SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2002
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
(Exact name of Registrant as specified in its charter)
IRSA INVESTMENTS AND REPRESENTATIONS INC.
(Translation of registrant's name into English)
REPUBLIC OF ARGENTINA
(Jurisdiction of incorporation or organization)
BOLIVAR 108
(C1066AAB)
BUENOS AIRES, ARGENTINA
(Address of principal executive offices)
Form 20-F X Form 40-F
----- -----
Indicate by check mark whether the registrant by furnishing
the information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.
Yes No X
----- ------
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
(THE "COMPANY")
REPORT ON FORM 6-K
Attached is a copy of the translation into English of the Quarterly Financial
Statements for the period ended on September 30, 2002 filed with the Bolsa de
Comercio de Buenos Aires and with the Comision Nacional de Valores
IRSA INVERSIONES Y REPRESENTACIONES
SOCIEDAD ANONIMA
AND SUBSIDIARIES
FREE TRANSLATION OF THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
for the three-month periods ended
September 30, 2002 and 2001
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2002 AND 2001
In thousands of pesos
====================================================================================
September 30, September 30,
2002 2001
(Notes 2 and 3) (Notes 2 and 3)
----------------------------------
ASSETS
------
CURRENT ASSETS
--------------
Cash and banks 43,526 4,875
Investments (Note 7) 54,741 63,672
Mortgages and leases receivables 32,896 46,560
Other receivables (Note 5) 15,022 91,530
Inventory (Note 6) 20,037 37,889
----------------------------------
TOTAL CURRENT ASSETS 166,222 244,526
----------------------------------
NON-CURRENT ASSETS
------------------
Mortgages receivables 5,521 44,881
Other receivables (Note 5) 41,156 40,431
Inventory (Note 6) 63,743 59,600
Investments (Note 7) 390,073 751,735
Fixed assets (Note 8) 1,251,243 491,644
Intangible assets 48,807 6,244
----------------------------------
TOTAL NON-CURRENT ASSETS 1,800,543 1,394,535
----------------------------------
TOTAL ASSETS 1,966,765 1,639,061
====================================================================================
===================================================================================
September 30, September 30,
2002 2001
(Notes 2 and 3) (Notes 2 and 3)
----------------------------------
LIABILITIES
-----------
CURRENT LIABILITIES
-------------------
Trade accounts payable 28,597 14,190
Mortgages payable 6,657 -
Customer advances 11,541 6,050
Short term-debt (Note 9) 594,515 417,530
Salaries and social security charges 2,107 2,011
Taxes payable 21,481 6,138
Other liabilities (Note 10) 19,480 24,091
----------------------------------
TOTAL CURRENT LIABILITIES 684,378 470,010
----------------------------------
NON-CURRENT LIABILITIES
-----------------------
Trade accounts payable 5,674 385
Long term-debt (Note 9) 196,151 28,145
Customer advances 27,145 352
Taxes payable 635 2,555
Other liabilities (Note 10) 5,826 8,381
----------------------------------
TOTAL NON-CURRENT LIABILITIES 235,431 39,818
----------------------------------
TOTAL LIABILITIES 919,809 509,828
----------------------------------
Minority interest 458,740 131,340
----------------------------------
SHAREHOLDERS' EQUITY 588,216 997,893
----------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,966,765 1,639,061
===================================================================================
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
Eduardo Sergio Elsztain
President
1
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the three-month periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
=======================================================================================================================
September 30, September 30,
2002 2001
(Notes 2 and 3) (Notes 2 and 3)
---------------------------------------
Mortgages, leases and services 50,518 36,403
Costs of sales, leases and services (37,989) (10,675)
---------------------------------------
GROSS INCOME 12,529 25,728
---------------------------------------
Selling expenses (6,629) (2,663)
Administrative expenses (9,369) (7,437)
---------------------------------------
SUBTOTAL (15,998) (10,100)
Loss from operations and holding of real estate assets (Note 11) (786) 97
---------------------------------------
OPERATING INCOME (NOTE 4) (4,255) 15,725
---------------------------------------
Financial results, net (Note 12) 80,612 (80,630)
Net income in related companies 349 (14,610)
Other income and expenses, net (Note 13) 9,577 (2,926)
---------------------------------------
SUBTOTAL 86,283 (82,441)
---------------------------------------
Minority interest (17,021) (2,031)
Income tax and asset tax (1,652) (3,207)
---------------------------------------
INCOME (LOSS) FOR THE PERIOD 67,610 (87,679)
=======================================================================================================================
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
Eduardo Sergio Elsztain
President
2
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
UNAUDITED STATEMENTS OF CONSOLIDATED CASH FLOWS (1)
For the three months periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
================================================================================================================================
September30, September30,
2002 2001
(Notes 2 and 3) (Notes 2 and 3)
------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- Income (loss) for the period 67,610 (87,679)
- ADJUSTMENTS TO RECONCILE NET LOSS TO CASH FLOW FROM OPERATING ACTIVITIES:
o Equity in earnings of affiliated companies (358) 14,610
o Minority interest in related companies 17,021 2,031
o Results from repurchase Notes (10,635) -
o Allowances and provisions 5,163 259
o Amortization and depreciation 22,812 5,545
o Loss from operations and holding of real estate assets 786 -
o Financial results (107,312) 48,208
o Income tax 1,537 3,207
- CHANGES IN ASSETS AND LIABILITIES:
o Increase in current investments (330) (19,156)
o Increase in non-current investments (2,419) -
o (Increase)/Decrease in mortgages and leases receivables (1,054) 26,420
o Decrease in other receivables 36,704 8,591
o Decrease in inventory 12,252 20,207
o (Increase)/Decrease in intangible assets (212) 133
o Decrease in taxes payable, salaries and social security and customer advances (6,208) (1,814)
o (Increase)/Decrease in accounts payable (1,101) 2,124
o Increase in accrued interest 24,020 10,229
o Cash dividends received - -
o (Decrease)/Increase in other liabilities (10,696) 12,770
------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 47,580 45,755
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
o Decrease from equity interest in subsidiary companies and equity investees - 4,008
o Increase from equity interest in subsidiary companies and equity investees (10,490) (8,348)
o Payment for acquisition of undeveloped parcels of land (959) (321)
o Loans granted to related parties - (66,493)
o Cash acquired (from APSA and Bs. As. Trade) 16,569 -
o Purchase and improvements of fixed assets (3,876) (21,578)
------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,244 (92,732)
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
o Purchase of treasury stock - -
o Proceeds from short-term and long-term debt 41,586 134,773
o Payment of short-term and long-term debt (66,408) (119,129)
o Minority shareholders contribution 92 -
o Intercompany loans 1,153 -
o Increase in intangible assets (357) -
o Payment of mortgages (3,034) -
------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (26,968) 15,644
------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 21,856 (31,333)
CASH AND CASH EQUIVALENTS AS OF BEGINNING OF YEAR 28,556 37,626
------------------------------------
CASH AND CASH EQUIVALENTS AS OF END OF PERIOD 50,412 6,293
================================================================================================================================
(1) Includes cash, banks and investments with a realization term not exceeding
three months.
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
Eduardo Sergio Elsztain
President
3
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
UNAUDITED STATEMENTS OF CONSOLIDATED CASH FLOWS (CONTINUED)
For the three-months periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
September 30, September 30,
2002 2001
(Notes 2 and 3) (Notes 2 and 3)
----------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
NON-CASH ACTIVITIES:
o Increase in inventory through a decrease in fixed assets 3,592 -
o Increase in fixed assets through a decrease in inventory 1,220 -
o Increase in investments through a decrease in mortgages receivable 781 -
o Decrease in mortgages receivable through a decrease in current investments 2,020 -
o Increase in fixed assets through an increase in mortgages 4,121 -
o Decrease in Short and long term-debt though a decrease in other liabilities 36,311 -
o Decrease in other liabilities through an increase in customer advances 2,744 -
o Decrease in Short and long term-debt though a decrease in other receivable - 5,972
Eduardo Sergio Elsztain
President
4
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the three-month periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
NOTE 1: ARGENTINE ECONOMIC SITUATION
Argentina is immersed in a difficult economic climate. The prevailing
indicators were a significant public debt burden, a financing system
in crisis, country risk levels far above normal average and a more
than four-year economic recession. This situation has led to a
significant decrease in products and services consumption and an
increase in the unemployment level. These circumstances have affected
the Government's ability to comply with existing commitments and
access to bank financing.
As from December 3, 2001 measures were issued to restrict the free
availability and circulation of cash and the transfer of foreign
currency abroad. Subsequently, the Government declared default on the
external debt.
On January 6, 2002 after a political crisis that resulted in the
resignation of two presidents, the Government enacted Law 25561 (Law
of public emergency and exchange system reform) that involved an
in-depth change of the prevailing economic model, and announced new
economic measures though Decree 214 (Restructuring of the financial
system) dated February 3, 2002 and Decree 260 (Exchange Regime),
substantially modifying some of the measures implemented by the Law
25561 These decrees are being complemented by other regulations being
issued by the various control agencies, some of which are been pending
at the date of the issuance of these financial statements. In
addition, on April 24, 2002 the Government signed an agreement with
provincial governors, which, together with other changes to the
National Administration, will lay down the basis for further measures
that have yet to be issued or fully implemented.
Listed below are some of the measures adopted by the Government that
are in force at the date of filing these financial statements and the
effect they have on the Company's economic and financial situation:
5
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 1: (Continued)
------
1. On February 8, 2002 a single free exchange market system was
established observing the requirements to be laid down by the
Argentine Central Bank.
2. At present certain transfers abroad of a financial nature require the
prior approval of the Central Bank and there are certain requirements
for settling and collecting foreign currency arising from exports.
3. As from February 3, 2002 deposits in U.S. dollars or other foreign
currencies in Argentine financial institutions were converted to
pesos at the exchange rate of Ps. 1.4 per US$ 1 or its equivalent in
such other currency. Furthermore, there are restrictions on the
availability of certain balances in current accounts and savings
accounts in dollars and fixed term deposits in pesos or dollars. In
addition, the possibility exists of transforming part or all of the
rescheduled deposits into Government Bonds or other financial
institutions. If the depositors do not elect to receive Government
Bonds, they will receive bonds issued by the Bank that will observe
the pre-existing conditions.
4. Debts in the Argentine financial and the obligation to pay money that
are not related to the financial system, whatever their origin or
nature, were converted to pesos at the exchange rate of $ 1 to US$ 1
or its equivalent in such other foreign currency.
5. As from February 3, 2002 a reference stabilization index (CER) was to
be applied to the rescheduled deposits and credits and debts were
converted to pesos at the rate of exchange of Ps. 1 per US$ 1 or its
equivalents in such other currency. The CER is an index that measures
the daily rate of change derived from the monthly change in the
Consumer Price Index (CPI) published by the INDEC.
6. The negative net results that originate in this devaluation will be
deductible from income tax as from the future five financial years.
Impact of the economic situation on the Company
The impact generated by all these measures adopted to date by the
Government on the financial situation of the Company at September 30,
2002 was calculated according to the evaluations and estimates made
by Management at the date of preparing the financial statements.
Future actual results could differ from the evaluations and estimates
made at the date of preparing these financial statements and these
differences could be significant. Therefore, the Company's financial
statements may not report all the adjustments that could result from
these adverse conditions. Furthermore, at this time it is not
possible to foresee the future development of the country's economy
or its consequences on the economic and financial situation of the
Company. Thus, any decision that must be made on the basis of
6
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 1: (Continued)
these financial statements must take into account the effects of
these measures and their future development and the Company's
financial statements must be considered in the light of these
uncertain circumstances.
As mentioned in Note 6 to the individual financial statements at
September 30, 2002, the Company was unable to meet certain
financial ratios required by el loan agreement and the negotiable
obligations, so that the banks and the holders of the notes could
require accelation of maturities. In this connection, the Company
is making progress in the negotiations with creditor banks and
holders of obligations to refinance its debt. The Management of
the Company expects to refinance and partially settle those debts
with the net proceeds of the issuance of the negotiable
obligations convertible for shares mentioned in Note 13 to the
basic unaudited financial statements.
As mentioned in Note 14 to the consolidated financial statements,
the subsidiary Hoteles Argentinos S.A. has not paid principal
installments amounting to US$ 300 thousand, with original
maturities set for January 26, April 29, July 29 and October 26,
2002, and an interest installment amounting to US$ 315 thousand
which fell due on July 29 and October 26, 2002, under the
long-term loan agreement secured by a mortgage entered into with
Bank Boston N.A., Buenos Aires branch. At the date of issue of
these financial statements, the Management of the Company was
renegotiating that liability.
The financial statements have been prepared assuming that the
Company will continue as a going concern. Therefoe, these
financial statements do not include the effects of a possible
adjustment or reclassification, if any, that might be required if
the Company could be obliged to sell its assets and settle its
liabilities, including contingencies in conditions different to
the normal course of its business.
NOTE 2: BASIS OF CONSOLIDATION - CORPORATE CONTROL
a) Basis of consolidation
The consolidated financial statements have been prepared following
the guidelines of Technical Resolution No. 4 of the Argentine
Federation of Professional Councils of Economic Sciences
(F.A.C.P.C.E.), pursuant to which the Balance Sheets as of
September 30, 2002 and 2001 of IRSA Inversiones y Representaciones
Sociedad Anonima, the Statements of Income
7
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 2: (Continued)
and the Statements of Cash Flows for the three month then ended were
consolidated with the financial statements of those companies in which
has the necessary votes to exercise control over the corporate
decisions.
All significant intercompany balances and transactions have been
eliminated in consolidation.
The following table shows the data concerning the corporate control:
September 30, September 30,
2002 2001
-----------------------------------
DIRECT OR INDIRECT % OF
COMPANIES VOTING SHARES
--------------------------------------------------- -----------------------------------
IRSA International Ltd (1) - 100,00
Ritelco S.A.(1) 100,00 -
Palermo Invest S.A. 66,67 66,67
Abril S. A. 83,33 83,33
Pereiraola S. A. 83,33 83,33
Baldovinos S. A. 83,33 83,33
Hoteles Argentinos S. A. 80,00 80,00
Buenos Aires Trade & Finance Center S.A (3) 100,00 50,00
Alto Palermo S.A ("APSA") (2) 49,93 49,51
(1) In accordance with mentioned in Note 16 to the Unaudited
Consolidated Financial Statements, as of September 30, 2002 the
Company decided the liquidation anticipated of IRSA International
Ltd.
(2) As from the three-month period ended September 30, 2002 and as a
result of the acquisition by the Company of the convertible
negotiable obligations mentioned in Note 21 to the consolidated
financial statements, the Company consolidates its financial
statements with those of its subsidiary Alto Palermo S.A.
(3) On August 16, 2002, the Company and RAGHSA S.A. agreed: i) the
redistribution of the block 5M, of the Old Puerto Madero of the
City of Buenos Aires, ii) the division and distribution of the
charge and commitment to build on those plots of land, previously
undertaken before Corporacion Antiguo Puerto Madero S.A.(CAPM),
iii) the renegotiation of the other commitments and obligations
also assumed before CAPM and iv) the exchange of the shares
issued by ARSA, BARSA and BAT&FCSA, respectively, which own the
plots of land included in block 5M. As a result of the share
exchange, the Company now owns 100% of the shares in BAT&FCSA,
and transferred its 50% interest in ARSA and BARSA respectively,
to RAGHSA S.A.
As a result of the consolidation of the related company Alto Palermo
S.A., mentioned above, since the beginning of this fiscal year the
Company has discontinued the application of the proportional
consolidation method in the preparation of the income statements.
Accordingly, the financial statement figures originally issued as of
September 30, 2001 have been reclassified to conform them to the
presentation as of September 30 , 2002.
8
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 2: (Continued)
------
b) Consideration of the effects of inflation
The financial statements have been prepared in constant currency,
reflecting the overall effects of inflation through August 31, 1995.
As from that date, in accordance with professional accounting
standards and the requirements of the control authorities, restatement
of the financial statements was discontinued until December 31, 2001.
As from January 1, 2002, in accordance with Resolution No. 3/2002 of
the Professional Council in Economic Sciences of the Autonomous City
of Buenos Aires and Resolution No. 415 of the National Securities
Commission, the effects of inflation are being recognized in the
financial statements. To this end, the restatement method established
by Technical Pronouncement No. 6 of the F.A.C.P.C.E. has been
followed.
As a consequence of the above, the Company's financial statements are
presented in constant currency of September 30, 2002, having
considered that the accounting measurements restated by the change in
the purchasing power of the currency until August 31, 1995 and those
arising between that date and December 31, 2001 are stated in currency
of the latter date.
The above restatement was made applying the coefficients prepared
based on the domestic wholesale price index.
The Company used a conversion factor to restate the comparative
financial statements in constant Argentine pesos of September 30, 2002
for comparative purposes.
c. Reclassifications
Certain reclassifications of prior period information have been made
to conform with the current period presentation.
d. Acquisition of related companies
During the quarter ended September 30, 2002, the Company acquired
30.955% of the capital stock and registered, non-endorsable,
convertible negotiable obligations issued by Valle de Las Lenas S.A.,
falling due on October 31, 2005, with a face value of US$ 3.7 million,
for approximately US$ 2.4 million.
Those shares and negotiable obligations have temporarily been valued
at their acquisition cost, restated in currency values as of September
2002.
9
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 2: (Continued)
------
e. Sales in jointly controlled affiliated companies incorporated
abroad
i) Latin American Econetworks N.V (LAE) : On November 7, 2001, the
Company sold its interest in LAE for a total consideration of
US$5,250. The price was fully collected on that date. In July
2000, this company was conceived as a developer of software,
technology and internet services.
ii) Brazil Realty S.A. Empreendimentos e Participacoes ("Brazil
Realty"): As established by the agreement signed on February 28,
2002 and the First Amendment dated May 3, 2002, between Ritelco
S.A, IRSA International Limited, IRSA and Creed Holding Ltd,
through its subsidiary Ritelco S.A., the Company sold 100% of its
participation in Brazil Realty for US$ 44,187 thousand, which had
been collected in full at the date of issue of these financial
statements.
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the subsidiaries mentioned in Note 2 have
been prepared on a consistent basis with those applied by IRSA
Inversiones y Representaciones Sociedad Anonima.
a. Jointly controlled affiliated companies incorporated abroad
The financial statements of the related companies under joint
control set up abroad, used for application of the equity method
of accounting to value the investment in those companies, were
converted into Argentine pesos at the year-end rate of exchange
based on the financial statements of those companies stated in
the currency of the country of origin. The conversion method
envisages the conversion of monetary assets and liabilities at
the exchange rate in force at the end of each period and the
non-monetary assets and liabilities and equity accounts based on
amounts adjusted for inflation, if applicable, at the exchange
rate in force at the end of each period. Average exchange rates
were used for the conversion of financial statements that reflect
the results for the periods. The net gain/loss for monetary
conversion is included in the Financial results, net.
Since March 31, 1999, as a consequence of changes in the
variables to measure fluctuations in domestic prices, and the
performance of the Brazilian currency compared to the Argentine
peso, IRSA International Limited has decided to value its
investments in fixed assets and other intangible assets that
cannot be disposed of by its subsidiary, Brazil Realty S.A.
Empreendimentos e Participacoes, at their original cost in pesos,
less applicable accumulated depreciation, following the
calculation method laid down by
10
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 3: (Continued)
------
Technical Resolution No. 13, which was approved by the March 1999
Resolution of the Administrative Board of the Argentine
Federation of Professional Councils in Economic Sciences.
b. Shares and options of Banco Hipotecario S.A.
The shares in Banco Hipotecario S.A. held by Ritelco S.A. (a
wholly-owned subsidiary) have been valued at their quotation at
the end of the year, less estimated selling expenses, while
options were valued at restated cost as mentioned in Note 1.b) to
the individual unaudited financial statements or estimated net
realizable value, whichever is lower.
c. Revenue Recognition
The Company's revenues mainly stem from office rental, shopping
center operations, development and sale of real estate, hotel
operations and, to a lesser extent, from e-commerce activities.
See Note 4 for details on the Company's business segments. As
discussed in Note 2.a., the consolidated statements of income
were prepared following the guidelines of Technical Resolution
No. 4 of the F.A.C.P.C.E.
o Leases and services from shopping center operations
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 rent (the "Base Rent") and (ii) a
specified percentage of the tenant's monthly gross retail sales
(the "Percentage Rent") (which generally ranges between 4% and 8%
of tenant's gross sales).
Furthermore, pursuant to the rent escalation clause in most
leases, a tenant's Base Rent generally increases between 4% and
7% each year during the term of the lease. Minimum rental income
is recognized on a straight-line basis over the term of the
lease. Certain lease agreements contain provisions, which provide
for rents based on a percentage of sales or based on a percentage
of sales volume above a specified threshold. The Company
determines the compliance with specific targets and calculates
the additional rent on a monthly basis as provided for in the
contracts. Thus, these contingent rents are not recognized until
the required thresholds are exceeded.
Generally, the Company's lease agreements vary from 36 to 120
months. Law No. 24,808 provides that tenants may rescind
commercial lease agreements after the initial
11
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 3: (Continued)
six months, upon not less than 60 days' written notice, subject
to penalties which vary from one to one and a half 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. The Company also charges its tenants a monthly
administration fee, prorated among the tenants according to their
leases, which varies from shopping center to shopping center,
relating to the administration and maintenance of the common area
and the administration of contributions made by tenants to
finance promotional efforts for the overall shopping centers
operations. Administration fees are recognized monthly when
earned. In addition to rent, tenants are generally charged
"admission rights", a non-refundable admission fee that tenants
may be required to 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. Admission rights are
recognized using the straight-line method over the life of the
respective lease agreements. Furthermore, the lease agreements
generally provide for the reimbursement of real estate taxes,
insurance, advertising and certain common area maintenance costs.
These additional rents and tenant reimbursements are accounted
for on the accrual basis.
o Credit card operations
Revenues derived from credit card transactions consist of
commissions and financing income. Commissions are recognized at
the time the merchants' transactions are processed, while
financing income is recognized when earned.
o Hotel operations
The Company recognizes revenues from its rooms, catering, and
restaurant facilities as earned on the close of business each
day.
o International operations
As of September 30, 2001, the Company held a 49.95% ownership
interest in Brazil Realty, a company operating in Brazil, which
business primarily comprised the same type of operations related
to real estate conducted by the Company in Argentina. See Note
2.e.ii., the Company sold its ownership interest in Brazil of
february 28, 2002.
d. Intangible assets, net
Intangible assets are carriedat cost adjusted for inflation, less
accumulated depreciation.
12
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 3: (Continued)
o Trademarks
Trademarks include the expenses and fees related to their
registration.
o Advertising expenses
Advertising expenses relate to the Torres de Abasto project, the
opening of Abasto Shopping and promotion costs related to Paseo
Alcorta. The expenses incurred in relation to Torres de Abasto
project are recognized in the statement of operations as
determined under the percentage-of-completion method. Other
advertising expenses are amortized under the straight-line method
over a term of 3 years.
o Investment projects
Investment projects represent expenses primarily related to
marketing efforts incurred by the Alto Palermo S.A for the
selling of merchandise through certain means of communication.
These costs are capitalized and amortized to income under the
straight-line method as from the start up date of the project.
These expenses are written off upon abandonment or disposal of
project.
o Goodwill
Representing the excess of cost over the fair value of net
identifiable assets acquired, is stated at cost adjusted for
inflation at the end of the period, and is amortized on a
straight-line basis over its estimated economic life, not
exceeding 10 years. The goodwill included in this caption was
generated by the purchase of shares in Tarshop S.A., Inversha
S.A., Pentigras S.A. and Fibesa S.A. by Alto Palermo S.A..
o Tenants list-Patio Bullrich
This item represents the acquired tenant list of the Patio
Bullrich shopping mall and is amortized using the straight-line
method over a five-year period.
e. Issuance of new technical pronouncements
In accordance with mentioned in Note 1.c) to the individual unaudited
financial statements, the main amendments to the new Technical
Pronouncements, which would mean significant adjustments being made to
the Company's financial statements, are related to the recognition of
income tax according to the deferred tax method and of the interest
rate swap contract at the subsidiary Alto Palermo S.A. However, we
cannot provide assurance that the National Securities Commission will
adopt the above-mentioned Technical Pronouncements without adding any
amendment or limitation to their application and, therefore, the
effects on the financial statements of the Company could differ from
those previously indicated.
13
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTA 4: SEGMENT INFORMATION
The Company has determined that its reportable segments are those that
are based on the Company's method of internal reporting. Accordingly,
the Company has six reportable segments. These segments are
Development and sales of properties, Office and other non-shopping
center rental properties, Shopping centers, Hotel operations,
International and Others. As discussed in Note 2.a., the consolidated
statements of income were prepared following the guidelines of
Technical Resolution No. 4 of the F.A.C.P.C.E.
A general description of each segment follows:
o Development and sale of properties
This segment includes the operating results of the Company's
construction and ultimate sale of residential buildings business.
o Office and other non-shopping center rental properties
This segment includes the operating results of the Company's
lease and service revenues of office space and other non-retail
building properties from tenants.
o Shopping centers
This segment includes the operating results of the Company's
shopping centers principally comprised of lease and service
revenues from tenants. This segment also includes revenues
derived from credit card transactions that consist of commissions
and financing income.
o Hotel operations
This segment includes the operating results of the Company's
hotels principally comprised of room, catering and restaurant
revenues.
14
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 4: (Continued)
o International
This segment includes the results of operations:
-Brazil: for the period ended September 30, 2001. As mentioned
in Note 2.e.ii), the Company sold its ownership interest in
Brazil in February 2002
o Others
This segment primarily includes revenues and associated costs
generated from the sale of equity securities, other
securities-related transactions and other non-core activities of
the Company. This segment also includes the results in equity
investees of the Company relating to Internet, telecommunications
and other technology-related activities of the Company.
The Company measures its reportable segments based on net income.
Inter-segment transactions, if any, are accounted for at current
market prices. The Company evaluates performance of its segments and
allocates resources to them based on net income. The Company is not
dependent on any single customer.
The accounting policies of the segments are the same as those
described in Note 2 to the unaudited financial statements and in Note
3 to the consolidated unaudited financial statements.
The following information provides the operating results from each
business unit:
15
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 4:
As of September 30, 2002:
-------------------------------------------------------------------------------------------------
Financial and
Sales and Office and Shopping other
developments Others (a) International centers Hotels operations Total
-------------------------------------------------------------------------------------------------
Income 14,295 5,541 - 23,320 7,362 - 50,518
Costs (14,920) (2,148) - (16,820) (4,101) - (37,989)
Gross income (625) 3,393 - 6500 3,261 - 12,529
Administrative expenses (1,574) (721) - (4,385) (2,689) - (9,369)
Selling expenses (786) - - (5,025) (818) - (6,629)
Loss on purchasers rescissions
of sales contracts - - - - - - -
Results from operations and
holding of real estate assets (786) - - - - - (786)
-----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (3,771) 2,672 - (2,910) (246) - (4,255)
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization (b) 951 1,598 - 14,494 1,104 - 18,147
-----------------------------------------------------------------------------------------------------------------------------------
(a) Includes offices, commercial and residential premises.
(b) Included in operating income/loss.
16
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 4:
As of September 30, 2001
------------------------------------------------------------------------------------------------
Financial
Sales and Office and Shopping and other
developments Others (a) International centers Hotels operations Total
------------------------------------------------------------------------------------------------
Income 12,045 13,384 - - 10,974 - 36,403
Costs 246 (2,833) - - (8,088) - (10,675)
Gross income 12,291 10,551 - - 2,886 - 25,728
Administrative expenses (2,744) (1,283) (88) (197) (3,125) - (7,437)
Selling expenses (1,501) (36) - - (1,126) - (2,663)
Results from operations and
holding of real estate assets - - 97 - - - 97
-----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 8,046 9,232 9 (197) (1,365) - 15,725
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization (b) 619 2,190 - - 1,943 - 4,752
-----------------------------------------------------------------------------------------------------------------------------------
(a) Includes offices, commercial and residential premises.
(b) Included in operating income/loss.
17
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 5: OTHER RECEIVABLES
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
-----------------------------------------------
Non- Non-
Current Current Current Current
-----------------------------------------------
Asset tax and prepayments 2,507 36,333 4,190 34,848
Value Added Tax (VAT) 375 1,849 8,572 2,898
C.N. Hacoaj Project 593 - 1,471 -
Related parties 504 143 67,351 2,601
Services to be billed - - 551 -
Guarantee deposits 554 2,033 - 84
Personnel loans and prepayments 3,468 - 2,482 -
Trust accounts receivable 2,056 - - -
Bids in progress 1,083 - - -
Gross sales tax 240 365 - -
Debtors under legal proceedings - - 414 -
Sundry debtors 2,095 433 - -
Operation pending settlement 14 - - -
Income tax prepayments and withholdings 773 - 925 -
Country club debtors 457 - 1,898 -
Tax on debits and credits 2 - 538 -
Other 301 - 3,138 -
-----------------------------------------------
15,022 41,156 91,530 40,431
===============================================
18
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 6: INVENTORY
The breakdown for this item is as follows:
September 30, 2002
------------------------------------
Non-
Current Current
------------------------------------
Constitucion 1111 1,929 -
Dique IV - 6,198
Dock 13 - 54
Dorrego 1916 - 13
Minetti "D" - 223
Figueroa Alcorta - -
Madero 1020 1,972 -
Caballito plots of land - 13,701
Padilla 902 - 247
Pilar - 3,428
Puerto Madero Dock 6 - -
Rivadavia 2768 - 155
Sarmiento 517 - 357
Torres Jardin 328 330
V.Celina - 71
Abril/Baldovinos 9,550 11,441
Alto Palermo Park 4,234 -
Alto Palermo Plaza 1,097 -
Benavidez - 14,299
Torres de Abasto 629 13,226
Other properties 1 -
Other 297 -
------------------------------------
20,037 63,743
====================================
September 30, 2001
------------------------------------
Non-
Current Current
------------------------------------
Constitucion 1111 2,634 -
Dique IV - 6,194
Dock 13 64 -
Dorrego 1916 - -
Minetti "D" 420 312
Figueroa Alcorta 487 -
Madero 1020 - -
Caballito plots of land - 20,025
Padilla 902 - 363
Pilar - 3,429
Puerto Madero Dock 6 210 15
Rivadavia 2768 - -
Sarmiento 517 438 95
Torres Jardin 1,708 303
V.Celina 60 -
Abril/Baldovinos 26,690 6,643
Alto Palermo Park 4,776 7,923
Alto Palermo Plaza - -
Benavidez - 14,298
Torres de Abasto - -
Other properties - -
Other 402 -
------------------------------------
37,889 59,600
====================================
19
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 7: INVESTMENTS
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
---------------------------------
CURRENT
Lebacs 6,383 -
Bocanova 202 -
Boden 1,188 -
Bocon Pro 1 - 8,594
Telecom Argentina - 13,902
Banco Hipotecario S.A. 15,511 16,617
Perez Companc - 668
Time deposits and money markets 503 1,413
Mutual funds 26,187 19,271
Patriotic Bond - 1,548
Tarshop Trust 4,707 -
Other investments 60 1,659
---------------------------------
54,741 63,672
=================================
NON-CURRENT
Alto Palermo S.A. - 359,224
Brazil Realty - 131,729
Llao - Llao Resorts S.A. 12,469 5,386
Alto Invest S.A. 197 -
Banco de Credito y Securitizacion S.A. 7,051 7,052
Latin American Econetworks N.V. - 9,979
IRSA Telecomunicaciones N.V. 2,672 3,098
Valle de las Lenas S.A 8,506 -
Perez Cuesta S.A.C.I. 14,370 -
E-Commerce Latina S.A 5,288 -
Banco Hipotecario S.A. 6,888 23,341
IRSA I Trust Exchangeable Certificate Class B 1,144 -
IRSA I Trust Exchangeable Certificate Class C 1,839 -
IRSA I Trust Exchangeable Certificate Class D 5,853 -
IRSA I Trust Exchangeable Certificate Class A 620 -
Tarshop Trust 4,819 -
Art work 37 38
---------------------------------
71,753 539,847
---------------------------------
Undeveloped parcels of land:
Torres Jardin IV 2,245 3,050
Puerto Retiro 46,460 46,890
Santa Maria del Plata 116,709 124,847
Pereiraola 21,996 21,908
Dique 3 parcela 1.b. (1) 25,992 3,552
Buenos Aires Realty S.A. - 4,187
Argentine Realty S.A. - 4,338
Caballito 24,958 -
Rosario 56,459 -
20
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 7: (Continued)
Undeveloped parcels of land:
Neuquen 8,574 -
Alcorta Plaza 11,812 -
Other parcels of undeveloped land 3,115 3,116
--------------------------
318,320 211,888
--------------------------
390,073 751,735
==========================
(1) Bs. As. Trade & Finance Center S.A. to September 30, 2002.
NOTE 8: FIXED ASSETS
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
------------------- ----------------
HOTELS
Hotel Intercontinental 60,235 69,985
Hotel Libertador 42,046 44,098
Hotel Piscis 5,235 -
------------------- ----------------
107,516 114,083
------------------- ----------------
OFFICE BUILDINGS
Avda. de Mayo 595 4,205 -
Avda. de Mayo 701 - 6,371
Avda. Madero 942 2,326 5,855
Edificios costeros (Dique II) 23,891 27,185
Laminar Plaza 28,541 32,811
Libertador 498 37,997 54,223
Libertador 602 2,532 3,214
Madero 1020 9,071 20,782
Maipu 1300 41,568 47,998
Puerto Madero Dock 5 - 2,416
Reconquista 823 17,797 21,715
Rivadavia 2768 - 341
Sarmiento 517 258 599
Suipacha 652 10,154 14,657
Alto Palermo Plaza 1,906 4,530
Intercontinental Plaza 65,159 72,916
Costeros Dique IV 17,883 23,423
------------------- ----------------
263,288 339,036
------------------- ----------------
COMMERCIAL REAL ESTATE
Alsina 934 1,515 1,544
Constitucion 1111 408 6,134
Rivadavia 2243 - 8,260
Av. Santa Fe 1588 - 8,392
------------------- ----------------
1,923 24,330
------------------- ----------------
21
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 8: (Continued)
OTHER FIXED ASSETS
Alto Palermo Park 802 3,081
Thames 4,022 4,827
Other 5,669 6,287
-------------------- ---------------
10,493 14,195
-------------------- ---------------
SHOPPING CENTER
Alto Avellaneda 98,085 -
Alto Palermo 262,801 -
Paseo Alcorta 76,053 -
Abasto 225,147 -
Patio Bullrich 133,510 -
Buenos Aires Design 24,062 -
Nuevo Noa 21,934 -
Other properties 11,478 -
Other 14,953 -
-------------------- ---------------
868,023 -
-------------------- ---------------
1,251,243 491,644
==================== ===============
NOTE 9: SHORT AND LONG TERM DEBT
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
----------------------- ----------------------------
Non- Non-
Current Current Current Current
----------------------- ----------------------------
Convertible bond APSA 2006 (1) - 74,121 - -
Negotiable obligations APSA (2) 10,716 120,196 - -
Accrued interest- Convertible bond 3,740 - - -
Accrued interest- Negotiable obligations APSA 4,564 - - -
Intercompany 232 - - -
Bank debts (3) 347,628 1,834 284,025 28,145
Accrued interest - bank loans 12,646 - 1,385 -
Negotiable obligations 2001 - principal amount (4) 151,689 - 96,222 -
Negotiable obligations 2001 - accrued interest - - 2,312 -
Other (5) 63,300 - 33,586 -
----------------------- ----------------------------
594,515 196,151 417,530 28,145
======================= ============================
The detail of issue of negotiable obligations and financial loans is mentioned
in Note 6 to the unaudited financial statements.
22
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 9: (Continued)
(1) Corresponds to Negotiable Obligations convertible for Shares
("ONC") issued by APSA for US$ 50,000.000, as mentioned in Note
21 to the unaudited consolidated financial statements, net of the
ONC subscribed by the Company for a total amount of $ 112.879
thousand.
(2) Includes:
a) $ 50,330 thousand corresponding to general unsecured
obligations issued by APSA for an original face value of
total $85,000,000, which will fall due on April 7, 2005,
date on which the principal will be fully amortized. As of
September 30, 2002 APSA recorded certain mismatchings in
financial ratios required under the Trust Agreement. As a
result of this, the assumption of additional indebtedness by
APSA and its subsidiaries is restricted.
b) $ 27,432 thousand corresponding to general obligations
secured by APSA originally issued for a total amount of US$
40,000,000, falling due on January 13, 2005, date on which
the principal will be fully amortized. These negotiable
obligations are secured by the transfer in trust of all the
shares which represent the capital stock of Shopping Alto
Palermo S.A. for the benefit of the holders of those
negotiable obligations. As of September 30, 2002, as a
result of the prevailing conditions, the Company recorded
certain mismatchings in the financial ratios required under
the Trust Agreement signed in connection with the issuance
of negotiable obligations. After the closing date, APSA
called an Extraordinary Meeting of Holders of Negotiable
Obligations that was held on November 11, 2002, at which it
was decided to grant a waiver to the Company due to the
failure to meet its commitments during the quarter comprised
between July 1, 2002 and September 30, 2002.
c) $ 53,150 thousand corresponding to general securities under
obligations secured by Shopping Alto Palermo S.A. (SAPSA).
Under the issue terms and conditions of those obligations,
SAPSA is required to meet certain financial ratios and
conditions, certain ratios and indebtedness levels, and
there are restrictions on the obtainment of new loans. As of
September 30, 2002, as a result of the prevailing
conditions, SAPSA recorded certain mismatchings in the
financial ratios required under the Trust Agreement signed
in connection with the issuance of negotiable obligations.
After the closing date, the Extraordinary Meeting of Holders
of Negotiable Obligations held on November 11, 2002, granted
a waiver to the Company for its failure to comply with its
commitments during the quarter comprised between July 1,
2002 and September 30, 2002.
(3) It mainly includes:
a) $ 299,200 thousand corresponding to a Syndicated loan
obtained by the Company, as detailed in Note 6 to the basic
financial statements.
b) $ 42,637 thousand at current values, corresponding to a loan
secured by real estate property owned by Hoteles Argentinos
S.A., as mentioned in Note 14 to the consolidated financial
statements.
c) $ 1,834 thousand at current values, corresponding to a debt
arising from interest rate swap operations. Corresponds to
:(1) US$ 50.1 million for the guarantee provided to Morgan
Guaranty Trust Company of New Bank, (2) a liability of US$
69.1 million and (3) a fee of $ 69.1 million arising from
that contract (as detailed in Note 14.c) and Note 20.ii)).
(4) Corresponds to the Negotiable Obligations issued by the Company,
as mentioned in Note 6 to the unaudited basic financial
statements.
(5) As mentioned in Note 19 to the unaudited consolidated financial
statements, $ 59,611 thousand for a debt with GSEM/AP Holdings
L.P. have been included.
23
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 10: OTHER LIABILITIES
The breakdown for this item is as follows:
September 30, 2002 September 30, 2001
2002 2001
----------------------------- ----------------------------
Current Non-current Current Non-current
Current Current Current Current
----------------------------- ----------------------------
Seller financing 856 725 1,922 3,207
Dividends payable 6,905 - - -
Intercompany 1,181 - 15 -
Guarantee deposits 1,093 847 1,635 3,849
Provision for discounts 33 - 73 -
Provision for lawsuits and contingencies 658 2,649 239 372
Fees payable 5 - 215 -
Rebilled condominium expenses 522 - 951 -
Directors' deposits - 8 - 18
Fund administration 3 482 - 935
Operation pending settlement 4,053 - 13,484 -
Other provisions 1,611 - 1,900 -
Collections on behalf of third parties 58 - 117 -
Pending settlements for sales of plots 444 - 2,469 -
Profits not yet realized 214 1,115 - -
Other 1,844 - 1,071 -
----------------------------- ----------------------------
19,480 5,826 24,091 8,381
============================= ============================
NOTE 11: RESULTS FROM OPERATIONS AND HOLDINGS OF REAL ESTATE ASSETS
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
----------------- -----------------
Results from transactions related to shares of real estate (786) 97
companies
----------------- -----------------
(1) (786) 97
================= =================
(1) This item includes losses from the quotation of shares in real
estate companies, premiums on issuance of shares earned and
losses from the impairment of real estate assets.
NOTE 12: FINANCIAL RESULTS, NET
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
--------------- ----------------
FINANCIAL RESULTS GENERATED BY ASSETS:
Interest income 7,267 123
Gain/(loss) on financial operations 6,186 (51,553)
Exchange loss (15,028) (20,782)
Gain on exposure to inflation (37,367) 4,645
--------------- ----------------
(38,942) (67,567)
--------------- ----------------
24
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 12: (Continued)
FINANCIAL RESULTS GENERATED BY LIABILITIES:
Exchange gain/(loss) 81,696 (2)
Loss on exposure to inflation 35,557 -
Financial expenses 2,301 (13,061)
--------------- -----------------
119,554 (13,063)
--------------- -----------------
OTHER INCOME AND EXPENSES, NET 80,612 (80,630)
=============== =================
NOTE 13: OTHER INCOME AND EXPENSES; NET
September 30, September 30,
2002 2001
--------------- -----------------
OTHER INCOME:
Gain on early redemption of debt 10,635 -
Gain from the sale of fixed assets 15 -
Other 99 317
--------------- -----------------
10,749 317
--------------- -----------------
OTHER EXPENSES:
Unrecoverable VAT (91) (539)
Donations (9) (246)
Gain/ (loss) from the sale of fixed assets - (1)
Contingencies for lawsuits (247) -
Debit and credit tax (410) (702)
Other (415) (1,755)
--------------- -----------------
(1,172) (3,243)
=============== =================
FINANCIAL RESULTS, NET 9,577 (2,926)
=============== =================
NOTE 14: RESTRICTED ASSETS
Puerto Retiro S.A.: extension of the bankruptcy
On April 18, 2000, Puerto Retiro S.A. was notified of a filing made by
the National Government, through the Ministry of Defense, to extend
the petition in bankruptcy of Inversora Darsena Norte S.A. (Indarsa)
to Puerto Retiro S.A. Concurrently with the complaint, at the request
of plaintiff, the bankruptcy court granted an order restraining the
ability of Puerto Retiro to sell or dispose in any manner the real
estate property purchased from Tandanor S.A. ("Tandanor").
Indarsa had purchased 90% of the capital stock of Tandanor, a formerly
state owned company privatized in 1991, engaged in the shipyard
industry.
In June 1993, Tandanor sold the plot of land near Puerto Madero
denominated "Planta 1" to Puerto Retiro S.A.
25
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 14: (Continued)
Indarsa did not comply with the payment of the outstanding price for
the purchase of the stock of Tandanor, and therefore the Ministry of
Defense requested the bankruptcy of Indarsa. Since the only asset of
Indarsa were the shareholdings in Tandanor, the Ministry of Defense is
pursuing to extend the bankruptcy to other companies or individuals
which, according to its view, acted as an economic group, and
therefore, requested the extension of the bankruptcy to Puerto Retiro
which acquired Planta 1 from Tandanor. The lawsuit is at its first
stages. Puerto Retiro S.A. answered the claim and appealed the
preventive measures ordered. This appeal was overruled on December 14,
2000.
Puerto Retiro S.A. believes, pursuant to the advice of its legal
advisors, that the plaintiff's claim shall be rejected by the courts.
Hoteles Argentinos S.A.: mortgage loan
The Extraordinary Shareholders' Meeting of Hoteles Argentinos S.A.
held on January 5, 2001, approved taking a long-term mortgage loan
from Bank Boston N.A. Buenos Aires for a total of US$ 12,000,000 to be
used to refinance existing debts. The term of the loan was agreed at
60 months payable in 19 equal and quarterly installments of US$
300,000 and one final payment of US$ 6,300,000. The agreement was
signed on January 26, 2001.
Interest is paid quarterly in arrears at an annual interest rate
equivalent to LIBOR for nine-month loans plus the applicable mark-up
per the contract, which consists in a variable interest rate
applicable during the interest bearing periods, which ranges from
6.56% to 8.46% per year.
The guarantee granted was a senior mortgage on a Company property,
which houses the Hotel Sheraton Libertador Buenos Aires.
At the date of issue of these financial statements, as a result of the
current economic situation, the lack of credit and the crisis of the
Argentine financial system, principal installments of US$ 300 thousand
falling due on Juanuary 26, April 29, July 29 and October 26, 2002,
respectivelly and the interest installment amounting to US$ 315
thousand falling due on July 29 and October 26, 2002 were not paid.
Although Hoteles Argentinos' Management is renegotiating the debt with
its creditors, as failure to pay the installments when due entitles
the bank to require acceleration of principal and interest maturities,
the loan has been classified and is shown under current financial
loans in these financial statements.
Alto Palermo S.A.- Restricted assets.
a) As of September 30, 2002, APSA records funds for $ 108 thousand
in other current receivables, which have been restricted by the
Federal Court of First Instance dealing with Labor Matters No. 40
- Single Clerk's Office, in relation to the case entitled "Del
Valle Soria, Delicia v. New Shopping S.A.", dismissal without
legal justification.
b) As of September 30, 2002, the Company records $ 15.0 million for
shares in Emprendimiento Recoleta S.A. on which a pledge has been
set up.
26
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 14: (Continued)
c) As of September 30, 2002, the Company records a balance of $
187.4 million in non-current financial debts, corresponding to
derivative financial instruments used as collateral for
operations.
d) As of September 30, 2002, Shopping Neuquen S.A. includes $ 56
thousand in financial loans, corresponding to a mortgage set up
on acquired land for $ 3,334 thousand.
e) On January 18, 2001, Shopping Alto Palermo S.A. issued negotiable
obligations secured by all the shares representing its corporate
capital transferred in trust in favor of their holders.
f) On December 19, 2001 a "Guarantee Trust" agreement was entered
into by and between Tarshop S.A., as Trustor, and HSBC
Participaciones (Argentina) S.A., as Trustee, to secure
compliance by Tarshop S.A with its obligations with the
beneficiary, HSBC Bank Argentina S.A.. Those obligations include
a loan for $ 1,5 million requested by Tarshop S.A. on November 9,
2000.
The trust assets include receivables in favor of Tarshop S.A. for
coupons issued for amounts charged to certain users of the Shopping
card (Tarjeta Shopping) issued by Tarshop S.A..
Buenos Aires Trade & Finance Center S.A..
On October 18, 1999, the Company set up a first mortgage in favor of
Corporacion Antiguo Puerto Madero Sociedad Anonima as collateral for
the balance of the price of U$S 6,428,943,90 (principal and interest)
for the acquisition of the Plot of Land 1 of Block 5 M of Dock 3 of
Puerto Madero, in the City of Buenos Aires, which will fall due on
December 9, 2002. The debt balance amounts to $5,823 thousand
(principal, VAT and interest), and has been disclosed net of VAT and
interest not yet accrued for $ 125 thousand under Mortgages payable.
NOTE 15: TARSHOP CREDIT CARD RECEIVABLE SECURITIZACION
Alto Palermo S.A. has ongoing revolving period securitization programs
through which Tarshop, a majority-owned subsidiary of APSA, transfers
a portion of its customer credit card receivable balances to a master
trust (the "Trust") that issues certificates to public and private
investors.
To the extent the certificates are sold to third parties, the
receivables transferred qualify as sales for financial statement
purposes and are removed from the APSA balance sheet. The remaining
receivables in the Trust which have not been sold to third parties are
reflected on the APSA balance sheet as a retained interest in
transferred credit card receivables. Under these programs, APSA acts
as the servicer on the accounts and receives a fee for its services.
27
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 15: (Continued)
Under the securitization programs, the Trust may issue two types of
certificates representing undivided interests in the Trust - Titulos
de Deuda Fiduciaria ("TDF") and Certificados de Participacion ("CP"),
which represent debt, and equity certificates, respectively. Interest
and principal services are paid periodically to the TDF holders
throughout the life of the security. CPs are subordinated securities
which entitle the CP holders to share pro rata in the cash flows of
the securitized credit card receivables, after principal and interest
on the TDFs and other fees and expenses have been paid. During the
revolving period no payments are made to TDF and CP holders. Principal
collections of the underlying financial assets are used by the Trust
to acquire additional credit card receivables throughout the revolving
period. Once the revolving period ends, a period of liquidation occurs
during which: (i) no further assets are purchased and (ii) all cash
collections are used to fulfill the TDF service requirements and (iii)
the remaining proceeds are used to fulfill the CPs service
requirements.
Alto Palermo S.A. entered into two-year revolving-period
securitization programs, through which Tarshop sold an aggregate
amount of Ps. 83.1 million of its customer credit card receivable.
Under the securitization programs, the Trusts issued Ps. 12.4 million
nominal value subordinated CPs, Ps. 23.8 million 12% fixed-rate
interest TDFs and Ps. 20.0 million 18% fixed-rate interest TDFs, and
Ps. 6.9 million variable rate interest TDFs. Tarshop acquired all the
CPs at an amount equal to their nominal value while the TDFs were sold
to other investors through a public offering in Argentina. As a credit
protection for investors, Tarshop has established cash reserves for
losses amounting to Ps. 0.7 million.
NOTE 16: REDUCTION OF CAPITAL STOCK OF IRSA INTERNATIONAL LIMITED AND
RITELCO S.A.
On December 22, 2000, the shareholders of IRSA International Limited
decided to redeem shares and retained earnings in that company for US$
59,260. On the same date, the shareholders of Ritelco S.A. decided to
redeem shares for US$ 58,727. These reductions are pending of approval
from the respective control authorities.
On March 7, 2001, the shareholders of IRSA International Limited
decided to redeem shares for US$ 4,370. On the same date, the
shareholders of Ritelco S.A. decided to redeem shares for US$ 4,560.
Both decisions are pending of approval from the respective control
authorities.
During the period ended September 30, 2001, the shareholders of IRSA
International Limited decided to redeem shares and retained earnings
for US$ 12,464. The decision is pending of approval from the
respective control authorities.
28
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 16: (Continued)
On September 30, 2002 the shareholders of IRSA International Limited
approved the liquidation of the Company, which is pending approval by
the control authorities. On that date, the shareholders of Ritelco
S.A. decided to make a reduction in capital stock and unappropriated
retained earnings amounting to US$ 46,879 thousand. That reduction has
not yet been submitted to the approval of the corresponding control
authorities.
NOTE 17: IRSA INTERNATIONAL LIMITED INVESTMENT'S IN IRSA
TELECOMUNICACIONES N.V.
In the fourth quarter of the year ended June 30, 2000, the Company had
invested US$ 3.0 million, in the form of irrevocable capital
contributions, into two unrelated companies, namely, Red Alternativa
S.A., a provider of satellite capacity to Internet service providers,
and Alternativa Gratis S.A., an Internet service provider (referred to
herein as the "Companies"). At that date, the Companies were
development stage companies with no significant operations.
Between July 2000 and August 2000, the Company, together with Dolphin
Fund Plc, increased their respective investments in the abovementioned
Companies, in exchange for shares of common stock. In a series of
transactions, which occurred between August 2000 and December 2000,
(i) the Company formed IRSA Telecomunicaciones N.V. ("ITNV"), a
holding company organized under the laws of the Netherlands Antilles,
for the purposes of completing a reorganization of the Companies (the
"Reorganization") and (ii) the Company, Dolphin Fund Plc and the
previous majority shareholder of the Companies contributed their
respective ownership interests in the Companies into ITNV in exchange
for shares of common stock of ITNV
In September and December 2000, the Company had made additional
contributions to ITNV for US$ 3 million, generating an increase in its
participation in the capital stock at that date of 62%.
As a result of the Reorganization, the Companies are now wholly owned
subsidiaries of ITNV. Following the Reorganization, the Company held a
49.36% interest in ITNV.
On December 27, 2000, the shareholders of ITNV entered into an
agreement with Quantum Industrial Partners LDC ("QIP") and SFM
Domestic Investment LLC ("SFM" and together with QIP referred to
herein as the "Investors") (the "Shareholders Agreement"), under which
the Investors contributed US$ 4.0 million in cash in exchange for
1,751,453 shares of Series A mandatorily redeemable convertible
preferred stock and an option to purchase 2,627,179 additional shares
of mandatorily redeemable convertible preferred stock. Pursuant to the
terms of the Shareholders Agreement, options were granted for a period
up to five years and at an exercise price equal to the quotient of US$
6.0 million by 2,627,179 preferred shares. On or after December 27,
2005, ITNV might be required, at the written request of holders of the
then outstanding Series A preferred stock to redeem such holders'
outstanding shares of series A preferred stock for cash at the greater
of (i)
29
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 17: (Continued)
200% of the original issue price multiplied by the number of preferred
stock to be redeemed, and (ii) the fair market value of the common
shares each holder of Series A preferred stock would have been
entitled to receive if such holder had converted the number of Series
A preferred stock to be redeemed into common stock at the redemption
date; plus in the case of (i) and (ii), any accrued or declared but
unpaid dividends.
NOTE 18: SETTING UP OF A FINANCIAL TRUST FOR THE SECURITIZATION OF RECEIVABLES
OF IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA (IRSA),
INVERSORA BOLIVAR S.A. AND BALDOVINOS S.A.
The Board of Directors of IRSA, in the meeting held on November 2,
2001, authorized the setting up of a financial trust for the
securitization of Company receivables. The trust program for issuing
participation certificates, under the terms of Law No. 24.441, was
approved by the National Securities Commission by means of Resolution
No. 13.040, dated October 14, 1999, as regards the program and in
particular as regards the Trust called IRSA I following a decision of
the Board of Directors dated December 14, 2001.
On December 17, 2001, IRSA, Inversora Bolivar S.A. and Baldovinos
S.A., parties of the first part (hereinafter the "Trustors") and Banco
Sudameris Argentina S.A., party of the second part (hereinafter the
"Trustee"), have agreed to set up the IRSA I Financial Trust under the
Global Program for the Issuance of FIDENS Trust Values, pursuant to
the contract entered into on November 2, 2001.
Under the above program, the trustors have sold their personal and
real estate credits, secured with mortgages or arising from bills of
sale with the possession of the related properties, for the total
amount US$ 26,585,774 to the Trustee, in exchange for cash and the
issuance by the Trustee of Participation Certificates for the same
nominal value and in accordance with the following classes:
o Class A Participation Certificates ("CPA"): Nominal value of US$
13,300,000, with a 15% fixed annual nominal yield, with monthly
Service payments due on the 15th of each month or on the
immediately following working day. These certificates grant the
right to collect the following Services: (a) a fixed yield
calculated on the Class' principal balance, with monthly
capitalization, payable monthly as from the total settlement of
the CPAs, and (b) an amortization.
o Class B Participation Certificates ("CPB"): Nominal value of US$
1,000,000, with a 15.50% fixed annual, nominal yield, with
monthly Service payments due on the 15th of each month or on the
immediately following working day. These certificates grant the
right to collect the following Services: (a) a fixed yield
calculated on the Class' principal balance, with monthly
capitalization, payable monthly as from the total settlement of
the CPAs, and (b) an amortization equivalent to the sums paid as
from the Last Service Payment Date on which the total settlement
of the CPA Certificates may have taken place, net of their fixed
yield.
30
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 18: (Continued)
o Class C Participation Certificates ("CPC"): Nominal value of US$
1,600,000, with a 16% fixed annual nominal yield, with monthly
Service payments due on the 15th of each month or on the
immediately following working day. These certificates grant the
right to collect the following Services: (a) a fixed yield
calculated on the Class' principal balance, with monthly
capitalization, payable monthly as from the total settlement of
the CPBs, and (b) an amortization equivalent to the sums paid as
from the Last Service Payment Date on which the total settlement
of the CPBs may have taken place, net of their fixed yield. The
fixed yield will accrue as from the Cut-Off Date and will be
capitalized on a monthly basis.
o Class D Participation Certificates ("CPD"): Nominal Value of US$
10,685,774. These grant the right to collect monthly the sums
arising from the Cash Flow, net of the contributions made to the
Expense Fund, once the remaining classes have been fully settled.
The period for placing the Participation Certificates was from
December 27, 2001 to January 15, 2002.
Pursuant to Decree No. 214/02, assets and debts in U.S. dollars or
other foreign currencies in the Argentine financial system as of
January 6, 2002, were converted to pesos at the rate of exchange of
Ps. 1 per US$ 1 or its equivalent in another currency and was adjusted
by a reference stabilization index (CER).
At September 30, 2002, the Exchangeable Class A , B , C and D
Participation Certificates amounted to thousand $ 7,879 in IRSA,
thousand $ 1,255 in Inversora Bolivar S.A., and thousand $ 323 in
Baldovinos S.A.
NOTE 19: CAPITAL REDUCTION IN PALERMO INVEST S.A. AND INVERSORA BOLIVAR S.A.
On November 9, 2001, IRSA Inversiones y Representaciones S.A. ("the
Company") and GSEM/AP Holdings L.P. ("GSEM") entered into a first
amendment to the Shareholders' Agreement entered into on February 25,
1998, which was followed by a second amendment dated November 27,
which established, among other issues, the following:
a) The capital reduction of Palermo Invest S.A. by thousand $
37,169.
b) The unanimous approval of Palermo Invest S.A.'s shareholders of a
cash dividend for a total amount in pesos equivalent to thousand
US$ 19,702, provided this amount does not exceed, on the payment
dates, the amount legally distributable.
31
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 19: (Continued)
c) The assignment by the Company in favor of GSEM of rights
proportional to the dividends mentioned in b) (called "IRSA
Dividend Right"), in such a way that GSEM will have the right to
collect all the dividends that may be approved (called "GSEM
Dividend Right"), with the scope defined in point g).
d) The Company's obligation to pay a total amount of thousand US$
13,135 to GSEM (called "GSEM Credit"), to be settled in two equal
installments for a total amount of US$ 6,567 each, plus interest
accrued at the time of payment, the first installment falling due
on January 31, 2002 and the second on April 30, 2002.
e) The entering into a Share Trust Agreement pursuant to which the
Company has assigned in trust, under the terms of Law No. 24,441,
in favor of the Trustee (ABN AMRO BANK N.V.), all the shares it
owns in Palermo Invest S.A.. Under no circumstances, may the
Trustee transfer, pledge or otherwise assign IRSA's shares either
wholly or partially to any Person, and it must at all times
exercise the voting rights granted by the shares as indicated by
IRSA. Under the trust provisions, GSEM is not empowered, at any
time, to request the trustee to extinguish the right to redeem
IRSA's shares. Upon the Company's total fulfillment of its
obligations to GSEM, the trustee must return the shares to IRSA
under the terms and conditions of the trust agreed with the
Trustee.
f) GSEM is empowered to collect all the distributions that Palermo
Invest S.A. may resolve, provided the Company has not settled all
the obligations generated in favor of GSEM, as provided in point
d) above.
g) Finally, the Company and GSEM/AP Holdings L.P. acknowledge that:
i) all the amounts received in cash by GSEM from Palermo Invest
S.A. on account of IRSA Dividend Right, must be considered as a
reduction in the amount owed by IRSA under the GSEM Credit, and
ii) all the amounts received in cash by GSEM on account of the
GSEM Credit will oblige GSEM to return to IRSA the equivalent
portion of IRSA Dividend Right, but if IRSA pays the total amount
plus all accrued interest and reasonable costs to GSEM, IRSA may
then recover its rights regarding the IRSA Dividend Right .
At the date of these financial statements: a) the first and second
installment regarding the Company's payment obligation with GSEM
mentioned in point d), which were due on January 31, 2002, and April
30, 2002, respectively are still outstanding.
32
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 20: DERIVATIVE INSTRUMENTS
The Company uses various financial derivatives, mainly term exchange
purchase-sale contracts, to hedge its net investment in foreign
operations and as a complement to reduce its global financial costs.
The counterparties to these instruments generally are major financial
institutions. The Company does not hold or issue derivative
instruments for trading purposes. In entering into these contracts,
the Company has assumed the risk that might arise from the possible
inability of counterparties to meet the terms of their contracts. The
Company does not expect any losses as a result of counterparty
defaults.
(i) Foreign currency forward-exchange contracts
The Company uses foreign currency forward-exchange contracts as a
supplement to reduce its overall financing costs. Premiums on foreign
currency forward-exchange contracts are amortized over the life of the
respective contract. The market value of the foreign currency forward
contracts has not been recognized in the accompanying financial
statements. As of September 30, 2002 and 2001, the Company did not
have any foreign currency forward contracts in force.
(ii) Interest rate swap
In order to minimize its financing costs and to manage interest rate
exposure, the Company entered into an interest rate swap agreement to
effectively convert a portion of its peso-denominated fixed-rate debt
to peso-denominated floating rate debt.
As of March 31, 2001, the Company had an interest rate swap agreement
outstanding with an aggregate notional amount of Ps. 85.0 million with
maturities through March 2005. This swap agreement initially allowed
the Company to reduce the net cost of its debt. However, subsequent to
June 30, 2001, the Company modified the swap agreement due to an
increase in interest rates as a result of the economic situation.
Under the terms of the revised agreement, the Company converted its
peso-denominated fixed rate debt to U.S. dollar-denominated floating
rate debt for a notional amount of US$ 69.1 million with maturities
through March 2005. As collateral for the agreement, the Company was
required to make a deposit of US$ 50.0 million with the counterparty.
Any differential to be paid or received under this agreement is
accrued and is recognized as an adjustment to interest expense in the
statement of operations. The related accrued receivable or payable is
included as an adjustment to interest payable. The fair value of the
swap agreement is not recognized in the consolidated financial
statements. During the period ended September 30, 2002 and 2001, the
Company recognized net losses of Ps. 0.82 million and 4.13 million,
respectively.
33
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 21: ALTO PALERMO - ISSUANCE OF NEGOTIABLE OBLIGATIONS CONVERTIBLE FOR
SHARES
On August 20, 2002, Alto Palermo S.A. issued Series I of Negotiable
Obligations convertible for ordinary, book-entry shares, par value of
$ 0.10 each, for up to US$ 50,000,000.
After the end of the period granted to exercise the accretion right,
the Negotiable Obligations convertible for Shares for US$ 50,000,000
were fully subscribed and paid-up.
This issuance was resolved at the Ordinary and Extraordinary Meeting
of Shareholders held on December 4, 2001, approved by the National
Securities Commission Resolution No. 14196 dated March 15, 2002 and
authorized to list for trading on the Buenos Aires Stock Exchange on
July 8, 2002.
The main issue terms and conditions of the convertible Negotiable
Obligations are as follows:
- Issue currency: US dollars.
- Due date: July 19, 2006.
- Interest: at a fixed nominal rate of 10% per annum. Interest is
payable semi-annually.
- Payment currency: US dollars or its equivalent in pesos.
- Conversion right: the negotiable obligations shall be convertible
for ordinary book-entry shares with a par value of 0.10 each and
at a price of US$ 0.0324 per share, at the option of each holder.
- Right to collect dividends: the shares underlying the conversion
of the negotiable obligations will be entitled to the same right
to collect any dividends to be declared after the conversion as
the shares outstanding at the time of the conversion.
The Convertible Negotiable Obligations were paid in cash or by using
liabilities due from APSA on the subscription date. In this
connection, the Company has subscribed Negotiable Obligations
Convertible for Shares representing 60.77% of the capital stock, for a
total amount of US$ 31.0 million, by using loans existing at that
date, intercompany balances and cash contributions.
NOTE 22: ALTO PALERMO - COMMITMENT TO MAKE CONTRIBUTIONS AND OPTIONS GRANTED TO
ACQUIRE SHARES IN RELATED COMPANIES
Alto Palermo S.A. and Telefonica de Argentina S.A. have undertaken to
make capital contributions in E-Commerce Latina S.A. for $ 10 million,
payable during April 2001, according to their respective
shareholdings, and, if approved by the Board of Directors of
E-Commerce Latina S.A., to make an optional capital contribution for
up $12 million for the development of new lines of business.
Telefonica de Argentina S.A. would contribute 75% of that amount.
On April 30, 2001, Alto Palermo S.A. and Telefonica de Argentina S.A.
made a contribution of $ 10 million, according to their respective
shareholdings.
34
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTA 22: (Continued)
In addition, E-Commerce Latina S.A. has granted an irrevocable option
to acquire Class B shares representing 15% of the corporate capital of
Altocity.com S.A. in favor of Consultores Internet Managers Ltd., a
company organized in the Cayman Islands, in order to act as
representative of the Management of Altocity.com S.A. and represented
by an independent lawyer. That option may be exercised during a term
of 8 years as from February 26, 2000, at a price equivalent to current
and future contributions to be made in Altocity.com S.A., plus
interest to be accrued at a rate of 14% and to be capitalized
annually.
35
Corporate domicile: Bolivar 108 1(0)Floor - Federal Capital
Principal activity: Real estate investment and development
Unaudited Financial Statements for the three-month periods
ended as of September 30, 2002
compared with the same previous period
Stated in thousands of pesos
Fiscal period No. 60 beginning July 1(0), 2001
DATE OF REGISTRATION WITH THE PUBLIC REGISTRY OF COMMERCE
Of the By-laws: June 25, 1943
Of last amendment: July 2, 1999
Registration number with the
Superintendence of Corporations: 4,337
Duration of the Company: Until April 5, 2043
Information related to subsidiary companies is shown in Schedule C.
================================================================================
CAPITAL COMPOSITION (NOTE 11)
--------------------------------------------------------------------------------
In thousands of pesos
--------------------------------------------------------------------------------
Authorized for
Public Offer
Type of stock of Shares Subscribed Paid up
--------------------------------------------------------------------------------
Common stock,1 vote each 211,999,273 212,000 212,000
Treasury stock (4,587,285) (4,588) (4,588)
-------------------------------------------------
207,411,988 207,412 207,412
================================================================================
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
UNAUDITED BALANCE SHEETS AS OF SEPTEMBER 30, 2002 AND 2001
In thousands of pesos
===============================================================================================
September 30, September 30,
2002 2001
(Notes 1 and 2) (Notes 1 and 2)
--------------------------------
ASSETS
CURRENT ASSETS
Cash and banks (Schedule G) 9,154 1,681
Investments (Schedules C, D and G) 13,140 27,838
Mortgages and leases receivables (Note 3 - Schedule G) G) 6,358 28,453
Other receivables (Note 4 - Schedule G) 21,119 82,278
Inventory (Note 5) 4,230 6,023
--------------------------------
TOTAL CURRENT ASSETS 54,001 146,273
--------------------------------
NON-CURRENT ASSETS
Mortgages receivables (Note 3 - Schedule G) 429 35,399
Other receivables (Note 4 - Schedule G) 12,019 28,431
Inventory (Note 5) 24,777 30,736
Investments (Schedules C, D and G) 840,577 935,167
Fixed assets (Schedule A) 205,728 289,206
Intangible assets (Schedule B) 2,441 3,395
---------------------------------
TOTAL NON-CURRENT ASSET 1,085,971 1,322,334
---------------------------------
TOTAL ASSETS 1,139,972 1,468,607
=================================================================================================
===============================================================================================
September 30, September 30,
2002 2001
(Notes 1 and 2) (Notes 1 and 2)
--------------------------------
LIABILITIES
CURRENT LIABILITIES
Trade accounts payable (Schedule G) 4,489 2,913
Notes payable (Schedule G) - -
Mortgages payable (Schedule G) 959 -
Customer advances (Schedule G) 264 3,143
Short and long term debt (Note 6 - Schedule G) 523,146 363,757
Salaries and social security charges 328 529
Taxes payable (Schedule G) 10,706 4,570
Other liabilities (Note 7 - Schedule G) 10,308 88,761
-------------------------------
TOTAL CURRENT LIABILITIES 550,200 463,673
-------------------------------
NON-CURRENT LIABILITIES
Trade accounts payable (Schedule G) - 385
Short and long term debt (Note 6 - Schedule G) - -
Customer advances (Schedule G) 80 352
Taxes payable (Schedule G) - -
Other liabilities (Note 7 - Schedule G) 1,476 6,304
-------------------------------
TOTAL NON-CURRENT LIABILITIES 1,556 7,041
-------------------------------
TOTAL LIABILITIES 551,756 470,714
-------------------------------
SHAREHOLDERS' EQUITY (As per relevant statement) 588,216 997,893
-------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,139,972 1,468,607
==============================================================================================
The accompanying notes and schedules are an integral part of these unaudited
financial statements.
Eduardo Sergio Elsztain
President
37
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
UNAUDITED STATEMENTS OF INCOME
For the three-month periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
============================================================================================================================
September 30, September 30,
2002 2001
(Notes 1 and 2) (Notes 1 and 2)
---------------------------------------------
Mortgages, leases and services 13,196 13,467
Cost of sales, leases and services (Schedule F) (12,746) (4,639)
---------------------------------------------
GROSS INCOME 450 8,828
---------------------------------------------
Selling expenses (Schedule H) (386) (816)
Administrative expenses (Schedule H) (2,089) (3,643)
---------------------------------------------
SUBTOTAL (2,475) (4,459)
---------------------------------------------
Loss from operations and holding of real estate assets (786) -
---------------------------------------------
OPERATING INCOME (2,811) 4,369
---------------------------------------------
Financial results, net (Note 8) 48,817 (34,332)
Equity in earnings of controlled and affiliated companies (Nota 10 c.) 22,644 (55,824)
Other income and expenses,net (Note 9) (442) (852)
---------------------------------------------
INCOME (LOSS) BEFORE TAXES 68,208 (86,639)
Income tax and asset tax (Note 2 .g and .h) (598) (1,040)
---------------------------------------------
INCOME (LOSS) FOR THE PERIOD 67,610 (87,679)
============================================================================================================================
The accompanying notes and schedules are an integral part of these unaudited
financial statements.
Eduardo Sergio Elsztain
President
38
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the three-month periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos (Notes 1 and 2)
=================================================================================================================================
Shareholders' contributions
Items
---------------------------------------------------------------------------------------------------------------------------------
Inflation Inflation
Treasury adjustment adjustment
Common Stock stock of common of treasury Additional
(Note 11) (Note 11) stock stock paid-in-capital Total
---------------------------------------------------------------------------------------------------------------------------------
Balances as of beginning of the year 207,412 4,588 271,415 6,006 573,034 1,062,455
Net income (loss) for the period - - - - - -
------------------------------------------------------------------------------------
Balances as of 30.09.02 207,412 4,588 271,415 6,006 573,034 1,062,455
====================================================================================
Balances as of 30.09.01 207,412 4,588 271,415 6,006 573,034 1,062,455
=================================================================================================================================
=========================================================
Reserved
Earnings
--------------
Total as of Total as of
Retained September September
Legal reserve earnings 30, 2002 30, 2001
--------------------------------------------------------
19,568 (561,417) 520,606 1,085,572
- 67,610 67,610 (87,679)
---------------------------------------------------------
19,568 (493,807) 588,216 -
=========================================================
19,568 (84,130) - 997,893
=========================================================
The accompanying notes and schedules are an integral part of these unaudited
financial statements.
Eduardo Sergio Elsztain
President
39
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
UNAUDITED STATEMENTS OF CASH FLOWS (1)
For the three-month periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
============================================================================================================================
September 30, September 30,
2002 2001
(Notes 1 and 2) (Notes 1 and 2)
----------------------------------
CASH FLOWS FROM OPERATING ACITIVITES:
- Gain/(Loss) for the period 67,610 (87,679)
- ADJUSTMENTS TO RECONCILE NET LOSS TO CASH FLOW FROM OPERATING ACTIVITIES:
o Equity in earnings of affiliated companies (22,739) 55,559
o Resultado por operaciones de activos inmobiliarios 786 -
o Allowances and provisions 124 7
o Amortization and depreciation 1,096 2,794
o Financial results (59,437) 17,052
o Income tax 598 1,040
- CHANGES IN ASSETS AND LIABILITIES:
o Increase in current investments (1,573) (6,098)
o Increase in non-current investments (17,557) -
o Decrease in mortgages and leases receivables, net 3,988 10,456
o Decrease/(Increase) in other receivables 23,698 (9,102)
o Decrease in inventory 10,069 540
o Decrease in intangible assets 7 128
o Increase in taxes payable, salaries and social security and customer advances 1,215 1,579
o Decrease in accounts and notes payable (1,892) (546)
o Increase in accrued interest 10,863 9,728
o Cash dividends received - 1,555
o Decrease (Increase) in other liabilities 2,380 (58)
----------------------------------
NET CASH (PROVIDED IN) USED BY OPERATING ACTIVITIES 19,236 (3,045)
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
o Decrease from equity interest in subsidiary companies and equity investees 3,937 32,359
o Increase from equity interest in subsidiary companies and equity investees (16,454) (436)
o Payment for acquisition of undeveloped parcels of land - (188)
o Loans granted to related parties - (64,938)
o Cash acquired from mergers - 268
o Purchase and improvements of fixed assets (3,748) (20,890)
----------------------------------
NET CASH USED IN INVESTING ACTIVITIES (16,265) (53,825)
----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
o Intercompany loans 4,290 82,474
o Proceeds from loans - 86,297
o Payment of loans (2,801) (117,898)
o Increase in intangible assets (126) -
o Payment of seller financing - -
----------------------------------
NET CASH USED IN FINANCING ACTIVITIES 1.363 50,873
----------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 4.334 (5,997)
----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AS OF BEGINNING OF PERIOD 5,066 8,443
----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AS OF END OF PERIOD 9,400 2,446
============================================================================================================================
(1) Includes cash, banks and investments with a realization term not exceeding
three months.
The accompanying notes and schedules are an integral part of these unaudited
financial statements.
Eduardo Sergio Elsztain
President
40
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
UNAUDITED STATEMENTS OF CASH FLOWS (CONTINUED)
For the three-month periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
September 30, September 30,
2002 2001
(Notes 1 and 2) (Notes 1 and 2)
---------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
NON-CASH ACTIVITIES:
o Increase in inventory through a decrease in fixed assets 3,592 -
o Increase in fixed assets through a decrease in inventory 154 -
o Assets acquired from mergers - 319
o Increase in non current investments through an increase in short and log term debts 84,024 -
o Increase in fixed assets through an increase in mortgages payable 959 -
o Increase in investments through an increase in other liailities 952 -
o Decrease in short and long term debt through a decrease in other receivables - 5,972
o Decrease in bank debts through an increase in other liabilities - 369
Eduardo Sergio Elsztain
President
41
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
For the three-months periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
NOTE 1: BASIS FOR THE PRESENTATION
a) Disclosure criteria
In compliance with the provisions of Resolution No. 368/01 and 372/01
of the Argentine Securities Commission, these financial statements are
stated in thousands of Argentine pesos and have been prepared in line
with the valuation and disclosure criteria contained in Technical
Resolutions No. 4, 5, 6, 8, 9, 10, 12 and 13 of the Argentine
Federation of Professional Councils of Economic Sciences (the
"FACPCE"), and according to the provisions of the aforementioned
Resolutions.
These financial statements include the effect of the Company's merger
with a) Home Financing S.A. effective July 1, 2001 and b) Sociedad del
Dique S.A. and Santa Maria del Plata S.A. effective July 1, 2000.
The present financial statements must be readen condiderating the
circumstances mentioned in note 1 to the consolidated financial
statements.
b) Recognition of the effects of inflation
The financial statements have been prepared in constant currency,
reflecting the overall effects of inflation through August 31, 1995.
As from that date, in accordance with professional accounting
standards and the requirements of the control authorities, restatement
of the financial statements was discontinued until December 31, 2001.
As from January 1, 2002, in accordance with Resolution No. 3/2002 of
the Professional Council in Economic Sciences of the Autonomous City
of Buenos Aires and Resolution No. 415 of the National Securities
Commission, the effects of inflation are being recognized in the
financial statements. To this end, the restatement method established
by Technical Pronouncement No. 6 of the F.A.C.P.C.E. has been
followed.
As a consequence of the above, the Company's financial statements are
presented in constant currency of September 30, 2002, having
considered that the accounting measurements restated by the change in
the purchasing power of the currency until August 31, 1995 and those
arising between that date and December 31, 2001 are stated in currency
of the latter date.
The above restatement was made applying the coefficients prepared
based on the domestic wholesale price index.
For purposes of comparison, the figures corresponding to the
three-month period ended September 30, 2001 have been restated as of
September 30, 2002.
42
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 1: (Continued)
c) Issuance of new technical pronouncements
The Professional Council in Economic Sciences of the Autonomous City
of Buenos Aires approved Technical Pronouncements No. 16 "Conceptual
framework for professional accounting standards" ; No. 17:
"Professional accounting standards: development of some general
application issues", No. 18 : "Professional accounting standards:
development of some particular application issues" and No. 19
"Amendments to Technical Pronouncements Nos. 4, 5, 6, 8, 9, 11 and
14", through Resolutions C 238/01, C 243/01, C 261/01 and C 262/01,
respectively; establishing that those Technical Pronouncements and
amendments to them will come into force for fiscal years commencing as
from July 1, 2002.
At the date of issue of these financial statements, the National
Securities Commission had not adopted those Technical pronouncements
and, consequently, as mentioned in Note 1.a), the Company has prepared
these financial statements applying the pronouncements issued by that
body, which do not contemplate these changes and differ from the
provisions of applicable accounting standards.
The main amendments to the new Technical Pronouncements, which would
mean significant adjustments being made to the Company's financial
statements, are related to the recognition of income tax according to
the deferred tax method and of the interest rate swap contract at the
subsidiary Alto Palermo S.A.
However, we cannot provide assurance that the National Securities
Commission will adopt the above-mentioned Technical Pronouncements
without adding any amendment or limitation to their application and,
therefore, the effects on the financial statements of the Company
could differ from those previously indicated.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the principal accounting policies
followed by the Company in the preparation of the financial
statements, which have been applied consistently with respect to the
previous period.
a. Investments
a.1. Current investments
Current investments include time deposits, which are
valued at their cost plus accrued interest and mutual
funds, which are carried at market value.
Time deposits have original maturities of three months
or less. Unrealized gains and losses on time deposits
and mutual funds are included in financial results, net,
in the statements of income.
43
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 2: (Continued)
Current investments also include equity securities and
government bonds. Unrealized gains and losses on
government bonds and equity securities are also included
in financial results, net, in the statements of income.
Generally, these investments represent securities traded
on a National Securities Exchange, which are valued at
the last reported sales price on the last business day
of the period net of estimated selling expenses.
a.2. Non-current investments
a.2.1. Equity investments
Equity investments in controlled and affiliated
companies have been accounted for under the
equity method, in accordance with the provisions
of Technical Resolution No. 5 of the
F.A.C.P.C.E., except for the recently acquired
related company Valle de las Lenas S.A., which
for the time being has been valued at its
acquisition cost.
Equity investments in less than 20% of the
capital stock in companies in which the Company
does not exercise significant influence are
generally carried at market value, recognizing
realized gains and losses in earnings, and if
these do not exist, at their acquisition cost.
The value paid for the purchase of shares in
controlled and affiliated companies over or
under their equity value at the date of
acquisition was recognized as positive or
negative goodwill, which is amortized over ten
periods.
The Company presents consolidated financial
statements with its subsidiaries as
complementary information.
a.2.2. Participation certificates
The certificates of participation in IRSA I
financial trust have been valued at their
acquisition cost plus accrued interest in the
case of classes A, B and C, and at the cost
resulting from apportioning the participation
certificate holding to the trust assets in the
case of class D.
a.2.3. Investments in debt securities
The investment in APSA's Convertible Bonds has
been valued at cost, applying the exchange rate
in force at period end, plus accrued interest.
44
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 2: (Continued)
a.3. Plots of land
The Company acquires undeveloped land in order to
provide an adequate and well-located supply for its
residential and office building operations. The
Company's strategy for land acquisition and development
is dictated by specific market conditions where the
Company conducts its operations.
Land held for development and sale and improvements are
stated at cost adjusted for inflation at the end of the
period, as defined in Note 1.b), or estimated net
realizable value, whichever is lower. Land and land
improvements are transferred to inventories when
construction commences.
At the end of the previous fiscal year, as mentioned in
Note 2.m., the Company set up provisions for impairment
of certain plots (identified as Santa Maria del Plata
and Torres Jardin IV).
The accounting value of plots of land, net of provisions
set up, does not exceed estimated recoverable value.
b. Inventory
A property is classified as available for sale upon determination
by the Board of Directors that the property is to be marketed for
sale in the normal course of business over the next several
periods.
Residential, office and other non-retail properties completed or
under construction are stated at cost, adjusted for inflation at
the end of the period, as defined in Note 1.b), or estimated net
realizable value, whichever is lower. Costs include land and land
improvements, direct construction costs, construction overhead
costs, interest on indebtedness and real estate taxes. Selling
and advertising costs are deferred and charged to expense in the
period in which the related revenue is earned, as determined
under the percentage-of-completion method. Total contract costs
are charged to expense in the period in which the related revenue
is earned, as determined under the percentage-of-completion
method. No interest costs were capitalized during the period
ended September 30, 2002 and 2001.
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 expected to be collected by the Company.
45
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 2: (Continued)
At the end of the previous fiscal year, as mentioned in Note 2.m,
the Company set up provisions for impairment of certain
inventories (identified as Avda. Madero 1020, Rivadavia 2768,
Constitucion 1111, Terrenos de Caballito, Padilla 902 and parking
lots in Dock 13).
The accounting value of inventories, net of provisions set up,
does not exceed estimated recoverable value.
c. Fixed assets
Fixed assets, net comprise primarily of rental properties and
other property and equipment held for use by the Company.
Fixed assets value, net of provisions set up, does not exceed
estimated recoverable value.
o Rental properties
Rental properties are carried at cost, adjusted for
inflation at the end of the period, as defined in Note 1.b),
less accumulated depreciation. Costs incurred for the
acquisition of the properties are capitalized. Accumulated
depreciation is computed under the straight-line method over
the estimated useful lives of the assets, which generally
are estimated to be 50 periods for buildings. Expenditures
for ordinary maintenance and repairs are charged to
operations in the period incurred. Significant renovations
and improvements, which improve or extend the useful life of
the asset are capitalized and depreciated over its estimated
remaining useful life. At the time depreciable assets are
retired or otherwise disposed of, the cost and the
accumulated depreciation of the assets are eliminated from
the accounts and any profit or loss is recognized.
The Company capitalizes interest on long-term construction
projects. No interest costs were capitalized during the
period ended September 30, 2002 and 2001.
At the end of the previous fiscal year, as mentioned in Note
2.m, the Company set up provisions for impairment of certain
rental properties (identified as Libertador 498, Maipu 1300,
Avda. Madero 1020, Suipacha 652, Laminar Plaza, Reconquista
823, Constitucion 1111, Dique 2 M10- Building C-. Libertador
602, Dock 2 M10 -Building A-, Avda. Madero 942, Avda. de
Mayo 595, Costeros Dique IV and Sarmiento 517).
46
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 2: (Continued)
o Software obtained or developed for internal use
The Company capitalizes certain costs associated with the
development of computer software for internal use. Costs
capitalized during the period ended June 31, 2002 and 2001
were not material. These costs are being amortized on a
straight-line basis over a period of 3 periods.
o Other properties and equipment
Other property and equipment properties are carried at cost,
less accumulated depreciation. Accumulated depreciation is
computed under the straight-line method over the estimated
useful lives of the assets, as specified below:
Asset Estimated useful life (periods)
------------------------------------- --------------------------------------
Leasehold improvements On contract basis
Facilities 10
Machinery and equipment 10
Furniture and fixtures 5
Computer equipment 3
The cost of maintenance and repairs is charged to expense as
incurred. The cost of significant renewals and improvements
are added to the carrying amount of the respective assets.
When assets are retired or otherwise disposed of, the cost
and related accumulated depreciation are removed from the
accounts.
d. Intangible assets
Intangible assets are carried at cost, adjusted for inflation at
the end of the period as defined in Note 1.b), less accumulated
depreciation.
o Deferred Financing Cost
Expenses incurred in connection with the issuance of debt
and proceeds of loans have been deferred and are being
amortized using the interest method over the life of the
related issuances. In the case of repurchase of this notes,
the related expenses are amortized using the proportional
method.
o Selling and advertising expenses
Expenses incurred relating to the marketing of developing
properties, including advertising, commissions and other
expenses, are charged to expense in the period in which the
related revenue is earned, as determined under the
percentage-of-completion method.
47
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 2: (Continued)
e. Foreign currency assets and liabilities
Assets and liabilities denominated in foreign currency are
translated at the exchange rate prevailing at period end.
Transactions denominated in foreign currencies are translated
into pesos at the prevailing exchange rates on the date of
transaction settlement. Foreign currency transaction gains and
losses are recorded within financial results, net.
Pursuant to Decree No. 214/02 and Decree No. 762/02, assets and
debts in U.S. dollars or other foreign currencies in the
Argentine financial system as of January 6, 2002, were converted
to pesos at the rate of exchange of Ps. 1 per US$ 1 and were
adjusted by a reference stabilization index (CER).
f. Monetary assets and liabilities
Monetary assets and liabilities are stated at their face value
plus or minus the related financial gain or loss.
g. Income tax
The Company has determined its income tax charge at the 35% rate
in force in all periods presented.
As permitted under Argentine income tax law in determining its
taxable income for the period ended September 30, 2002, the
Company has taken into consideration tax losses of approximately
Ps. 11,6 million.
As of September 30, 2002, the Company had accumulated tax loss
carryforwards of approximately Ps. 383 million, which expire as
follows:
Maturity $
---------------------------------------------------------
2003 81
2004 535
2005 28,440
2006 137
2007 342,196
2008 11,624
---------------------
Total $ 383,013
48
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 2: (Continued)
h. Asset tax
During the period ended September 30, 1999, Law 25,063 set out
the asset tax for four fiscal periods. This tax supplements the
income tax, because while the latter is levied on the taxable
income for the period, the asset tax is levied on the potential
yield of certain assets at a 1% rate, and the Company's tax
liability is the higher of both taxes.
Law 25,360 modified law 25,063 by extending the term of
application to ten fiscal periods.
Any excess of the asset tax over and above the income tax in a
given fiscal period may be considered as a payment on account of
the income tax to be generated in the next four periods (in
excess of the asset tax).
As of September 30, 2002 the Company has estimated the applicable
asset tax and has reflected the portion it estimates it will be
able to offset in future periods in line with the rules in force
under other (current and non-current) receivables, charging the
remaining portion to income currently.
i. Customer advances
Customer advances represent payments received in advance in
connection with the sale and rent of properties.
j. Provisions for allowances and contingencies
The Company provides for losses relating to mortgage, lease and
other accounts receivable. The allowance for losses is recognized
when, based on 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 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 collateral dependent, when applicable. While management
uses the information available to make evaluations, future
adjustments to the allowance may be necessary if future economic
conditions differ substantially from the assumptions used in
making the evaluations. Management has considered all events
and/or transactions that are subject to reasonable and normal
methods of estimations, and the consolidated financial statements
reflect that consideration.
49
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 2: (Continued)
The Company has certain contingent liabilities with respect to
existing or potential claims, lawsuits and other proceedings,
including those involving 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. Such
accruals are based on developments to date, the Company's
estimates of the outcomes of these matters and the Company's
lawyers' experience in contesting, litigating and settling 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 effect on the Company's future results of
operations and financial condition or liquidity.
k. Advertising expenses
The Company generally charges the advertising and publicity
expenses to results when they are incurred, except for the
advertising and publicity expenses related to the sale of real
estate projects. Advertising and promotion expenses were
approximately Ps. 47 and Ps. 577 million for the period ended
September 30, 2002 and 2001, respectively.
l. Pension information
The Company does not maintain any pension plans. Argentine laws
provide for pension benefits to be paid to retired employees from
government pension plans and/or privately managed funds plan to
which employees may elect to contribute.
m. Impairment of long-lived assets
The Company regularly evaluates its non-current assets for
recoverability. The Company considers that impairment losses
arise when the recoverable value is lower than book value.
Impairment losses must be appropriated to the result for the
period. The recoverable value is mainly determined using
independent estimates or projections of future cash flows. At the
end of the previous fiscal year, due to the progressive
deterioration of the Argentine economy and the impact on the
Company's revenue of the measures adopted by the National
Government mentioned in Note 1 to the unaudited consolidated
financial statements, the Company has reevaluated the recoverable
value of its non-current assets, recording an impairment loss as
the valuation of certain assets has exceeded the estimated
recoverable value.
n. Financial derivatives
The Company uses various financial derivatives to hedge its net
investment in foreign operations and as a complement to reduce
its global financial costs.
50
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 2: (Continued)
The Company does not engage in trading or other speculative use
of these financial instruments. Additionally, the Company has not
used financial instruments to hedge transactions foreseen or firm
commitments. To be eligible for hedging, the Company must be
exposed to currency or interest rate risk, and the financial
instrument must reduce the exposure and be designated as such. In
addition, for hedging purposes, the significant characteristics
and expected terms of the planned transaction must be identified
and the expected transaction must be probable. Financial
instruments that can be recorded as hedging instruments must
maintain a high correlation between the hedging instrument and
the item being hedged at the beginning and during the entire
hedging period.
The Company formally documents all the relationships between
hedging instruments and hedged items, as well as its risk
management objective and strategy before embarking on hedging
transactions. This process includes detailing all the derivatives
designated for hedging of specific assets and liabilities in the
balance sheet or specific firm commitments or planned
transactions. The Company also evaluates both at the beginning of
the hedging transaction and on an ongoing basis whether the
derivatives used in hedging transactions are very effective to
offset fluctuations in the market values or cash flows of the
items hedged. If it is determined that a derivative is not very
effective for hedging or that it has stopped being an effective
cover, the Company would discontinue the recording of such
hedging instrument in the future.
- Foreign currency forward-exchange contracts
In accordance with the Company's risk management policies,
it uses long-term foreign currency purchase and sale
contracts as a supplement to reduce its overall financial
costs as well as to administer its exposure regarding net
investments in financial transactions.
Foreign currency forward-exchange contracts entered into by
the Company generally mature within one period. Premiums on
foreign currency forward-exchange contracts are amortized
over the life of the respective contracts.
- Interest rate swaps
Interest rate swaps are used to hedge interest rate
exposure. Interest rate swaps are recognized on an accrual
basis, recording the net amount receivable or payable as an
adjustment to the interest rate expense. The accrued amount
receivable or payable is included as an adjustment to the
interest expense. Upon expiry or termination of a swap, the
net income or loss realized or pending realization is
recognized over the remaining original term if the hedged
item remains unpaid, or immediately if the underlying hedged
item is not unpaid. If the swap has not expired, or if it
expires before maturity, but the underlying hedged item is
no longer unpaid, the unrealized income or loss on the
interest swap is immediately recognized.
51
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 2: (Continued)
o. Shareholders' equity
Opening balances and account movements are stated in the currency
of the month to which they correspond, restated as mentioned in
Note 1.b).
p. Results for the period
The results for the period are shown as follows:
- Income accounts are shown in currency of the month to which
they correspond, and have been restated as mentioned in Note
1.b).
- Charges for assets consumed (fixed asset depreciation,
intangible asset amortization and cost of sales) were
determined based on the values recorded for such assets.
- Financial gains and losses are included in Note 8, broken
down to show those generated by assets and by liabilities.
- Income/(loss) from investments in controlled and affiliated
companies was calculated under the equity method, by
applying the percentage of the Company's equity interest to
the income/(loss) of such companies.
q. Estimations
The preparation of the financial statements requires management
to make 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 financial
statements, and the reported amounts of revenues and expenses for
the period. Estimates are used when accounting for the
depreciation, amortization, impairment of long-lived assets,
income taxes and contingencies. Future actual results could
differ from the estimates and assumptions prepared at the date of
these financial statements.
r. Revenue recognition
r.1. Sales of properties
The Company records revenue from the sale of properties
classified as inventory when all of the following criteria
are met:
o the sale has been consummated;
o there is sufficient evidence to demonstrate the buyer's
ability and commitment to pay for the property;
o the Company's receivable is not subject to future
subordination; and
o the Company has transferred the property to the buyer.
52
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 2: (Continued)
The Company uses the percentage-of-completion method of
accounting with respect to sales of development properties
under construction effected under fixed-price contracts.
Under this method, revenue is recognized based on the ratio
of costs incurred to total estimated costs applied to the
total 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 construction activities
have begun. The percentage-of-completion method of
accounting requires the Company's management to prepare
budgeted costs in connection with sales of properties/units.
All changes to estimated costs of completion are
incorporated into revised estimates during the contract
period.
r.2. Leases
Revenues from leases are recognized over the life of
the related lease contracts. All revenues are
presented net of taxes levied on sales.
s. Cash and cash equivalents
The Company considers all highly liquid investments with original
maturities of three months or less, consisting primarily of time
deposits, to be cash equivalents.
t. Result from operations and holding of real estate
The results from operations and holding of real estate assets
include the results provided by the valuation and sale of shares
in real estate investment companies and the results due to
impairment of real estate assets.
53
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 3: MORTGAGES AND LEASES RECEIVABLES
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
--------------------------------------------------------
Current Non-current Current Non-current
--------------------------------------------------------
Mortgages and leases receivable 1,378 429 16,963 33,550
Debtors under legal proceedings 1,784 - 9,576 -
Intercompany (Note 10 a.) 3,978 - 3,661 1,849
Less:
Allowance for doubtful accounts (Schedule E) (782) - (1,747) -
--------------------------------------------------------
6,358 429 28,453 35,399
========================================================
As of September 30, 2002, current and non-current receivables from
the sale of real estate are secured by first degree mortgages in
favor of the Company.
NOTE 4: OTHER RECEIVABLES
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
------------------------------------------------------
Current Non-current Current Non-current
------------------------------------------------------
Asset tax (Note 2 h.) 2,392 11,477 4,178 25,743
Value Added Tax (VAT) 3 - 2,789 -
C.N. Hacoaj Project 593 - 1,471 -
Intercompany (Note 10 a.) 13,720 143 69,231 2,604
Services to be billed - - 551 -
Guarantee deposits - 38 - 84
Expenses to recover 837 - 1,097 -
Gross sales tax 4 - - -
Income tax advances 62 - 257 -
Trust accounts receivable - 361 - -
Credit Fiscal Certificates 2,056 - - -
Other 1,452 - 2,704 -
------------------------------------------------------
21,119 12,019 82,278 28,431
======================================================
54
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 5: INVENTORY
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
----------------------------------------------------
Current Non-current Current Non-current
----------------------------------------------------
Real estate for sale 4,230 24,777 6,023 30,736
----------------------------------------------------
4,230 24,777 6,023 30,736
====================================================
NOTE 6: SHORT AND LONG TERM DEBT
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
----------------------------------------------------------
Current Non-current Current Non-current
----------------------------------------------------------
Bank 299,200 - 252,657 -
loans
(1) (3)
Accrued interest - bank
loans (1) 12,646 - 1,332 -
Negotiable Obligations - 2001 principal
amount
(2) (3) 151,689 - 96,222 -
Negotiable Obligations - 2001 -accrued
interest
(2) - - 2,312 -
Other 59,611 - 11,234 -
(4)
----------------------------------------------------------
523,146 - 363,757 -
==========================================================
1. In May 2000, the Company obtained a syndicated loan amounting to
US$ 80,000 thousand through Bank Boston (leader of a bank
syndicate) repayable in 24 months, bearing interest payable
quarterly at the LIBO rate over three months plus 500 basic
points. At September 30, 2002, the interest rate accrued on the
loan was 7,11%.
As from December 2001 the Company initiated a loan renegotiation
process. The contract terms require that the Company maintain
certain ratios and financial conditions, certain rates and
indebtedness levels and sets restrictions on certain investments,
payments, obtaining of new loans and sales of certain assets and
capital investments.
At September 30, 2002, as a result of the current economic
situation, the Company has been unable to comply with certain
financial ratios established by the loan agreement. See footnote
3.
2. On December 21, 2000, the Board of Directors approved the issue
of Class 02 negotiable obligations for US$ 43,500 thousand, in
denominations of US$ 10,000 and multiples of US$ 1,000. the net
proceeds from the negotiable obligations were appropriated to the
settlement of the loan from Banca Nazionale del Lavoro amounting
to US$ 21,763 thousand, HSBC for US$ 14,838 thousand and Banco
Sudameris for US$ 6,449 thousand.
The notes would be fully settled within 365 days from issue, i.e.
on December 20, 2001, accruing interest at a floating rate
payable quarterly in arrears.
As from December 2001, the Company has initiated a negotiable
obligation renegotiation process, as a result of which the due
date has been postponed to November 13, 2002.
During the quarter ended June 30, 2002, the Company has
repurchased part of the notes, so that the new value, including
interest capitalized up to October 31, 2002, amounts to US$ 41.0
million.
At September 30, 2002, as a result of the current economic
situation, the Company has been unable to comply with certain
financial ratios established by the loan agreement. See footnote
3.
3. On November 7, 2002 the Company signed a letter of intent with
the creditor banks under the Syndicated Loan Agreement and the
holders of Floating Rate Negotiable Obligations, in which it
plans to refinance the debt for a term of 7 years, at a lower
rate and with other financial commitments. The loans indicated in
1 and those indicated in 2 contain "cross - default provision" in
connection with the financial instruments of our subsidiary APSA,
as described in Note 21 to the unaudited consolidated financial
statements.
4. As mentioned in Note 19 to the unaudited consolidated financial
statements, the Company included the debt of $ 59,611 thousand
with GSEM / AP Holdings S.P.
55
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 7: OTHER LIABILITIES
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
----------------------------------------------------------
Current Non-current Current Non-current
----------------------------------------------------------
Seller financing 810 725 1,896 3,207
Intercompany (Note 10 a.) 4,782 - 84,476 -
Guarantee deposits 547 743 1,267 3,079
Provision for discounts (Schedule E) 11 - 24 -
Provision for lawsuits (Schedule E) 328 - 11 -
Fees payable 5 - 215 -
Directors' deposits - 8 - 18
Fund administration 3 - - -
Operating pending settlement 3,286 - - -
Collections on behalf of third parties 58 - 117 -
Other 478 - 755 -
----------------------------------------------------------
10,308 1,476 88,761 6,304
==========================================================
NOTE 8: FINANCIAL RESULTS, NET
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
---------------- ----------------
FINANCIAL RESULTS GENERATED BY ASSETS:
Interest income 665 122
Exchange (loss) gain (8,903) -
(Loss)/gain on exposure to inflation (10,462) -
Gain/(loss) on financial operations 4,068 (23,788)
---------------- ----------------
(14,632) (23,666)
---------------- ----------------
FINANCIAL RESULTS GENERATED BY LIABILITIES:
Exchange gain/(loss) 77,857 (2)
Loss on exposure to inflation 2,629 -
Financial expenses (Schedule H) (17,037) (10,664)
---------------- ----------------
63,449 (10,666)
---------------- ----------------
FINANCIAL RESULTS, NET 48,817 (34,332)
================ ================
56
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 9: OTHER INCOME AND EXPENSES, NET
The breakdown for this item is as follows:
September 30, September 30,
2002 2001
---------------- ----------------
OTHER INCOME:
Other 19 137
---------------- ----------------
19 137
---------------- ----------------
OTHER EXPENSES:
Unrecoverable VAT (65) (246)
Donations (6) (24)
Debit and credit tax (272) (465)
Other (118) (254)
---------------- ----------------
(461) (989)
---------------- ----------------
TOTAL OTHER INCOME AND EXPENSES, NET (442) (852)
================ ================
NOTE 10: BALANCES AND TRANSACTIONS WITH INTERCOMPANY
a. The balances as of September 30, 2002 and 2001 with
controlled, affiliated and related companies are as follows:
September 30, September 30,
2002 2001
-------------------------------
ABRIL S.A.
Current mortgages and leases receivables 16 28
Other current receivables - 1,940
ALTERNATIVA GRATIS S.A.
Current mortgages and leases receivables - 31
ALTO PALERMO S.A.
Current mortgages and leases receivables 897 394
Other current receivables - 66,493
Current accounts payable 11 301
Other current liabilities 591 -
ALTOCITY.COM S.A.
Current mortgages and leases receivables 57 86
BALDOVINOS S.A.
Current mortgages and leases receivables 1,013 2,393
Non-current mortgages receivables - 1,849
Other current receivables - -
Other current liabilities 37 44
BANCO HIPOTECARIO S.A.
Current mortgages and leases receivables - 4
Current investments 5,155 -
57
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 10: (Continued)
September 30, September 30,
2002 2001
-------------------------------
BANCO DE CREDITO Y SECURITIZACION S.A
Non-current investments 7,051 -
CACTUS S.A.
Current trade accounts payable - -
CRESUD S.A.C.I.F.
Current mortgages and leases receivables - 201
Current accounts payable - 91
Other current liabilities 8 -
DOLPHIN FUND MANAGEMENT S.A.
Current mortgages and leases receivables 1 445
Other current receivables 281 -
Current accounts payable - 157
FIBESA S.A.
Current accounts payable 2 -
HOTELES ARGENTINOS S.A.
Other current receivables - 11
Current accounts payable 2 51
INVERSORA BOLIVAR S.A.
Current mortgages and leases receivables 1,940 44
Other current receivables 170 -
Other current liabilities - 66,289
LLAO LAO RESORTS S.A.
Other current liabilities 1,153 -
PALERMO INVEST
Other current receivables 13,135 -
Other current liabilities - 18,143
PRESTAMOS AL PERSONAL
Managers, Directors and other current Staff of the Company 134 787
Managers, Directors and other non- current Staff of the Company 143 2,604
RED ALTERNATIVA S.A.
Current mortgages and leases receivables 50 20
RITELCO S.A
Other current receivables 2,993 -
TARSHOP SOCIEDAD ANONIMA
Current mortgages and leases receivables 4 15
UNIVERSAL REAL STATE S.A.
Current mortgages and leases receivables - -
58
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 10: (Continued)
b. Gain/(loss) on controlled, affiliated and related companies
during the periods ended September 30, 2002 and 2001 are as
follows:
Sales and Alquileres Recovery of Interest Interest
Period service fees ganados expenses Earned Lost
------------------------------------------------------------------------------
INTERCOMPANY
Alto Palermo S.A. 2002 - - - 2,008 -
2001 - - - 4,132 -
Altocity.Com S.A. 2002 - 16 - - -
2001 - 63 - - -
Alternativa Gratis S.A. 2002 - - - - -
2001 - 137 - - -
Palermo Invest S.A 2002 - - - - -
2001 - - - - 35
Cresud S.A 2002 - - - - 199
2001 - 93 - - -
Econetworks Argentina S.A. 2002 - - - - -
2001 - 33 - - -
Red Alternativa S.A. 2002 - 20 45 - -
2001 - - - - -
Tarshop S.A. 2002 - 11 - - -
2001 - 23 - - -
Dolphin Found Management S.A. 2002 - - - - 32
2001 - - - - -
Abril S.A. 2002 5 - - - -
2001 40 - - - -
Llao Llao Resorts S.A. 2002 - - - - 6
2001 - - - - -
Prestamos al personal 2002 - - - 8 -
2001 - - - 78 -
-----------------------------------------------------------------
Total 2002 5 47 45 2,016 237
=================================================================
Total 2001 40 349 - 4,210 35
=================================================================
c. The composition of intercompany gain/(loss) is as follows:
Income / (loss)
------------------------------------
September 30, September 30,
2002 2001
------------------------------------
Equity in earnings of controlled and affiliated companies 22,739 (55,559)
Amortization of intangible assets and investments (95) (265)
------------------------------------
22,644 (55,824)
====================================
59
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 11: COMMON STOCK
a. Common stock
As of September 30, 2002, IRSA's capital stock was as follows:
==================================================================================================
Approved by
---------------------------------------------
Date of record with
the Public Registry
Par Value Body Date of Commerce
--------------------------------------------------------------------------------------------------
Shares issued for - First Meeting for IRSA's 04.05.1943 06.25.1943
cash Incorporation
Shares issued for 16,000 Extraordinary Shareholders' 11.18.1991 04.28.1992
cash Meeting
Shares issued for 16,000 Extraordinary Shareholders' 04.29.1992 06.11.1993
cash Meeting
Shares issued for 40,000 Extraordinary Shareholders' 04.20.1993 10.13.1993
cash Meeting
Shares issued for 41,905 Extraordinary Shareholders' 10.14.1994 04.24.1995
cash Meeting
Shares issued for 2,000 Extraordinary Shareholders' 10.14.1994 06.17.1997
cash Meeting
Shares issued for 74,951 Extraordinary Shareholders' 10.30.1997 07.02.1999
cash Meeting
Shares issued for 21,090 Extraordinary Shareholders' 04.07.1998 04.24.2000
cash Meeting
Shares issued for 54 Board of Directors' Meeting 05.15.1998 07.02.1999
cash
----------
212,000
Treasury Stock (4,588)
----------
207,412
==================================================================================================
On November 5, 2002 the Ordinary and Extraordinary Meeting of
Shareholders for the fiscal year ended June 30, 2002 was held, at
which it was resolved to approve the distribution of 4,587,285 shares
held in the Company's own portfolio in proportion to the respective
holdings of the shareholders, the Board of Directors having been
vested with the implementation of its distribution.
60
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 11: (Continued)
b. Treasury stock
The Company repurchases periodically outstanding ordinary shares
when it considers that their price is undervalued on the market.
During the period ended September 30, 2002 and 2001 no treasury
shares were bought.
c. Restriction on the distribution of profits
In accordance with the Argentine Corporations Law and the
Company's By-laws, 5% of the net and realized profit for the
period calculated in accordance with Argentine GAAP plus (less)
prior period adjustments must be appropriated by resolution of
the shareholders to a legal reserve until such reserve equals 20%
of the Company's outstanding capital. This legal reserve may be
used only to absorb losses.
d. Noncontributory Management Stock Ownership Plan
On October 30, 1997, the shareholders authorized the Company to
enter into a Noncontributory Management Stock Ownership Plan
("NMSOP") with eight executive officers of the Company (the
"Beneficiaries"), pursuant to which the Beneficiaries were
granted the right to purchase up to 24 million shares of common
stock (the "Participation Shares"), at a purchase price equal to
Ps. 1.0 per share, subject to the implementation of an Equity
Participation Agreement ("EPA"). Under Argentine law, the Company
established a special purpose trust in this connection (the
"Trust").
The Beneficiaries were required to purchase the Participation
Shares available, if any, within 24 months of any capital
increase. The Trust has an original term of six periods.
According to the terms of the NMSOP and the Trust, Beneficiaries
are not entitled to receive any distributions (either in the form
of shares, cash or other) from the Trust during its term,
although, Beneficiaries are allowed to cause the Trust to sell
their designated shares of common stock held by the Trust in
certain cases. In addition, the Company was not allowed to grant
any loans or otherwise assist the Beneficiaries in financing the
purchase of the Participation Shares.
On April 7, 1998, the Company's shareholders, at an extraordinary
shareholders' meeting, approved a capital increase of 24 million
shares to permit the Beneficiaries to purchase all of the
Participation Shares to which they were entitled under the EPA.
The BASE and the CNV approved the capital increase on June 4,
1999, and on August 31, 1999 the Beneficiaries acquired
21,090,024 shares at Ps. 1.0 per share.
61
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 12: (Continued)
- The Labor Court N(degree) 55 decided the embargo of units
N(degree) 14 and 20 located in Sarmiento 517, property of the
Company, in connection with a lawsuit in which the Company is
codefendant.
- In connection with the acquisition of additional interest in
Santa Maria del Plata S.A., the Company pledged 2,460,041 shares
of its interest in that company to secure the balance owed until
it is fully paid.
- As indicated in Note 19 e) to the September 30, 2002 unaudited
consolidated financial statements, the Company has assigned in
trust, under the terms of Law 24.441, in favor of the Trustee
(ABN AMRO BANK N.V.) all the shares it owns in Palermo Invest
S.A.
- In view of the acquisition of Piscis Hotel by the Company, a
senior mortgage and privilege has been set up on that hotel, in
favor of Banco Rio de la Plata, for a total amount of US$
275,000.
NOTE 13: NEGOTIABLE OBLIGATIONS CONVERTIBLE
On March 8, 2002, the Ordinary and Extraordinary Meeting of
Shareholders resolved:
a) Approving the issuance of Negotiable Obligations Convertible into
Ordinary Shares of the company ("ONC") for up to a face value of
US$100,000,000 (one hundred million pesos), for a term of 5
(five) periods, at a fixed interest rate of 6% to 12% per annum,
payable half-periodly in arrears.
b) Approving a subscription option for the ONC holders to subscribe
ordinary shares of the company at 1 (one) share per $1 (one peso)
of ONC face value, paying in cash $1(pesos one) as subscription
price, during 15 (fifteen) days after the conversion term has
expired, including the corresponding capital increase.
c) Suppressing the preferential subscription and accretion rights,
or reducing the term to exercise the preference, as provided by
section 12 of the Negotiable Obligations Law and other applicable
regulations.
d) Amending article nine (9) of the bylaws to partially adapt its
contents to the market circumstances arising from the amendment
approved, by replacing 1) the 20% percentage referred to in the
amendment to the bylaws, by the percentage indicated in Decree
677/01, i.e., 35%; and 2) eliminating the negotiable obligations
or other convertible debt securities, as well as the warrants,
from the calculation mentioned in Article Nine of the Bylaws.
The public offering and listing of the above-mentioned negotiable
obligations was approved by Resolution No. 14316 of the National
Securities Commission dated September 24, 2002 and the Buenos Aires
Stock Exchange, authorizing the issuance for up to US$ 100,000,000 of
securities consisting of negotiable obligations convertible for
ordinary shares, bearing interest at an annual rate of 8% and falling
due in 2007 and which, at the time of their conversion, provide the
right to options to subscribe 100,000,000 ordinary shares.
Furthermore, the conversion price and the price of Warrants have been
set as follows:
62
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS(CONTINUED)
NOTE 13: (Continued)
a) The conversion price is 0.5571 shares (5.5713 GDS), while the
price of the Warrant is 0.6686 shares (6.6856 GDS).
b) The holder is entitled to exchange each Negotiable Obligation
issued by IRSA for 1.7949 shares (0.1795 GDS) and has an option
to purchase the same number of shares at the exercise price set
for the Warrant.
The convertible negotiable obligations and options will fall due
on November 14, 2007.
At the date of issue of these financial statements, the
convertible negotiable obligations were in the period in which
holders may exercise their preemptive rights.
63
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
FIXED ASSETS
For the three-months periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
===========================================================================================================================
Depreciation
-------------------------------------------
For the period
-----------------------------
Deductions
Value at Increases Deductions And
Items beginning and and Value as of Accumulated Transfers Rate
of year transfers Transfers end of as of %
and Period beginning of
writedown year
of
inventories
(2)
---------------------------------------------------------------------------------------------------------------------------
Facilities - - - - - - 10
Furniture and fixtures 1,523 - - 1,523 1,521 - 20
Computer equipment 4,086 31 - 4,117 3,836 2 33.33
Leasehold improvements 5,683 4 - 5,687 3,356 - 10
Real Estate:
------------
Alsina 934 1,787 - - 1,787 265 - 2
Av. de Mayo 595 5,621 - - 5,621 1,394 - 2
Av. Madero 942 5,527 - (2,772) 2,755 839 (429) 2
Constitucion 1111 588 - - 588 177 - 2
Costeros Dique IV 18,304 - - 18,304 351 - 2
Dique 2 M10 (1I) Edif. A 19,169 - - 19,169 797 - 2
Dique 2 M10 (1I) Edif. C 5,599 - - 5,599 - - 2
Laminar Plaza 30,134 - - 30,134 1,478 - 2
Libertador 498 43,889 - - 43,889 5,734 - 2
Libertador 602 2,883 - - 2,883 341 - 2
Madero 1020 11,808 - (1,269) 10,539 1,603 (174) 2
Maipu 1300 47,537 - - 47,537 5,784 - 2
Piscis 586 4,649 - 5,235 - - 2
Puerto Madero Dock 5 - - - - - - 2
Reconquista 823 21,325 - - 21,325 3,449 - 2
Rivadavia 2243 - - - - - - 2
Rivadavia 2768 - - - - - - 2
Av. Santa Fe 1588 - - - - - - 2
Sarmiento 517 303 179 (178) 304 43 1 2
Suipacha 652 13,332 - - 13,332 3,129 - 2
------------------------------------------------------------------------------------------------
TOTAL AS OF SEPTEMBER 30, 239,684 4,863 (4,219) 240,328 34,097 (600) -
2002
================================================================================================
TOTAL AS OF SEPTEMBER 30, 302,172 20,893 - 323,065 32,282 - -
2001
===========================================================================================================================
SCHEDULE A
============================================================================
Depreciation
----------------------
For the
period
----------
Net Net
carrying carrying
Items Amount Accumulated Value as value as
(1) as of of of
period end September September
30, 2002 30, 2001
----------------------------------------------------------------------------
Facilities - - - 69
Furniture and fixtures - 1,521 2 69
Computer equipment 116 3,954 163 471
Leasehold improvements 149 3,505 2,182 2,679
Real Estate:
------------
Alsina 934 7 272 1,515 1,544
Av. de Mayo 595 22 1,416 4,205 6,371
Av. Madero 942 19 429 2,326 5,855
Constitucion 1111 3 180 408 6,134
Costeros Dique IV 70 421 17,883 23,423
Dique 2 M10 (1I) Edif. A 80 877 18,292 20,994
Dique 2 M10 (1I) Edif. C - - 5,599 6,191
Laminar Plaza 115 1,593 28,541 32,811
Libertador 498 158 5,892 37,997 54,223
Libertador 602 10 351 2,532 3,214
Madero 1020 39 1,468 9,071 20,782
Maipu 1300 185 5,969 41,568 47,996
Piscis - - 5,235 -
Puerto Madero Dock 5 - - - 2,416
Reconquista 823 79 3,528 17,797 21,715
Rivadavia 2243 - - - 8,260
Rivadavia 2768 - - - 341
Av. Santa Fe 1588 - - - 8,392
Sarmiento 517 2 46 258 599
Suipacha 652 49 3,178 10,154 14,657
----------------------------------------------
TOTAL AS OF SEPTEMBER 30, 1,103 34,600 205,728 -
2002
==============================================
TOTAL AS OF SEPTEMBER 30, 1,577 33,859 - 289,206
2001
============================================================================
(1) The accounting application of the depreciation for the period is set
forth in Schedule H.
(2) See coments in Note 2.c.
64
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INTANGIBLE ASSETS
For the three-months periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
====================================================================================================================================
Values of origin Amortization
-------------------------------------------------------------------------------------------
Balances Accumulated
as of Balances as as of
beginning of end of beginning
Items of year Additions Deductions period of year Additions Deductions
------------------------------------------------------------------------------------------------------------------------------------
Development property expenses 442 - (7) 435 178 - -
Bank loan expenses 14,913 126 - 15,039 14,629 - -
Exchange expenses 3,236 - - 3,236 1,462 - -
-------------------------------------------------------------------------------------------
TOTAL AS OF SEPTEMBER 30, 2002 18,591 126 (7) 18,710 16,269 - -
===========================================================================================
TOTAL AS OF SEPTEMBER 30, 2001 15,261 208 (128) 15,341 10,534 195 -
====================================================================================================================================
SCHEDULE B
===========================================================================================
Amortization Net carrying value as of
--------------------------------------------------
Accumulated
Amount as of end September September
Items (1) of period 30, 2002 30, 2001
-------------------------------------------------------------------------------------------
Development property expenses - 178 257 411
Bank loan expenses - 14,629 410 1,593
Exchange expenses - 1,462 1,774 1,391
--------------------------------------------------
TOTAL AS OF SEPTEMBER 30, 2002 - 16,269 2,441 -
==================================================
TOTAL AS OF SEPTEMBER 30, 2001 1,217 11,496 - 3,395
===========================================================================================
(1) The accounting application of the amortization for the period is set
forth in Schedule H.
65
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
SHARES AND OTHER SECURITIES ISSUED IN SERIES
INTEREST IN OTHER COMPANIES
Balance Sheets as of September 30, 2002 and 2001
In thousands of pesos
============================================================================================================
Value as Value as
Issuer and types of securities Class P.V. Amount Listing of of
value September September
30, 2002 30, 2001
------------------------------------------------------------------------------------------------------------
CURRENT INVESTMENTS
APSA 2005 bonds U$S 0.001 700,000 - - 1,659
Telecom Argentina S.A $ 0.001 537,239 - - 13,902
Perez Companc S.A. $ 0.001 1,638,171 - - 668
Bocon PRO 1 $ 0.001 13,174,419 0.0003 - 8,594
Banco Hipotecario S.A. $ 0.001 2,410,824 0.0021 5,155 701
Patriotic Bond $ 0.001 700,000 0,0010 - 1,548
Lebac $ 0.001 40,000 - 40 -
-------------------------------------------------------------------
Total current investments as of 5,195 -
September 30, 2002
===================================================================
Total current investments as of 27,072
September 30, 2001
============================================================================================================
SCHEDULE C
==================================================================================================================
Issuer's information (1)
-------------------------------------------------------------
Last financial statement
-------------------------------------------------
Capital
Main stock Income(loss)Shareholders' (1)
Issuer and types of securities Activity Date (par value) for the equity Interest in
period capital
stock
------------------------------------------------------------------------------------------------------------------
CURRENT INVESTMENTS
APSA 2005 bonds
Telecom Argentina S.A
Perez Companc S.A.
Bocon PRO 1
Banco Hipotecario S.A.
Patriotic Bond
Lebac
--------------------------------------------------------------------------
Total current investments as of
September 30, 2002
==========================================================================
Total current investments as of
September 30, 2001
==================================================================================================================
(1) Not inform because the equity interest is less than 5%.
66
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
SHARES AND OTHER SECURITIES ISSUED IN SERIES
INTEREST IN OTHER COMPANIES
Balance Sheets as of September 30, 2002 and 2001
In thousands of pesos
=====================================================================================================
Value Value
Issuer and types of securities Recorded Recorded
Class P.V. Amount Listing at at
value September September
30, 2002 30, 2001
-----------------------------------------------------------------------------------------------------
NON-CURRENT INVESTMENTS
Abril S.A. Common 1 5,000 1,320 - (20,394) (17,669)
vote - - - 25,315 24,193
Irrevoc.
Contrib
IRSA International Ltd. Common 1 0.001 - - - 426,288
vote
Pereiraola S.A. Common 1 0.001 50,000 - 7,832 7,957
vote
Irrevoc. - - - 1,108 1,026
Contrib.
Baldovinos S.A. Common 1 0.001 6,000 - (5,605) (4,539)
vote
Irrevoc. - - - 11,636 11,578
Contrib.
Palermo Invest S.A. Common 1 0.001 76,949,667 - 137,601 217,154
vote
Hoteles Argentinos S.A. Common 1 0.001 7,309,273 - (2,564) 16,409
vote
Irrevoc. - - - 3,553 1,327
Contrib.
Alto Palermo S.A. (ex SAMAP) Common 1 0,001 64,559,510 - 364,193 98,994
vote
Buenos Aires Realty S.A. Common 1 0.001 6,000 - - (153)
vote
Irrevoc. - - - - 4,340
Contrib.
Buenos Aires Trade and Finance Common 1 0.001 6,000 - 10,539 (142)
Center S.A. vote
Irrevoc. - - - 10,793 3,694
Contrib.
Argentine Realty S.A. Common 1 0.001 6,000 - - (179)
vote
Irrevoc. - - - - 4,517
Contrib.
Llao - Llao Resort S.A Common 1 0.001 5,878,940 - 10,057 3,937
vote
Irrevoc. - - - 2,412 1,449
Contrib.
Banco de Credito y Securitizacion Common 1 0.001 3,187,500 - 7,051 7,052
S.A. vote
Alto Invest S.A. Common 1 0.001 960 - 12 -
vote - - - 185 -
Irrevoc.
Contrib.
Ritelco S.A. Common 1 0.001 66,970,394 - 40,427 -
vote
Valle de las Lenas S.A. Common 1 0.001 22,012,078 - 8,506 -
vote
-----------------------------------------------------------------
Total as of September 30, 2002 612,657 -
=================================================================
Total as of September 30, 2001 - 807,233
=====================================================================================================
SCHEDULE C (Continued)
==============================================================================================================
Issuer's information
----------------------------------------------------------------
Last financial statement
------------------------------------------
Issuer and types of securities Main Income
Capital (loss) Shareholders' Interest
Activity Date Stock for the equity in
(Par period Capital
value) Stock
--------------------------------------------------------------------------------------------------------------
NON-CURRENT INVESTMENTS
Abril S.A. Building, 09. 30. 13,200 (1,711) 54,887 50%
development and 2002
administration of
country club
IRSA International Ltd. Investment 09. 30.
2002
Pereiraola S.A. Real estate and 09. 30. 100 (31) 2,680 50%
financing 2002
Baldovinos S.A. Real estate and 09. 30. 12 (353) 11,514 50%
building 2002
Palermo Invest S.A. Investments 09. 30. 78,251 1,649 206,626 66,67%
2002
Hoteles Argentinos S.A. Hotel Libertador 09. 30. 9,887 4,933 (1,516) 79,99%
exploitation 2002
Alto Palermo S.A. (ex SAMAP) Real estate 09. 30. 70,000 32,996 712,841 49,9310%
investments 2002
Buenos Aires Realty S.A. Real estate 09. 30.
investments 2002
Buenos Aires Trade and Finance Real estate 09. 30. 12 476 21,190 100%
Center S.A. investments 2002
Argentine Realty S.A. Real estate 09. 30.
investments 2002
Llao - Llao Resort S.A Hotel Llao-Llao 09. 30. 11,757 2,797 24,009 50%
exploitation 2002
Banco de Credito y Securitizacion 09. 30. 62,500 (20,370) 104,372 5,10%
S.A. Banking 2002
Alto Invest S.A. 09. 30. 12 (99) 690 8%
2002
Electronic Commerce
Ritelco S.A. 09. 30. 66,970 (1,024) 40,427 100%
Investments 2002
Valle de las Lenas S.A. 28. 02. 22,012 450 62,983 30,9550%
Turism 2002
--------------------------------------------------------------------------
Total as of September 30, 2002
==========================================================================
Total as of September 30, 2001
==============================================================================================================
67
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
OTHER INVESTMENTS
Balance Sheets as of September 30, 2002 and 2001
In thousands of pesos
SCHEDULE D
=============================================================================================================
Value as of Value as of
Items September 30, 2002 September 30, 2001
-------------------------------------------------------------------------------------------------------------
CURRENT INVESTMENTS
Time deposits 174 344
Mutual funds 7,771 422
-----------------------------------------
Total current investments as of September 30, 2002 7,945 -
=========================================
Total current investments as of September 30, 2001 - 766
=========================================
NON-CURRENT INVESTMENTS
Santa Maria del Plata 116,709 124,847
Torres Jardin IV 2,245 3,050
-----------------------------------------
Subtotal 118,954 127,897
-----------------------------------------
IRSA I Trust Exhangeable Certificates Class A 516 -
IRSA I Trust Exhangeable Certificates Class B 953 -
IRSA I Trust Exchangeable Certificates Class C 1,532 -
IRSA I Trust Exchangeable Certificates Class D 4,878 -
Convertible Bond APSA 2006 101,050 -
-----------------------------------------
Subtotal 108,929 -
-----------------------------------------
Art work 37 37
-----------------------------------------
Total non-current investments as of September 30, 2002 227,920 -
=========================================
Total non-current investments as of September 30, 2001 - 127,934
=============================================================================================================
68
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
ALLOWANCES AND PROVISIONS
For the three-month periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
SCHEDULE E
====================================================================================================================================
Carrying value Carrying value
Balances as of as of as of
beginning of September 30, September 30,
Items year Increases (1) Decreases 2002 2001
------------------------------------------------------------------------------------------------------------------------------------
DEDUCTED FROM ASSETS:
Allowance for doubful accounts 1,213 - (431) 782 1,747
Provision for impairment of inventory 11,545 926 (4,320) 8,151 -
Provision for impairment of fixed assets 42,517 - (1,159) 41,358 -
Provision for impairment of undeveloped 9,387 - - 9,387 -
plots of land
FROM LIABILITIES:
Provisions for lawsuits 231 124 (27) 328 11
Provisions for discounts 12 - (1) 11 24
--------------------------------------------------------------------------------------
TOTAL AS OF SEPTEMBER 30, 2002 64,905 1,050 (5,938) 60,017 -
======================================================================================
TOTAL AS OF SEPTEMBER 30, 2001 1,933 7 (158) - 1,782
====================================================================================================================================
(1) The increase in the provision for lawsuits was allocated to the note on
other expenses and the increase in the inventory valuation allowance
results from the transfer of fixed assets for their subsequent sale. This
does not have effects on results.
69
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
COST OF SALES, LEASES AND SERVICES
For the periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
SCHEDULE F
=================================================================================================================
September 30, 2002 September 30, 2001
------------------------------------------
I. COST OF SALES
Stock as of beginning of year 35,638 37,299
PLUS (LESS):
Purchases for the period - 9
Expenses (Schedule H) 383 252
Transfers to fixed assets (154) -
Transfers from fixed assets 3,592 -
LESS:
Reclassification of inventories sold 16 177
Reclassification from expenses for property sold to intangible assets - -
Stock as of end of period (29,007) (36,759)
------------------------------------------
SUBTOTAL 10,468 978
------------------------------------------
PLUS
Cost of sales - Abril S.A. 848 781
Cost of sales - Inversora del Pacifico S.A. - -
Cost of sales - Llao Llao - -
Resultado de operaciones y tenencia de activos inmobiliarios - -
------------------------------------------
COST OF PROPERTIES SOLD 11,316 1,759
------------------------------------------
II. COST OF LEASES
Expenses (Schedule H) 1,337 1,962
------------------------------------------
COST OF PROPERTIES LEASED 1,337 1,962
------------------------------------------
III. COST OF FEES FOR SERVICES
Expenses (Schedule H) 93 918
------------------------------------------
COSTO OF FEES FOR SERVICES 93 918
------------------------------------------
TOTAL COSTS OF SALES, LEASES AND SERVICES 12,476 4,639
=================================================================================================================
70
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
FOREIGN CURRENCY ASSETS AND LIABILITIES
Balance Sheets as of September 30, 2002 and 2001
In thousands of pesos
SCHEDULE G
===================================================================================================================================
Total as of Total as of
Prevailing exchange September 30, September 30,
Items Class Amount rate 2002 2001
-----------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and banks:
Cash U$S 204,586 0.00364 (1) 745 4
Banks U$S 45,288 0.00364 (1) 165 507
Savings accounts U$S 2,081,223 0.00364 (1) 7,576 137
Checks to be deposited U$S - 0.00364 (1) - 9
Investments:
APSA 2005 bond U$S - 0.00364 (1) - 1,659
Patriotic bond U$S - 0.00364 (1) - -
Time deposits U$S - 0.00364 (1) - 343
Convertible Bond APSA 2006 U$S 27,760,893 0.00364 (1) 101,050 -
F.R.B. U$S - 0.00364 (1) - -
Mutual Funds U$S 2,126,166 0.00364 (1) 7,739 268
Mortgages and leases receivables U$S - 0.00364 (1) - 27,068
Other receivables: U$S
Intercompany U$S - 0.00364 (1) - 66,506
Services to be billed U$S - 0.00364 (1) - 551
Operations pendings to settlement U$S - 0.00364 (1) - -
Personnel loans and prepayments U$S - 0.00364 (1) - 484
-------------- ----------------------------------
Total Current Assets 32,218,156 117,275 97,536
-------------- ----------------------------------
NON-CURRENT ASSETS
Mortgages receivable U$S - 0.00364 (1) - 35,399
Other receivables:
Intercompany U$S - 0.00364 (1) - -
Guarantee deposits U$S - 0.00364 (1) - 84
Personnel loans and prepayments U$S - 0.00364 (1) - 2,592
Investments:
IRSA International Ltd.:
Shares U$S - 0.00364 (1) - 426,288
-------------- ----------------------------------
Total Non-current Assets U$S - - 464,363
-------------- ----------------------------------
TOTAL ASSETS AS OF SEPTEMBER 30, 2002 U$S 32,218,156 117,275 -
============== ==================================
TOTAL ASSETS AS OF SEPTEMBER 30, 2001 U$S 561,903,583 - 561,899
============== ==================================
LIABILITIES
CURRENT LIABILITIES
Accounts payable U$S 824,818 0.00374 (1) 3,085 93
Customer advances U$S 22,000 0.00374 (1) 80 3,143
Mortgages payable U$S 256,465 0.00374 (1) 959 -
Taxes payable U$S 2,308,624 0.00374 (1) 8,634 -
Short and long term debt U$S 139,878,877 0.00374 (1) 523,146 363,266
Other liabilities:
Debt for purchase of shares U$S - 0.00374 (1) - 1,896
Intercompany U$S 316,683 0.00374 (1) 1,153 84,476
Guarantee deposits U$S - 0.00374 (1) - 1,267
Provisions U$S - 0.00374 (1) - 24
Collections on behalf of third parties U$S - 0.00374 (1) - 117
-------------- ----------------------------------
Total Current Liabilities U$S 143,607,467 537,057 454,282
-------------- ----------------------------------
NON-CURRENT LIABILITIES
Accounts payable U$S - 0.00374 (1) - 385
Short and long term debt U$S - 0.00374 (1) - -
Customer advances U$S 22,000 0.00374 (1) 80 352
Other liabilities:
Debt for purchase of shares U$S - 0.00374 (1) - 3,207
Guarantee deposits U$S - 0.00374 (1) - 3,079
Directors' deposits U$S - 0.00374 (1) - 18
-------------- ----------------------------------
Total Non-current Liabilities U$S 22,000 80 7,041
-------------- ----------------------------------
TOTAL LIABILITIES AS OF SEPTEMBER 30, 2002 U$S 143,629,467 537,137 -
============== ==================================
TOTAL LIABILITIES AS OF SEPTEMBER 30, 2001 U$S 461,323,757 - 461,323
===================================================================================================================================
(1) Official rate of exchange quoted by Banco Nacion at September 30, 2002.
71
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY LAW 19,550, SECTION 64, PARAGRAPH B)
For the three-month periods beginning on
July 1, 2002 and 2001
and ended September 30, 2002 and 2001
In thousands of pesos
SCHEDULE H
==============================================================================================================================
Total as of Cost of
September 30, properties Cost of Cost of fees Cost of hotel
Items 2002 leased properties sold for services activity
------------------------------------------------------------------------------------------------------------------------------
Directors' fees 98 - - - -
Fees and payments for services 303 - - - -
Salaries, bonuses and social security charges 956 - - - -
Other expenses of personnel administration 166 - - - -
Depreciation and amortization 1,103 838 - - -
Maintenance of buildings 906 499 383 - -
Utilities and postage 3 - - - -
Travel expenses 32 - - - -
Advertising and promotion 47 - - - -
Fees and expenses for property sold 346 - - - -
Local transportation and stationery 38 - - - -
Taxes, rates and assessments - - - - -
Subscriptions and dues 16 - - - -
Interest and indexing adjustments 16,950 - - - -
Bank charges 82 - - - -
Safety box and stockbroking charges 21 - - - -
Doubtful accounts - - - - -
Insurance 23 - - - -
Security 7 - - - -
Courses 3 - - - -
Lawsuits - - - - -
Results of trust - - - - -
Rents 94 - - - -
Other 131 - - 93 -
-------------------------------------------------------------------------------------
Total as of September 30, 2002 21,235 1,337 383 93 -
=====================================================================================
Total as of September 30, 2001 - 1,962 252 918 -
==============================================================================================================================
==================================================================================================
Expenses
-------------------------------------------
Total as of
September
Items Administration Selling Financing 30, 2001
--------------------------------------------------------------------------------------------------
Directors' fees 98 - - 358
Fees and payments for services 303 - - 305
Salaries, bonuses and social security
charges 956 - - 2,254
Other expenses of personnel administration 166 - - 2
Depreciation and amortization 265 - - 2,794
Maintenance of buildings 24 - - 1,108
Utilities and postage 3 - - -
Travel expenses 32 - - 11
Advertising and promotion 8 39 - 577
Fees and expenses for property sold - 346 - 232
Local transportation and stationery 38 - - 27
Taxes, rates and assessments - - - 20
Subscriptions and dues 16 - - 95
Interest and indexing adjustments - - 16,950 9,297
Bank charges - - 82 137
Safety box and stockbroking charges 16 - 5 44
Doubtful accounts 23 - - -
Insurance
Security 7 - - 2
Courses 3 - - 7
Lawsuits - - - -
Results of trust - - - -
Rents 94 - - -
Other 37 1 - 978
---------------------------------------------------------
Total as of September 30, 2002 2,089 386 17,037 -
=========================================================
Total as of September 30, 2001 3,643 816 10,664 18,255
==================================================================================================
72
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
BREAKDOWN BY MATURITY DATE OF RECEIVABLES AND LIABILITIES
AS OF SEPTEMBER 30, 2002 AND 2001
In thousands of pesos
SCHEDULE I
====================================================================================================================================
WITH MATURITY DATE
-------------------------------------------------------------------------------------------------------
TO DUE
----------------------------------------------------------------------------------------------
UP TO FROM 3 FROM 6 FROM 9 FROM 1 FROM 2 FROM 3 FROM 4 TOTAL
WITHOUT FALLING 3 TO 6 TO 9 TO 12 TO 2 TO 3 TO 4 PERIODS TOTAL WITH
TERM DUE MONTHS MONTHS MONTHS MONTHS PERIODS PERIODS PERIODS ON TO DUE TERM
------------------------------------------------------------------------------------------------------------------------------------
2002
Assets
Investments 114,190 - 61 56 82 52 199 4,076 1,536 1,817 7,879 7,879
Receivables 2,056 1,003 22,487 658 641 632 2,506 2,480 2,467 4,995 36,866 37,869
Liabilities
Loans - 59,612 463,564 - - - - - - - 463,534 523,146
Other liabilities - 35 24,990 206 291 1,532 1,075 153 245 83 28,575 28,610
2001
Assets
Investments 27,486 - 109 97 62 84 - - - - 352 352
Receivables - 1,447 22,775 73,244 5,911 7,353 13,111 16,707 9,069 24,944 173,114 174,561
Liabilities
Loans - - 186,797 - 176,960 - - - - - 363,757 363,757
Other liabilities - - 98,379 677 274 588 3,027 3,163 166 683 106,957 106,957
====================================================================================================================================
================================================================
INTEREST
------------------------------
ACCRUED
-----------------------
TOTAL NO FIXED VARIABLE
ACRCRUED TERM TERM
----------------------------------------------------------------
2002
Assets
Investments 122,069 - 104,091 17.978
Receivables 39,925 37,095 2,830 -
Liabilities
Loans 523,146 - 211,301 311,845
Other liabilities 28,610 24,373 2,702 1,535
2001
Assets
Investments 27,838 27,486 352 -
Receivables 174,561 47,592 60,476 66,493
Liabilities
Loans 363,757 491 - 363,266
Other liabilities 106,957 101,376 5,581 -
================================================================
73
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 2002
Stated in thousands of pesos
1. None
2. None
3. Additional information on assets and liabilities
===================================================================================================================================
FALLING DUE WITH NO TO DUE (POINT 3 C)
MATURITY
DATE
-----------------------------------------------------------------------------------------
CONCEPT 30.06.02 CURRENT 31.12.02 31.03.02 30.06.03 30.09.03 TOTAL
-----------------------------------------------------------------------------------------------------------------------------------
RECEIVABLES
Receivables for sale 1,003 - 5,242 48 37 28 6,358
Other receivables - 2,056 17,245 610 604 604 21,119
-------------------------------------------------------------------------------------------------------
Total 1,003 2,056 22,487 658 641 632 27,477
LIABILITIES
Customer advances - - 204 20 20 20 264
Taxes payables - - 10,428 120 87 71 10,706
Trade accounts payable - - 4,489 - - - 4,489
Mortgages payable - - - - - 959 959
Other liabilities 35 - 9,635 66 174 398 10,308
Short and long term debts 59,612 - 463,534 - - - 523,146
Salaries and social
securities payables - - 234 - 10 84 328
-------------------------------------------------------------------------------------------------------
Total 59,647 - 488,524 206 291 1,532 550,200
===================================================================================================================================
74
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 2002
3. (Continued)
Stated in thousands of pesos
===================================================================================================================================
TO MATURE (POINT 3 C)
------------------------------------------------------------------------------------------
WITHOUT ANY
FIXED DUE DATE
ITEMS (NON-CURRENT) 30.9.04 30.9.05 30.9.06 30.9.07 30.9.08 30.9.09 30.9.10
-----------------------------------------------------------------------------------------------------------------------------------
RECEIVABLES
Receivables for sale - 87 60 48 53 31 29 29
Other receivables - 2,419 2,420 2,419 2,422 1,940 - -
Total - 2,506 2,480 2,467 2,475 1,971 29 29
LIABILITIES
Customer advances - 80 - - - - - -
Other liabilities - 995 153 245 - - - -
Total - 1,075 153 245 - - - -
===================================================================================================================================
==========================================================================================
TO MATURE (POINT 3 C)
--------------------------------------------------------------
ITEMS 30.9.11 30.9.12 30.9.13 30.9.14 30.9.17 30.9.43 TOTAL
---------------------------------------------------------------------------------------------
RECEIVABLES
Receivables for sale 21 24 28 19 - - 429
Other receivables - - - 38 361 - 12,019
Total 21 24 28 57 361 - 12,448
LIABILITIES
Customer advances - - - - - - 80
Other liabilities - 75 - - - 8 1,476
Total - 75 - - - 8 1,556
=============================================================================================
75
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
UNAUDITED BUENOS AIRES STOCK EXCHANGE REGULATIONS
BALANCE SHEET AS OF SEPTEMBER 30, 2002
Stated in thousands of pesos
The classification of receivables and liabilities is as follows:
4-a. Breakdown by currency and maturity
===============================================================================================================================
CURRENT NON-CURRENT
---------------------------------------------------------------------------------
LOCAL FOREIGN LOCAL FOREIGN TOTAL TOTAL
ITEMS CURRENCY CURRENCY TOTAL CURRENT CURRENCY CURRENCY NON-CURRENT
-------------------------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLES
Receivables 6,358 - 6,358 429 - 429 6,787
Other receivables 21,119 - 21,119 12,019 - 12,019 33,138
------------------------------------------------------------------------------------------------
Total 27,477 - 27,477 12,448 - 12,448 39,925
===============================================================================================================================
LIABILITIES
Customer advances 184 80 264 - 80 80 344
Taxes payable 2,072 8,634 10,706 - - - 10,706
Trade accounts payable 1,404 3,085 4,489 - - - 4,489
Mortgages payable - 959 959 - - - 959
Other liabilities 9,155 1,153 10,308 1,476 - 1,476 11,784
Short and long term debt - 523,146 523,146 - - - 523,146
Salaries and social security
payable 328 - 328 - - - 328
------------------------------------------------------------------------------------------------
Total 13,143 537,057 550,200 1,476 80 1,556 551,756
===============================================================================================================================
=======================================================================
TOTAL IN TOTAL IN
LOCAL FOREIGN TOTAL
ITEMS CURRENCY CURRENCY
-----------------------------------------------------------------------
ACCOUNTS RECEIVABLES
Receivables 6,787 - 6,787
Other receivables 33,138 - 33,138
----------------------------------------
Total 39,925 - 39,925
=======================================================================
LIABILITIES
Customer advances 184 160 344
Taxes payable 2,072 8,634 10,706
Trade accounts payable 1,404 3,085 4,489
Mortgages payable - 959 959
Other liabilities 10,631 1,153 11,784
Short and long term debt - 523,146 523,146
Salaries and social security
payable 328 - 328
----------------------------------------
Total 14,619 537,137 551,756
=======================================================================
76
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 2002
Stated in thousands of pesos
4-b. Breakdown by adjustment clause
=================================================================================================================================
CURRENT NON-CURRENT
-----------------------------------------------------------------------------------
WITHOUT WITH WITHOUT WITH TOTAL
ITEMS ADJUSTMENT ADJUSTMENT TOTAL ADJUSTMENT ADJUSTMENT NON-CURRENT TOTAL
CLAUSE CLAUSE CURRENT CLAUSE CLAUSE
---------------------------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLES
Receivables 6,358 - 6,358 429 - 429 6,787
Other receivables 21,119 - 21,119 12,019 - 12,019 33,138
-----------------------------------------------------------------------------------------------
Total 27,477 - 27,477 12,448 - 12,448 39,925
=================================================================================================================================
LIABILITIES
Customer advances 264 - 264 80 - 80 344
Taxes payable 10,706 - 10,706 - - - 10,706
Trade accounts payable 4,489 - 4,489 - - - 4,489
Mortgages payable 959 - 959 - - - 959
Other liabilities 10,308 - 10,308 1,476 - 1,476 11,784
Short and long term debt 523,146 - 523,146 - - - 523,146
Salaries and social security
payable 328 - 328 - - - 328
-----------------------------------------------------------------------------------------------
Total 550,200 - 550,200 1,556 - 1,556 551,756
=================================================================================================================================
==============================================================================
TOTAL TOTAL
WITHOUT WITHT
ITEMS ADJUSTMENT ADJUSTMENT TOTAL
CLAUSE CLAUSE
------------------------------------------------------------------------------
ACCOUNTS RECEIVABLES
Receivables 6,787 - 6,787
Other receivables 33,138 - 33,138
--------------------------------------------
Total 39,925 - 39,925
==============================================================================
LIABILITIES
Customer advances 344 - 344
Taxes payable 10,706 - 10,706
Trade accounts payable 4,489 - 4,489
Mortgages payable 959 - 959
Other liabilities 11,784 - 11,784
Short and long term debt 523,146 - 523,146
Salaries and social security
payable 328 - 328
--------------------------------------------
Total 551,756 - 551,756
==============================================================================
77
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 2002
Stated in thousands of pesos
4-c. Breakdown of accounts receivable and liabilities by interest clause
================================================================================================================
CURRENT NON-CURRENT
-------------------------------------------------------------------------------
NOT- NOT- TOTAL
ACCRUING INTEREST ACCRUING TOTAL ACCRUING INTEREST ACCRUING NON-
INTEREST CURRENT INTEREST CURRENT
----------------------------------------------------------------------------------------------------------------
FIXED VARIABLE FIXED VARIABLE
RATE RATE RATE RATE
------------------- --------------------
ACCOUNTS RECEIVABLES
Receivables 181 - 6,177 6,358 424 - 5 429
Other receivables 2,082 - 19,037 21,119 143 - 11,876 12,019
-------------------------------------------------------------------------------
Total 2,263 - 25,214 27,477 567 - 11,876 12,448
================================================================================================================
LIABILITIES
Customer advances - - 264 264 - - 80 80
Taxes payable - - 10,706 10,706 - - - -
Trade accounts payable - - 4,489 4,489 - - - -
Mortgages payable 959 - - 959 - - - -
Other liabilities 1,743 810 7,755 10,308 - 725 751 1,476
Short and long term debt 211,301 311,845 - 523,146 - - - -
Salaries and social security
payable - - 328 328 - - - -
-------------------------------------------------------------------------------
Total 214,003 312,665 23,542 550,200 - 725 831 1,556
================================================================================================================
=============================================================================
TOTAL TOTAL
TOTAL ACCRUING NOT-ACCRUING TOTAL
INTEREST INTEREST
-----------------------------------------------------------------------------
ACCOUNTS RECEIVABLES
Receivables 6,787 605 6,182 6,787
Other receivables 33,138 2,225 30,913 33,138
--------------------------------------------
Total 39,925 2,830 37,095 39,925
=============================================================================
LIABILITIES
Customer advances 344 - 344 344
Taxes payable 10,706 - 10,706 10,706
Trade accounts payable 4,489 - 4,489 4,489
Mortgages payable 959 959 - 959
Other liabilities 11,784 3,278 8,506 11,784
Short and long term debt 523,146 523,146 - 523,146
Salaries and social security
payable 328 - 328 328
--------------------------------------------
Total 551,756 527,383 24,373 551,756
=============================================================================
78
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 2002
Stated in thousands of pesos
5. Intercompany
a. Intercompany interest
See Schedule C to the financial statements.
b. Intercompany debit/credit balances (Note 10)
Current mortgages and leases receivables
========================================================================
September 30, 2002
---------------------
Intercompany:
Abril S.A. 16
Alto Palermo S.A. 897
Altocity.Com S.A. 57
Baldovinos S.A. 1,013
Dolphin Fund Management S.A. 1
Inversora Bolivar S.A 1,940
Red Alternativa S.A. 50
Tarshop Sociedad Anonima 4
========================================================================
Other current receivables
========================================================================
September 30, 2002
---------------------
Intercompany:
Dolphin Fund Management S.A. 281
Inversora Bolivar S.A. 170
Palermo Invest S.A 13,135
========================================================================
Current trade accounts payable
========================================================================
September 30, 2002
---------------------
Intercompany:
Alto Palermo S.A. 11
Fibesa S.A. 2
Hoteles Argentinos S.A. 2
========================================================================
79
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 2002
Stated in thousands of pesos
Other current liabilities
=========================================================================
September 30, 2002
-------------------
Intercompany:
Alto Palermo S.A. 591
Baldovinos S.A. 37
Cresud S.A. 8
Ritelco S.A. 2,993
Llao Llao Resorts S.A. 1,153
=========================================================================
80
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 2002
Stated in thousands of pesos
6. None.
7. In view of the nature of the inventory, no physical inventories are
performed and there are no frozen assets.
8. Not applicable. See Notes 2.a., 2.b., 2.c. and 2.d. to the unaudited
financial statements.
9. None.
10. None.
11. None.
12. See Notes 2.a., 2.b., 2.c. and 2.d. to the unaudited financial statements.
81
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 2002
Stated in thousands of pesos
13. Insured Assets.
Insured Accounting
amounts values Risk covered
------------ ------------ ----------------------------------------------------
Alsina 934 Capital (3) 1,890 1,515 Fire, explosion with additional coverage and debris
removal
Alsina 934 Capital (3) 308 1,515 Third party liability with additional coverage and
minor risks.
Av. de Mayo 589-99 Capital 4,662 4,205 Fire, explosion with additional coverage and debris
removal
Av. Alicia M. de Justo 1714 Dock (1) 17,000 54 Fire, explosion with additional coverage and
13 Capital debris removal
Av. Alicia M. de Justo 1714 Dock (1) 555 54 Third party liability with additional coverage and
13 Capital minor risks.
Av. Alicia M. de Justo 750 Dock (1) 16,775 - Fire, explosion with additional coverage and
5 Capital debris removal
Av. Alicia M. de Justo 750 Dock (1) 202 - Third party liability with additional coverage and
5 Capital minor risks.
Av. Alicia M. de Justo 840 Dock (1) 17,550 - Fire, explosion with additional coverage and
6 Capital debris removal
Av. Alicia M. de Justo 840 Dock (1) 406 - Third party liability with additional coverage and
6 Capital minor risks.
Bolivar 108 e H. Yrigoyen 476 10,395 - Fire, explosion with additional coverage and
Capital debris removal
Bolivar 108 e H. Yrigoyen 476 3,829 - Third party liability with additional coverage and
Capital minor risks.
Constitucion 1111 Capital 460 2,336 Fire, explosion with additional coverage and
debris removal
Constitucion 1111 Capital 1,000 2,336 Third party liability with additional coverage and
minor risks.
Constitucion 1111 TIA Capital 3,625 2,336 Fire, explosion with additional coverage and debris
removal
Dorrego 1916 Capital (4) 17,430 13 Fire, explosion with additional coverage and debris
removal
Dorrego 1916 Capital (4) 506 13 Third party liability with additional coverage and
minor risks.
Edificios costeros Dique 2 Este. 29,400 23,891 Fire, explosion with additional coverage and
Dockitos. P. Madero Capital debris removal
Edificios costeros Dique 2 Este. 2,021 23,891 Third party liability with additional coverage and
Dockitos. P. Madero Capital minor risks.
Edificios costeros Dique 4 O. (1) 17,000 17,883 Fire, explosion with additional coverage and
Cosentini 240 Capital debris removal
Edificios costeros Dique 4 O. (1) 1,002 17,883 Third party liability with additional coverage and
Cosentini 240 Capital minor risks.
F. Alcorta 3351 Palacio Alcorta (1) 30,250 - Fire, explosion with additional coverage and
Capital debris removal
F. Alcorta 3351 Palacio Alcorta (1) 1,655 - Third party liability with additional coverage and
Capital minor risks.
Gurruchaga 274 Torres Jardin III (2) 10,736 151 Fire, explosion with additional coverage and
Capital debris removal
Gurruchaga 274 Torres Jardin III (2) 601 151 Third party liability with additional coverage and
Capital minor risks.
ING Butty 240 Laminar Plaza (1) 47,250 28,540 Fire, explosion with additional coverage and
Capital debris removal
ING Butty 240 Laminar Plaza (1) 4,130 28,540 Third party liability with additional coverage and
Capital minor risks.
Libertador 450-98 Capital (1) 67,200 37,997 Fire, explosion with additional coverage and
debris removal
Libertador 450-98 Capital (1) 3,758 37,997 Third party liability with additional coverage and
minor risks.
82
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 2002
Stated in thousands of pesos
13. Insured Assets (Continued)
Insured Accounting
amounts values Risk covered
------------ ------------ ----------------------------------------------------
Av. Libertador 602 Capital (1) 25,200 2,531 Third party liability with additional coverage and
minor risks.
Av. Libertador 602 Capital (1) 1,002 2,531 Fire, explosion with additional coverage and
debris removal
Madero 1020 Capital (1) 56,700 11,042 Fire, explosion with additional coverage and
debris removal
Madero 1020 Capital (1) 3,283 11,042 Third party liability with additional coverage and
minor risks.
Madero 940 Capital (1) 36,960 2,326 Fire, explosion with additional coverage and
debris removal
Madero 940 Capital (1) 1,315 2,326 Third party liability with additional coverage and
minor risks.
Maipu 1270 - 1300 Capital 44,100 41,569 Fire, explosion with additional coverage and
debris removal
Maipu 1270 - 1300 Capital 2,778 41,569 Third party liability with additional coverage and
minor risks.
Padilla 870 Torres Jardin II (2) 9,450 442 Fire, explosion with additional coverage and
Capital debris removal
Padilla 870 Torres Jardin II (2) 607 442 Third party liability with additional coverage and
Capital minor risks.
Reconquista 823 Capital 13,000 17,797 Fire, explosion with additional coverage and
debris removal
Rivadavia 2768 Capital (1) 3,610 155 Fire, explosion with additional coverage and
debris removal
Rivadavia 2768 Capital (1) 251 155 Third party liability with additional coverage and
minor risks.
Sarmiento 501 (1) 3,885 615 Fire, explosion with additional coverage and
debris removal
Sarmiento 501 (1) 607 615 Third party liability with additional coverage and
minor risks.
Serrano 287 Torres Jardin I (2) 9,450 65 Fire, explosion with additional coverage and
Capital debris removal
Serrano 287 Torres Jardin I (2) 607 65 Third party liability with additional coverage and
Capital minor risks.
Suipacha 664 31,500 10,154 Fire, explosion with additional coverage and
debris removal
Suipacha 664 2,722 10,154 Third party liability with additional coverage and
minor risks.
83
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 2002
Stated in thousands of pesos
General
In the case of insurance covering fire and explosion with additional coverage,
the amounts insured are stated at replacement and/or reconstruction to an "as
new" condition value, not including land and foundations, due to the
apportionment rules.
Insured amounts correspond to units belonging to the company that are being
sold, and/or units sold under mortgages not having individual policies with
assigned rights.
Notes:
(1) Insured amounts correspond to the total for the building. The amount
insured for each co-owner is obtained by applying the percentage of
co-ownership to the total insurance. (2) Insured amounts correspond solely
to jointly held areas.
(3) Insurance purchased by tenants with provisions for the assignment of
rights.
(4) Insured amounts correspond to units not yet having a bill of sale.
(5) Insured amounts correspond to common areas and partially to individual
areas.
In our opinion, the above-described policies adequately cover current risks.
14. Not applicable.
15. See comments in Note 1 to the consolidated financial statements.
16. Not applicable.
17. None.
18. In accordance which was stipulated in loans agreements, the Company shall
not distribute dividends until this obligations would be cancelled.
BUENOS AIRES, NOVEMBER 11, 2002.
84
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
BUSINESS OVERVIEW
In thousands of pesos
1. BRIEF COMMENTS ON THE COMPANY'S ACTIVITIES DURING THE YEAR, INCLUDING
REFERENCES TO SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD.
See attached.
2. CONSOLIDATED SHAREHOLDERS' EQUITY STRUCTURE AS COMPARED WITH THE SAME
PERIOD FOR THE FOUR PREVIOUS YEARS.
September September September 30, September September
30, 2002 30, 2001 2000 30, 1999 30, 1998
-------------- -------------- --------------- -------------- --------------
Current Assets 166,222 244,526 254,317 439,350 379,758
Non-Current Assets 1,800,543 1,394,535 1,626,242 1,566,020 1,559,475
-------------- -------------- --------------- -------------- --------------
TOTAL 1,966,765 1,639,061 1,880,559 2,005,370 1,939,233
============== ============== =============== ============== ==============
Current Liabilities 684,378 470,010 330,442 416,099 261,135
Non-Current Liabilities 235,431 39,818 225,025 150,896 358,700
-------------- -------------- --------------- -------------- --------------
SUBTOTAL 919,809 509,828 555,467 566,995 619,835
-------------- -------------- --------------- -------------- --------------
Minority interest in
subsidiaries 458,740 131,340 128,059 128,665 119,282
-------------- -------------- --------------- -------------- --------------
Shareholders' Equity 588,216 997,893 1,197,033 1,309,710 1,200,116
-------------- -------------- --------------- -------------- --------------
TOTAL 1,966,765 1,639,061 1,880,559 2,005,370 1,939,233
============== ============== =============== ============== ==============
3. CONSOLIDATED INCOME STRUCTURE AS COMPARED WITH THE SAME PERIOD FOR THE
FOUR PREVIOUS YEARS.
September September September September September
30, 2002 30, 2001 30, 2000 30, 1999 30, 1998
------------- -------------- ------------- -------------- --------------
Operating ordinary profit (4,255) 15,725 16,608 6,194 12,887
Financial results 80,612 (80,630) (20,410) (799) (20,010)
Equity in earnings of
affiliated companies 349 (14,610) 9,779 7,143 9,467
Other income (expenses) 9,577 (2,926) (1,431) 301 6,346
------------- -------------- ------------- -------------- --------------
LOSS BEFORE TAXES 86,283 (82,441) 4,546 12,839 8,690
Income tax/ asset tax (1,652) (3,207) (2,869) (2,944) -
Minority interest (17,021) (2,031) (730) (922) (1,670)
------------- -------------- ------------- -------------- --------------
NET (LOSS) INCOME 67,610 (87,679) 947 8,973 7,020
============= ============== ============= ============== ==============
85
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
BUSINESS OVERVIEW
In thousands of pesos
4. STATISTICAL DATA AS COMPARED WITH THE SAME PERIOD OF THE FOUR PREVIOUS
YEARS.
Summary of properties sold in units and thousands of pesos.
Accumulated Accumulated Accumulated Accumulated Accumulated
as of as of as of as of as of
Real Estate September September September September September
30, 2002 30, 2001 30, 2000 30, 1999 30, 1998
(1) (1) (1) (1) (1)
------------------------------------ ------------- -------------- ------------- -------------- -------------
Apartments & Loft Buildings
Torres Jardin 29 886 3,703 511 2,115
Torres de Abasto 414 2,567 6,046 (9,286) 22,679
Alcorta Palace 1 - - 20 1,442
Concepcion Arenal and Dorrego 1916 - - 1,812 1,378 588
Alto Palermo Park 819 3,327 - 2,581 1,025
Other 214 1,438 1,284 - 1,340
Residential Communities
Abril / Baldovinos 3,971 3,495 4,364 5,444 8,517
Villa Celina I, II and III - - (49) 22 1,316
Villa Celina IV and V - 44 1,739 - -
Other - - - - -
Undeveloped parcels of land
Dique IV - - 12,387 - -
Puerto Madero Dique II - - - - -
Other
Puerto Madero Dock 13 - - - 531 -
Puerto Madero Dock 6 141 - - - 872
Av. de Mayo 701 - - 3,128 - -
Constitucion 1111 2,000 - - - -
Madero 1020 4,362 - - - -
Madero 940 1,659 - - - -
Other 601 58 - 226 88
------------- -------------- ------------- -------------- -------------
14,211 11,815 34,414 1,427 39,982
============= ============== ============= ============== =============
(1) Deductions on account of gross sales tax are not included.
86
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
BUSINESS OVERVIEW
In thousands of pesos
5. KEY RATIOS AS COMPARED WITH THE SAME PERIOD OF THE FOUR PREVIOUS YEARS.
September September September September September
30, 2002 30, 2001 30, 2000 30, 1999 30, 1998
------------- ------------- ------------- ------------ -------------
LIQUIDITY RATIO
Current Assets 166,222 = 0,24 244,526 = 0,52 254,316 = 0,77 439,350 = 1,06 379,758 = 1,45
------------ ------------- ------------- ------------- -------------
Current 684,378 470,010 330,442 416,099 261,135
Liabilities
INDEBTEDNESS RATIO
Total liabilities 919,809 = 1,56 509,828 = 0,51 555,466 = 0,46 566,995 = 0,43 619,836 = 0,52
------------ ------------- ------------ -------------- -------------
Shareholders' 588,216 997,893 1,197,033 1,309,710 1,200,116
Equity
INCOME BEFORE INCOME TAX, TAX ON ASSETS AND MINORITY INTEREST.
September September September September September
30, 2002 30, 2001 30, 2000 30, 1999 30, 1998
------------ ------------ ------------- ------------- -------------
Income
Before income tax/
Tax on assets 86,283 = 0,17 (82,176) = (0,08) 4,546 = 0,004 12,838 = 0,01 8,691 = 0,007
----------- ------------ ------------ ------------ ------------
Shareholders' 520,606 1,085,572 1,196,086 1,300,738 1,193,095
equity at end
excluding (loss)
income for the
period
6. BRIEF COMMENT ON THE FUTURE PERSPECTIVES FOR THE ENSUING YEAR
See attached.
87
IQ03 Highlights, including significant operations occurred after September 30,
2002.
ACQUISITION OF VALLE DE LAS LENAS S.A. - During the first quarter of fiscal year
2003, our Company acquired 30.955% of the stock capital, and US$ 3.7 million
convertible notes due October 31, 2005, of Valle de Las Lenas S.A. for a total
amount of US$ 2.4 million.
ACQUISITION OF PISCIS HOTEL - In September 2002, our Company acquired the Piscis
hotel, located in Valle de Las Lenas, province of Mendoza. The property was
purchased for a total of US$ 1.4. Piscis is a five-star hotel with 90 bedrooms
and 8 suites, 2 restaurants and 2 bars, a casino, fitness facilities that
include two swimming pools and a ski gear storage facilities.
EXTENSION OF MATURITY OF THE US$ 43.5 MILLION NOTE - After a number of
extensions agreed upon between our Company and the holders of the US$ 43.5
million Notes, November 14, 2002, was established as final date of maturity of
the principal amount. In addition, we agreed with our holders the capitalization
of interests due on October 31, 2002. We are currently negotiating with the note
holders to restructure this debt.
RESTRUCTURING OF OUTSTANDING DEBT - We are currently drafting the final
documents for the restructuring of the US$ 80 million syndicated credit facility
and the US$ 43.5 million floating rate notes. On November 7, 2002, the six
intervening banks signed an engagement letter in which they signfy their
intention to refinance our debt, extending maturity up to seven years and at a
lower interest rate of LIBOR plus 200 basis points. The consummation of the
refinancing transaction is subject to certain conditions specified in the
engagement letter.
LOAN TO HOTELES ARGENTINOS - Due to the current economic situation, our
subsidiary Hoteles Argentinos S.A., owner of 100% of Sheraton Libertador hotel,
did not pay the principal and interest installments at maturity under the Ps.
42.8 million loan granted by Bank Boston N.A. Hoteles Argentinos' management is
currently renegotiating the payment of this debt with its creditors.
SALE OF MADERO 1020 OFFICES - On July 31, 2002 the Company sold floor 21 located
at the office tower of Madero 1020 for an amount of US$ 410,000. On August 2,
2002 the Company sold floor 15 for US$ 400,000, on August 29, 2002 our Company
sold floor 23 for an amount of US$ 365,000 and on October 31, 2002, our Company
sold floor 2 for US$ 370,000, all of them located in this same building.
SALE OF LIBERTADOR 498 OFFICES - On November 4, 2002, we sold floor 27 and 8
parking spaces, located in the office building "El Rulero" (Libertador 498), for
a total of US$ 650,000.
ISSUE OF BONDS CONVERTIBLE INTO ORDINARY SHARES OF OUR COMPANY - On October 15,
2002, started the preemptive rights period of the notes convertible into
ordinary shares of our Company for an amount of up to US$ 100 million. The
convertible notes are accompanied by non-detachable warrants that enable the
purchase of additional shares of our common stock. The convertible notes bear an
8% interest per year and mature in November 2007. The subscription period ends
on November 20, 2002.
ISSUE OF BONDS CONVERTIBLE INTO ORDINARY SHARES OF APSA - On August 23, 2002,
APSA successfully ended the placement of US$ 50 million of Series I notes,
convertible into ordinary shares of the company, with a face value of Ps.0.10
each. Our Company has subscribed a total amount of US$ 27.2 million of these
notes.
I. OFFICES AND OTHER RENTAL PROPERTIES
During the three-month period ended September 30, 2002, revenues from the
Company's rental portfolio reached Ps.5.5 million, as compared to Ps.13.4
million in the same period for fiscal year 2002. The average occupancy rate
registered a fall from 72% as of June 30, 2002, to 69% as of September 30, 2002.
This reduction is a result of the deep economic recession that forced many firms
to reduce costs and to resize their facilities or move to lower-priced areas,
leaving unoccupied buildings such as the one located in Reconquista 823.
During the ended period, the Company sold some of its rental properties that
were considered to be non-strategic.
SALE OF LIBERTADOR 498 OFFICES - On November 4, 2002, we sold floor 27 and 8
parking spaces located in the office building "El Rulero" (Libertador 498), for
a total of US$ 650,000.
SALE OF MADERO 1020 OFFICES - On July 31, 2002 the Company sold floor 21 located
at the office tower of Madero 1020 for an amount of US$ 410,000. On August 2,
2002 our Company sold floor 15 for US$ 400,000, on August 29, 2002 our Company
sold floor 23 for an amount of US$ 365,000 and on October 31, 2002, the Company
sold floor 2 for US$ 370,000, all of the floors located in this same building.
SALE OF MADERO 940 OFFICES - On September 6, 2002, we sold one unit of the
office building situated in Madero 940 for US$ 470,000.
SALE OF DOCK 5 UNITS - On August 20, 2002, our Company sold unit 140 located in
Dock 5 US$ 110,000.
SALE OF DOCK 6 UNITS - On July 15, 2002 we sold unit 146 for an amount of
Ps.140,000.
The following chart presents information on the Company's offices and other
rental properties as of September 30, 2002.
OFFICES AND OTHER RENTAL PROPERTIES
DATE OF LEASABLE OCCUPANCY MONTHLY TOTAL RENTAL INCOME FOR THE PERIOD BOOK
ACQUISITION AREA M2 RATE RENTAL ENDED SEPTEMBER 30, VALUE
(1) (2) INCOME PS./000(4) PS./000(5)
PS./000(3) 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------------------
OFFICES
Inter-Continental
Plaza(6) 11/18/97 22,535 77% 642 2,250 3,876 4,044 65,159
Libertador 498 12/20/95 11,152 59% 228 639 1,666 1,900 37,997
Maipu 1300 9/28/95 10,325 66% 189 571 1,551 1,646 41,569
Laminar Plaza 3/25/99 6,521 85% 268 786 1,471 1,144 28,540
Madero 1020 12/21/95 3,647 63% 81 203 894 1,037 9,070
Reconquista 823/41 11/12/93 6,100 0% 0 - 763 763 17,797
Suipacha 652/64 11/22/91 11,453 31% 53 149 546 841 10,154
Edificios Costeros 3/20/97 6,389 27% 51 98 560 431 23,891
Costeros Dique IV 8/29/01 5,437 63% 101 291 274 - 17,883
Others (7) 3,555 45% 45 207 448 488 9,320
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 87,114 56% 1,658 5,194 12,049 12,294 261,380
OTHER RENTAL PROPERTIES
Commercial Properties(8) 4,076 98% 42 81 854 1,410 1,922
Other properties(9) 34,015 100% 69 248 722 853 6,730
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 38,091 100% 111 329 1,576 2,263 8,652
RELATED EXPENSES
MANAGEMENT FEES 172 387 365
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OFFICES AND
OTHER(10) 125,205 69% 1,769 5,695 14,012 14,922 270,032
------------------------------------------------------------------------------------------------------------------------------------
Notes:
(1) Total leasable area for each property. Excludes common areas and parking.
(2) Calculated dividing occupied square meters by leasable area.
(3) Agreements in force as of 09/30/02 were computed.
(4) Total consolidated leases, according to the RT4 method, reexpressed as from
09/30/02. Excludes gross income tax deduction.
(5) Cost of acquisition, plus improvements, less accumulated depreciation, plus
adjustment for inflation as of 09/30/02.
(6) Through Inversora Bolivar S.A.
(7) Includes the following properties: Madero 942, Av. de Mayo 595/99, Av.
Libertador 602 y Sarmiento 517 (through our Company). Cumulative revenues of
fiscal years 2001 and 2000 additionally include the revenues from Puerto Madero
Dock 5 (fully sold). The revenues of fiscal year 2001 additionally include the
revenues from Avenida de Mayo 701 and Puerto Madero Dock 6 (fully sold).
(8) Includes the following properties: Constitucion 1111 and Alsina 934/44
(through the Company). Cumulative revenues include: In all fiscal years
reported, the revenues from Santa Fe 1588 (fully sold). In fiscal years 2002 and
2001, the revenues from Rivadavia 2243. In fiscal year 2001 the revenues from
Sarmiento 580 and Montevideo 1975 (fully sold).
(9) Includes the following properties: the Santa Maria del Plata facilities
(former Ciudad Deportiva de Boca Juniors, through the Company - only rents are
included since book value is reflected on the Developments table) -Aguero 596
and R. Nunez 4615 (Cordoba), plots in Carlos Gardel (through Alto Palermo S.A),
Thames, units in Alto Palermo Plaza and units in Alto Palermo Park (through
Inversora Bolivar S.A). Cumulative revenues include: In fiscal years 2001, the
revenues from Serrano 250 (fully sold).
(10) Corresponds to the "Offices and Other Rental Properties" business unit
mentioned in Note 4 to the Consolidated Financial Statements. Excludes gross
income tax deduction.
II. SHOPPING CENTERS - ALTO PALERMO S.A ("APSA")
As a result of the subscription of the negotiable obligations convertible for
ordinary shares in APSA, since the beginning of this fiscal year the Company has
discontinued the application of the proportional consolidation method in the
preparation of the income statements because currently this method does not
properly reflect the results of its operations and has adopted the consolidation
of its businesses under the guidelines of Technical Pronouncement No. 4 of the
F.A.C.P.C.E
During the three-month period ended September 30, 2002, the revenues from the
shopping center segment were of Ps.23.3 million, as compared to Ps. 61.9 in the
same period for fiscal year 2002.
A symptom of improvement that was reflected in this segment of business was the
increase in the sales of APSA's lessees. After two years of constant decreases
in sales, they amounted Ps. 217.3 million during the first quarter of fiscal
year 2003, exhibiting a rise of 18.3% if compared to sales not restated during
the first three months of fiscal year 2002.
Moreover, the improvement in lessees' sales allowed for a decline in APSA's
allowances for doubtful accounts which, not including the ones originated by
Tarshop's operations, decreased a 96.1%.
In view of APSA's lessees' revenues recovery, during this quarter APSA began to
apply the Referential Stabilization Coefficient ("CER") upon "pesified"
agreements and reinstated the key money charge upon execution or renewal of
lease agreements in its shopping centers.
Over the last 12 months, APSA's shopping centers have received approximatelly
63.4 million visitors.
As of September 30, 2002, the average occupancy rate of APSA's shopping centers
was of approximately 92%. The increase in this indicator during the last few
months evidences both the increasing interest of potential lessees in leasing
properties in APSA's shopping centers and the attractiveness of APSA's business
at present.
TARJETA SHOPPING.
During this quarter, Tarshop S.A., the credit card company in which APSA holds
an 80% interest, experienced a decrease of 22.7% in its credit card portfolio
(including its securitized receivables), from Ps. 71.2 million as of September
30, 2001 to Ps. 55.0 million as of September 30, 2002. In addition, the number
of card holders decreased by 1,786 during this period, amounting 150,372.
The deep Argentine political, economic and social crisis impacted over the
evolution of the credit card business, affecting the main variables of this
segment. Tarjeta Shopping revenues experienced a 76.7% drop, from Ps.15.2
million as of September 30, 2001, to Ps.3.5 million as of September 30, 2002;
further, the net loss for the three-month period ended September 30, 2002, was
of Ps.3.4 million, contrasting with the positive result generated during the
same period of the previous year.
Tarjeta Shopping's share in credit card sales at Alto Palermo, Alto Avellaneda
and Abasto de Buenos Aires as of September 30, 2002, increased was 5.1%, 32.6%
and 14.6%, respectively. The credit card activation rate is of approximately
61%.
The following chart presents information on the Company's shopping centers as of
September 30, 2002.
SHOPPING CENTERS
DATE GROSS PERCENTAJE TOTAL RENTAL INCOME FOR THE FIRST BOOK
OF LEASABLE LEASED QUARTER OF FISCAL YEAR, VALUE
ACQUISITION AREA (2) Ps./000(3) Ps./000(4)
m2(1) 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------------------
SHOPPING CENTERS (5)
Alto Palermo 12/23/97 18,129 92% 6,274 12,093 13,741 262,801
Abasto 07/17/94 40,476 95% 4,936 10,992 11,907 225,147
Alto Avellaneda 12/23/97 26,701 94% 2,564 7,572 9,290 98,085
Paseo Alcorta 06/06/97 14,909 84% 2,615 6,083 6,568 76,053
Patio Bullrich 10/01/98 11,623 91% 2,543 4,446 4,422 133,510
Alto Noa Shopping 03/29/95 18,876 88% 491 1,660 1,277 21,934
Buenos Aires Design 11/18/97 9,693 90% 451 3,205 3,128 24,062
------------------------------------------------------------------------------------------------------------------------------------
Fibesa and other (6) 662 2,374 2,792
Revenues Tarjeta Shopping 3,461 15,406 10,477
TOTAL SHOPPING CENTERS
(7) 140,407 92% 23,997 63,831 63,602 841,592
Notes: (1) Total leasable area in each property. Excludes common areas and
parking spaces.
(2) Calculated dividing occupied square meters by leasable area.
(3) Total consolidated rents, according to RT4 method, reexpressed as of
09/30/02. Excludes gross income tax deduction.
(4) Cost of acquisition plus improvements, less accumulated depreciation, plus
adjustment for inflation as of 09/30/02.
(5) Through Alto Palermo S.A.
(6) Includes revenues from Fibesa S.A. and Alto Invest.
(7) Corresponds to the "Shopping Centers" business unit mentioned in Note 4 to
the Consolidated Financial Statements. Excludes gross income tax deduction.
III. SALES AND DEVELOPMENTS
Revenues from this segment were Ps.14.3 millon during the three-month period
ended September 30, 2002, as compared to Ps.12.0 million recorded during the
same period of fiscal year 2002. This increase mainly results from the Company's
sale of non-core properties.
SALE OF CONSTITUCION 1111 store - On September 27, 2002, our Company sold a
commercial store located in Constitucion 1111 for US$ 547,945.
ABRIL, HUDSON, PROVINCIA DE BUENOS AIRES- During the three-month period ended
September 30, 2002, 18 lots of Abril were sold. 19 of the 20 neighborhoods
projected for all the development were being marketed, with 87% of the lots in
such neighborhoods sold. There were 110 houses under construction, 427 finished
houses and 50 new projects has been submitted.
TORRES JARDIN - The project was initially made up of four 23-story towers,
however, we decided not to build Torres Jardin IV. The three first building
towers have been finished and include 490 apartments. As of September 30, 2002,
100%, 98% and 100% of Towers Jardin I, II and III respectively, had been sold.
TORRES DE ABASTO - The residential complex includes 4 apartment towers with a
total of 545 units. Our company has successfully completed the marketing of the
last 39 units available for sale during fiscal year 2002. The final sale of 100%
of Torres de Abasto units represented the end of one of the most successful real
estate projects in the country. We are proud to have succeeded in the sale of
the last units under a context where the sale of new real estate properties
suffered a serious setback.
The following chart illustrates IRSA's development properties as of September
30, 2002.
DEVELOPMENT PROPERTIES
DATE OF ESTIMATED/ AREA DESTINED TOTAL PERCENTAGE PORCENTAJE ACCUMULATED
ACQUISITION ACTUAL COST FOR SALES UNITS OR LOTS CONSTRUCTED SOLD SALES
(Ps.000)(1) (m2)(2) (3) (4) (Ps. 000)(5)
------------------------------------------------------------------------------------------------------------------------------------
APPARTMENT COMPLEXES
Torres Jardin 7/18/96 56,933 32,244 490 100% 97% 70,337
Torres de Abasto (8) 7/17/94 75,277 35,630 545 100% 99% 109,885
Palacio Alcorta 5/20/93 76,286 25,555 191 100% 100% 77,067
Concepcion Arenal 12/20/96 15,163 6,913 70 100% 97% 11,590
Alto Palermo Park (9) 11/18/97 36,182 10,654 73 100% 90% 43,248
Other (10) 50,190 23,717 182 100% 97% 53,537
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 310,031 134,713 1,551 N/A N/A 365,664
RESIDENTIAL
------------
COMMUNITIES
-----------
Abril/Baldovinos (11) 1/3/95 131,775 1,408,905 1273 100% 87% 193,183
Villa Celina I, II y III 5/26/92 4,772 75,970 219 100% 100% 14,012
Villa Celina IV y V 12/17/97 2,465 58,480 181 100% 99% 9,542
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 139,012 1,543,355 1,673 N/A N/A 216,737
LAND RESERVE
Dique 3 (parcela 1) (12) 9/9/99 - 10,474 - 0% 0% -
Puerto Retiro (9) 5/18/97 - 82,051 - 0% 0% -
Caballito 11/3/97 - 20,968 - 0% 0% -
Santa Maria del Plata 7/10/97 - 715,952 - 0% 0% -
Pereiraola (11) 12/16/96 - 1,299,630 - 0% 0% -
Monserrat (9) 11/18/97 - 3,400 - 0% 100% 5,553
Dique 4 (ex Soc del Dique) 12/2/97 - 4,653 - 0% 50% 12,388
Other (13) - 4,439,447 - 0% -
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL - 6,576,575 - N/A N/A 17,941
OTHER
-----
Sarmiento 580 01/12/94 11,764 2,635 14 100% 100% 10,905
Santa Fe 1588 01/02/94 8,394 2,713 20 100% 100% -
Rivadavia 2243/65 05/02/94 8,217 2,070 4 100% 100% -
Libertador 498 12/20/95 5,110 1,491 2 100% 100% -
Av. de mayo 701 3,108 680 1 100% 100% 3,128
Constitucion 111 06/16/94 2,329 2,430 1 100% 100% 2,000
Madero 1020 12/21/95 3,619 2,195 4 100% 100% 6,906
Madero 940 08/31/94 2,885 772 1 100% 100% 1,659
Other properties (14) 79,282 43,527 262 100% 99% 102,999
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 124,708 58,513 309 N/A N/A 127,597
SUBTOTAL 573,751 8,313,156 3,533 N/A N/A 727,939
------------------------------------------------------------------------------------------------------------------------------------
INTEREST FOR FINANCING PROPERTY SALES
TOTAL (15) 573,751 8,313,156 3,533 N/A N/A 727,939
------------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED SALES FOR THE PERIOD ENDED BOOK VALUE(7)
SEPTEMBER 30, (6) (Ps. 000) (PROP. VALUE)
2002 2001 2000 (Ps. 000)
(Ps. 000) (Ps. 000) (Ps. 000)
-----------------------------------------------------------------------------------------------
APPARTMENT COMPLEXES
Torres Jardin 29 886 3,703 658
Torres de Abasto (8) 414 2,567 6,046 13,855
Palacio Alcorta 1 - - -
Concepcion Arenal - - 1,480 223
Alto Palermo Park (9) 819 3,327 - 4,234
Other (10) 214 1,438 1,616 1,719
-----------------------------------------------------------------------------------------------
SUBTOTAL 1,477 8,218 12,845 20,689
RESIDENTIAL
------------
COMMUNITIES
-----------
Abril/Baldovinos (11) 3,971 3,495 4,364 20,382
Villa Celina I, II y III - - (49) 61
Villa Celina IV y V - 44 1,739 10
-----------------------------------------------------------------------------------------------
SUBTOTAL 3,971 3,539 6,054 20,453
LAND RESERVE
Dique 3 (parcela 1) (12) - - - 25,992
Puerto Retiro (9) - - - 46,460
Caballito - - - 13,701
Santa Maria del Plata - - - 116,709
Pereiraola (11) - - - 21,996
Monserrat (9) - - - -
Dique 4 (ex Soc del Dique) - - 12,387 6,198
Other (13) - - - 127,067
-----------------------------------------------------------------------------------------------
SUBTOTAL - - 12,387 358,123
OTHER
-----
Sarmiento 580 - - - -
Santa Fe 1588 - - - -
Rivadavia 2243/65 - - - -
Libertador 498 - - - -
Av. de mayo 701 - - 3,128 -
Constitucion 111 2,000 - - -
Madero 1020 4,362 - - 1,972
Madero 940 1,659 - - -
Other properties (14) 742 58 - 566
-----------------------------------------------------------------------------------------------
SUBTOTAL 8,763 58 3,128 2,538
SUBTOTAL 14,211 11,815 34,414 401,803
-----------------------------------------------------------------------------------------------
INTEREST FOR FINANCING PROPERTY SALES 148 791 1,044
TOTAL (15) 14,359 12,606 35,458 401,803
-----------------------------------------------------------------------------------------------
Notes:
(1) Cost of acquisition plus total investment made and/or planned if the project
has not been completed, adjusted for inflation as of 09/30/02.
(2) Total area devoted to sales upon completion of the development or
acquisition and before the sale of any of the units (including parking and
storage spaces, but excluding common areas). In the case of Land Reserves the
land area was considered.
(3) Represents the total units or plots upon completion of the development or
acquisition (excluding parking and storage spaces).
(4) The percentage sold is calculated dividing the square meters sold by the
total saleable square meters.
(5) Includes only cumulative sales consolidated by the RT4 method, adjusted for
inflation as of 09/30/02.
(6) Corresponds to the Company's sales consolidated by the RT4 method, adjusted
for inflation as of 09/30/02. Excludes gross income tax deduction.
(7) Cost of acquisition plus improvement plus activated interest, adjusted for
inflation as of 09/30/02.
(8) Through Alto Palermo S.A. Includes Abasto plots and inventories related to
the Coto project.
(9) Through Inversora Bolivar S.A.
(10) Includes the following properties: Dorrego 1916 (fully sold through our
Company), Republica de la India 2785 (fully sold), Arcos 2343, Fco. Lacroze 1732
and Yerbal 855 (through Baldovinos) and units for sale in Alto Palermo Plaza
(through Inversora Bolivar).
(11) Directly through our Company and indirectly through Inversora Bolivar S.A.
(12) Through Bs As Trade & Finance S.A.
(13) Includes the following land reserves : Torre Jardin IV, Constitucion 1111,
Padilla 902, and Terreno Pilar (through our Company), and Pontevedra, Mariano
Acosta, Merlo, Intercontinental Plaza II, Terrenos Benavidez (through Inversora
Bolivar S.A.) and Terrenos Alcorta, Neuquen, Rosario and Caballito (through APSA
S.A.).
(14) Includes the following properties: Sarmiento 517 (through our
Company), Puerto Madero Dock 13, Puerto Madero Dock 5, Puerto Madero Dock 6,
Rivadavia 2768, Serrano 250; Montevideo 1975 (Rosario) (fully sold through our
Company).
(15) Corresponds to the "Sales and Developments" business unit mentioned in Note
4 to the Consolidated Financial Statements. Excludes gross income tax deduction.
IV. HOTELS
Even though this business segment has been considered to be non-core over the
last few years, the devaluation of the Argentine Peso have resulted in a
significant tourist inflow into the country that turned the hotel segment into a
promising alternative. Moreover, the fact that this segment is the only one that
may generate income in hard currency is another reason for considering a
possible strategy change with respcet to this branch of business. It is so, that
during this quarter we have acquired a new five-star hotel located in one of the
most important ski resorts in Argentina.
ACQUISITION OF PISCIS HOTEL - In September 2002, our Company acquired the Piscis
hotel, located in Valle de Las Lenas, one of the most modern of the big ski
resorts of Argentina. The property was purchased for a total of US$1.4 million
from Banco Rio and ICI Argentina. Piscis is a five-star hotel with 90 bedrooms
and 8 suites, 2 restaurants and 2 bars, a casino, fitness facilities that
include two swimming pools and ski gear storage facilities. The hotel is by
managed Badino S.A.
Total revenues from the hotel segment amounted Ps.7.4 million over the
three-month period ended September 30, 2002, against Ps.11.0 million recorded
over the same period in fiscal year 2002.
Llao Llao's occupancy level had a significant rise because of the increase in
tourism and the average rate per room measured in Pesos, was accompanied by the
exchange rate fluctuations due to its close correlation with the dollar value.
We estimate that the current exchange rate will have a positive impact on the
business, promoting regional tourism's growth.
The chart below shows information regarding our Company's hotels estimated
for the three-month period ended September 30, 2002.
HOTELS
ACCUMULATED SALES FOR THE PERIOD BOOK
HOTEL DATE OF NUMBER AVERAGE AVERAGE ENDED SEPTEMBER 30, (1) (Ps. 000) VALUE
ACQUISITION OF ROOMS OCCUPANCY ROOM RATE (Ps/000
% Ps. 2002 2001 2000 (Ps. 000)
-----------------------------------------------------------------------------------------------------------------------
Inter-Continental 11/97 312 44 251,5 4.841 6.605 5.371 60.235
Sheraton Libertador 3/98 200 52 180,8 2.521 4.369 4.871 42.046
Llao Llao (3) 6/97 158 72 416,0 - - - 12.469
Piscis (4) 9/02 98 N/D N/D - - - 5.236
--- --- ----- ----- ------ ------ -------
TOTAL 768 N/A N/A 7.362 10.974 10.242 122.186
-----------------------------------------------------------------------------------------------------------------------
Notes:
(1) Corresponds to our total sales consolidated under the RT4 method adjusted
by inflation as of 09/30/02. It does not include gross income tax
deduction.
(2) Represents 100% of the hotel's book value including facilities and
goodwill.
(3) Although the hotel Llao Llao does not consolidate its revenues anymore, we
consider it is relevant to include it. The book value represents the value
of our investment.
(4) The average occupation and the average price per room are not available to
date.
V. FINANCIAL TRANSACTIONS AND OTHERS
IMPACT OF EXCHANGE RATE FLUCTUATIONS AND INFLATION ON THE COMPANY'S FINANCIAL
POSITION - Inflation and the appreciation of the Peso during this quarter
generated a positive result for our Company. The exposure of our
dollar-denominated assets and liabilities to these economic indicators, that in
the previous fiscal year resulted in a loss of approximately Ps. 308 million,
contrasts with a gain of Ps.64.9 million generated during this quarter . This
result is registered under "Financial Results" and considerably explains the
gain for this period.
EXTENSION OF MATURITY OF THE US$ 43.5 MILLION NOTE - After a number of
extensions agreed upon between our Company and the holders of the US$ 43.5
million Notes, November 14, 2002, was established as final date of maturity of
the principal amount. In addition, we agreed with our holders the capitalization
of interest due on October 31, 2002. At present, progress has been made in the
negotiations with the holders for the refinancing of our debt for a longer
period and at lower rates.
RESTRUCTURING OF OUTSTANDING DEBT - We are currently drafting the final
documents for the restructuring of the US$ 80 million syndicated credit facility
and the US$ 43.5 million floating rate notes. On November 7, 2002, the six
intervening banks signed an engagement letter in which they signfy their
intention to refinance our debt, extending maturity up to seven years and at a
lower interest rate of LIBOR plus 200 basis points. The consummation of the
refinancing transaction is subject to certain conditions specified in the
engagement letter.
LOAN TO HOTELES ARGENTINOS - Due to the current economic situation, our
subsidiary Hoteles Argentinos S.A., owner of 100% of Sheraton Libertador hotel,
did not pay the principal and interest installments at maturity under the Ps.
42.8 million loan granted by Bank Boston N.A. Hoteles Argentinos' management is
currently renegotiating the payment of this debt with its creditors.
ISSUE OF BONDS CONVERTIBLE INTO ORDINARY SHARES OF OUR COMPANY - On October 15,
2002, started the preemptive rights offering of the notes convertible into
ordinary shares of our Company for an amount of up to US$ 100 million, as
approved by the Ordinary and Extraordinary Shareholders Meetings of IRSA, held
on March 8, 2002. The convertible notes are accompanied by non-detachable
warrants that enable the purchase of additional shares of our common stock. The
subscription price is 100% of the face value of the convertible notes, which
bear an 8% interest per year, paid semiannually and mature in November 2007. The
conversion price is of US$ 0.5571 per ordinary share, what means each note is
convertible in 1.7949 ordinary shares. The net proceeds from the offering will
be primarily used to facilitate the renegotiation or payment of our indebtedness
outstanding to this date, as working capital and to acquire APSA's second branch
of convertible notes, if offered .
ISSUE OF BONDS CONVERTIBLE INTO ORDINARY SHARES OF APSA - On July 19, 2002, APSA
issued the first branch of notes convertible into ordinary shares of the company
for up to US$ 50
million, as approved by the Ordinary and Extraordinary Shareholders Meeting of
APSA held on December 4, 2001. The issue conditions include a conversion price
of US$ 0.0324, which means that every convertible note is potentially
convertible for 30.864 shares of Ps. 0.10 face value each, the accrual of a 10%
annual interest rate payable semi-annually and a subscription price of 100% of
the principal amount of the convertible note. Maturities were fixed for July 19,
2006. On August 23, 2002, APSA successfully ended the placement of Series I for
US$ 50 million, of which our Company has subscribed a total amount of US$ 27.2
million.
The funds obtained have allowed APSA to precencel a significant amount of its
debt and therefore considerably improve its financial structure and maturity
schedule. The funds obtained have been allocated to the full repayment of
short-term bank debt which, as of March 31, 2002, came up to a face value of
approximately Ps. 39.0 million, and the amount of Ps. 64.9 million (plus the
accrued CER adjustment) of the senior secured notes. Regarding the loans APSA
had with its shareholders, these were used for the subscription of the
convertible notes. In the case of the secured senior notes repurchase and
short-term bank debt repayments, APSA obtained discounts for up to 25%.
VII. BRIEF COMMENTS ON PROSPECTS FOR THE ONCOMING QUARTER
The economy seems to have reached bottom; the economic crisis has somehow been
coped with and social violence has been checked. The exchange rate has
stabilized and inflation is under control. The first signs of reactivation have
started to come to light.
We expect that the new government to result from the presidential elections
scheduled for March 2003 will be able to start solving the substantive issues
that could not be dealt with by the current President Duhalde, as due to the
economic, political and social crisis that required measures aimed at addressing
short-term problems, the necessary structural and institutional reforms are
still pending.
The future of Argentina largely depends on the decisions and policies to be
adopted by the next government and its capacity to solve issues such as the
restructuring of the financial system and a tax reform that enables to reach a
sustainable fiscal solvency position, among others.
In addition, the political and economic actions to be taken by the new Brazilian
government led by President Luis Inacio da Silva will have a material impact on
Argentina and rest of the countries of the region.
Our Company continues to trust in the country and renews its commitment by the
issue of bonds convertible into ordinary shares of the Company for up to US$ 100
million.
During the last weeks we have concluded the commercial agreement with our bank
creditors to refinance 88% of our Company's financial debt, fact concluded with
the signing of the engagement letter. We are actually abbocated in the task of
ultimating details that will permit us the signing of the final documentation.
Together with the issue of the convertible bonds, these facts will allow us to
be one of the few Argentine companies without financial problems and imminent
maturities, and with enough cash to take advantage of the opportunities arising
in the market.
The extremely complicated economic context prevailing in Argentina gives our
Company the opportunity of benefiting from the low prices of real estate assets.
Since the devaluation of the peso in January 2002, real estate prices have
fallen from 30% to 60% in dollar terms, depending on the quality and location of
the properties. The proceeds of the convertible bonds offering will allow our
Company to restruture its liabilities and have sufficient liquidity so as to
take advantage of these opportunities.
As concerns development projects, after 3 years of inactivity, the Company might
consider restarting some of its projects in the light of the favourable building
costs.
We are proud of having gone through the worst of the crisis and to be one of the
few groups in the country that has not fallen in default. The debt refinancing
is about to be closed and our confidence in Argentina makes us have strong
expectations for the coming future. Deep crises are followed by great
opportunities in the market, which we will be able to profit from thanks to our
available cash funds.
[PRICEWATERHOUSECOOPERS LOGO OMITTED]
[SC INTERNATIONAL LOGO OMITTED]
[ABELOVICH, POLANO & ASOCIADOS LOGO OMITTED]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
We have carried out a limited review of the balance sheets of IRSA Inversiones y
Representaciones Sociedad Anonima at September 30, 2002 and 2001, and the
related statements of income, the statement of changes in shareholders' equity
and cash flows for the three month periods then ended, and the complementary
notes 1 to 13 and exhibits A to I. Furthermore, we have carried out a limited
review of the consolidated financial statements of IRSA Inversiones y
Representaciones Sociedad Anonima with its subsidiaries for the three month
periods ended September 30, 2002 and 2001, which are presented as complementary
information. The preparation and issuance of the financial statements are the
responsibility of the Company's management.
Our reviews were limited to the application of the procedures established by
Technical Pronouncement No. 7 of the Argentine Federation of Professional
Councils in Economic Sciences for limited reviews of interim financial
statements, which consist mainly of the application of analytical procedures on
the amounts disclosed in the financial statements and inquiries of Company staff
responsible for the preparation of the information included in the financial
statements and of its subsequent analysis. These reviews are substantially less
in scope than an audit, the objective of which is to express an opinion on the
financial statements under review. Accordingly, we do not express an opinion on
the Company's financial position, the results of its operations, the changes in
its shareholders' equity and its cash flows, or on its consolidated financial
statements.
The Company has prepared the financial statements applying the valuation
criteria established by the National Securities Commision which, as explained in
Note 1 c) to the basic financial statements, differ in certain aspects from
current accounting standards. The effect on the financial statements derived
from the different valuation criteria has not been quantified by the Company,
and we were unable to estimate the impact on the financial statements of the
deviation from current professional accounting standards through the performing
of other audit procedures.
Note 1 to the consolidated financial statements details the situation at the end
of the period related to the economic measures issued by the National Government
to confront the Argentine crisis, some of which may have been pending issue at
the date of preparation of these financial statements. The impact generated by
all these measures adopted to date by the Government on the financial statements
of the Company at September 30, 2002 was recognized according to the evaluations
and estimates made by Management when preparing the financial statements. Actual
results could differ from the evaluations and estimates made at the date of
preparing these financial statements and these differences could be significant.
Therefore, the Company's financial statements may not report all the adjustments
that could result from these adverse conditions. Furthermore, at this time it is
not possible to foresee the future development of the country's economy or its
consequences on the economic and financial situation of the Company. Thus, any
decision that must be made on the basis of these financial statements must take
into account the effects of these measures and their future development and the
Company's financial statements must be considered in the light of these
uncertain circumstances.
PRICE WATERHOUSE & CO. ABELOVICH, POLANO & ASOCIADOS
Av. A. Moreau de Justo 270, Piso 2(degree) 25 de Mayo 596 - 8(degree)Piso
C1107AAF Ciudad de Buenos Aires - Argentina (1002) Buenos Aires - Argentina
Tel. (54-11) 4319-4600 Tel./Fax 4312-8525 - E-mail: abelovich@elsitio.net
Fax: (54-11) 4315-6448 / 9
www.pwcglobal.com
[PRICEWATERHOUSECOOPERS LOGO OMITTED]
[SC INTERNATIONAL LOGO OMITTED]
[ABELOVICH, POLANO & ASOCIADOS LOGO OMITTED]
REPORT OF INDEPENDENT ACCOUNTANTS (Contd.)
As mentioned in Note 6 to the financial statements, at September 30, 2002 the
Company was unable to meet certain financial ratios required by the trust
agreement related to the issuance of negotiable obligations and the syndicated
loan. As mentioned in Note 14 to the consolidated financial statements, the
subsidiary Hoteles Argentinos S.A. has not paid principal installments amounting
to US$ 300 thousand each installment, with original maturities set for January
26, April 29, July 29 and October 26, 2002, respectively and interest
installment amounting to US$ 315 thousand which fell due on July 29 and October
26, 2002, under the US$ 12 million long-term loan agreement secured by a
mortgage entered into with BankBoston N.A. Buenos Aires Branch.
During the period ended on September 30, 2002, the Company recorded accumulated
losses of $ 493,807 thousand and a shortfall of working capital of $ 496,199
thousand (consolidated shortfall of working capital of $ 518,156 thousand) (and
in the year ended on June 30, 2002 a net loss of $ 499,619 thousand, accumulated
losses of $ 496,479 thousand and a shortfall of working capital of $ 456,524
thousand). Company Management is currently defining and implementing an action
plan to counteract these circumstances as has been detailed in Note 1 to the
consolidated financial statements. These financial statements have been prepared
using accounting principles applicable to a going concern. Therefore, these
financial statements do not include the effects of possible adjustments or
reclassifications, if any, that might be required if the above situation is not
resolved in favor of continuing the Company's activities and the Company were
obliged to sell its assets and settle its liabilities, including contingencies,
in conditions other than those of the normal course of its business.
Based on the work done and on our examination of the Company's financial
statements and its consolidated financial statements for the years ended June
30, 2002 and 2001, on which we issued our qualified report dated September 9,
2002 in relation to the matters mentioned in previous paragraphs, we report that
the financial statements of IRSA Inversiones y Representaciones Sociedad Anonima
at September 30, 2002 and 2001 and its consolidated financial statements at
those dates, prepared in accordance with accounting standards currently in
effect in the Autonomous City of Buenos Aires, consider all significant facts
and circumstances of which we have become aware and regarding them we have no
other observations to make.
PRICE WATERHOUSE & CO. ABELOVICH, POLANO & ASOCIADOS
Av. A. Moreau de Justo 270, Piso 2(degree) 25 de Mayo 596 - 8(degree)Piso
C1107AAF Ciudad de Buenos Aires - Argentina (1002) Buenos Aires - Argentina
Tel. (54-11) 4319-4600 Tel./Fax 4312-8525 - E-mail: abelovich@elsitio.net
Fax: (54-11) 4315-6448 / 9
www.pwcglobal.com
[PRICEWATERHOUSECOOPERS LOGO OMITTED]
[SC INTERNATIONAL LOGO OMITTED]
[ABELOVICH, POLANO & ASOCIADOS LOGO OMITTED]
REPORT OF INDEPENDENT ACCOUNTANTS (Contd.)
In accordance with current regulations we report that:
a) the financial statements of IRSA Inversiones y Representaciones Sociedad
Anonima and its consolidated financial statements are transcribed to the
"Inventory and Balance Sheet Book" and comply with the requirements of
Commercial Companies Law and the pertinent resolutions of the National
Securities Commission;
b) the financial statements of IRSA Inversiones y Representaciones Sociedad
Anonima arise from official accounting records carried in all formal
respects in accordance with legal requirements;
c) we have read the business overview report and the additional information
to the notes to the financial statements required by sect. 68 of the
Buenos Aires Stock Exchange Regulations, on which, as regards those
matters that are within our competence, we have no observation to make;
d) at September 30, 2002, the debt accrued in favor of the Integrated Pension
and Survivors' Benefit System according to the accounting records amounted
to $ 154 thousand, none of which was claimable at that date.
Buenos Aires
November 11, 2002
ABELOVICH, POLANO & ASOCIADOS PRICE WATERHOUSE & Co.
(Partner) (Partner)
-------------------------------------------- --------------------------------------------
Dr. Jose Daniel Abelovich Carlos Martin Barbafina
Public Accountant (U.B.A.) Public Accountant (U.C.A.)
C.P.C.E.C.A.B.A. T(degree)102 F(degree)191 C.P.C.E.C.A.B.A. T(degree)175 F(degree)65
Professional Registration of the Firm Professional Registration of the Firm
C.P.C.E.CAP.FED. T(degree)1 F(degree)240 C.P.C.E.CAP.FED. T(degree)1 F(degree)1
PRICE WATERHOUSE & CO. ABELOVICH, POLANO & ASOCIADOS
Av. A. Moreau de Justo 270, Piso 2(degree) 25 de Mayo 596 - 8(degree)Piso
C1107AAF Ciudad de Buenos Aires - Argentina (1002) Buenos Aires - Argentina
Tel. (54-11) 4319-4600 Tel./Fax 4312-8525 - E-mail: abelovich@elsitio.net
Fax: (54-11) 4315-6448 / 9
www.pwcglobal.com
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Buenos Aires, Argentina.
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
By: _____________________________________________
Name: Saul Zang
Title: Second Vice Chairman of the
Board of Directors
Dated: November 19, 2002