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 February, 2003
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 December 31, 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 six-month periods ended
December 31, 2002 and 2001
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2002 AND 2001
In thousands of pesos
====================================================================================================================================
December 31, December 31, December 31, December 31,
2002 2001 2002 2001
(Notes 2 and 3) (Notes 2 and 3) (Notes 2 and 3) (Notes 2 and 3)
---------------------------------- ----------------------------------
ASSETS LIABILITIES
CURRENT ASSETS CURRENT LIABILITIES
Cash and banks 33,995 11,857 Trade accounts payable 23,018 14,315
Investments (Note 7) 227,147 49,444 Mortgages payable 881 -
Mortgages and leases receivables 34,268 26,626 Customer advances 13,865 5,119
Other receivables (Note 5) 16,046 97,536 Short term-debt (Note 9) 63,035 431,113
Inventory (Note 6) 16,308 39,675 Salaries and social
security charges 2,766 1,244
----------------------------------
TOTAL CURRENT ASSETS 327,764 225,138 Taxes payable 10,647 8,573
----------------------------------
Other liabilities (Note 10) 14,377 32,751
----------------------------------
TOTAL CURRENT LIABILITIES 128,589 493,115
----------------------------------
NON-CURRENT LIABILITIES
Trade accounts payable 4,885 380
NON-CURRENT ASSETS Long term-debt (Note 9) 810,917 27,204
------------------
Mortgages receivables 3,727 9,475 Customer advances 27,036 -
Other receivables (Note 5) 46,709 36,720 Taxes payable - -
Inventory (Note 6) 9,300 59,512 Other liabilities (Note 10) 6,629 6,461
----------------------------------
Investments (Note 7) 429,337 765,040 TOTAL NON-CURRENT LIABILITIES 849,467 34,045
----------------------------------
Fixed assets (Note 8) 1,215,785 464,462 TOTAL LIABILITIES 978,056 527,160
----------------------------------
Intangible assets 48,096 5,759 Minority interest 462,035 87,616
---------------------------------- ----------------------------------
TOTAL NON-CURRENT ASSETS 1,752,954 1,340,968 SHAREHOLDERS' EQUITY 640,627 951,330
----------------------------------
----------------------------------
TOTAL ASSETS 2,080,718 1,566,106 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 2,080,718 1,566,106
====================================================================================================================================
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 six-month periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
====================================================================================================================
December 31, December 31,
2002 2001
(Notes 2 and 3) (Notes 2 and 3)
-----------------------------------------
Mortgages, leases and services 100,681 71,531
Costs of sales, leases and services (72,831) (33,694)
-----------------------------------------
GROSS INCOME 27,850 37,837
-----------------------------------------
Selling expenses (8,314) (4,515)
Administrative expenses (17,793) (16,807)
-----------------------------------------
SUBTOTAL (26,107) (21,322)
Loss from operations and holding of real estate assets (Note 11) (775) (4,563)
-----------------------------------------
OPERATING INCOME (NOTE 4) 968 11,952
-----------------------------------------
Financial results, net (Note 12) 147,676 (96,023)
Net income in related companies (2,976) (28,187)
Other income and expenses, net (Note 13) 10,765 (2,917)
-----------------------------------------
SUBTOTAL 156,433 (115,175)
-----------------------------------------
Minority interest (26,783) (1,133)
Income tax and asset tax (2,601) (3,260)
-----------------------------------------
INCOME (LOSS) FOR THE PERIOD 127,049 (119,568)
====================================================================================================================
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 six month periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
===================================================================================================================================
December 31, December 31,
2002 2001
(Notes 2 and 3) (Notes 2 and 3)
---------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- Income (loss) for the period 127,049 (119,568)
- ADJUSTMENTS TO RECONCILE NET LOSS TO CASH FLOW FROM OPERATING ACTIVITIES:
o Net income in related companies 2,976 28,187
o Minority interest in related companies 26,783 1,133
o Results from repurchase Notes (11,771) -
o Allowances and provisions 6,484 378
o Amortization and depreciation 44,163 12,813
o Loss from operations and holding of real estate assets 775 4,563
o Financial results (192,221) 47,972
o Income tax and asset tax 2,601 3,260
o (Gain)/loss from the sale of fixed assets and intangible assets (2,119) 2
- CHANGES IN ASSETS AND LIABILITIES:
o Increase in current investments (3.517) (5.206)
o Increase in non-current investments (497) -
o (Increase)/Decrease in mortgages and leases receivables (40) 22,157
o Decrease in other receivables 19,807 31,302
o Decrease in inventory 20,067 14,947
o (Increase)/Decrease in intangible assets (370) 227
o Decrease in taxes payable, salaries and social security and customer advances (4,516) (2,575)
o (Decrease)/Increase in accounts payable (4,456) 2,193
o Increase in accrued interest and exchange differents 30,229 28,819
o Cash dividends received - 2,784
o Decrease in other liabilities (13,055) (19,560)
---------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 48,372 53,828
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
o Decrease from equity interest in subsidiary companies and equity investees - 14,727
o Increase from equity interest in subsidiary companies and equity investees (11,226) (14,149)
o Payment for acquisition of undeveloped parcels of land (507) (681)
o Loans granted to related parties - (64,514)
o Cash acquired (from APSA and Bs. As. Trade S.A) 16,344 -
o Sales of fixed assets and intangible assets 2,119 (2)
o Purchase and improvements of fixed assets (4,454) (21,489)
---------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 2,276 (86,108)
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
o Proceeds from short-term and long-term debt 402,353 167,618
o Payment of short-term and long-term debt (250,957) (151,815)
o Minority shareholders contribution 85 284
o Intercompany loans (8,708) -
o Increase in mortgages payable (6,265) (2,880)
o Payment of seller financing (1,181) (1,970)
---------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 135,327 11,327
---------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 185,975 (21,043)
CASH AND CASH EQUIVALENTS AS OF BEGINNING OF YEAR 28,170 37,118
---------------------------------------
CASH AND CASH EQUIVALENTS AS OF END OF PERIOD 214,145 16,075
===================================================================================================================================
(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 six-month periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
December 31, December 31,
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 7,187 16,628
o Increase in fixed assets through a decrease in inventory 1,221 -
o Decrease in mortgages receivable throug the trust - 58,011
o Increase in investments through a decrease in mortgages receivable - 28,989
o Decrease in investments through an increase in mortgages receivable 1,964 -
o Increase in customer advances through a decrease in other liabilities 2,832 -
o Increase an undeveloped parcels of land through a decrease in inventory 14,106 -
o Increase in fixed asset through an increase in mortgages payable 3,953 -
o Increase in short and long term-debt though a decrease in other liabilities 35,305 -
o Increase in investments through a decrease in mortgages receivable 760 -
o Increase in other receivable through a decrease in mortgages receivable - 7,201
4
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
For the six-month periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
NOTE 1: ARGENTINE ECONOMIC SITUATION
Argentina is immersed in a critical economic situation. The main
features of the current economic context are a major external debt
burden, a financial system in crisis, country risk indicators far above
normal average and an economic recession that has already lasted more
than four years. This situation has led to a significant decrease in
the demand for goods and services and a large rise in the level of
unemployment. The Government's ability to comply with its commitments
has been impaired, which led it to default in the payment of external
debt services at the beginning of 2002. Furthermore, it is expected
that there will be presidential elections during 2003.
To overcome the crisis the country is undergoing, as from December 2001
the government issued measures to restrict the free availability and
circulation of cash and the transfer of foreign currency abroad.
Subsequently, as from January 2002, laws, decrees and regulations were
enacted that involved profound changes to the prevailing economic model
and the amendment of the Convertibility Law in force until then. Among
the measures adopted was the establishment of a single free exchange
market system, that led to a significant devaluation of the Argentine
peso during the first months of 2002; the pesification of certain
assets and liabilities in foreign currency held abroad and the
resulting increase in local prices.
Impact on the Company's financial position
As mentioned in Note 13 to the unaudited financial statements, during
November 2002, the Company successfully completed the restructuring of
its financial debt. Along these lines, the current cash position will
enable the Company to take advantage of the opportunities available on
the real estate market, as it did over the previous decade.
The future development of the economic crisis might require the
Government to modify some measures adopted or issue additional
regulations. Therefore, the Company's financial statements should be
considered in the light of these circumstances.
5
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
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 December 31, 2002 and 2001 of IRSA
Inversiones y Representaciones Sociedad Anonima, the Statements of
Income and the Statements of Cash Flows for the six 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:
December 31, December 31,
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) 49,99 49,34
(1) In accordance with mentioned in Note 16 to the Unaudited
Consolidated Financial Statements, as of December 31, 2002 the
Company decided the liquidation anticipated of IRSA
International Ltd.
(2) As from the quarter ended on 30 September 2002 and as a result
of the Company's acquisition of the convertible negotiable
bonds (CNB) referred to in Note 21 to the consolidated
financial statements, the Company is consolidating its
financial statements with those of its subsidiary Alto Palermo
S.A. Furthermore, during January 2003, we purchased an
additional 3.4 million shares in Alto Palermo, for a total of
U$S 2.3 million, taking our equity interest to 54.9%. We also
purchased 2.6 million CNB, for a value of U$S 2.9 million,
which, together with the 27.3 million underwritten at the time
of the issue, has taken our position to 59.9% of the overall
CNB issued by our subsidiary.
6
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 2: (Continued)
(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
December 31, 2001 have been reclassified to conform them to the
presentation as of December 31, 2002.
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 December 31, 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 December 31, 2002
for comparative purposes.
7
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 2: (Continued)
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 December 31, 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 December
2002.
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.
8
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 3: (Continued)
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 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 period, 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.
9
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 3: (Continued)
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.
10
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 3: (Continued)
c. Revenue Recognition (Continued)
o Leases and services from shopping center operations
(Continued)
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 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.
11
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 3: (Continued)
c. Revenue Recognition (Continued)
o International operations
As of December 31, 2001, the Company held a 49.34% 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.
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.
12
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 3: (Continued)
d. Intangible assets, net (Coninued)
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.
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.
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.
13
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTA 4: (Continued)
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.
o International
This segment includes the results of operations:
-Brazil: for the period ended December 31, 2001. As mentioned in Note
2.e.ii), the Company sold its ownership interest in Brazil in February
2002
14
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 4: (Continued)
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: (Continued)
As of December 31, 2002:
----------------------------------------------------------------------------
Sales and Office and
developments Others (a) International Shopping centers Hotels
---------------------------------------------------------------------------------------------------------------------------------
Income 21,465 9,580 - 52,732 16,904
Costs (24,901) (4,369) - (34,312) (9,249)
Gross income (3,436) 5,211 - 18,420 7,655
Administrative expenses (2,975) (1,370) - (8,786) (4,662)
Selling expenses (1,409) (2) - (5,372) (1,531)
Loss on purchasers rescissions of sales contracts - - - - -
Results from operations and holding of real estate
assets (775) - - - -
---------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (8,595) 3,839 - 4,262 1,462
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization (b) 1,550 3,055 - 29,638 2,426
---------------------------------------------------------------------------------------------------------------------------------
------------------------------------
Financial and
other operations Total
-----------------------------------------------------------------------------------------
Income - 100,681
Costs - (72,831)
Gross income - 27,850
Administrative expenses - (17,793)
Selling expenses - (8,314)
Loss on purchasers rescissions of sales contracts - -
Results from operations and holding of real estate
assets - (775)
-----------------------------------------------------------------------------------------
OPERATING INCOME - 968
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Depreciation and amortization (b) - 36,669
-----------------------------------------------------------------------------------------
(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: (Continued)
As of December 31, 2001
-------------------------------------------------------------------------
Sales and Office and
developments Others (a) International Shopping centers Hotels
-------------------------------------------------------------------------
Income 23,346 26,796 - - 21,389
Costs (11,113) (6,464) - - (16,117)
Gross income 12,233 20,332 - - 5,272
Administrative expenses (6,565) (3,097) (471) (450) (6,224)
Selling expenses (2,474) (70) - - (1,971)
Loss on purchasers rescissions of sales contracts - - - - -
Results from operations and holding of real estate assets (4,754) - 191 - -
------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (1,560) 17,165 (280) (450) (2,923)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization (b) 629 3,908 - - 4,006
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------
Financial and
other operations Total
------------------------------------
Income - 71,531
Costs - (33,694)
Gross income - 37,837
Administrative expenses - (16,807)
Selling expenses - (4,515)
Loss on purchasers rescissions of sales contracts - -
Results from operations and holding of real estate assets - (4,563)
-----------------------------------------------------------------------------------------------
OPERATING INCOME - 11,952
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Depreciation and amortization (b) - 8,543
-----------------------------------------------------------------------------------------------
(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:
December 31, December 31,
2002 2001
-------------------------------------------------------
Non- Non-
Current Current Current Current
-------------------------------------------------------
Asset tax and prepayments 2,331 38,823 5,841 33,578
Value Added Tax (VAT) 1,647 1,814 2,300 2,706
C.N. Hacoaj Project - - 1,294 -
Related parties 247 136 62,480 353
Services to be billed 130 - 111 -
Guarantee deposits 2,142 545 - 83
Personnel loans and prepayments 2,621 - - -
Suppliers advances 572 - 657 -
Interest rate swap receivable 189 4,674 - -
Gross sales tax 351 253 - -
Debtors under legal proceedings 44 - - -
Sundry debtors 1,160 - 2,298 -
Operation pending settlement 244 - 10,031 -
Income tax prepayments and withholdings 523 31 694 -
Country club debtors 338 - 1,909 -
Tax on debits and credits 2 - 358 -
Trust accounts receivable - 433 5,704 -
Credit Fiscal Certificates 2,141 - - -
Other 1,384 - 3,859 -
-------------------------------------------------------
16,046 46,709 97,536 36,720
=======================================================
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:
December 31, 2002
-----------------------------------------
Non-
Current Current
-----------------------------------------
Constitucion 1111 - -
Dique IV - -
Minetti "D" - 218
Figueroa Alcorta
Madero 1020 1,620 -
Caballito plots of land - -
Pilar - -
Rivadavia 2243 - -
Rivadavia 2768 - 153
Sarmiento 517 - 352
Torres Jardin 185 362
V.Celina - 54
Abril/Baldovinos 7.389 8,094
Alto Palermo Park 4,171 -
Alto Palermo Plaza 1,247 -
Benavidez - -
Torres de Abasto 607 -
Resale merchandise 7 -
Other properties 743 67
Other 339 -
-----------------------------------------
16,308 9,300
=========================================
December 31, 2001
-----------------------------------------
Non-
Current Current
-----------------------------------------
Constitucion 1111 2,599 -
Dique IV - 6,112
Minetti "D" 216 362
Madero 1020 - -
Caballito plots of land - 19,755
Pilar - 3,382
Rivadavia 2243 - -
Rivadavia 2768 3,352 -
Sarmiento 517 - -
Torres Jardin 166 515
V.Celina 838 345
Abril/Baldovinos 65 -
Alto Palermo Park 18,873 14,513
Alto Palermo Plaza 12,955 -
Benavidez 2 -
Torres de Abasto - 14,105
Resale merchandise - -
Other properties 184 423
Other 425 -
-----------------------------------------
39,675 59,512
=========================================
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:
December 31, December 31,
2002 2001
-----------------------------------------
CURRENT
Cedro 127 -
Lebacs 20 -
Bocanova 202 -
Boden 1,080 -
Bocon Pro 1 - 2,145
Telecom Argentina - 2,110
Banco Hipotecario S.A. 13,678 13,841
Time deposits and money markets 92,651 4,218
Mutual funds 113,348 24,948
Patriotic Bond - 2,182
Tarshop Trust 6,041 -
-----------------------------------------
227,147 49,444
=========================================
NON-CURRENT
Alto Palermo S.A. - 342,177
Brazil Realty S.A - 153,155
Llao - Llao Resorts S.A. 12,805 5,700
Alto Invest S.A. 197 -
Banco de Credito y Securitizacion S.A. 6,956 6,957
IRSA Telecomunicaciones N.V. - 3,046
Valle de las Lenas S.A 8,391 -
Perez Cuesta S.A.C.I. 13,202 -
E-Commerce Latina S.A 4,695 -
Banco Hipotecario S.A. 4,174 18,157
IRSA I Trust Exchangeable Certificate Class B 1,188 2,224
IRSA I Trust Exchangeable Certificate Class C 1,912 3,561
IRSA I Trust Exchangeable Certificate Class D 5,796 21,238
IRSA I Trust Exchangeable Certificate Class A 558 -
Tarshop Trust 2,825 -
Art work 37 37
Other investments - 13
-----------------------------------------
62,736 556,265
-----------------------------------------
20
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 7: (Continued)
December 31, December 31,
2002 2001
Undeveloped parcels of land:
Constitucion 1111 1,869 -
Dique IV 6,115 -
Caballito plots of land 13,516 -
Padilla 902 244 -
Pilar 3,382 -
Torres Jardin IV 2,215 3,009
Puerto Retiro 45,899 46,186
Benavidez 14,106 -
Santa Maria del Plata 115,133 123,415
Pereiraola 21,711 21,642
Bs. As. Trade and Finance Center S.A 25,781 3,365
Buenos Aires Realty S.A. - 3,974
Argentine Realty S.A. - 4,112
Air space Supermercado Coto 8,976 -
Caballito 24,621 -
Rosario 55,776 -
Neuquen 8,458 -
Alcorta Plaza 15,727 -
Other parcels of undeveloped land 3,072 3,072
------------------------------------
366,601 208,775
------------------------------------
429,337 765,040
====================================
NOTE 8: FIXED ASSETS
The breakdown for this item is as follows:
December 31, December 31,
2002 2001
--------------------------------------
HOTELS
Hotel Intercontinental 58,297 68,066
Hotel Libertador 40,956 42,645
Hotel Piscis 5,139 -
--------------------------------------
104,392 110,711
--------------------------------------
21
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 8: (Continued)
December 31, December 31,
2002 2001
--------------------------------------
OFFICE BUILDINGS
Avda. de Mayo 595 4,126 6,252
Avda. Madero 942 2,277 5,748
Edificios costeros (Dique II) 23,488 26,744
Laminar Plaza 28,042 32,230
Libertador 498 34,992 53,261
Libertador 602 2,489 3,157
Madero 1020 7,625 20,414
Maipu 1300 40,831 47,181
Puerto Madero Dock 5 - 2,374
Reconquista 823 17,480 21,326
Rivadavia 2768 - 333
Sarmiento 517 253 347
Suipacha 652 9,968 14,389
Alto Palermo Plaza 1,868 4,430
Intercontinental Plaza 63,938 71,549
Costeros Dique IV 17,551 23,010
--------------------------------------
254,928 332,745
--------------------------------------
COMMERCIAL REAL ESTATE
Alsina 934 1,488 1,519
Constitucion 1111 403 6,016
--------------------------------------
1,891 7,535
--------------------------------------
OTHER FIXED ASSETS
Alto Palermo Park 793 3,027
Thames 3,849 4,626
Other 6,012 5,818
--------------------------------------
10,654 13,471
--------------------------------------
SHOPPING CENTER
Alto Avellaneda 95,064 -
Alto Palermo 254,874 -
Paseo Alcorta 74,039 -
Abasto 219,742 -
Patio Bullrich 130,085 -
Buenos Aires Design 23,115 -
Nuevo Noa 21,343 -
Other properties 11,294 -
Other 14,364 -
--------------------------------------
843,920 -
--------------------------------------
1,215,785 464,462
======================================
22
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 9: SHORT AND LONG TERM DEBT
The breakdown for this item is as follows:
December 31, December 31,
2002 2001
-------------------------------- ----------------------------
Non- Non-
Current Current Current Current
-------------------------------- ----------------------------
Convertible bond APSA 2006 (1) - 76,415 - -
Accrued interest- Convertible bond APSA 2006 (1) 3,404 - - -
Negotiable obligations APSA (2) 8,051 99,662 - -
Accrued interest- Negotiable obligations APSA (2) 2,275 - - -
Bank debts (3) 44,476 171,870 279,972 27,204
Accrued interest - bank loans (3) 778 - 1,905 -
Bond 100 M. (4) - 337,000 - -
Interest-Bond 100 M. (4) 3,520 - - -
Negotiable obligations 2009 - principal amount (4) - 125,970 94,921 -
Negotiable obligations 2009 - accrued interest (4) 479 - 480 -
Other 52 - 53,835 -
-------------------------------- ----------------------------
63,035 810,917 431,113 27,204
================================ ============================
(1) Corresponds to the Negotiable Bonds Convertible to stock (CNB)
issued by APSA for a value of U$S 50,000 million, as detailed
in Note 21 to the consolidated financial statements, net of
the CNB underwritten by the Company for $ 92,085 thousand.
(2) Includes:
(a) $ 50,330 thousand in unsecured general liabilities
belonging to APSA, originally issued for a total
value of V$N 85,000,000, which mature on 7 April
2005, on which date the principal will be amortized
in full. At 31 December 2002, APSA recorded certain
time lags in the relationships of the financial
covenants required under the Trust Fund Agreement. As
a result of this situation, APSA and its subsidiaries
are subject to restrictions for taking out additional
loans.
(b) $ 18.737 thousand corresponding to secured general
liabilities of APSA originally issued for a value of
U$S 40.000 thousand, and which mature on 13 January
2005, on which date the full amount of the principal
will be amortized. The current negotiable bonds are
secured by the fiduciary assignment in the interest
of the holders of the total share capital in Shopping
Alto Palermo S.A. At 31 December 2002, owing to the
prevailing economic difficulties, the Company
recorded certain time lags in the relationships of
the financial covenants required under the Trust Fund
Agreement signed in connection with the issue of the
negotiable bonds. After the financial closing date,
APSA summoned an Extraordinary Meeting of Bondholders
to be held on 10 February 2003, which resolved to
exempt the Company owing to the failure to meet
commitments during the semester running from 1 July
2002 to 31 December 2002.
(c) $ 38.646 thousand corresponding to secured general
liabilities in Shopping Alto Palermo S.A. (SAPSA).
The terms of the liabilities require SAPSA to
maintain certain financial ratios and conditions,
specific debt/equity ratios, and establish
restrictions to the procurement of new loans. At 31
December 2002, as a result of the prevailing economic
recession, SAPSA recorded certain time lags in the
relationships of the financial covenants required by
the Trust Fund Agreement signed in connection with
the issue of negotiable bonds. After the financial
closing date, the Extraordinary Meeting of
bondholders held on 10 February 2003 granted an
exemption owing to failure to comply with commitments
during the semester running from 1 July 2002 to 31
December 2002.
(3) Includes mainly:
(a) U$S 51,000 thousand corresponding to an unsecured
loan falling due in the year 2009, as detailed in
Note 6 to the unaudited financial statements.
(b) $ 39,095 thousand current, corresponding to a loan
secured with real estate assets belonging to Hoteles
Argentinos S.A., as detailed in Note 14 to the
unaudited consolidated financial statements.
(c) $ 5.381 thousand corresponding to other current bank
loans.
(4) Corresponding to the issue of Convertible Negotiable Bonds of
the Company for a total value of U$S 100 million as set forth
in Note 6 to the unaudited financial statements. Corresponding
to the issue of Negotiable Bonds secured with certain Company
assets maturing in the year 2009, as detailed in Note 6 and 12
c. a to the unaudited financial statements.
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:
December 31, 2002 December 31, 2001
------------------------------------ --------------------------------
Current Non-current Current Non-current
------------------------------------ --------------------------------
Seller financing 6,391 - 1,637 1,582
Dividends payable 3,005 - - -
Intercompany 300 - 14,336 -
Guarantee deposits 806 703 1,700 3,574
Provision for discounts 15 - 72 -
Provision for lawsuits and contingencies 639 4,378 301 364
Fees payable - - 17 -
Rebilled condominium expenses 366 - - -
Directors' deposits - 8 - 17
Fund administration 299 491 - 924
Operation pending settlement 133 - 8,737 -
Other provisions 240 - 980 -
Collections on behalf of third parties 48 - 183 -
Pending settlements for sales of plots 347 - 2,446 -
Profits not yet realized 211 1,001 - -
Other 1,577 48 2,342 -
------------------------------------ --------------------------------
14,377 6,629 32,751 6,461
==================================== ================================
NOTE 11: RESULTS FROM OPERATIONS AND HOLDINGS OF REAL ESTATE ASSETS
The breakdown for this item is as follows:
December 31, December 31,
2002 2001
--------------------- ------------------
Results from transactions related to shares of real estate companies (775) 192
Results from holding of real estate assets - (4.755)
--------------------- ------------------
(1) (775) (4.563)
===================== ==================
(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:
December 31, December 31,
2002 2001
------------------ -------------------
FINANCIAL RESULTS GENERATED BY ASSETS:
Interest income 8,454 205
Gain/(loss) on financial operations 2,395 (71,160)
Exchange loss (22,271) (443)
(Loss)/gain on exposure to inflation (37,217) 7,808
------------------ -------------------
(48,639) (63,590)
------------------ -------------------
24
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 12: (Continued)
December 31, December 31,
2002 2001
------------------ -------------------
FINANCIAL RESULTS GENERATED BY LIABILITIES:
Discounts 25,962 -
Exchange gain/(loss) 157,719 (9)
Gain on exposure to inflation 33,377 -
Financial expenses (20,743) (32,424)
------------------ -------------------
196,315 (32,433)
------------------ -------------------
FINANCIAL RESULTS, NET 147,676 (96,023)
================== ===================
NOTE 13: OTHER INCOME AND EXPENSES; NET
December 31, December 31,
2002 2001
------------------ -------------------
OTHER INCOME:
Gain on early redemption of debt 11,771 -
Gain from the sale of fixed assets 2,119 -
Other 564 635
------------------ -------------------
14,454 635
------------------ -------------------
OTHER EXPENSES:
Unrecoverable VAT (425) (980)
Donations (119) (297)
Gain/ (loss) from the sale of fixed assets - (2)
Contingencies for lawsuits (2,084) -
Debit and credit tax (712) (1,054)
Other (349) (1,219)
------------------ -------------------
(3,689) (3,552)
================== ===================
OTHER INCOME AND EXPENSES, NET 10,765 (2,917)
================== ===================
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, October 26, 2002 and
January 26 2003, respectivelly and the interest installment amounting
to US$ 315 thousand falling due on July 29, October 26, 2002 and
January 26, 2003 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 December 31, 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 December 31, 2002, the Company records $ 14.5 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 December 31, 2002, the Company records a balance of $
4.7 million in non-current financial debts, corresponding to
derivative financial instruments used as collateral for
operations.
d) As of December 31, 2002, Shopping Neuquen S.A. includes $ 52
thousand in financial loans, corresponding to a mortgage set
up on acquired land for $ 3,289 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. At
the financial closing date the full amount of the debt was settled
(principal, VAT and interest), and at the date of issue of these
financial statements the registration of the cancellation of the
mortgage is in process
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. 0.2 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 December 31, 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 June 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.
29
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 17: (Continued)
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) 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:
30
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 18: (Continued)
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.
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 December 31, 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.
31
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
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. As stated
in Decree No. 214/02, the dollar rate of exchange mentioned
above has been left without effect
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.
32
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 19: (Continued)
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 31 December 2002, the Company has settled all the installments
referred to in item d) amounting to a total of $ 39,208 thousand,
recording a net gain of $ 25,962 thousand as a result of a remission by
GSEM. Along these lines, at the date of issue of these financial
statements, the aspects referred to in items c), e), f) and g) are null
and void.
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 December 31, 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.
33
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 20: (Continued)
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. 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 December 31, 2002 and
2001, the Company recognized a gain of Ps. 2.42 million and a loss of
Ps. 0.53 million, respectively.
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.
34
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
NOTE 21: (Continued)
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.
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
Name of the Company: IRSA Inversiones y Representaciones S.A.
Corporate domicile: Bolivar 108 1o Floor - Federal Capital
Principal activity: Real estate investment and development
Unaudited Financial Statements for the six-month periods
ended as of December 31, 2002
compared with the same previous period
Stated in thousands of pesos
Fiscal period No. 60 beginning July 1o, 2002
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 of
Type of stock Shares Subscribed Paid up
------------------------------------------------------------------------------------------------------------------------
Common stock,1 vote each 211,999,273 212,000 212,000
========================================================================================================================
36
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
UNAUDITED BALANCE SHEETS AS OF DECEMBER 31, 2002 AND 2001
In thousands of pesos
================================================================================================
December 31, December 31,
2002 2001
(Notes 1 and 2) (Notes 1 and 2)
--------------------------------------
ASSETS
CURRENT ASSETS
Cash and banks (Schedule G) 9,056 5,968
Investments (Schedules C, D and G) 154,893 15,454
Mortgages and leases receivables (Note 3 and Schedule G) 4,261 17,225
Other receivables (Note 4 and Schedule G) 44,492 120,280
Inventory (Note 5) 1,805 7,419
--------------------------------------
TOTAL CURRENT ASSETS 214,507 166,346
--------------------------------------
NON-CURRENT ASSETS
------------------
Mortgages receivables (Note 3 and Schedule G) 302 7,066
Other receivables (Note 4 and Schedule G) 12,170 26,873
Inventory (Note 5) 1,206 30,894
Investments (Schedules C, D and G) 856,079 860,035
Fixed assets (Schedule A) 198,375 267,181
Intangible assets (Schedule B) 6,425 3,037
--------------------------------------
TOTAL NON-CURRENT ASSETS 1,074,557 1,195,086
--------------------------------------
TOTAL ASSETS 1,289,064 1,361,432
================================================================================================
======================================================================================
December 31, December 31,
2002 2001
(Notes 1 and 2) (Notes 1 and 2)
--------------------------------------
LIABILITIES
CURRENT LIABILITIES
Trade accounts payable (Schedule G) 2,261 2,592
Mortgages payable (Schedule G) 881 -
Customer advances (Schedule G) 407 2,675
Short - term debt (Note 6 and Schedule G) 4,777 382,341
Salaries and social security charges 293 321
Taxes payable (Schedule G) 792 6,596
Other liabilities (Note 7 and Schedule G) 2,825 10,727
--------------------------------------
TOTAL CURRENT LIABILITIES 12,236 405,252
--------------------------------------
NON-CURRENT LIABILITIES
Trade accounts payable (Schedule G) - 383
Long - term debt (Note 6 and Schedule G) 634,840 -
Customer advances (Schedule G) 754 -
Other liabilities (Note 7 and Schedule G) 607 4,467
--------------------------------------
TOTAL NON-CURRENT LIABILITIES 636,201 4,850
--------------------------------------
TOTAL LIABILITIES 648,437 410,102
--------------------------------------
SHAREHOLDERS `EQUITY (As per relevant statement) 640,627 951,330
--------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,289,064 1,361,432
======================================================================================
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 six-month periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
===============================================================================================================================
December 31, December 31,
2002 2001
(Notes 1 and 2) (Notes 1 and 2)
--------------------------------------------------
Mortgages, leases and services 20,767 33,515
Cost of sales, leases and services (Schedule F) (21,390) (17,668)
--------------------------------------------------
GROSS (LOSS) - INCOME (623) 15,847
Selling expenses (Schedule H) (620) (1,233)
Administrative expenses (Schedule H) (3,902) (8,325)
--------------------------------------------------
SUBTOTAL (4,522) (9,558)
--------------------------------------------------
Loss from operations and holding of real estate assets (775) (4,755)
--------------------------------------------------
OPERATING INCOME (5,920) 1,534
--------------------------------------------------
Financial results, net (Note 8) 107,277 (59,305)
Equity in earnings of controlled and affiliated companies (Note 10 c.) 27,730 (58,517)
Other income and (expenses),net (Note 9) (1,002) (1,224)
--------------------------------------------------
INCOME - (LOSS) BEFORE TAXES 128,085 (117,512)
Income tax and asset tax (Note 2 g. and h.) (1,036) (2,056)
--------------------------------------------------
INCOME - (LOSS) FOR THE PERIOD 127,049 (119,568)
===============================================================================================================================
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 six-month periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos (Notes 1 and 2)
====================================================================================================================================
Shareholders' contributions
-----------------------------------------------------------------------------------------
Inflation Inflation
Common Stock Treasury stock adjustment of adjustment of Additional
Items (Note 11) (Note 11) common stock treasury stock paid-in-capital Total
------------------------------------------------------------------------------------------------------------------------------------
Balances as of beginning of the year 207,412 4,588 264,951 5,863 565,298 1,048,112
Distribution resolved by the Ordinary and
Extraordinary Shareholders' Meeting on
November 5, 2002:
- Distribution of Company shares: 4,588 (4,588) 5,863 (5,863) - -
Income - (Loss) for the period - - - - - -
-----------------------------------------------------------------------------------------
Balances as of December 31, 2002 212,000 - 270,814 - 565,298 1,048,112
=========================================================================================
Balances as of December 31, 2001 207,412 4,588 264,942 5,853 565,298 1,048,093
====================================================================================================================================
==============================================================================================================
Reserved
Earnings
Total as of Total as of
Retained December 31, December 31,
Items Legal reserve earnings 2002 2001
------------------------------------------------------------------------------------------------------------
Balances as of beginning of the year 19,304 (553,838) 513,578 1,070,898
Distribution resolved by the Ordinary and
Extraordinary Shareholders' Meeting on
November 5, 2002:
- Distribution of Company shares: - - - -
Income - (Loss) for the period - 127,049 127,049 (119,568)
-----------------------------------------------------------------
Balances as of December 31, 2002 19,304 (426,789) 640,627 -
=================================================================
Balances as of December 31, 2001 19,304 (116,067) - 951,330
============================================================================================================
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 six-month periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
==================================================================================================================================
December 31, December 31,
2002 2001
(Notes 1 and 2) (Notes 1 and 2)
-----------------------------------
CASH FLOWS FROM OPERATING ACITIVITES:
- Income- (Loss) for the period 127,049 (119,568)
- ADJUSTMENTS TO RECONCILE NET LOSS TO CASH FLOW FROM OPERATING ACTIVITIES:
o Equity in earnings of controlled and affiliated companies (27,730) 58,517
o Loss from operations and holding of real estate assets 775 4,755
o Allowances and provisions 124 50
o Amortization and depreciation 3,962 7,469
o Financial results (127,237) 15,469
o Income tax and asset tax 1,036 2,056
- CHANGES IN ASSETS AND LIABILITIES:
o (Increase ) Decrease in current investments (1,849) 9,073
o Increase in non-current investments (17,592) -
o Decrease in mortgages and leases receivables 6,115 32,788
o Decrease (Increase) in other receivables 22,179 (25,771)
o Decrease in inventory 14,036 10,334
o Decrease in intangible assets 31 175
o (Decrease) Increase in taxes payable, salaries and social security and
customer advances (139) 2,673
o Decrease in accounts payable (1,128) (818)
o Increase in accrued interest 8,194 25,806
o Cash dividends received - 1,534
o (Increase) Decrease in other liabilities (1,558) 4,567
-----------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,268 29,109
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
o Decrease from equity interest in subsidiary companies and equity investees 6,282 86,125
o Increase from equity interest in subsidiary companies and equity investees (22,477) (2,335)
o Payment for acquisition of undeveloped parcels of land - (441)
o Cash acquired from mergers - 264
o Loans granted to related parties (31,090) (64,514)
o Purchase and improvements of fixed assets (3,764) (20,691)
-----------------------------------
NET CASH USED IN INVESTING ACTIVITIES (51,049) (1,592)
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
o Proceeds from loans 355,109 117,356
o Payment of loans (161,512) (141,234)
o Increase in intangible assets (6,040) (2,880)
o Payment of seller financing (1,181) (1,970)
-----------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 186,376 (28,728)
-----------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 141,595 (1,211)
----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AS OF BEGINNING OF PERIOD 4,998 8,329
----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AS OF END OF PERIOD 146,593 7,118
==================================================================================================================================
(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 six-month periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
December 31, December 31,
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 7,187 16,628
o Increase in fixed assets through a decrease in inventory 170 -
o Increase in undeveloped parcels of land through a decrease in inventory 25,126 -
o Decrease in other receivables through an increase in Convertible Bond APSA 2006 81,694 -
o Increase in fixed assets through an increase in mortgages payable 920 -
o Decrease in short and long term debt through a decrease in other receivables 7,392 -
o Increase in non current investments through a decrease in other receivables 455 -
o Assets acquired from mergers - 314
o Increase in investments through a decrease in mortgages receivables - 23,235
o Decrease in mortgages receivables through trust - 46,494
o Increase in other receivables through a decrease in mortgages receivables - 2,747
Eduardo Sergio Elsztain
President
41
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
For the six-months periods beginning on
July 1, 2002 and 2001
and ended December 31, 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, 372/01 and
398/02 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
"F.A.C.P.C.E."), and according to the provisions of the aforementioned
Resolutions.
The financial statements for the six-month periods ending 31 December
2002 and 2001 have not been audited. The Company's management considers
that they include all the necessary adjustments to reasonably present
the financial result for the periods referred to.
The financial result for the period ended 31 December 2002 does not
necessarily reflect the net income for the year.
The present financial statements must be readen considerating the
circumstances mentioned in Note 1 to the unaudited 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 December 31, 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 six-month
period ended December 31, 2001 have been restated as of December 31,
2002.
42
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
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"
and 20: "Derivatives and hedging transactions", through Resolutions C
238/01, C 243/01, C 261/01, C 262/01 and C 187/02, respectively;
establishing that those Technical Pronouncements and amendments to them
will come into force for fiscal years commencing as from July 1, 2002,
(except for Technical Pronouncements No. 20, whose effective date
tallies with the financial years commencing 1 January 2003).
The National Securities Commission, through Resolution 434/02, has
adopted the Technical Resolutions referred to with certain exceptions
and modifications, which shall apply to the financial years commencing
on 1 January 2003. Consequently, the Company has prepared these
financial statements in accordance with Resolutions 368/01, 372/01 and
398/02, as detailed in Note 1.a); such Resolutions do not envisage
these changes and differ with the provisions contained in the
accounting standards currently in force.
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.
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 regard to the same period of
the previous year.
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 (CONTD.)
NOTE 2: (Continued)
a. Investments (Continued)
a.1. Current investments (Continued)
Current investments also include equity securities,
government bonds and stock. Unrealized gains and
losses on government bonds, equity securities and
stock 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 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, adjusted for
inflation at the end of the period, as
defined in Note 1.b).
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.
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 (CONTD.)
NOTE 2: (Continued)
a. Investments (Continued)
a.3. Undeveloped parcels of lands
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 December 31, 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 (CONTD.)
NOTE 2: (Continued)
b. Inventory (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 the resulting gain
or loss is disclosed in the statement of results.
The Company capitalizes interest on long-term
construction projects. No interest costs were
capitalized during the period ended December 31, 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, Dock 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 (CONTD.)
NOTE 2: (Continued)
c. Fixed assets (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
December 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, adjusted for inflation at the end of the
period, as defined in Note 1.b), 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 (CONTD.)
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, 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.
The taxable results for the period ended December 31, 2002,
determined according to the to Argentine income tax law,
showed a taxable income of approximately Ps. 48.4 million.
As of December 31, 2002, the Company had accumulated tax loss
carryforwards of approximately Ps. 323 million, which expire
in the year 2007.
48
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
NOTE 2: (Continued)
h. Asset tax
During the period ended June 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 ten periods (in
excess of the asset tax).
As of December 31, 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. 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 (CONTD.)
NOTE 2: (Continued)
j. Provisions for allowances and contingencies (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. 128 and Ps. 698 thousand for the period
ended December 31, 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 (CONTD.)
NOTE 2: (Continued)
n. Financial derivatives (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 (CONTD.)
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 (CONTD.)
NOTE 2: (Continued)
r. Revenue recognition (Continued)
r.1. Sales of properties (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.
53
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
NOTE 3: MORTGAGES AND LEASES RECEIVABLES
The breakdown for this item is as follows:
December 31, December 31,
2002 2001
--------------------------------- ---------------------------------
Current Non-current Current Non-current
--------------------------------- ---------------------------------
Mortgages and leases receivable 1,220 302 9,019 6,771
Debtors under legal proceedings 1,563 - 3,287 -
Intercompany (Note 10 a.) 2,259 - 6,566 295
Less:
Allowance for doubtful accounts (Schedule E) (781) - (1,647) -
--------------------------------- ---------------------------------
4,261 302 17,225 7,066
================================= =================================
As of December 31, 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:
December 31, December 31,
2002 2001
----------------------------------------------------------------
Current Non-current Current Non-current
----------------------------------------------------------------
Asset tax (Note 2 h.) 2,003 11,635 4,113 26,436
Value Added Tax (VAT) 1,263 - 264 -
C.N. Hacoaj Project - - 1,294 -
Intercompany (Note 10 a.) 36,894 136 105,033 354
Services to be billed 130 - 111 -
Guarantee deposits - 38 - 83
Expenses to recover 361 - 1.144 -
Gross sales tax 4 - - -
Income tax prepayments and withholdings - - 9 -
Operating pending settlement 244 - 3,533 -
Trust accounts receivable - 361 2,243 -
Credit Fiscal Certificates 2,141 - - -
Other 1,452 - 2,536 -
----------------------------------------------------------------
44,492 12,170 120,280 26,873
================================================================
54
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
NOTE 5: INVENTORY
The breakdown for this item is as follows:
December 31, December 31,
2002 2001
-------------------------------- --------------------------------
Current Non-current Current Non-current
-------------------------------- --------------------------------
Real estate for sale 1,805 1,206 7,419 30,894
-------------------------------- --------------------------------
1,805 1,206 7,419 30,894
================================ ================================
El value recorded at December 31, 2002 includes the valuation allowance, as
mentioned in Note 2.b.
NOTE 6: SHORT AND LONG TERM DEBT
The breakdown for this item is as follows:
December 31, December 31,
2002 2001
--------------------------------- -----------------------------------
Current Non-current Current Non-current
--------------------------------- -----------------------------------
Bank loans (2) - 171,870 253,946 -
Bank loans - Accrued interest (2) 778 - 1,870 -
Negotiable Obligations - 2009 principal amount (3) - 125,970 94,921 -
Negotiable Obligations - 2009 -accrued interest (3) 479 - 480 -
Convertible Negotiable Obligations - 2007 principal - 337,000 - -
amount (1)
Convertible Negotiable Obligations - 2007 accrued 3,520 - - -
interest (1)
Other financial loans - - 31,124 -
--------------------------------- -----------------------------------
4,777 634,840 382,341 -
================================= ===================================
1. According to Note 13, these tally with the Negotiable Bonds
convertible to stock (CNB) for a total amount of U$S 100
million.
2. In November 2002, The Company obtained an unsecured loan for a
total of U$S 51 million, which falls due on 20 November 2009,
with the principal being amortized in 20 quarterly
installments with a two-year grace period. U$S 35 million of
the principal accrue interest at the LIBO rate over three
months plus 200 basis points, and U$S 16 million accrue
interest at a fixed rate that is progressively increased. At
31 December 2002, it accrues a fixed annual interest rate of
5.50% plus an annual LIBO of 1.42%. Interest is payable on a
quarterly basis.
The terms of the loan require the Company to maintain certain
financial covenants and conditions, specific debt/equity
ratios, moreover, they also restrict certain investments, the
making of payments, the procurement of new loans and the sale
of certain assets and other capital investments.
3. In November 2002, the Board of Directors of the Company
approved the issue of Negotiable Bonds secured by the assets
described in Note 12.c. for U$S 37.4 million, which mature on
20 November 2009, and have quarterly interest payments at the
LIBO rate over three months plus 200 basis points. At 31
December 2002 these accrue an annual interest of 1.42% at the
LIBO rate.
The terms of the loan require the Company to maintain certain
financial covenants and conditions, specific debt/equity
ratios; they also restrict certain investments, the making of
payments, the procurement of new loans and the sale of certain
assets and other capital investments.
55
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
NOTE 7: OTHER LIABILITIES
The breakdown for this item is as follows:
December 31, December 31,
2002 2001
---------------------------------- ----------------------------------
Current Non-current Current Non-current
---------------------------------- ----------------------------------
Seller financing 1,031 - 1,610 1,582
Intercompany (Note 10 a.) 424 - 6,708 -
Guarantee deposits 624 599 1,285 2,868
Provision for discounts (Schedule E) 5 - 24 -
Provision for lawsuits (Schedule E) 288 - 131 -
Fees payable - - 17 -
Directors' deposits - 8 - 17
Fund administration - - 183 -
Operating pending settlement 118 - - -
Collections on behalf of third parties 48 - - -
Other 287 - 769 -
---------------------------------- ----------------------------------
2,825 607 10,727 4,467
================================== ==================================
NOTE 8: FINANCIAL RESULTS, NET
The breakdown for this item is as follows:
December 31, December 31, 2001
2002
------------------ -------------------
FINANCIAL RESULTS GENERATED BY ASSETS:
Interest income 864 164
Exchange loss (21,456) -
Loss on exposure to inflation (33,901) -
Gain - (Loss) on financial operations 7,270 (32,673)
------------------ -------------------
(47,223) (32,509)
------------------ -------------------
FINANCIAL RESULTS GENERATED BY LIABILITIES:
Discounts 25,962 -
Exchange gain 123,232 (9)
Gain on exposure to inflation 26,607 -
Financial expenses (Schedule H) (21,301) (26,787)
------------------ -------------------
154,500 (26,796)
------------------ -------------------
FINANCIAL RESULTS, NET 107,277 (59,305)
================== ===================
56
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
NOTE 9: OTHER INCOME AND EXPENSES, NET
The breakdown for this item is as follows:
December 31, December 31,
2002 2001
------------------ -------------------
OTHER INCOME:
Other 54 423
------------------ -------------------
54 423
------------------ -------------------
OTHER EXPENSES:
Unrecoverable VAT (388) (659)
Donations (115) (57)
Debit and credit tax (462) (746)
Other (91) (185)
------------------ -------------------
(1,056) (1,647)
------------------ -------------------
TOTAL OTHER INCOME AND EXPENSES, NET (1,002) (1,224)
================== ===================
NOTE 10: BALANCES AND TRANSACTIONS WITH INTERCOMPANY
a. The balances as of December 31, 2002 and 2001 with controlled,
affiliated and related companies are as follows:
December 31, December 31,
2002 2001
------------------------------------
ABRIL S.A.
Current mortgages and leases receivables 7 -
Other current receivables - 1,916
ALTERNATIVA GRATIS S.A.
Current mortgages and leases receivables 2 109
ALTO PALERMO S.A.
Current mortgages and leases receivables 844 1,988
Other current receivables - 62,489
Current accounts payable 320 223
Other current liabilities 352 -
ALTOCITY.COM S.A.
Current mortgages and leases receivables 74 70
BALDOVINOS S.A.
Current mortgages and leases receivables 609 3,917
Non-current mortgages receivables - 295
Other current liabilities 37 22
BANCO HIPOTECARIO S.A.
Current investments 5,503 522
57
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
NOTE 10: (Continued)
December 31, December 31,
2002 2001
------------------------------------
BANCO DE CREDITO Y SECURITIZACION S.A
Non-current investments 6,956 6,957
CRESUD S.A.C.I.F.
Current mortgages and leases receivables - 31
Current accounts payable - 92
DOLPHIN FUND MANAGEMENT S.A.
Current mortgages and leases receivables 1 397
Current accounts payable 3 37
FIBESA S.A.
Current accounts payable 2 -
HOTELES ARGENTINOS S.A.
Current mortgages and leases receivables - 13
Current accounts payable 2 37
INVERSORA BOLIVAR S.A.
Current mortgages and leases receivables 706 13
Other current receivables 519 702
IRSA INTERNATIONAL LTD.
Other current liabilities - 6,686
LLAO LAO RESORTS S.A.
Other current liabilities 35 -
PALERMO INVEST
Other current receivables 5,336 28,662
MANAGERS, DIRECTORS AND OTHER STAFF OF THE COMPANY
Other current receivables 134 447
Other non-current receivables 136 354
RED ALTERNATIVA S.A.
Current mortgages and leases receivables 15 22
RITELCO S.A.
Other current receivables 30,905 10,817
Other current liabilities - -
SAPSA
Current mortgages and leases receivables - 2
TARSHOP S.A.
Current mortgages and leases receivables 1 4
58
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
NOTE 10: (Continued)
b. Gain - (Loss) on controlled, affiliated and related companies
during the periods ended December 31, 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 - - - 1,851 -
2001 - - - 6,590 -
Altocity.Com S.A. 2002 - 44 - - -
2001 - 124 - - -
Alternativa Gratis S.A. 2002 - - - - -
2001 - 185 - - -
Palermo Invest S.A 2001 - - - - 76
Cresud S.A 2002 - - - - 196
2001 - - - 384 -
Red Alternativa S.A. 2002 - 51 44 - -
Tarshop S.A. 2002 - 11 - - -
Dolphin Found Management S.A. 2002 - - - - 32
Abril S.A. 2002 5 - - - -
2001 78 - - - -
Llao Llao Resorts S.A. 2002 - - - - 20
Prestamos al personal 2002 - - - 8 -
2001 - - - 119 -
----------------------------------------------------------------------------
Total 2002 5 106 44 1,859 248
============================================================================
Total 2001 78 309 - 7,093 76
============================================================================
c. The composition of intercompany gain - (loss) is as follows:
Income - (Loss)
------------------------------------------
December 31, 2002 December 31, 2001
------------------------------------------
Equity in earnings of controlled and affiliated companies 27,918 (57,989)
Amortization of intangible assets and investments (188) (528)
------------------------------------------
27,730 (58,517)
==========================================
59
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
NOTE 11: COMMON STOCK
a. Common stock
As of December 31, 2002, IRSA's capital stock was as follows:
==================================================================================================================
Approved by
-----------------------------------------------------
Date of record with
the Public Registry of
Par Value Body Date Commerce
------------------------------------------------------------------------------------------------------------------
Shares issued for cash - First Meeting for IRSA's Incorporation 04.05.1943 06.25.1943
Shares issued for cash 16,000 Extraordinary Shareholders' Meeting 11.18.1991 04.28.1992
Shares issued for cash 16,000 Extraordinary Shareholders' Meeting 04.29.1992 06.11.1993
Shares issued for cash 40,000 Extraordinary Shareholders' Meeting 04.20.1993 10.13.1993
Shares issued for cash 41,905 Extraordinary Shareholders' Meeting 10.14.1994 04.24.1995
Shares issued for cash 2,000 Extraordinary Shareholders' Meeting 10.14.1994 06.17.1997
Shares issued for cash 74,951 Extraordinary Shareholders' Meeting 10.30.1997 07.02.1999
Shares issued for cash 21,090 Extraordinary Shareholders' Meeting 04.07.1998 04.24.2000
Shares issued for cash 54 Board of Directors' Meeting 05.15.1998 07.02.1999
------------
212,000
==================================================================================================================
At 31 December 2002 the losses recorded by the Company
absorbed over 50% of the capital and reserves. Article 206 of
the Company Law establishes a compulsory capital reduction
under such circumstances. However, owing to the crisis
currently affecting the Republic of Argentina, and through
Decree 1269, the National Executive Branch suspended the
enforcement of this article until 10 December 2003.
The Ordinary and Extraordinary Shareholder's Meeting held on 5
November 2002 and its recess held on 27 November 2002,
approved the distribution of 4,587,285 treasury stock
proportionately with the shareholders' holdings and, in
accordance with the resolution issued by the Board of
Directors on 11 December 2002, such stock was made available
to the shareholders as from 19 December 2002.
b. Treasury stock
The Company repurchases periodically outstanding ordinary
shares when it considers that their price is undervalued on
the market.
During the six - month period ended December 31, 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.
60
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
NOTE 11: (Continued)
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.
According to the terms of the Trust Fund, 7,718,701 shares
were sold during the month of October, 2002. As a result of
this transaction, at 31 December 2002, only 111,575 shares
remained with the Recipients.
NOTE 12: RESTRICTED ASSETS
- The Labor Court No55 decided the embargo of units No14 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.
- The Company has mortgaged the following real estate: Dock 2
M10 (1l) buildings A and B, Torre Jardin IV, Dock IV,
Reconquista 823, 9 activity units at Suipacha 652, 58 activity
units at Madero 1020 and 14 plots of the land owned in the
district of Caballito, in connection with the secured
negotiable bonds referred to in Note 6.2.
- 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.
61
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
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:
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.
62
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTD.)
NOTE 13: (Continued)
As a result of the distribution of 4,587,285 treasury stock, the
Company has adjusted the conversion price of its Convertible Negotiable
Bonds in accordance with the terms of the issue. Thus, the conversion
price of the Negotiable Bonds fell from U$S 0.5571 to U$S 0.54505 and
the price of execution of the warrants dropped from U$S 0.6686 to U$S
0.6541. Said adjustment came into force on 20 December 2002.
The Convertible Negotiable Obligations and options will fall due on
November 14, 2007.
The convertible negotiable bonds were underwritten in full and fully
paid in cash and allocated to the restructuring or partial settlement
of the Company's financial debt at the time of said underwriting.
Consequently, the Company's financial debt is detailed in Note 6 to the
financial statements after the restructuring and placement referred to.
63
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
FIXED ASSETS
For the six-months periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
SCHEDULE A
=================================================================================================
Value at Increases Deductions
Items beginning and and Value as of end
of year transfers Transfers of
Period
-------------------------------------------------------------------------------------------------
Facilities - - - -
Furniture and fixtures 1,502 - - 1,502
Computer equipment 4,031 91 - 4,122
Leasehold improvements 5,606 7 - 5,613
Real Estate:
Alsina 934 1,763 - - 1,763
Av. de Mayo 595 5,545 - - 5,545
Av. Madero 942 5,445 - (2,734) 2,711
Constitucion 1111 580 - - 580
Costeros Dique IV 18,057 - - 18,057
Dique 2 M10 (1I) Edif. A 18,910 - - 18,910
Dique 2 M10 (1I) Edif. C 5,523 - - 5,523
Laminar Plaza 29,728 - - 29,728
Libertador 498 43,297 12 (2,651) 40,658
Libertador 602 2,845 - - 2,845
Madero 1020 11,643 - (2,750) 8,893
Maipu 1300 46,896 - - 46,896
Piscis 578 4,589 - 5,167
Puerto Madero Dock 5 - - - -
Reconquista 823 21,037 - - 21,037
Rivadavia 2768 - - - -
Sarmiento 517 299 176 (176) 299
Suipacha 652 13,152 - - 13,152
--------------------------------------------------------------
TOTAL AS OF DECEMBER 31, 2002 236,437 4,875 (8,311) 233,001
==============================================================
TOTAL AS OF DECEMBER 31, 2001 298,088 20,705 (18,858) 299,935
=================================================================================================
====================================================================================================================================
Depreciation
------------------------------------------------------------------------
For the period
-------------------------------------------
Net
Increase, Net carrying carrying
deductions Value as of value as
Items Accumulated as And Rate Amount Accumulated December 31, of
of beginning Transfers % (1) as of period 2002 December
of year end 31, 2001
------------------------------------------------------------------------------------------------------------------------------------
Facilities - - 10 - - - 67
Furniture and fixtures 1,500 - 20 - 1,500 2 18
Computer equipment 3,785 1 33.33 134 3,920 202 303
Leasehold improvements 3,311 - 10 283 3,594 2,019 2,492
Real Estate:
Alsina 934 261 - 2 14 275 1,488 1,517
Av. de Mayo 595 1,375 - 2 44 1,419 4,126 6,252
Av. Madero 942 828 (423) 2 29 434 2,277 5,750
Constitucion 1111 175 - 2 2 177 403 6,016
Costeros Dique IV 346 - 2 160 506 17,551 23,012
Dique 2 M10 (1I) Edif. A 786 - 2 159 945 17,965 20,638
Dique 2 M10 (1I) Edif. C - - 2 - - 5,523 6,108
Laminar Plaza 1,458 - 2 228 1,686 28,042 32,232
Libertador 498 5,657 (295) 2 304 5,666 34,992 53,263
Libertador 602 336 - 2 20 356 2,489 3,157
Madero 1020 1,581 (382) 2 69 1,268 7,625 20,414
Maipu 1300 5,706 - 2 359 6,065 40,831 47,177
Piscis - - 2 28 28 5,139 -
Puerto Madero Dock 5 - - 2 - - - 2,374
Reconquista 823 3.402 - 2 155 3,557 17,480 21,323
Rivadavia 2768 - - 2 - - - 332
Sarmiento 517 42 1 2 3 46 253 349
Suipacha 652 3,087 - 2 97 3,184 9,968 14,387
------------------------------------------------------------------------------------------------------
TOTAL AS OF DECEMBER 31, 2002 33,636 (1,098) - 2,088 34,626 198,375 -
======================================================================================================
TOTAL AS OF DECEMBER 31, 2001 31,846 (2,219) - 3,127 32,754 - 267,181
====================================================================================================================================
(1) The accounting application of the depreciation for the period is set
forth in Schedule H.
64
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INTANGIBLE ASSETS
For the six-months periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
SCHEDULE B
==========================================================================================================================
Values of origin
------------------------------------------------------------------------------------------
Amortization
Balances as of Balances as of Accumulated as
Items beginning of Additions Deductions end of of beginning of
year period year
--------------------------------------------------------------------------------------------------------------------------
Development property expenses 436 - (31) 405 176
Bank loan expenses 14,711 6,040 - 20,751 14,431
Exchange expenses 3,192 - - 3,192 1,442
------------------------------------------------------------------------------------------
TOTAL AS OF DECEMBER 31, 2002 18,339 6,040 (31) 24,348 16,049
==========================================================================================
TOTAL AS OF DECEMBER 31, 2001 15,054 3,079 (179) 17,954 10,385
==========================================================================================================================
===================================================================================================================
Amortization Net carrying value as of
------------------------------------------------------------------------------------
Items Additions Amount Accumulated as of December 31, December 31,
(1) end of period 2002 2001
-------------------------------------------------------------------------------------------------------------------
Development property expenses - - 176 229 347
Bank loan expenses - 124 14,555 6,196 943
Exchange expenses - 1,750 3,192 - 1,747
------------------------------------------------------------------------------------
TOTAL AS OF DECEMBER 31, 2002 - 1,874 17,923 6,425 -
====================================================================================
TOTAL AS OF DECEMBER 31, 2001 190 4,342 14,917 - 3,037
===================================================================================================================
(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 December 31, 2002 and 2001
In thousands of pesos
SCHEDULE C
===============================================================================================================================
Value as of Value as of
Issuer and types of securities Class P.V. Amount Listing value December 31, December 31,
2002 2001
-------------------------------------------------------------------------------------------------------------------------------
CURRENT INVESTMENTS
Telecom Argentina S.A $ 0.001 537,239 - - 2,110
Bocon PRO 1 $ 0.001 13,174,419 0.0003 - 2,145
Banco Hipotecario S.A. $ 0.001 2,991,155 0,0018 5,503 522
Patriotic Bond $ 0.001 700,000 0,0010 - 2,182
Lebac $ 0.001 40,000 - 20 -
Boden $ 0.001 7,909 0,0010 8 -
Cedro $ 0.001 88,541 0,0010 89 -
-------------------------------------------------------------------------------
Total current investments as of December 31, 5,620 -
2002
===============================================================================
Total current investments as of December 31,
2001 6,959
===============================================================================================================================
====================================================================================================================================
Issuer's information (1)
----------------------------------------------------------------------
Last financial statement
--------------------------------------------------------
Capital
Main stock Income - Shareholders'
Issuer and types of securities Activity Date (par value) (loss) equity (1)
for the Interest in
period capital stock
------------------------------------------------------------------------------------------------------------------------------------
CURRENT INVESTMENTS
Telecom Argentina S.A
Bocon PRO 1
Banco Hipotecario S.A.
Patriotic Bond
Lebac
Boden
Cedro
-------------------------------------------------------------------------------------
Total current investments as of December 31,
2002
=====================================================================================
Total current investments as of December 31,
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 December 31, 2002 and 2001
In thousands of pesos
SCHEDULE C (Continued)
==========================================================================================================================
Value
Issuer and types of securities Recorded at
Class P.V. Amount Listing value December 31, 2002
--------------------------------------------------------------------------------------------------------------------------
NON-CURRENT INVESTMENTS
Abril S.A. Common 1 vote 5,000 1,320 - (21,564)
Irrevoc. Contrib - - - 25,136
IRSA International Ltd. Common 1 vote 0.001 - - -
Pereiraola S.A. Common 1 vote 0.001 50,000 - 7,719
Irrevoc. Contrib. - - - 1,118
Baldovinos S.A. Common 1 vote 0.001 6,000 - (5,717)
Irrevoc. Contrib. - - - 11,479
Palermo Invest S.A. Common 1 vote 0.001 76,949,667 - 135,131
Hoteles Argentinos S.A. Common 1 vote 0.001 7,309,273 - (169)
Irrevoc. Contrib. - - - 3,505
Alto Palermo S.A. (ex SAMAP) Common 1 vote 0,001 64,559,510 - 369,392
Buenos Aires Realty S.A. Common 1 vote 0.001 6,000 - -
Irrevoc. Contrib. - - - -
Buenos Aires Trade and Finance Center S.A. Common 1 vote 0.001 6,000 - 7,636
Irrevoc. Contrib. - - - 19,083
Argentine Realty S.A. Common 1 vote 0.001 6,000 - -
Irrevoc. Contrib. - - - -
Llao - Llao Resort S.A Common 1 vote 0.001 5,878,940 - 10,426
Irrevoc. Contrib. - - - 2,379
Banco de Credito y Securitizacion S.A. Common 1 vote 0.001 3,187,500 - 6,956
Alto Invest S.A. Common 1 vote 0.001 960 - 12
Irrevoc. Contrib. - - 185
Ritelco S.A. Common 1 vote 0.001 66,970,394 - 32,506
Valle de las Lenas S.A. Common 1 vote 0.001 22,012,078 8,391
-----------------------------------------------------------------------------
Total as of December 31, 2002 613,604
=============================================================================
Total as of December 31, 2001 -
==========================================================================================================================
===============================================================================================
Issuer's information
--------------------------------
Value
Issuer and types of securities Recorded at Main
December 31, 2001 Activity
-----------------------------------------------------------------------------------------------
NON-CURRENT INVESTMENTS
Abril S.A. (17,308) Building, development and
administration of country club
24,099
IRSA International Ltd. 422,535 Investment
Pereiraola S.A. 7,838 Real estate and financing
1,034
Baldovinos S.A. (4,988) Real estate and building
11,421
Palermo Invest S.A. 131,129 Investments
Hoteles Argentinos S.A. 15,242 Hotel Libertador exploitation
2,444
Alto Palermo S.A. (ex SAMAP) 94,365 Real estate investments
Buenos Aires Realty S.A. (338) Real estate investments
4,310
Buenos Aires Trade and Finance Center S.A. (301) Real estate investments
3,666
Argentine Realty S.A. (373) Real estate investments
4,484
Llao - Llao Resort S.A 3,834 Hotel Llao-Llao exploitation
1,866
Banco de Credito y Securitizacion S.A. 6,957 Banking
Alto Invest S.A. - Electronic Commerce
-
Ritelco S.A. - Investments
Valle de las Lenas S.A. - Turism
----------------------------------------------------
Total as of December 31, 2002 -
====================================================
Total as of December 31, 2001 711,916
===============================================================================================
====================================================================================================================================
Issuer's information
-----------------------------------------------------------------------
Last financial statement
-------------------------------------------------------------------
Capital
Issuer and types of securities stock Income(loss) Shareholders' Interest in Capital
Date (Par value) for the period equity Stock
------------------------------------------------------------------------------------------------------------------------------------
NON-CURRENT INVESTMENTS
Abril S.A. 12.31. 2002 13,200 (3,683) 52,478 50%
IRSA International Ltd. 12.31. 2002
Pereiraola S.A. 12.31. 2002 100 (47) 2,676 50%
Baldovinos S.A. 12.31. 2002 12 (587) 11,120 50%
Palermo Invest S.A. 12.31. 2002 78,251 710 202,916 66.6700%
Hoteles Argentinos S.A. 12.31. 2002 9,887 7,889 1,482 79.9999%
Alto Palermo S.A. (ex SAMAP) 12.31. 2002 70,000 52,773 723,419 49.9997%
Buenos Aires Realty S.A. 12.31. 2002
Buenos Aires Trade and Finance Center S.A. 12.31. 2002 12 305 26,579 100%
Argentine Realty S.A. 12.31. 2002
Llao - Llao Resort S.A 12.31. 2002 11,757 3,782 24,706 50%
Banco de Credito y Securitizacion S.A. 06.30. 2002 62,500 (20,370) 104,372 5,1000%
Alto Invest S.A. 12.31. 2002 12 (84) 693 8%
Ritelco S.A. 12.31. 2002 66,970 (8,385) 40,892 100%
Valle de las Lenas S.A. 02. 28. 2002 22,012 450 62,983 30,9500%
-----------------------------------------------------------------------------------------
Total as of December 31, 2002
=========================================================================================
Total as of December 31, 2001
====================================================================================================================================
67
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
OTHER INVESTMENTS
Balance Sheets as of December 31, 2002 and 2001
In thousands of pesos
SCHEDULE D
===============================================================================================================================
Value as of December Value as of December
Items 31, 2002 31, 2001
-------------------------------------------------------------------------------------------------------------------------------
CURRENT INVESTMENTS
Time deposits 64 332
Mutual funds 144,996 8,163
Convertible Bond APSA 2006 - Accrued interest 4,213 -
------------------------------------------------
Total current investments as of December 31, 2002 149,273 -
================================================
Total current investments as of December 31, 2001 - 8,495
================================================
NON-CURRENT INVESTMENTS
Constitucion 1111 1,869 -
Dique IV 6,115 -
Padilla 902 244 -
Pilar 3,382 -
Santa Maria del Plata 115,133 123,415
Terrenos de Caballito 13,516 -
Torres Jardin IV 2,215 3,007
------------------------------------------------
Subtotal 142,474 126,422
------------------------------------------------
IRSA I Trust Exchangeable Certificates Class A 465 -
IRSA I Trust Exchangeable Certificates Class B 990 1,783
IRSA I Trust Exchangeable Certificates Class C 1,594 2,854
IRSA I Trust Exchangeable Certificates Class D 4,830 17,023
Convertible Bond APSA 2006 92,085 -
------------------------------------------------
Subtotal 99,964 21,660
------------------------------------------------
Art work 37 37
------------------------------------------------
Total non-current investments as of December 31, 2002 242,475 -
================================================
Total non-current investments as of December 31, 2001 - 148,119
===============================================================================================================================
68
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
ALLOWANCES AND PROVISIONS
For the six-month periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
SCHEDULE E
====================================================================================================================================
Carrying value as
Balances as of Carrying value as of of
Items beginning of year Increases (1) Decreases December 31, 2002 December 31, 2001
------------------------------------------------------------------------------------------------------------------------------------
DEDUCTED FROM ASSETS:
Allowance for doubful accounts 1,197 - (416) 781 1,647
Provision for impairment of inventory 11,389 6,257 (17,457) 189 -
Provision for impairment of fixed assets 41,942 - (6,717) 35,225 -
Provision for impairment of undeveloped
plots of land 9,260 13,196 - 22,456 -
FROM LIABILITIES:
Provisions for lawsuits 228 124 (64) 288 131
Provisions for discounts 12 - (7) 5 24
----------------------------------------------------------------------------------------
TOTAL AS OF DECEMBER 31, 2002 64,028 19,577 (24,661) 58,944 -
========================================================================================
TOTAL AS OF DECEMBER 31, 2001 1,907 157 (262) - 1,802
====================================================================================================================================
(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 six - month periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
SCHEDULE F
===================================================================================================================================
December 31, 2002 December 31, 2001
-------------------------------------------------
I. COST OF SALES
Stock as of beginning of year 35,157 36,795
PLUS (LESS):
Purchases for the period - 7
Expenses (Schedule H) 1,227 1,047
Transfers to fixed assets (170) -
Transfers from fixed assets 7,187 16,628
Transfers to investments (25,126) -
LESS: - -
Reclassification from inventories sold - 175
Stock as of end of period (3,011) (38,313)
-------------------------------------------------
SUBTOTAL 15,264 16,339
-------------------------------------------------
PLUS
Cost of sales - Abril S.A. 3,090 908
Loss from operations and holding of real estate assets - (4,755)
-------------------------------------------------
COST OF PROPERTIES SOLD 18,354 12,492
-------------------------------------------------
II. COST OF LEASES
Expenses (Schedule H) 2,841 4,000
-------------------------------------------------
COST OF PROPERTIES LEASED 2,841 4,000
-------------------------------------------------
III. COST OF FEES FOR SERVICES
Expenses (Schedule H) 195 1,176
-------------------------------------------------
COST OF FEES FOR SERVICES 195 1,176
-------------------------------------------------
TOTAL COSTS OF SALES, LEASES AND SERVICES 21,390 17,668
===================================================================================================================================
70
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
FOREIGN CURRENCY ASSETS AND LIABILITIES
Balance Sheets as of December 31, 2002 and 2001
In thousands of pesos
SCHEDULE G
====================================================================================================================================
Total as of Total as of
Items Class Amount Prevailing exchange rate December 31, 2002 December 31, 2001
-----------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and banks:
Cash U$S 1,192,518 0,00327 (1) 3,900 11
Banks U$S 33,919 0,00327 (1) 111 663
Savings accounts U$S 722,991 0,00327 (1) 2,364 13
Checks to be deposited U$S - 0,00327 (1) - 52
Investments:
Patriotic bond U$S - 0,00327 (1) - 2,182
Time deposits U$S - 0,00327 (1) - 332
Mutual Funds U$S 17,578,114 0,00327 (1) 57,480 8,163
Mutual Funds Euros 25,521,652 0,00343 (1) 87,496 -
Convertible Bond APSA 2006 U$S 1,250,138 0,00337 (1) 4,213 -
Mortgages and leases receivables U$S - 0,00327 (1) - 15,491
Other receivables:
Intercompany U$S 10,000,000 0,00337 (1) 33,700 87,271
Services to be billed U$S - 0,00327 (1) - 111
Operations pendings to settlement U$S - 0,00327 (1) - 3,533
Personnel loans and prepayments U$S - 0,00327 (1) - 94
---------------- ----------------------------------------
Total Current Assets 56,299,332 189,264 117,916
---------------- ----------------------------------------
NON-CURRENT ASSETS
Mortgages receivable U$S - 0,00327 (1) - 7,066
Other receivables:
Guarantee deposits U$S - 0,00327 (1) - 83
Personnel loans and prepayments U$S - 0,00327 (1) - 351
Investments:
IRSA International Ltd.:
Shares U$S - 0,00327 (1) - 310,438
Convertible Bond APSA 2006 U$S 27,324,848 0,00337 (1) 92,085 -
---------------- ----------------------------------------
Total Non-current Assets U$S 27,324,848 92,085 317,938
---------------- ----------------------------------------
TOTAL ASSETS AS OF DECEMBER 31, 2002 U$S 83,624,180 281,349 -
================ ========================================
TOTAL ASSETS AS OF DECEMBER 31, 2001 U$S 435,862,690 435,854
================ ========================================
LIABILITIES
CURRENT LIABILITIES
Accounts payable U$S - 0,00337 (1) - 100
Customer advances U$S - 0,00337 (1) - 2,675
Mortgages payable U$S 261,394 0,00337 (1) 881 -
Taxes payable U$S 17,525 0,00337 (1) 59 -
Short term debt U$S 1,417,265 0,00337 (1) 4,777 381,536
Other liabilities:
Debt for purchase of shares U$S - 0,00337 (1) - 1,610
Intercompany U$S - 0,00337 (1) - 22
Guarantee deposits U$S - 0,00337 (1) - 1,285
Provisions U$S - 0,00337 (1) - 24
Collections on behalf of third parties U$S - 0,00337 (1) - 183
---------------- ----------------------------------------
Total Current Liabilities U$S 1,696,184 5,717 387,435
---------------- ----------------------------------------
NON-CURRENT LIABILITIES
Accounts payable U$S - 0,00337 (1) - 382
Long term debt U$S 188,380,007 0,00337 (1) 634,840 -
Customer advances U$S - 0,00337 (1) - -
Other liabilities:
Debt for purchase of shares U$S - 0,00337 (1) - 1,582
Guarantee deposits U$S - 0,00337 (1) - 2,867
Directors' deposits U$S - 0,00337 (1) - 18
---------------- ----------------------------------------
Total Non-current Liabilities U$S 188,380,007 634,840 4,849
---------------- ----------------------------------------
TOTAL LIABILITIES AS OF DECEMBER 31, 2002 U$S 190,076,191 640,557 -
================ ========================================
TOTAL LIABILITIES AS OF DECEMBER 31, 2001 U$S 392,284,507 - 392,284
===================================================================================================================================
(1) Official rate of exchange quoted by Banco Nacion at December 31, 2002.
71
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY LAW 19,550, SECTION 64, PARAGRAPH B)
For the six-month periods beginning on
July 1, 2002 and 2001
and ended December 31, 2002 and 2001
In thousands of pesos
SCHEDULE H
===================================================================================================================================
Total as of Cost of properties Cost of properties Cost of fees for
Items December 31, 2002 leased sold services
-----------------------------------------------------------------------------------------------------------------------------------
Directors' fees 92 - - -
Fees and payments for 700 - - -
services
Salaries, bonuses and social security charges 1,647 - - -
Other expenses of personnel administration 321 - - -
Depreciation and amortization 3,962 1,671 - -
Maintenance of buildings 2,445 1,170 1,227 -
Utilities and postage 7 - - -
Travel expenses 54 - - -
Advertising and promotion 128 - - -
Fees and expenses for property sold 556 - - -
Local transportation and stationery 70 - - -
Taxes, rates and assessments - - - -
Subscriptions and dues 67 - - -
Interest and indexing adjustments 19,218 - - -
Bank charges 199 - - -
Safety box and stockbroking charges 82 - - -
Doubtful - - - -
accounts
Insurance 23 - - -
Security 8 - - -
Courses 7 - - -
Lawsuits - - - -
Results of trust - - - -
Rents 155 - - -
Other 345 - - 195
-----------------------------------------------------------------------------------
Total as of December 31, 2002 30,086 2,841 1,227 195
===================================================================================
Total as of December 31, 2001 - 4,000 1,047 1,176
===================================================================================================================================
===================================================================================================================================
Expenses
--------------------------------------------------------------
Total as of
Items Administration Selling Financing December 31, 2001
-----------------------------------------------------------------------------------------------------------------------------------
Directors' fees 92 - - 663
Fees and payments for 700 - - 1,318
services
Salaries, bonuses and social security charges 1,647 - - 4,259
Other expenses of personnel administration 321 - - 15
Depreciation and amortization 417 - 1,874 7,469
Maintenance of buildings 48 - - 3,238
Utilities and postage 7 - - 20
Travel expenses 54 - - 15
Advertising and promotion 64 64 - 698
Fees and expenses for property sold - 556 - 565
Local transportation and stationery 70 - - 98
Taxes, rates and assessments - - - 20
Subscriptions and dues 67 - - 133
Interest and indexing adjustments - - 19,218 21,057
Bank charges - - 199 369
Safety box and stockbroking charges 72 - 10 72
Doubtful - - - 37
accounts
Insurance 23 - - 4
Security 8 - - 17
Courses 7 - - 59
Lawsuits - - - 92
Results of trust - - - 997
Rents 155 - - -
Other 150 - - 1,353
-----------------------------------------------------------------------------------
Total as of December 31, 2002 3,902 620 21,301 -
===================================================================================
Total as of December 31, 2001 8,325 1,233 26,787 42,568
===================================================================================================================================
72
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
BREAKDOWN BY MATURITY DATE OF RECEIVABLES AND LIABILITIES
AS OF DECEMBER 31, 2002 AND 2001
In thousands of pesos
SCHEDULE I
====================================================================================================================================
WITH MATURITY DATE
-------------------------------------------------------------------------------------------------------
TO DUE
-------------------------------------------------------------------------------------
FROM 3 FROM 6 FROM 9 FROM 1 FROM 2 FROM 3 FROM 4
WITHOUT FALLING UP TO 3 TO 6 TO 9 TO 12 TO 2 TO 3 TO 4 PERIODS TOTAL TO TOTAL
TERM DUE MONTHS MONTHS MONTHS MONTHS PERIODS PERIODS PERIODS ON DUE WITH TERM
------------------------------------------------------------------------------------------------------------------------------------
2002
Assets
Investments 150,680 - 4,213 - - - 720 4,489 93,238 1,517 104,177 104,177
Receivables 2,442 5,335 39,142 542 477 815 1,880 1,861 1,846 6,885 53,448 58,783
Liabilities
Loans - - 1,257 3,520 - - - 29,784 29,784 575,272 639,617 639,617
Other liabilities 308 260 4,173 208 1,215 1,295 417 453 355 136 8,252 8,512
------------------------------------------------------------------------------------------------------------------------------------
2001
Assets
Investments 15,123 - 89 39 44 159 - 460 11,781 9,419 21,991 21,991
Receivables - 1,637 69,749 61,501 3,365 1,253 4,694 8,990 4,563 15,692 169,807 171,444
Liabilities
Loans - - 177,740 189,326 - 15,275 - - - - 382,341 382,341
Other liabilities 74 - 17,138 135 493 5,071 2,712 1,302 188 648 27,687 27,687
====================================================================================================================================
===========================================================
INTEREST
------------------------------
ACCRUED
--------------------
TOTAL NO FIXED VARIABLE
ACRCRUED TERM TERM
-------------------------------------------------------------
2002
Assets
Investments 254,857 4,241 95,223 155,393
Receivables 61,225 60,058 865 302
Liabilities
Loans 639,617 4,777 390,920 243,920
Other liabilities 8,820 6,920 1,900 -
-------------------------------------------------------------
2001
Assets
Investments 37,114 17,021 4,969 15,124
Receivables 171,444 93,415 19,420 58,609
Liabilities
Loans 382,341 2,350 58,917 321,074
Other liabilities 27,761 24,112 3,649 -
=============================================================
73
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF DECEMBER 31, 2002
Stated in thousands of pesos
1. None
2. None
3. Additional information on assets and liabilities
==================================================================================================================================
WITH NO
FALLING DUE MATURITY TO DUE (POINT 3 C)
DATE
--------------------------------------------------------------------------------------------
CONCEPT 30.09.02 30.11.02 CURRENT 31.03.03 30.06.03 30.09.03 31.12.03 TOTAL
----------------------------------------------------------------------------------------------------------------------------------
RECEIVABLES
Receivables for sale - - - 4,131 89 24 17 4,261
Other receivables 5,335 - 2,442 35,011 453 453 798 44,492
----------------------------------------------------------------------------------------------------
Total 5,335 - 2,442 39,142 542 477 815 48,753
LIABILITIES
Customer advances - - - 248 53 53 53 407
Taxes payables - - - 630 - - 162 792
Trade accounts payable - - - 2,261 - - - 2,261
Mortgages payable - - - (16) (16) 913 - 881
Other liabilities - 260 308 943 171 63 1,080 2,825
Short and long term debts - - - 1,257 3,520 - - 4,777
Salaries and social securities -
payables - - 107 - 186 - 293
----------------------------------------------------------------------------------------------------
Total - 260 308 5,430 3,728 1,215 1,295 12,236
==================================================================================================================================
74
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF DECEMBER 31, 2002
3. (Continued) Stated in thousands of pesos
===================================================================================================================================
TO MATURE (POINT 3 C)
--------------------------------------------------------------------------------------
WITHOUT ANY
FIXED DUE DATE
ITEMS (NON-CURRENT) 31.03.04 30.06.04 30.09.04 31.12.04 31.03.05
-----------------------------------------------------------------------------------------------------------------------------------
RECEIVABLES
Receivables for sale - 29 72 17 6 22
Other receivables - 453 453 453 397 454
Total - 482 525 470 403 476
LIABILITIES
Customer advances - 53 53 53 53 53
Other liabilities - 32 63 53 57 -
Short and long term debts - - - - - 7,446
Total - 85 116 106 110 7,499
===================================================================================================================================
=========================================================================
----------------------------------------------
ITEMS 30.06.05 30.09.05 31.12.05
-------------------------------------------------------------------------
RECEIVABLES
Receivables for sale 6 17 3
Other receivables 453 453 453
Total 459 470 456
LIABILITIES
Customer advances 53 53 53
Other liabilities 96 39 106
Short and long term debts 7,446 7,446 7,446
Total 7,595 7,538 7,505
=========================================================================
=========================================================================================================================
TO MATURE (POINT 3 C)
-----------------------------------------------------------------------------------------------
ITEMS 31.3.06 30.6.06 30.9.06 31.12.06 31.3.07 30.6.07
-------------------------------------------------------------------------------------------------------------------------
RECEIVABLES
Receivables for sale 21 4 4 4 27 70
Other receivables 453 453 453 454 6.788 -
Total 474 457 457 458 6.815 70
LIABILITIES
Customer advances 53 50 50 50 127 -
Other liabilities 120 - 32 - - -
Short and long term debt 7.446 7.446 7.446 7.446 14.892 14.892
Total 7.619 7.496 7.528 7.496 15.019 14.892
=========================================================================================================================
===================================================================================
---------------------------------------------
ITEMS 30.9.07 31.12.09 30.9.17 TOTAL
-----------------------------------------------------------------------------------
RECEIVABLES
Receivables for sale - - - 302
Other receivables - - - 12.170
Total - - - 12.472
LIABILITIES
Customer advances - - - 754
Other liabilities - - 9 607
Short and long term debt 14.892 530.596 - 634.840
Total 14.892 530.596 9 636.201
===================================================================================
75
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
UNAUDITED BUENOS AIRES STOCK EXCHANGE REGULATIONS
BALANCE SHEET AS OF DECEMBER 31, 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
-----------------------------------------------------------------------------------------------
FOREIGN LOCAL FOREIGN TOTAL
ITEMS LOCAL CURRENCY CURRENCY TOTAL CURRENT CURRENCY CURRENCY NON-CURRENT
------------------------------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLES
Receivables for sale 4,261 - 4,261 302 - 302
Other receivables 34,492 10,000 44,492 12,170 - 12,170
-----------------------------------------------------------------------------------------------
Total 38,753 10,000 48,753 12,472 - 12,472
====================================================================================================================================
LIABILITIES
Customer advances 407 - 407 754 - 754
Taxes payable 775 17 792 - - -
Trade accounts payable 2,261 . 2,261 - - -
Mortgages payable 620 261 881 - - -
Other liabilities 2,825 - 2,825 607 - 607
Short and long term debt 3,360 1,417 4,777 446,460 188,380 634,840
Salaries and social security payable 293 - 293 - - -
-----------------------------------------------------------------------------------------------
Total 10.541 1.695 12.236 447.821 188.380 636.201
====================================================================================================================================
==========================================================================================================
TOTAL IN
TOTAL TOTAL IN LOCAL FOREIGN TOTAL
ITEMS CURRENCY CURRENCY
----------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLES
Receivables for sale 4,563 4,563 - 4,563
Other receivables 56,662 46,662 10,000 56,662
---------------------------------------------------------------------
Total 61,225 51,225 10,000 61,225
==========================================================================================================
LIABILITIES
Customer advances 1,161 1,161 - 1,161
Taxes payable 792 775 17 792
Trade accounts payable 2,261 2,261 - 2,261
Mortgages payable 881 620 261 881
Other liabilities 3,432 3,432 - 3,432
Short and long term debt 639,617 449,820 189,797 639,617
Salaries and social security payable 293 293 - 293
---------------------------------------------------------------------
Total 648.437 458.362 190.075 648,437
==========================================================================================================
76
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF DECEMBER 31, 2002
Stated in thousands of pesos
4-b. Breakdown by adjustment clause
====================================================================================================================================
CURRENT NON-CURRENT
-----------------------------------------------------------------------------------------------
WITHOUT WITH WITHOUT WITH
ITEMS ADJUSTMENT ADJUSTMENT TOTAL CURRENT ADJUSTMENT ADJUSTMENT TOTAL
CLAUSE CLAUSE CLAUSE CLAUSE NON-CURRENT
------------------------------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLES
Receivables 4,261 - 4,261 302 - 302
Other receivables 44,492 - 44,492 12,170 - 12,170
-----------------------------------------------------------------------------------------------
Total 48,753 - 48,753 12,472 - 12,472
====================================================================================================================================
LIABILITIES
Customer advances 407 - 407 754 - 754
Taxes payable 792 - 792 - - -
Trade accounts payable 2,261 - 2,261 - - -
Mortgages payable 881 - 881 - - -
Other liabilities 2,825 - 2,825 607 - 607
Short and long term debt 4,777 - 4,777 634,840 - 634,840
Salaries and social security payable 293 - 293 - - -
-----------------------------------------------------------------------------------------------
Total 12,236 - 12,236 636,201 - 636,201
====================================================================================================================================
==============================================================================================================
TOTAL WITHOUT TOTAL WITHT
ITEMS TOTAL ADJUSTMENT ADJUSTMENT TOTAL
CLAUSE CLAUSE
-----------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLES
Receivables 4,563 4,563 - 4,563
Other receivables 56,662 56,662 - 56,662
----------------------------------------------------------------------
Total 61,225 61,225 - 61,225
===========================================================================================================
LIABILITIES
Customer advances 1,161 1,161 - 1,161
Taxes payable 792 792 - 792
Trade accounts payable 2,261 2,261 - 2,261
Mortgages payable 881 881 - 881
Other liabilities 3,432 3,432 - 3,432
Short and long term debt 639,617 639,617 - 639,617
Salaries and social security payable 293 293 - 293
----------------------------------------------------------------------
Total 648,437 648,437 - 648,437
===========================================================================================================
77
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF DECEMBER 31, 2002
Stated in thousands of pesos
4-c. Breakdown of accounts receivable and liabilities by interest clause
====================================================================================================================================
CURRENT NON-CURRENT
-----------------------------------------------------------------------------------------------------
NOT- NOT-
ACCRUING INTEREST ACCRUING TOTAL ACCRUING INTEREST ACCRUING TOTAL NON-
INTEREST CURRENT INTEREST CURRENT
------------------------------------------------------------------------------------------------------------------------------------
FIXED VARIABLE FIXED VARIABLE
RATE RATE RATE RATE
------------------------ -------------------------
ACCOUNTS RECEIVABLES
Receivables 865 - 3,396 4,261 - 302 - 302
Other receivables - - 44,492 44,492 - - 12,170 12,170
-----------------------------------------------------------------------------------------------------
Total 865 - 47,888 48,753 - 302 12,170 12,472
====================================================================================================================================
LIABILITIES
Customer advances - - 407 407 - - 754 754
Taxes payable - - 792 792 - - - -
Trade accounts payable - - 2,261 2,261 - - - -
Mortgages payable 881 - - 881 - - - -
Other liabilities 1,019 - 1,806 2,825 - - 607 607
Short and long term debt - - 4,777 4,777 516,890 117,950 - 634,840
Salaries and social security
payable - - 293 293 - - - -
-----------------------------------------------------------------------------------------------------
Total 1,900 - 10,336 12,236 516,890 117,950 1,361 636,201
====================================================================================================================================
=====================================================================================
TOTAL TOTAL
TOTAL ACCRUING NOT-ACCRUING TOTAL
INTEREST INTEREST
-------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLES
Receivables 4,563 1,167 3,396 4,563
Other receivables 56,662 - 56,662 56,662
-------------------------------------------------------
Total 61,225 1,167 60,058 61,225
=====================================================================================
LIABILITIES
Customer advances 1,161 - 1,161 1,161
Taxes payable 792 - 792 792
Trade accounts payable 2,261 - 2,261 2,261
Mortgages payable 881 881 - 881
Other liabilities 3,432 1,019 2,413 3,432
Short and long term debt 639,617 634,840 4,777 639,617
Salaries and social security
payable 293 - 293 293
-------------------------------------------------------
Total 648,437 636,740 11,697 648,437
=====================================================================================
78
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF DECEMBER 31, 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
=====================================================================
December 31, 2002
------------------------
Intercompany:
Abril S.A. 7
Alternativa Gratis S.A. 2
Alto Palermo S.A. 844
Altocity.Com S.A. 74
Baldovinos S.A. 609
Dolphin Fund Management S.A. 1
Inversora Bolivar S.A 706
Red Alternativa S.A. 15
Tarshop Sociedad Anonima 1
=====================================================================
Other current receivables
=====================================================================
December 31, 2002
------------------------
Intercompany:
Ritelco S.A. 30,905
Inversora Bolivar S.A. 519
Palermo Invest S.A 5,336
=====================================================================
Current trade accounts payable
=====================================================================
December 31, 2002
------------------------
Intercompany:
Alto Palermo S.A. 320
Dolphin Fund Management S.A. 3
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 DECEMBER 31, 2002
Stated in thousands of pesos
Other current liabilities
==================================================================
December 31, 2002
------------------------
Intercompany:
Alto Palermo S.A. 352
Baldovinos S.A. 37
Llao Llao Resorts S.A. 35
==================================================================
80
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
BUSINESS OVERVIEW
In thousands of pesos
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF DECEMBER 31, 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
BUSINESS OVERVIEW
In thousands of pesos
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF DECEMBER 31, 2002
Stated in thousands of pesos
13. Insured Assets.
Insured Accounting
amounts values Risk covered
-------------- -------------- ------------------------------------------------------------
Alsina 934 Capital (3) 1,890 1,488 Fire, explosion with additional coverage and debris removal
Alsina 934 Capital (3) 308 Third party liability with additional coverage and minor
1,488 risks.
Av. de Mayo 589-99 Capital 4,662 4,126 Fire, explosion with additional coverage and debris removal
Av. Alicia M. de Justo 1714 Dock 13
Capital (1) 17,000 53 Fire, explosion with additional coverage and debris removal
Av. Alicia M. de Justo 1714 Dock 13
Capital (1) 555 53 Third party liability with additional coverage and minor
risks.
Av. Alicia M. de Justo 750 Dock 5
Capital (1) 16,775 - Fire, explosion with additional coverage and debris removal
Av. Alicia M. de Justo 750 Dock 5
Capital (1) 202 - Third party liability with additional coverage and minor
risks.
Av. Alicia M. de Justo 840 Dock 6
Capital (1) 17,550 - Fire, explosion with additional coverage and debris removal
Av. Alicia M. de Justo 840 Dock 6 Third party liability with additional coverage and minor
Capital (1) 406 - risks.
Bolivar 108 e H. Yrigoyen 476 Capital 10,395 - Fire, explosion with additional coverage and debris removal
Bolivar 108 e H. Yrigoyen 476 Capital 3,829 Third party liability with additional coverage and minor
- risks.
Constitucion 1111 Capital 460 402 Fire, explosion with additional coverage and debris removal
Constitucion 1111 Capital 1,000 402 Third party liability with additional coverage and minor
risks.
Constitucion 1111 TIA Capital 3,625 402 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.
Dockitos. P. Madero Capital 29,400 23,488 Fire, explosion with additional coverage and debris removal
Edificios costeros Dique 2 Este.
Dockitos. P. Madero Capital 2,021 23,488 Third party liability with additional coverage and minor
risks.
Edificios costeros Dique 4 O.
Cosentini 240 Capital (1) 17,000 17,551 Fire, explosion with additional coverage and debris removal
Edificios costeros Dique 4 O.
Cosentini 240 Capital (1) 1,002 17,551 Third party liability with additional coverage and minor
risks.
F. Alcorta 3351 Palacio Alcorta
Capital (1) 30,250 - Fire, explosion with additional coverage and debris removal
F. Alcorta 3351 Palacio Alcorta
Capital (1) 1,655 - Third party liability with additional coverage and minor
risks.
Gurruchaga 274 Torres Jardin III
Capital (2) 10,736 140 Fire, explosion with additional coverage and debris removal
Gurruchaga 274 Torres Jardin III
Capital (2) 601 140 Third party liability with additional coverage and minor
risks.
ING Butty 240 Laminar Plaza Capital (1) 47,250 28,041 Fire, explosion with additional coverage and debris removal
ING Butty 240 Laminar Plaza Capital (1) 4,130 28,041 Third party liability with additional coverage and minor
risks.
Libertador 450-98 Capital (1) 67,200 34,992 Fire, explosion with additional coverage and debris removal
Libertador 450-98 Capital (1) 3,758 34,992 Third party liability with additional coverage and minor
risks.
82
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
BUSINESS OVERVIEW
In thousands of pesos
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF DECEMBER 31, 2002
Stated in thousands of pesos
13. Insured Assets (Continued)
Insured Accounting
amounts values Risk covered
-------------- -------------- ------------------------------------------------------------
Av. Libertador 602 Capital (1) Third party liability with additional coverage and minor
25,200 2,488 risks.
Av. Libertador 602 Capital (1) 1,002 2,488 Fire, explosion with additional coverage and debris removal
Madero 1020 Capital (1) 56,700 7,665 Fire, explosion with additional coverage and debris removal
Madero 1020 Capital (1) 3,283 7,665 Third party liability with additional coverage and minor
risks.
Madero 940 Capital (1) 36,960 3,857 Fire, explosion with additional coverage and debris removal
Madero 940 Capital (1) 1,315 3,857 Third party liability with additional coverage and minor
risks.
Maipu 1270 - 1300 Capital 44,100 40,832 Fire, explosion with additional coverage and debris removal
Maipu 1270 - 1300 Capital 2,778 40,832 Third party liability with additional coverage and minor
risks.
Padilla 870 Torres Jardin II Capital (2) 9,450 355 Fire, explosion with additional coverage and debris removal
Padilla 870 Torres Jardin II Capital (2) 607 355 Third party liability with additional coverage and minor
risks.
Reconquista 823 Capital 13,000 17,480 Fire, explosion with additional coverage and debris removal
Rivadavia 2768 Capital (1) 3,610 152 Fire, explosion with additional coverage and debris removal
Rivadavia 2768 Capital (1) 251 152 Third party liability with additional coverage and minor
risks.
Sarmiento 501 (1) 3,885 605 Fire, explosion with additional coverage and debris removal
Sarmiento 501 (1) 607 605 Third party liability with additional coverage and minor
risks.
Serrano 287 Torres Jardin I Capital (2) 9,450 53 Fire, explosion with additional coverage and debris removal
Serrano 287 Torres Jardin I Capital (2) 607 53 Third party liability with additional coverage and minor
risks.
Suipacha 664 31,500 9,968 Fire, explosion with additional coverage and debris removal
Suipacha 664 2,722 9,968 Third party liability with additional coverage and minor
risks.
83
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
BUSINESS OVERVIEW
In thousands of pesos
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
INFORMATION REQUIRED BY SECTION 68 OF THE
BUENOS AIRES STOCK EXCHANGE REGULATIONS
UNAUDITED BALANCE SHEET AS OF DECEMBER 31, 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, FEBRUARY 10, 2003.
84
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
BUSINESS OVERVIEW
In thousands of pesos
1. BRIEF COMMENTS ON THE COMPANY'S ACTIVITIES DURING THE PERIOD, 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.
December 31, December 31, December 31, December 31, December 31,
2002 2001 2000 1999 1998
--------------- --------------- ------------------ ---------------- ----------------
Current Assets 327,764 225,138 363,891 364,993 338,402
Non-Current Assets 1,752,954 1,340,968 1,427,584 1,580,560 1,562,318
--------------- --------------- ------------------ ---------------- ----------------
TOTAL 2,080,718 1,566,106 1,791,475 1,945,553 1,900,720
=============== =============== ================== ================ ================
Current Liabilities 128,589 493,115 351,517 408,437 395,329
Non-Current Liabilities 849,467 34,045 195,872 126,625 190,172
--------------- --------------- ------------------ ---------------- ----------------
SUBTOTAL 978,056 527,160 547,389 535,062 585,501
--------------- --------------- ------------------ ---------------- ----------------
Minority interest in subsidiaries 462,035 87,616 126,981 123,022 120,216
--------------- --------------- ------------------ ---------------- ----------------
Shareholders' Equity 640,627 951,330 1,117,106 1,287,470 1,195,003
--------------- --------------- ------------------ ---------------- ----------------
TOTAL 2,080,718 1,566,106 1,791,476 1,945,554 1,900,720
=============== =============== ================== ================ ================
3. CONSOLIDATED INCOME STRUCTURE AS COMPARED WITH THE SAME PERIOD FOR THE
FOUR PREVIOUS YEARS.
December 31, December 31, December 31, December 31, December 31,
2002 2001 2000 1999 1998
---------------- ---------------- ---------------- ---------------- ----------------
Operating ordinary profit 968 11,952 22,225 16,601 35,603
Financial results 147,676 (96,023) (48,360) 22,930 (22,068)
Equity in earnings of affiliated
companies (2,976) (28,188) 8,440 8,920 20,638
Other income (expenses) 10,765 (2,917) (2,935) 810 13,051
---------------- ---------------- ---------------- ---------------- ----------------
GAIN BEFORE TAXES 156,433 (115,176) (20,630) 49,261 47,224
Income tax/ asset tax (2,601) (3,260) (321) (6,998) (17)
Minority interest (26,783) (1,133) (1,373) (2,791) (4,177)
---------------- ---------------- ---------------- ---------------- ----------------
NET INCOME 127,049 (119,569) (22,324) 39,472 43,030
================ ================ ================ ================ ================
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 as Accumulated as Accumulated as Accumulated as Accumulated as
of of of of of
Real Estate December 31, December December 31, December 31, December 31,
2002 31, 2001 2000 1999 1998
(1) (1) (1) (1) (1)
------------------------------------ ---------------- ---------------- ---------------- ---------------- ----------------
Apartments & Loft Buildings
Torres Jardin 112 1,617 4,980 3,864 6,815
Torres de Abasto 441 4,280 9,553 (12,545) 45,920
Alcorta Palace 1 520 - 20 2,012
Concepcion Arenal and Dorrego 1916 - 107 3,109 1,647 657
Alto Palermo Park 914 2,598 - 5,037 5,476
Other 404 1,418 1,267 591 2,691
Residential Communities
Abril / Baldovinos 7,346 4,750 10,327 11,811 15,668
Villa Celina I, II and III 28 (51) 57 118 2,302
Villa Celina IV and V - 44 2,012 - -
Other - - - 249 4,556
Undeveloped parcels of land
Monserrat - - 1,790 - -
Dique IV - - 12,220 - -
Other
Madero 940 1,637 - - - -
Puerto Madero Dock 6 139 64 - - 860
Libertador 498 2,296 - - - -
Constitucion 1111 1,973 - - - -
Av. de Mayo 701 - - 3,085 - -
Madero 1020 5,585 - - - -
Santa Fe 1588 - 8,107 - - -
Other 592 127 181 746 220
---------------- ---------------- ---------------- ---------------- ----------------
21,468 23,581 48,581 11,538 87,177
================ ================ ================ ================ ================
(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.
December 31, December 31, December 31,
2002 2001 2000
----------------- ----------------- -----------------
LIQUIDITY RATIO
Current Assets 327,764 = 2,55 225,138 = 0,46 363,891 = 1,04
----------------- ----------------- -----------------
Current Liabilities 128,589 493,115 351,517
INDEBTEDNESS RATIO
Total liabilities 978,056 = 1,53 527,160 = 0,55 547,389 = 0,49
----------------- ----------------- -----------------
Shareholders' Equity 640,627 951,330 1,117,106
INCOME BEFORE INCOME TAX, TAX ON ASSETS AND MINORITY INTEREST.
December 31, December 31, December 31,
2002 2001 2000
----------------- ----------------- -----------------
Income
Before income tax/
Tax on assets 156,433 = 0,30 (115,176) =(0,11) (20,630) = (0,02)
----------------- ----------------- -----------------
Shareholders' equity at 513,578 1,070,898 1,139,429
end excluding (loss)
income for the period
December 31, December 31,
1999 1998
----------------- -----------------
LIQUIDITY RATIO
Current Assets 364,993 = 0,89 338,402 = 0,86
----------------- -----------------
Current Liabilities 408,437 395,329
INDEBTEDNESS RATIO
Total liabilities 535,062 = 0,42 585,501 = 0,49
----------------- -----------------
Shareholders' Equity 1,287,470 1,195,003
INCOME BEFORE INCOME TAX, TAX ON ASSETS AND MINORITY INTEREST.
December 31, December 31,
1999 1998
----------------- -----------------
Income
Before income tax/
Tax on assets 49,261 = 0,04 47,225 = 0,04
----------------- -----------------
Shareholders' equity at 1,247,998 1,151,972
end excluding (loss)
income for the period
87
IQ03 Highlights, including significant operations occurred after December 31,
2002.
I. OFFICES AND OTHER RENTAL PROPERTIES
During the six-month period ended December 31, 2002, revenues from the Company's
rental portfolio reached Ps.9.6 million, as compared to Ps.26.8 million in the
same period for fiscal year 2002. The average occupancy rate registered a rise
from 69% as of September 30, 2002, to 72% as of December 31, 2002. Since the
dramatic collapse of our income after the pesification of our leasing agreements
income has remained pretty stable.
During this quarter, the Company sold some of its rental properties with the aim
to concentrate our ownership in whole buildings.
SALE OF MADERO 1020 OFFICES - On October 31, 2002, our Company sold floor 2 and
8 parking spaces located in the office building of "Madero 1020", for US$
370,000.
SALE OF LIBERTADOR 498 OFFICES - On November 4, 2002, we sold floor 27, 8
parking spaces and 7 complementary units, located in the office building "El
Rulero" (Libertador 498), for a total of US$ 650,000.
The chart below presents information on the Company's offices and other rental
properties as of December 31, 2002.
OFFICES AND OTHER RENTAL PROPERTIES
LEASABLE MONTHLY BOOK
AREA RENTAL TOTAL RENTAL INCOME FOR THE PERIOD VALUE
DATE OF (M2) OCCUPANCY INCOME ENDED DECEMBER 31,2002, PS.000 (4) PS.000
ACQUISITION (1) RATE(2) PS./000 (3) 2003 2002 2001 (5)
------------------------------------------------------------------------------------------------------------------------------------
OFFICES
Inter-Continental Plaza (6) 11/18/97 22,535 77% 488 3,430 7,600 8,045 63,938
Libertador 498 20/12/95 10,533 62% 213 1,224 3,195 3,600 34,992
Maipu 1300 09/28/95 10,325 73% 192 1,135 3,085 3,247 40,831
Laminar Plaza 03/25/99 6,521 90% 256 1,510 2,867 2,557 28,042
Madero 1020 12/21/95 3,075 74% 75 430 1,434 2,047 7,625
Reconquista 823/41 11/12/93 6,100 0% 0 0 1,506 1,637 17,480
Suipacha 652/64 11/22/91 11,453 45% 51 296 903 1,569 9,968
Edificios Costeros 03/20/97 6,389 31% 25 220 1,082 1,122 23,488
Costeros Dique IV 08/29/01 5,437 48% 51 392 949 0 17,551
Other (7) - 3,556 45% 54 337 885 936 9,145
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 85,924 59% 1,405 8,974 23,506 24,760 253,060
OTHER RENTAL PROPERTIES
Comercial Properties (8) 4,076 98% 5 101 1,973 2,762 1,891
Other Properties (9) 34,015 100% 72 463 1,372 1,662 6,510
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 38,091 100% 77 564 3,345 4,424 8,401
RELATED EXPENSES
MANAGEMENT FEES 335 751 707
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OFFICES AND OTHER (10) 124,015 72% 1,482 9,873 27,602 29,891 261,461
------------------------------------------------------------------------------------------------------------------------------------
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 12/31/02 were computed.
(4) Total consolidated leases, according to the RT4 method, reexpressed as from
12/31/02. Excludes gross income tax deduction.
(5) Cost of acquisition, plus improvements, less accumulated depreciation, plus
adjustment for inflation as of 12/31/02.
(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 2002 and 2001 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 our Company). Cumulative revenues additionally include: In fiscal
years 2002 and 2001, the revenues from Santa Fe 1588 and Rivadavia 2243
(fully sold). 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) -
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 of December 31, 2002, our share in APSA, the leading shopping center company
in Argentina, was of 49,9%. Notwithstanding, by the end of the second quarter of
fiscal year 2003, we acquired 3.4 million additional shares of APSA, increasing
our ownership to 54.9%.
As of December 31, 2002, total revenues were Ps.53.2 million, i.e., 56.4% less
than for the same period of the previous year. The net profit for the six-month
period was Ps.52.8 million, in contrast to the Ps.47.7 million loss for the same
period of the previous year.
The macroeconomic context has been favorable for APSA during this quarter. The
index measuring consumers' confidence reverted the negative trend shown since
early 2001 to reach a 29.6% increase during the last quarter of 2002. On the
other hand, retail inflation, which, during the first nine months of the year
had seriously undermined consumers with a 39.7% increase during the last three
months of 2002, showed a significant deceleration, reaching an additional
increase of only 0.9%. Another variable which positively affected our business
was the increase of tourism in Argentina. By means of strategic marketing
actions, the Company was able to channel to its Shopping Centers the increased
flow of tourists, a kind of public with higher purchasing power and higher
average consumption.
In this way, our lessees' sales were significantly fostered during the three
months ended December 31, 2002, causing them to reach their highest historic
performance in nominal terms by totaling Ps.271.5 million, equivalent to 51.9%
more than the invoicing during the quarter ended December 31, 2001 and 13.9%
higher than the invoicing during the quarter ended December 31, 2001.
In view of our lessees' revenues recovery, during this quarter we continue to
apply the Referential Stabilization Coefficient ("CER") upon "pesified"
agreements and reinstated the key money charge upon execution or renewal of
lease agreements in our shopping centers.
APSA's shopping centers received approximately 65.4 million visits during the
last twelve months.
At December 31, 2002, the average level of occupation of APSA shopping centers
(including Mendoza Plaza) was approximately 94.1%.
TARJETA SHOPPING
During this quarter, Tarshop S.A., the credit card company in which the Company
holds an 80% interest, had a 26.4% decrease in its credit card portfolio
(including securitized receivables), from Ps. 71.6 million as of December 31,
2001 to Ps. 52.8 million as of December 31, 2002. In addition, the number of
card holders decreased by 1,753 during this period, amounting to 148,619.
Although Tarjeta Shopping revenues, which were affected by the Argentine
financial crisis, experienced a 57.2% drop during the six month period from Ps.
27.8 million as of December 31, 2001 to Ps. 11.9 million as of December 31,
2002, Tarshop collection evidenced a 22.7% improvement in the bad debt
allowance, from Ps. 7.5 million to Ps. 5.8 million, respectively. In
addition, an improvement of the situation was evidenced in this respect during
the last three months of 2002 as compared to the immediately preceding quarter,
as the charge decreased by 64.2%.
Tarjeta Shopping's share in credit card sales at Alto Palermo, Alto Avellaneda
and Abasto de Buenos Aires as of December 31, 2002 was 4.8%, 29.4% and 16.3%,
respectively. The credit cards activation rate is approximately 59%. The chart
below presents information on the Company's shopping centers as of December 31,
2002.
SHOPPING CENTERS
TOTAL RENTAL INCOME FOR THE SIX-MONTH PERIOD
DATE GROSS PERCENTAGE ENDED DECEMBER 31, BOOK
OF LEASABLE LEASED PS./000 (3) VALUE
ACQUISITION AREA M2 (1) (2) 2003 2002 2001 PS./000 (4)
---------------------------------------------------------------------------------------------------------------------------------
SHOPPING CENTERS (5)
Alto Palermo 12/23/97 18,146 88% 13,454 23,267 27,482 254,874
Abasto 07/17/94 40,476 97% 9,424 21,864 24,479 219,742
Alto Avellaneda 12/23/97 26,701 97% 4,737 15,017 18,447 95,064
Paseo Alcorta 06/06/97 14,909 86% 6,089 11,696 13,673 74,039
Patio Bullrich 10/01/98 11,623 95% 4,927 8,502 8,493 130,085
Nuevo NOA Shopping 03/29/95 18,876 88% 855 2,911 2,684 21,343
Buenos Aires Design 11/18/97 11,992 92% 1,127 5,931 6,103 23,115
Fibesa and others (6) 2,003 4,155 5,080 -
Revenues Tarjeta Shopping 11,759 28,216 20,230 -
---------------------------------------------------------------------------------------------------------------------------------
TOTAL SHOPPING CENTERS (7) 142,723 93% 54,375 121,559 126,671 818,262
---------------------------------------------------------------------------------------------------------------------------------
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
12/31/02. Excludes gross income tax deduction.
(4) Cost of acquisition plus improvements, less accumulated depreciation, plus
adjustment for inflation as of 12/31/02.
(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 of Ps.21.5 million during the six-month period
ended December 31, 2002, as compared to Ps.23.3 million recorded during the same
period of fiscal year 2002. This decrease mainly results from the Company's
reduced stock of units available for sale, because of the interruption in the
launching of new projects.
ABRIL, HUDSON, PROVINCE OF BUENOS AIRES. During the quarter ended December 31,
2002, 13 lots of Abril were sold. 19 of the 20 neighborhoods projected for all
the development were being marketed, with 92% of the lots in such neighborhoods
sold. There were 110 houses under construction and 470 finished houses.
The following chart illustrates IRSA's development properties as of December 31,
2002.
DEVELOPMENT PROPERTIES
DATE ESTIMATED COST/ AREA DESTINED TOTAL PERCENTAGE PERCENTAGE ACCUMULATED
OF REAL COST FOR SALES UNITS OR CONSTRUCTED SOLD SALES
ACQUISITION (PS. 000) (1) (M2) (2) LOTS (3) (4) (PS.000) (5)
APARTMENT COMPLEXES
Torres Jardin 7/18/96 56,163 32,244 490 100% 98% 69,469
Torres de Abasto (8) 7/17/94 74,259 35,630 545 100% 99% 108,430
Palacio Alcorta 5/20/93 75,254 25,555 191 100% 100% 76,024
Concepcion Arenal 12/20/96 14,958 6,913 70 100% 97% 11,433
Alto Palermo Park (9) 11/18/97 35,692 10,654 73 100% 90% 42,769
Other (10) 49,827 23,900 184 100% 97% 53,005
SUBTOTAL 306,153 134,896 1,553 N/A N/A 361,130
RESIDENTIAL
COMMUNITIES
Abril/Baldovinos (11) 1/3/95 129,992 1,408,905 1,273 100% 88% 193,998
Villa Celina I, II y III 5/26/92 4,707 75,970 219 100% 99% 13,851
Villa Celina IV y V 12/17/97 2,432 58,480 181 100% 99% 9,413
Other - - - 0% 0% -
SUBTOTAL 137,131 1,543,355 1,673 N/A N/A 217,262
LAND RESERVE
Dique 3 (12) 9/9/99 10,474 0% - -
Puerto Retiro (9) 5/18/97 82,051 0% - -
Caballito 11/3/97 20,968 0% - -
Santa Maria del Plata 7/10/97 715,952 0% - -
Pereiraola (11) 12/16/96 1,299,630 0% - -
Monserrat (9) 11/18/97 3,400 0% 100% 5,478
Dique 4 (ex Soc del Dique) 12/2/97 4,653 0% 50% 12,220
Other (13) 4,439,447 0% -
SUBTOTAL 6,576,575 N/A N/A 17,698
OTHER
Sarmiento 580 1/12/94 11,605 2,635 14 100% 100% 10,758
Santa Fe 1588 11/2/94 8,280 2,713 20 100% 100% 8,107
Rivadavia 2243/65 5/2/94 8,106 2,070 4 100% 100% 3,634
Libertador 498 12/20/95 7,397 2,191 3 100% 100% 5,888
Constitucion 1159 9/16/94 2,297 2,430 1 100% 100% 1,973
Madero 1020 12/21/95 9,823 2,768 5 100% 100% 8,094
Madero 940 8/31/94 2,846 772 1 100% 100% 1,637
Other Properties (14) 81,275 44,207 263 100% 99% 104,690
SUBTOTAL 131,629 59,786 311 N/A N/A 144,781
SUBTOTAL 574,913 8,314,612 3,537 N/A N/A 740,871
INTEREST FOR FINANCING PROPERTY SALES - MANAGEMENT FEES
TOTAL (15) 574,913 8,314,612 3,537 N/A N/A 740,871
DEVELOPMENT PROPERTIES
ACCUMULATED SALES FOR THE SIX-MONTH PERIOD BOOK
DE LOS EJERCICIOS FISCALES (6) (PS. 000) VALUE
03 02 01 (PS. 000)
(PS. 000) (PS. 000) (PS. 000) (7)
APARTMENT COMPLEXES
Torres Jardin 112 1,617 4,980 547
Torres de Abasto (8) 441 4,280 9,553 607
Palacio Alcorta 1 520 - -
Concepcion Arenal - 107 2,782 218
Alto Palermo Park (9) 914 2,598 - 4,171
Other (10) 404 1,418 1,594 2,003
SUBTOTAL 1,872 10,540 18,909 7,546
RESIDENTIAL
COMMUNITIES
Abril/Baldovinos (11) 7,346 4,750 10,327 15,483
Villa Celina I, II y III 28 (51) 57 43
Villa Celina IV y V - 44 2,012 11
Other - - - -
SUBTOTAL 7,374 4,743 12,396 15,537
LAND RESERVE
Dique 3 (12) - - - 25,781
Puerto Retiro (9) - - - 45,899
Caballito - - - 13,516
Santa Maria del Plata - - - 115,133
Pereiraola (11) - - - 21,711
Monserrat (9) - - 1,790 -
Dique 4 (ex Soc del Dique) - - 12,220 6,115
Other (13) - - - 138,447
SUBTOTAL - - 14,010 366,602
OTHER
Sarmiento 580 - - - -
Santa Fe 1588 - 8,107 - -
Rivadavia 2243/65 - - - -
Libertador 498 2,296 - - -
Constitucion 1159 1,973 - - -
Madero 1020 5,585 - - 1,620
Madero 940 1,637 - - -
Other Properties (14) 731 191 3,266 588
SUBTOTAL 12,222 8,298 3,266 2,178
SUBTOTAL 21,468 23,581 48,581 391,863
INTEREST FOR FINANCING PROPERTY SALES
- MANAGEMENT FEES 121 716 1,763
TOTAL (15) 21,589 24,297 50,344 391,863
Notes:
Cost of acquisition plus total investment made and/or planned if the project has
not been completed, adjusted for inflation as of 12/31/02.
(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 12/31/02.
(6) Corresponds to the Company's sales consolidated by the RT4 method, adjusted
for inflation as of 12/31/02. Excludes gross income tax deduction.
(7) Cost of acquisition plus improvement plus activated interest, adjusted for
inflation as of 12/31/02.
(8) Through APSA S.A.
(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 (fully sold), Yerbal 855, Pampa 2966 J.M. Moreno 285 (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 1159,
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,
Caballito and the Coto project (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, Av. de
Mayo 701, 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
Despite the low income that has been historically generated by this business
segment, the devaluation of the Peso has brought about an increase in the inflow
of tourists in Argentina, turning this segment into a more profitable
alternative. This shift has been more intensely sensed as from the beginning of
fiscal year 2003, with a significant increase in the occupancy rate of all of
our hotels.
The Llao Llao Hotel has undergone a successful winter season and during summer
time the same trend is being observed. Tourists from all over the world visit
our country so as to get to know this famous hotel and the surrounding
landscape. In order to satisfy all of our guests needs we have built an outdoors
swimming pool of gigantic dimensions that has got a heating system, enabling its
use during winter as well.
Total revenues from the hotel segment amounted to Ps.16.9 million over the
six-month period ended December 31, 2002, against Ps.21.4 million recorded over
the same period in fiscal year 2002.
Because of the implementation of the new RT4 consolidation method, as from June
2002, revenues from Llao Llao hotel are no longer consolidated.
The chart below shows information regarding our Company's hotels estimated for
the six-month period ended December 31, 2002.
HOTELS
HOTEL DATE OF NUMBER OF ROOMS AVERAGE AVG. PRICE ACCUMULATED SALES AS OF DECEMBER BOOK VALUE AS OF
ACQUISITION OCCUPANCY PER ROOM 31, (PS. 000) (2) DECEMBER 31, 2002
(3)
% (1) PS. 2002 2001 2000 (PS. 000)
------------------- ------------- --------------- ----------- -------------- ---------- ----------- ------------- ------------------
Inter-Continental 11/97 312 50 250 10,947 12,984 21,440 58,297
Sheraton Libertador 3/98 200 47 229 5,611 8,404 12,655 40,956
Llao-Llao (4) 6/97 158 66 416 - - - 12,806
Piscis (2) 9/02 98 N/D N/D - - - 5,139
------------- --------------- ----------- -------------- ---------- ----------- ------------- ------------------
Total 768 N/D N/D 16,558 21,388 34,095 117,198
------------- --------------- ----------- -------------- ---------- ----------- ------------- ------------------
Notes:
(1) Accumulated average for the period.
(2) Corresponds to our total sales consolidated under the RT4 method adjusted
by inflation as of 12/31/02. It does not include gross income tax
deduction.
(3) Represents 100% of the hotel's book value including facilities and
goodwill.
(4) The average occupation and the average price per room are not available to
date.
(5) Although Llao Llao Hotel no longer consolidates its sales, we consider it
import to include it in the table. The book value represents the value of
our investment.
V. FINANCIAL TRANSACTIONS AND OTHERS
IMPACT OF EXCHANGE RATE FLUCTUATIONS ON THE COMPANY'S FINANCIAL POSITION - Our
dollar-denominated liabilities have been positively affected by the 11% Peso
appreciation during the six-month period ended December 31, 2002, generating a
positive result for our Company of Ps.157.7 million. The exposure of our assets
to this same macroeconomic indicator during the same period in fiscal year 2002
generated a loss of Ps.22.3 million. The net result generated by the
appreciation of the Peso was of Ps. 135.4 million and is registered under
"Financial Results". It considerably explains the gain for this period.
RESTRUCTURING OF OUTSTANDING DEBT - On November 15, 2002, we signed a
Refinancing Framework Agreement and on November 21, 2002, the operation was
concreted with our six bank creditors (Banca Nazionale del Lavoro, BankBoston,
Banco Ciudad, HSBC, Banco Itau and Banco Nacion) to refinance the Syndicated US$
80 million Loan and the outstanding US$ 37.0 million Floating Rate Notes under
the following scheme:
I. US$ 13.6 million cash down payment reducing the principal;
II. US$ 15.0 million of the 8% Convertible Notes due 2007 subscribed by
BankBoston swapping old debt;
III. US$ 37.4 million Secured Floating Rate Notes due 2009 with an interest rate
of 90-day LIBOR plus 200 basic points. These Notes are secured with a first
priority mortgage on some of our real estate properties for a 50% value of the
debt; and
IV. US$ 51.0 million Unsecured Credit Facility due 2009. 69% of the Facility
bears an interest rate of 90-day LIBOR plus 200 basic points while the remaining
bears a fixed step up rate ranging from 5.5% to 6.5%.
ISSUE OF BONDS CONVERTIBLE INTO ORDINARY SHARES OF OUR COMPANY - The Company's
successful offering of up to US$ 100 million Convertible Notes ended on November
21, 2002. Convertible notes are accompanied by non-detachable warrants that
enable the purchase of additional shares of our common stock. These notes bear
an 8% interest per year and mature in November 2007. The conversion price is of
US$ 0.5450 per share, meaning that every convertible note can be exchanged for
1.8349 common shares. The proceeds of the convertible notes' offering have been
mostly used to cancel and restructure our liabilities outstanding at the moment,
remaining US$ 55 million cash position for working capital.
GOLDMAN SACHS DEBT CANCELLATION - On December 4, 2002 we have cancelled our debt
with GSEM/AP Holdings, LP (Goldman Sachs), consisting in US$ 16.3 million of
principal plus accrued interest as of today, for a total of US$ 11.1 million.
DISTRIBUTION OF TREASURY SHARES - As of December 19, 2002, 4,587,285 treasury
shares of our Company have been distributed among the shareholders,
proportionally to their shareholdings. This distribution represents a 2.21% of
the outstanding capital stock.
ADJUSTMENT OF CONVERSION PRICE OF CONVERTIBLE NOTES DUE 2007 - As a result of
the distribution of 4,587,285 treasury shares, the Company has adjusted the
conversion price of the notes according to what has been stipulated in the
issuance clauses. Due to such adjustment the conversion price of the notes goes
from US$ 0.5571 to US$ 0.5450 and the exercise price for the warrants goes from
US$ 0.6686 to US$ 0.6541. This adjustment is in force as from December 20, 2002.
PURCHASE OF APSA'S SHARES AND CONVERTIBLE NOTES - During January 2003, we have
acquired 3.4 million additional shares of APSA, thus our ownership in the
company adds up to 54.9%. Moreover, we have acquired 2.6 million of APSA's
Convertible Notes that together with the 27,324,848 convertible notes subscribed
at the moment of the issuance, amount to 59.9% of the convertible notes issued
by our subsidiary.
IMPROVEMENT IN THE GRADING OF OUR CONVERTIBLE NOTES' GLOBAL PROGRAM FOR UP TO
US$ 250 MILLION - On January 28, 2002, Fitch, a grading agency, raised the grade
of our Convertible Notes' Global Program for up to US$ 250 million, from C (arg)
to B- (arg). The raise in the grade is due to the restructuring of our debt by
which we have extended all maturities on a long-term basis. Our Secured Debt for
US$ 37.4 million has been issued under this program.
VII. BRIEF COMMENTS ON PROSPECTS FOR THE ONCOMING QUARTER
We believe that the worst has been overcome and, as evidenced by history, deep
crisis bring about opportunities and growth.
Our Company was able to face the adverse conditions arisen during the Argentine
crisis and was one of the very few companies which avoided a default. The
successful subscription of our Convertible Bonds has evidenced the confidence
place upon us both by the domestic and the international markets. Banks have
also contributed to refinance our debt with longer terms and lower interest
rates.
The proceeds from the Convertible Bonds have placed us in a privileged cash
position, which will enable us to take advantage of the opportunities appearing
in the market, especially at a time when property prices have significantly
dropped.
As regards Argentina, although the refinancing of debt maturities with the IMF
enables to reduce the economic uncertainty, the political-electoral map
continues to be complex, it being the main obstacle to prepare macroeconomic
forecasts.
Luiz Inacio da Silva's administration in Brazil showed a good start, which is
reflected by the improvement of the main financial indicators, but some risks
still continue to exist.
We are optimistic as to the future. Our cautious performance has caused us to
attain an outstanding position in the market and its confidence will enable us
to keep on growing. The time of adjustment is coming to an end and as soon as
the conditions exist we will put into practice the projects postponed by the
recession.
[PRICEWATERHOUSECOOPERS LOGO] [SC INTERNATIONAL LOGO] ABELOVICH,
POLANO
& ASOCIADOS
Free translation from the original prepared in Spanish for publication in
Argentina
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Shareholders of
IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANONIMA
1. We have reviewed the balance sheets of IRSA Inversiones y
Representaciones Sociedad Anonima at December 31, 2002 and 2001, and the
related statements of income, of changes in shareholders' equity and of
cash flows for the six-month periods then ended, and the complementary
notes 1 to 13 and exhibits A to I. In addition, we have reviewed the
consolidated financial statements of IRSA Inversiones y Representaciones
Sociedad Anonima and subsidiaries for the six-month periods the ended.
These financial statements are the responsibility of the Company's
management.
2. We conducted our review in accordance with standards established by
Technical Resolution No. 7 of the Argentine Federation of Professional
Councils of Economic Sciences for limited reviews of financial
statements. A review of interim financial information consists
principally of applying analytical procedures to financial data and
making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
3. The Company has prepared the financial statements following the valuation
criteria established by the Comision Nacional de Valores, which as
explained in Note 1 c) differ from certain aspect of prevailing
accounting standards in Argentina. The effect on the financial statements
arising from the different valuation criteria have not been quantified by
the Company and we have not been able, through the performance of other
auditing procedures, to estimate the impact on the financial statements
of this divergence from professional accounting standards in Argentina.
4. As detailed in note 1 to the consolidated financial statements, as result
of the economic crisis in Argentina, the period under consideration was
affected by the measures adopted by the National Government. The future
evolution of the crisis may require that the Government modify some of
the measures adopted or issue additional regulations. Consequently, the
Company's financial statements must be read in the light of these
circumstances.
5. Our report dated September 9, 2002 on the financial statements at June
30, 2002 and 2001 included a qualification referred to the uncertainty as
to whether the Company would be in a position to continue to operate as
going concern. As mentioned in Note 1 to the consolidated financial
statements, the restructuring of the Company's debt was satisfactorily
completed in November 2002. Consequently, our report on the financial
statements at December 31, 2002 does not longer contain the mentioned
observation.
PRICE WATERHOUSE & CO. ABELOVICH, POLANO & ASOCIADOS
Av. A. Moreau de Justo 270, Piso 2o 25 de Mayo 596 - 8o Piso
C1107AAF Ciudad de Buenos Aires - Argentina (1002) Buenos Aires - Argentina
Tel. (54-11) 4319-4600 Tel./Fax 4312-8525 -
Fax: (54-11) 4315-6448 / 9 E-mail: abelovich@elsitio.net
www.pwcglobal.com
[PRICEWATERHOUSECOOPERS LOGO] [SC INTERNATIONAL LOGO] ABELOVICH,
POLANO
& ASOCIADOS
INDEPENDENT ACCOUNTANT'S REPORT (Contd.)
6. Based on the work done and on our audit of the financial statements of
the Company' 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 paragraph 5, we report that the financial statements
of IRSA Inversiones y Representaciones Sociedad Anonima at December 31,
2002 and 2001 and the consolidated financial statements at those dates,
prepared in accordance with accounting standards of 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 than those mentioned in paragraph 3.
7. 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 Comision Nacional de Valores;
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 December 31, 2002, the debt accrued in favor of the Integrated
Pension and Survivors' Benefit System according to the accounting
records amounted to $ 77 thousand, none of which was due at that
date.
Buenos Aires
February 10, 2003
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. To 102 Fo 191 C.P.C.E.C.A.B.A. To 175 Fo 65
Professional Registration of the Firm Professional Registration of the Firm
C.P.C.E.CAP.FED. To 1 Fo 240 C.P.C.E.CAP.FED. To 1 Fo 1
PRICE WATERHOUSE & CO. ABELOVICH, POLANO & ASOCIADOS
Av. A. Moreau de Justo 270, Piso 2o 25 de Mayo 596 - 8o Piso
C1107AAF Ciudad de Buenos Aires - Argentina (1002) Buenos Aires - Argentina
Tel. (54-11) 4319-4600 Tel./Fax 4312-8525 -
Fax: (54-11) 4315-6448 / 9 E-mail: abelovich@elsitio.net
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: /S/ Saul Zang
Name: Saul Zang
Title: Second Vice Chairman of the Board of Directors
Dated: February 21, 2003