
specifically applicable to the transfer of
securities.\par\pard\plain\sb286\fi462\cf1\f51\fs16\i\ql Tax
Treaties\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Argentina has entered into tax
treaties with several countries. There is currently no tax treaty or convention in
effect between Argentina and the\plain\cf1\f51\fs16\ql United
States.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 234
\
{\*\bkmkend tx46076_52}\par\pard\plain\cf1\f51\fs16\b\ql F. Dividends and Paying
Agents\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This Section is not applicable.
tx46076_53}\par\pard\plain\sb286\cf1\f51\fs16\b\ql G. Statement by
Experts\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This section is not applicable.
tx46076_54}\par\pard\plain\sb286\cf1\f51\fs16\b\ql H. Documents on
display\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We file annual, quarterly and
other information with the SEC. You may read and copy any document that we file at
the public reference rooms of\plain\cf1\f51\fs16\ql the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549; and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You may obtain\plain\cf1\f51\fs16\ql information on the operation
of the Public Reference Rooms by calling the SEC at 1-800-SEC-0330. Our Internet
address is http://www.irsa.com. It\plain\cf1\f51\fs16\ql should be noted that
nothing on our website should be considered part of this annual report. You may
request a copy of these filings at no cost, by\plain\cf1\f51\fs16\ql writing or
calling the offices of IRSA, Moreno 877, (C1091AAQ) Buenos Aires, Argentina. Our
telephone number is +54-11-4323-7400.{\*\bkmkstart tx46076_55}{\*\bkmkend
tx46076_55}\par\pard\plain\sb286\cf1\f51\fs16\b\ql I. Subsidiary
Information\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This section is not
applicable.\par\pard\plain\cf1\f51\fs27\ql \~{\*\bkmkstart item_1_3_16}{\*\bkmkend
item_1_3_16}
\par\pard\plain
Item\~11.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Quantitative and qualitative
disclosures about market risk\cell{
{\trowd\cellx972\cellx8563\trrh206\row}}}\pard\plain\sb88\fi462\cf1\f51\fs16\ql In
the normal course of business, we are exposed to interest rate and exchange rates
risks, primarily related to changes in exchanges rates and\plain\cf1\f51\fs16\ql
interest rates. We manage our exposure to these risks through the use of various
financial instruments, none of which are entered into for
trading\plain\cf1\f51\fs16\ql purposes. We have established policies and
procedures governing the use of such financial instruments. The use of financial
derivatives instruments is to\plain\cf1\f51\fs16\ql our core business and is
supervised by internal control policies.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
The following discusses our exposure to these risks. This discussion contains
forward-looking statements that are subject to risks and
uncertainties.\plain\cf1\f51\fs16\ql Actual results could vary materially as a
result of a number of factors including those set forth in the risk factors section
of this Form 20-F. Uncertainties\plain\cf1\f51\fs16\ql that are either
nonfinancial or nonquantifiable, such as political, economic, tax, other
regulatory, or credit risks, are not included in the
following\plain\cf1\f51\fs16\ql assessment of our market
risks.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Interest Rate
Risk\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The primary objective of our
investment activities is to preserve capital while maximizing yields without
significantly increasing risk. To achieve\plain\cf1\f51\fs16\ql this objective, we
maintain our portfolio of cash equivalents and short-term investments in a variety
of securities, including both government and\plain\cf1\f51\fs16\ql corporate
obligations and money market funds.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Investments in both fixed rate and floating rate interest earning instruments carry
varying degrees of interest rate risk. Fixed rate securities
may\plain\cf1\f51\fs16\ql have their fair market value adversely impacted due to a
rise in interest rates. In general, longer dated securities are subject to greater
interest rate risk\plain\cf1\f51\fs16\ql than shorter dated securities. While
floating rate securities are generally subject to less interest rate risk than
fixed rate securities, floating rate securities\plain\cf1\f51\fs16\ql may produce
less income\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 235
\
than expected if interest rates decrease. Due in part to these factors, our
investment income may fall short of expectations or we may suffer losses
in\plain\cf1\f51\fs16\ql principal if securities that have declined in market
value due to changes in interest rates are sold. To date, we have not utilized
derivative financial\plain\cf1\f51\fs16\ql instruments to hedge interest rate
risk; however, there can be no assurance as to the employment of hedging strategies
in the future.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql We are also exposed to
changes in interest rates primarily as a result of our borrowing activities, which
include short-term borrowings, and other\plain\cf1\f51\fs16\ql floating-rate long-
term debt used to maintain liquidity and fund our business operations. Our interest
expense is sensitive to changes in the general level\plain\cf1\f51\fs16\ql of
interest rates because part of our long-term debt (i.e., our secured floating rate
notes and syndicated loan, which as of the date of this annual
report\plain\cf1\f51\fs16\ql have been cancelled) bear interest at floating
rates.\par\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql Foreign Exchange
Risk\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql From April\~1, 1991, until the
beginning of 2002, Convertibility Law No.\~23,928 was applicable to Argentina. This
law established a fixed exchange\plain\cf1\f51\fs16\ql rate, under which the
Argentine Central Bank was obliged to sell U.S. Dollars to any person at a fixed
rate of one Peso per U.S. Dollar. Accordingly, the\plain\cf1\f51\fs16\ql foreign
currency fluctuations were reduced to a minimum level, during this
period.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The primary economic change
implemented by the current Argentine government in January 2002 was the
announcement of the devaluation of the\plain\cf1\f51\fs16\ql Peso. Due to the end
of the Convertibility Plan, our foreign exchange exposure has increased
considerably.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Foreign currency exchange
rate fluctuations could impact our cash flow in Pesos, since some of our products
and inputs are payable in U.S. Dollars.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Foreign currency exchange restrictions imposed by the Argentine government in the
future could prevent or restrict our access to U.S. Dollars,
thus\plain\cf1\f51\fs16\ql affecting our ability to service our U.S.\~Dollar-
denominated liabilities. Also, fluctuations in the exchange rate between the Peso
and the U.S.\~Dollar may\plain\cf1\f51\fs16\ql adversely affect the U.S.\~Dollar
equivalent of the Peso price of our common shares on the Buenos Aires Stock
Exchange, and as a result would likely\plain\cf1\f51\fs16\ql affect the market
price of our GDSs in the United States.\par\pard\plain\sb198\cf1\f51\fs16\ql IRSA
Indebtedness\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
rh-66\trrh0
rh-66\trrh0\row}}}
lx10799\trrh361
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc As of June\~30,
2007\par\pard\plain\intbl\cf1\f51\fs13\b\qc Expected contractual maturity
date\cell{
More\~than\~1
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc and\~not\~more
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc More\~than\~2
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc than
10\plain\intbl\cf1\f51\fs13\b\qc years\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Total Long-
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Term Debt
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc (incl.
2007\~maturities)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Fair\~value(2)\cell{
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc (in millions of constant Ps. as of
June 30, 2007)\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Long-Term
Debt:\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fixed rate
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\ql (US$-denominated)
}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Variable rate
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\ql (US$ denominated)
Libor\~+\~200\cell\pard\plain\intbl\cf1\f51\fs16\ql
\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (1)\cell\pard\plain\intbl\cf1\f51\fs16\ql These
figures were calculated based on the observed exchange rate published by the
Central Bank as of June\~30, 2007 which was Ps.3.093 =\plain\intbl\cf1\f51\fs16\ql
US$1.00.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (2)\cell\pard\plain\intbl\cf1\f51\fs16\ql It
includes accrued interest\cell{
\
Alto Palermo Indebtedness\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
lvertalb\cellx8693\clvertalc\cellx9681\clvertalb\cellx9968\clvertalc\cellx10790\trr
h-66\trrh0
lvertalb\cellx8693\clvertalc\cellx9681\clvertalb\cellx9968\clvertalc\cellx10790\trr
h-66\trrh0\row}}}
lx10798\trrh361
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc As of June\~30,
2007\par\pard\plain\intbl\cf1\f51\fs13\b\qc Expected contractual maturity
date\cell{
\pard\plain\intbl\cf1\f51\fs20\ql \~\plain\intbl\cf1\f51\fs13\ql
More\~than\~1
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc than
10\plain\intbl\cf1\f51\fs13\b\qc years\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Total Long-
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc Term Debt
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc (incl.
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc 2007\~maturities)
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Fair\~value\~(4)\cell{
Liabilities\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fixed Rate Debt
(US$)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
ellx8693\clvertalb\cellx9681\clvertalb\cellx9968\clvertalb\cellx10790\trrh206\row}}
}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Principal
Payment\plain\intbl\cf1\f51\fs11\ql\super (1)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Average interest
\~\cell{
}
(US$)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
Payment\plain\intbl\cf1\f51\fs11\ql\super (2)\cell\pard\plain\intbl\cf1\f51\fs13\ql
}
(Pesos)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
}
Payment\plain\intbl\cf1\f51\fs11\ql\super (2)
rate\plain\intbl\cf1\f51\fs11\ql\super (3)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
}\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
corresponds to Convertible Note.\cell{
\par\pard\plain
corresponds to the series I Note due 2017.\cell{
\par\pard\plain
Dollars-denominated loans were converted to Pesos at an exchange rate of Ps.
3.093\~per U.S. Dollar.\cell{
\par\pard\plain
includes accrued interest.\cell{
{\trowd\cellx432\cellx6931\trrh206\row}}}\pard\plain\sb286\fi462\cf1\f51\fs16\b\ql
Sensitivity to Exchange Rates and Interest
rates\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We are also exposed to changes in
interest rates primarily as a result of our borrowing activities, which include
short-term borrowings, and other\plain\cf1\f51\fs16\ql floating-rate long-term
debt used to maintain liquidity and fund our business operations. Our interest
expense is sensitive to changes in the general level\plain\cf1\f51\fs16\ql of
interest rates because part of our long-term debt (i.e., our secured floating rate
notes and syndicated loan, which as of the date of this annual
report\plain\cf1\f51\fs16\ql have been cancelled) bear interest at floating
rates.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As of October\~29, 2007, we
cancelled our secured floating rate notes and syndicated loan and as a result our
interest expenses are not sensitive to\plain\cf1\f51\fs16\ql changes in the
general level of interest rate. As of the date of this Form 20-F, outstanding
indebtedness represented by our notes due 2017 accrues\plain\cf1\f51\fs16\ql
interest at a fix rate of 8.5%\~per year. It\u8217?s fair market value trends to
drop 5.8%\~per 100 Bps of increase in interest rate
level.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Also, a change of 1% in Ps. / US$
exchange rate would imply a Ps. 4.6\~million change in the Peso equivalent of our
debt face value and increases\plain\cf1\f51\fs16\ql our interest expenses in Ps.
0.4\~million annually.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql This sensitivity
analysis provides only a limited, point-in-time view of the market risk sensitivity
of certain of our financial instruments. The actual\plain\cf1\f51\fs16\ql impact
of our market foreign exchange rate and/or interest rate changes on our financial
instruments may differ significantly from the impact shown in
the\plain\cf1\f51\fs16\ql sensitivity analysis\par\pard\plain\cf1\f51\fs27\ql
\par\pard\plain
ITEM\~12.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Description of Other than Equity
Securities\cell{
This item is not applicable.\par\pard\plain\cf1\f51\fs13\ql
\
{\*\bkmkend part_1_2_5}\par\pard\plain\cf1\f51\fs16\b\qc PART
II\par\pard\plain\cf1\f51\fs18\ql \~{\*\bkmkstart item_1_3_18}{\*\bkmkend
item_1_3_18}
\par\pard\plain
ITEM\~13.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Defaults, Dividend Arrearages and
Delinquencies\cell{
\par\pard\plain
ITEM\~14.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Material Modifications to the
Rights of Security Holders and Use of Proceeds\cell{
{\trowd\cellx972\cellx9400\trrh206\row}}}\pard\plain\sb88\cf1\f51\fs16\b\ql A. Fair
Price Provision\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql At our annual meeting
held on October\~30, 2000, our shareholders approved an amendment to our bylaws
which included the adoption of a fair\plain\cf1\f51\fs16\ql price provision
(the \u8220?Fair Price Provision\u8221?). On March\~8, 2002 our shareholders
decided to make a new amendment to Article Nine of our\plain\cf1\f51\fs16\ql by
laws including, among others, an increase in the minimum percentage of capital
obliged to comply with the Fair Price Provision, from twenty
percent\plain\cf1\f51\fs16\ql (20%)\~to thirty five percent (35%), according to
Decree No.\~677/2001. On October\~10, 2007, our shareholders decided to make a new
amendment to\plain\cf1\f51\fs16\ql Article Nine of our bylaws, to include the
control concept under Decree No.\~677/2001, which provides for the effective
control regularly held in addition\plain\cf1\f51\fs16\ql to the legal
control.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The following description is a
summary of the main provisions of the Fair Price Provision, which constitutes
Article Nine of our bylaws and does\plain\cf1\f51\fs16\ql not contain a
description of all of the terms of the Fair Price Provision. The Fair Price
Provision prohibits a party seeking to acquire, directly or\plain\cf1\f51\fs16\ql
indirectly, either control or (together with such party\u8217?s other holdings)
thirty five percent (35%)\~or more of our capital stock without
complying\plain\cf1\f51\fs16\ql with the procedural and price requirements
described below. Acquisitions made in violation of the Fair Price Provision are
deemed ineffective against us\plain\cf1\f51\fs16\ql and will not be registered in
our share registry. Shares acquired in violation of the Fair Price Provision shall
have no voting or equity rights until the Fair\plain\cf1\f51\fs16\ql Price
Provision has been complied with. The Fair Price Provision applies to transactions
involving shares of our common stock and any securities\plain\cf1\f51\fs16\ql
convertible in shares of our common stock, including, without limitation,
convertible debentures and bonds and our global depositary
receipts\plain\cf1\f51\fs16\ql (\u8220?GDRs\u8221?). The Fair Price Provision
excludes certain acquisitions of shares in certain limited
circumstances.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Fair Price Provision
provides that a party seeking to acquire, directly or indirectly, control of our
company or thirty five percent (35%)\~or more\plain\cf1\f51\fs16\ql of our capital
stock shall be required to make a public tender offer for all of the outstanding
common stock of us and any shares of common stock into\plain\cf1\f51\fs16\ql which
outstanding securities of our company are presently convertible or exchangeable in
accordance with the procedural and price terms of the Fair
Price\plain\cf1\f51\fs16\ql Provision and in accordance with applicable law. For
purposes of the thirty five percent threshold contained in the Fair Price Provision
parties acting in\plain\cf1\f51\fs16\ql concert or which are under common control
or administration are deemed a single
party.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql There are cases excluded from the
tender offer requirements:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql acquisitions by existing shareholders or
by those exercising control over shares or convertible securities in accordance
with the provisions\plain\intbl\cf1\f51\fs16\ql under Decree 677/2001,
irrespective of the application of the regulations imposed by the Comisi\u243?n
Nacional de Valores; and holdings\plain\intbl\cf1\f51\fs16\ql of more than 35%,
which derive from the distribution of shares or dividends paid in\cell{
\
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\ql shares
approved by the shareholders, or the issuance of shares as a result of a merger
approved by the shareholders; in both cases, the excess\plain\intbl\cf1\f51\fs16\ql
holding shall be disposed of within 180 days of its registration in the relevant
shareholder\u8217?s account, or prior to the holding of
our\plain\intbl\cf1\f51\fs16\ql shareholders meeting, whatever occurs first.\cell{
{\trowd\clvertalc\cellx864\cellx10800\trrh636\row}}}\pard\plain\sb198\fi462\cf1\f51
\fs16\ql The Fair Price Provision requires the offering party to notify use of the
tender offer simultaneously with its filing of the public tender offer with
Valores\plain\cf1\f51\fs16\ql . The notice to us is required to set forth all of
the terms and conditions of any agreement that the offering party
has\plain\cf1\f51\fs16\ql made with any other of our shareholders with respect to
the proposed transaction and to provide, among other things, the following
information:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the identity and nationality of the
offering party and, in the event the offer is made by a group, the identity of each
member of the group;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the terms and conditions of the offering,
including the price, the tender offer period and the requirements for accepting the
tender offer;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql accounting documentation required by
Argentine law relating to the offering party;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql details of all prior acquisitions by the
offering party of shares or securities convertible into shares of our capital
stock.\cell{
sb198\fi462\cf1\f51\fs16\ql We will distribute the information provided by the
offering party to our shareholders.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
The\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\cf1\f51\fs16\ql regulations require that transactions which cause a
person\u8217?s holdings of capital stock of a registered\plain\cf1\f51\fs16\ql
Argentine company, to hold 5% or more of the voting power, should be immediately
notified to the\plain\cf1\f51\fs16\i\ql Comisi\u243?n Nacional de
Valores\plain\cf1\f51\fs16\ql . Thereafter,\plain\cf1\f51\fs16\ql every change in
the holdings that represents a multiple of 5% of the voting power should also be
notified.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Fair Price Provision
requires that the consideration paid in the tender offer be paid in cash and that
the price paid for each share in the tender\plain\cf1\f51\fs16\ql offer be the
same and not less than the highest price per share derived from the five following
alternative valuation methods:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the highest price per share of our common
stock paid by the offering party, or on behalf of the offering party, for any
acquisition of\plain\intbl\cf1\f51\fs16\ql shares or convertible securities within
the 2 years prior to the commencement of the tender offer;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the highest closing selling price of a
share of our common stock on the Bolsa de Comercio de Buenos Aires during the
thirty day period\plain\intbl\cf1\f51\fs16\ql immediately preceding the
commencement of the tender offer;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the highest price resulting from the
calculations made according to the provisions of (i)\~and (ii)\~above multiplied by
a fraction the\plain\intbl\cf1\f51\fs16\ql numerator of which is such highest
price and the denominator of which is the lowest closing price of a share of our
common stock on the\plain\intbl\cf1\f51\fs16\ql Bolsa de Comercio de Buenos Aires
during the two-year period prior to the period referred to in sub-sections (i)\~or
(ii), as applicable;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql our aggregate net earnings per share
during our preceding four completed fiscal quarters prior to the commencement of
the tender offer,\plain\intbl\cf1\f51\fs16\ql multiplied by our highest price to
earnings ratio during the two-year period immediately\cell{
\
\par\pard\plain
preceding the commencement of the tender offer. Such multiples shall be determined
considering the average closing selling price of our\plain\intbl\cf1\f51\fs16\ql
common stock on the Bolsa de Comercio de Buenos Aires, and our aggregate net income
from our preceding four completed fiscal quarters;\plain\intbl\cf1\f51\fs16\ql
and,\cell{
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql the book value per share of our common
stock at the time the tender offer is commenced, multiplied by the highest ratio
determined by a\plain\intbl\cf1\f51\fs16\ql fraction the numerator of which is the
closing selling price of a share of our common stock on the Bolsa de Comercio de
Buenos Aires on\plain\intbl\cf1\f51\fs16\ql each day during the two year period
prior to the commencement of the tender offer and the denominator of which is the
latest known\plain\intbl\cf1\f51\fs16\ql book value per share of our common stock
on each such date.\cell{
sb286\cf1\f51\fs16\b\ql B. Limitations on the payment of
dividends.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On February\~2, 2007 we issued
our 2017 fixed rate notes for a total amount of US$150.0 million at an annual
interest rate of 8.5% payable\plain\cf1\f51\fs16\ql semi-annual and mature on
February\~2, 2017. This bond limits our ability to pay dividends which may not
exceed the sum of:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
income; or\cell{
f1\f51\fs9\ql \~
\par\pard\plain
income if the consolidated interest coverage ratio is at least 3.0 to 1; or\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
income if the consolidated interest coverage ratio is at least 4.0 to 1.\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
received by us or\plain\intbl\cf1\f51\fs16\ql by its restricted subsidiaries from
restricted subsidiaries or issuance\plain\intbl\cf1\f51\fs16\ql and sale of our
qualified capital stock or the qualified capital stock of its restricted
subsidiaries subsequent to the issue of our notes due\plain\intbl\cf1\f51\fs16\ql
2017, or (b)\~issuance and sale subsequent to the issuance of our notes due 2017 of
our indebtedness or of the indebtedness of its
restricted\plain\intbl\cf1\f51\fs16\ql subsidiaries that has been converted into
or exchanged for its qualified capital stock.\cell{
\sb286\cf1\f51\fs16\b\ql C. This section is not
applicable.\par\pard\plain\sb88\cf1\f51\fs16\b\ql D. This section is not
applicable.\par\pard\plain\sb88\cf1\f51\fs16\b\ql E. This section is not
applicable.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc 240
\
\par\pard\plain
ITEM\~15T.\cell\pard\plain\intbl\f0\fs16\ql \~\cell{
tx46076_61}\pard\plain\sb88\cf1\f51\fs16\b\ql A. Disclosure Controls and
Procedures.\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We maintain disclosure
controls and procedures that are designed to ensure that information required to be
disclosed in the reports we file or submit\plain\cf1\f51\fs16\ql under the
Securities and Exchange Act of 1934, as amended (the
\u8220?\plain\cf1\f51\fs16\b\ql Exchange Act\plain\cf1\f51\fs16\ql \u8221?), is
recorded, processed, summarized and reported within\plain\cf1\f51\fs16\ql the time
periods specified in the SEC\u8217?s rules and forms, and that such information is
accumulated and communicated to management, including our\plain\cf1\f51\fs16\ql
Chief Executive Officer, Chief Financial Officer and Chief Administrative Officer,
as appropriate, to allow timely decisions regarding required\plain\cf1\f51\fs16\ql
disclosure.\~In connection with the preparation of this Annual Report on Form 20-F,
we carried out an evaluation under the supervision and with
the\plain\cf1\f51\fs16\ql participation of our management, including our Chief
Executive Officer, Chief Financial Officer and Chief Administrative Officer, of the
effectiveness of\plain\cf1\f51\fs16\ql the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act) as of June\~30,\plain\cf1\f51\fs16\ql 2007.\~Based upon this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures were\plain\cf1\f51\fs16\ql effective as of
the end of fiscal year 2007.{\*\bkmkstart tx46076_62}{\*\bkmkend
tx46076_62}\par\pard\plain\sb286\cf1\f51\fs16\b\ql B. Management\u8217?s Annual
Report on Internal Control Over Financial
Reporting\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The management of IRSA
Inversiones y Representaciones S.A. is responsible for establishing and maintaining
adequate internal control over\plain\cf1\f51\fs16\ql financial reporting as
defined in Rules 13a\u8211?15(f) and 15d-15(f) under the Exchange Act.\~Our
internal control over financial reporting is a process\plain\cf1\f51\fs16\ql
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes
in\plain\cf1\f51\fs16\ql accordance with applicable generally accepted accounting
principles.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Management assessed the
effectiveness of the Company\u8217?s internal control over financial reporting as
of June\~30, 2007.\~In making this\plain\cf1\f51\fs16\ql assessment, management
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (\u8220?COSO\u8221?)\plain\cf1\f51\fs16\ql in Internal
Control\u8211?Integrated Framework. Based on this assessment and the criteria set
forth in Internal Control\u8211?Integrated Framework,\plain\cf1\f51\fs16\ql
management concluded that, as of the end of fiscal year 2007, our internal control
over the financial reporting was effective.{\*\bkmkstart tx46076_63}{\*\bkmkend
tx46076_63}\par\pard\plain\sb286\cf1\f51\fs16\b\ql C. Attestation Report of the
Registered Public Accounting Firm\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This
annual report does not include an attestation report of the Company\u8217?s
registered public accounting firm regarding internal control
over\plain\cf1\f51\fs16\ql financial reporting.\~Management\u8217?s report on
internal control over financial reporting was not subject to attestation by our
independent registered\plain\cf1\f51\fs16\ql public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the Company
to provide only\plain\cf1\f51\fs16\ql management\u8217?s report on internal
control over financial reporting in this annual report.{\*\bkmkstart tx46076_64}
{\*\bkmkend tx46076_64}\par\pard\plain\sb286\cf1\f51\fs16\b\ql D. Changes in
Internal Control Over Financial Reporting\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
During the period covered by this Annual Report on Form 20 F, the company has
implemented a new ERP software. Our internal control over\plain\cf1\f51\fs16\ql
financial reporting has been adapted accordingly, for the change in our accounting
system. After carrying out an evaluation under the supervision and
with\plain\cf1\f51\fs16\ql the participation of our management, of the
effectiveness of the design and operation of our disclosure controls and
procedures, we concluded that our\plain\cf1\f51\fs16\ql disclosure controls and
procedures were effective.\par\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
ITEM\~16.\cell\pard\plain\intbl\f0\fs16\ql \~\cell{
Audit Committee Financial Expert\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql Pursuant
to the System governing the Transparency of Public Offers established through
Decree No.\~677/2001, the rules of the\plain\cf1\f51\fs16\i\ql Comisi\u243?
n\plain\cf1\f51\fs16\i\ql Nacional de Valores\plain\cf1\f51\fs16\ql , its
Resolution No.\~400 and 402, the board of directors established that the Audit
Committee shall be a committee of the board of\plain\cf1\f51\fs16\ql directors.
The main function of the Audit Committee is to assist the board of directors in
performing its duty of exercising due care, diligence and\plain\cf1\f51\fs16\ql
competence in issues relating to us, specifically in the enforcement of the
accounting policy and in the issue of accounting and financial information,
the\plain\cf1\f51\fs16\ql management of business risk and of internal control
systems, the conduct and ethical soundness of the company\u8217?s business, the
supervision of the\plain\cf1\f51\fs16\ql integrity of our financial statements,
the compliance by our company with the legal provisions, the independence and
capability of the independent auditor\plain\cf1\f51\fs16\ql and the performance of
the internal audit function of our company and of the external
auditors.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On December\~4, 2006, our
board of directors appointed Cedric Bridger, Mauricio Wior, and Mario Blejer, all
of them independent members, as\plain\cf1\f51\fs16\ql members of the audit
committee. The board of directors named Cedric Bridger as the financial expert in
accordance with the relevant SEC rules. We have\plain\cf1\f51\fs16\ql a fully
independent audit committee as per the standard provided in Rule 10(A)-3(b)(1).
tx46076_66}\par\pard\plain\sb286\cf1\f51\fs16\b\ql B. Code of
Ethics\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql We have adopted a code of ethics
that applies to our directors, officers and employees. Our code of ethics is posted
in our website\plain\cf1\f51\fs16\ql www.irsa.com.ar. On July\~25 2005, our Code
of Ethics was amended by our board of directors. The amendment was reported in a
report on Form 6-K on\plain\cf1\f51\fs16\ql August\~1,
2005.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql If we make any substantive
amendment to the code of ethics or grant any waivers, including any implicit waiver
to any of its provision we will\plain\cf1\f51\fs16\ql disclose the nature of such
amendment or waiver in a report on Form 6-K or in our next annual report and we
will post it in our website.{\*\bkmkstart tx46076_67}{\*\bkmkend
tx46076_67}\par\pard\plain\sb286\cf1\f51\fs16\b\ql C. Principal Accountant Fees and
Services\par\pard\plain\sb88\cf1\f51\fs16\b\ql Audit
Fees\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql During the fiscal years ended
June\~30, 2007 and June\~30, 2006, we were billed for a total amount of Ps.2.3
million and Ps.1.6 million respectively,\plain\cf1\f51\fs16\ql for professional
services rendered by our principal accountants for the audit of our annual
financial statements, performance of the audit or review of
our\plain\cf1\f51\fs16\ql interim financial statements and other services normally
provided in connection with regulatory filings or
engagements.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Audit-Related
Fees\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql During the fiscal years ended
million and Ps.0.01 million\plain\cf1\f51\fs16\ql respectively, for professional
services rendered by our principal accountants mainly related to the issuance of
covenants certificates and other certifications.\par\pard\plain\cf1\f51\fs13\ql
\
Tax Fees\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql During fiscal years ended
million and Ps.0.03 million, respectively,\plain\cf1\f51\fs16\ql for professional
services rendered by our principal accountants for tax compliance, tax advice and
tax planning.\par\pard\plain\sb286\cf1\f51\fs16\b\ql All Other
Fees\par\pard\plain\sb88\cf1\f51\fs16\ql During fiscal year ended June\~30, 2007
and June\~30, 2006 we were billed for professional services rendered by our
principal accountants including fees\plain\cf1\f51\fs16\ql mainly related to
special assignments and courses for a total amount of Ps. 0.00 and Ps.
0.09\~million, respectevely.\par\pard\plain\sb286\cf1\f51\fs16\b\ql Audit Committee
Pre-Approval Policies and Procedures\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
Audit Committee pre-approves all services, fees and services provided by the
external auditors to ensure auditors\u8217? independence. One of
the\plain\cf1\f51\fs16\ql main tasks of the Audit Committee is to give it opinion
in relation to the appointment of the external auditors, proposed by the Board of
Directors to the\plain\cf1\f51\fs16\ql General Shareholder\u8217?s Meeting. In
order to accomplish such task, the Audit Committee
shall:\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Require any additional and
complementary documentation related to this analysis.\par\pard\plain\cf1\f51\fs9\ql
\~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Verify the independence of the external
auditors;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Analyze different kinds of services that
the external auditor would provide to the company. This description must also
include an estimate\plain\intbl\cf1\f51\fs16\ql of the fees payable for such
services, specifically in order to maintain the principle of independence;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Inform the fees billed by the external
auditor, separating the services related to the Audit Committee and other special
services that could\plain\intbl\cf1\f51\fs16\ql be not included as fees related to
the Audit Committee;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Take notice of any strategy proposed by of
the external auditors and review it in accordance with the reality other business
and the risks\plain\intbl\cf1\f51\fs16\ql involved;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Analyze and supervise the working plan of
the external auditors considering the business\u8217? reality and the estimated
risks;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Propose adjustments (if necessary) to such
working plan;\cell{
f1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Hold meetings with the external auditors
in order to: (a)\~analyze the difficulties, results and conclusions of the proposed
working plan;\plain\intbl\cf1\f51\fs16\ql (b)\~analyze eventual possible conflicts
of interests, related party transactions, compliance with the legal framework and
information\plain\intbl\cf1\f51\fs16\ql transparency;\cell{
cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Evaluate the performance of external
auditors and their opinion regarding the Financial Statements.\cell{
\
{\*\bkmkend tx46076_68}\par\pard\plain\cf1\f51\fs16\b\ql D. Exemption from the
Listing Standards for Audit Committees\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql
This section is not applicable.{\*\bkmkstart tx46076_69}{\*\bkmkend
tx46076_69}\par\pard\plain\sb286\cf1\f51\fs16\b\ql E. Purchase of Equity Securities
by the Issuer and its Affiliates\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql This
section is not applicable.{\*\bkmkstart part_1_2_6}{\*\bkmkend
part_1_2_6}\par\pard\plain\sb286\cf1\f51\fs16\b\qc PART
III\par\pard\plain\cf1\f51\fs18\ql \~{\*\bkmkstart item_1_3_22}{\*\bkmkend
item_1_3_22}
\par\pard\plain
ITEM\~17.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Financial Statements\cell{
{\trowd\cellx972\cellx7107\trrh206\row}}}\pard\plain\sb88\fi462\cf1\f51\fs16\ql The
Registrant has responded to Item\~18 in lieu of responding to this
Item.\par\pard\plain\cf1\f51\fs27\ql \~{\*\bkmkstart item_1_3_23}{\*\bkmkend
item_1_3_23}
\par\pard\plain
ITEM\~18.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Financial Statements\cell{
Reference is made to pages F-1 through F-197.\par\pard\plain\cf1\f51\fs27\ql
\par\pard\plain
ITEM\~19.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Exhibits\cell{
Index to Financial Statements (see page F-1).\par\pard\plain\cf1\f51\fs13\ql
\
INDEX OF EXHIBITS{\*\bkmkstart part_1_2_7}{\*\bkmkend
part_1_2_7}\par\pard\plain\sb198\cf1\f51\fs16\b\qc
SIGNATURES\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The registrant hereby
certifies that it meets all of the requirements for filing on Form 20-F and that it
has duly caused and authorized the\plain\cf1\f51\fs16\ql undersigned to sign this
annual report on its behalf.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
{\trowd\clvertalc\cellx4320\trrh-66\trrh0
\pard\plain\intbl\f0\fs16\ql \~\cell{
{\trowd\clvertalc\cellx4320\trrh-66\trrh0\row}}}
{\trowd\clvertalb\cellx4320\trrh206
\pard\plain\intbl\cf1\f51\fs16\ql IRSA INVERSIONES Y\cell{
{\trowd\clvertalb\cellx4320\trrh206\row}}}
\pard\plain\intbl\cf1\f51\fs16\ql REPRESENTACIONES\cell{
\pard\plain\intbl\cf1\f51\fs16\ql SOCIEDAD AN\u211?NIMA\cell{
\par\pard\plain
{\trowd\clbrdrb\brdrs\brdrcf1\cellx4320\trrh206
\pard\plain\intbl\cf1\f51\fs16\ql /s/ Eduardo S. Elsztain\cell{
{\trowd\clbrdrb\brdrs\brdrcf1\cellx4320\trrh206\row}}}
\pard\plain\intbl\cf1\f51\fs16\ql Eduardo S.
Elsztain\par\pard\plain\intbl\cf1\f51\fs16\ql Chief Executive Officer\cell{
{\trowd\clvertalb\cellx4320\trrh429\row}}}\pard\plain\sb198\cf1\f51\fs16\ql Date:
December 27, 2007\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
\pard\plain\intbl\cf1\f51\fs13\b\qc
Exhibit\~No.\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\ql Description of Exhibit\cell{
\pard\plain\intbl\cf1\f51\fs16\ql
\~\~\~\~\~\~1.1*\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\i\ql Estatutos\plain\intbl\cf1\f51\fs16\ql
of the registrant, which serve as the registrant\u8217?s articles of incorporation
and bylaws, and an English translation\plain\intbl\cf1\f51\fs16\ql thereof.\cell{
\~\~\~\~\~\~1.2\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql English translation of the amendment to
the bylaws.\cell{
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Indenture dated May 11, 2007, between the
Company as Issuer, The Bank of New York as trustee, Co-Registrar, Principal
Paying\plain\intbl\cf1\f51\fs16\ql Agent and Transfer Agent, and Banco R\u237?o de
la Plata S.A. as Registrar, Paying Agent, Transfer Agent and Representative
of\plain\intbl\cf1\f51\fs16\ql the Trustee in Argentina for the US$ 200,000,000
Global Note Program for Notes due no less than 30 days from date of
original\plain\intbl\cf1\f51\fs16\ql issue.\cell{
\~\~\~\~\~\~4.1**\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Exchange of Operating Services Agreement
between the Company, Cresud and Alto Palermo dated June 30, 2007.\cell{
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql English translation of the Amendment to
the Exchange of Operating Services Agreement between the Company, Cresud and
Alto\plain\intbl\cf1\f51\fs16\ql Palermo dated August 23, 2007.\cell{
\~\~\~\~11.1***\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Code of Ethics of the Company.\cell{
\~\~\~\~12.1\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Certification pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 for Chief Executive Officer.\cell{
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Certification pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 for Chief Financial Officer.\cell{
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Certification pursuant to 18 U.S.C. 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Chief
Executive\plain\intbl\cf1\f51\fs16\ql Officer.\cell{
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Certification pursuant to 18 U.S.C. 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Chief
Financial\plain\intbl\cf1\f51\fs16\ql Officer.\cell{
{\trowd\cellx748\clvertalb\cellx1463\cellx10799\trrh413\row}}}\pard\plain\cf1\f51\f
s18\ql
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql *\cell\pard\plain\intbl\cf1\f51\fs16\ql
Incorporated herein by reference to the exhibit to the registrant\u8217?s
registration statement on Form F-3 (File No.\~333-7984) filed with the
SEC\plain\intbl\cf1\f51\fs16\ql on November\~18, 1997.\cell{
\
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql **\cell\pard\plain\intbl\cf1\f51\fs16\ql
Incorporated herein by reference to the exhibit to the registrant\u8217?s
registration statement on Form 6-K (File No.\~001-13542) filed with
the\plain\intbl\cf1\f51\fs16\ql SEC on July\~6, 2004.\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql ***\cell\pard\plain\intbl\cf1\f51\fs16\ql
Incorporated herein by reference to the registrant\u8217?s registration statement
on Form 6-K (File No.\~001-13542) filed with the SEC on\plain\intbl\cf1\f51\fs16\ql
August\~1, 2005.\cell{
\
}{\*\fldrslt\cf3\f52\fs16\b\ql Table of Contents}}{\*\bkmkstart index}{\*\bkmkend
index}\pard\plain\ul{\field{\*\fldinst HYPERLINK \\l "toc46076_33" }
{\*\fldrslt\cf3\f51\fs16\b\qc INDEX TO THE FINANCIAL
STATEMENTS}}\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0
66\trrh0\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ul\ql IRSA Inversiones y
Representaciones Sociedad An\u243?nima\cell\pard\plain\intbl\cf1\f51\fs13\ql
{\trowd\clvertalb\cellx10107\clvertalb\cellx10322\clbrdrb\brdrs\brdrcf1\clvertalb\c
ellx10798\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Page\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Report of Independent Registered
Public Accounting Firm\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qr F-2\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Consolidated Balance Sheets as of
June\~30, 2006 and 2007\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Consolidated Statements of Income
for the years ended June\~30, 2005, 2006 and
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Consolidated Statements of Changes
in Shareholders\u8217? Equity for the years ended June\~30, 2005, 2006
and\~2007\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Consolidated Statements of Cash
Flows for the years ended June\~30, 2005, 2006 and
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Notes to the Consolidated Financial
Statements\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ul\ql Banco Hipotecario
S.A.\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
ellx10798\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Page\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Report of Independent Registered
Public Accounting Firm\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Consolidated Balance Sheets as of
June\~30, 2006 and 2007\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Consolidated Statements of Income
for the years ended June\~30, 2005, 2006 and
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Consolidated Statements of Changes
in Shareholders\u8217? Equity for the years ended June\~30, 2005, 2006
and\~2007\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Consolidated Statements of Cash
Flows for the years ended June\~30, 2005, 2006 and
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Notes to the Consolidated Financial
Statements\cell\pard\plain\intbl\cf1\f51\fs13\ql
\
0\par\pard\plain\f0\fs4\par\pard\plain\ul{\field{\*\fldinst HYPERLINK \\l "toc" }
{\*\fldrslt\cf3\f52\fs16\b\ql Table of Contents}}\par\pard\plain\cf1\f51\fs16\b\qc
Report of Independent Registered Public Accounting
Firm\par\pard\plain\sb198\cf1\f51\fs16\ql To the Board of Directors and
Shareholders of\par\pard\plain\cf1\f51\fs16\ql IRSA Inversiones y Representaciones
Sociedad An\u243?nima\par\pard\plain\sb198\cf1\f51\fs16\ql In our opinion, the
accompanying consolidated balance sheets and the related consolidated statements of
income, of changes in shareholders\u8217? equity\plain\cf1\f51\fs16\ql and of cash
flows present fairly, in all material respects, the financial position of IRSA
Inversiones y Representaciones Sociedad An\u243?nima and its\plain\cf1\f51\fs16\ql
subsidiaries at June\~30, 2007 and 2006, and the results of their operations and
their cash flows for each of the three years in the period ended
June\~30,\plain\cf1\f51\fs16\ql 2007 in conformity with accounting principles
generally accepted in Argentina. These financial statements are the responsibility
of the Company\u8217?s\plain\cf1\f51\fs16\ql management. Our responsibility is to
express an opinion on these financial statements based on our audits. We conducted
our audits of these statements in\plain\cf1\f51\fs16\ql accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the\plain\cf1\f51\fs16\ql audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis,\plain\cf1\f51\fs16\ql evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant
estimates made by\plain\cf1\f51\fs16\ql management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.\par\pard\plain\sb198\cf1\f51\fs16\ql Accounting principles
generally accepted in Argentina vary in certain significant respects from
accounting principles generally accepted in the United\plain\cf1\f51\fs16\ql
States of America and as allowed by Item\~18 to Form 20-F. Information relating to
the nature and effect of such differences is presented in Note 28
to\plain\cf1\f51\fs16\ql the consolidated financial
statements.\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0\row}}}
{\trowd\cellx4320\trrh206
\pard\plain\intbl\cf1\f51\fs16\ql PRICE WATERHOUSE & Co. S.R.L.\cell{
{\trowd\cellx4320\trrh206\row}}}
\pard\plain\intbl\cf1\f51\fs16\ql By\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\brdrb\brdrs\cf1\f51\fs16\ql /s/ Andr\u233?s Suarez
(Partner)\cell{
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Andr\u233?s Suarez\cell{
{\trowd\cellx409\clvertalb\cellx818\clvertalb\cellx4318\trrh223\row}}}\pard\plain\s
b198\cf1\f51\fs16\ql Buenos Aires, Argentina\par\pard\plain\cf1\f51\fs16\ql
August\~31, 2007\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc
F-2
\
nima\par\pard\plain\cf1\f51\fs16\b\qc Consolidated Balance
Sheets\par\pard\plain\cf1\f51\fs16\b\qc as of June\~30, 2007 and
2006\par\pard\plain\cf1\f51\fs16\qc (Amounts in thousands, except share data and as
otherwise indicated)\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
ASSETS\cell\pard\plain\intbl\cf1\f51\fs13\ql
lb\cellx10797\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Current
Assets\cell\pard\plain\intbl\cf1\f51\fs13\ql
lb\cellx10797\trrh206\row}}}
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Cash and banks (Notes 4.a. and
29.e.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps\cell\pard\plain\intbl\cf1\f51\fs16\qr
. 218,356\cell\pard\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Investments (Notes 4.b. and
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Mortgages and leases receivable, net
(Notes 4.c. and 29.e.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
expenses (Notes 4.d. and 29.e.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Inventories (Note
\~\cell{
\pard\plain\intbl\li968\fi-176\cf1\f51\fs16\b\ql Total current
\~\cell{
66\trrh0\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Non-Current
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Mortgages and leases receivable, net
(Notes 4.c. and 29.e.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
expenses (Notes 4.d. and 29.e.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Inventories (Note
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Investments (Notes 4.b. and
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Fixed assets, net (Note
29.a.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Intangible assets, net (Note
29.b.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\~\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Negative goodwill,
ql \~\cell\pard\plain\intbl\cf1\f51\fs16\ql
\~\cell{
\pard\plain\intbl\li968\fi-176\cf1\f51\fs16\b\ql Total non-current
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Total
{\trowd\clvertalb\cellx7765\clvertalb\cellx8252\clbrdrt\brdrdb\brdrcf1\clvertalb\ce
llx8471\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx9157\clvertalc\cellx9252\clvertalb\ce
llx9735\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx9954\clbrdrt\brdrdb\brdrcf1\clvertalb
\cellx10702\clvertalc\cellx10797\trrh63
\~\cell{
\cellx10702\clvertalc\cellx10797\trrh63\row}}}
66\trrh0\row}}}
LIABILITIES\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Current
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Trade accounts payable (Notes 4.f.
and 29.e.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Mortgages payable (Notes 4.l. and
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Customer advances (Notes 4.g. and
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Short-term debt (Notes 4.i. and
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Salaries and social security payable
(Note 4.h.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Taxes payable (Notes 4.j. and
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Other liabilities (Notes 4.k. and
\~\cell{
\pard\plain\intbl\li968\fi-176\cf1\f51\fs16\b\ql Total current
\~\cell{
66\trrh0\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Non-Current
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Trade accounts payable (Notes 4.f.
and 29.e.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Mortgages payable (Notes 4.l. and
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Customer advances (Note
4.g.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Long-term debt (Notes 4.i. and
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Taxes payable (Note
4.j.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Other liabilities (Notes 4.k. and
\~\cell{
\pard\plain\intbl\li968\fi-176\cf1\f51\fs16\b\ql Total non-current
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Total
\~\cell{
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql SHAREHOLDERS\u8217?
EQUITY\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Total Liabilities and
Shareholders\u8217? Equity\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10702\clvertalc\cellx10797\trrh63
\~\cell{
\cellx10702\clvertalc\cellx10797\trrh63\row}}}\pard\plain\sb198\cf1\f51\fs16\qc The
accompanying notes are an integral part of these consolidated financial
statements.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-3
\
nima\par\pard\plain\cf1\f51\fs16\b\qc Consolidated Statements of
Income\par\pard\plain\cf1\f51\fs16\b\qc for the years ended June\~30, 2007, 2006
and 2005\par\pard\plain\cf1\f51\fs16\qc (Amounts in thousands, except share data
and as otherwise indicated)\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
trrh206
trrh206\row}}}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Costs (Note
29.d)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\ql
\~\cell{
}
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Gross
trrh206\row}}}
\~\cell{
}
\cellx10795\trrh206
trrh206
trrh206\row}}}
\cellx10795\trrh206
\~\cell{
}
trrh206
trrh206\row}}}
\~\cell{
}
\cellx10795\trrh206
securitized receivables (Note 16)\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
real estate assets, net (Note 7)\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\~\cell{
}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Operating
\~\cell{
}
trrh206
trrh206\row}}}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gain on equity
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Financial results, net (Note
8)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql
trrh206\row}}}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other expenses, net (Note
9)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql
\~\cell{
}
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Income before taxes and minority
trrh206\row}}}
\~\cell{
}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Income tax and
MPIT\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
trrh206\row}}}
\~\cell{
}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Net
\cellx9302\clvertalc\cellx9397\clvertalb\cellx9858\clbrdrt\brdrdb\brdrcf1\clvertalb
\cellx10077\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx10700\clvertalc\cellx10795\trrh63
\~\cell{
\row}}}
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Earnings per share (Note
18):\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
trrh206\row}}}
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Basic net income per
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Ps.\cell\pard\plain\intbl\cf1\f51\fs16\qr
\~\cell{
}
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Diluted net income per
trrh206\row}}}
\~\cell{
\row}}}\pard\plain\sb198\cf1\f51\fs16\qc The accompanying notes are an integral
part of these consolidated financial statements.\par\pard\plain\cf1\f51\fs13\ql
\~\par\pard\plain\cf1\f51\fs16\qc F-4
\
nima\par\pard\plain\cf1\f51\fs16\b\qc Consolidated Statements of Changes in
Shareholders\u8217? Equity\par\pard\plain\cf1\f51\fs16\b\qc for the years ended
June\~30, 2007, 2006 and 2005\par\pard\plain\cf1\f51\fs16\qc (Amounts in thousands,
except share data and as otherwise indicated)\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
{\trowd\clvertalc\cellx989\clvertalb\cellx1080\clvertalc\cellx1535\clvertalc\cellx2
\clvertalc\cellx3921\clvertalc\cellx4561\clvertalc\cellx4656\clvertalb\cellx4712\cl
vertalc\cellx4931\clvertalc\cellx5679\clvertalc\cellx5774\clvertalb\cellx5830\clver
talc\cellx6055\clvertalc\cellx6695\clvertalb\cellx6786\clvertalc\cellx7274\clvertal
c\cellx7976\clvertalb\cellx8067\clvertalc\cellx8615\clvertalc\cellx9255\clvertalc\c
ellx9350\clvertalb\cellx9406\clvertalc\cellx10041\clvertalc\cellx10789\trrh-
66\trrh0
{\trowd\clvertalc\cellx989\clvertalb\cellx1080\clvertalc\cellx1535\clvertalc\cellx2
\clvertalc\cellx3921\clvertalc\cellx4561\clvertalc\cellx4656\clvertalb\cellx4712\cl
vertalc\cellx4931\clvertalc\cellx5679\clvertalc\cellx5774\clvertalb\cellx5830\clver
talc\cellx6055\clvertalc\cellx6695\clvertalb\cellx6786\clvertalc\cellx7274\clvertal
c\cellx7976\clvertalb\cellx8067\clvertalc\cellx8615\clvertalc\cellx9255\clvertalc\c
ellx9350\clvertalb\cellx9406\clvertalc\cellx10041\clvertalc\cellx10789\trrh-
66\trrh0\row}}}
{\trowd\clvertalb\cellx989\clvertalb\cellx1080\clbrdrb\brdrs\brdrcf1\clvertalb\cell
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Shareholders\u180?
91\trrh688
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Common\~stock
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc (Note
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Inflation
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc adjustment\~of
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc common\~stock
5.c.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Additional
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc paid-in-capital
Legal
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc reserve
5.d.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Reserve\~for\~new
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc developments
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc (note
5.c)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Retained\~earnings
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc (Accumulated
deficit)\cell\pard\plain\intbl\cf1\f51\fs13\ql
Shareholders\u8217?
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc equity\cell{
91\trrh688\row}}}
cfpat12\clcbpat12\cellx4712\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx4931\clve
rtalb\clshdng100\clcfpat12\clcbpat12\cellx5679\clvertalb\clshdng100\clcfpat12\clcbp
at12\cellx5774\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx5830\clvertalb\clshdng
100\clcfpat12\clcbpat12\cellx6055\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx669
\clcbpat12\cellx7274\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx7976\clvertalb\c
lshdng100\clcfpat12\clcbpat12\cellx8067\clvertalb\clshdng100\clcfpat12\clcbpat12\ce
llx8615\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx9255\clvertalb\clshdng100\clc
fpat12\clcbpat12\cellx9350\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx9406\clver
talb\clshdng100\clcfpat12\clcbpat12\cellx10041\clvertalb\clshdng100\clcfpat12\clcbp
at12\cellx10789\trrh825
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Balances
as\plain\intbl\cf1\f51\fs16\b\ql of\plain\intbl\cf1\f51\fs16\b\ql
June\~30,\plain\intbl\cf1\f51\fs16\b\ql 2004\cell\pard\plain\intbl\cf1\f51\fs13\ql
Ps.\cell\pard\plain\intbl\cf1\f51\fs16\qr 959,854\cell{
at12\cellx10789\trrh825\row}}}
rdrcf1\clvertalb\cellx2702\clbrdrb\brdrs\brdrcf1\clvertalb\cellx3342\clvertalb\cell
x3433\clbrdrb\brdrs\brdrcf1\clvertalb\cellx3921\clbrdrb\brdrs\brdrcf1\clvertalb\cel
lx4561\clvertalc\cellx4656\clvertalb\cellx4712\clbrdrb\brdrs\brdrcf1\clvertalb\cell
x4931\clbrdrb\brdrs\brdrcf1\clvertalb\cellx5679\clvertalc\cellx5774\clvertalb\cellx
5830\clbrdrb\brdrs\brdrcf1\clvertalb\cellx6055\clbrdrb\brdrs\brdrcf1\clvertalb\cell
x6695\clvertalb\cellx6786\clbrdrb\brdrs\brdrcf1\clvertalb\cellx7274\clbrdrb\brdrs\b
rdrcf1\clvertalb\cellx7976\clvertalb\cellx8067\clvertalb\cellx8615\clvertalb\cellx9
\~\cell{
rdrcf1\clvertalb\cellx2702\clbrdrb\brdrs\brdrcf1\clvertalb\cellx3342\clvertalb\cell
x3433\clbrdrb\brdrs\brdrcf1\clvertalb\cellx3921\clbrdrb\brdrs\brdrcf1\clvertalb\cel
lx4561\clvertalc\cellx4656\clvertalb\cellx4712\clbrdrb\brdrs\brdrcf1\clvertalb\cell
x4931\clbrdrb\brdrs\brdrcf1\clvertalb\cellx5679\clvertalc\cellx5774\clvertalb\cellx
5830\clbrdrb\brdrs\brdrcf1\clvertalb\cellx6055\clbrdrb\brdrs\brdrcf1\clvertalb\cell
x6695\clvertalb\cellx6786\clbrdrb\brdrs\brdrcf1\clvertalb\cellx7274\clbrdrb\brdrs\b
rdrcf1\clvertalb\cellx7976\clvertalb\cellx8067\clvertalb\cellx8615\clvertalb\cellx9
\cellx3921\clvertalb\cellx4561\clvertalb\cellx4656\clvertalb\cellx4712\clvertalb\ce
llx4931\clvertalb\cellx5679\clvertalb\cellx5774\clvertalb\cellx5830\clvertalb\cellx
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Conversion
of\plain\intbl\cf1\f51\fs16\ql debt into\plain\intbl\cf1\f51\fs16\ql
common\plain\intbl\cf1\f51\fs16\ql shares\cell\pard\plain\intbl\cf1\f51\fs13\ql
83,450\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Exercise
of\plain\intbl\cf1\f51\fs16\ql warrants\cell\pard\plain\intbl\cf1\f51\fs13\ql
105,680\cell{
income\plain\intbl\cf1\f51\fs16\ql for the\plain\intbl\cf1\f51\fs16\ql
103,245\cell{
rdrcf1\clvertalb\cellx2702\clbrdrt\brdrs\brdrcf1\clvertalb\cellx3342\clvertalb\cell
5830\clbrdrt\brdrs\brdrcf1\clvertalb\cellx6055\clbrdrt\brdrs\brdrcf1\clvertalb\cell
x6695\clvertalb\cellx6786\clbrdrt\brdrs\brdrcf1\clvertalb\cellx7274\clbrdrt\brdrs\b
9406\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10041\clbrdrt\brdrs\brdrcf1\clvertalb\cel
lx10789\trrh29
Ps.\cell\pard\plain\intbl\cf1\f51\fs16\qr 1,252,229\cell{
lx10789\trrh29
93,321\cell{
43,643\cell{
Accumulated\plain\intbl\cf1\f51\fs16\ql losses\plain\intbl\cf1\f51\fs16\ql
absorption\plain\intbl\cf1\f51\fs16\ql of\plain\intbl\cf1\f51\fs16\ql
approved\plain\intbl\cf1\f51\fs16\ql by\plain\intbl\cf1\f51\fs16\ql
shareholders\plain\intbl\cf1\f51\fs16\ql meeting\plain\intbl\cf1\f51\fs16\ql
held\plain\intbl\cf1\f51\fs16\ql 11/29/05\cell\pard\plain\intbl\cf1\f51\fs13\ql
96,573\cell{
lx10789\trrh29
lx10789\trrh29
27,893\cell{
25,958\cell{
Appropriation\plain\intbl\cf1\f51\fs16\ql of retained\plain\intbl\cf1\f51\fs16\ql
earnings\plain\intbl\cf1\f51\fs16\ql approved\plain\intbl\cf1\f51\fs16\ql
by\plain\intbl\cf1\f51\fs16\ql shareholders\plain\intbl\cf1\f51\fs16\ql
meeting\plain\intbl\cf1\f51\fs16\ql held\plain\intbl\cf1\f51\fs16\ql
107,097\cell{
lx10789\trrh29
{\trowd\clvertalb\cellx989\clvertalb\cellx1080\clbrdrt\brdrdb\brdrcf1\clvertalb\cel
lx1535\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx2175\clvertalb\cellx2266\clbrdrt\brdrd
b\brdrcf1\clvertalb\cellx2702\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx3342\clvertalb\
cellx3433\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx3921\clbrdrt\brdrdb\brdrcf1\clverta
lb\cellx4561\clvertalc\cellx4656\clvertalb\cellx4712\clbrdrt\brdrdb\brdrcf1\clverta
lb\cellx4931\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx5679\clvertalc\cellx5774\clverta
lb\cellx5830\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx6055\clbrdrt\brdrdb\brdrcf1\clve
rtalb\cellx6695\clvertalb\cellx6786\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx7274\clbr
drt\brdrdb\brdrcf1\clvertalb\cellx7976\clvertalb\cellx8067\clbrdrt\brdrdb\brdrcf1\c
lvertalb\cellx8615\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx9255\clvertalc\cellx9350\c
lvertalb\cellx9406\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx10041\clbrdrt\brdrdb\brdrc
f1\clvertalb\cellx10789\trrh63
{\trowd\clvertalb\cellx989\clvertalb\cellx1080\clbrdrt\brdrdb\brdrcf1\clvertalb\cel
lx1535\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx2175\clvertalb\cellx2266\clbrdrt\brdrd
b\brdrcf1\clvertalb\cellx2702\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx3342\clvertalb\
cellx3433\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx3921\clbrdrt\brdrdb\brdrcf1\clverta
lb\cellx4561\clvertalc\cellx4656\clvertalb\cellx4712\clbrdrt\brdrdb\brdrcf1\clverta
rtalb\cellx6695\clvertalb\cellx6786\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx7274\clbr
drt\brdrdb\brdrcf1\clvertalb\cellx7976\clvertalb\cellx8067\clbrdrt\brdrdb\brdrcf1\c
lvertalb\cellx8615\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx9255\clvertalc\cellx9350\c
lvertalb\cellx9406\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx10041\clbrdrt\brdrdb\brdrc
f1\clvertalb\cellx10789\trrh63\row}}}\pard\plain\sb198\cf1\f51\fs16\qc The
accompanying notes are an integral part of these consolidated financial
\
nima\par\pard\plain\cf1\f51\fs16\b\qc Notes to the Consolidated Financial
Statements\par\pard\plain\cf1\f51\fs16\b\qc for the years ended June 30, 2007, 2006
and as otherwise indicated)\par\pard\plain\cf1\f51\fs13\ql
\~\par\pard\plain\cf1\f51\fs16\b\qc IRSA Inversiones y Representaciones Sociedad
An\u243?nima\par\pard\plain\cf1\f51\fs16\b\qc Consolidated Statements of Cash
Flows\par\pard\plain\cf1\f51\fs16\b\qc for the years ended June\~30, 2007, 2006 and
2005\par\pard\plain\cf1\f51\fs16\qc (Amounts in thousands, except share data and as
otherwise indicated)\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql CASH FLOWS FROM OPERATING
ACTIVITIES:\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net income for the
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Adjustments to reconcile net income
to net cash flows from operating
activities:\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10794\trrh206
trrh206
amortization\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10794\trrh206
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Accruals for director\u8217?s
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Allowances and
provisions\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Gain on equity
trrh206\row}}}
\cellx10794\trrh206
trrh206
results\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10794\trrh206
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Goodwill
impairment\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Gain from sale of
inventories\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh413
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Changes in certain assets and
liabilities, net of non-cash transactions and the effects
of\plain\intbl\cf1\f51\fs16\ql acquisitions:\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh413\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql (Increase) decrease in current
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Increase in non-current
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Increase in mortgages and leases
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql (Increase) decrease in other
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Decrease (increase) in
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql (Increase) decrease in intangible
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Increase in trade accounts
trrh413
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql (Decrease) increase in customer
advances, salaries and social security payable and
taxes\plain\intbl\cf1\f51\fs16\ql payable\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh413\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Increase (decrease) in other
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Increase in accrued
trrh206\row}}}
\~\cell{
}
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Net cash provided by operating
\~\cell{
}
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql CASH FLOWS FROM INVESTING
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Credit default swap
agreement\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Payment for acquisition of
subsidiary net of cash acquired\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Acquisition of undeveloped parcels
of land\cell\pard\plain\intbl\cf1\f51\fs13\ql
)\cell{
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Acquisition of fixed
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Increase in non-current
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Decrease in minority
trrh206\row}}}
\cellx10794\trrh206
deposit\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Sale of IRSA Telecommunications
N.V.\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Loans granted to third
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Increase in
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Loans granted to related
\~\cell{
}
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Net cash used in investing
trrh206\row}}}
\~\cell{
}
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql CASH FLOWS FROM FINANCING
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Proceeds from settlement of swap
agreement\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Proceeds from short-term and long-
term debt\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Payment of short-term and long-term
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Collateral
deposit\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Exercise of
warrants\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Payment of cash dividends by
subsidiaries to minority shareholders\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Payment of seller financing of
Mendoza Plaza Shopping S.A.\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Decrease in mortgages
trrh206
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Settlement of debt with related
trrh206\row}}}
\~\cell{
}
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Net cash provided (used in) by
\~\cell{
}
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net increase in cash and cash
equivalents\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10794\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cash and cash equivalents as of the
beginning of the year\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
}
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cash and cash equivalents as of the
end of the year\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\~\cell{
\row}}}\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-6
\
and as otherwise indicated)\par\pard\plain\cf1\f51\fs13\ql
\~\par\pard\plain\cf1\f51\fs16\b\qc IRSA Inversiones y Representaciones Sociedad
An\u243?nima\par\pard\plain\cf1\f51\fs16\b\qc Consolidated Statements of Cash
Flows\par\pard\plain\cf1\f51\fs16\b\qc for the years ended June\~30, 2007, 2006 and
2005 (continued)\par\pard\plain\cf1\f51\fs16\qc (Amounts in thousands, except share
data and as otherwise indicated)\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Supplemental cash flow
information:\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Cash paid during the year
for:\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
trrh206
trrh206\row}}}
\cellx10796\trrh206
{\trowd\clvertalc\cellx6613\clvertalc\cellx8013\clvertalc\cellx9406\clvertalc\cellx
10799\trrh-66\trrh0
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Non-cash investing and financing
activities:\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Conversion of debt into common
shares\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Increase in inventory through a
decrease in undeveloped parcels of land\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Liquidation of interest in credit
card receivables\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Increase in fixed assets through a
decrease in undeveloped parcels of land\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Increase in inventory through a
decrease in fixed assets\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Increase in fixed assets through an
increase in other receivables and prepaid
trrh206\row}}}
\cellx10796\trrh206
decrease in inventory\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Increase in other receivables
through a decrease in fixed assets\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Increase in other receivables
through a decrease in intangible assets\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
decrease in other investments\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Increase in intangible assets
through a decrease in fixed assets\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
increase in mortgages payable\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Increase in credit card
trrh206
decrease in other receivables\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
decrease in non-current investments\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
decrease in trade accounts payable\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Increase in costs of issuance of
debt through an increase in trade accounts
payables\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Increase in short-term and long-term
debt through a decrease in other
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Decrease in inventory through a
decrease in mortgages payables\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
Palermo Invest S.A.\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
increase in mortgages payable\cell\pard\plain\intbl\cf1\f51\fs13\ql
10799\trrh-66\trrh0
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Acquisitions of subsidiary
companies:\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cash and cash
equivalents\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fair market value of
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fair market value of fixed assets
acquired\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fair market value of other assets
acquired (1)\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fair market value of liabilities
assumed\cell\pard\plain\intbl\cf1\f51\fs13\ql
~\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qr
\~\cell{
}
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net assets
trrh206\row}}}
\cellx10796\trrh206
trrh206
Goodwill\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\~\cell{
}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Purchase
price\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Seller
financing\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\~\cell{
}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Purchase price
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Less: cash and cash equivalents
trrh206\row}}}
\~\cell{
}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net cash paid for the
acquisition\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
}
10799\trrh-66\trrh0
lx7917\clvertalb\cellx8012\clvertalb\cellx8450\clvertalb\cellx9309\clvertalb\cellx9
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Acquisitions of minority
interest:\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fair market value of inventories
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fair market value of fixed assets
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fair market value of other assets
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fair market value of liabilities
assumed\cell\pard\plain\intbl\cf1\f51\fs13\ql
l \~\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net assets
trrh206
trrh206\row}}}
\cellx10796\trrh206
Goodwill\cell\pard\plain\intbl\cf1\f51\fs13\ql
ql \~\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Purchase
price\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh206\row}}}
\cellx10796\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Seller
financing\cell\pard\plain\intbl\cf1\f51\fs13\ql
ql \~\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql
trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Purchase price
trrh206\row}}}
42\clvertalb\cellx10061\clvertalb\cellx10701\clvertalb\cellx10796\trrh29\row}}}\par
d\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\p
lain\f0\fs4\par
\par\pard\plain
2006, includes fair market value of undeveloped parcels of lands for 4,222.\cell{
\
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\b\ql 1.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
Organization and description of business\cell{
IRSA Inversiones y Representaciones Sociedad An\u243?nima (\u8220?IRSA\u8221?), is
a real estate company incorporated under the laws of\plain\cf1\f51\fs16\ql
Argentina which, through its investments in subsidiaries and joint ventures (IRSA
and subsidiaries are collectively referred hereinafter as\plain\cf1\f51\fs16\ql
\u8220?IRSA\u8221? or the \u8220?Company\u8221?), is primarily involved in (i)\~the
acquisition and development of residential properties primarily
for\plain\cf1\f51\fs16\ql sale and the acquisition of undeveloped land reserves
either for future development or sale, (ii)\~the acquisition, development and
operation of office and\plain\cf1\f51\fs16\ql other non-shopping center properties
primarily for rental purposes, (iii)\~the acquisition, development and operation of
shopping center properties, (iv)\~the\plain\cf1\f51\fs16\ql acquisition and
operation of luxury hotels, (v)\~credit card operations and (vi)\~other non-core
activities. The Company is the only Argentine real estate\plain\cf1\f51\fs16\ql
company whose shares are listed and traded on both the Buenos Aires Stock Exchange
(\u8220?BASE\u8221?) and the New York Stock Exchange\plain\cf1\f51\fs16\ql
(\u8220?NYSE\u8221?).\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
Preparation of financial statements\cell{
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
a.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Basis of presentation\cell{
{\trowd\clvertalc\cellx432\cellx864\cellx5890\trrh206\row}}}\pard\plain\sb88\fi462\
cf1\f51\fs16\ql The consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting principles used
in\plain\cf1\f51\fs16\ql Argentina, as set forth by the Federaci\u243?n Argentina
de Consejos Profesionales de Ciencias Econ\u243?micas (\u8220?FACPCE\u8221?)
and\plain\cf1\f51\fs16\ql implemented, adapted, amended, revised and/or
supplemented by the Consejo Profesional de Ciencias Econ\u243?micas de la Ciudad
Aut\u243?noma de\plain\cf1\f51\fs16\ql Buenos Aires (\u8220?CPCECABA\u8221?)
(collectively \u8220?Argentine GAAP\u8221?). In addition, the Company must comply
with the regulations of\plain\cf1\f51\fs16\ql the\plain\cf1\f51\fs16\i\ql
Comisi\u243?n Nacional de Valores\plain\cf1\f51\fs16\ql (\u8220?CNV\u8221?), the
National Securities Commission in Argentina. Argentine GAAP and the regulations
of\plain\cf1\f51\fs16\ql the CNV, as applicable, differ in certain significant
respects from generally accepted accounting principles in the United States of
America (\u8220?US\plain\cf1\f51\fs16\ql GAAP\u8221?). Such differences involve
methods of measuring the amounts shown in the consolidated financial statements, as
well as additional\plain\cf1\f51\fs16\ql disclosures required by US\~GAAP and
Regulation S-X of the Securities and Exchange Commission (\u8220?SEC\u8221?). A
description of the significant\plain\cf1\f51\fs16\ql differences between Argentine
GAAP and US\~GAAP as they relate to the Company are set forth in Note 28 to these
consolidated financial statements.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
Additionally as discussed in Note 3.m. in order to comply with the regulations of
the CNV, the Company recognized deferred income tax assets
and\plain\cf1\f51\fs16\ql liabilities on a non-discounted basis. This accounting
practice represented a departure from Argentine GAAP but did not have a material
effect on the\plain\cf1\f51\fs16\ql consolidated financial statements for the
years ended June\~30, 2006 and 2005. As further discussed in Note 2.d., in December
2005 and January 2006, the\plain\cf1\f51\fs16\ql CPCECABA issued revised
accounting standards. One of these standards requires companies to account for
deferred income taxes on an undiscounted\plain\cf1\f51\fs16\ql basis, thus
aligning the accounting to that of the CNV. Since the CNV adopted the CPCECABA
standards effective for fiscal years beginning as from\plain\cf1\f51\fs16\ql
January\~1, 2006, there is no longer a difference on this subject between Argentine
GAAP and the CNV regulations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As
discussed in Note 2.c., in order to comply with the regulations of the CNV, the
Company discontinued inflation accounting as from
February\~28,\plain\cf1\f51\fs16\ql 2003. The application of this CNV regulation
represented a departure from Argentine GAAP. However, such departure did not have a
material effect on\plain\cf1\f51\fs16\ql the consolidated financial
\par\pard\plain
b.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Principles of consolidation\cell{
cf1\f51\fs16\ql The consolidated financial statements include the accounts of the
Company and its subsidiaries over which the Company has effective
control.\plain\cf1\f51\fs16\ql Investments in companies in which the Company
exercises significant influence, but not control, are accounted for under the
equity method. Investments\plain\cf1\f51\fs16\ql in joint ventures and/or jointly
controlled operations in which the company exercises joint control are accounted
for under the proportionate consolidation\plain\cf1\f51\fs16\ql method. All
significant intercompany balances and transactions have been eliminated in
consolidation.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In accordance with
Argentine GAAP, the presentation of the parent company\u8217?s individual financial
statements is mandatory. Consolidated\plain\cf1\f51\fs16\ql financial statements
are to be included as supplementary information to the individual financial
statements. For the purpose of these financial statements,\plain\cf1\f51\fs16\ql
individual financial statements have been omitted since they are not required for
SEC reporting purposes.\par\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
Preparation of financial statements (continued)\cell{
\par\pard\plain
b.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Principles of consolidation
(continued)\cell{
3\ql \~\par\pard\plain\fi462\cf1\f51\fs16\ql A description of the subsidiaries over
which the Company has effective control, with their respective percentage of
capital stock owned, is presented\plain\cf1\f51\fs16\ql as
follows:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Percentage of capital stock
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc owned as of June\~30,
(i)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell{
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ul\ql Controlled
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Ritelco S.A. (\u8220?
Ritelco\u8221?)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Palermo Invest S.A. (\u8220?Palermo
Invest\u8221?) (v)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Abril S.A. (\u8220?Abril\u8221?)
(ii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Pereiraola S.A. (\u8220?
Pereiraola\u8221?) (ii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Baldovinos S.A. (\u8220?
Baldovinos\u8221?) (ii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Hoteles Argentinos S.A. (\u8220?
Hoteles Argentinos\u8221?)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Patagonian Investment S.A.
(Patagonian Investment) (iii)\~and (vi)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Buenos Aires Trade\~& Finance Center
S.A. (\u8220?BAT&FCSA\u8221?) (iv)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alto Palermo S.A. (\u8220?Alto
Palermo\u8221? or \u8220?APSA\u8221?)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Llao Llao Resorts S.A. (\u8220?Llao
Llao Resorts\u8221? or \u8220?LLR\u8221?)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Rummaala S.A. (\u8220?
Rummaala\u8221?) (iii)\~and (Note 27)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Canteras Natal Crespo S.A. (\u8220?
Canteras Natal Crespo\u8221?)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql CYRSA S.A. (\u8220?CYRSA\u8221?)
(vii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10795\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Solares de Santa Mar\u237?a S.A.
(\u8220?Solares de Santa Mar\u237?a\u8221?)
(iii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Inversora Bol\u237?var S.A.(\u8220?
Inversora Bol\u237?var\u8221?)\cell\pard\plain\intbl\cf1\f51\fs13\ql
b\cellx10617\clvertalb\cellx10795\trrh206\row}}}\pard\plain\f0\fs4\par\pard\plain\f
0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (i)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Percentage of equity interest owned has been rounded and does not contemplate the
effects of the potential conversion of irrevocable
contributions\plain\intbl\cf1\f51\fs16\ql into common shares.\cell{
{\trowd\cellx432\cellx10800\trrh413\row}}}
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (ii)\cell\pard\plain\intbl\cf1\f51\fs16\ql Equity
interest in Abril, Pereiraola and Baldovinos were held 50% directly by the Company
and 50% indirectly through its subsidiary Palermo\plain\intbl\cf1\f51\fs16\ql
Invest. In fiscal year 2007, Baldovinos was merged with and into Inversora
Bol\u237?var, subsidiary consolidated with Palermo Invest. See
Note\plain\intbl\cf1\f51\fs16\ql 2.f. for details.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (iii)\cell\pard\plain\intbl\cf1\f51\fs16\ql See
Note 2.f. for details.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (iv)\cell\pard\plain\intbl\cf1\f51\fs16\ql Merged
with and into the Company effective December\~1, 2005.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (v)\cell\pard\plain\intbl\cf1\f51\fs16\ql Equity
interest in Palermo Invest was held 98% directly by the Company and 2% indirectly
through its wholly owned subsidiary Patagonian\plain\intbl\cf1\f51\fs16\ql
Investment.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (vi)\cell\pard\plain\intbl\cf1\f51\fs16\ql Formed
on July\~21, 2006.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (vii)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Formed on April\~13, 2007 to develop specific projects.\cell{
{\trowd\cellx432\cellx7946\trrh206\row}}}\pard\plain\li88\sb286\cf1\f51\fs16\b\ql
Proportionate consolidation\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql The Company
exercises joint control over Metroshop (through APSA) and Canteras Natal Crespo. As
required by Technical Resolution No.\~21\plain\cf1\f51\fs16\ql \u8220?Equity
Method of Accounting, Consolidation of Financial Statements and Related Party
Transactions\u8221? (\u8220?RT No.\~21\u8221?), under\plain\cf1\f51\fs16\ql
Argentine GAAP, the Company accounted for this investment under the proportionate
consolidation method. Accordingly, these financial statements
reflect\plain\cf1\f51\fs16\ql the Company\u8217?s pro rata equity interest in
these investments on a line-by-line basis.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
c.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Presentation of financial statements in
constant Argentine pesos\cell{
cf1\f51\fs16\ql On August\~22, 1995, the Argentine government issued Decree
No.\~316/95 discontinuing the requirement that financial information be restated
for\plain\cf1\f51\fs16\ql inflation for any date or period after August\~31, 1995.
Effective September\~1, 1995 in accordance with CNV resolutions and Argentine GAAP,
the\plain\cf1\f51\fs16\ql Company began accounting for its financial transactions
on a historical cost basis, without considering the effects of inflation. Prior to
September\~1, 1995,\plain\cf1\f51\fs16\ql the financial statements were prepared
on the basis of general price level accounting, which reflected changes in
purchasing power of the Argentine Peso\plain\cf1\f51\fs16\ql in the historical
financial statements. The financial statement information of periods prior to
August\~31, 1995 was restated to pesos of general purchasing\plain\cf1\f51\fs16\ql
power as of August\~31, 1995. The August\~31, 1995 balances, adjusted to the
general purchasing power of the Peso at that date, became the historical
cost\plain\cf1\f51\fs16\ql basis for subsequent accounting and
reporting.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-9
\
\par\pard\plain
\par\pard\plain
c.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Presentation of financial statements in
constant Argentine pesos (continued)\cell{
3\ql \~\par\pard\plain\fi462\cf1\f51\fs16\ql However, as a result of the
inflationary environment in Argentina in 2002, the CPCECABA approved on March\~6,
2002, a resolution reinstating the\plain\cf1\f51\fs16\ql application of inflation
accounting in financial statements as from January\~1, 2002. This resolution
provided that all recorded amounts restated for inflation\plain\cf1\f51\fs16\ql
through August\~31, 1995, as well as those arising between that date and
December\~31, 2001 are to be considered stated in currency as of
December\~31,\plain\cf1\f51\fs16\ql
2001.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql On July\~16, 2002, the Argentine
government issued a decree, instructing the CNV to issue the necessary regulations
for the acceptance of financial\plain\cf1\f51\fs16\ql statements prepared in
constant currency. On July\~25, 2002, the CNV reinstated the requirement to submit
financial statements in constant
currency.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql However, after considering
inflation levels for the second half of 2002 and the first months of 2003, on
March\~25, 2003, the Argentine government\plain\cf1\f51\fs16\ql repealed the
provisions of the previous decree related to the inflation adjustment and
instructed the CNV to issue the necessary regulations to
preclude\plain\cf1\f51\fs16\ql companies under its supervision from presenting
price-level restated financial statements. Therefore, on April\~8, 2003, the CNV
issued a resolution\plain\cf1\f51\fs16\ql providing for the discontinuance of
inflation accounting as of March\~1, 2003. The Company complied with the CNV
resolution and accordingly recorded\plain\cf1\f51\fs16\ql the effects of inflation
until February\~28, 2003.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Since
Argentine GAAP required companies to discontinue inflation accounting as from
October\~1, 2003, the application of the CNV resolution\plain\cf1\f51\fs16\ql
represented a departure from Argentine GAAP. However, due to the low level of
inflation rates during the period from March to September 2003, such
a\plain\cf1\f51\fs16\ql departure did not have a material effect on the
consolidated financial statements.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
d.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Adoption by the CNV of CPCECABA
accounting standards\cell{
cf1\f51\fs16\ql The CNV issued General Resolutions 485 and 487 on December\~29,
2005 and January\~26, 2006, respectively adopting, with certain
modifications,\plain\cf1\f51\fs16\ql the new accounting standards previously
issued by the CPCECABA through its Resolution CD 93/2005. These standards are to be
mandatorily applied for\plain\cf1\f51\fs16\ql fiscal years or interim periods
corresponding to fiscal years beginning as from January\~1, 2006. The standards
were effective for the Company for the year\plain\cf1\f51\fs16\ql ended June\~30,
2007.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The most significant changes
included in the accounting standards adopted by the CNV relate to (i)\~changes in
the impairment test of long-lived\plain\cf1\f51\fs16\ql assets, (ii)\~changes to
deferred income tax accounting and (iii)\~accounting of deferred income taxes on a
non-discounted basis.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Under the new
standards, the carrying value of a long-lived asset is considered impaired by a
company when the expected cash flows from such\plain\cf1\f51\fs16\ql asset is
separately identifiable and less than its carrying value. Expected cash flows are
determined primarily using the anticipated cash flows
discounted\plain\cf1\f51\fs16\ql at a rate commensurate with the risk
involved.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The new standards provide for
the accounting treatment of differences between the tax basis and book basis of
non-monetary items for deferred\plain\cf1\f51\fs16\ql income tax calculation
purposes when companies prepare price-level restated financial statements. The new
accounting standard mandates companies to\plain\cf1\f51\fs16\ql treat these
differences as temporary differences but allows a one-time accommodation to
continue treating these differences as permanent at the time
of\plain\cf1\f51\fs16\ql adoption of the standard. As a result, the Company
elected to continue treating differences as permanent. As of June\~30, 2007, the
estimated effect of\plain\cf1\f51\fs16\ql treating the differences as temporary
would have been an increase in total liabilities of Ps. 176.0\~million against
(i)\~a decrease in retained earnings of Ps.\plain\cf1\f51\fs16\ql 188.4\~million
and (ii)\~an additional gain of Ps. 12.4\~million for the year ended June\~30,
\par\pard\plain
e.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Reclassifications\cell{
cf1\f51\fs16\ql Certain reclassifications of prior year\u8217?s information have
been made to conform to the current year
presentation.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
f.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Significant acquisitions, dispositions
and development of businesses\cell{
cf1\f51\fs16\ql In the preparation of these consolidated financial statements,
unless otherwise indicated, the operating results of all acquired businesses have
been\plain\cf1\f51\fs16\ql included in the Company\u8217?s consolidated financial
statements since the date of the respective
acquisition.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-10
\
\par\pard\plain
\par\pard\plain
and development of businesses (continued)\cell{
3\ql \~\par\pard\plain\fi462\cf1\f51\fs16\ul\ql Year ended June\~30,
2007\par\pard\plain\sb198\fi462\cf1\f51\fs16\ul\ql Acquisition of plots of land in
Bariloche\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In December 2006, the
Company\u8217?s subsidiary, LLR acquired from an unrelated party a 129,533 square
meters plot of land located in Colonia\plain\cf1\f51\fs16\ql Nahuel Huapi,
Bariloche in the Province of Rio Negro, Argentina, for an aggregate purchase price
of US$ 7 million. The transaction was financed US$\plain\cf1\f51\fs16\ql
4.2\~million in cash and US$ 2.8\~million through the assumption of a first-degree
mortgage on the property. The mortgage, bearing interest at a fixed
rate\plain\cf1\f51\fs16\ql of 7%\~per annum, will be payable in 36 monthly
installments of US$ 86 each, beginning on January\~14,
2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Acquisition of additional
interest in Palermo Invest\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In October
2006, the Company acquired the remaining 33,33% of Palermo Invest from GSEM/AP
Holdings, L.P. for an aggregate purchase price of\plain\cf1\f51\fs16\ql US$ 18
million. Palermo Invest is a corporation whose main activity is the purchase and
holding of equity securities of entities which principal
businesses\plain\cf1\f51\fs16\ql are real estate and investment in equity
securities and other form of investment. The transaction was financed US$
9.0\~million in cash and US$ 9.0\~million\plain\cf1\f51\fs16\ql through a note
payable in three annual installments of US$ 3.0\~million each, beginning on
October\~4, 2007. The note will accrue interest at a fixed rate
of\plain\cf1\f51\fs16\ql 9%\~per
annum.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Purchase of additional 50% of
E-Commerce Latina S.A. shares\par\pard\plain\sb88\sa44\fi462\cf1\f51\fs16\ql On
January 2007, the Company\u8217?s subsidiary APSA acquired the remaining 50% in E-
commerce Latina S.A., through which the Company\plain\cf1\f51\fs16\ql offered its
products via internet on the altocity.com website. Effective
March\~1\plain\cf1\f51\fs11\ql\super st\plain\cf1\f51\fs16\ql , 2007, the website
was deactivated. However, E-commerce Latina S.A.\plain\cf1\f51\fs16\ql started new
business activities. E-commerce Latina S.A. restructured its business activities
away from internet-based operations. Activity was not\plain\cf1\f51\fs16\ql
significant as of June\~30, 2007.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Bid
for the acquisition of Patio Olmos\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In
November 2006, the Company\u8217?s subsidiary APSA submitted a bid for the
acquisition of a property known as \u8220?Edificio Ex Escuela\plain\cf1\f51\fs16\ql
Gobernador Vicente de Olmos\u8221? (\u8220?Olmos\u8221?) located in Cordoba,
Argentina for Ps. 32.5 million. The Company made a down
payment\plain\cf1\f51\fs16\ql of Ps. 9.7\~million under the terms of the bidding
process. The property, which is located in the City of Cordoba, is a 5,147 square
meter four-story\plain\cf1\f51\fs16\ql building comprising commercial space,
parking lots and movie theatres. The property is subject to a 40-year concession
contract granted to an unrelated\plain\cf1\f51\fs16\ql party for the commercial
use of the building. Pursuant to the concession granted in 1990 from the Provincial
Government of Cordoba, the licensee should\plain\cf1\f51\fs16\ql pay the owner of
the building a monthly concession fee actually amounting to Ps. 10.1 increasing in
Ps. 2.5 every 47 months. The closing of the purchase\plain\cf1\f51\fs16\ql is
subject to several regulatory approvals. On January\~15, 2007, the Company was
served notice of certain objections from the Argentine
Antitrust\plain\cf1\f51\fs16\ql Authority seeking to enjoin the Company from
completing the bid. In addition, in January 2007, the National Commission for the
Defense of Competition\plain\cf1\f51\fs16\ql notified the Company of two claims
filed against it. One claim was filed by an individual and the other by the actual
licensee of the concession. As of\plain\cf1\f51\fs16\ql the date of these
financial statements, these claims are still pending
resolution.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Acquisition of
Rummaala\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On January\~16, 2007, the
Company acquired the total shares of the company named Rummaala, the main asset of
which is a plot of land located in\plain\cf1\f51\fs16\ql Vicente Lopez, Province
of Buenos Aires. The purchase price was US$ 21,172, payable as follows: (i)\~US$
500 in cash paid in April 2006; (ii)\~US$ 3,752\plain\cf1\f51\fs16\ql in cash and
(iii)\~by delivering certain units of the building to be constructed in the land
owned by Rummaala in the amount of US$ 16,920, within a\plain\cf1\f51\fs16\ql 4-
year term as from the approval date of the plans by the related authorities or when
the facilities be vacated, whichever last occurs. As security
for\plain\cf1\f51\fs16\ql compliance with the construction of the future building
and transfer of the future units, the shares acquired were pledged. Simultaneously
with the former\plain\cf1\f51\fs16\ql transaction, Rummaala acquired a plot of
land adjacent to its own property in the amount of US$ 15,000, payable as follows:
(i)\~US$ 500 in cash paid in\plain\cf1\f51\fs16\ql April 2006; (ii)\~by delivering
certain units of buildings Cruceros I and II owned by the Company in the amount of
US$ 1,247 and (iii)\~by delivering\plain\cf1\f51\fs16\ql certain units of the
building to be constructed in the land acquired in the amount of US$ 13,253, within
a 40-month term considered as from the approval\plain\cf1\f51\fs16\ql date of the
plans by the related authorities or when the facilities be vacated, whichever last
occurs. As security for compliance with the construction of
the\plain\cf1\f51\fs16\ql future building and transfer of the future units, the
Company\u8217?s property located at Suipacha 652 was
mortgaged.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-11
\
\par\pard\plain
\par\pard\plain
3\ql \~\par\pard\plain\fi462\cf1\f51\fs16\ul\ql Panamerican Mall
Project\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In June 2006, the Company
acquired from an unrelated party, Phillips Argentina S.A., a 28,741 square meters
plot of land (the \u8220?Phillips\plain\cf1\f51\fs16\ql land\u8221?) located in
Saavedra, a neighborhood in the northern area of Buenos Aires, for an aggregate
purchase price of US$ 17.9 million. The\plain\cf1\f51\fs16\ql Company developed a
project for the construction of a mall including a hypermarket, a movie theatre
complex and office and/or residential buildings. For\plain\cf1\f51\fs16\ql that
purpose, in December 2006, the Company entered into a Construction, Management and
Commercialization Agreement with an unrelated party,\plain\cf1\f51\fs16\ql Centro
Comercial Panamericano S.A. (\u8220?CCP\u8221?) to partner in the project. The
Company incorporated Panamerican Mall S.A.\plain\cf1\f51\fs16\ql (\u8220?
PAMSA\u8221?) for this purpose. The Company contributed cash and the Phillips land
to PAMSA amounting to Ps. 158.3 million. PAMSA\plain\cf1\f51\fs16\ql acquired from
CCP an adjacent property amounting to Ps. 36.9\~million through cash and 20% of the
stock of PAMSA. In addition, the Company and CCP\plain\cf1\f51\fs16\ql committed
to make capital contributions amounting to US$ 37.8\~million and US$ 9.4\~million,
respectively, to complete the
project.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql C\u243?rdoba
Shopping\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On December\~27, 2006, the
Company acquired 100% interest in the Cordoba Shopping Villa Cabrera located in
Cordoba, Argentina owned by\plain\cf1\f51\fs16\ql Empalme S.A.I.C.F.A.I.G.
(\u8220?Empalme\u8221?). The property, which is located in the Villa Cabrera
neighborhood of the city of Cordoba, is a\plain\cf1\f51\fs16\ql 35,000 square
meter shopping center comprising 106 stores, a 12 movie theatre complex and a
1,500-vehicle parking lot. The interest was acquired for\plain\cf1\f51\fs16\ql US$
13.3 million. The Company paid US$ 7.3\~million in cash and financed the remaining
portion of the purchase price in three equal installments of
US$\plain\cf1\f51\fs16\ql 2\~million each due every six months as from December
2007. This financing accrues interest at a fixed rate of 6%\~per annum.
Governmental approval was\plain\cf1\f51\fs16\ql obtained in December
2006.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Incorporation of Solares de
Santa Maria \u8211? Sale of Santa Maria del Plata and sale of
shares\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In May 2007, the Company formed
Solares de Santa Maria (\u8220?Solares\u8221?) and contributed cash in the amount
of Ps. 310,000. Solares\plain\cf1\f51\fs16\ql acquired the Ex Ciudad Deportiva
Boca Juniors (Santa Maria del Plata) plot of land located in Buenos Aires for US$
100,000. On June\~26, 2007, the\plain\cf1\f51\fs16\ql Company sold in commission a
10% interest in Solares to Israel Sutton
Dabbah.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Transfer of the
administration of Abril\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On May\~24, 2006,
the Company, together with its subsidiaries, Inversora Bol\u237?var and Baldovinos
revised the May\~4, 2005 proposal submitted\plain\cf1\f51\fs16\ql to the Residents
Committee of Abril Club de Campo (the \u8220?Club\u8221?) pursuant to which the
Company would transfer the Club\u8217?s\plain\cf1\f51\fs16\ql management and
shares of Abril to the residents (the \u8220?Letter of Offer\u8221?). Under the
Letter of Offer, the Company and its subsidiary Inversora\plain\cf1\f51\fs16\ql
Bol\u237?var, will:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
1-\cell\pard\plain\intbl\cf1\f51\fs16\ql Contribute cash to Abril for Ps. 650 and
repave the Club\u8217?s roads and streets;\cell{
\ql \~
\par\pard\plain
2-\cell\pard\plain\intbl\cf1\f51\fs16\ql Transfer to Abril of two plots of
land;\cell{
\ql \~
\par\pard\plain
3-\cell\pard\plain\intbl\cf1\f51\fs16\ql Pay severance to one dismissed employee of
Abril;\cell{
\ql \~
\par\pard\plain
4-\cell\pard\plain\intbl\cf1\f51\fs16\ql Grant Abril a free and perpetual right of
way and covenant not to build on certain premises;\cell{
\ql \~
\par\pard\plain
5-\cell\pard\plain\intbl\cf1\f51\fs16\ql Settle unpaid municipal taxes claimed by
the Municipality where the Club is located if higher than amounts recognized as of
September\~30,\plain\intbl\cf1\f51\fs16\ql 2005.\cell{
2\cf1\f51\fs16\ql In June 2007, after compliance of the letter of Office, the
Company transferred the Class\~A and Class B shares of Abril to a trust. The
trustee, as\plain\cf1\f51\fs16\ql instructed by the residents of the Club, elected
three directors of the Board of Directors of
Abril.\par\pard\plain\li88\sb286\cf1\f51\fs16\b\ql Acquisition of additional shares
of Canteras Natal Crespo\par\pard\plain\sb88\cf1\f51\fs16\ql In a series of
transactions between December 2006 and January 2007, the Company increased its
ownership interest in Canteras Natal Crespo to 55.93%\plain\cf1\f51\fs16\ql for an
aggregate purchase price of US$ 645. Subsequently, in April 2007, the Company sold
5.93% to ECIPSA for US$ 312. The Company\u180?s\plain\cf1\f51\fs16\ql interest in
Canteras Natal Crespo is 50% as of the date of these financial
\
\par\pard\plain
\par\pard\plain
f.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Significant acquisition, dispositions
3\ql \~\par\pard\plain\fi462\cf1\f51\fs16\ul\ql Acquisition of the Bouchard
Building\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On March\~15, 2007, the Company
acquired from an unrelated party a 33,324 square meter office building known as
\u8220?Bouchard\plain\cf1\f51\fs16\ql Building\u8221? for an aggregate purchase
price of US$ 84,100. The transaction was fully paid in cash as of the date of these
financial statements. The\plain\cf1\f51\fs16\ql Argentine Antitrust Authority
issued a resolution requiring the Company to inform the transaction as one of
concentrating interests. The Company rejected\plain\cf1\f51\fs16\ql this
requirement and the case is still pending
resolution.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Purchase option of
Edificio Rep\u250?blica\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On December\~22,
2006, the Company entered into a Put and Call Option Agreement (the \u8220?
Agreement\u8221?) with Banco Comafi S.A., as\plain\cf1\f51\fs16\ql trustee of the
Fideicomiso Rep\u250?blica (\u8220?Rep\u250?blica Trust\u8221?), for the
acquisition of an office building known as Tucuman\plain\cf1\f51\fs16\ql 1\u8212?
Rep\u250?blica Building, located in Buenos Aires. The exercise of the call and put
option is subject to certain conditions for closing and is\plain\cf1\f51\fs16\ql
exercisable within 60 days as from the fulfillment of those conditions. Upon
transfer of title, the Company has to pay 50% of the purchase price of
US$\plain\cf1\f51\fs16\ql 74,000, while the remaining 50% has to be paid semi-
annually in 5 installments accruing interest at a fixed rate of 8%\~per annum. The
balance will be\plain\cf1\f51\fs16\ql secured by a mortgage on the
property.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Acquisition of the Dock Del
Plata Building\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql In June 2005, the Company
entered into a Credit Default Swap Agreement (the \u8220?Agreement\u8221?) with
Credit Suisse International\plain\cf1\f51\fs16\ql (\u8220?CSI\u8221?) pursuant to
which the Company, provided certain conditions were met, would acquire a mortgage
receivable for US$ 10,000 on a\plain\cf1\f51\fs16\ql 8,900 square meter office
building known as Dock del Plata Building located in Puerto Madero, Buenos Aires.
As guarantee for the Agreement, the\plain\cf1\f51\fs16\ql Company paid a deposit
US$ 4,000. The Agreement was rescinded in November 2006 and the guarantee deposit
was released. The Company executed the\plain\cf1\f51\fs16\ql mortgage and acquired
the building for US$ 8,800 (using US$ 4,000 of the deposit guarantee plus available
cash of US$ 4,800).\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Year ended
June\~30, 2006\par\pard\plain\sb198\fi462\cf1\f51\fs16\ul\ql Investment in IRSA
Telecomunicaciones N.V. (ITNV)\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On August,
2005, a share purchase agreement was entered into by and between ITNV, Ritelco and
Dolphin Fund PLC (another shareholder of\plain\cf1\f51\fs16\ql ITNV) whereby ITNV
acquired all the common shares held by those shareholders for US$ 0.1470333852\~per
share. The amount of this transaction is US$\plain\cf1\f51\fs16\ql 850, of which
US$ 604 correspond to Ritelco. On that date, ITNV cancelled the total amount of the
transaction.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Acquisition of Canteras
Natal Crespo\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql During the fiscal year ended
June\~30, 2006, the Company acquired from Ecipsa Holding S.A. (ECIPSA), a 43.18%
equity interest in Canteras Natal\plain\cf1\f51\fs16\ql Crespo. Such shares have
equal percentage of votes. The total amount agreed for such purchase was US$
1,541.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Canteras Natal Crespo is a
company located in the Province of Cordoba, Argentina, which primary operations are
the development of own or\plain\cf1\f51\fs16\ql third-party plots, countries, sale
or rent of plots of land, real estate and house-
building.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql General Paz plot of
land\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On June\~29, 2006 the Company\u8217?
s subsidiary, APSA acquired from Philips Argentina S.A. a plot of land located in
the northern area of\plain\cf1\f51\fs16\ql Buenos Aires, covering 28,741 square
meters of surface area. The purchase price was US$ 17.9\~million, which was fully
paid.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-13
\
\par\pard\plain
\par\pard\plain
3\ql \~\par\pard\plain\fi462\cf1\f51\fs16\ul\ql Purchase of additional shares and
convertible notes of APSA\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql During the
fiscal year ended June\~30, 2006 the Company acquired 759,393 shares of APSA for a
total amount of Ps. 4.3 million. As a result of this\plain\cf1\f51\fs16\ql
transaction, the Company\u8217?s ownership interest in APSA increased from 60.69%
to 61.54%.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Sale of the Alcorta Plaza
plot of land\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On December\~22, 2005, the
Company subscribed a preliminary purchase contract with possession, by which the
Company sold to RAGHSA S.A.\plain\cf1\f51\fs16\ql the plot of land denominated
Alcorta Plaza for a total price of US$ 7.7 million. On March\~13, 2006 the deed
title of the building was registered and a\plain\cf1\f51\fs16\ql first privilege
degree mortgage guarantee was established on certain functional units to be used as
offices and garages of the building property of\plain\cf1\f51\fs16\ql RAGHSA S.A.,
located in Buenos Aires. The mortgage amounted to US$ 4.4 million. The agreed terms
and conditions of payment were determined in\plain\cf1\f51\fs16\ql four
installments of US$ 1.9\~million and 7.5% annual interest on the balance. The first
three installments have been collected at the date of these
financial\plain\cf1\f51\fs16\ql
statements.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Year ended June\~30,
2005\par\pard\plain\sb88\fi462\cf1\f51\fs16\ul\ql Purchase of additional shares and
convertible notes of APSA\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On
November\~30, 2004, the Company purchased from GSEM/AP, a Goldman Sachs subsidiary,
3,061,450 units of APSA Convertible Notes with a\plain\cf1\f51\fs16\ql nominal
value of US$ 1\~per note and 4,458,080 shares of APSA, for a total consideration of
US$ 15.3 million. At the same time, in accordance with the\plain\cf1\f51\fs16\ql
shareholders agreement entered into with Parque Arauco S.A., the Company sold to
Parque Arauco S.A. 1,004,866 units of APSA Convertible Notes
and\plain\cf1\f51\fs16\ql 1,463,284 shares at the same price paid to Goldman
Sachs, totaling US$ 5.1 million. As a result of this transaction, the
Company\u8217?s ownership\plain\cf1\f51\fs16\ql interest in APSA increased from
53.81% to 60.69%.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Mendoza Plaza
Shopping\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On September\~29, 2004, the
Company\u8217?s subsidiary, APSA, entered into a purchase agreement pursuant to
which APSA acquired an additional\plain\cf1\f51\fs16\ql 49.9% ownership interest
in Mendoza Plaza Shopping for US$ 5.3 million. APSA paid US$ 1.77\~million on
December\~2, 2004 and the remaining balance\plain\cf1\f51\fs16\ql was paid in two
equal annual installments of US$ 1.77\~million each on September\~29, 2005 and
2006. Through this acquisition, APSA became the holder\plain\cf1\f51\fs16\ql of
record of 68.8% of the capital stock of Mendoza Plaza Shopping, the main activity
of which is the operation of the Mendoza Plaza Shopping center
in\plain\cf1\f51\fs16\ql the city of Mendoza. APSA also entered into the following
contracts in connection with debt owed by Mendoza Plaza
Shopping:\par\pard\plain\li88\sb88\cf1\f51\fs16\ql (i) Put option with Banco de
Chile S.A. (\u8220?Banco de Chile\u8221?), whereby Banco de Chile was entitled,
although not obliged, to assign to\plain\cf1\f51\fs16\ql APSA two defaulted credit
agreements amounting to US$ 18\~million originally granted to Mendoza Plaza
Shopping. As a result of the economic\plain\cf1\f51\fs16\ql measures issued in
Argentina in 2002, these financial agreements had been converted into Argentine
pesos at the exchange rate of Ps. 1.0\~per US\plain\cf1\f51\fs16\ql Dollar and
indexed based on the reference stabilization index (CER). On March\~30, 2005 Banco
de Chile executed the put option, transferring all\plain\cf1\f51\fs16\ql the
rights of the credit facilities to APSA in exchange for US$ 8.5\~million (Ps. 24.8
million).\par\pard\plain\li88\sb88\cf1\f51\fs16\ql (ii) Call option with HSBC Bank
Argentina S.A., whereby APSA was entitled, although not obliged, to acquire, and
HSBC Bank Argentina S.A.\plain\cf1\f51\fs16\ql was obliged to transfer, a
defaulted loan agreement originally granted to Mendoza Plaza Shopping amounting to
US$ 7.0 million. As a result of the\plain\cf1\f51\fs16\ql economic measures issued
in Argentina in 2002, this financial agreement was converted into Argentine pesos
at the exchange rate of Ps. 1.0\~per US\plain\cf1\f51\fs16\ql Dollar and indexed
by the reference stabilization index (CER). On March\~29, 2005 APSA transferred the
purchase option to Mendoza Plaza\plain\cf1\f51\fs16\ql Shopping, which exercised
the option paying Ps. 6.8\~million for the settlement of the loan (corresponding to
the exercise price of Ps. 7.2\~million net\plain\cf1\f51\fs16\ql of rental fees
collected by HSBC Bank Argentina S.A. as guarantee amounting to Ps. 0.4 million).
This cash payment was funded through a loan\plain\cf1\f51\fs16\ql granted by
APSA.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-14
\
\par\pard\plain
\par\pard\plain
3\ql \~\par\pard\plain\li88\cf1\f51\fs16\ql (iii) APSA also entered into an
agreement with Inversiones Falabella Argentina S.A. (\u8220?Falabella\u8221?), the
remaining minority shareholder\plain\cf1\f51\fs16\ql of Mendoza Plaza Shopping,
pursuant to which, among other things, Falabella has the irrevocable right to sell
to APSA (put option) its ownership\plain\cf1\f51\fs16\ql interest in Mendoza Plaza
Shopping for a total consideration of US$ 3.0 million. The put option can be
exercised until the last business day of\plain\cf1\f51\fs16\ql October 2008. As of
the date of issuance of these financial statements, such option has not been
excercised.\par\pard\plain\sb198\cf1\f51\fs16\ql On May\~31, 2005 the shareholders
of Mendoza Plaza Shopping approved the conversion of debt owed to APSA totaling Ps.
36.1\~million into common\plain\cf1\f51\fs16\ql shares. As a result of this
transaction, APSA increased its ownership interest in Mendoza Plaza Shopping from
68.8% to 85.4%.\par\pard\plain\sb286\fi462\cf1\f51\fs16\ul\ql Alto Rosario
Shopping\par\pard\plain\sb88\fi462\cf1\f51\fs16\ql On November\~9, 2004, the
Company\u8217?s subsidiary, APSA opened a new developed shopping center, Alto
Rosario, in the city of Rosario,\plain\cf1\f51\fs16\ql Province of Santa Fe,
Argentina.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
g.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Use of estimates\cell{
cf1\f51\fs16\ql The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make\plain\cf1\f51\fs16\ql estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities as of the date of the\plain\cf1\f51\fs16\ql financial statements, and
the reported amounts of revenues and expenses during the reporting years.
Significant estimates include those required in the\plain\cf1\f51\fs16\ql
accounting for barter transactions, gain from recognition of inventories at net
realizable value, provisions and allowances for contingencies, impairment
of\plain\cf1\f51\fs16\ql long-lived assets, debt restructuring, deferred income
asset and asset tax credit. Future actual results could differ from those estimates
and evaluations\plain\cf1\f51\fs16\ql made at the date of preparation of these
financial statements.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
Significant accounting policies\cell{
following is a summary of significant accounting policies followed by the Company
in the preparation of these consolidated financial\plain\cf1\f51\fs16\ql
\par\pard\plain
a.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Revenue recognition\cell{
cf1\f51\fs16\ql The Company primarily derives its revenues from domestic office and
shopping center leases and services operations, credit card operations,
the\plain\cf1\f51\fs16\ql development and sale of properties, hotel operations and
other non-core activities. See Note 6 for details on the Company\u8217?s business
segments.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Development and sale of properties\cell{
b198\fi462\cf1\f51\fs16\ql The Company records revenue from the sale of properties
when all of the following criteria are met:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
(i)\cell\pard\plain\intbl\cf1\f51\fs16\ql the sale has been consummated;\cell{
\ql \~
\par\pard\plain
(ii)\cell\pard\plain\intbl\cf1\f51\fs16\ql the Company has determined that the
buyer\u8217?s initial and continuing investments are adequate to demonstrate a
commitment to pay for\plain\intbl\cf1\f51\fs16\ql the property;\cell{
9\ql \~
\par\pard\plain
(iii)\cell\pard\plain\intbl\cf1\f51\fs16\ql the Company\u8217?s receivable is not
subject to future subordination; and\cell{
\ql \~
\par\pard\plain
(iv)\cell\pard\plain\intbl\cf1\f51\fs16\ql the Company has transferred to the buyer
the risk of ownership, and does not have a continuing involvement in the
property.\cell{
2\cf1\f51\fs16\ql The Company uses the percentage-of-completion method of
accounting with respect to sales of development properties under construction
effected\plain\cf1\f51\fs16\ql under fixed-priced contracts. Under this method,
revenue is recognized based on the ratio of costs incurred to total estimated costs
applied to the total\plain\cf1\f51\fs16\ql contract price. The Company does not
commence revenue and cost recognition until such time as the decision to proceed
with the project is made and\plain\cf1\f51\fs16\ql construction activities have
begun.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The percentage-of-completion
method of accounting requires company\u8217?s management to prepare budgeted costs
(i.e. the estimated costs of\plain\cf1\f51\fs16\ql completion) in connection with
sales of properties and/or units. All changes to estimated costs of completion are
incorporated into revised estimates during\plain\cf1\f51\fs16\ql the contract
period.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-15
\
\par\pard\plain
Significant accounting policies (continued)\cell{
\par\pard\plain
a.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Revenue recognition (continued)\cell{
3\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Leases and services from office and other
buildings\cell{
b198\fi462\cf1\f51\fs16\ql Leases with tenants are accounted for as operating
leases. Tenants are charged a monthly rent. Rental income is recognized on a
straight-line basis\plain\cf1\f51\fs16\ql over the term of the lease and unpaid
rents are included in accounts receivable in the accompanying consolidated balance
sheets.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Leases and services from shopping center
operations\cell{
b198\fi462\cf1\f51\fs16\ql Leases with tenants are accounted for as operating
leases. Tenants are generally charged a rent which consists of the higher of (i)\~a
monthly base\plain\cf1\f51\fs16\ql rent (the \u8220?Base Rent\u8221?) and (ii)\~a
specified percentage of the tenant\u8217?s monthly gross retail sales (the \u8220?
Percentage Rent\u8221?)\plain\cf1\f51\fs16\ql (which generally ranges between 4%
and 8% of tenant\u8217?s gross sales). Furthermore, pursuant to the rent escalation
clause in most leases, the\plain\cf1\f51\fs16\ql tenant\u8217?s Base Rent
generally increases between 4% and 7% each year during the term of the
lease.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql For the years ended June\~30,
2007, 2006 and 2005, the majority of the tenants were charged with the Percentage
Rent.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Certain lease agreements contain
provisions, which provide for rents based on a percentage of sales or based on a
percentage of sales volume above\plain\cf1\f51\fs16\ql a specified threshold. The
Company determines the compliance with specific targets and calculates the
additional rent on a monthly basis as provided for\plain\cf1\f51\fs16\ql in the
contracts. Thus, these contingent rents are not recognized until the required
thresholds are exceeded.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Generally, the
Company\u8217?s lease agreements vary from 36 to 120 months. Law No.\~24,808
provides that tenants may rescind commercial lease\plain\cf1\f51\fs16\ql
agreements after the initial six months, upon not less than 60 days\u8217? written
notice, subject to penalties which vary from one to one and a
half\plain\cf1\f51\fs16\ql months rent if the tenant rescinds during the first
year of its lease, and one month of rent if the tenant rescinds after the first
year of its lease.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Company also
charges its tenants a monthly administration fee, prorated among the tenants
according to their leases, which varies from\plain\cf1\f51\fs16\ql shopping center
to shopping center, relating to the administration and maintenance of the common
area and the administration of contributions made by\plain\cf1\f51\fs16\ql tenants
to finance promotional efforts for the overall shopping centers\u8217? operations.
Administration fees are recognized monthly when
earned.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In addition to rent, tenants are
generally charged \u8220?admission rights\u8221?, a non-refundable admission fee
that tenants may be required to\plain\cf1\f51\fs16\ql pay upon entering into a
lease and upon lease renewal. Admission right is normally paid in one lump sum or
in a small number of monthly installments.\plain\cf1\f51\fs16\ql Admission rights
are recognized using the straight-line method over the life of the respective lease
agreements.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Company also derives
revenues for parking lot fees charged to visitors. Parking revenues are recognized
as services are performed.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Lease agent operations\cell{
b198\fi462\cf1\f51\fs16\ql The Company\u8217?s subsidiaries FIBESA S.A. and
Comercializadora Los Altos S.A. (formerly Altocity.com S.A.), wholly owned
APSA\u180?s\plain\cf1\f51\fs16\ql subsidiary act as leasing agents for the retail
space available in certain of the Company\u8217?s shopping centers. FIBESA\u8217?s
and Comercializadora\plain\cf1\f51\fs16\ql Los Altos S.A. revenues are derived
primarily from collected fees calculated as a percentage of the final rental income
value. Revenues are recognized at\plain\cf1\f51\fs16\ql the time that the
transaction is successfully concluded. A transaction is considered successfully
concluded when both parties have signed the related lease\plain\cf1\f51\fs16\ql
contract.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Credit card operations\cell{
b198\cf1\f51\fs16\ql The Company, through its indirect subsidiary through APSA,
Tarshop S.A. (\u8220?Tarshop\u8221?), derives revenues from credit card
transactions which\plain\cf1\f51\fs16\ql primarily are comprised of (i)\~merchant
discount fees which are recognized when transactional information is received and
processed by the Company;\plain\cf1\f51\fs16\ql (ii)\~data processing services
which consist of processing and printing cardholders statement of accounts, and
which are recognized as services are provided;\plain\cf1\f51\fs16\ql (iii)\~life
and disability insurance charges to cardholders which are recognized on an accrual
basis and (iv)\~interest income generated by financing by\plain\cf1\f51\fs16\ql
financing and lending activitities.\par\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
\par\pard\plain
a.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Revenue recognition (continued)\cell{
3\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Hotel operations\cell{
b198\fi462\cf1\f51\fs16\ql The Company recognizes revenues from its rooms,
catering, and restaurant facilities as earned on the close of each business
day.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
b.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Cash and cash equivalents\cell{
cf1\f51\fs16\ql For purposes of the statements of cash flows, the Company considers
all highly liquid investments with original maturities of three months or
less\plain\cf1\f51\fs16\ql to be cash equivalents. Cash equivalent consist of time
deposits with original maturities of less than three months at date of purchase and
mutual funds.\plain\cf1\f51\fs16\ql Mutual funds are considered to be cash
equivalents since original maturity is determined by reference to the frequency
with which liquidity is available\plain\cf1\f51\fs16\ql according to current
Argentine GAAP guidance and practice.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
c.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Investments\cell{
\ql \~
\par\pard\plain
(i)\cell\pard\plain\intbl\cf1\f51\fs16\ql Current\cell{
cf1\f51\fs16\ql Current investments primarily include mutual funds, time deposits
and mortgage and government bonds. Time deposits are valued at cost
plus\plain\cf1\f51\fs16\ql accrued interest at year-end. Mutual funds and mortgage
and government bonds are carried at market value at year-
end.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Unrealized gains and losses on
these investments are included within \u8220?Financial results, net\u8221? in the
accompanying consolidated\plain\cf1\f51\fs16\ql statements of
income.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Current investments also include
the current portion of the retained interests in transferred receivables pursuant
to the securitization programs of\plain\cf1\f51\fs16\ql Tarshop (See Note 16) and
the retained interest in transferred mortgage receivables (See Note
15).\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
(ii)\cell\pard\plain\intbl\cf1\f51\fs16\ql Non-current\cell{
\ql \~
\par\pard\plain
a)\cell\pard\plain\intbl\cf1\f51\fs16\ql Equity investments\cell{
cf1\f51\fs16\ql The Company has an 11.76% investment in Banco Hipotecario S.A.
(\u8220?BHSA\u8221?). This investment is accounted for under the
equity\plain\cf1\f51\fs16\ql method due to the significant influence of the
Company on the decisions of BHSA and to the intention of holding the investment
permanently. In\plain\cf1\f51\fs16\ql accordance with regulations of
the\plain\cf1\f51\fs16\i\ql Banco Central de la Rep\u250?blica
Argentina\plain\cf1\f51\fs16\ql (\u8220?BCRA\u8221?) and also as imposed by the
agreements signed\plain\cf1\f51\fs16\ql by BHSA as a result of its financial debt
restructuring process, there are certain restrictions on the distribution of
profits by BHSA. The Company also\plain\cf1\f51\fs16\ql has a 5.10% investment in
Banco de Cr\u233?dito y Securitizaci\u243?n S.A. (\u8220?
BACSA\u8221?).\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The financial statements
of BHSA and BACSA are prepared in accordance with BCRA standards. For the purpose
of valuation of the investment in\plain\cf1\f51\fs16\ql the Company adjustments
necessary to adequate the financial statements to Argentine GAAP have been
considered.\par\pard\plain\sb198\fi946\cf1\f51\fs16\ql The Company\u8217?s purchase
of Empalme, Palermo Invest and certain other businesses have been accounted for
following the guidance in\plain\cf1\f51\fs16\ql Technical Resolution No.\~18,
\u8220?Specific Considerations for the Preparation of Financial Statements\u8221?
as explained in Note 2.f. The purchase\plain\cf1\f51\fs16\ql price was allocated
based on the fair value of each component. However, since the sum of the individual
fair values of the identifiable tangible and\plain\cf1\f51\fs16\ql intangible
assets exceeded the purchase price paid, negative goodwill exists. Under Argentine
GAAP, when negative goodwill exists after an acquiring\plain\cf1\f51\fs16\ql
entity initially assigns values to all assets acquired and liabilities assumed, RT
No.\~18 states that the entity must first reassess whether all acquired
assets\plain\cf1\f51\fs16\ql and assumed liabilities have been identified and
properly valued. If an amount of negative goodwill still results after this
reassessment, intangible assets\plain\cf1\f51\fs16\ql acquired (including above
and below market leases, in-place leases and tenant relationships, as applicable),
are subject to reduction. If after all of these\plain\cf1\f51\fs16\ql intangible
assets are reduced to zero and an amount of negative goodwill still remains, the
remaining unallocated negative goodwill is amortized under
the\plain\cf1\f51\fs16\ql straight-line method over the remaining weighted average
useful life at the main tangible assets acquires Accordingly, pursuant to Argentine
GAAP, the\plain\cf1\f51\fs16\ql amount of negative goodwill was fully allocated to
reduce the value of intangible assets acquired to zero and the remaining
unallocated amount is\plain\cf1\f51\fs16\ql
amortized.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-17
\
\par\pard\plain
\par\pard\plain
c.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Investments (continued)\cell{
3\ql \~
\par\pard\plain
b)\cell\pard\plain\intbl\cf1\f51\fs16\ql Retained interests in securitization
programs\cell{
cf1\f51\fs16\ql Non-current investments also include the retained interests in
transferred receivables pursuant to the securitization programs of APSA\u8217?
s\plain\cf1\f51\fs16\ql subsidiary, Tarshop (see Note
16).\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Also include the Company\u8217?s
retained interests in securitized mortgage receivables pursuant to the
securitization programs entered into by the\plain\cf1\f51\fs16\ql Company (see
Note 15).\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
c)\cell\pard\plain\intbl\cf1\f51\fs16\ql Undeveloped parcels of land\cell{
cf1\f51\fs16\ql The Company acquires undeveloped land in order to provide an
adequate and well-located supply for its residential and office building
operations.\plain\cf1\f51\fs16\ql The Company\u8217?s strategy for land
acquisition and development is dictated by specific market conditions where the
Company conducts its operations.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Land
held for development and sale and improvements are stated at cost (adjusted for
inflation as described in Note 2.c.) or estimated fair market\plain\cf1\f51\fs16\ql
value, whichever is lower. Land and land improvements are transferred to
inventories or fixed assets, as appropriate, when the Company determines
that\plain\cf1\f51\fs16\ql the properties are to be marketed for sale, when
construction commences or the land is
leased.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The carrying amount does not
exceed their respective estimated recoverable value at the end of this
year.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql During year ended June\~30, 2002
and due to Argentina\u8217?s crisis, the Company had recognized significant
impairment losses in connection with\plain\cf1\f51\fs16\ql certain parcels of
undeveloped land (identified as Santa Maria del Plata, Torres Jard\u237?n IV,
Caballito Project, Alcorta Plaza, Coto air space and\plain\cf1\f51\fs16\ql
Neuqu\u233?n). In addition, during the years ended June\~30, 2003 and 2007, the
Company also recognized additional impairment losses totaling Ps.
9,628\plain\cf1\f51\fs16\ql and Ps. 20, respectively, in connection with other
parcels of undeveloped land (mainly Padilla 902, Pilar, Constituci\u243?n 1111,
Benavidez and Rosario\plain\cf1\f51\fs16\ql Project and Torres Jard\u237?n IV ).
As a result of an increase in their respective fair market values, during the years
ended June\~30, 2004, 2005, 2006\plain\cf1\f51\fs16\ql and 2007, the Company
partially reversed these impairment losses, recognizing gains of Ps. 15,146
(Caballito Project, Alcorta Plaza, Coto Air Space,\plain\cf1\f51\fs16\ql
Neuqu\u233?n, Torres de Caballito, Pilar, Torres Jard\u237?n IV and
Constituci\u243?n 1111), Ps. 3,585 (Torres Jard\u237?n IV, Padilla
902,\plain\cf1\f51\fs16\ql Neuqu\u233?n, Caballito Project, Alcorta Plaza and Coto
air space), Ps. 6,421 (primarily Caballito Project, Coto air space and Merlo), and
Ps. 20\plain\cf1\f51\fs16\ql (primarily Conil and Padilla 902) respectively. The
impairment losses and gains associated with the reversal of previously recognized
impairment charges\plain\cf1\f51\fs16\ql have been included within \u8220?Gain
from operations and holdings of real estate assets, net\u8221? in the accompanying
consolidated statements of\plain\cf1\f51\fs16\ql
income.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
d.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Inventories\cell{
cf1\f51\fs16\ql Inventories are comprised primarily of properties held for
development and sale and to a lesser extent other minor inventories from hotel
operations.\plain\cf1\f51\fs16\ql A property is classified as held for sale upon
determination by the Board of Directors that the property is to be marketed for
sale in the normal course of\plain\cf1\f51\fs16\ql
business.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Residential, office and other
non-retail properties completed or under construction are stated at acquisition or
construction cost (adjusted for\plain\cf1\f51\fs16\ql inflation as described in
Note 2.c.) less allowances for impairment or estimated fair market value, whichever
is lower. The Company records impairment\plain\cf1\f51\fs16\ql losses for certain
inventories which have market values lower than costs. Costs include land and land
improvements, direct construction costs, interest on\plain\cf1\f51\fs16\ql
indebtedness and real estate taxes. During the year ended June\~30, 2006, the
Company capitalized interest costs amounting to Ps. 222, in connection
with\plain\cf1\f51\fs16\ql the development of \u8220?San Martin de Tours\u8221?
project.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Inventories on which the
Company received down payments that fix the sales price and the terms and
conditions of the contract assure reasonably\plain\cf1\f51\fs16\ql the closing of
the transaction and realization of the gain, are valued at net realizable value.
See \u8220?Gain from recognition of inventories at net\plain\cf1\f51\fs16\ql
realizable value\u8221? in the consolidated statements of
income.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-18
\
\par\pard\plain
\par\pard\plain
d.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Inventories (continued)\cell{
3\ql \~\par\pard\plain\fi462\cf1\f51\fs16\ql Properties held for sale are
classified as current or non-current based on the estimated date of sale and the
time at which the related receivable is\plain\cf1\f51\fs16\ql expected to be
collected by the Company.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In addition,
inventory includes receivables representing the rights to receive certain property
units. The units relating to the buildings called\plain\cf1\f51\fs16\ql \u8220?
Torres Caballito\u8221?, \u8220?Benavidez\u8221? and \u8220?Dique III\u8221? have
been valued at acquisition or construction cost, as\plain\cf1\f51\fs16\ql
applicable.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql During the years ended
June\~30, 2002 and due to Argentina\u8217?s crisis, the Company had recognized
significant impairment losses and during\plain\cf1\f51\fs16\ql the years ended
June\~30, 2003 and 2006 the Company also recognized additional impairment losses
totaling Ps. 844 and Ps. 206, respectively, in\plain\cf1\f51\fs16\ql connection
with certain properties classified as inventories (identified as Av. Madero 1020,
Rivadavia 2768, Minetti D, Torres Jard\u237?n, Sarmiento 517,\plain\cf1\f51\fs16\ql
parking lots in Dock 13, Constituci\u243?n 1111, Terrenos de Caballito, Padilla 902
and Torres de Abasto). As a result of an increase in their fair
market\plain\cf1\f51\fs16\ql values, during the years ended June\~30, 2004, 2005,
2006 and 2007 the Company partially reversed previously recognized impairment
losses, recognizing a\plain\cf1\f51\fs16\ql gain of Ps. 6 (Rivadavia 2768), Ps.
297 (primarily in connection with Torres Jard\u237?n, Minetti D and parking lots in
Dock 13), Ps. 11 (primarily in\plain\cf1\f51\fs16\ql connection with Minetti D and
Torres Jard\u237?n), and Ps. 101 (only Torres de Abasto). The impairment losses and
gains associated with the reversal of\plain\cf1\f51\fs16\ql previously recognized
impairment charges have been included within \u8220?Gain (loss) from operations and
holdings of real estate assets, net\u8221? in\plain\cf1\f51\fs16\ql the
consolidated statements of income.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
e.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Fixed assets, net\cell{
cf1\f51\fs16\ql Fixed assets, net are comprised primarily of rental properties
(including shopping centers), hotels and other property and equipment held for use
by\plain\cf1\f51\fs16\ql the Company.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Rental properties (including shopping
centers)\cell{
b198\fi462\cf1\f51\fs16\ql Rental properties are carried at cost (adjusted for
inflation as described in Note 2.c.), less accumulated depreciation and allowances
for impairment.\plain\cf1\f51\fs16\ql Accumulated depreciation is computed under
the straight-line method over the estimated useful lives of the assets, which are
estimated between 10 to 30\plain\cf1\f51\fs16\ql years for office buildings and
related improvements and between 19 and 31 years for shopping centers. Expenditures
for maintenance and repairs are\plain\cf1\f51\fs16\ql charged to expense as
incurred. Significant renewals and improvements are capitalized and depreciated
over their estimated remaining useful lives. At the\plain\cf1\f51\fs16\ql time
depreciable assets are retired or otherwise disposed of, the cost and the
accumulated depreciation and allowances for impairment of the assets
are\plain\cf1\f51\fs16\ql removed from the accounts and any profit or loss is
recognized. The Company capitalizes interest on long-term construction projects.
During the year\plain\cf1\f51\fs16\ql ended June\~30, 2007 and 2005 APSA
capitalized financial costs amounting to Ps. 7.1\~million and Ps. 2.1\~million, in
connection with the construction of\plain\cf1\f51\fs16\ql the Panamerican Mall and
Shopping Alto Rosario.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql During the year
ended June\~30, 2002 and due to Argentina\u8217?s crisis the Company had recognized
significant impairment losses in connection\plain\cf1\f51\fs16\ql with certain
properties (identified as Libertador 498, Maip\u250? 1300, Avda. Madero 1020,
Suipacha 652, Laminar Plaza, Reconquista 823,\plain\cf1\f51\fs16\ql
Constituci\u243?n 1111, Dique 2 M10- Edificio C-. Libertador 602, Dock 2 M10
-Building A-, Avda. Madero 942, Avda. De Mayo 595, Costeros\plain\cf1\f51\fs16\ql
Dique IV and Sarmiento 517, Intercontinental Plaza, Alto Palermo Park, Alto Palermo
Plaza, Thames, Hotel Intercontinental, Alto Avellaneda, Alto
Noa,\plain\cf1\f51\fs16\ql Abasto and other properties). In addition, during the
years ended June\~30, 2003 and 2005, the Company also recognized impairment losses
totaling Ps.\plain\cf1\f51\fs16\ql 1,892 in connection with certain properties
(identified as Avda. Madero 1020, Reconquista 823, Avda. Madero 942, and Sarmiento
517) and Ps. 245 in\plain\cf1\f51\fs16\ql connection with certain properties
(identified as Lotes Abril Club de Campo), respectively. As a result of increases
in their fair market values, during the\plain\cf1\f51\fs16\ql years ended
June\~30, 2003, 2004, 2005, 2006 and 2007 the Company partially reversed the
impairment losses, recognizing gains of Ps. 15,532, Ps.
47,880,\plain\cf1\f51\fs16\ql Ps. 24,301, Ps. 6,390 and 2,467 (primarily
Neuqu\u233?n, Suipacha 654, Av. de Mayo 589, Reconquista 823, Constituci\u243?n
1111, Torre\plain\cf1\f51\fs16\ql Constituci\u243?n 1159, and Sarmiento 517),
respectively. The impairment losses and gains associated with the reversal of
previously recognized\plain\cf1\f51\fs16\ql impairments have been included
within \u8220?Gain from operations and holdings of real estate assets, net\u8221?
in the accompanying consolidated\plain\cf1\f51\fs16\ql statements of
\
\par\pard\plain
\par\pard\plain
e.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Fixed assets, net (continued)\cell{
3\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Other property and equipment\cell{
b198\fi462\cf1\f51\fs16\ql Other property and equipment are carried at cost
(adjusted for inflation as described in Note 2.c.), less accumulated depreciation
at the end of the\plain\cf1\f51\fs16\ql year. Accumulated depreciation is computed
under the straight-line method over the estimated useful lives of the assets, as
specified below:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
66\trrh0
66\trrh0\row}}}
b\cellx6478\trrh228
Asset\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Estimated useful life (years)\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Leasehold
improvements\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Lesser of lease term or asset useful
life\cell{
Facilities\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc Between 10 and 20\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Machinery and
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc 10\cell{
Vehicles\cell\pard\plain\intbl\cf1\f51\fs13\ql
Software\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Computer
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Furniture and
fixtures\cell\pard\plain\intbl\cf1\f51\fs13\ql
{\trowd\trqc\cellx3304\clvertalb\cellx3498\clvertalb\cellx6478\trrh206\row}}}\pard\
plain\sb198\fi462\cf1\f51\fs16\ql During the year ended June\~30, 2007, independent
appraisals reassessed the appropriateness of the useful lives of the Company\u8217?
s office\plain\cf1\f51\fs16\ql buildings and other properties. As a result of the
work, the Company changed the useful lives of these properties and recognized an
additional\plain\cf1\f51\fs16\ql depreciation of Ps. 8.6\~million related to these
assets.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
f.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Intangible assets, net\cell{
cf1\f51\fs16\ql Intangible assets are carried at cost, adjusted for inflation (as
described in Note 2.c.), less accumulated
amortization.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Preoperating and organization
expenses\cell{
b198\fi462\cf1\f51\fs16\ql Represents primarily expenses incurred relating to pre-
opening activities of certain shopping centers. These expenses are amortized on
a\plain\cf1\f51\fs16\ql straight-line basis over a three-year period commencing
upon the opening of the shopping center.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Trademarks\cell{
b198\fi462\cf1\f51\fs16\ql Fees and expenses related to the registration of
trademarks are amortized on a straight-line basis over 10
years.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
g.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Negative goodwill, net\cell{
cf1\f51\fs16\ql Goodwill represents the excess of cost over the fair value of net
identifiable assets. Goodwill is being amortized under the straight-line method
over\plain\cf1\f51\fs16\ql a period not to exceed 10
years.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql When the sum of the individual
fair values of the identifiable tangible and intangible assets exceeds the purchase
price paid, negative goodwill\plain\cf1\f51\fs16\ql exists. Under Argentine GAAP,
when negative goodwill exists after an acquiring entity initially assigns values to
all assets acquired and liabilities\plain\cf1\f51\fs16\ql assumed, RT No.\~18
states that the entity must first reassess whether all acquired assets and assumed
liabilities have been identified and properly valued.\plain\cf1\f51\fs16\ql If an
amount of negative goodwill still results after this reassessment, intangible
assets acquired (including above and below market leases, in-place
leases\plain\cf1\f51\fs16\ql and tenant relationships, as applicable), are subject
to reduction. If after all of these intangible assets are reduced to zero and an
amount of negative\plain\cf1\f51\fs16\ql goodwill still remains, the remaining
unallocated negative goodwill is amortized under the straight-line method over the
weighted average useful life of\plain\cf1\f51\fs16\ql the main tangible assets
acquired.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Assets and liabilities
denominated in foreign currencies are translated at the prevailing exchange rates
as of year-end. Transactions denominated in\plain\cf1\f51\fs16\ql foreign
currencies are translated into pesos at the prevailing exchange rates on the date
of transaction settlement. Foreign currency transaction gains
and\plain\cf1\f51\fs16\ql losses are recorded within \u8220?Financial results,
net\u8221? in the accompanying consolidated statements of
\
\par\pard\plain
\par\pard\plain
h.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Other receivables and liabilities\cell{
\cf1\f51\fs16\ql Certain other receivables and liabilities (value added tax, cash
reserves and guarantee deposits) have been measured based on the best estimate
of\plain\cf1\f51\fs16\ql the amount receivable and payable, respectively,
discounted at the interest rate that reflect the time-value of money and the
estimate specific transactions\plain\cf1\f51\fs16\ql risks at the time of
incorporation to assets and liabilities, respectively. The remaining other
receivables and liabilities have been valued at their nominal\plain\cf1\f51\fs16\ql
value plus interest, if any.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
i.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Financial receivables and
liabilities\cell{
cf1\f51\fs16\ql Financial receivables and payables have been valued at the amount
deposited and collected, respectively, net of operating costs, plus
accrued\plain\cf1\f51\fs16\ql interests based on the interest rate estimated at
the time of the transaction. In the case, the Company has the intention and
feasibility of selling financial\plain\cf1\f51\fs16\ql receivables after the year-
end, those receivables are valued at their net realizable
value.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
j.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Mortgages and leases receivable and
trade accounts payable\cell{
cf1\f51\fs16\ql Mortgages and leases receivable and trade accounts payable have
been valued at the price applicable to spot operations at the time of the
transaction\plain\cf1\f51\fs16\ql plus accrued interest based on the internal rate
of return.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
k.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Related party balances and other
transactions\cell{
cf1\f51\fs16\ql Receivables and payables with related parties generated by
financial transactions and other sundry transactions have been valued in accordance
with\plain\cf1\f51\fs16\ql the terms agreed by the
parties.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
l.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Income tax\cell{
cf1\f51\fs16\ql The subsidiaries of the Company calculate their income taxes on a
separate basis. The Company did not either calculate or pay income taxes on
a\plain\cf1\f51\fs16\ql consolidated basis for any of the years presented. The
statutory income tax rate was 35% for all the years
presented.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Company records income
taxes using the deferred tax method required by Technical Resolution No.\~17
\u8220?Overall Considerations for the\plain\cf1\f51\fs16\ql Preparation of
Financial Statements\u8221? (\u8220?RT 17\u8221?). Accordingly, deferred tax assets
and liabilities are recognized for the future tax\plain\cf1\f51\fs16\ql
consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases.\plain\cf1\f51\fs16\ql Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which
those temporary\plain\cf1\f51\fs16\ql differences are expected to be recorded or
settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the\plain\cf1\f51\fs16\ql period that includes the
enactment date. A valuation allowance is recognized for that component of net
deferred tax assets which is not
recoverable.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql As discussed in note 2.d
the Company has treated the differences between the price-level restated amounts of
assets and liabilities and their\plain\cf1\f51\fs16\ql historical basis as
permanent differences for deferred income tax calculation
purposes.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In accordance with CNV
regulations, deferred tax assets and liabilities have not been discounted. Since
Argentine GAAP required (for the\plain\cf1\f51\fs16\ql Company\u8217?s fiscal
years ended June\~30, 2006 and 2005) the accounting for deferred tax assets and
liabilities on a discounted basis, the application\plain\cf1\f51\fs16\ql of the
CNV resolution represented a departure from generally accepted accounting
principles until the Company\u8217?s fiscal year ended June\~30,
2006.\plain\cf1\f51\fs16\ql However, such a departure did not have a significant
effect on the 2006 and 2005 consolidated financial statements. As from July\~1,
2006, there is no\plain\cf1\f51\fs16\ql such difference between CNV regulations
and Argentine GAAP, as discussed in Note 2.d.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
m.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Minimum Presumed Income Tax\cell{
cf1\f51\fs16\ql The company and its subsidiaries are subject to the Minimum
Presumed Income Tax Law (\u8220?Impuesto a la Ganancia M\u237?
nima\plain\cf1\f51\fs16\ql Presunta\u8221? or \u8220?MPIT\u8221?). The MPIT is
calculated on an individual entity basis at the statutory tax rate of 1%, and is
based upon the\plain\cf1\f51\fs16\ql taxable assets of each Argentine entity as of
the end of the year. This tax is complementary to Income Tax and the Company is
required to pay the\plain\cf1\f51\fs16\ql greater of the income tax or the MPIT.
Any excess of the MPIT over the income tax may be carried forward and recognized as
a payment on account of\plain\cf1\f51\fs16\ql any excess of income tax over MPIT
occurring within the subsequent ten years. In the opinion of that the Company will
utilize\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-21
\
\par\pard\plain
\par\pard\plain
m.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Minimum Presumed Income Tax
(continued)\cell{
3\ql \~\par\pard\plain\cf1\f51\fs16\ql such asset against future taxable income
charges within the next ten years and, as a result, the Company has recognized the
accumulated MPIT charge\plain\cf1\f51\fs16\ql within \u8220?Other current and non-
current receivables\u8221?, as appropriate, in the accompanying consolidated
balance sheet. This tax credit has been\plain\cf1\f51\fs16\ql recorded at its
nominal value.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
n.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Customer advances\cell{
cf1\f51\fs16\ql Customer advances represent payments received in advance in
connection with the sale and lease of properties.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
o.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Mortgage payables\cell{
cf1\f51\fs16\ql Mortgage payables includes the debt assumed in the acquisition of
Bouchard 710 and LLR (see Notes 13 for details). For the year ended
June\~30,\plain\cf1\f51\fs16\ql 2006 also included the debt assumed in the
purchase of a plot of land where the Company constructed
\u8220?\plain\cf1\f51\fs16\i\ql San Martin de Tours\plain\cf1\f51\fs16\ql \u8221?
project.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
p.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Provisions for allowances and
contingencies\cell{
cf1\f51\fs16\ql The Company provides for losses relating to mortgage, lease and
other accounts receivable. The allowance for losses is recognized when, based
on\plain\cf1\f51\fs16\ql current information and events, it is probable that the
Company will be unable to collect all amounts due according to the terms of the
agreements. The\plain\cf1\f51\fs16\ql allowance is determined on a one-by-one
basis considering the present value of expected future cash flow or the fair value
of collateral if the loan is\plain\cf1\f51\fs16\ql collateral dependent, when
applicable. While management uses the information available to make evaluations,
future adjustments to the allowance may be\plain\cf1\f51\fs16\ql necessary if
future economic conditions differ substantially from the assumptions used in making
the assessments. Management has considered all events\plain\cf1\f51\fs16\ql and/or
transactions that are subject to reasonable and normal methods of estimations, and
the consolidated financial statements reflect that
consideration.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The Company has certain
contingent liabilities with respect to existing or potential claims, lawsuits and
other proceedings, including those involving\plain\cf1\f51\fs16\ql labor and other
matters. The Company accrues liabilities when it is probable that future costs will
be incurred and such costs can be reasonably estimated.\plain\cf1\f51\fs16\ql Such
accruals are based on developments to date, the Company\u8217?s estimates of the
outcomes of these matters and the Company\u8217?s\plain\cf1\f51\fs16\ql
lawyers\u8217? experience in contesting, litigating and settling other matters. As
the scope of the liabilities becomes better defined, there may be
changes\plain\cf1\f51\fs16\ql in the estimates of future costs, which could have a
material effect on the Company\u8217?s future results of operations and financial
condition or\plain\cf1\f51\fs16\ql liquidity.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
q.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Advertising expenses\cell{
cf1\f51\fs16\ql The Company generally expenses advertising and promotion costs as
incurred with the exception of advertising and promotion expenses incurred
to\plain\cf1\f51\fs16\ql market real estate projects and to launch new shopping
centers.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Advertising and promotion
expenses were approximately Ps. 31.7\~million, Ps.\~19.5 million and Ps.
12.2\~million for the years ended June\~30, 2007,\plain\cf1\f51\fs16\ql 2006 and
2005, respectively.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Advertising and
promotion expenses to market real estate projects and to launch new shopping
centers are capitalized as advertising expenses and\plain\cf1\f51\fs16\ql
preoperating expenses, respectively, within intangible
assets.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
r.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Pension information\cell{
cf1\f51\fs16\ql The Company does not maintain any pension plans. Argentine laws
provide for pension benefits to be paid to retired employees from
government\plain\cf1\f51\fs16\ql pension plans and/or privately managed funds plan
to which employees may elect to contribute. The Company does not sponsor any
employee stock\plain\cf1\f51\fs16\ql ownership
plans.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
s.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Impairment of long-lived assets\cell{
cf1\f51\fs16\ql The Company periodically evaluates the carrying value of its long-
lived assets for impairment when events or changes in circumstances
indicate\plain\cf1\f51\fs16\ql that the carrying amount of an asset may not be
recoverable. The carrying value of a long-lived asset is considered impaired by the
Company when the\plain\cf1\f51\fs16\ql expected cash flows, from such asset is
separately identifiable and less than its carrying value. In that event, a loss is
recognized based on the amount by\plain\cf1\f51\fs16\ql which the carrying value
exceeds the fair market value of the long-lived asset. Fair market value is
determined primarily using the anticipated cash flows\plain\cf1\f51\fs16\ql
discounted at a rate commensurate with the risk involved or based on independent
appraisals.\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-22
\
\par\pard\plain
\par\pard\plain
s.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Impairment of long-lived assets
(continued)\cell{
3\ql \~\par\pard\plain\fi462\cf1\f51\fs16\ql Under Argentine GAAP, the impairment
loss is recorded in the income statement against a liability account. This
liability account is a contra\plain\cf1\f51\fs16\ql account to fixed assets, which
means that it is presented on the balance sheet as a direct reduction from the book
value of the fixed assets to arrive at the\plain\cf1\f51\fs16\ql fixed
asset\u8217?s carrying value at any particular point in time. The liability account
is depreciated over the useful life of the related asset
decreasing\plain\cf1\f51\fs16\ql depreciation expense each period. Under Argentine
GAAP, a previously recognized impairment loss should only be reversed when there is
a subsequent\plain\cf1\f51\fs16\ql change in estimates used to compute the fair
market value of the asset. In that event, the new carrying amount of the asset
should be the lower of its fair\plain\cf1\f51\fs16\ql market value or the net
carrying amount the asset would have had if no impairment had been recognized. Both
the impairment charge and the impairment\plain\cf1\f51\fs16\ql reversal are
recognized in earnings.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
t.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Vacation expenses\cell{
cf1\f51\fs16\ql Vacation expenses are fully accrued in the period the employee
renders services to earn such vacation.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
u.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Derivative financial instruments\cell{
cf1\f51\fs16\ql As part of its risk management, the Company may use financial
instruments. The Company also engages in trading of certain financial
instruments.\plain\cf1\f51\fs16\ql In entering into these contracts, the Company
assumes the risk that might arise from the possible inability of counter parties to
meet the terms of their\plain\cf1\f51\fs16\ql contracts. The Company does not
expect any losses as a result of counterparty defaults. The Company applies
Technical Resolution No.\~20 (\u8220?RT\plain\cf1\f51\fs16\ql No.\~20\u8221?),
\u8220?Accounting for Derivative Instruments and Hedging Activities\u8221?, which
establishes accounting and reporting standards for\plain\cf1\f51\fs16\ql
derivative instruments and for hedging activities. RT No.\~20 requires that an
entity recognize all derivatives as either assets or liabilities in the
balance\plain\cf1\f51\fs16\ql sheet and measure those instruments at fair value.
The accounting for changes in the fair value of a derivative depends on the
intended use of the\plain\cf1\f51\fs16\ql derivative and how it is designated. RT
No.\~20 prescribes that changes in the fair value of effective cash flow hedges are
deferred as a separate\plain\cf1\f51\fs16\ql component of the balance sheet and
subsequently reclassified into earnings when the hedged items affect earnings.
Gains and losses from fair value\plain\cf1\f51\fs16\ql hedges are recognized in
earnings in the period of any changes in the fair value of the related recognized
asset or liability. Gains and losses on derivative\plain\cf1\f51\fs16\ql
instruments that are not designated as a hedging instrument are recognized in
earnings in the period of change. For details on the Company\u8217?
s\plain\cf1\f51\fs16\ql derivative instruments activity, see Note
\par\pard\plain
v.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Monetary assets and liabilities\cell{
cf1\f51\fs16\ql Monetary assets and liabilities are disclosed at their face value,
adding or deducting the corresponding financial
results.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
w.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Earnings per share\cell{
cf1\f51\fs16\ql The Company is required to disclose earnings per share information
for all years presented. Basic earnings per share (\u8220?basic EPS\u8221?)
are\plain\cf1\f51\fs16\ql computed by dividing the net income available to common
shareholders for the years by the weighted-average number of common shares
outstanding\plain\cf1\f51\fs16\ql during the year. Diluted earnings per share
(\u8220?diluted EPS\u8221?) are computed by dividing the adjusted net income for
the year by the\plain\cf1\f51\fs16\ql weighted-average number of common shares and
potential common shares outstanding during the
year.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql In computing diluted EPS, income
available to common shareholders used in the basic EPS calculation is adjusted to
add back the after-tax amount\plain\cf1\f51\fs16\ql of interest recognized for the
year with respect to any debt convertible to common stock. Additional adjustments
are made for any other income or loss\plain\cf1\f51\fs16\ql items that would
result from the assumed conversion of potential common shares. The weighted-average
number of common shares outstanding is\plain\cf1\f51\fs16\ql adjusted to include
the number of additional common shares that would have been outstanding if the
dilutive potential common shares had been issued.\plain\cf1\f51\fs16\ql Diluted
EPS is based on the most advantageous conversion rate or exercise price over the
entire term of the instrument from the standpoint of the
security\plain\cf1\f51\fs16\ql holder. The calculation of diluted EPS excludes
potential common shares if their effect is anti-dilutive. The Company has
considered the dilutive effect of\plain\cf1\f51\fs16\ql outstanding warrants and
convertible debt in calculating diluted EPS.\par\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
\par\pard\plain
x.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Deferred debt issuance costs\cell{
cf1\f51\fs16\ql Expenses incurred in connection with the issuance of debt are
amortized over the term of the debt, applying effective interest method.
Deferred\plain\cf1\f51\fs16\ql financing costs are classified within short-term or
long-term debts, as appropriate. Amortization of deferred financing costs is
included within\plain\cf1\f51\fs16\ql \u8220?Financial results, net\u8221? in the
accompanying statements of income as a greater financing
expense.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
Details of balance sheet accounts\cell{
\par\pard\plain
a.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Cash and banks:\cell{
8\ql \~
\par\pard\plain
66\trrh0\row}}}
b\cellx9935\trrh172
ow}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Bank
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cash on
hand\cell\pard\plain\intbl\cf1\f51\fs13\ql
4,760\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Checks to be
deposited\cell\pard\plain\intbl\cf1\f51\fs13\ql
1,064\cell{
b\cellx8031\clbrdrt\brdrs\brdrcf1\clvertalb\cellx8592\clvertalb\cellx9153\clbrdrt\b
rdrs\brdrcf1\clvertalb\cellx9372\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9933\trrh29
rdrs\brdrcf1\clvertalb\cellx9372\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9933\trrh29\r
ow}}}
{\trowd\trqc\clvertalb\cellx7252\clvertalb\cellx7812\clbrdrt\brdrdb\brdrcf1\clverta
lb\cellx8031\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx8592\clvertalb\cellx9153\clbrdrt
\brdrdb\brdrcf1\clvertalb\cellx9372\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx9933\trrh
63
\par\pard\plain
b.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Investments:\cell{
8\ql \~
\par\pard\plain
66\trrh0\row}}}
b\cellx9935\trrh172
ow}}}
Current\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mutual funds
(iv)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Retained interests in securitized
receivables (i)\cell\pard\plain\intbl\cf1\f51\fs13\ql
10,319\cell{
6,431\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage bonds issued by BHSA (Note
2,704\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Government
bonds\cell\pard\plain\intbl\cf1\f51\fs13\ql
1,287\cell{
TDFs\cell\pard\plain\intbl\cf1\f51\fs13\ql
324\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Retained interest in securitized
mortgage receivables (ii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
184\cell{
439\cell{
ow}}}
63
63\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Non-
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Equity
investments:\cell\pard\plain\intbl\cf1\f51\fs13\ql
BHSA\cell\pard\plain\intbl\cf1\f51\fs13\ql
BACSA\cell\pard\plain\intbl\cf1\f51\fs13\ql
4,782\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql E-Commerce Latina S.A. (Note
2.f.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
129\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Retained interests in
securitization programs:\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Retained interests in securitized
receivables (i)\cell\pard\plain\intbl\cf1\f51\fs13\ql
37,814\cell{
TDFs\cell\pard\plain\intbl\cf1\f51\fs13\ql
752\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Retained interest in securitized
mortgage receivables (ii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
2,126\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Undeveloped parcels of land
(iii):\cell\pard\plain\intbl\cf1\f51\fs13\ql
114,397\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Puerto Retiro (Note
46,518\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Caballito
(v)\cell\pard\plain\intbl\cf1\f51\fs13\ql
36,622\cell{
Pereiraola\cell\pard\plain\intbl\cf1\f51\fs13\ql
21,875\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Torres
16,079\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Air space Supermercado Coto \u8211?
Ag\u252?ero 616\cell\pard\plain\intbl\cf1\f51\fs13\ql
13,143\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Caballito plot of
land\cell\pard\plain\intbl\cf1\f51\fs13\ql
9,223\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Canteras Natal
Crespo\cell\pard\plain\intbl\cf1\f51\fs13\ql
4,427\cell{
Pilar\cell\pard\plain\intbl\cf1\f51\fs13\ql
3,408\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Torre Jard\u237?n
IV\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql
3,030\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Share\u8217?s purchase
\u8212?\~\~\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Padilla
94\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql General Paz plot of land
(vi)\cell\pard\plain\intbl\cf1\f51\fs13\ql
59,837\cell{
\pard\plain\intbl\li572\fi-176\cf1\f51\fs16\ql Dique
IV\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql
6,704\cell{
5,319\cell{
ow}}}
63
63\row}}}\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-24
\
\par\pard\plain
Details of balance sheet accounts (continued)\cell{
\par\pard\plain
b.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Investments (continued):\cell{
3\ql
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (i)\cell\pard\plain\intbl\cf1\f51\fs16\ql As part
of its credit card securitization programs, Tarshop transfers credit card
receivables to trusts in exchange for cash and certificates
representing\plain\intbl\cf1\f51\fs16\ql undivided interests in such receivables.
Trusts debt securities represent debt certificates (TDFs) issued by trusts which
are valued at amortized cost.\plain\intbl\cf1\f51\fs16\ql Retained interests in
transferred credit card receivables represent equity certificates (CPs) issued by
trusts which are accounted for under the equity\plain\intbl\cf1\f51\fs16\ql method
of accounting (See Note 16 for details).\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (ii)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Represents retained interests in the Company\u8217?s securitization program
described in Note 15.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (iii)\cell\pard\plain\intbl\cf1\f51\fs16\ql Shown
net of allowances for impairment losses mentioned in Note 3.c.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (iv)\cell\pard\plain\intbl\cf1\f51\fs16\ql As of
June\~30, 2007 includes: Ps. 96,687 corresponding to common investment fund \u8220?
Dolphin Fund PLC\u8221?, Ps. 3,085 corresponding to\plain\intbl\cf1\f51\fs16\ql
NCH Development Partner fund, Ps. 1,749 corresponding to Goal Capital Plus - Class
B - Banco Itau fund, Ps. 3,056 corresponding to Premier\plain\intbl\cf1\f51\fs16\ql
Renta Plus - Banco Superville fund, Ps. 6,280 corresponding to Delta Ahorro Pesos -
Raymond James Argentina fund, Ps. 1,813 corresponding
to\plain\intbl\cf1\f51\fs16\ql Fima Ahorro - Banco Galicia fund, Ps. 2,603
corresponding to 1784 Ahorro Pesos - Class A - Standard Bank fund, Ps. 503
corresponding to\plain\intbl\cf1\f51\fs16\ql Gainvest fund not considered as cash
for the purpose of the statement of cash flows, and as of June\~30, 2006: Ps. 3.174
corresponding to NCH\plain\intbl\cf1\f51\fs16\ql Development Partner fund, Ps.
49,976 corresponding to common investment fund \u8220?Dolphin Fund PLC\u8221? and
Ps. 1,091 corresponding to\plain\intbl\cf1\f51\fs16\ql Gainvest funds not
considered as cash for the purpose of the statement of cash flows.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (v)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Encumbered in relation with a tax claim from the Federal Administration of Public
Revenues (\u8220?AFIP\u8221?)\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (vi)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Transferred to fixed assets\cell{
\par\pard\plain
c.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Mortgages and leases receivable,
net:\cell{
8\ql \~
\par\pard\plain
cellx8346\clvertalc\cellx8441\clvertalb\cellx9058\clvertalc\cellx9277\clvertalc\cel
lx9838\clvertalc\cellx9933\trrh-66\trrh0
lx9838\clvertalc\cellx9933\trrh-66\trrh0\row}}}
rtalb\clshdng100\clcfpat12\clcbpat12\cellx9933\trrh206
rtalb\clshdng100\clcfpat12\clcbpat12\cellx9933\trrh206\row}}}
clvertalb\cellx8441\clvertalb\cellx9058\clvertalb\cellx9277\clvertalb\cellx9838\clv
ertalb\cellx9933\trrh206
ertalb\cellx9933\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Leases and services
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Checks to be
deposited\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Debtors under legal proceedings
(i)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Pass-through expenses receivables
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Receivables from the sale of
properties (iv)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Related parties (Note
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage receivables
Less:\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Allowance for doubtful accounts
(Note 29.c.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
b\cellx7706\clbrdrt\brdrs\brdrcf1\clvertalb\cellx8346\clvertalc\cellx8441\clvertalb
\cellx9058\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9277\clbrdrt\brdrs\brdrcf1\clvertal
b\cellx9838\clvertalc\cellx9933\trrh29
\~\cell{
b\cellx9838\clvertalc\cellx9933\trrh29\row}}}
rtalb\cellx9838\clvertalc\cellx9933\trrh63
\~\cell{
rtalb\cellx9838\clvertalc\cellx9933\trrh63\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage receivables
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Receivables from the sale of
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Allowance for doubtful accounts
(Note 29.c.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\~\cell{
rtalb\cellx9838\clvertalc\cellx9933\trrh63\row}}}\pard\plain\f0\fs4\par\pard\plain\
f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (i)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Comprised of Ps. 1.3\~million and Ps. 2.0\~million related to mortgage receivables
and Ps. 23.6\~million and Ps. 23.3\~million related to
leases\plain\intbl\cf1\f51\fs16\ql receivables, as of June\~30, 2007 and 2006,
respectively.\cell{
\pard\plain
Represents receivables for common area maintenance and other operating expenses
passed through to tenants of shopping centers.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (iii)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Mortgage receivables consist of fixed-rate mortgage receivables from several
borrowers. At June\~30, 2007, the amount due from the
largest\plain\intbl\cf1\f51\fs16\ql individual borrower was Ps. 478 at a
contractual interest rate of 10%.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (iv)\cell\pard\plain\intbl\cf1\f51\fs16\ql Mainly
relates to one pending installment of US$ 1.9\~million accruing interest at a rate
of 7.5%\~per annum from the sale of Alcorta Plaza land.\cell{
\
\par\pard\plain
\~\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
d.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Other receivables and prepaid
expenses:\cell{
8\ql \~
\par\pard\plain
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Prepaid expenses and
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Value Added Tax (\u8220?
VAT\u8221?)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Loans
Granted\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Miscellaneous
debtors\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Receivable from trust guarantee fund
(v)\~and (Note 16)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gross revenue tax
prepayment\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Guarantee deposits
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Income tax
prepayment\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Guarantee of defaulted credits (Note
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Tax on personal assets to be
recovered\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Future contracts
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Down payments for acquisitions
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Debtors under legal
proceedings\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Deferred income tax (Note
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Receivable from trust guarantee fund
(v)\~and (Note 16)\cell\pard\plain\intbl\cf1\f51\fs13\ql
VAT\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Guarantee of defaulted credits (Note
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage receivable
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Allowance for doubtful mortgage
receivable (iv)\~and (Note 29 c.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gross revenue tax
prepayment.\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Credit default swap agreements
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Present value \u8211? other
(752\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell{
\~\cell{
\~\cell{
rtalb\cellx9838\clvertalc\cellx9933\trrh63\row}}}\pard\plain\f0\fs4\par\pard\plain\
f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard\plain\f0\fs4\par
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (i)\cell\pard\plain\intbl\cf1\f51\fs16\ql As of
June\~30, 2006 the balance relates to a guarantee deposit held by Deutsche Bank in
favor of the owner of an undeveloped land, Argentimo\plain\intbl\cf1\f51\fs16\ql
S.A. amounting to US$ 3 million. The deposit was part of an agreement between APSA,
Argentimo S.A. and a developer, Constructora San\plain\intbl\cf1\f51\fs16\ql
Jos\u233? S.A., pursuant to which the Company acquired a parcel of land to build a
commercial center and a dwelling and/or office buildings.
The\plain\intbl\cf1\f51\fs16\ql guarantee deposit was released on December\~26,
2006 (See Note 2.f.). At June\~30, 2007 the balance is mainly comprised of
restricted cash of Ps.\plain\intbl\cf1\f51\fs16\ql 0.3\~million related to
deposits required as collateral for certain labor lawsuits of the Company and Ps.
0.9\~million related to attached funds in\plain\intbl\cf1\f51\fs16\ql connection
with Llao Llao Litigation (See Note 21 for details).\cell{
\pard\plain
Represents advances paid for the acquisition of Rummaala (see Note 2.f.).\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (iii)\cell\pard\plain\intbl\cf1\f51\fs16\ql As of
June\~30, 2006, represents a guarantee deposit payment of US$ 4\~million under a
credit default swap agreement (the\plain\intbl\cf1\f51\fs16\ql \u8220?
Agreement\u8221?). (See Note 2.f. for details).\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (iv)\cell\pard\plain\intbl\cf1\f51\fs16\ql
Corresponds to a loan granted to an unaffiliated third party, which is
collateralized by a mortgage on certain properties. During fiscal year
2001,\plain\intbl\cf1\f51\fs16\ql this debtor filed for bankruptcy. As a result,
the Company recognized an allowance for the entire balance based on the opinion of
its legal counsel.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (v)\cell\pard\plain\intbl\cf1\f51\fs16\ql The
accounts receivable financial trusts as credit protection for investors include the
contingency funds of financial trust that as of June\~30,
2007\plain\intbl\cf1\f51\fs16\ql amounted to Ps. 11.9 million. They are restricted
availability credits until settlement in accordance with the respective
prospectuses.\cell{
\
\par\pard\plain
\~\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
e.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Inventories:\cell{
8\ql \~
\par\pard\plain
66\trrh0\row}}}
b\cellx9934\trrh172
ow}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Plot 1 c) Dique III
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Torres de Rosario
(vii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
7,325\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql San Mart\u237?n de
Tours\cell\pard\plain\intbl\cf1\f51\fs13\ql
14,211\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Abril /
Baldovinos\cell\pard\plain\intbl\cf1\f51\fs13\ql
5,670\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Benavidez
2,329\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Dock 13 Puerto
Madero\cell\pard\plain\intbl\cf1\f51\fs13\ql
1,605\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql \u8220?Edificios Cruceros\u8221?
3,629\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Plot 1 d) Dique III
25,549\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Down payment
1,773\cell{
3,602\cell{
ow}}}
63
63\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Rummaala plot of land (Vicente
Lopez) (v)\cell\pard\plain\intbl\cf1\f51\fs13\ql
Ps.\cell\pard\plain\intbl\cf1\f51\fs16\qr \u8212?\~\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Plot 1 e) Dique III
41,808\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Plot 1 c) Dique III
7,274\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Caballito
22,663\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Benavidez
6,213\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Abril /
Baldovinos\cell\pard\plain\intbl\cf1\f51\fs13\ql
2,872\cell{
ow}}}
63
63\row}}}\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrs
p0\par\pard\plain\f0\fs4\par
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (i)\cell\pard\plain\intbl\cf1\f51\fs16\ql On
May\~18, 2005, the Company entered into a preliminary agreement with an unrelated
party, DYPSA Desarrollos y Proyectos S.A.\plain\intbl\cf1\f51\fs16\ql (\u8220?
DYPSA\u8221?) pursuant to which the Company would sell to DYPSA an undeveloped plot
of land of Dique III (identified as plot 1d) for\plain\intbl\cf1\f51\fs16\ql a
total purchase price of US$ 8,500. The Company received US$ 2,150 as down payment
and the remaining balance of US$ 6,350 was to be\plain\intbl\cf1\f51\fs16\ql
received at the time of signing the deed and effective transfer of property which
was originally scheduled for November 2005. The inventory
was\plain\intbl\cf1\f51\fs16\ql valued at net realizable value (Ps. 23.9 million)
as of June\~30, 2005 and a gain of Ps. 15\~million recognized accordingly. After
several\plain\intbl\cf1\f51\fs16\ql postponements, in January 2006 DYPSA paid an
additional US$ 1,000 out of the remaining balance. The transfer of property and
signing of deed\plain\intbl\cf1\f51\fs16\ql and property documents was executed
with Alvear Palace Hotel S.A. and Desarrollos Premium Plus S.A. on July\~17, 2006,
at which time the\plain\intbl\cf1\f51\fs16\ql Company received the outstanding
balance of US$ 5,350.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (ii)\cell\pard\plain\intbl\cf1\f51\fs16\ql On
September\~7, 2004, the Company entered into a barter and option agreement with
DYPSA pursuant to which the Company (i)\~exchanged an\plain\intbl\cf1\f51\fs16\ql
undeveloped parcel of land of Dique III (identified as plot 1c) of its property for
the future delivery of housing units, parking lots and
storage\plain\intbl\cf1\f51\fs16\ql spaces representing an aggregate 28.5% of the
housing area of a 37-storey building to be constructed by DYPSA on plot 1c within a
maximum\plain\intbl\cf1\f51\fs16\ql period of 36 months and (ii)\~granted an
option to DYPSA to acquire an undeveloped plot of land of Dique III (identified as
plot 1e) of its property\plain\intbl\cf1\f51\fs16\ql within a maximum term of 548
days as from the signing date of the deed on plot 1c and subject to the completion
of certain work-in-progress in\plain\intbl\cf1\f51\fs16\ql the 37-storey building.
As a result, the Company signed the deed of conveyance of plot 1c and the option
for plot 1e in November 2004. The\plain\intbl\cf1\f51\fs16\ql parties valued the
transactions at a price of US$ 8,030 and US$ 10,800 for plots 1c and 1e,
respectively. As guarantee for the first transaction,\plain\intbl\cf1\f51\fs16\ql
DYPSA set up a first degree mortgage on plot 1c in favor of the Company for the
total value of the respective transaction. In May 2006,
DYPSA\plain\intbl\cf1\f51\fs16\ql accepted the option to acquire plot 1e on an
exchange basis and both parties increased the value of the transaction to US$
13,530. As consideration\plain\intbl\cf1\f51\fs16\ql for plot 1e, DYPSA will
deliver housing units, individual storage spaces and parking lots representing an
aggregate 31.5% of the housing area of a\plain\intbl\cf1\f51\fs16\ql 40-storey
building to be constructed by DYPSA on plot 1e within a maximum period of 36
months. As guarantee for this transaction, DYPSA set\plain\intbl\cf1\f51\fs16\ql
up a first degree mortgage on plot 1e in favor of the Company for the original
value of the respective transaction. On March\~29, 2007,
DYPSA\plain\intbl\cf1\f51\fs16\ql transferred to the Company the possession of all
of the individual storage spaces and parking lots in a total amount of US$ 487,
corresponding to\plain\intbl\cf1\f51\fs16\ql the barter for the plot 1 c).\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (iii)\cell\pard\plain\intbl\cf1\f51\fs16\ql
During the year ended June\~30, 2004, the Company sold a parcel of land in exchange
for 40 housing units of the building to be constructed in
the\plain\intbl\cf1\f51\fs16\ql acquired land. The housing units to be received
were originally valued at the price established in the contract amounting to Ps.
5.8\~million and as a\plain\intbl\cf1\f51\fs16\ql result the Company recognized a
loss of Ps. 0.8 million.\cell{
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (iv)\cell\pard\plain\intbl\cf1\f51\fs16\ql On
May\~21, 2004, the Company sold to Desarrolladora El Encuentro S.A. (DEESA) an
undeveloped parcel of land located in Benavidez,
Province\plain\intbl\cf1\f51\fs16\ql of Buenos Aires, in exchange for US$ 980 in
cash and 110 residential\cell{
\
\par\pard\plain
\par\pard\plain
e.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Inventories (continued)\cell{
3\ql \~
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\ql plots to
be subdivided by DEESA in the acquired land which were valued at US$ 3,000. As a
guarantee of the obligations assumed for this\plain\intbl\cf1\f51\fs16\ql
transaction, DEESA set up a first mortgage on the acquired land in favor of the
Company amounting to US$ 3,000 and made a guarantee\plain\intbl\cf1\f51\fs16\ql
payment of US$ 500 to the Company. This balance does not accrue interest and will
be returned as work progresses (50% at the time of\plain\intbl\cf1\f51\fs16\ql
certification of 50% of progress and the remaining upon certification of 90% of
work progress). On December\~26, 2006 the Company\plain\intbl\cf1\f51\fs16\ql
reimbursed US$ 250 of the guarantee deposit to DEESA.\cell{
\par\pard\plain
(v)\cell\pard\plain\intbl\cf1\f51\fs16\ql See Note 2.f.\cell{
\ql \~
\par\pard\plain
(vi)\cell\pard\plain\intbl\cf1\f51\fs16\ql On May\~4, 2006, the Company entered
into a barter agreement with an unrelated party, Koad S.A. (Koad) pursuant to which
the Company\plain\intbl\cf1\f51\fs16\ql exchanged an undeveloped parcel of land of
its property for the future delivery of units of property in a building complex to
be constructed\plain\intbl\cf1\f51\fs16\ql by Koad on the land. Both parties
valued the transaction in US$ 7,500. As consideration for the transaction, Koad
made a down payment of\plain\intbl\cf1\f51\fs16\ql US$ 50 and will settle the
remaining balance through the delivery of 118 apartments and 55 parking units
within a maximum period of 1,188\plain\intbl\cf1\f51\fs16\ql days. However, the
final number of units to be received is subject to certain adjustments, depending
on completion of milestone dates\plain\intbl\cf1\f51\fs16\ql contemplated in the
agreement. Koad encumbered the yet-to-be constructed building with a first-degree
mortgage in favor of the Company\plain\intbl\cf1\f51\fs16\ql in the amount of US$
7,450 and two insurance policies aggregating US$ 2,500.\cell{
s9\ql \~
\par\pard\plain
(vii)\cell\pard\plain\intbl\cf1\f51\fs16\ql Valued at net realizable value.\cell{
7\ql \~
\par\pard\plain
f.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Trade accounts payable:\cell{
8\ql \~
\par\pard\plain
66\trrh0\row}}}
b\cellx9935\trrh172
ow}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Suppliers
Accruals\cell\pard\plain\intbl\cf1\f51\fs13\ql
26,300\cell{
2,904\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Foreign
suppliers\cell\pard\plain\intbl\cf1\f51\fs13\ql
1,024\cell{
734\cell{
ow}}}
63
63\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Debt for the purchase of plot of
land (see Note 4 e.(v))\cell\pard\plain\intbl\cf1\f51\fs13\ql
Ps.\cell\pard\plain\intbl\cf1\f51\fs16\qr \u8212?\~\~\cell{
Suppliers\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Foreign
suppliers\cell\pard\plain\intbl\cf1\f51\fs13\ql
1,010\cell{
Accruals\cell\pard\plain\intbl\cf1\f51\fs13\ql
36\cell{
ow}}}
63
63\row}}}
clvertalc\cellx9934\trrh1245
\
pard\plain\intbl\f0\fs4\par\pard\plain\intbl\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brd
rsp0\par\pard\plain\intbl\f0\fs4\par\intbl\par\pard\plain\intbl\li770\fi-
374\cf1\f51\fs16\ql (i)\~\~\~\~\~Includes accounts payable to merchants for credit
card operations.\par\pard\plain\intbl\cf1\f51\fs27\ql
\~\par\pard\plain\intbl\li374\fi-374\cf1\f51\fs16\b\ql g.\~\~\~\~\~\~Customer
advances:\par\pard\plain\intbl\cf1\f51\fs18\ql
clvertalc\cellx9934\trrh1245\row}}}
b\cellx9935\trrh172
ow}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Admission
rights\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Lease advances
12,302\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Customers
26,520\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Down payment received for the sale
of Rosario plot of land (ii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
2,366\cell{
ow}}}
63
63\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Admission rights (Note
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Lease advances
11,679\cell{
ow}}}
63
\
\par\pard\plain
\par\pard\plain
g.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Customer advances (continued):\cell{
3\ql \~
\par\pard\plain
(i)\cell\pard\plain\intbl\cf1\f51\fs16\ql Lease advances include current and non-
current balances of Ps. 1.2\~million and Ps. 3.7\~million as of June\~30, 2007
respectively, and Ps.\plain\intbl\cf1\f51\fs16\ql 1.2\~million and Ps.
5.0\~million as of June\~30, 2006, respectively, related to advances received from
Hoyts Cinemas (\u8220?Hoyts\u8221?) for\plain\intbl\cf1\f51\fs16\ql the
construction of the movie theater complexes at the Abasto and Alto Noa Shopping
Centers. These advances accrue interest at the\plain\intbl\cf1\f51\fs16\ql six-
month LIBOR plus 2-2.25%. As of June\~30, 2007 the six-month LIBOR was 5.39%. Based
on the agreement between the Company and\plain\intbl\cf1\f51\fs16\ql Hoyts, the
Company settles the advances by offsetting them against lease expense owed by Hoyts
for the spaces it rents. As mentioned in\plain\intbl\cf1\f51\fs16\ql Note 26, as
of June\~30, 2007 includes Ps. 16.3\~million related to advances received from NAI
International II, Inc. for the acquisition of a\plain\intbl\cf1\f51\fs16\ql movie
theater complex and a portion of parking facilities in the Cordoba Shopping.\cell{
s9\ql \~
\par\pard\plain
(ii)\cell\pard\plain\intbl\cf1\f51\fs16\ql As of both June\~30, 2007 and 2006
represents a payment received from Villa Hermosa S.A. in connection with a
preliminary sale contract for\plain\intbl\cf1\f51\fs16\ql a plot of land that is
currently an integral part of the property located in Rosario (Torres de Rosario),
on which the Company plans to build a\plain\intbl\cf1\f51\fs16\ql residential
building. The liability is disclosed net of expenses incurred by the Company on
behalf of Villa Hermosa S.A. The preliminary\plain\intbl\cf1\f51\fs16\ql purchase
contract referred to above was subscribed on December\~9, 2005.\cell{
27\ql \~
\par\pard\plain
h.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Salaries and social security
payable:\cell{
8\ql \~
\par\pard\plain
lx9933\trrh-66\trrh0
lx9933\trrh-66\trrh0\row}}}
b\cellx9935\trrh172
\cellx9933\trrh172
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc 2006\cell{
cfpat12\clcbpat12\cellx9293\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx9933\trrh
206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for vacation and
bonuses\cell\pard\plain\intbl\cf1\f51\fs13\ql
206\row}}}
clvertalb\cellx8375\clvertalb\cellx9074\clvertalb\cellx9293\clvertalb\cellx9933\trr
h206
3,852\cell{
h206\row}}}
206
339\cell{
206\row}}}
b\cellx9933\trrh29
h206
h206\row}}}
rtalb\cellx9933\trrh63
rtalb\cellx9933\trrh63\row}}}
h780
\pard\plain\intbl\cf1\f51\fs27\ql \~\par\pard\plain\intbl\li374\fi-
374\cf1\f51\fs16\b\ql i.\~\~\~\~\~\~\~Short-term and long-term
debt:\par\pard\plain\intbl\cf1\f51\fs18\ql \~\cell\pard\plain\intbl\cf1\f51\fs13\ql
h780\row}}}
b\cellx9935\trrh172
\cellx9933\trrh172
\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc 2006\cell{
206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Short-term
206\row}}}
h206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql IRSA Non-Convertible and Convertible
Notes (i)\cell\pard\plain\intbl\cf1\f51\fs13\ql
Ps.\cell\pard\plain\intbl\cf1\f51\fs16\qr 882\cell{
h206\row}}}
206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Deferred debt issuance costs
206\row}}}
h206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql APSA Non-Convertible and Convertible
Notes (ii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
2,161\cell{
h206\row}}}
206
\u8212?\~\~\cell{
206\row}}}
h206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Collateralized Notes
18,067\cell{
h206\row}}}
206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Uncollateralized Loan Agreement
11,116\cell{
206\row}}}
h206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Seller financings
12,934\cell{
h206\row}}}
206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql HASA collateralized loan (Note
783\cell{
206\row}}}
h206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Bank overdrafts including accrued
interests\cell\pard\plain\intbl\cf1\f51\fs13\ql
52,208\cell{
h206\row}}}
206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql APSA Syndicated Loan
25,582\cell{
206\row}}}
b\cellx9933\trrh29
h206
h206\row}}}
206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Long-term
206\row}}}
h206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql IRSA Non-Convertible and Convertible
Notes (i)\cell\pard\plain\intbl\cf1\f51\fs13\ql
h206\row}}}
206
\u8212?\~\~\cell{
206\row}}}
h206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql APSA Non-Convertible and Convertible
Notes (ii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
47,812\cell{
h206\row}}}
206
\u8212?\~\~\cell{
206\row}}}
h206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Seller financing
h206\row}}}
206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Collateralized Notes
79,265\cell{
206\row}}}
h206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Uncollateralized Loan Agreement
48,749\cell{
h206\row}}}
206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql HASA collateralized loan (Note
18,516\cell{
206\row}}}
h206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Uncollateralized loans
98\cell{
h206\row}}}
b\cellx9933\trrh29
206
206\row}}}
h482
\
374\cf1\f51\fs16\ql (i)\~\~\~\~\~See Note 10 for details of the issuance of IRSA
Notes.\cell\pard\plain\intbl\cf1\f51\fs13\ql
h482\row}}}\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-29
\
\par\pard\plain
\par\pard\plain
i.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Short-term and long-term debt
(continued):\cell{
3\ql \~
\par\pard\plain
(ii)\cell\pard\plain\intbl\cf1\f51\fs16\ql In May 2007, APSA issued an aggregate
amount of US$ 170.0\~million of non-convertible notes (the APSA Non-Convertible
Notes) under\plain\intbl\cf1\f51\fs16\ql the Global Program for up to US$
200\~million authorized by the CNV on April\~19, 2007. The APSA Non-Convertible
Notes were issued at\plain\intbl\cf1\f51\fs16\ql par in two series. Out of the
total amount, US$ 120.0\~million were issued as Series I of APSA Non-Convertible
Notes due May\~11, 2017 and\plain\intbl\cf1\f51\fs16\ql Ps. 154.0\~million
(equivalent to US$ 50.0 million) were issued as Series II of APSA Non-Convertible
Notes due June\~11, 2012. Series I bear\plain\intbl\cf1\f51\fs16\ql interest at a
fixed rate of 7.875%\~per annum and Series II bear interest at a fixed rate of
11.0%\~per annum. Series I of APSA\plain\intbl\cf1\f51\fs16\ql Non-Convertible
Notes pay interest in cash semi-annually in arrears on May\~11 and November\~11 of
each year, beginning on November\~11,\plain\intbl\cf1\f51\fs16\ql 2007. Series II
of APSA Non-Convertible Notes pay interest in cash semi-annually in arrears on
June\~11 and December\~11 of each year,\plain\intbl\cf1\f51\fs16\ql beginning on
December\~11, 2007. Principal on the Series I APSA Non-Convertible Notes is fully
paid at maturity while principal on the\plain\intbl\cf1\f51\fs16\ql Series II APSA
Non-Convertible Notes is paid semi-annually in seven equal and consecutive
installments beginning on June\~11, 2009.\cell{
{\trowd\clvertalc\cellx432\cellx864\cellx10800\trrh1856\row}}}\pard\plain\li176\sb8
8\cf1\f51\fs16\ql On August\~20, 2002, the Company\u8217?s subsidiary, APSA, issued
an aggregate amount of US$ 50\~million of uncollateralized
convertible\plain\cf1\f51\fs16\ql notes (the \u8220?APSA Convertible Notes\u8221?)
in exchange for cash and the settlement of certain liabilities. The issuance was
approved\plain\cf1\f51\fs16\ql by the meeting of shareholders on December\~4, 2001
and subsequently by the CNV on March\~15, 2002. The issuance was authorized
for\plain\cf1\f51\fs16\ql listing on the Buenos Aires Stock Exchange on July\~8,
2002. Proceeds from the issuance were used to repay certain short-term
debt\plain\cf1\f51\fs16\ql aggregating Ps. 27.3\~million and the redemption of
previously issued APSA Senior Notes for a principal amount of Ps. 52.8 million.
The\plain\cf1\f51\fs16\ql APSA Convertible Notes accrue interest at a fixed annual
interest rate of 10% payable semi-annually, are convertible at any time at
the\plain\cf1\f51\fs16\ql option of the holder into common shares of APSA of Ps.
0.10 par value per share and originally matured on July\~19, 2006. A meeting
of\plain\cf1\f51\fs16\ql noteholders resolved to extend the maturity date of the
APSA Convertible Notes through July\~19, 2014 although the remaining terms
and\plain\cf1\f51\fs16\ql conditions were left unchanged. Argentine GAAP requires
that an exchange of debt instruments with substantially different terms
be\plain\cf1\f51\fs16\ql considered a debt extinguishment and that the old
instrument be derecognized. Argentine GAAP clarifies that from a debtor\u8217?
s\plain\cf1\f51\fs16\ql perspective, an exchange of debt instruments between, or a
modification of a debt instrument by, a debtor and a creditor shall be deemed
to\plain\cf1\f51\fs16\ql have been accomplished with debt instruments that are
substantially different if the present value of the cash flows under the terms of
the\plain\cf1\f51\fs16\ql new debt instrument is at least 10 percent different
from the present value of the remaining cash flows under the terms of the
original\plain\cf1\f51\fs16\ql instrument. The new debt instrument should be
initially recorded at fair value and that amount should be used to determine the
debt\plain\cf1\f51\fs16\ql extinguishment gain or loss to be recognized. Fair
value should be determined by the present value of the future cash flows to be paid
under\plain\cf1\f51\fs16\ql the terms of the new debt instrument discounted at a
rate commensurate with the risks of the debt instrument and time value of money. If
it\plain\cf1\f51\fs16\ql is determined that the original and new debt instruments
are not substantially different, then a new effective interest rate is to be
determined\plain\cf1\f51\fs16\ql based on the carrying amount of the original debt
instrument and the revised cash flows. Based on the analysis performed, the
Company\plain\cf1\f51\fs16\ql concluded that the instruments were not
substantially different and accordingly, the old instrument was not derecognized.
The outstanding\plain\cf1\f51\fs16\ql balance was reclassified as non-current in
these consolidated financial statements. The outstanding balance of the APSA
Convertible Notes as\plain\cf1\f51\fs16\ql of June\~30, 2007 amounts to US$
47.2\~million, of which US$ 31.7\~million is held by the Company. Accordingly,
balances shown reflect\plain\cf1\f51\fs16\ql amount held by third parties after
intercompany eliminations.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
(iii)\cell\pard\plain\intbl\cf1\f51\fs16\ql In November 2002 the Company completed
the refinancing of the financial debts for US$ 117 million. The restructuring
comprised a cash\plain\intbl\cf1\f51\fs16\ql settlement \u8211?of US$
13.6\~million and new debt instruments in exchange for the balance. As a result,
the Company issued US$\plain\intbl\cf1\f51\fs16\ql 37.4\~million Collateralized
Notes, a US$ 51\~million Uncollateralized Loan Agreement and US$ 15\~million of
IRSA Convertible Notes.\cell{
{\trowd\clvertalc\cellx432\cellx864\cellx10800\trrh619\row}}}\pard\plain\li176\sb88
\cf1\f51\fs16\ql The Company issued US$ 37.4\~million Collateralized Notes which
are due on November\~20, 2009 (the \u8220?Collateralized
Notes\u8221?).\plain\cf1\f51\fs16\ql The Collateralized Notes bear interest at 3-
month LIBOR plus 200 basis points. Interest is payable quarterly, having commenced
in February\plain\cf1\f51\fs16\ql 2003. Under Argentine GAAP, the new debt
instrument was discounted using an 8% interest rate. The terms of the
Collateralized Notes\plain\cf1\f51\fs16\ql require the Company to maintain certain
financial ratios and conditions, specific debt/equity ratios; moreover, they also
restrict certain\plain\cf1\f51\fs16\ql investments, the making of payments, the
procurement of new loans and the sale of certain assets and other capital
investments. In addition,\plain\cf1\f51\fs16\ql the Company has mortgaged certain
real estate properties (See Note 13 for details). The outstanding balance of the
Collateralized Notes\plain\cf1\f51\fs16\ql amounts to US$ 21.7\~million
(equivalent to US$ 26.1\~million discounted at an interest rate of 8%). The
Uncollateralized Loan Agreement due\plain\cf1\f51\fs16\ql November\~20, 2009
payable in 20 quarterly equal installments having commencing in February 2005. The
Uncollateralized Loan Agreement\plain\cf1\f51\fs16\ql accrues interest at
differentiated rates as follows: US$ 35\~million of principal amount accrues
interest at 3-month LIBOR plus 200 basis\plain\cf1\f51\fs16\ql points while the
remaining US$ 16\~million of principal amount accrues interest at a fixed rate that
is progressively increased. Interest is\plain\cf1\f51\fs16\ql payable quarterly
having commenced in February 2003. The Uncollateralized Loan Agreement contains
similar restrictions and\par\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
\par\pard\plain
i.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Short-term and long-term debt
(continued)\cell{
3\ql \~\par\pard\plain\li176\cf1\f51\fs16\ql covenants as the Collateralized Notes.
On July\~25, 2003 the Company redeemed the mentioned US$ 16\~million for US$ 10.9
million. In\plain\cf1\f51\fs16\ql addition, on March\~17, 2004, the Company
redeemed US$ 12\~million for a total amount of US$ 8.6 million. Additionally, the
Company\plain\cf1\f51\fs16\ql settled ten installments amounting to US$ 6.9
million. As of June\~30, 2007, the outstanding balance of the Uncollateralized Loan
Agreement\plain\cf1\f51\fs16\ql amounts to US$ 13.4\~million (equivalent to US$
16.1\~million discounted at the interest rate of 8%).\par\pard\plain\cf1\f51\fs9\ql
\~
\par\pard\plain
(iv)\cell\pard\plain\intbl\cf1\f51\fs16\ql On April\~5, 2005 Banco Rio de la Plata
S.A. and Bank Boston N.A. granted the Company a syndicated loan in a total amount
of Ps.\plain\intbl\cf1\f51\fs16\ql 50\~million, which will be amortized in four
six-month equal and consecutive installments beginning on October\~5, 2005. The
syndicated loan\plain\intbl\cf1\f51\fs16\ql accrued interest at a 7.875% fixed
rate during the first year and accrues interest at a variable rate (Encuesta) plus
3% during the second year\plain\intbl\cf1\f51\fs16\ql payable quarterly as from
July 2005. The terms and conditions of the syndicated loan include various
restrictive covenants, which among\plain\intbl\cf1\f51\fs16\ql other things
require the Company to maintain certain financial ratios. Proceeds from this loan
were used to repay the balance of the Notes at\plain\intbl\cf1\f51\fs16\ql their
maturity for Ps. 48.4\~million originally issued for an amount Ps. 85 million. On
April\~9, 2007 the total amount of the debt was\plain\intbl\cf1\f51\fs16\ql
cancelled.\cell{
s9\ql \~
\par\pard\plain
(v)\cell\pard\plain\intbl\cf1\f51\fs16\ql The balance as of June\~30, 2007 mainly
includes: (a)\~Ps. 18.6\~million of the amount owed for the acquisition of the
shareholding of Empalme\plain\intbl\cf1\f51\fs16\ql S.A.I.C.F.A. y G. This loan
accrues 6% nominal annual interest, payable in 3 installments of US$ 2.0\~million
each, due on December\~22,\plain\intbl\cf1\f51\fs16\ql 2007;\~June\~19, 2008 and
December\~16, 2008. On June\~25, the first installment was paid; (b)\~US$
9.0\~million related to the purchase of 33.33%\plain\intbl\cf1\f51\fs16\ql of the
shareholding of Palermo Invest (See note 2.f.) and (c)\~US$ 16.9\~million related
to the purchase of parcels of land in Vicente Lopez\plain\intbl\cf1\f51\fs16\ql
(See note 4.e.(v)).\cell{
s9\ql \~
\par\pard\plain
(vi)\cell\pard\plain\intbl\cf1\f51\fs16\ql Mainly includes the banking and
financial loans accounts include a loan from Banco de la Ciudad de Buenos Aires to
Tarshop S.A. for Ps.\plain\intbl\cf1\f51\fs16\ql 5.0\~million, which is secured by
Certificates of Participation related to the Fideicomisos Financieros Tarjeta
Shopping Series XII, XIV, XVI\plain\intbl\cf1\f51\fs16\ql and XVIII. Additionally,
Certificates of Participation related to Fideicomisos Financieros Tarjeta Shopping
Series XXI, XXIII, XXV and\plain\intbl\cf1\f51\fs16\ql XXVI for Ps. 11.7\~million
were granted as a pledge to the Standard Bank (formerly Bank Boston N.A.) as
guarantee.\cell{
27\ql \~
\par\pard\plain
j.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Taxes payable:\cell{
8\ql \~
\par\pard\plain
66\trrh0\row}}}
b\cellx9934\trrh172
ow}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Income tax provision,
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql VAT
5,676\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gross revenue
3,217\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Income tax
withholdings\cell\pard\plain\intbl\cf1\f51\fs13\ql
1,045\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for tax on
shareholders\u8217? personal assets\cell\pard\plain\intbl\cf1\f51\fs13\ql
3,150\cell{
4,061\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql VAT
withholdings\cell\pard\plain\intbl\cf1\f51\fs13\ql
555\cell{
877\cell{
ow}}}
63
63\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Deferred income tax (Note
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gross revenue
2,881\cell{
ow}}}
63
\
\par\pard\plain
\par\pard\plain
k.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Other liabilities:\cell{
8\ql \~
\par\pard\plain
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Accrual for directors fees, net of
advances paid (Note 11) (iii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for contingencies (Note
29.c.) (i)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for donations committed
(Note 11)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Contributed leasehold improvements
\~\cell{
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for contingencies (Note
29.c.) (i)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Contributed leasehold improvements
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Present value \u8211? other
\~\cell{
\~\cell{
{\trowd\trqc\cellx9292\cellx9935\trrh3737
\
374\cf1\f51\fs16\ql (i)\~\~\~\~\~This reserve relates to labor, tax and other
miscellaneous matters. This balance also includes reserves the claims related
to\plain\intbl\cf1\f51\fs16\ql Shopping Neuqu\u233?n further discussed in Note 20
and the Llao Llao litigation further discussed in Note 21. In the
opinion\plain\intbl\cf1\f51\fs16\ql of management and based on consultation with
external legal counsel, the Company has established provisions for
amounts\plain\intbl\cf1\f51\fs16\ql which are probable of adverse occurrence and
which, according to estimates developed by the Company\u8217?s legal
counsel,\plain\intbl\cf1\f51\fs16\ql would meet all related contingencies and
corresponding fees relating to these claims. The classification of contingency
reserves\plain\intbl\cf1\f51\fs16\ql as non-current liabilities was based on a
review of the current facts and circumstances and consultation with external
legal\plain\intbl\cf1\f51\fs16\ql counsel. Management reassesses these matters as
new facts are brought into management\u8217?s
attention.\par\pard\plain\intbl\cf1\f51\fs9\ql \~\par\pard\plain\intbl\li374\fi-
374\cf1\f51\fs16\ql (ii)\~\~\~\~Contributed leasehold improvements relate to
improvements made by tenants in Abasto Shopping Center and Mendoza
Plaza\plain\intbl\cf1\f51\fs16\ql Shopping. Leasehold improvements are recorded as
fixed assets based on construction costs incurred with a
corresponding\plain\intbl\cf1\f51\fs16\ql deferred liability. Leasehold
improvements are amortized to income over the term of the leases. Such
amortization, net of the\plain\intbl\cf1\f51\fs16\ql related depreciation of the
leasehold improvement, was not significant for the years ended June\~30, 2007 and
2006.\par\pard\plain\intbl\cf1\f51\fs9\ql \~\par\pard\plain\intbl\li374\fi-
374\cf1\f51\fs16\ql (iii)\~\~Net of advances for Ps. 1,375 and Ps. 325 for the
years ended June\~30, 2007 and 2006.\par\pard\plain\intbl\cf1\f51\fs27\ql
\~\par\pard\plain\intbl\li374\fi-374\cf1\f51\fs16\b\ql l.\~\~\~\~\~\~\~Mortgage
payables\par\pard\plain\intbl\cf1\f51\fs18\ql \~\cell\pard\plain\intbl\li374\fi-
374\cf1\f51\fs16\ql \~\~\~\~\~\~\~\~\~\~\~\~\~\~\par\pard\plain\intbl\li374\fi-
374\cf1\f51\fs16\ql \~\~\~\~\~\~\~\~\~\~\par\pard\plain\intbl\li374\fi-
374\cf1\f51\fs16\ql \~\~\~\~\par\pard\plain\intbl\li374\fi-374\cf1\f51\fs16\b\ql
\~\~\~\~\~\~\~\~\~\cell{
{\trowd\trqc\cellx9292\cellx9935\trrh3737\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage payable Bouchard 710 (Note
13) (i)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage payable San Mart\u237?n de
Tours (Note 13)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage payable Llao Llao (Note
\~\cell{
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage payable Llao Llao (Note
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Mortgage payable Bouchard 710 (Note
13) (i)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
\~\cell{
rtalb\cellx9290\clvertalc\cellx9933\trrh63\row}}}\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
\par\pard\plain
l.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Mortgage payables (continued)\cell{
3\ql \~
\par\pard\plain
(i)\cell\pard\plain\intbl\cf1\f51\fs16\ql On July\~1, 2005 the Company paid the
first installment of the mortgage for the purchase of the Bouchard 710 Building for
US$ 422. Also on\plain\intbl\cf1\f51\fs16\ql July\~26, 2005 the Company modified
one of the contract clauses of such mortgage, by which a partial anticipated
cancellation of US$ 3,203\plain\intbl\cf1\f51\fs16\ql was made and agreed to pay
the remaining price balance of US$ 13,625 in 34 equal, monthly and consecutive
installments of US$ 452 each\plain\intbl\cf1\f51\fs16\ql (interest according to
the French system were included with an annual rate of 8.5%). As of June\~30, 2007
the company has cancelled twenty\plain\intbl\cf1\f51\fs16\ql three principal
installments for an amount of US$ 8,854, being the balance of principal US$
4,771.\cell{
s27\ql \~
\par\pard\plain
Shareholders\u8217? equity\cell{
\par\pard\plain
a.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Common stock\cell{
cf1\f51\fs16\ql As of June\~30, 2007, the Company had 464,969,156 authorized and
outstanding shares of common stock, having a par value of Ps. 1.0\~per
share.\plain\cf1\f51\fs16\ql Holders of the common stock are entitled to one vote
for each share held of record on all matters submitted to a vote of shareholders.
Following is a\plain\cf1\f51\fs16\ql detail of the activity during the years ended
June\~30, 2005, 2006 and 2007:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
cellx3674\clvertalb\cellx3932\clvertalc\cellx4225\clvertalc\cellx4848\clvertalb\cel
lx5106\clvertalc\cellx5432\clvertalc\cellx6055\clvertalc\cellx6150\clvertalb\cellx6
lx5106\clvertalc\cellx5432\clvertalc\cellx6055\clvertalc\cellx6150\clvertalb\cellx6
\cellx8701\clvertalb\cellx8959\clvertalb\cellx9932\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Common
Approved by\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx8701\clvertalb\cellx8959\clvertalb\cellx9932\trrh172\row}}}
\cellx5106\clbrdrb\brdrs\brdrcf1\clvertalb\cellx6055\clvertalb\cellx6150\clvertalb\
cellx6402\clbrdrb\brdrs\brdrcf1\clvertalb\cellx7042\clvertalb\cellx7322\clbrdrb\brd
rs\brdrcf1\clvertalb\cellx8698\clvertalb\cellx8956\clbrdrb\brdrs\brdrcf1\clvertalb\
cellx9929\trrh533
Shares\par\pard\plain\intbl\cf1\f51\fs13\b\qc
Par\~value\cell\pard\plain\intbl\cf1\f51\fs13\ql
Additional\par\pard\plain\intbl\cf1\f51\fs13\b\qc paid-
in-\par\pard\plain\intbl\cf1\f51\fs13\b\qc
capital\cell\pard\plain\intbl\cf1\f51\fs13\ql
Body\cell\pard\plain\intbl\cf1\f51\fs13\ql
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc registration\cell{
\cellx5106\clbrdrb\brdrs\brdrcf1\clvertalb\cellx6055\clvertalb\cellx6150\clvertalb\
cellx6402\clbrdrb\brdrs\brdrcf1\clvertalb\cellx7042\clvertalb\cellx7322\clbrdrb\brd
rs\brdrcf1\clvertalb\cellx8698\clvertalb\cellx8956\clbrdrb\brdrs\brdrcf1\clvertalb\
{\trowd\trqc\clvertalb\cellx2282\clvertalb\cellx2540\clvertalb\cellx2759\clvertalb\
cellx3674\clvertalb\cellx3932\clvertalb\cellx4225\clvertalb\cellx4848\clvertalb\cel
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Balances as of June\~30,
\~\cell{
\brdrdb\brdrcf1\clvertalb\cellx4225\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx4848\clve
rtalb\cellx5106\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx5432\clbrdrt\brdrdb\brdrcf1\c
lvertalb\cellx6055\clvertalc\cellx6150\clvertalb\cellx6402\clvertalb\cellx7042\clve
rtalb\cellx7322\clvertalb\cellx8698\clvertalb\cellx8956\clvertalb\cellx9929\trrh63
\~\cell{
rtalb\cellx7322\clvertalb\cellx8698\clvertalb\cellx8956\clvertalb\cellx9929\trrh63\
row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Conversion of debt
into\plain\intbl\cf1\f51\fs16\ql common shares (Note
10.a)\cell\pard\plain\intbl\cf1\f51\fs13\ql
Board of\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc September\~30,
December\~30,\~2004;\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc February\~13,\cell{
402\cellx7042\clvertalb\cellx7322\clvertalb\cellx8698\clvertalb\cellx8956\cellx9929
\trrh1213
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Exercise of warrants (Note
Directors
Meeting\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc March 31,
\par\pard\plain\intbl\fs16\par\pard\plain\intbl\cf1\f51\fs16\qc June 30, 2005
\par\pard\plain\intbl\fs16\cell\pard\plain\intbl\cf1\f51\fs13\ql
402\cellx7042\clvertalb\cellx7322\clvertalb\cellx8698\clvertalb\cellx8956\cellx9929
\trrh1213\row}}}
rdrs\brdrcf1\clvertalb\cellx4225\clbrdrt\brdrs\brdrcf1\clvertalb\cellx4848\clvertal
b\cellx5106\clbrdrt\brdrs\brdrcf1\clvertalb\cellx5432\clbrdrt\brdrs\brdrcf1\clverta
lb\cellx6055\clvertalc\cellx6150\clvertalb\cellx6402\clvertalb\cellx7042\clvertalb\
cellx7322\clvertalb\cellx8698\clvertalb\cellx8956\clvertalb\cellx9929\trrh29
\~\cell{
cellx7322\clvertalb\cellx8698\clvertalb\cellx8956\clvertalb\cellx9929\trrh29\row}}}
\~\cell{
\~\cell{
row}}}
\~\cell{
Board of
\par\pard\plain\intbl\fs16\par\pard\plain\intbl\cf1\f51\fs16\qc
Directors\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc January 17,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc February 3,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc February
20,\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc February 13,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc December 5,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc November\~29,\cell{
402\cellx7042\clvertalb\cellx7322\cellx8698\clvertalb\cellx8956\cellx9929\trrh1626
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Appropriation of
accumulated\plain\intbl\cf1\f51\fs16\ql deficit approved
by\plain\intbl\cf1\f51\fs16\ql shareholders meeting
held\plain\intbl\cf1\f51\fs16\ql 11/29/05\cell\pard\plain\intbl\cf1\f51\fs13\ql
ql \~\cell\pard\plain\intbl\cf1\f51\fs16\qc
Meeting\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc March 30,
\par\pard\plain\intbl\fs16\par\pard\plain\intbl\cf1\f51\fs16\qc April 17,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc September
29,\plain\intbl\cf1\f51\fs16\qc 2006
\par\pard\plain\intbl\fs16\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc 2006
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc 2007\cell{
402\cellx7042\clvertalb\cellx7322\cellx8698\clvertalb\cellx8956\cellx9929\trrh1626\
row}}}
\~\cell{
\~\cell{
\~\cell{
row}}}
Board of\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc September, 29,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc 2006, January 11,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc April 11, June 29
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\qc November\plain\intbl\cf1\f51\fs16\qc
29,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc 2006,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc June 26,
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc 2007.
\par\pard\plain\intbl\fs16\par\pard\plain\intbl\cf1\f51\fs16\qc 11,412 shares
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc are pending
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs16\qc registration.\cell{
402\cellx7042\clvertalb\cellx7322\clvertalb\cellx8698\clvertalb\cellx8956\clvertalb
\cellx9929\trrh413
Directors
Meeting\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell{
402\cellx7042\clvertalb\cellx7322\clvertalb\cellx8698\clvertalb\cellx8956\clvertalb
\~\cell{
\~\cell{
\~\cell{
row}}}\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
b.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Inflation adjustment of common
stock\cell{
cf1\f51\fs16\ql As mentioned in Note 2.c. the Company\u8217?s consolidated
financial statements were prepared on the basis of general price-level
accounting\plain\cf1\f51\fs16\ql which reflected changes in the purchase price of
the peso in the historical financial statements through February\~28, 2003. The
inflation adjustments\plain\cf1\f51\fs16\ql related to common stock and treasury
stock were appropriated to inflation adjustment reserves that form part of
shareholders\u8217? equity. According to\plain\cf1\f51\fs16\ql CNV Rules,
the\par\pard\plain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-33
\
\par\pard\plain
Shareholders\u8217? equity (continued)\cell{
\par\pard\plain
b.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Inflation adjustment of common stock
(continued)\cell{
3\ql \~\par\pard\plain\cf1\f51\fs16\ql balances of the inflation adjustment
reserves may be applied only towards the issuance of common stock to shareholders
of the Company.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
c.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Restriction on the distribution of
profits\cell{
cf1\f51\fs16\ql In accordance with the Argentine Corporations Law and the
Company\u8217?s By-laws, 5% of the net and realized profit for the year calculated
in\plain\cf1\f51\fs16\ql accordance with Argentine GAAP plus (less) prior year
adjustments must be appropriated by resolution of the shareholders to a legal
reserve until such\plain\cf1\f51\fs16\ql reserve equals 20% of the Company\u8217?s
outstanding capital (including inflation adjustment). This legal reserve may be
used only to absorb losses.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql By virtue of
the Company\u8217?s Uncollateralized Loan Agreement for US$ 51\~million and
Collateralized Notes to become mature in November\plain\cf1\f51\fs16\ql 2009,
there are certain restrictions as regards payment of dividend and distributions or
re-purchase of debt or shares (\u8220?Restricted
Payments\u8221?).\plain\cf1\f51\fs16\ql Restricted Payment will be done if the
conditions that follow are complied with: (i)\~that at the time of becoming
effective and as a consequence of same\plain\cf1\f51\fs16\ql it did not happen nor
it happen an assumption of non-compliance, and (ii)\~that during the previous
calculation period it does not happen a violation of the\plain\cf1\f51\fs16\ql
financial commitments assumed by virtue of the above-mentioned
contracts.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
d.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Reserve for new developments\cell{
cf1\f51\fs16\ql Pursuant to a resolution of the Inspecci\u243?n General de
Justicia, companies should indicate the intended use of the accumulated retained
earnings\plain\cf1\f51\fs16\ql balance of the period. Accordingly, a special
reserve labeled as \u8220?Reserve for New Developments\u8221? is created. The
accumulated retained\plain\cf1\f51\fs16\ql earnings balance is transferred to this
equity account. This reclassification has no impact on the total shareholders
equity of the Company.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
Segment information\cell{
Company is required to disclose segment information in accordance with RT 18. RT 18
establishes standards for reporting information about\plain\cf1\f51\fs16\ql
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial
reports\plain\cf1\f51\fs16\ql issued to shareholders. Operating segments are
components of a company about which separate financial information is available
that is regularly\plain\cf1\f51\fs16\ql evaluated by the chief operating decision
maker(s) in deciding how to allocate resources and assess performance. The
statement also establishes standards\plain\cf1\f51\fs16\ql for related disclosures
about a company\u8217?s products and services, geographical areas and major
customers. The Company has determined that its\plain\cf1\f51\fs16\ql reportable
segments are those that are based on the Company\u8217?s method of internal
reporting. Accordingly, the Company has six reportable\plain\cf1\f51\fs16\ql
segments. These segments are Development and Sale of Properties, Office and Other
Non-Shopping Center Rental Properties, Shopping Centers,
Credit\plain\cf1\f51\fs16\ql Card Operations, Hotel Operations and Financial
Operations and Others.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql A general
description of each segment follows:\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Development and Sale of Properties\cell{
b198\fi462\cf1\f51\fs16\ql This segment includes the operating results of the
Company\u8217?s construction and ultimate sale of residential buildings
business.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Office and Other Non-Shopping Center
Rental Properties\cell{
Company\u8217?s lease and service revenues of office space and other non-retail
building\plain\cf1\f51\fs16\ql properties from
tenants.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Shopping Centers\cell{
Company\u8217?s shopping centers principally comprised of lease and service
revenues from\plain\cf1\f51\fs16\ql tenants.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Credit Card Operations\cell{
b198\fi462\cf1\f51\fs16\ql This segment includes the operating result from
operations with credit cards, which include commissions, financing income, charges
to users by life\plain\cf1\f51\fs16\ql and incapacity insurance and
accounts\u8217? summaries, among others.\par\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
Segment information (continued)\cell{
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Hotel Operations\cell{
Company\u8217?s hotels principally comprised of room, catering and restaurant
revenues.\par\pard\plain\cf1\f51\fs9\ql \~
\par\pard\plain
\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Financial Operations and Others\cell{
b198\fi462\cf1\f51\fs16\ql This segment primarily includes revenues and associated
costs generated from the sale of equity securities, other securities-related
transactions and\plain\cf1\f51\fs16\ql other non-core activities of the Company.
This segment also includes the gains or losses on in equity investees of the
Company relating to the banking\plain\cf1\f51\fs16\ql
activity.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql Inter-segment transactions, if
any, are accounted for at current market prices. The Company evaluates performance
of its segments and allocates\plain\cf1\f51\fs16\ql resources to them based on
operating income. The Company is not dependent on any single
customer.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql The accounting policies of the
segments are the same as those described in Note
3.\par\pard\plain\sb198\cf1\f51\fs16\ul\ql As of and for the year ended June\~30,
2007\plain\cf1\f51\fs16\ql :\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
rtalc\cellx6909\clvertalb\cellx7065\clvertalc\cellx7387\clvertalc\cellx8027\clverta
lc\cellx8122\clvertalb\cellx8278\clvertalc\cellx8729\clvertalc\cellx9477\clvertalc\
cellx9572\clvertalb\cellx9728\clvertalc\cellx9947\clvertalc\cellx10695\clvertalc\ce
llx10790\trrh-66\trrh0
llx10790\trrh-66\trrh0\row}}}
Office and
other\~non-\par\pard\plain\intbl\cf1\f51\fs13\b\qc shopping
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc center\~rental
properties\~(a)\cell\pard\plain\intbl\cf1\f51\fs13\ql
Shopping
Credit\~card
Hotel
Financial
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc operations\~and
at12\cellx10695\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10790\trrh206
at12\cellx10695\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx10790\trrh206\row}}}
clvertalb\cellx9728\clvertalb\cellx9947\clvertalb\cellx10695\clvertalb\cellx10790\t
rrh206
)\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\ql
rrh206\row}}}
278\clbrdrt\brdrs\brdrcf1\clvertalb\cellx8729\clbrdrt\brdrs\brdrcf1\clvertalb\cellx
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Gross profit
P\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
17,928\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
608\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
427,109\cell\pard\plain\intbl\cf1\f51\fs16\b\ql \~\cell{
rrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gain from valuation
of\plain\intbl\cf1\f51\fs16\ql inventories at net\plain\intbl\cf1\f51\fs16\ql
realizable value\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh619\row}}}
rrh206
rrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net income
from\plain\intbl\cf1\f51\fs16\ql retained interest in\plain\intbl\cf1\f51\fs16\ql
securitized receivables\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh825
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql (Loss) Gain
from\plain\intbl\cf1\f51\fs16\ql operations and\plain\intbl\cf1\f51\fs16\ql
holdings of real estate\plain\intbl\cf1\f51\fs16\ql assets,
rrh825\row}}}
\~\cell{
608\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
rrh413
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Amortization
of\plain\intbl\cf1\f51\fs16\ql goodwill\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh413\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql (Loss) Gain on
equity\plain\intbl\cf1\f51\fs16\ql investees\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh206
rrh206\row}}}
(expenses)\plain\intbl\cf1\f51\fs16\ql income,
\~\cell{
rrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql (Loss) Income
before\plain\intbl\cf1\f51\fs16\b\ql taxes and
minority\plain\intbl\cf1\f51\fs16\b\ql
(1,116\cell\pard\plain\intbl\cf1\f51\fs16\b\ql )\cell\pard\plain\intbl\cf1\f51\fs13
\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
rrh619\row}}}
rrh206
rrh206\row}}}
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Net (loss)
(12,906\cell\pard\plain\intbl\cf1\f51\fs16\b\ql )\cell\pard\plain\intbl\cf1\f51\fs1
3\ql \~\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
rrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Acquisitions of
fixed\plain\intbl\cf1\f51\fs16\ql assets and
intangible\plain\intbl\cf1\f51\fs16\ql
rrh619\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Depreciation
and\plain\intbl\cf1\f51\fs16\ql amortization
(b)\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh619
investments\plain\intbl\cf1\f51\fs16\ql in affiliated\plain\intbl\cf1\f51\fs16\ql
rrh619\row}}}
rrh206
rrh206\row}}}
\~\cell{
\~\cell{
rrh206
rrh206\row}}}
\~\cell{
rrh206
rrh206\row}}}
\~\cell{
947\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10695\clvertalc\cellx10790\trrh29\row}}}\p
ard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard
\plain\f0\fs4\par
\par\pard\plain
\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (b)\cell\pard\plain\intbl\cf1\f51\fs16\ql
\
\par\pard\plain
\~\par\pard\plain\cf1\f51\fs16\ul\ql As of and for the year ended June\~30,
2006\plain\cf1\f51\fs16\ql :\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
llx10787\trrh-66\trrh0
llx10787\trrh-66\trrh0\row}}}
Office and
other\~non-\par\pard\plain\intbl\cf1\f51\fs13\b\qc shopping
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc center\~rental
properties\~(a)\cell\pard\plain\intbl\cf1\f51\fs13\ql
Shopping
Credit\~card
Hotel
Financial
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc operations\~and
rrh206
rrh206\row}}}
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Gross
56\cell\pard\plain\intbl\cf1\f51\fs16\b\ql \~\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell\pard\plain\intbl\cf1\f51\fs16\b\ql
rrh619
rrh619\row}}}
rrh206
rrh206\row}}}
securitized receivables\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gain from
operations\plain\intbl\cf1\f51\fs16\ql and holdings of
real\plain\intbl\cf1\f51\fs16\ql estate assets,
rrh619\row}}}
\~\cell{
56\cell\pard\plain\intbl\cf1\f51\fs16\b\ql \~\cell\pard\plain\intbl\cf1\f51\fs13\ql
rrh206
rrh206\row}}}
rrh206
rrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Other expenses,
\~\cell{
rrh413
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Income before
taxes\plain\intbl\cf1\f51\fs16\b\ql and minority
rrh413\row}}}
rrh206
rrh206\row}}}
\~\cell{
rrh619
rrh619\row}}}
rrh413
investments\plain\intbl\cf1\f51\fs16\ql in affiliated
rrh413\row}}}
96\trrh-66\trrh0
rrh206
rrh206\row}}}
\~\cell{
\~\cell{
rrh206
rrh206\row}}}
\~\cell{
rrh206
rrh206\row}}}
\~\cell{
986\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10692\clvertalc\cellx10787\trrh29\row}}}\p
ard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\pard
\plain\f0\fs4\par
\par\pard\plain
\pard\plain
\
\par\pard\plain
\~\par\pard\plain\cf1\f51\fs16\ul\ql As of and for the year ended June\~30,
\par\pard\plain
cellx9635\clvertalb\cellx9786\clvertalc\cellx10005\clvertalc\cellx10691\clvertalc\c
ellx10786\trrh-66\trrh0
cellx9635\clvertalb\cellx9786\clvertalc\cellx10005\clvertalc\cellx10691\clvertalc\c
ellx10786\trrh-66\trrh0\row}}}
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Development\~and
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc sale of
Office and
Shopping
Credit\~card
Hotel\~operations\cell\pard\plain\intbl\cf1\f51\fs13\ql
Financial
and\~others\cell\pard\plain\intbl\cf1\f51\fs13\ql
rtalb\clshdng100\clcfpat12\clcbpat12\cellx10005\clvertalb\clshdng100\clcfpat12\clcb
Ps.\cell\pard\plain\intbl\cf1\f51\fs16\qr 940\cell\pard\plain\intbl\cf1\f51\fs16\ql
clvertalb\cellx9786\clvertalb\cellx10005\clvertalb\cellx10691\clvertalb\cellx10786\
trrh206
trrh206\row}}}
\~\cell{
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Gross profit
(39\cell\pard\plain\intbl\cf1\f51\fs16\b\ql )\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh619
trrh619\row}}}
trrh206
trrh206\row}}}
trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gain from
operations\plain\intbl\cf1\f51\fs16\ql and holdings of
real\plain\intbl\cf1\f51\fs16\ql estate assets,
trrh619\row}}}
\~\cell{
income\plain\intbl\cf1\f51\fs16\b\ql
(39\cell\pard\plain\intbl\cf1\f51\fs16\b\ql )\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh413
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Amortization
of\plain\intbl\cf1\f51\fs16\ql goodwill\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh413\row}}}
trrh206
trrh206\row}}}
(expenses)\plain\intbl\cf1\f51\fs16\ql income,
\~\cell{
trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Income before
taxes\plain\intbl\cf1\f51\fs16\b\ql and minority\plain\intbl\cf1\f51\fs16\b\ql
trrh619\row}}}
trrh206
trrh206\row}}}
\~\cell{
trrh619
trrh619\row}}}
trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Non-
current\plain\intbl\cf1\f51\fs16\ql investments in\plain\intbl\cf1\f51\fs16\ql
affiliated companies\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh619\row}}}
96\trrh-66\trrh0
trrh206
trrh206\row}}}
\~\cell{
\~\cell{
trrh206
trrh206\row}}}
\~\cell{
trrh206
trrh206\row}}}
\~\cell{
0005\clbrdrt\brdrs\brdrcf1\clvertalb\cellx10691\clvertalc\cellx10786\trrh29\row}}}\
pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrsp0\par\par
d\plain\f0\fs4\par
\par\pard\plain
\pard\plain
\
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\b\ql 7.\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Gain
from operations and holdings of real estate assets, net:\cell{
\par\pard\plain
lx9153\clvertalc\cellx9372\clvertalc\cellx9933\trrh-66\trrh0
lx9153\clvertalc\cellx9372\clvertalc\cellx9933\trrh-66\trrh0\row}}}
b\cellx9935\trrh172
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Year ended June\~30,\cell{
\cellx9153\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9933\trrh172
\cellx9153\clbrdrb\brdrs\brdrcf1\clvertalb\cellx9933\trrh172\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gain from operation and holdings of
\~\~\~2,568\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\~12,616\cell\pard\plain\intbl\cf1\f51\fs13\ql
Ps.\cell\pard\plain\intbl\cf1\f51\fs16\qr \~\~27,938\cell{
lb\cellx9933\trrh29
ertalb\cellx9372\clvertalb\cellx9933\trrh206
ertalb\cellx9372\clvertalb\cellx9933\trrh206\row}}}
lvertalb\cellx9933\trrh63
lvertalb\cellx9933\trrh63\row}}}
\pard\plain
Financial results, net:\cell{
\par\pard\plain
lx8503\clvertalc\cellx8598\clvertalb\cellx9083\clvertalc\cellx9302\clvertalc\cellx9
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Year ended
\cellx8503\clvertalb\cellx8598\clvertalb\cellx9083\clbrdrb\brdrs\brdrcf1\clvertalb\
cellx9835\clvertalb\cellx9930\trrh172
cellx9835\clvertalb\cellx9930\trrh172\row}}}
0\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Generated by
0\trrh206\row}}}
ertalb\cellx8598\clvertalb\cellx9083\clvertalb\cellx9302\clvertalb\cellx9835\clvert
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Net unrealized gain on investments
and others\cell\pard\plain\intbl\cf1\f51\fs13\ql
0\trrh206
0\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Gain on derivative instruments (Note
0\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Interest on discounting
0\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Foreign exchange (loss)
gain\cell\pard\plain\intbl\cf1\f51\fs13\ql
b\cellx8503\clvertalc\cellx8598\clvertalb\cellx9083\clbrdrt\brdrs\brdrcf1\clvertalb
\cellx9302\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9835\clvertalc\cellx9930\trrh29
\~\cell{
\cellx9302\clbrdrt\brdrs\brdrcf1\clvertalb\cellx9835\clvertalc\cellx9930\trrh29\row
}}}
0\trrh206
0\trrh206\row}}}
\~\cell{
}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Generated by
0\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Interest expense and others (Note
29.f.)\cell\pard\plain\intbl\cf1\f51\fs13\ql
0\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Foreign exchange (loss)
gain\cell\pard\plain\intbl\cf1\f51\fs13\ql
0\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Interest on discounting
0\trrh206\row}}}
Discounts\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\cell{
}}}
0\trrh206
0\trrh206\row}}}
\~\cell{
}}}
\pard\plain\intbl\cf1\f51\fs16\b\ql Financial results,
rtalb\cellx8503\clvertalc\cellx8598\clvertalb\cellx9083\clbrdrt\brdrdb\brdrcf1\clve
rtalb\cellx9302\clbrdrt\brdrdb\brdrcf1\clvertalb\cellx9835\clvertalc\cellx9930\trrh
63
\~\cell{
\par\pard\plain
Other expenses, net:\cell{
\par\pard\plain
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Year ended
cellx9835\clvertalb\cellx9930\trrh172
cellx9835\clvertalb\cellx9930\trrh172\row}}}
0\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Other
income:\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
0\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Recovery of allowance for doubtful
accounts, net\cell\pard\plain\intbl\cf1\f51\fs13\ql
0\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Easement income
0\trrh206\row}}}
\~\cell{
}}}
0\trrh206
\~\cell{
0\trrh206\row}}}
\~\cell{
}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Other
expenses:\cell\pard\plain\intbl\cf1\f51\fs13\ql
0\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Provision for
l \~\cell\pard\plain\intbl\cf1\f51\fs16\ql
0\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Tax on shareholders\u8217? personal
0\trrh206
Donations\cell\pard\plain\intbl\cf1\f51\fs13\ql
0\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Recovery (loss) on fire damages (net
of insurance recoveries)\cell\pard\plain\intbl\cf1\f51\fs13\ql
0\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Unreimbursed
0\trrh206\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Unrecoverable
VAT\cell\pard\plain\intbl\cf1\f51\fs13\ql
0\trrh206
0\trrh206\row}}}
\~\cell{
}}}
\~\cell{
}}}
0\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\b\ql Other expenses,
0\trrh206\row}}}
63
\~\cell{
63\row}}}\pard\plain\f0\fs4\par\pard\plain\f0\fs2\brdrt\brdrs\brdrw15\brdrcf2\brdrs
p0\par\pard\plain\f0\fs4\par
\par\pard\plain
\pard\plain\intbl\cf1\f51\fs16\ql (i)\cell\pard\plain\intbl\cf1\f51\fs16\ql As of
June\~30, 2006, the charge relates to the termination of the easement agreement
with Riocruz S.C.S. On February\~2, 1999, Mendoza Plaza\plain\intbl\cf1\f51\fs16\ql
Shopping S.A. had entered into an easement agreement with one anchor tenant, C&A,
for an aggregate purchase price of US$ 2.9 million.
Easement\plain\intbl\cf1\f51\fs16\ql revenue was amortized to income under the
straight-line method over the term of the agreement. In September 2005, Mendoza
Plaza Shopping S.A.\plain\intbl\cf1\f51\fs16\ql acquired from Riocruz S.C.S. the
retail space where the C&A store was located, and consequently, the easement
agreement was terminated.\cell{
\
\par\pard\plain
Issuance of IRSA Notes\cell{
\par\pard\plain
a)\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Convertible Notes\cell{
cf1\f51\fs16\ql On November\~21, 2002, the Company issued US$ 100\~million of 8%
convertible notes due 2007 (the \u8220?IRSA Convertible Notes\u8221?)
with\plain\cf1\f51\fs16\ql non-detachable warrants to acquire additional shares of
common stock (the \u8220?Warrants\u8221?) in exchange for US$ 85.0\~million in cash
and the\plain\cf1\f51\fs16\ql settlement of certain liabilities (See Note 4.i.).
In accordance with the agreement, the IRSA Convertible Notes are convertible, at
any time, at the option of\plain\cf1\f51\fs16\ql the holder, into a fixed number
of common shares of the Company. The agreement provides for an original conversion
price of US$ 0.55713, which only\plain\cf1\f51\fs16\ql can be adjusted as a result
of anti-dilution provisions. Once converted, the holder has the right to acquire an
additional equal number of shares at the\plain\cf1\f51\fs16\ql exercise price of
US$ 0.66856\~per share. The exercise price of the warrants is also adjusted as a
result of anti-dilution provisions. Under Argentine GAAP\plain\cf1\f51\fs16\ql no
proceeds were allocated to the conversion feature and warrants. Proceeds from the
issuance of the IRSA Convertible Notes were mainly used to
the\plain\cf1\f51\fs16\ql settlement and restructuring of the debts outstanding at
that date and for working capital needs.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql
As a result of the distribution of treasury shares approved by the shareholders in
November 2002, effective December\~20, 2002 the conversion
price\plain\cf1\f51\fs16\ql and the warrants exercise price was decreased to US$
0.54505 and to US$ 0.65406,
respectively.\par\pard\plain\sb198\fi462\cf1\f51\fs16\ql During the years ended
June\~30, 2003, 2004, 2005, 2006 and 2007, certain holders of IRSA Convertible
Notes (aggregating US$ 81.1 million)\plain\cf1\f51\fs16\ql exercised their
conversion rights and, as a result, the Company issued 12,531 shares, 23,734,388
shares, 52,448,952 shares, 55,961,675 shares and\plain\cf1\f51\fs16\ql 16,640,658
shares of common stock, respectively. During the years ended June\~30, 2004, 2005,
2006 and 2007, the Company also issued 104,171,679\plain\cf1\f51\fs16\ql shares of
common stock in exchange for US$ 68.1\~million in cash as a result of the exercise
of warrants. As of June\~30, 2007, the outstanding balance of\plain\cf1\f51\fs16\ql
the IRSA Convertible Notes amounted to US$ 18.9
million.\par\pard\plain\cf1\f51\fs27\ql \~
\par\pard\plain
b)\cell\pard\plain\intbl\cf1\f51\fs16\b\ql Issuance of Non-Convertible Note\cell{
cf1\f51\fs16\ql In February 2007, the Company issued US$ 150.0\~million of non-
convertible notes (the Non-Convertible Notes) due February 2017 under
the\plain\cf1\f51\fs16\ql Global Program for up to US$ 200\~million authorized by
the CNV in December 2006. The Non-Convertible Notes bear interest at a fixed rate
of\plain\cf1\f51\fs16\ql 8.5%\~per annum. The Non-Convertible Notes pay interest
in cash semi-annually in arrears on February\~2 and August\~2 of each year,
beginning on\plain\cf1\f51\fs16\ql August\~2, 2007. Principal on the Non-
Convertible Notes is fully paid at maturity.\par\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
Balances and transactions with related parties\cell{
following is a summary of the balances and transactions with related
parties:\par\pard\plain\cf1\f51\fs18\ql \~
\par\pard\plain
lc\cellx9454\clvertalb\cellx9735\clvertalc\cellx9970\clvertalc\cellx10610\clvertalc
\cellx10705\cellx10790\trrh-66\trrh0
lc\cellx9454\clvertalb\cellx9735\clvertalc\cellx9970\clvertalc\cellx10610\clvertalc
\cellx10705\cellx10790\trrh-66\trrh0\row}}}
lvertalb\cellx2812\clvertalb\clvmgf\cellx4198\clvertalb\cellx4367\clbrdrb\brdrs\brd
cf1\clvertalb\cellx10615\clvertalb\cellx10710\cellx10795\trrh344
Relation\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Description
Transaction\~/caption\cell\pard\plain\intbl\cf1\f51\fs13\ql
Income\~(loss)\~included\~in\~the\~statement\~of
income\~for\~the\~year\~ended\~June\~30,\cell\pard\plain\intbl\cf1\f51\fs13\ql
Balance\~receivable
(payable)\~as\~of\~June\~30,\cell\pard\plain\intbl\cf1\f51\fs13\ql
cf1\clvertalb\cellx10615\clvertalb\cellx10710\cellx10795\trrh344\row}}}
705\clvertalc\cellx10706\clvertalc\cellx10707\clvertalc\cellx10708\cellx10787\trrh1
72
2006\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\cell\pard\plain\intbl\f0\fs16\ql
72\row}}}
{\trowd\clvmgf\cellx1273\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx1442\clshdng
100\clcfpat12\clcbpat12\clvmgf\cellx2643\clvertalb\clshdng100\clcfpat12\clcbpat12\c
ellx2812\clshdng100\clcfpat12\clcbpat12\cellx4198\clvertalb\clshdng100\clcfpat12\cl
cbpat12\cellx4367\clshdng100\clcfpat12\clcbpat12\cellx4615\clshdng100\clcfpat12\clc
pat12\clcbpat12\cellx5793\clshdng100\clcfpat12\clcbpat12\cellx6041\clshdng100\clcfp
00\clcfpat12\clcbpat12\cellx8107\clshdng100\clcfpat12\clcbpat12\cellx8202\clvertalb
\clshdng100\clcfpat12\clcbpat12\cellx8344\clshdng100\clcfpat12\clcbpat12\cellx8579\
clshdng100\clcfpat12\clcbpat12\cellx9219\clshdng100\clcfpat12\clcbpat12\cellx9454\c
lvertalb\clshdng100\clcfpat12\clcbpat12\cellx9735\clshdng100\clcfpat12\clcbpat12\ce
llx9970\clshdng100\clcfpat12\clcbpat12\cellx10610\clshdng100\clcfpat12\clcbpat12\ce
llx10705\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10706\clvertalc\clshdng100\c
lcfpat12\clcbpat12\cellx10707\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10708\c
lshdng100\clcfpat12\clcbpat12\cellx10787\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Red
Alternativa\plain\intbl\cf1\f51\fs16\ql S.A.\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Subsidiary
of\plain\intbl\cf1\f51\fs16\ql ITNV, equity\plain\intbl\cf1\f51\fs16\ql investee
of the\plain\intbl\cf1\f51\fs16\ql Company (sold\plain\intbl\cf1\f51\fs16\ql in
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Rental
Income\cell\pard\plain\intbl\cf1\f51\fs13\ql
llx9970\clshdng100\clcfpat12\clcbpat12\cellx10610\clshdng100\clcfpat12\clcbpat12\ce
lshdng100\clcfpat12\clcbpat12\cellx10787\trrh206\row}}}
{\trowd\clshdng100\clcfpat12\clcbpat12\clvmrg\cellx1273\clvertalb\clshdng100\clcfpa
t12\clcbpat12\cellx1442\clshdng100\clcfpat12\clcbpat12\clvmrg\cellx2643\clvertalb\c
lshdng100\clcfpat12\clcbpat12\cellx2812\clshdng100\clcfpat12\clcbpat12\cellx4198\cl
vertalb\clshdng100\clcfpat12\clcbpat12\cellx4367\clvertalb\clshdng100\clcfpat12\clc
12\clcbpat12\cellx10705\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10706\clverta
lc\clshdng100\clcfpat12\clcbpat12\cellx10707\clvertalc\clshdng100\clcfpat12\clcbpat
12\cellx10708\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10709\clvertalc\clshdng
100\clcfpat12\clcbpat12\cellx10710\clshdng100\clcfpat12\clcbpat12\cellx10785\trrh41
2
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Sales and\plain\intbl\cf1\f51\fs16\ql
Developments\cell\pard\plain\intbl\cf1\f51\fs13\ql
100\clcfpat12\clcbpat12\cellx10710\clshdng100\clcfpat12\clcbpat12\cellx10785\trrh41
2\row}}}
{\trowd\clvmgf\cellx1273\clvertalb\cellx1442\clvmgf\cellx2643\clvertalb\cellx2812\c
ertalb\cellx9735\clvertalb\cellx9970\clvertalb\cellx10610\clvertalb\cellx10705\clve
rtalc\cellx10706\clvertalc\cellx10707\clvertalc\cellx10708\clvertalc\cellx10709\clv
ertalc\cellx10710\cellx10785\trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Altocity.com
of\plain\intbl\cf1\f51\fs16\ql E-Commerce\plain\intbl\cf1\f51\fs16\ql Latina
S.A., an\plain\intbl\cf1\f51\fs16\ql equity investee\plain\intbl\cf1\f51\fs16\ql
of the Company\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Other
receivables\plain\intbl\cf1\f51\fs16\ql and prepaid\plain\intbl\cf1\f51\fs16\ql
expenses (current)\cell\pard\plain\intbl\cf1\f51\fs13\ql
ertalc\cellx10710\cellx10785\trrh619\row}}}
{\trowd\clvmrg\cellx1273\clvertalb\cellx1442\clvmrg\cellx2643\clvertalb\cellx2812\c
ertalc\cellx10710\clvertalc\cellx10711\clvertalc\cellx10712\cellx10783\trrh412
liabilities\plain\intbl\cf1\f51\fs16\ql
(current)\cell\pard\plain\intbl\cf1\f51\fs13\ql
(471\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell\pard\plain\intbl\f0\fs16\ql
ertalc\cellx10710\clvertalc\cellx10711\clvertalc\cellx10712\cellx10783\trrh412\row}
}}
ertalc\cellx10710\clvertalc\cellx10711\clvertalc\cellx10712\clvertalc\cellx10713\cl
vertalc\cellx10714\cellx10781\trrh206
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Rental
vertalc\cellx10714\cellx10781\trrh206\row}}}
vertalc\cellx10714\clvertalc\cellx10715\clvertalc\cellx10716\cellx10779\trrh413
developments\cell\pard\plain\intbl\cf1\f51\fs13\ql
vertalc\cellx10714\clvertalc\cellx10715\clvertalc\cellx10716\cellx10779\trrh413\row
}}}
vertalc\cellx10714\clvertalc\cellx10715\clvertalc\cellx10716\clvertalc\cellx10717\c
lvertalc\cellx10718\cellx10777\trrh413
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Trade
accounts\plain\intbl\cf1\f51\fs16\ql payable
lvertalc\cellx10718\cellx10777\trrh413\row}}}
lshdng100\clcfpat12\clcbpat12\cellx10610\clvertalb\clshdng100\clcfpat12\clcbpat12\c
ellx10705\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10706\clvertalc\clshdng100\
clcfpat12\clcbpat12\cellx10707\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10708\
clcbpat12\cellx10710\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10711\clvertalc\
clshdng100\clcfpat12\clcbpat12\cellx10712\clvertalc\clshdng100\clcfpat12\clcbpat12\
cellx10713\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10714\clvertalc\clshdng100
\clcfpat12\clcbpat12\cellx10715\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10716
\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10717\clvertalc\clshdng100\clcfpat12
\clcbpat12\cellx10718\clshdng100\clcfpat12\clcbpat12\cellx10777\trrh825
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Alternativa
Gratis\plain\intbl\cf1\f51\fs16\ql S.A.\cell\pard\plain\intbl\cf1\f51\fs13\ql
of\plain\intbl\cf1\f51\fs16\ql ITNV, equity\plain\intbl\cf1\f51\fs16\ql investee
of the\plain\intbl\cf1\f51\fs16\ql
development\cell\pard\plain\intbl\cf1\f51\fs13\ql
lshdng100\clcfpat12\clcbpat12\cellx10610\clvertalb\clshdng100\clcfpat12\clcbpat12\c
\clcbpat12\cellx10718\clshdng100\clcfpat12\clcbpat12\cellx10777\trrh825\row}}}
lvertalc\cellx10718\cellx10777\trrh413
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Hoteles
Sheraton\plain\intbl\cf1\f51\fs16\ql de Argentina\plain\intbl\cf1\f51\fs16\ql
S.A.C.\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Shareholder
of\plain\intbl\cf1\f51\fs16\ql HASA,\plain\intbl\cf1\f51\fs16\ql subsidiary of
the\plain\intbl\cf1\f51\fs16\ql Company\cell\pard\plain\intbl\cf1\f51\fs13\ql
lvertalc\cellx10718\cellx10777\trrh413\row}}}
lvertalc\cellx10718\clvertalc\cellx10719\clvertalc\cellx10720\cellx10775\trrh413
liabilities\plain\intbl\cf1\f51\fs16\ql (non
current)\cell\pard\plain\intbl\cf1\f51\fs13\ql
lvertalc\cellx10718\clvertalc\cellx10719\clvertalc\cellx10720\cellx10775\trrh413\ro
w}}}
cbpat12\cellx4367\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx4615\clvertalb\clsh
dng100\clcfpat12\clcbpat12\cellx5255\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx
t12\clcbpat12\cellx6041\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx6681\clvertal
\cellx7219\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx7467\clvertalb\clshdng100\
710\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10711\clvertalc\clshdng100\clcfpa
0718\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10719\clvertalc\clshdng100\clcfp
BHSA\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Equity
investee\plain\intbl\cf1\f51\fs16\ql of the Company\plain\intbl\cf1\f51\fs16\ql
{\trowd\clvmrg\cellx1273\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx1442\clshdng
100\clcfpat12\clcbpat12\clvmrg\cellx2643\clvertalb\clshdng100\clcfpat12\clcbpat12\c
at12\clcbpat12\cellx10720\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10721\clver
talc\clshdng100\clcfpat12\clcbpat12\cellx10722\clshdng100\clcfpat12\clcbpat12\cellx
10773\trrh413
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Investments\plain\intbl\cf1\f51\fs16\ql
talc\clshdng100\clcfpat12\clcbpat12\cellx10722\clshdng100\clcfpat12\clcbpat12\cellx
10773\trrh413\row}}}
talc\clshdng100\clcfpat12\clcbpat12\cellx10722\clvertalc\clshdng100\clcfpat12\clcbp
at12\cellx10723\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10724\clshdng100\clcf
pat12\clcbpat12\cellx10771\trrh619
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Results from\plain\intbl\cf1\f51\fs16\ql
holding and\plain\intbl\cf1\f51\fs16\ql
at12\cellx10723\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10724\clshdng100\clcf
pat12\clcbpat12\cellx10771\trrh619\row}}}
at12\cellx10723\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10724\clvertalc\clshd
ng100\clcfpat12\clcbpat12\cellx10725\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx
10726\clshdng100\clcfpat12\clcbpat12\cellx10769\trrh206
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Short term
debts\cell\pard\plain\intbl\cf1\f51\fs13\ql
10726\clshdng100\clcfpat12\clcbpat12\cellx10769\trrh206\row}}}
10726\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10727\clvertalc\clshdng100\clcf
pat12\clcbpat12\cellx10728\clshdng100\clcfpat12\clcbpat12\cellx10767\trrh206
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Long term
debts\cell\pard\plain\intbl\cf1\f51\fs13\ql
pat12\clcbpat12\cellx10728\clshdng100\clcfpat12\clcbpat12\cellx10767\trrh206\row}}}
pat12\clcbpat12\cellx10729\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10730\clsh
pat12\clcbpat12\cellx10729\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10730\clsh
35\clvertalb\cellx9970\clvertalb\cellx10610\clvertalb\cellx10705\clvertalc\cellx107
10718\clvertalc\cellx10719\clvertalc\cellx10720\clvertalc\cellx10721\clvertalc\cell
lx10726\clvertalc\cellx10727\clvertalc\cellx10728\clvertalc\cellx10729\clvertalc\ce
llx10730\cellx10765\trrh825
BACSA\cell\pard\plain\intbl\cf1\f51\fs13\ql
investee\plain\intbl\cf1\f51\fs16\ql of the Company\plain\intbl\cf1\f51\fs16\ql
and subsidiary\plain\intbl\cf1\f51\fs16\ql of BHSA
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Mortgages
and\plain\intbl\cf1\f51\fs16\ql leases receivables,\plain\intbl\cf1\f51\fs16\ql
net (current)\cell\pard\plain\intbl\cf1\f51\fs13\ql
35\clvertalb\cellx9970\clvertalb\cellx10610\clvertalb\cellx10705\clvertalc\cellx107
llx10730\cellx10765\trrh825\row}}}
pat12\clcbpat12\cellx10728\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10729\clve
rtalc\clshdng100\clcfpat12\clcbpat12\cellx10730\clshdng100\clcfpat12\clcbpat12\cell
x10765\trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cresud
S.A.C.I.F.\plain\intbl\cf1\f51\fs16\ql y
A.\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql
Shareholder of\plain\intbl\cf1\f51\fs16\ql the
rtalc\clshdng100\clcfpat12\clcbpat12\cellx10730\clshdng100\clcfpat12\clcbpat12\cell
x10765\trrh619\row}}}
rtalc\clshdng100\clcfpat12\clcbpat12\cellx10730\clvertalc\clshdng100\clcfpat12\clcb
pat12\cellx10731\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10732\clshdng100\clc
fpat12\clcbpat12\cellx10763\trrh619
pat12\cellx10731\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10732\clshdng100\clc
fpat12\clcbpat12\cellx10763\trrh619\row}}}
pat12\cellx10731\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10732\clvertalc\clsh
dng100\clcfpat12\clcbpat12\cellx10733\clvertalc\clshdng100\clcfpat12\clcbpat12\cell
x10734\clshdng100\clcfpat12\clcbpat12\cellx10761\trrh412
(1,550\cell\pard\plain\intbl\cf1\f51\fs16\ql )\cell\pard\plain\intbl\f0\fs16\ql
x10734\clshdng100\clcfpat12\clcbpat12\cellx10761\trrh412\row}}}
x10734\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10735\clvertalc\clshdng100\clc
fpat12\clcbpat12\cellx10736\clshdng100\clcfpat12\clcbpat12\cellx10759\trrh619
accounts\plain\intbl\cf1\f51\fs16\ql payable\plain\intbl\cf1\f51\fs16\ql (non-
fpat12\clcbpat12\cellx10736\clshdng100\clcfpat12\clcbpat12\cellx10759\trrh619\row}}
}
fpat12\clcbpat12\cellx10736\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10737\clv
ertalc\clshdng100\clcfpat12\clcbpat12\cellx10738\clshdng100\clcfpat12\clcbpat12\cel
lx10757\trrh412
ertalc\clshdng100\clcfpat12\clcbpat12\cellx10738\clshdng100\clcfpat12\clcbpat12\cel
ertalc\clshdng100\clcfpat12\clcbpat12\cellx10738\clvertalc\clshdng100\clcfpat12\clc
bpat12\cellx10739\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10740\clshdng100\cl
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Short and\plain\intbl\cf1\f51\fs16\ql
long-term debts-\plain\intbl\cf1\f51\fs16\ql IRSA
Convertible\plain\intbl\cf1\f51\fs16\ql
Notes\cell\pard\plain\intbl\cf1\f51\fs13\ql
bpat12\cellx10739\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10740\clshdng100\cl
bpat12\cellx10739\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10740\clvertalc\cls
hdng100\clcfpat12\clcbpat12\cellx10741\clvertalc\clshdng100\clcfpat12\clcbpat12\cel
lx10742\clshdng100\clcfpat12\clcbpat12\cellx10753\trrh206
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Accrued
lx10742\clshdng100\clcfpat12\clcbpat12\cellx10753\trrh206\row}}}
lx10742\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10743\clvertalc\clshdng100\cl
cfpat12\clcbpat12\cellx10744\clshdng100\clcfpat12\clcbpat12\cellx10751\trrh413
cfpat12\clcbpat12\cellx10744\clshdng100\clcfpat12\clcbpat12\cellx10751\trrh413\row}
}}
cfpat12\clcbpat12\cellx10745\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10746\cl
shdng100\clcfpat12\clcbpat12\cellx10749\trrh206
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Cost of
shdng100\clcfpat12\clcbpat12\cellx10749\trrh206\row}}}
\clvertalc\cellx10726\clvertalc\cellx10727\clvertalc\cellx10728\clvertalc\cellx1072
10745\clvertalc\cellx10746\cellx10749\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Dolphin
Fund\plain\intbl\cf1\f51\fs16\ql Management\plain\intbl\cf1\f51\fs16\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Related
party\plain\intbl\cf1\f51\fs16\ql (iii)\cell\pard\plain\intbl\cf1\f51\fs13\ql
10745\clvertalc\cellx10746\cellx10749\trrh206\row}}}
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Results from\plain\intbl\cf1\f51\fs16\ql
holding and\plain\intbl\cf1\f51\fs16\ql
g100\clcfpat12\clcbpat12\cellx4367\clshdng100\clcfpat12\clcbpat12\cellx4615\clshdng
100\clcfpat12\clcbpat12\cellx5255\clshdng100\clcfpat12\clcbpat12\cellx5503\clvertal
b\clshdng100\clcfpat12\clcbpat12\cellx5793\clshdng100\clcfpat12\clcbpat12\cellx6041
clvertalb\clshdng100\clcfpat12\clcbpat12\cellx7219\clshdng100\clcfpat12\clcbpat12\c
ellx7467\clshdng100\clcfpat12\clcbpat12\cellx8107\clshdng100\clcfpat12\clcbpat12\ce
llx8202\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx8344\clshdng100\clcfpat12\clc
bpat12\cellx8579\clshdng100\clcfpat12\clcbpat12\cellx9219\clshdng100\clcfpat12\clcb
pat12\cellx9454\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx9735\clshdng100\clcfp
at12\clcbpat12\cellx9970\clshdng100\clcfpat12\clcbpat12\cellx10610\clshdng100\clcfp
vertalc\clshdng100\clcfpat12\clcbpat12\cellx10731\clvertalc\clshdng100\clcfpat12\cl
cbpat12\cellx10732\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10733\clvertalc\cl
shdng100\clcfpat12\clcbpat12\cellx10734\clvertalc\clshdng100\clcfpat12\clcbpat12\ce
lvertalc\clshdng100\clcfpat12\clcbpat12\cellx10739\clvertalc\clshdng100\clcfpat12\c
lcbpat12\cellx10740\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10741\clvertalc\c
lshdng100\clcfpat12\clcbpat12\cellx10742\clvertalc\clshdng100\clcfpat12\clcbpat12\c
Dalor\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Related\plain\intbl\cf1\f51\fs16\ql
company of a\plain\intbl\cf1\f51\fs16\ql minority\plain\intbl\cf1\f51\fs16\ql
shareholder of\plain\intbl\cf1\f51\fs16\ql
Tarshop\cell\pard\plain\intbl\cf1\f51\fs13\ql
Liabilities\plain\intbl\cf1\f51\fs16\ql
at12\clcbpat12\cellx9970\clshdng100\clcfpat12\clcbpat12\cellx10610\clshdng100\clcfp
clcbpat12\cellx10748\trrh1031\row}}}\pard\plain\cf1\f51\fs13\ql
\
\par\pard\plain
Balances and transactions with related parties (continued)\cell{
\par\pard\plain
lc\cellx9676\clvertalb\cellx9969\clvertalc\cellx10609\clvertalc\cellx10704\cellx107
89\trrh-66\trrh0
lc\cellx9676\clvertalb\cellx9969\clvertalc\cellx10609\clvertalc\cellx10704\cellx107
Transaction\~/caption\cell\pard\plain\intbl\cf1\f51\fs13\ql
Income\~(loss)\~included\~in\~the\~statement\~of
income\~for\~the\~year\~ended\~June\~30,\cell\pard\plain\intbl\cf1\f51\fs13\ql
Balance receivable
72
72\row}}}
llx10609\clshdng100\clcfpat12\clcbpat12\cellx10704\clvertalc\clshdng100\clcfpat12\c
lshdng100\clcfpat12\clcbpat12\cellx10707\clshdng100\clcfpat12\clcbpat12\cellx10786\
trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql E-Commerce
Latina\plain\intbl\cf1\f51\fs16\ql S.A.\cell\pard\plain\intbl\cf1\f51\fs13\ql
investee\cell\pard\plain\intbl\cf1\f51\fs13\ql
receivables\plain\intbl\cf1\f51\fs16\ql and prepaid
expenses\plain\intbl\cf1\f51\fs16\ql
Ps. 25\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql
trrh619\row}}}
vertalb\clshdng100\clcfpat12\clcbpat12\cellx4560\clshdng100\clcfpat12\clcbpat12\cel
lx4808\clshdng100\clcfpat12\clcbpat12\cellx5448\clshdng100\clcfpat12\clcbpat12\cell
at12\cellx6211\clshdng100\clcfpat12\clcbpat12\cellx6851\clshdng100\clcfpat12\clcbpa
t12\cellx7099\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx7366\clshdng100\clcfpat
12\clcbpat12\cellx7614\clshdng100\clcfpat12\clcbpat12\cellx8254\clshdng100\clcfpat1
2\clcbpat12\cellx8349\clvertalb\clshdng100\clcfpat12\clcbpat12\cellx8472\clshdng100
\clcfpat12\clcbpat12\cellx8754\clshdng100\clcfpat12\clcbpat12\cellx9394\clshdng100\
shdng100\clcfpat12\clcbpat12\cellx10609\clshdng100\clcfpat12\clcbpat12\cellx10704\c
ellx10709\clshdng100\clcfpat12\clcbpat12\cellx10784\trrh412
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Investments\plain\intbl\cf1\f51\fs16\ql
(non-current)\cell\pard\plain\intbl\cf1\f51\fs13\ql
ellx10709\clshdng100\clcfpat12\clcbpat12\cellx10784\trrh412\row}}}
ellx4411\clvertalb\cellx4560\cellx4808\cellx5448\cellx5696\clvertalb\cellx5963\cell
x6211\cellx6851\cellx7099\clvertalb\cellx7366\cellx7614\cellx8254\cellx8349\clverta
lb\cellx8472\cellx8754\cellx9394\cellx9676\clvertalb\cellx9969\cellx10609\cellx1070
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Estudio Zang
(legal\plain\intbl\cf1\f51\fs16\ql advisory)\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Shareholders
of\plain\intbl\cf1\f51\fs16\ql law firm are\plain\intbl\cf1\f51\fs16\ql directors
of the\plain\intbl\cf1\f51\fs16\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Cost of
legal\plain\intbl\cf1\f51\fs16\ql
2
)\cell\pard\plain\intbl\f0\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql
2\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Grupo
Sutton\cell\pard\plain\intbl\cf1\f51\fs13\ql
of\plain\intbl\cf1\f51\fs16\ql Llao Llao\plain\intbl\cf1\f51\fs16\ql Resorts
S.A.,\plain\intbl\cf1\f51\fs16\ql subsidiary of the\plain\intbl\cf1\f51\fs16\ql
clcbpat12\cellx10713\clshdng100\clcfpat12\clcbpat12\cellx10780\trrh412
clcbpat12\cellx10713\clshdng100\clcfpat12\clcbpat12\cellx10780\trrh412\row}}}
clshdng100\clcfpat12\clcbpat12\cellx10715\clshdng100\clcfpat12\clcbpat12\cellx10778
\trrh413
liabilities\plain\intbl\cf1\f51\fs16\ql (non-
clshdng100\clcfpat12\clcbpat12\cellx10715\clshdng100\clcfpat12\clcbpat12\cellx10778
\trrh413\row}}}
cellx10717\clshdng100\clcfpat12\clcbpat12\cellx10776\trrh619
cellx10717\clshdng100\clcfpat12\clcbpat12\cellx10776\trrh619\row}}}
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Fundaci\u243?
n\plain\intbl\cf1\f51\fs16\ql IRSA\cell\pard\plain\intbl\cf1\f51\fs13\ql
Donations\cell\pard\plain\intbl\cf1\f51\fs13\ql
0716\clvertalc\cellx10717\clvertalc\cellx10718\clvertalc\cellx10719\cellx10774\trrh
413
0716\clvertalc\cellx10717\clvertalc\cellx10718\clvertalc\cellx10719\cellx10774\trrh
413\row}}}
10720\clvertalc\cellx10721\clvertalc\cellx10722\clvertalc\cellx10723\cellx10770\trr
h619
10720\clvertalc\cellx10721\clvertalc\cellx10722\clvertalc\cellx10723\cellx10770\trr
h619\row}}}
\clcbpat12\cellx10721\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10722\clvertalc
\clshdng100\clcfpat12\clcbpat12\cellx10723\clshdng100\clcfpat12\clcbpat12\cellx1077
0\trrh413
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Bass
Hotels\~&\plain\intbl\cf1\f51\fs16\ql Resorts
BV\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql
Shareholder of\plain\intbl\cf1\f51\fs16\ql Nuevas\plain\intbl\cf1\f51\fs16\ql
Fronteras S.A.,\plain\intbl\cf1\f51\fs16\ql subsidiary of
0\trrh413\row}}}
\clshdng100\clcfpat12\clcbpat12\cellx10724\clvertalc\clshdng100\clcfpat12\clcbpat12
\cellx10725\clshdng100\clcfpat12\clcbpat12\cellx10768\trrh413
\cellx10725\clshdng100\clcfpat12\clcbpat12\cellx10768\trrh413\row}}}
talb\cellx4560\cellx4808\cellx5448\cellx5696\clvertalb\cellx5963\cellx6211\cellx685
1\cellx7099\clvertalb\cellx7366\cellx7614\cellx8254\cellx8349\clvertalb\cellx8472\c
ellx8754\cellx9394\cellx9676\clvertalb\cellx9969\cellx10609\cellx10704\clvertalc\ce
llx10705\clvertalc\cellx10706\clvertalc\cellx10707\clvertalc\cellx10708\clvertalc\c
ellx10709\clvertalc\cellx10710\clvertalc\cellx10711\clvertalc\cellx10712\clvertalc\
cellx10713\clvertalc\cellx10714\clvertalc\cellx10715\clvertalc\cellx10716\clvertalc
\cellx10717\clvertalc\cellx10718\clvertalc\cellx10719\clvertalc\cellx10720\clvertal
c\cellx10721\clvertalc\cellx10722\clvertalc\cellx10723\clvertalc\cellx10724\clverta
lc\cellx10725\cellx10768\trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Cactus
of\plain\intbl\cf1\f51\fs16\ql Cresud
lc\cellx10725\cellx10768\trrh619\row}}}
at12\clcbpat12\cellx10609\clshdng100\clcfpat12\clcbpat12\cellx10704\clvertalc\clshd
shdng100\clcfpat12\clcbpat12\cellx10768\trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Futuros
y\plain\intbl\cf1\f51\fs16\ql Opciones.com\plain\intbl\cf1\f51\fs16\ql
of\plain\intbl\cf1\f51\fs16\ql Cresud
shdng100\clcfpat12\clcbpat12\cellx10768\trrh619\row}}}
x10724\clvertalc\cellx10725\cellx10768\trrh825
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Managers,
Directors\plain\intbl\cf1\f51\fs16\ql and other staff
of\plain\intbl\cf1\f51\fs16\ql the
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Mortgages and
lease\plain\intbl\cf1\f51\fs16\ql receivables\plain\intbl\cf1\f51\fs16\ql
(Director\u8217?s\plain\intbl\cf1\f51\fs16\ql Guarantee
deposits)\cell\pard\plain\intbl\cf1\f51\fs13\ql
x10724\clvertalc\cellx10725\cellx10768\trrh825\row}}}
x10724\clvertalc\cellx10725\clvertalc\cellx10726\clvertalc\cellx10727\cellx10766\tr
rh825
expenses\plain\intbl\cf1\f51\fs16\ql (current)
(personnel\plain\intbl\cf1\f51\fs16\ql
loans)\cell\pard\plain\intbl\cf1\f51\fs13\ql
x10724\clvertalc\cellx10725\clvertalc\cellx10726\clvertalc\cellx10727\cellx10766\tr
rh825\row}}}
lx10728\clvertalc\cellx10729\cellx10764\trrh825
expenses\plain\intbl\cf1\f51\fs16\ql (non-current)\plain\intbl\cf1\f51\fs16\ql
(personnel loans)\cell\pard\plain\intbl\cf1\f51\fs13\ql
lx10728\clvertalc\cellx10729\cellx10764\trrh825\row}}}
lx10728\clvertalc\cellx10729\clvertalc\cellx10730\clvertalc\cellx10731\cellx10762\t
rrh412
lx10728\clvertalc\cellx10729\clvertalc\cellx10730\clvertalc\cellx10731\cellx10762\t
rrh412\row}}}
llx10732\clvertalc\cellx10733\cellx10760\trrh412
llx10732\clvertalc\cellx10733\cellx10760\trrh412\row}}}
llx10732\clvertalc\cellx10733\clvertalc\cellx10734\clvertalc\cellx10735\cellx10758\
trrh413
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Expenses to
be\plain\intbl\cf1\f51\fs16\ql recovered\cell\pard\plain\intbl\cf1\f51\fs13\ql
llx10732\clvertalc\cellx10733\clvertalc\cellx10734\clvertalc\cellx10735\cellx10758\
trrh413\row}}}
ellx10736\clvertalc\cellx10737\cellx10756\trrh413
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Interest and\plain\intbl\cf1\f51\fs16\ql
exchange differences\cell\pard\plain\intbl\cf1\f51\fs13\ql
ellx10736\clvertalc\cellx10737\cellx10756\trrh413\row}}}
trrh413
Plaza\plain\intbl\cf1\f51\fs16\ql Shopping
S.A.\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\f0\fs16\ql
\~\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql
Accrued interest\cell\pard\plain\intbl\cf1\f51\fs13\ql
trrh413\row}}}
ellx10736\clvertalc\cellx10737\cellx10756\trrh413
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Falabella
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Minority\plain\intbl\cf1\f51\fs16\ql
shareholder of\plain\intbl\cf1\f51\fs16\ql Mendoza
Plaza\plain\intbl\cf1\f51\fs16\ql Shopping S.A.,\plain\intbl\cf1\f51\fs16\ql a
subsidiary of\plain\intbl\cf1\f51\fs16\ql the
ellx10736\clvertalc\cellx10737\cellx10756\trrh413\row}}}
ellx10736\clvertalc\cellx10737\clvertalc\cellx10738\clvertalc\cellx10739\cellx10754
\trrh619
ellx10736\clvertalc\cellx10737\clvertalc\cellx10738\clvertalc\cellx10739\cellx10754
\trrh619\row}}}
cellx10740\clvertalc\cellx10741\cellx10752\trrh206
liabilities\plain\intbl\cf1\f51\fs16\ql (non-
cellx10740\clvertalc\cellx10741\cellx10752\trrh206\row}}}
cellx10740\clvertalc\cellx10741\clvertalc\cellx10742\clvertalc\cellx10743\cellx1075
0\trrh206
cellx10740\clvertalc\cellx10741\clvertalc\cellx10742\clvertalc\cellx10743\cellx1075
0\trrh206\row}}}
\cellx10744\clvertalc\cellx10745\cellx10748\trrh412
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Other liabilities
-\plain\intbl\cf1\f51\fs16\ql Dividends\cell\pard\plain\intbl\cf1\f51\fs13\ql
\cellx10744\clvertalc\cellx10745\cellx10748\trrh412\row}}}
\cellx10724\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10725\clvertalc\clshdng10
7\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10728\clvertalc\clshdng100\clcfpat1
2\clcbpat12\cellx10729\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10730\clvertal
t12\clcbpat12\cellx10745\clshdng100\clcfpat12\clcbpat12\cellx10748\trrh412
Starwood\cell\pard\plain\intbl\cf1\f51\fs13\ql
of\plain\intbl\cf1\f51\fs16\ql HASA,\plain\intbl\cf1\f51\fs16\ql subsidiary of
t12\clcbpat12\cellx10745\clshdng100\clcfpat12\clcbpat12\cellx10748\trrh412\row}}}
t12\clcbpat12\cellx10746\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10747\trrh61
9
t12\clcbpat12\cellx10746\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10747\trrh61
9\row}}}
lc\cellx10725\clvertalc\cellx10726\clvertalc\cellx10727\clvertalc\cellx10728\clvert
alc\cellx10729\clvertalc\cellx10730\clvertalc\cellx10731\clvertalc\cellx10732\clver
talc\cellx10733\clvertalc\cellx10734\clvertalc\cellx10735\clvertalc\cellx10736\clve
vertalc\cellx10745\clvertalc\cellx10746\clvertalc\cellx10747\trrh1031
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Leon
Halac\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Minority\plain\intbl\cf1\f51\fs16\ql
shareholder of\plain\intbl\cf1\f51\fs16\ql Tarshop
S.A.,\plain\intbl\cf1\f51\fs16\ql subsidiary of the\plain\intbl\cf1\f51\fs16\ql
talc\cellx10733\clvertalc\cellx10734\clvertalc\cellx10735\clvertalc\cellx10736\clve
vertalc\cellx10745\clvertalc\cellx10746\clvertalc\cellx10747\trrh1031\row}}}\pard\p
lain\cf1\f51\fs13\ql \~\par\pard\plain\cf1\f51\fs16\qc F-41
\
\par\pard\plain
Balances and transactions with related parties (continued)\cell{
\par\pard\plain
lb\cellx9977\clvertalc\cellx10617\clvertalc\cellx10712\cellx10789\trrh-66\trrh0
lb\cellx9977\clvertalc\cellx10617\clvertalc\cellx10712\cellx10789\trrh-
66\trrh0\row}}}
of\par\pard\plain\intbl\cf1\f51\fs13\b\qc Transaction /
caption\cell\pard\plain\intbl\cf1\f51\fs13\ql
\~\~\cell\pard\plain\intbl\cf1\f51\fs13\b\qc Income (loss) included in the
statement of
\par\pard\plain\intbl\fs16\plain\intbl\cf1\f51\fs13\b\qc income for the year ended
Balance receivable
72
72\row}}}
ellx9977\clshdng100\clcfpat12\clcbpat12\cellx10617\clshdng100\clcfpat12\clcbpat12\c
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Consultores
Assets\plain\intbl\cf1\f51\fs16\ql Management
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Mortgages and
leases\plain\intbl\cf1\f51\fs16\ql receivables, net\plain\intbl\cf1\f51\fs16\ql
Ps. 193\cell\pard\plain\intbl\cf1\f51\fs16\ql
Ps. 75\cell\pard\plain\intbl\cf1\f51\fs16\ql \~\cell\pard\plain\intbl\f0\fs16\ql
clcbpat12\cellx10717\clshdng100\clcfpat12\clcbpat12\cellx10784\trrh619
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Other receivables
and\plain\intbl\cf1\f51\fs16\ql prepaid expenses\plain\intbl\cf1\f51\fs16\ql
clcbpat12\cellx10717\clshdng100\clcfpat12\clcbpat12\cellx10784\trrh619\row}}}
\clcfpat12\clcbpat12\cellx9271\clshdng100\clcfpat12\clcbpat12\cellx9624\clvertalb\c
lshdng100\clcfpat12\clcbpat12\cellx9977\clshdng100\clcfpat12\clcbpat12\cellx10617\c
clcbpat12\cellx10718\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10719\clshdng100
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Trade accounts
payable\plain\intbl\cf1\f51\fs16\ql
clcbpat12\cellx10718\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10719\clshdng100
lb\cellx8631\cellx9271\cellx9624\clvertalb\cellx9977\cellx10617\cellx10712\clvertal
lc\cellx10717\clvertalc\cellx10718\clvertalc\cellx10719\cellx10782\trrh412
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Metronec
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Metroshop
S.A.\plain\intbl\cf1\f51\fs16\ql shareholder\cell\pard\plain\intbl\cf1\f51\fs13\ql
lc\cellx10717\clvertalc\cellx10718\clvertalc\cellx10719\cellx10782\trrh412\row}}}
alc\cellx10721\cellx10780\trrh412
alc\cellx10721\cellx10780\trrh412\row}}}
cellx10720\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10721\clshdng100\clcfpat12
\clcbpat12\cellx10780\trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Metroshop
of\plain\intbl\cf1\f51\fs16\ql Tarshop S.A.,\plain\intbl\cf1\f51\fs16\ql
subsidiary of APSA\cell\pard\plain\intbl\cf1\f51\fs13\ql
cellx10720\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10721\clshdng100\clcfpat12
\clcbpat12\cellx10780\trrh619\row}}}
\clshdng100\clcfpat12\clcbpat12\cellx10778\trrh413
\clshdng100\clcfpat12\clcbpat12\cellx10778\trrh413\row}}}
\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10725\clshdng100\clcfpat12\clcbpat12
\cellx10776\trrh413
\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10725\clshdng100\clcfpat12\clcbpat12
talc\cellx10725\cellx10776\trrh619
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Museo de
los\plain\intbl\cf1\f51\fs16\ql Ni\u241?
os\cell\pard\plain\intbl\cf1\f51\fs13\ql \~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql
Related party\cell\pard\plain\intbl\cf1\f51\fs13\ql
talc\cellx10725\cellx10776\trrh619\row}}}
talc\cellx10725\clvertalc\cellx10726\clvertalc\cellx10727\cellx10774\trrh413
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Montages and
leases\plain\intbl\cf1\f51\fs16\ql receivables
talc\cellx10725\clvertalc\cellx10726\clvertalc\cellx10727\cellx10774\trrh413\row}}}
4\trrh206
\pard\plain\intbl\li176\fi-176\cf1\f51\fs16\ql Parque Arauco
of\plain\intbl\cf1\f51\fs16\ql APSA\cell\pard\plain\intbl\cf1\f51\fs13\ql
4\trrh206\row}}}
\cellx10728\clvertalc\clshdng100\clcfpat12\clcbpat12\cellx10729\clshdng100\clcfpat1
\~\~\cell\pard\plain\intbl\cf1\f51\fs16\ql Short term
debt\plain\intbl\cf1\f51\fs16\ql
cellx10720\clvertalc\clshdng100\clcfpat12\clcbpat12\c

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