Form 6-K
Table of Contents

 

 

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 May, 2010

 

 

CRESUD SOCIEDAD ANONIMA COMERCIAL INMOBILIARIA

FINANCIERA Y AGROPECUARIA

(Exact name of Registrant as specified in its charter)

CRESUD INC.

(Translation of registrant’s name into English)

 

 

Republic of Argentina

(Jurisdiction of incorporation or organization)

Moreno 877, 23rd Floor, (C1091AAQ)

Buenos Aires, Argentina

(Address of principal executive offices)

 

 

Form 20-F      ü            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      ü    

 

 

 


Table of Contents

CRESUD S.A.C.I.F. and A

(THE “COMPANY”)

REPORT ON FORM 6-K

Attached is a copy of the English translation of the Financial Statements for the nine-month period ended on March 31, 2010 and on March 31, 2009 filed by the Company with the Bolsa de Comercio de Buenos Aires and with the Comisión Nacional de Valores.


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria,

Financiera y Agropecuaria

Free Translation of the Unaudited Financial Statements

Corresponding to the nine-month periods

ended March 31, 2010 and 2009


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Unaudited Financial Statements

Index

 

Presentation

  
Consolidated Balance Sheet    2
Consolidated Statement of Income    3
Consolidated Statement of Cash Flow    4
Notes to the Consolidated Financial Statements    6
Balance Sheet    78
Statement of Income    79
Statement of Changes in Shareholders’ Equity    80
Statement of Cash Flow    81
Notes to the Financial Statements    83
Schedules    126

Additional Information to the Notes to the Financial Statements required by section 68 of the Buenos Aires Stock Exchange Regulations

   136
Business Highlights    142
Report of Independent Auditors    161


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

Cresud Sociedad Anónima,

Comercial, Inmobiliaria,

Financiera y Agropecuaria

Free Translation from the original prepared in Spanish

for publication in Argentina

Unaudited Consolidated Financial Statements

Corresponding to the nine-month periods

ended March 31, 2010 and 2009


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Fiscal year No. 75 started on July 1, 2009

Unaudited Financial Statements for the period ended March 31, 2010

In comparative format with previous fiscal year (Note 1- Consolidated Statements)

(in thousands of pesos)

 

Legal Address:    Moreno 877, 23rd Floor
   Ciudad Autónoma de Buenos Aires
Principal Activity:    Agriculture, livestock and real-estate

DATES OF REGISTRATION AT THE PUBLIC REGISTRY OF COMMERCE

Free translation from the original prepared in spanish

for publication in Argentina

 

Of the by-laws:    February  19th, 1937
Of the latest amendment:    July 28th, 2008
Duration of the Company:    June 6th, 2082

Information on controlled companies in Note 2 to the Consolidated Unaudited Financial Statements

CAPITAL STATUS (Note 3 of basic unaudited financial statements)

SHARES

 

Type of stock

   Authorized    Subscribed    Paid-in

Ordinary certified shares of Ps. 1 face value and 1 vote each

   501,559,427    501,559,427    501,559,427

 

1


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Unaudited Consolidated Balance Sheet as of March 31, 2010 and 2009 and June 30, 2009

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

     March  31,
2010
(Notes 1 and 2)
    June  30,
2009
(Notes 1 and 2)
    March  31,
2009
(Notes 1 and 2)
 

ASSETS

      

Current Assets

      

Cash and banks (Note 4.a.)

   83,302      82,459      68,507   

Investments (Note 4.b.)

   237,272      345,541      285,825   

Trade accounts receivable, net (Note 4.c.)

   377,193      303,095      267,175   

Other receivables (Note 4.d.)

   256,556      287,363      184,655   

Inventories (Note 4.e.)

   369,303      139,197      196,841   
                  

Total Current Assets

   1,323,626      1,157,655      1,003,003   
                  

Non-Current Assets

      

Trade accounts receivable (Note 4.c.)

   25,333      9,230      10,759   

Other receivables (Note 4.d.)

   236,552      242,592      276,222   

Inventories (Note 4.e.)

   203,238      251,529      239,669   

Investments on controlled and related companies (Note 4.b.)

   1,960,493      1,337,390      1,019,805   

Other investments (Note 4.b.)

   5,301      21,215      57,562   

Property and Equipment, net (Note 4.f.)

   3,219,856      3,309,998      3,181,710   

Intangible assets, net (Note 4.g.)

   72,471      55,187      45,870   
                  

Subtotal Non-Current Assets

   5,723,244      5,227,141      4,831,597   
                  

Goodwill, net (Note 4.h.)

   (366,557   (408,740   (309,154
                  

Total Non-Current Assets

   5,356,687      4,818,401      4,522,443   
                  

Total Assets

   6,680,313      5,976,056      5,525,446   
                  

LIABILITIES

      

Current Liabilities

      

Trade accounts payable (Note 4.i.)

   373,713      339,894      208,048   

Mortgages payable (Note 4.j.)

   —        1,930      2,812   

Short-term debt (Note 4.k.)

   912,169      536,888      516,037   

Salaries and social security payable (Note 4.l.)

   43,581      41,754      27,898   

Taxes payable (Note 4.m.)

   113,933      155,952      152,647   

Advances from customers (Note 4.n.)

   197,225      97,386      106,310   

Other liabilities (Note 4.o.)

   106,619      136,057      60,488   

Provisions for lawsuits and contingencies (Note 4.p.)

   4,212      4,051      3,972   
                  

Total Current Liabilities

   1,751,452      1,313,912      1,078,212   
                  

Non-Current Liabilities

      

Trade accounts payable (Note 4.i.)

   11,425      89,193      107,386   

Advances from customers (Note 4.n.)

   93,507      150,357      140,619   

Long-term debt (Note 4.k.)

   948,363      866,700      991,127   

Taxes payable (Note 4.m.)

   255,454      224,529      182,012   

Other liabilities (Note 4.o.)

   70,118      76,676      59,866   

Provisions for lawsuits and contingencies (Note 4.p.)

   7,507      5,823      7,150   
                  

Total Non-Current Liabilities

   1,386,374      1,413,278      1,488,160   
                  

Total Liabilities

   3,137,826      2,727,190      2,566,372   
                  

Minority interest

   1,577,679      1,435,982      1,290,582   
                  

SHAREHOLDERS’ EQUITY

   1,964,808      1,812,884      1,668,492   
                  

Total Liabilities and Shareholders’ Equity

   6,680,313      5,976,056      5,525,446   
                  

The accompanying notes are an integral part of the consolidated financial statements

Saúl Zang

Vicepresident I

acting as President

 

2


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Unaudited Consolidated Statements of Income

Corresponding to the nine-month periods beginning on July 1, 2009 and 2008

and ended March 31, 2010 and 2009

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

     March 31, 2010     March 31, 2009  

Agricultural production income (Note 6)

   80,337      62,986   

Cost of agricultural production (Note 6)

   (78,801   (78,103
            

Production Profit - Agricultural

   1,536      (15,117
            

Sales - crops, beef cattle, milk and others (Note 6)

   159,411      133,293   

Cost of sales - crops, beef cattle, milk and others (Note 6)

   (144,580   (108,667
            

Sales profit - Agricultural business

   14,831      24,626   
            

Sales and development of properties (Note 6)

   155,132      134,845   

Income from lease and service of offices, shopping centers, hotels, consumer financing and others (Note 6)

   809,011      482,918   

Cost of sales and development of properties (Note 6)

   (64,843   (91,037

Cost of lease and service offices, shopping centers, hotels, consumer financing and others (Note 6)

   (294,137   (170,272
            

Sales profit - Real estate business

   605,163      356,454   
            

Gross profit - Agricultural business

   16,367      9,509   
            

Gross profit - Real estate business

   605,163      356,454   
            

Gross profit

   621,530      365,963   
            

Selling expenses

   (150,858   (149,904

Administrative expenses

   (171,801   (86,694

Gain from recognition of inventories at net realizable value

   18,704      7,718   

Unrealized gain (loss) on inventories (Note 4.q.)

   64,210      (2,956

Net gain (loss) from retained interest in securitized receivables of Tarjeta Shopping

   34,824      (25,210
            

Operating gain

   416,609      108,917   
            

Amortization of goodwill

   38,758      15,031   

Financial results

    

Generated by assets:

    

Exchange gains and discounts

   9,172      90,171   

Conversion differences

   14,466      5,085   

Interest income

   488      8,094   

Gain on hedging operations

   5,285      33,084   

Tax on bank account operations

   (4,617   (3,418

Loss on financial operations

   51,624      (33,809

Others

   (270   (164
            

Subtotal

   76,148      99,043   
            

Generated by liabilities:

    

Loans and convertible notes

   (143,017   (99,931

Net gain from repurchase of non-convertible notes

   —        137,520   

Others

   (847   (1,211

Exchange loss and discounts

   (23,929   (160,890
            

Subtotal

   (167,793   (124,512
            

Financial results, net

   (91,645   (25,469
            

Gain (loss) on participation in equity investees

   140,218      (70,152

Other income and expenses, net (Note 4.r.)

   (17,811   (16,684

Management fee

   (20,446   (493
            

Net income before income tax and minority interest

   465,683      11,150   
            

Income tax and minimum presumed income tax

   (105,271   (32,466

Minority interest

   (175,755   25,987   
            

Net income for the period

   184,657      4,671   
            

Earnings per share :

    

Basic net gain per share (Note 5)

   0.38      0.01   

Diluted net gain per share (Note 5)

   0.34      0.01   

The accompanying notes are an integral part of the consolidated financial statements.

Saúl Zang

Vicepresident I

acting as President

 

3


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

Corresponding to the nine-month periods beginning on July 1, 2009 and 2008

and ended March 31, 2010 and 2009

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

     March 31, 2010     March 31, 2009  

Changes in cash and cash equivalents

    

Cash and cash equivalents at the beginning of the year

   211,676      521,086   

Cash and cash equivalents at the end of the period

   120,801      166,909   
            

Net decrease in cash and cash equivalents

   (90,875   (354,177
            

Causes of changes in cash and cash equivalents

    

Operating activities

    

Income for the period

   184,657      4,671   

Income tax

   105,271      32,466   

Adjustments made to reach net cash flow from operating activities

    

(Gain) loss on equity investees

   (140,218   70,152   

Minority interest

   175,828      (25,987

Increase in allowances, provisions and accruals

   51,786      71,887   

Depreciation and amortization

   135,989      78,213   

Unrealized (gain) loss on Inventories

   (64,210   2,956   

Financial results

   (85,389   142,402   

Loss from sales of fixed assets

   18,984      (99

Adjustment valuation to net realizable value in other assets

   (18,704   (7,718

Amortization of goodwill

   (38,758   (15,031

Result from barter of inventories

   —        (2,867

Result from repurchase of non-convertible notes

   —        (137,520

Changes in operating assets and liabilities

    

Decrease (increase) in current investments

   10,670      (78,186

Increase in trade accounts receivable, leases and services

   (91,271   (78,837

Decrease in other receivables

   (3,857   (102,083

Increase in inventories

   (60,570   (29,089

(Decrease) increase in social security payables, taxes payable and advances from customers

   (82,766   102,960   

Decrease in trade accounts payable

   (50,512   (27,438

Dividends collected

   4,186      1,980   

(Decrease) increase in accrued interest

   (2,843   949   

Increase (decrease) in other liabilities

   18,244      (26,169
            

Cash flows provided by (applied to) operating activities

   66,517      (22,388
            

Investing activities

    

(Increase) decrease in non-current investments

   (310   37,768   

Increase in interest in equity method investees (except IRSA)

   (162,322   (35,534

Increase in IRSA’s interest

   —        (89,893

Increase of Intangible assets

   (7,326   (2,545

Acquisition and upgrading of fixed assets

   (98,165   (243,964

Gain on the sales of fixed assets

   3,464      1,196   

Increase in goodwill

   (470   (45

Payment for subsidiary acquired, net of cash acquired

   (8,622   171,481   

Purchase (sale) of undeveloped parcels of lands and other non-current investments

   71,704      (1,611

Purchase of Hersha Hospitality Trust s’ shares

   (176,068   —     

Advances for purchase of shares

   (23,028   —     

Collection of receivables of Subsidiaries

   6,598      —     

Collection (increase) of loans granted

   309      (2,174

Advance related to sale of Tarshop S.A. shares

   20,422      —     

Payments for the acquisition of equity investees

   (78,788   —     
            

Cash flows applied to investing activities

   (452,602   (165,321
            

Financing activities

    

Exercise of warrants and options

   128      37   

Expenses for repurchase of non-convertible notes

   (12,000   (90,137

Issuance of non-convertible notes

   129,204      —     

Increase in loans

   482,676      154,147   

Decrease in loans and mortgages payable

   (235,350   (149,576

Cash Dividends paid

   (95,291   (41,608

Proceeds from issuance of short-term negotiable values

   22,720      —     

Acquisition of minority interest

   (23,919   —     

Repurchase of treasury stock

   —        (62,109

Contributions received by subsidiaries from minority shareholders

   25,807      22,778   

Loans from Subsidiaries

   1,235      —     
            

Cash flows provided by (applied to) financing activities

   295,210      (166,468
            

Net decrease in cash and cash equivalents

   (90,875   (354,177
            

The accompanying notes are an integral part of the consolidated financial statements.

Saúl Zang

Vicepresident I acting as President

 

4


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Unaudited Consolidated Statements of Cash Flows (continued)

Corresponding to the nine-month periods beginning on July 1, 2009 and 2008

and ended March 31, 2010 and 2009

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

     March 31, 2010     March 31, 2009  

Items not involving changes in cash and cash equivalents

    

Inventory transferred to property and equipment

   1,661      1,044   

Undeveloped parcels of land transferred to an inventories

   —        4,777   

Property and equipment transferred to Inventory

   39,144      25,410   

Increase in other receivables through a decrease in undeveloped parcels of land

   —        4,065   

Increase in property and equipment through an increase in other liabilities

   —        60,620   

Transitory conversion differences on investments

   25,711      31,308   

Decrease in trade accounts payable through a decrease in undeveloped parcels of land

   —        5,445   

Increase in goodwill through a decrease in minority interest

   —        482   

Increase in fixed assets through an increase in trade accounts payable

   5,623      7,643   

Acquisition of subsidiary companies through a decrease of other receivables

   8,838      —     

Repurchase of treasury stock unpaid

   —        128   

Increase in inventory through an increase in customer advances

   3,110      —     

Increase in minority interest through a decrease in current other debts

   14,512      —     

Issuance of certification of participation

   13,070      25,634   

Capitalization of financial costs

   —        72,134   

Increase in non-current investment through a decrease in inventory

   1,076      —     

Increase in non-current investment throgh an increase in other debts

   12,300      —     

Decrease in non-current investment through an increase in other receivables

   6,359      —     

Complementary information

    

Interest paid

   143,974      100,601   

Income tax paid

   61,402      11,867   
     March 31, 2010     March 31, 2009  

Acquisition of subsidiaries companies

    

Investments

   395      175,097   

Trade accounts receivable and rentals

   11      179,640   

Other receivables

   1,022      283,653   

Inventories

   —        207,453   

Non-Current Investments

   289      941,770   

Property and equipment, net

   11,278      2,644,004   

Intangible assets

   —        45,787   

Goodwill

   (2,718   (286,593

Trade accounts payable

   —        (243,502

Mortgage payable

   —        (3,882

Advances from customers

   —        (237,539

Financial loans

   —        (1,369,227

Salaries and social security payable

   (87   (31,674

Taxes payable

   (27   (175,980

Other liabilities

   (5,294   (148,146

Minority interest

   —        (456,079
            

Acquired assets that do not affect cash, net value

   4,869      1,524,782   
            

Acquires funds

   13      230,472   
            

Acquired assets, net value

   4,882      1,755,254   
            

Minority interest

   (897   (852,656

Equity method previous to the purchase

   —        (786,711

Goodwill generated by the purchase

   21,478      (56,896
            

Purchase value of subsidiaries companies

   25,463      58,991   
            

Acquires funds

   (13   (230,472

Amount funded by sellers

   (14,574   —     

Advanced amounts

   (2,254   —     
            
   8,622      (171,481
            

The accompanying notes are an integral part of the consolidated financial statements.

Saúl Zang

Vicepresident I

acting as President

 

5


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 1: BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS

As a consequence of the application of the Technical Resolution No. 21 of the Federación Argentina de Consejos Profesionales de Ciencias Económicas (FACPCE), the Balance Sheet as of March 31, 2010 and 2009 and the Statements of Income and the Statements of Cash Flows for the periods ended on those dates were consolidated on a line by line basis with the financial statements of such companies in which it holds a majority of the voting shares.

During the semester ended December 31, 2008, Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries (Cresud, or the Entity or the Company) acquired directly and indirectly 68,712,008 additional shares of IRSA Inversiones y Representaciones Sociedad Anónima (IRSA). Thus, the Company’s direct and indirect interest in IRSA through its affiliates amounted to 54.01%, therefore, from October 1, 2008, the Company began to consolidate the financial statements of IRSA in accordance with Technical Resolution No. 21.

The financial statements as of March 31, 2010 and 2009 of the subsidiary companies Inversiones Ganaderas S.A. (IGSA), Futuros y Opciones.Com S.A. (FyO.Com), Agropecuaria Anta S.A. (ex Agropecuaria Cervera S.A.) (ANTA), FyO Trading S.A. (FyO Trading), Agrology S.A. and IRSA have been used in order to determine line by line consolidation.

For purposes of comparability, certain reclassifications have been made on the information as of June 30, 2009 and March 31, 2009.

These Financial Statements and the corresponding notes are presented in thousand of Argentine Pesos. Figures expressed in United States dollars (US$), are presented in million.

 

NOTE 2: CORPORATE CONTROL

The Company’s interest in other companies is shown in the following table:

 

COMPANY

   CRESUD
PERCENTAGE OF
VOTING SHARES
OWNED
   CONSOLIDATED
PERCENTAGE OF
VOTING SHARES
OWNED
 

IRSA

   50.49    57.38 (1) 

IGSA

   99.99    99.99   

FyO.Com

   64.30    64.30   

ANTA

   90.00    99.99 (2) 

Agrology S.A.

   97.00    99.99 (3) 

FyO Trading

   3.63    65.60 (4) 

 

  (1) Includes interests of 6.89% of Agrology S.A.
  (2) Includes interests of 9.99% of IGSA.
  (3) Includes interests of 2,99% of IGSA.
  (4) Includes interests of 61.97 of FyO.Com

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

 

 

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES

The Financial Statements of the Subsidiaries mentioned in Note 2 have been prepared based on accounting principles consistent with those followed by the Company for the preparation of its financial statements, as detailed in Note 2 of the basic financial statements.

High relevant valuation and disclosure criteria applied in preparing the financial statements of consolidated companies and not explained in the valuation criteria note of the holding company are as follows:

 

  a) Revenue recognition

 

   

Real Estate Business

 

  1) Revenue recognition of IRSA

 

   

Sales of properties

IRSA records revenue from the sale of properties when all of the following criteria are met:

 

   

The sale has been consummated.

 

   

There is sufficient evidence to demonstrate the buyer’s ability and commitment to pay for the property.

 

   

The Company’s receivable is not subject to future subordination.

 

   

The Company has transferred the property to the buyer.

IRSA uses the percentage-of-completion method of accounting with respect to sales of development properties under construction. Under this method, revenue is recognized based on the ratio of costs incurred to total estimated costs according to budgeted costs. IRSA 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 IRSA’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.

 

   

Revenues from leases

Revenues from leases are recognized on a straight –line basis over the life of the related lease contracts.

 

   

Hotel operations

IRSA recognizes revenues from its rooms, catering and restaurant facilities as accrued on the close of each business day.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 3: (continued)

 

Net operating results from each business unit are disclosed in Note 6.

 

  2) Revenue recognition of Alto Palermo S.A. (APSA)

 

   

Revenues for admission rights and rental of stores and stands

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 revenues (the “Percentage Rent”) (which generally ranges between 4% and 10% of tenant’s gross revenues).

Furthermore, pursuant to the rent escalation clause in most leases, the tenant’s Base Rent generally increases between 7% and 12% each year during the term of the lease. Minimum rental income is recognized following on the accrued criteria.

Certain lease agreements contain provisions, which provide for rents based on a percentage of revenues or based on a percentage of revenues volume above a specified threshold. APSA determines the compliance with specific targets and calculates the additional rent on a monthly basis as provided in the contracts. Thus, these contingent rents are not recognized until the required thresholds are exceeded.

Generally, APSA’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 after the first year of its lease, and one month of rent if the tenant rescinds after the first year of its lease.

Additionally, APSA charges its tenants monthly administration fees related 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. The administration fees are prorated among the tenants according to their leases which vary from shopping center to shopping center. 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 or upon lease renewal. Admission right is normally paid in one lump sum or in a small number of monthly installments.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 3: (continued)

 

Admission rights are recognized in earnings using the straight-line method over the life of the respective lease agreements.

 

   

Credit card operations “Consumer Financing”

Revenues derived from credit card transactions consist of commissions and financing income, charges to clients for life and disability insurance and for statements of account, among other. Commissions are recognized at the time the merchants’ transactions are processed, while the rest financial income is recognized when accrued. Income generated from granting consumer loans mainly includes financial interests, which are recognized by the accrued method during the period whether collection has or has not been made.

 

   

Lease agent operations

Fibesa S.A., company in which APSA has an interest of 99,99996%, acts as the leasing agent for APSA bringing together the Company and potential lessees for the retail space available in certain of APSA’s shopping centers. Fibesa S.A.’s revenues are derived primarily from collected commissions calculated as a percentage of the final rental income value and admission’s rights. Revenues are recognized at the time that the transaction is successfully concluded.

 

  b) Inventories

 

   

Real Estate Business

A property is classified as inventories 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 years.

Properties classified as inventories have been valued at acquisition or construction cost restated as mentioned in Note 1.b. to the basic financial statements or estimated market value, whichever is lower. Costs include land and land improvements, direct construction costs, construction overhead costs, financial costs and real estate taxes.

Inventories on which advance payments that establish price have been received, and the operation’s contract terms and conditions assure that the sale will be effectively accomplished and that the income will be realized, are valued at net realizable value. Profits arising from such valuation are shown in the “Gain from valuation of assets at net realizable value” caption of the Statements of Income.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 3: (continued)

 

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.

The amount recorded in inventories, net of allowances set up, does not exceed their estimated recoverable value at the end of the period/year.

Property units to receive:

IRSA has rights to receive certain property units to be built. The units have been valued according to the accounting measuring standards corresponding to inventories receivables (the price established in the deed or net realizable value, as applicable) and there have been disclosed under “Inventories”.

 

  c) Non-current investments

 

   

Real Estate Business

 

  a. Investments in debt securities:

Investments in debt securities were valued based on the best estimate of the discounted amount receivable, applying the corresponding internal rate of return estimated at the time of incorporation to assets, as IRSA will hold them to maturity.

 

  b. Investments on controlled and related companies and other non-current investment

Includes CPs issued by the Trusts recorded at their values calculated by the equity method of accounting, net of the allowances for impairment, if applicable. In addition, the interests held in entities over which the Company has not control, common control or significant influence have been measured for accounting purposes at cost plus any declared dividends.

As regards the acquisition of the ownership interest in Arcos del Gourmet S.A. in the course of this fiscal year, according to the disclosure in Note 9 B.2.d, APSA is analyzing the current value of the identifiable assets and liabilities acquired presently according to the Technical Resolution No. 21, Paragraph 1.3.1.

 

  c. Banco Hipotecario S.A. and Banco de Crédito y Securitización S.A.:

The Financial Statements of Banco Hipotecario S.A. and Banco de Credito y Securitización S.A. are prepared in accordance with the Central Bank of the

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 3: (continued)

 

Argentine Republic (“BCRA”) standards. For the purpose of the valuation of the investment in IRSA, adjustments necessary to adequate the financial statements to the professional accounting standards have been considered.

In accordance with the regulations of the BCRA, there are certain restrictions on the distribution of profits by Banco Hipotecario S.A. to IRSA.

 

  d. Tyrus S.A.:

Uruguay-based Tyrus S.A. has been classified as not integrated into the IRSA’s operations in relation to its subsidiaries whose operations are carried out fully abroad. IRSA does not control foreign operations, which are conducted with a significant degree of autonomy respect to the IRSA’s own operations. Besides, such operations are mainly financed with funds originating in its own transactions or with local loans.

The Tyrus’s assets and liabilities were converted into Pesos at the exchange rate in force at the close of the period. The Statement of Income accounts have been converted into Pesos at the exchange rates in force at the time of each transaction. Foreign exchange gains/losses arising from the conversion have been charged to the Shareholders’ equity caption in the line “Cumulative Translation Adjustment” and they amounted to Ps. 13,789 as of March 31, 2010.

 

  e. Undeveloped parcels of lands:

IRSA acquires undeveloped land in order to provide an adequate and well-located supply for its residential and office building operations. IRSA’s strategy for land acquisition and development is dictated by specific market conditions where IRSA conducts its operations.

Land held for development and sale and improvements are stated at cost restated as mentioned in Note 1.b. to the basic financial statements or market value, whichever is lower.

Land and land improvements are transferred to inventories or fixed assets when construction commences or their trade is decided.

The values thus obtained, do not exceed their respective estimated recoverable values at the end of de period/year.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 3: (continued)

 

  d) Business combinations

 

   

Real Estate Business

Significant entities on net asset acquired by the Company were recorded in line with the “purchased method” set forth in Technical Resolution No. 18. and Technical Resolution No. 21. All assets and liabilities acquired to third independent parties were adjusted to show their fair value. IRSA identified the assets and liabilities acquired including intangible assets such as: lease agreements acquired for prices and terms that are either higher or lower than in the market; costs of executing and delivering the lease agreements in force (costs that IRSA avoids incurring as a result of acquiring effective lease agreements); the value of acquired brands, the value of any deposits associated to the investment and the intangible value inherent in customer relations.

The process of identification and the determination of the purchased price paid is a matter that requires complex judgments and significant estimates.

IRSA uses the information contained in valuations estimated by independent appraisers as primary base for assigning the price paid for the land, the building and the shopping centers. The amounts assigned to all the other assets and liabilities are based on independent valuations or on the IRSA´s own analysis on comparable assets and liabilities. The current value of tangible assets acquired considers the property value as if it was empty.

In accordance with the terms of Technical Resolution No. 21, if the value of identified tangible and intangible assets and liabilities exceeds the price paid, the intangible assets acquired are not recognized as they would cause an increase of the negative goodwill generated by these acquisitions at the time of the purchase. Furthermore, as regards the negative goodwill generated, the portion concerning the investees’ expectations of future expenses or losses will be recognized in the statements of income for the same periods in which such expenses or losses are accrued and expensed. The portion that is not concerned with the investees’ expectations of future expenses or losses will be treated as follows: (i) the amount that does not exceed the investor’s interest over the current values of the investees’ identifiable non-monetary assets will be consistently recognized in the statement of income throughout a period equivalent to a weighted average of the remaining useful lives of the investees’ identifiable assets subject to depreciation; (ii) the amount that exceeds the current values of the investees’ identifiable non-monetary assets will be recognized in the statement of income at the time of the acquisition.

If the price paid is larger than the value of tangible and intangible assets and liabilities as identified, the excess is considered to be goodwill.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 3: (continued)

 

  e) Property and equipment, net

 

   

Agricultural Business

The tree plantations (wood) comprising this account has been valued at cost less respective accumulated depreciation as the Company has no intention to sell it, but use it in the production process.

Its cost was calculated according to a “Report on forestry mass increase” carried out by a forestry engineer at the request of the preceding shareholders of ANTA.

ANTA former Board of Directors based on such report as well as on owns estimates accepted the value of the tree plantations (wood) in Ps. 4,320.

Depreciation for the period was calculated based on the remaining concession term.

Other considerations – concessions granted

Among other goods and rights ANTA has the concession planning and execution of an integral development project including: biological, economical and social issues on several real estates located in the department of Anta, province of Salta. The company is also duty authorized to perform a significant agricultural, cattle farming and forestry project which was awarded under resolution No. 190/99 and bidding No. 58/98 of the Ministry of Production and Employment.

Such concession was granted for a 35 year term with a postponement option of 29 additional years by ANTA.

Among other obligations ANTA has to invest Ps. 16,000 in agriculture, cattle farming, hydraulic resources, continuing education, forestry development, forest planting, fauna, natural reserve and eco-tourism.

On July 2, 2008, a memorandum of understanding was executed by which the concession agreement mentioned in Note 12 was renegotiated.

 

   

Real Estate Business

Fixed assets comprise primarily of rental properties and other properties and equipment held for use by IRSA.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 3: (continued)

 

Fixed assets value, net of allowances set up, does not exceed estimated recoverable value at the end of the period/year.

Rental properties

Rental properties are carried at acquisition and/or construction cost, restated as mentioned in Note 1.b. to the basic financial statements, less accumulated depreciation and allowance for impairment at the end of the period/year. IRSA capitalizes the financial accrued costs associated with long-term construction projects. During the year ended June 30, 2009, financial costs were capitalized in the building known as “DIQUE IV” for Ps. 7,561.

Accumulated depreciation had been computed under the straight-line method over the estimated useful lives of each asset, applying annual rates in order to extinguish their values at the end of its useful life.

IRSA has allowances for impairment of certain rental properties.

Significant renewals 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 Income.

Other properties and equipment

Other properties and equipment properties are carried at cost, restated as mentioned in Note 1.b. to the basic financial statements, less accumulated depreciation at the end of the period/year. Accumulated depreciation is computed under the straight-line method over the estimated useful lives of the assets.

 

Assets

   Estimated useful life (years)
on  contract basis

Leasehold improvements

  

Furniture and fixtures

   10

Vehicles

   5

Machinery and equipment

   10

Computer equipment

   3

The cost of maintenance and repairs is charged to expense as incurred.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 3: (continued)

 

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.

 

  f) Intangible assets

 

   

Agricultural Business

Related to the concession right mentioned in Note 3.e.

The amortization of the concession right of ANTA is calculated according to its duration, whose remaining time is 29 years.

 

   

Real Estate Business

Intangible assets are carried at cost restated as mentioned in Note 1.b. to the basic financial statements, less accumulated amortization and corresponding allowances for impairment in value, if it corresponds. Included in the Intangible assets caption are the following:

 

   

Trademarks

Trademarks include the expenses and fees related to their registration.

 

   

Pre-operating expenses

- Those expenses were amortized by the straight-line method in 3 years, beginning as from the date of opening.

- The value of the intangible assets does not exceed their estimated recoverable value at the end of the period/year.

 

   

Non-Compete Agreement

These expenses are amortized by the straight-line method in 28 months period starting upon December 1st, 2009.

The value of these assets does not exceed their estimated recoverable value at the end of the period/year.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 3: (continued)

 

  g) Goodwill, net

 

   

Real Estate Business

Amortizations were calculated through the straight line method on the basis of an estimated useful life considering the weight average of the remaining useful life of the assets acquired.

The residual value of goodwill arising from the acquisition of net assets and shares in companies has been shown in the “Goodwill” caption. Amortizations were classified in the “Amortization of goodwill” caption of the statement of income. Goodwills related to the acquisition of interests in subsidiaries is included in non-current investments.

Values thus obtained do not exceed the respective estimated recoverable values at the end of the period/year.

 

  h) Customer advances

 

   

Real Estate Business

Customer advances represent payments received in connection with the sale and rent of properties and has been valued according to the amount of money received.

 

  i) Allowances

 

   

Real Estate Business

Allowance for doubtful accounts: IRSA allows for losses relating to trade receivables, leases and other accounts receivable. The allowance for losses is recognized when, based on current information and events, it is probable that IRSA 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 flows. While Management uses the information available to make assessments, future adjustments to the allowance may be necessary if future economic conditions differ substantially from the assumptions used in making the assessments. Management has considered all events and/or transactions that are subject to reasonable and normal methods of estimations.

For impairment of assets: IRSA regularly asses its non-current assets for recoverability at the end of every year.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 3: (continued)

 

IRSA has estimated the recoverable value of rental properties based on their economic use value, which is determined based on estimated future cash flows discounted. For the rest of the assets (inventories and undeveloped parcels of land) IRSA makes a comparison with market values based on values of comparable properties. If the recoverable value of assets, which had been impaired in prior years, increases, IRSA records the corresponding reversals of impairment loss as required by accounting standards.

For lawsuits: IRSA has certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving labor issues. IRSA 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, IRSA’s estimates of the outcomes of these matters and IRSA’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 an effect on IRSA’s future results of operations and financial condition or liquidity.

At the date of issuance of these financial statements, IRSA’s Management understands that there are no elements to foresee other potential contingencies having a negative impact on these financial statements.

 

  j) Liabilities in kind related to barter transactions

 

   

Real Estate Business

Liabilities in kind corresponding to obligations to deliver units to be built are valued considering the cost of the assets received. IRSA estimate that this value does exceed the cost of construction of the units to deliver plus additional costs to transfer the assets to the creditor. Liabilities in kind have been shown in the “Trade accounts payable”.

 

  k) Deferred financing cost

 

   

Real Estate Business

Expenses incurred in connection with the issuance of debt are amortized over the life of the related issuances. In the case of redemption or conversion of these notes, the related expenses are amortized using the accelerated depreciation method.

Amortization has been recorded under “Financial results, net” in the Statements of Income as a greater financing expense.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: Details of consolidated balance sheet and consolidated statement of income accounts

 

As of March 31, 2010 and 2009 and as of June 30, 2009 the principal items of the financial statements are as follows:

 

a. Cash and banks

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Cash

   5,534    3,406    5,225

Foreign currency

   108    579    1,599

Banks in local currency

   61,038    24,523    27,342

Banks in foreign currency

   5,308    51,200    32,937

Checks to be deposited

   11,314    2,751    1,404
              
     83,302      82,459      68,507
              

 

b. Investments

The breakdown for this item is as follow:

 

     March 31,
2010
    June 30,
2009
    March 31,
2009
 

Current

      

Investments

      

Mutual Funds (2)

   94,115      150,850      163,353   

Time deposits

   —        15,156      15,455   

Government Bonds, Bonds and Notes (1)

      

- Pre 2009 bonds

   —        10,108      6,351   

- Pro 2012 bonds

   —        3,987      2,256   

- Participation trust certificates

   4,820      16,490      16,490   

- Certificates of participation - Tarshop Trust

   143,414      136,231      82,917   

- Allowance for impairment of investments

   (8,984   (10,198   (8,710

- Global 2010 bonds

   202      67      49   

- Mortgage Bonds

   1,098      1,198      1,131   

Public shares (1)

   2,552      21,603      6,483   

Others investments (1)

   55      49      50   
                  
   237,272      345,541      285,825   
                  

 

(1) Not considered as cash equivalents in Cash Flow Statements.
(2) As of March 31, 2010 and June 30, 2009 includes Ps. 56,616 and Ps. 36,789 respectively, related to mutual funds not considered as cash equivalents in Cash Flow Statement.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

Non-current

Investments on controlled and related companies

Law No. 19,550 Section 33 and related parties:

 

     March 31,
2010
    June 30,
2009
    March 31,
2009
 

Agro-Uranga S.A.

      

Shares

   9,534      9,024      8,420   

Higher property value

   11,179      11,179      11,179   
                  
   20,713      20,203      19,599   
                  

Cactus Argentina S.A. (“Cactus”)

      

Shares

   15,701      10,032      5,634   

Goodwill

   4,015      4,015      —     
                  
   19,716      14,047      5,634   
                  

Exportaciones Agroindustriales Argentinas S.A.

      

Shares

   76      99      56   
                  
   76      99      56   
                  

BrasilAgro – Companhia Brasileira de Propriedades Agrícolas (BrasilAgro)

      

Shares

   300,250      220,709      171,107   

Higher values (1)

   6,887      6,887      6,887   

Goodwill

   6,965      3,841      3,841   

Negative Goodwill

   (16,140   (19,163   (17,183
                  
   297,962      212,274      164.652   
                  

Banco Hipotecario

      

Shares

   778,888      516,097      261,867   

Higher values (2)

   9,368      13,871      10,099   

Goodwill

   16,379      21,152      (8,829
                  
   804,635      551,120      263,137   
                  

Banco Crédito y Securitización S.A.

      

Shares

   5,927      5,127      4,889   
                  
   5,927      5,127      4,889   
                  

Manibil S.A.

      

Shares

   26,591      25,322      642   

Irrevocable capital contributions

   —        —        23,892   

Goodwill

   10      10      10   
                  
   26,601      25,332      24,544   
                  

 

(1) Corresponds to Ps. 10,596 of higher value property and equipment and Ps. (3,709) of higher tax effect value.
(2) Corresponds to Ps. 275 of higher value intangible assets, Ps. 25,047 of lower value trade account payables and Ps. (17,501) of higher value trade account receivable which belongs to the business combinations of Cresud and Agrology S.A., and Ps. 1,547 of IRSA.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Hersha Hospitality Trust

        

Shares

   224,339    —      —  
              
   224,339    —      —  
              

Metropolitan 885 Third Avenue LLC

        

Shares

   —      —      76,615
              
   —      —      76,615
              

Advances for shares purchases

   23,028    6,250    8,884
              
   23,028    6,250    8,884
              

Undeveloped parcels of land:

        

- Santa Maria del Plata

   204,382    203,584    177,147

- Puerto Retiro (1)

   66,375    66,331    62,834

- Plot of Land Berutti (2)

   54,204    54,018    52,122

- Plot of Land Caballito

   40,626    40,626    39,405

- Patio Olmos (3)

   33,218    33,218    32,949

- Pereiraola (7)

   24,157    24,157    23,413

- Torres de Rosario plot of land

   19,154    18,641    17,054

- Air Space Coto

   14,672    14,672    14,158

- Plot of Land Zetol (4)

   13,443    13,116    —  

- Canteras Natal Crespo

   6,467    6,465    6,000

- Pilar

   4,066    4,066    3,866

- Torres Jardin IV

   3,038    3,038    3,030

- Plot of Land Vista al Muelle (4)

   7,570    1,739    —  

- Catalinas Norte´s advance (6)

   22,259    —      —  

- Other land reserves

   23,865    19,267    19,817
              
   537,496    502,938    451,795
              
   1,960,493    1,337,390    1,019,805
              

 

(1) Note 8.B.1.a. to the consolidated financial statements.
(2) Note 10.B.2.c. to the consolidated financial statements.
(3) Note 10.B.2.a. to the consolidated financial statements.
(4) Note 9.B.1.e. to the consolidated financial statements.
(5) Note 10.B.2.d. to the consolidated financial statements.
(6) Note 10.B.1 to the consolidated financial statements.
(7) Note 18.1 to the consolidated financial statements.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

     March 31,
2010
    June 30,
2009
    March 31,
2009
 

Other Investments

      

The breakdown for this item is as follow:

      

Certificates of participation - Tarshop S.A. Trust

   3,929      22,900      64,289   

Allowance for impairment of investments

   (254   (1,891   (7,379

MAT

   90      90      90   

Coprolán

   21      21      21   

Other investments

   1,515      95      541   
                  
        5,301      21,215      57,562   
                  

 

c. Trade accounts receivable

The breakdown for this item is as follow:

 

     March 31,
2010
    June 30,
2009
    March 31,
2009
 

Current

      

Debtors from Tarjeta Shopping

   207,490      141,570      143,250   

Leases and services receivables

   62,993      75,077      60,401   

Checks to be deposited

   51,444      62,230      52,913   

Debtors from expenses and collective promotion fund

   34,422      37,725      30,808   

Leases and services receivables under legal proceedings

   34,133      34,583      34,490   

Trade accounts receivable – agricultural business

   24,815      25,106      15,729   

Trade accounts receivable – real estate

   20,110      15,681      14,401   

Accounts receivable in foreign currency

   20,262      15,477      9,871   

Debtors from hotel activities

   17,023      7,713      11,194   

Documents receivable

   6,534      7,461      7,123   

Debtors from Tarjeta Shopping – collection agents

   6,099      5,070      4,689   

Receivables from the sale of properties under legal proceedings

   1,133      1,320      1,417   

Credit cards receivable

   258      1,161      1,287   

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (note 4.s.)

   7,481      2,400      4,144   

Less:

      

Allowance for doubtful accounts

   (117,004   (129,479   (124,542
                  
   377,193      303,095      267,175   
                  

Non-current

      

Debtors from Tarjeta Shopping

   24,026      6,490      8,698   

Leases and services receivables

   2,010      2,691      2,366   

Trade accounts receivable – real estate

   133      2,306      6,794   

Accounts receivable in foreign currency

   —        451      466   

Documents receivable

   660      —        —     

Less:

      

Allowance for doubtful accounts

   (1,496   (2,708   (7,565
                  
   25,333      9,230      10,759   
                  

 

21


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

d. Other receivables

The breakdown for this item is as follow:

 

     March 31,
2010
    June 30,
2009
    March 31,
2009
 

Current

      

Call Option Metropolitan 885 Third Ave. LLC

   46,826      44,877      —     

Receivables from the sale of shares (1)

   35,290      34,553      33,852   

Outstanding VAT

   74,541      32,601      22,740   

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (Note 4.s.)

   11,715      89,925      21,279   

Prepaid expenses

   32,048      25,869      22,263   

Income tax advances and tax credit (net of provision for income tax)

   6,921      21,987      23,549   

Guarantee deposits re. securitization programs

   6,522      6,782      5,966   

Loans granted

   860      5,424      3,885   

Guarantee of defaulted credits

   —        4,206      3,948   

Outstanding gross sales tax payable and others

   6,821      3,318      2,788   

Receivable for services of third offered in Tarshop’ business

   4,105      2,746      3,222   

Guarantee deposits

   1,590      1,490      1,166   

Pre-paid insurance

   316      1,489      1,070   

Tax on minimum presumed income

   3,188      923      52   

Premiums collected

   1      743      3,376   

Financial operations to liquidate

   4,945      —        1,110   

Other tax credit

   789      171      247   

Prepaid leases

   124      75      258   

Expenses to be recovered

   265      47      4,523   

Receivables from stock holders in related companies

   —        29      21,294   

Others

   19,689      10,108      8,067   
                  
   256,556      287,363      184,655   
                  

Non-current

      

Deferred tax

   66,261      78,285      116,365   

Tax on minimum presumed income

   86,597      65,967      78,968   

Outstanding VAT

   57,252      65,575      69,371   

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (note 4.s.)

   20,724      22,513      4   

Prepaid expenses

   3,166      3,958      1,612   

Mortgages receivables under legal proceeding

   2,208      2,208      2,208   

Allowance for doubtful accounts

   (2,208   (2,208   (2,208

Outstanding gross sales tax payable and others

   944      1,989      1,948   

Guarantee deposits re. securitization programs

   —        999      3,667   

Loans granted

   295      —        —     

Guarantee deposits

   —        380      —     

Income tax advances and tax credit (net of provision for income tax)

   —        109      139   

Prepaid leases

   —        33      —     

Others

   1,313      2,784      4,148   
                  
   236,552      242,592      276,222   
                  

 

(1) In June 2007, IRSA sold 10% of the shareholding in Solares Santa María S.A. for US$ 10.6 million (on that such date IRSA collected US$ 1.5 million of such amount). The balance will become due in June, 2010 and it is supported by a pledge in favor of IRSA.

 

22


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

e. Inventories

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Agricultural business

        

Crops

   18,750    49,258    28,805

Materials and others

   33,710    26,898    28,687

Beef cattle

   30,927    18,279    19,757

Unharvested crops

   86,384    13,006    97,788

Seeds and fodder

   2,719    2,864    2,360

Real estate business

        

Credit from barter transaction of Terreno Caballito (Koad)

   12,040    19,222    8,545

Abril

   1,148    3,035    3,249

Inventories (hotel business)

   3,394    2,676    2,847

El Encuentro

   890    2,119    —  

Horizons

   176,888    —      —  

Other inventories

   1,182    1,273    957

Dock 13

   —      —      33

Torres Abasto

   —      —      21

San Martin de Tours

   132    431    424

Credit from barter transaction of Dique III

   —      68    3,368

Torres Jardin

   23    68    —  

Mendoza land

   1,116    —      —  
              
   369,303    139,197    196,841
              

Non-Current

        

Agricultural Business

        

Beef cattle

   125,847    77,828    75,165

Real estate business

        

Horizons

   —      109,144    91,834

Credit from barter of Caballito (Cyrsa)

   25,155    20,875    21,087

Credit from barter of Caballito (Koad)

   20,700    14,324    21,843

Credit from barter Rosario

   11,121    11,121    11,103

El Encuentro

   11,172    9,633    11,265

Caballito land

   6,754    6,653    4,429

Project Abasto (Cyrsa)

   —      1,098    —  

Torres Jardín

   45    —      85

Abril

   690    768    1,973

Cruceros Buildings

   6    25    —  

San Martin de Tours

   304    3    —  

Other inventories

   1,444    57    885
              
   203,238    251,529    239,669
              

 

23


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

f. Property and equipment, net

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Agricultural business

   457,817    430,529    422,460

Real estate business

        

Shopping Center

   1,593,172    1,453,747    1,339,007

Office buildings

   926,696    1,153,207    1,107,284

Hotels

   207,792    217,437    213,998

Other fixed assets

   26,118    51,452    95,274

Commercial real state

   8,261    3,626    3,687
              
   3,219,856    3,309,998    3,181,710
              

 

g. Intangible assets, net

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Concession rights

   21,512    22,076    22,265

Saving expenses of contracts in acquired leases

   11,846    13,897    14,440

Pre-operating expenses

   25,265    16,038    6,585

Tarshop ‘s customers

   2,683    2,902    1,860

Non-compete agreement

   10,435    —      —  

Trademarks

   675    274    720

Others

   55    —      —  
              
   72,471    55,187    45,870
              

 

h. Goodwill, net

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Goodwill

        

IRSA

   40,597    41,995    34,935

Arcos del Gourmet S.A.

   20,873    —      —  

APSA

   19,601    20,670    21,026

Tarshop S.A.

   6,904    6,897    8,150

Torre BankBoston

   5,742    5,899    5,951

Della Paolera 265 y Museo Renault

   3,154    3,276    3,316

Fibesa S.A.

   856    2,395    2,909

Conil S.A.

   506    —      —  

Baicom Network S.A.

   174    —      —  

 

24


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

     March 31,
2010
    June 30,
2009
    March 31,
2009
 

Negative goodwill

      

IRSA

   (365,472   (385,809   (279,816

APSA

   (44,128   (46,365   (47,113

Palermo Invest S.A.

   (40,733   (42,290   (42,809

Empalme S.A.I.C.F.A. y G.

   (8,608   (9,084   (9,251

Mendoza Plaza Shopping S.A.

   (5,743   (5,988   (6,097

Emprendimiento Recoleta S.A.

   (280   (336   (355
                  
   (366,557   (408,740   (309,154
                  

 

i. Trade accounts payable

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Suppliers

   256,529    191,122    151,129

Provisions

   88,712    104,421    45,907

Debt related to purchase of farms

   22,441    35,098    —  

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (Note 4.s.)

   3,889    6,961    9,086

Provisions for harvest expenses

   1,460    1,253    894

Others

   682    1,039    1,032
              
   373,713    339,894    208,048
              

Non-Current

        

Suppliers (1)

   11,425    58,862    46,766

Debt related to purchase of farms

   —      21,893    60,620

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties
(Note 4.s.)

   —      8,438    —  
              
   11,425    89,193    107,386
              

 

(1) Includes as of March 31, 2010 and June 30, 2009 current and non current Ps. 46,451, respectively, corresponding to the liabilities in kind associated to the “Horizons” and “Caballito” projects. (See Note 9.B.1.a)

 

j. Mortgage payable

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Mortgage payable Bariloche plots of land

   —      1,930    2,812
              
   —      1,930    2,812
              

 

25


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

k. Short-term and long-term debts

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Bank loans

   487,641    294,065    263,041

Overdraft

   261,552    166,651    167,312

Short-term debt

   22,720    —      —  

Debt related to purchase of subsidiaries

   —      —      11,616

Foreign financial entities

   3,528    788    —  

Debts for the purchase of Berutti plot of land

   —      —      14,828

Debts for purchase of shares

   19,386    —      —  

Seller financing

   23,421    28,895    —  

Non-convertible Notes – IRSA 2017 (1)

   5,545    14,839    5,283

Non-convertible Notes Class I

   15,547    —      —  

Non-convertible Notes Class II

   34,740    —      —  

Non-convertible Notes – APSA US$ 120 M.

   8,037    2,471    8,879

Convertible Notes – APSA 2014 US$ 50 M. (Nota 4.s.)

   1,185    2,610    1,121

Non-convertible Notes – APSA 2011 Ps. 55 M.

   240    —      —  

Non-convertible Notes – APSA 2011 US$ 6 M.

   11    —      —  

Non-convertible Notes – APSA 2012 Ps. 154 M.

   28,616    26,569    43,957
              
   912,169    536,888    516,037
              

Non-Current

        

Non-Convertible Notes IRSA 2017 (1)

   433,745    421,932    430,155

Convertible Notes – APSA US$ 120 M.

   257,416    250,512    303,082

Bank loans

   78,087    76,611    101,080

Convertible Notes – APSA 2014 US$ 50 M. (Nota 4.s.)

   59,954    58,679    57,622

Non-convertible Notes – APSA 2011 Ps. 55 M.

   43,771    —      —  

Non-convertible Notes – APSA 2011 US$ 6 M.

   25,393    —      —  

Non-convertible Notes – APSA 2012 Ps. 154 M.

   37,878    50,356    99,188

Seller financing

   12,119    8,610    —  
              
   948,363    866,700    991,127
              

 

(1) Note 13 A.1.a to the consolidated financial statements.

 

26


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

l. Salaries and social security payable

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Provisions for vacation and legal bonus

   34,910    30,677    20,884

Social security taxes payable

   8,208    10,188    6,136

Salaries payable

   205    299    473

Others

   258    590    405
              
   43,581    41,754    27,898
              

 

m. Taxes payable

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Vat payable, net and tax payment facilities plan for VAT

   43,502    75,727    60,382

Tax on minimum presumed income

   10,384    20,345    26,643

Income tax provision, net

   31,900    14,291    8,635

Tax on personal assets

   11,683    5,514    12,721

Provisions – Gross sales tax payable

   4,989    3,056    1,937

Income tax – Withholdings

   1,397    3,221    2,565

Tax moratorium – Income tax

   1,509    1,358    2,497

Minimum presumed income – Plan of facilities

   —      1,137    1,700

Income tax – Plan of facilities

   —      21,835    27,221

VAT – Withholdings

   393    824    352

Gross sales tax-withholdings

   2,700    1,959    1,906

Property tax payable

   138    208    70

Gross revenue tax moratorium

   477    449    441

Others

   4,861    6,028    5,577
              
   113,933    155,952    152,647
              

Non-current

        

Deferred income tax

   227,920    197,473    153,465

Tax moratorium – Income tax payable

   21,830    20,704    21,156

Tax moratorium – Personal assets

   2,468    2,773    3,619

Gross sales tax payable

   —      1,138    1,138

Tax on personal assets

   1,256    —      —  

Gross revenue tax moratorium

   1,952    2,433    2,610

Tax on minimum presumed income

   28    8    24
              
   255,454    224,529    182,012
              

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

n. Advances from customers

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Admission rights

   50,787    45,935    44,856

Advanced payments from customers

   122,660    30,601    38,389

Leases and service advances (1)

   23,778    20,850    23,065
              
   197,225    97,386    106,310
              

Non-current

        

Admission rights

   61,382    60,626    63,395

Advanced payments from customers

   —      56,822    43,829

Leases and service advances (1)

   32,125    32,909    33,395
              
   93,507    150,357    140,619
              

 

(1) See note 14.B.2.a to the consolidated financial statements.

 

  (a) Includes balances owed to NAI INTERNATIONAL II. INC., due to the financing agreement enclosed by Empalme S.A.I.C.F.A. y G.

 

  (b) As of March 31, 2010 and June 30, 2009 includes advances of Ps.10,121 and Ps. 8,122 respectively, received from Wall - Mart Argentina S.R.L. in the context of a rent contract entered into with Panamerican Mall S.A. (APSA’s Subsidiary), for a 30 years’ term.

 

o. Other liabilities

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Lower value of acquired contracts

   4,724    18,711    12,936

Debt to former minority shareholder of Tarshop S.A.

   3,481    —      —  

Payables to Nationals Park Administration

   12,632    10,223    10,174

Debt related to purchase of investments

   4,793    —      —  

Guarantee deposits

   5,051    5,228    4,892

Administration and reserve fund

   —      —      3,646

Additional capital contribution payable

   2,295    2,270    —  

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties
(Note 4.s.)

   28,373    90,336    5,558

Loans with shareholders of related parties

   —      837    17,531

Premiums collected

   23    543    1,576

Management agreement provision

   11,421    —      —  

Contributed leasehold improvements to be accrued and unrealized gains

   524    524    524

Dividends payable

   1,971    —      —  

Advance from sale of Tarshop S.A.’s shares

   20,840    —      —  

Mortgage with FyO.Com’s minority shareholder

   134    134    134

Others

   10,357    7,251    3,517
              
   106,619    136,057    60,488
              

 

28


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Non-current

        

Loans with shareholders of related parties

   48,047    47,388    41,895

Contributed leasehold improvements to be accrued and unrealized gains

   9,810    10,203    10,335

Guarantee deposits

   3,930    4,713    5,094

Debt to the former minority shareholders of Tarshop S.A.

   4,064    —      —  

Debts for the purchase of farm

   —      4,556    —  

Additional capital contribution payable

   3,462    3,425    —  

Lowest value of acquired contracts

   —      1,308    2,239

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties
(Note 4.s.)

   20    20    20

Others

   785    5,063    283
              
   70,118    76,676    59,866
              

 

p. Provisions for lawsuits and contingencies

The breakdown for this item is as follow:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Law contingencies for pending lawsuits

   4,212    4,051    3,972
              
   4,212    4,051    3,972
              

Non-current

        

Law contingencies for pending lawsuits

   7,507    5,823    7,150
              
   7,507    5,823    7,150
              

 

q. Unrealized gain (loss) on inventories

The breakdown for this item is as follow:

 

     March 31,
2010
    March 31,
2009
 

Unrealized gain on inventories - Beef cattle

   64,531      583   

Unrealized loss on inventories - Crops, raw materials and MAT

   (321   (3,343

Operative loss and unrealized loss on real estate assets

   —        (196
            

Total unrealized gain (loss) on inventories

   64,210      (2,956
            

 

r. Other income and expenses, net

The breakdown for this item is as follow:

 

     March 31,
2010
   March 31,
2009

Other Income

     

Recovery of allowances

   145    —  

Gains on the sale of other fixed assets

   35    99

Lawsuits contingencies

   —      212

Management fee

   652    —  

Others

   958    517
         

Sub-total Other Income

   1,790    828
         

 

29


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

     March 31,
2010
    March 31,
2009
 

Other Expenses

    

Tax on shareholders’ personal assets

   (10,036   (10,851

Lawsuits contingencies

   (138   —     

Unrecoverable VAT receivable

   (4,633   (2,775

Donations

   (4,252   (3,886

Others

   (542   —     
            

Sub-total Other Expenses

   (19,601   (17,512
            

Total Other Income and Expenses, net

   (17,811   (16,684
            

 

s. Companies under Law No. 19,550 Section 33 and others related parties:

Balances as of March 31, 2010, compared to the balances as of June 30, 2009 and March 31, 2009 held with related companies, persons and shareholders are as follows:

As of March 31,2010

 

    Current
Trade  accounts
receivable
  Current
Other
receivables
  Non
current
Other

receivables
  Current
Trade
accounts
payable
    Short
term
debt
    Long
term
debt
    Current
Other
liabilities
    Non  current
Other

liabilities
    Total  

Agro –Uranga S.A. (2)

  —     215   —     (594   —        —        —        —        (379

Banco Hipotecario S.A. (2)

  340   —     —     —        —        —        —        —        340   

Baicom Networks S.A. (2)

  —     —     277   —        —        —        —        —        277   

BrasilAgro (2)

  53   —     —     —        —        —        —        —        53   

Cactus (2)

  114   12   —     (32   —        —        —        —        94   

Canteras Natal Crespo S.A. (4)

  243   1,102   —     —        —        —        —        —        1,345   

Consorcio Dock del Plata S.A. (3)

  1,382   16   —     (53   —        —        —        —        1,345   

Consorcio Libertador S.A. (3)

  841   111   —     (265   —        —        (4   —        683   

Consultores Asset Management S.A. (3)

  692   1   —     (7   —        —        —        —        686   

Cresca S.A. (4)

  20   3,637   —     —        —        —        —        —        3,657   

Cyrsa S.A. (4)

  2,565   32   —     (998   —        —        —        —        1,599   

Directors (3)

  2   161   —     (29   —        —        (24,273   (20   (24,159

Dolphin Fund PLC (3)

  —     —     —     —        —        —        (3,023   —        (3,023

Estudio Zang, Bergel & Viñes (3)

  —     20   —     (1,403   —        —        —        —        (1,383

Fundación IRSA (3)

  31   3   —     (474   —        —        (1,073   —        (1,513

Inversiones Financieras del Sur S.A. (5)

  —     69   —     —        —        —        —        —        69   

Hersha Hospitality Trust (2)

  —     1,928   —     —        —        —        —        —        1,928   

Metroshop S.A. (1)

  —     2,265   20,443   —        —        —        —        —        22,708   

Museo de los niños S.A. (3)

  1,082   —     —     (5   —        —        —        —        1,077   

Parque Arauco S.A. (3)

  —     —     —     —        (1,185   (60,002   —        —        (61,187

Credits to employees (3)

  64   2,046   4   (29   —        —        —        —        2,085   

Puerto Retiro S.A. (2)

  52   97   —     —        —        —        —        —        149   
                                               

Total

  7,481   11,715   20,724   (3,889   (1,185   (60,002   (28,373   (20   53,549   
                                               

 

(1) Subsidiary
(2) Related companies
(3) Related parties
(4) Direct or Indirect common control.
(5) Shareholder

 

30


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

As of June 30, 2009

 

    Current
Trade
accounts
receivable
  Current
Other
receivables
  Non current
Other
receivables
  Current
Trade
accounts
payable
    Non current
Trade
accounts
payable
    Short
term
debt
    Long
term
debt
    Current
Other
liabilities
    Non current
Other
liabilities
    Total  

Agro –Uranga S.A. (2)

  —     39   —     (45   —        —        —        —        —        (6

Banco Hipotecario
S.A. (2)

  5   —     —     —        —        —        —        —        —        5   

BrasilAgro (2)

  13   —     —     —        —        —        —        —        —        13   

Cactus (2)

  25   15,031   —     (5,133   —        —        —        (3   —        9,920   

Canteras Natal Crespo
S.A. (4)

  193   864   —     —        —        —        —        —        —        1,057   

Consorcio Dock del Plata
S.A. (3)

  —     370   —     (46   —        —        —        —        —        324   

Consorcio Libertador
S.A. (3)

  —     532   —     (122   —        —        —        —        —        410   

Consultores Asset Management
S.A. (3)

  597   3,826   —     (7   —        —        —        —        —        4,416   

Cresca S.A. (4)

  —     788   —     —        —        —        —        —        —        788   

Cyrsa S.A. (4)

  1,530   20   —     (560   —        —        —        —        —        990   

Directors (3)

  —     191   —     (29   —        —        —        (2,362   (20   (2,220

Dolphin Fund PLC (3)

  —     63,560   —     —        —        —        —        (61,398   —        2,162   

Estudio Zang, Bergel &
Viñes (3)

  2   20   —     (683   —        —        —        —        —        (661

Fundación IRSA (3)

  22   3   —     (259   —        —        —        (1,073   —        (1,307

Inversiones Financieras del Sur S.A. (5)

  —     39   —     —        —        —        —        (25,500   —        (25,461

Metroshop S.A. (1)

  —     2,265   22,513   —        (8,438   —        —        —        —        16,340   

Museo de los niños
S.A. (3)

  —     811   —     (5   —        —        —        —        —        806   

Parque Arauco S.A. (3)

  —     —     —     —        —        (2,610   (58,679   —        —        (61,289

Credits to employees (3)

  6   1,553   —     (50   —        —        —        —        —        1,509   

Puerto Retiro S.A. (2)

  7   13   —     —        —        —        —        —        —        20   

Rummaalá S.A. (4)

  —     —     —     (22   —        —        —        —        —        (22
                                                     

Total

  2,400   89,925   22,513   (6,961   (8,438   (2,610   (58,679   (90,336   (20   (52,206
                                                     

As of March 31, 2009

 

    Current
Trade
accounts
receivable
  Current
Other
receivables
  Non current
Other
recivables
  Current
Trade
accounts
payable
    Short
term
debt
    Long
term
debt
    Current
Other
liabilities
    Non current
Other
liabilities
    Total  

Agro –Uranga S.A. (2)

  —     1,300   —     —        —        —        —        —        1,300   

Banco Crédito y Securitización
S.A. (2)

  18   —     —     —        —        —        —        —        18   

Banco Hipotecario
S.A. (2)

  4   —     —     —        —        —        —        —        4   

Cactus (2)

  182   6,191   —     (15   —        —        —        —        6,358   

Canteras Natal Crespo
S.A. (4)

  85   866   —     —        —        —        —        —        951   

Consorcio Dock del Plata
S.A. (3)

  321   30   —     (6   —        —        —        —        345   

Consorcio Libertador
S.A. (3)

  519   6   —     (136   —        —        (15   —        374   

Consultores Asset Management
S.A. (3)

  480   9,066   —     (2   —        —        —        —        9,544   

Cyrsa S.A. (4)

  1,552   2   —     (385   —        —        —        —        1,169   

Directors (3)

  —     2,478   —     —        —        —        (1,000   (20   1,458   

Estudio Zang, Bergel & Viñes (3)

  —     20   —     (902   —        —        (2   —        (884

Fundación IRSA (3)

  19   2   —     —        —        —        (4,541   —        (4,520

Metroshop S.A. (1)

  —     —     —     (7,640   —        —        —        —        (7,640

Museo de los niños
S.A. (3)

  811   —     —     —        —        —        —        —        811   

Parque Arauco S.A. (3)

  —     —     —     —        (1,121   (58,677   —        —        (59,798

Credit to employees (3)

  114   1,275   4   —        —        —        —        —        1,393   

Puerto Retiro S.A. (2)

  39   13   —     —        —        —        —        —        52   

Rummaalá
S.A. (4)

  —     30   —     —        —        —        —        —        30   
                                               

Total

  4,144   21,279   4   (9,086   (1,121   (58,677   (5,558   (20   (49,035
                                               

 

(1) Subsidiary
(2) Related companies
(3) Related parties
(4) Direct or Indirect common control.
(5) Shareholder

 

31


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

The results for the nine-month periods ended March 31, 2010 and 2009, held with related companies, persons and shareholders are as follows:

As of March 31, 2010

 

    Gain
from
leases
  Beef
cattle
expenses
    Fees     Interest
Gain
(loss)
    Others     Other
income
and expenses
and current
personal
asset´s tax
    Administration
services
  Salaries
and
wages
    Sales and
fees for
shared
services
  Donations     Total  

Shareholders in general (5)

  —     —        —        —        —        (328   —     —        —     —        (328

Agro –Uranga S.A. (2)

  —     —        —        9      437      —        —     —        —     —        446   

Cactus (2)

  —     (1,199   —        9      (797   —        111   —        —     —        (1,876

Canteras Natal Crespo
S.A. (4)

  —     —        —        74      —        —        —     —        36   —        110   

Consorcio Libertador
S.A. (3)

  8   —        —        —        —        —        —     —        92   —        100   

Consorcio Dock del Plata S.A. (3)

  —     —        —        —        —        —        —     —        169   —        169   

Consultores Asset Management
S.A. (3)

  —     —        (20,446   —        —        —        —     —        —     —        (20,446

Cresca S.A. (4)

  —     —        —        —        —        —        541   —        —     —        541   

Cyrsa S.A. (4)

  47   —        —        —        —        —        —     —        146   —        193   

Directors (3)

  —     —        (40,177   —        —        —        —     (428   —     —        (40,605

Estudio Zang, Bergel &
Viñes (3)

  —     —        (3,502   (6   —        —        —     —        —     —        (3,508

Fundación IRSA (3)

  —     —        —          —        —        —     —        —     (409   (409

Parque Arauco S.A. (3)

  —     —        —        (5,697   —        —        —     —        —     —        (5,697

Credits to employees (3)

  —     —        —        99      —        —        —     —        —     —        99   
                                                           

Total

  55   (1,199   (64,125   (5,512   (360   (328   652   (428   443   (409   (71,211
                                                           

 

(1) Subsidiary
(2) Related companies
(3) Related parties
(4) Direct or Indirect common control
(5) Shareholder

 

32


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 4: (continued)

 

As of March 31, 2009

 

     Gain
(loss)
from
leases
    Beef
cattle
expenses
    Fees     Interest
Gain
(loss)
    Others    Other
income
and expenses
and current
personal
asset´s tax
    Administration
services
    Salaries
and
wages
    Sales and
fees for
shared
services
    Donations     Total  

Shareholders in general (5)

   —        —        —        —        —      (392   —        —        —        —        (392

Agro –Uranga
S.A. (2)

   —        —        —        —        271    —        —        —        —        —        271   

Alto Palermo
S.A. (1)

   —        —        —        —        —      —        —        —        (462   —        (462

BrasilAgro (2)

   —        —        —        —        —      —        408      —        —        —        408   

Cactus (2)

   —        (455   —        620      287    —        127      —        —        —        579   

Canteras Natal Crespo S.A. (4)

   —        —        —        61      —      —        —        —        36      —        97   

Consorcio Libertador
S.A. (3)

   4      —        —        —        —      —        —        —        48      —        52   

Consultores Asset Management S.A. (3)

   —        —        (1,125   11      —      —        —        —        —        —        (1,114

Cyrsa S.A. (4)

   214      —        —        —        —      —        —        —        —        —        214   

Directors (3)

   —        —        —        (9   —      —        (23,608   (446   —        —        (24,063

Directors of Banco Hipotecario (3)

   —        —        —        (7   —      —        —        —        —        —        (7

Estudio Zang, Bergel &
Viñes (3)

   —        —        (1,702   —        —      —        —        —        —        —        (1,702

Fundación
IRSA (3)

   —        —        —        —           —        —        —        —        (191   (191

Inversiones Financieras del Sur S.A. (5)

   —        —        —        842      —      —        —        —        —        —        842   

IBOSA (1)

   —        —        —        —        —      —        (39   —        —        —        (39

IRSA (1)

   —        —        —        —        —      —        —        —        432      —        432   

Parque Arauco
S.A. (3)

   —        —        —        (14,793   —      —        —        —        —        —        (14,793

Credits to employees (3)

   (11   —        —        98      —      —        —        —        —        —        87   
                                                                 

Total

   207      (455   (2,827   (13,177   558    (392   (23,112   (446   54      (191   (39,781
                                                                 

 

 

(1) Subsidiary
(2) Related companies
(3) Related parties
(4) Direct or Indirect common control
(5) Shareholder

 

33


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 5: EARNINGS PER SHARE

 

Following reconciliation between the weighted average of outstanding shares of common stock and the diluted weighted average of shares of common stock. As of March 31, 2010 and 2009, it has been determined considering the possibility that the holders of options issued by the Company exercise them in shares of common stock of the Company up to 60,000,000 shares (see Note 15 to the basic financial statements).

 

      March 31,
2010
   March 31,
2009

Weight average of outstanding shares of common stock

   483,220,286    488,852,053

Diluted weighted average of shares of common stock

   542,463,193    548,094,960
      March 31,
2010
   March 31,
2009

Earnings for the calculation of basic earnings per share

   184,657    4,671

Earnings for the calculation of diluted earnings per share

   184,657    4,671

BASIC Earnings per share

   March 31,
2010
   March 31,
2009

Earnings

   184,657    4,671

Number of shares

   483,220,286    488,852,053

Earnings per share

   0.38    0.01

DILUTED Earnings per share

   March 31,
2010
   March 31,
2009

Earnings

   184,657    4,671

Number of shares

   542,463,193    548,094,960

Earnings per share

   0.34    0.01

 

34


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 6: SEGMENT REPORTING

 

As of March 31, 2010 :

 

     Agricultural     Real estate  
     Crops     Beef
cattle
    Milk     Feed
lot
  Others     Farm
sales
  Non
Operating
  Subtotal
Agricultural
business
    Development
and sale of
properties
    Office
and
others
    Shopping
Centers
    Hotel
operations
    Consumer
financing
    Financial
operations

and  others
    Subtotal
real
estate
business
    Total  

Description

  Local     International                                                                                      

Production income

  29,093      20,165      13,458      17,621      —     —        —     —     80,337      —        —        —        —        —        —        —        80,337   

Cost of production

  (30,726   (18,629   (15,261   (14,185   —     —        —     —     (78,801   —        —        —        —        —        —        —        (78,801
                                                                                               

Production profit

  (1,633   1,536      (1,803   3,436      —     —        —     —     1,536      —        —        —        —        —        —        —        1,536   
                                                                                               

Sales

  60,637      22,918      21,141      16,366      —     38,349      —     —     159,411      155,132      119,030      384,907      123,100      181,974      —        964,143      1,123,554   

Cost of sales

  (56,820   (20,575   (20,060   (16,366   —     (30,759   —     —     (144,580   (64,843   (26,678   (116,669   (76,056   (74,734   —        (358,980   (503,560
                                                                                               

Sales profit (loss)

  3,817      2,343      1,081      —        —     7,590      —     —     14,831      90,289      92,352      268,238      47,044      107,240      —        605,163      619,994   
                                                                                               

Gross (Loss) profit

  2,184      3,879      (722   3,436      —     7,590      —     —     16,367      90,289      92,352      268,238      47,044      107,240      —        605,163      621,530   
                                                                                               

Selling expenses

  (10,435   (3,549   (973   (345   —     (1,736   —     —     (17,038   (1,774   (338   (26,186   (11,832   (93,690   —        (133,820   (150,858

Administrative expenses

  (12,437   (3,777   (10,324   (2,364   —     (2,055   —     —     (30,957   (27,114   (34,403   (37,114   (25,927   (16,070   (216   (140,844   (171,801

Gain from recognition of inventories at net realizable value

  —        —        —        —        —     —        —     —     —        18,704      —        —        —        —        —        18,704      18,704   

Unrealized (loss) gain on inventories

  (147   (91   64,531      —        —     (83   —     —     64,210      —        —        —        —        —        —        —        64,210   

Net gain from retained interest in securitized receivables of Tarjeta Shopping

  —        —        —        —        —     —        —     —     —        —        —        —        —        34,824      —        34,824      34,824   
                                                                                               

Operating result

  (20,835   (3,538   52,512      727      —     3,716      —     —     32,582      80,105      57,611      204,938      9,285      32,304      (216   384,027      416,609   
                                                                                               

Assets

  498,268      323,578      270,131      47,498      19,823   14,635      7,642   134,995   1,316,570      674,482      972,991      1,884,867      239,449      254,420      1,337,534      5,363,743      6,680,313   

Liabilities

  30,733      35,901      1,874      643      28   4,947      —     625,628   699,754      304,031      414,103      1,030,486      256,605      295,422      137,425      2,438,072      3,137,826   

Non-current investments in other companies (1)

  17,195      297,962      113      2,144      19,716   —        —     1,337   338,467      26,602      —        —        —        —        1,034,900      1,061,502      1,399,969   

Increases and transfers of property and equipment and intangible assets

  22,309      —        10,118      584      —     844      —     4   33,859      7      480      67,593      3,517      1,696      —        73,293      107,152   

Amortization and depreciation

  3,447      —        1,422      507      —     431      —     501   6,308      14,956      18,469      78,448      12,774      5,034      —        129,681      135,989   

 

(1) Include equity method of BrasilAgro, Cactus, Agro – Uranga, Exportaciones Agroindustriales Argentinas S.A., Banco Hipotecario S.A., Banco Crédito and Securitización S.A., Manibil S.A. and Hersha Hospitality Trust.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 6: (Continued)

 

As of March 31, 2009:

 

     Agricultural     Real estate  
     Crops     Beef
cattle
    Milk     Feed
lot
  Others     Farm
sales
  Non
Operating
  Subtotal
Agricultural
business
    Development
and sale of
properties
    Office
and
other
    Shopping
Centers
    Hotel
operations
    Consumer
financing
    Financial
operations

and  others
  Subtotal
real
estate
business
    Total  

Description

  Local     Foreign                                                                                    

Production income

  36,735      —        10,558      15,693      —     —        —     —     62,986      —        —        —        —        —        —     —        62,986   

Cost of production

  (52,149   —        (11,992   (13,962   —     —        —     —     (78,103   —        —        —        —        —        —     —        (78,103
                                                                                             

Production profit

  (15,414   —        (1,434   1,731      —     —        —     —     (15,117   —        —        —        —        —        —     —        (15,117
                                                                                             

Sales

  79,327      —        11,396      14,714      —     27,856      —     —     133,293      134,845      80,081      189,661      84,898      126,911      1,367   617,763      751,056   

Cost of sales

  (63,852   —        (10,409   (14,732   —     (19,674   —     —     (108,667   (91,037   (16,179   (52,206   (49,245   (52,642   —     (261,309   (369,976
                                                                                             

Sales profit (loss)

  15,475      —        987      (18   —     8,182      —     —     24,626      43,808      63,902      137,455      35,653      74,269      1,367   356,454      381,080   
                                                                                             

Gross profit (loss)

  61      —        (447   1,713      —     8,182      —     —     9,509      43,808      63,902      137,455      35,653      74,269      1,367   356,454      365,963   
                                                                                             

Selling expenses

  (10,255   —        (808   (241   —     (2,064   —     —     (13,368   (1,542   (7,650   (16,605   (10,957   (99,782   —     (136,536   (149,904

Administrative expenses

  (10,959   (1,673   (6,312   (1,429   —     (1,276   —     —     (21,649   (10,015   (15,759   (26,061   (17,611   4,401      —     (65,045   (86,694

Gain from recognition of inventories at net realizable value

  —        —        —        —        —     —        —     —     —        7,718      —        —        —        —        —     7,718      7,718   

Unrealized loss on inventories

  (3,343   —        583      —        —     —        —     —     (2,760   —        —        —        —        (196   —     (196   (2,956

Net loss from retained interest in securitized receivables of Tarjeta Shopping

  —        —        —        —        —     —        —     —     —        —        —        —        —        (25,210   —     (25,210   (25,210
                                                                                             

Operating (loss) gain

  (24,496   (1,673   (6,984   43      —     4,842      —     —     (28,268   39,969      40,493      94,789      7,085      (46,518   1,367   137,185      108,917   
                                                                                             

Assets

  454,430      197,686      201,940      43,258      5,634   15,974      —     197,967   1,116,889      484,714      1,077,981      1,774,593      234,907      178,636      657,726   4,408,557      5,525,446   

Liabilities

  24,392      12,444      1,920      552      —     6,393      —     372,784   418,485      283,432      340,436      974,843      205,899      214,717      128,560   2,147,887      2,566,372   

Non current investments in other companies (1)

  17,494      164,652      161      2,000      5,634   —        —     —     189,941      24,544      76,615      —        —        —        268,026   369,185      559,126   

Increases and transfers of property and equipment and Intangible assets

  9,043      116,874      19,987      792      2,261   10,979      —     2,927   162,863      202      17,806      126,429      3,803      —        —     148,240      311,103   

Amortization and depreciation

  3,357      51      1,045      419      —     233      —     584   5,689      6,639      11,046      41,477      9,497      3,865      —     72,524      78,213   

 

(1) Include equity method of Banco Hipotecario S.A., Banco Crédito and Securitización S.A.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 7: LAWSUITS AND CLAIMS IN COURSE

 

  A. Agricultural Business

 

  1. Ongoing litigation with the city of Villa Mercedes.

The Misdemeanours Court Judge to the city of Villa Mercedes issued resolution No. 2980/08 about the situation of Cactus in such city, determining that the Company had a 36-month term to stop operating and transferring the establishment located on the Provincial Route 2B.

In such 36-month period, the Company shall not host over 18,500 head of cattle.

Such brief was appealed by Cactus before the Municipality, which was negatively answered on April 7, 2009, by means of Decree No. 0662/09, thus ratifying the Misdemeanour Court Judge’s ruling. Under the administrative justice of the city of Villa Mercedes, Cactus would have until April 7, 2012 to conclude its operations and transfer the establishment.

Cactus has filed appeals with the High Court of Justice of the Province of San Luis, objecting the lawfulness of the rulings entered by the Misdemeanours Court Judge of Villa Mercedes. The appeals are pending and the High Court has not ruled on them.

The Company’s legal advisors are optimistic about the possibilities of reversing the Misdemeanours Court Judge’s ruling.

 

  B. Real Estate Business

 

  1. Provision for unexpired claims against Llao Llao Holding S.A.

The Llao Llao Holding S.A. (“LLH”) Company (in liquidation process following the merger with and into the Company), predecessor of Llao Llao Resorts S.A. (“LLR”) as operator of the Llao Llao Hotel, was sued in 1997 by the National Parks Administration seeking collection of the unpaid balance of the additional sale price, in Argentine External Debt Bond (“EDB”) amounting to US$ 2.9 million. A ruling of the court of original jurisdiction sustained the claim. That ruling was appealed and the Court of Appeals confirmed the judgment of the court of original jurisdiction, demanding payment from the company of US$ 3.8 million, plus interest accrued through payment, punitive interest and attorney’s fees. In March 2004, LLH paid Ps. 9,156 in cash and EDB.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 7: (Continued)

 

The plaintiff requested the court of original jurisdiction to initiate an incidental procedure for execution of sentence by performing a settlement through the Ministry of Economy, the procedure has been questioned by LLR. In view of the fact that the information provided was not sufficient to evaluate the amount settled by the Ministry of Economy, it was requested that the execution be suspended until there is a sentence on the complaint recourse filed to the National Supreme Court for the denial of the extraordinary recourse soliciting that the debt be converted to pesos.

In July 2008, the Court of Appeals notified LLR that by means of a resolution dated June 18, 2008 it had confirmed the settlement approved by the court of original jurisdiction.

On March 17, 2009, the National Supreme Court admitted the incidental procedure and decided to suspend the enforcement of the judgment in so far as the extraordinary appeal lodged by LLR is not resolved.

On February 23, 2010, the Supreme Court of Justice dismissed the action, which rendered the judgment final and compelled LLR to pay the amount calculated by the State, which as of March 31, 2010 was Ps. 12,632 including interest and legal counsel fees, as disclosed in “Other current liabilities – Payables to National Parks Administration”.

Finally, on April 30, 2010 LLR paid the amount claimed.

 

NOTE 8: RESTRICTED ASSETS

 

  A. Agricultural Business

 

  1. Mortgages on plots of land in the Republic of Bolivia

Due to the purchase of farms in the Republic of Bolivia, a mortgage was established on such properties as mentioned in Note 10.A.1. As of the date of these financial statements, the mortgage on the “Las Londras” farm amounts to US$ 2.5 million, effective through November 11, 2010; the mortgage on the “San Cayetano” and “San Rafael” farms amount to US$ 2.0 million, effective through November 11, 2010 and the mortgage on the “La Fon Fon” farm amounts to US$ 1.9 million, effective through November 11, 2010.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 8: (Continued)

 

  2. Investment in Cactus

As of the issuance date of these financial statements, exist a first degree security interest as security in favor of Cactus Feeders Inc. on the 3,294,667 shares acquired on June 30, 2009 by Agrology S.A. through Helmir S.A.. (See Note 9.A.4).

 

  B. Real Estate Business

 

  1. IRSA

 

  a. Puerto Retiro S.A.

On April 18, 2000, Puerto Retiro S.A (indirect subsidiary of IRSA) was notified of a filing made by the National Government, through the Ministry of Defense, to extend the petition in bankruptcy of Inversora Dársena Norte S.A. (Indarsa) to Puerto Retiro S.A. At the request of plaintiff, the bankruptcy court granted an order restraining the ability of Puerto Retiro S.A. to sell or dispose in any manner the acquired real estate property from Tandanor S.A. in June 1993.

Indarsa had acquired 90% of the capital stock of Tandanor S.A. to a formerly estate owned company privatized in 1991, engaged in the shipyard industry.

Indarsa did not comply with the payment of the outstanding price for the acquisition of the stock of Tandanor, and therefore the Ministry of Defense requested the bankruptcy of Indarsa, pursuing to extend the bankruptcy to Puerto Retiro S.A.

The evidence steps of the legal procedures have been completed. Puerto Retiro S.A. appealed the precautionary measure, being the same confirmed by the Court on December 14, 2000. The parties have submitted their claims in due time. The file was passed for the judge to issue a pronouncement, the judge issued a decree adjourning the summoning of decisions to pronouncement in the understanding that there exists pre-judgment in respect of the penal cause filed against ex-officers of the Ministry of Defense and ex-directors of the Company. Consequently, the matter will not be solved until there is final judgment in penal jurisdiction.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 8: (Continued)

 

The Management and legal advisors of Puerto Retiro S.A. estimate that there are legal and technical issues sufficient to consider that the request for bankruptcy will be denied by the court. However, taking the circumstances into account and the progress of the legal action, this position cannot be considered final.

 

  b. Mortgage guaranteed loan Hoteles Argentinos S.A.

In March 2005, Credit Suisse First Boston (“CSFB”) acquired the debt for US$ 11.1 million of Hoteles Argentinos S.A. (“HASA”), which had been in non-compliance since January 2002. In April 2006 HASA made a payment reducing the capital amount payable to US$ 6.0 million. The balance accrued interests at a LIBOR rate 6 months plus 7.0%, being the last of US$ 5.07 due in March 2010.

Jointly, IRSA subscripted a credit default swap for 80% of the restructured debt value in order to protect CSFB in case of non-compliance with HASA’s obligations. For valuable consideration, IRSA will receive a payment of a coupon on a periodical basis. In addition, to support the obligations assumed, IRSA deposited as guarantee the amount of US$ 1.2 million.

With the last installment of the loan received having been repaid on March 15, 2010, CSFB reimbursed the deposit to IRSA. In connection with this matter, HASA borrowed funds from Standard Bank Argentina again, in the amount of Ps. 19,000, which will accrue interest at a fixed nominal 16.25% interest rate per annum, payable on a quarterly basis and with principal becoming due on March 15, 2011.

As a security interest for this transaction, IRSA entered into a put option agreement with Standard Bank whereby the Bank receives the right to sell to IRSA, which in turn agrees to purchase, 80% of the credit rights arising from the loan in the event of HASA’s default.

 

  c. IRSA and its subsidiaries has mortgaged on the following properties:

 

Property

   Book value as of
March 31,  2010
Ps.

Edificio República

   220,952

Plot of land Caballito

   36,741

Plots of land Bariloche

   21,900

Plot of land Zetol

   13,443

Suipacha 652

   11,049

Plot of land Vista al Muelle

   7,570

Plots of land Caballito

   6,754

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 8: (Continued)

 

  d. IRSA maintains a pledge over CYRSA’s shares

 

  e. To guarantee due compliance with all the covenants assumed by Liveck S.A., Zetol S.A.’s and Vista al Muelle S.A.’s minority shareholder pursuant to the stock purchase agreement for Vista al Muelle S.A.’s shares executed on June 11, 2009 and the Addendums to the Agreement dated January 4, 2010 and March 30, 2010 as well as payment of any damages and associated expenses, the parties have reciprocally tendered a security interest consisting in a possessory pledge over the shares in Vista al Muelle S.A. and Zetol S.A..

 

  f. IRSA has raised a mortgage over the property designated as “Suipacha 652” to secure compliance with its obligation to erect a building and to convey the units to be constructed in the building as this obligation represents the balance outstanding for the acquisition of a plot of land in Av. Del Libertador 1755. The Company also carries a mortgage loan granted by Banco Macro for the acquisition of the building designated as “Edificio República” (See Note 8.B.1.c to the Unaudited Consolidated Financial Statements).

 

  g. In May 2008, IRSA bought a 49% shareholding in Manibil S.A. from Land Group S.A.. Manibil S.A. had been created to transact business in real estate and construction and to carry out financial transactions and made contributions proportional to its shareholder possession for Ps. 23.9 million. By virtue of the contracts signed, IRSA agreed not to transfer its shares or any rights related thereto for a term of three years.

 

  2. APSA

 

  a. The fixed assets account included the multiplex cinema building in the Córdoba Shopping Villa Cabrera, which is encumbered by an antichresis to secure the financial payable carried by Empalme S.A.I.C.F.A. y G. (merged into Shopping Alto Palermo S.A. as from January 1st , 2009) had with NAI INTERNATIONAL ll Inc..

 

  b. The accounts receivable financial trusts include the contingency and expenses funds of financial trust as credit protection for investors that as of March 31, 2010 amounted to Ps. 5,412. They are restricted availability credits until settlement in accordance with the respective prospectus.

 

  c. As of March 31, 2010 under other current receivables, APSA has deposits thar are restricted under due to different court attachments.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 8: (Continued)

 

  d. As regards the case “Alto Palermo S.A. with Dirección General Impositiva in re: Appeal”, Case file No. 25.030-I, currently heard by Room A, Office of the 3rd Nomination, the property located at Av. Olegario Andrade 367, Caballito, Buenos Aires City has been encumbered, and its value as of March 31, 2010 amounts to Ps. 36,741 (disclosed in other “Non-current investments- Undeveloped parcels of land”).

 

  e. Other current investments account includes BONTE 2006 bonds for Ps. 34; which are deposited as rental guarantee.

 

  f. As of March 31, 2010, Tarshop S.A. has granted a pledge over Certificates of Participation related to the Fideicomisos Financieros Tarjeta Shopping, (CP) according to the following detail:

- To Standard Bank Argentina S.A., CP Al Standard Bank Argentina S.A., CP related to the Fideicomisos Financieros Tarjeta Shopping Series XLI, XLII, XLIV, XLVII y LIV, (loan of Ps.17,415).

- To Banco Itaú Buen Ayre S.A., CP related to the Fideicomisos Financieros Tarjeta Shopping Series XXXIX and XL (loan of Ps. 3,958).

- To Banco Supervielle S.A., CP related to the Fideicomisos Financieros Tarjeta Shopping Series XXXII, XXXVIII y L, (loan of Ps. 4,411).

- To Banco Hipotecario S.A., CP related to Fideicomisos Financieros Tarjeta Shopping Series XLVII, XLIX y LVI, (loan of Ps. 20,140).

 

  g. As of June 30, 2009, the plot of land located at Beruti 3351/59, Buenos Aires City, was encumbered by a first mortgage in favor of Dowler Company S.A., in security of the unpaid balance as of the date of purchase for US$ 4.5 million. On February 16, 2010 this amount was cancelled and the mortage was lifted. (Note 10.B.2.c).

 

  h. As regards the case styled “Case File N° 88.390/03 with María del Socorro Pedano; for Tres Ce S.A. o Alto Palermo S.A.”, the building located at Av. Virrey Toledo 702, Salta, has been encumbered for an amount of Ps. 180 (disclosed in “Fixed assets”).

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 8: (Continued)

 

  i. Guarantee Tarshop S.A.: On May 13, 2009, the Board of Directors of Alto Palermo S.A. resolved to approve that APSA stands as surety before Banco Itaú for the payment of emerging obligations for Tarshop S.A. as regards the organization of a new financial trust with such bank for up to a maximum amount equivalent to 10% of the face value of VDG’s (trust debt securities) subscribed by Banco Itaú. The total maximum amount of this surety stands at Ps. 5,000 and extends through the actual settlement of VDF’s. Likewise, it was resolved that APSA assumes the obligation to act as Substitute Manager in the eventual case that Tarshop were removed from its function as Manager under the trust agreement.

 

  j. As regards the barter commitment described in Note 10.B.2.d.), the delivery and title deed of Air Space Coto is compromised.

 

  k. Tarshop S.A. has granted cash as guarantee for leases, related to the stores where its branches operate, which are included in Other receivables and prepaid expenses for an amount of Ps. 413.

 

NOTE 9: ACQUISITION, CONSTITUTION AND RESTRUCTURING OF COMPANIES

 

  A. Agricultural Business

 

  1. Name change of Agropecuaria Cervera S.A

On November 12, 2008, the Extraordinary Shareholders’ Meeting of Agropecuaria Cervera S.A. approved the corporate name change to “Agropecuaria Anta Sociedad Anonima”, hence amending section 1 of the bylaws.

On December 17, 2008, formalities were approved by the Province of Salta’s IGPJ (Provincial regulatory agency of business associations) and was registered as of March 6, 2009.

 

  2. Republic of Bolivia and Republic of Uruguay

Under a series of transactions that constitute for Cresud a new expansion of the agricultural and livestock Business in South America as designed in its business plan, the Company through its affiliates Agrology S.A., IGSA and ANTA has organized companies in the Republic of Bolivia and has acquired a company in the Republic of Uruguay.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

Hence, the following companies were organized:

Agropecuaria Acres del Sud S.A., (“Acres”) Aguaribay Agropecuaria S.A. (“Aguaribay”), Calden Agropecuaria S.A. (“Calden”), Itín Agropecuaria S.A. (“Itín”), Ñandubay Agropecuaria S.A. (“Ñandubay”), Ombú Agropecuaria S.A. (“Ombú”), Yatay Agropecuaria S.A. (“Yatay”) and Yuchán Agropecuaria S.A. (“Yuchan”) whose shareholders are: Agrology S.A. holding a 95.12% interest, IGSA and ANTA holding a 2.44% interest each. Such companies in Bolivia (except Agropecuaria Acres del Sud S.A.) acquired plots of land for the agricultural exploitation which are described in Note 10.A.1.. Thus, Cresud holds a 100% interest in such companies, engaged in agricultural exploitation.

Additionally, during October 2008, the Company acquired through its affiliate Agrology S.A. 100% of the common stock of a company called Helmir S.A., located in Republic of Uruguay whose corporate purpose is broad.

 

  3. Expanding business into the Republic of Paraguay

Under the framework of a series of transactions that constitute for Cresud a new expansion of the agricultural and livestock businesses in South America, on September 3, 2008, the Company executed jointly with Carlos Casado S.A., an Argentine company owning large stretches of land in southern Paraguay, a framework agreement by which it was decided to generate synergy between both companies to do business on the real estate, agricultural and livestock, and forestry markets, as well as series of related agreements aiming at formalizing the productive coalition between both companies.

Within such context, Cresud participates together with Carlos Casado (with a 50% interest each) in Cresca S.A. a stock company organized under the law of the Republic of Paraguay, under which Cresud will assume the capacity of advisor under an advisory agreement, for the agricultural, livestock and forestry exploitation of an important rural area in Paraguay (hereinafter the “Property”) and possibly of up to 100,000 hectares also located in Paraguay, derived from the option exercised by the Company, granted by Carlos Casado S.A..

The advisory agreement shall be valid for 10 year terms as from the date the framework agreement is executed and will automatically renewed for two additional 10-year period as from maturity date of the original period, in turn being able to be renewed after the expiration of the additional period.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

Cresud has additionally executed a pre-purchase agreement as committed to acquire for a 50% interest in 41,931 hectares in Paraguay, owned by Carlos Casado S.A. for a total and agreed-upon amount of US$ 5.2 million in turn, to be contributed in kind to the Company aiming at developing the agricultural and forestry business in the neighboring country.

On January 23, 2009, Agrology S.A. directly and indirectly controlled by 99.99% by Cresud made a contribution in kind to the Paraguayan company, Cresca S.A.. Such contribution is made up of undivided 50% of five plots of land with whatever they have on, located in Mariscal José Félix Estigarribia, Dept. of Boquerón, Chaco Paraguayo, Republic of Paraguay, for 41,931 hectares, acquired from the Company Carlos Casado S.A..

Consequently, together with Carlos Casado S.A.’s contribution, the total contribution to Cresca S.A. stands at US$ 10.5 million.

On February 3, 2009, the previously called general shareholders’ meetings were held at Cresca S.A. headquarters, whose agenda included among other matters, the capital increase and the issuance of shares of such company as well as the ratification of those agreements that are among the transactions that together with Carlos Casado S.A. had been planned and that at present Cresud will develop through its affiliate, Agrology S.A.

Likewise, on that date, the amount of US$ 5.1 million was paid for the balance of the price originated by the capital contribution made by Carlos Casado S.A. to Cresca S.A. on behalf of Agrology S.A. and which resulted from the in-kind contribution of five plots of land located in The Republic of Paraguay, as it was mentioned opportunately.

On March 19, 2010 and in connection with the option already exercised related to the Option Property, Cresca S.A. required from Carlos Casado S.A. that 3,614 hectares (out of which 1,807 hectares belonging to Agrology S.A.) be transferred to it. As agreed in the Option Agreement, Cresca S.A. will pay Carlos Casado S.A. US$ 350 per hectare or US$ 1.3 million as follows: US$ 0.3 million paid on March 23, 2010; US$ 0.5 million will be paid on December 1, 2010 and US$ 0.5 million, on March 1, 2011.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

  4. Investment in Cactus

On June 30, 2009, Agrology, by means of its affiliate Helmir S.A. executed with the company Cactus Feeders Inc. an agreement to purchase shares of the company Cactus Argentina S.A.

By means of this agreement, Helmir S.A. acquired 3,294,667 registered, non endorsable shares of common stock with a face value of Ps. 1 each, entitled to 1 vote per share of Cactus, representing 12% of the common stock of such company, at a price of US$ 1.2 million, which will be paid on June 30, 2010, plus interest at 4% p.a. (See Note 12.2.a to the basic financial statements).

The debt is secured by a promissory in favor of Cactus Feeders Inc. for US$ 1.2 million, falling due on June 30, 2010. Likewise, a first degree security interest in favor of Cactus Feeders Inc. on the 3,294,667 shares acquired to secure the established payment.

Afterwards, Cresud assigned a receivable for Ps. 2,245, it carried from Cactus, to Helmir S.A. Both Cresud and Helmir S.A. have decided to capitalize those receivables it carried from Cactus.

As on July 2, 2009, Cactus’s shareholders have capitalized their interests accordingly, Helmir S.A.’s interest in Cactus has not changed.

 

  B. Real Estate Business

 

  1. IRSA

 

  a. Creation of CYRSA – Horizons Project

In January 2007, IRSA acquired two plots of land adjacent to its own located in Vicente López, Province of Buenos Aires (one of them through the acquisition of the total share of Rummaala S.A, actually merged with CYRSA). The purchase price was US$ 36.2 millions, from which US$ 30.3 millions will be canceled with certain units of the bulding to be constructed. As security for compliance with, Rummaala S.A. shares were pledged and the Building located in Suipacha 652 was mortgaged.

In April, 2007, IRSA constituted CYRSA S.A. (“CYRSA”), and in August 2007, CYRELA was incorporated with the ownership of 50% of CYRSA capital stock. IRSA contributed with the plots of land and the liability in kind related in the amount of Ps. 21,495 and CYRELA contributed Ps. 21,495 in cash.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

Then, a major real estate development known as “Horizons” was launched on the two plots of land mentioned.

From May 2008, CYRSA continued the marketing process of the building units to be constructed by signing preliminary sales contracts for 99% of the units to be marketed and received advances, which are disclosed in “Customer advances”.

The sale prices set forth in these preliminary sales contracts are made of a fixed and determined portion and another portion to be determined in line with the future construction expenses.

The buyer can choose from the following purchase plan:

- The balance is cancelled in installments and is fully paid at the time of transfer and signature of deeds.

- Partial cancellation will be on installments payable up to the time of transfer/signatures of deeds, the remaining balance to be financed during 90 months’ term with units having mortgaged guarantees.

Through preliminary sales agreements, CYRSA has committed to transfer the functional units before February 2011 to the latest.

As of March 31, 2010, the percentage of completion of the Horizons project was 78.74% considering the cost incurred in relation to the total estimated project costs.

 

  b. Acquisition of shares in Hersha Hospitality Trust (“Hersha”)

On August 4, 2009, the Company through Real Estate Investment Group (REIG), an entity controlled and managed by IRSA, announced the subscription of 5,700,000 ordinary shares representative of approximately 10.4% Hersha’s common stock. Together REIG adquired an option for a five-year term over a further 5,700,000 additionally ordinary shares at a price of US$ 3.00 per share. The total price paid by REIG for such shares was US$ 14.3 million. Also contemplated in the investment agreements was the appointment of our Chairman and CEO, Mr. Eduardo S. Elsztain, to the position of member of Hersha’s Board of Directors.

In January 2010, through REIG, IRSA subscribed 4,789,917 shares of Hersha’s common stock at a price of US$ 3.00 per share and for a total purchase amount of US$ 14.4 million.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

In March 2010, IRSA through REIG, subscribed 3,864,000 shares of Hersha’s common stock at a price of US$ 4.25 per share and for a total purchase amount of US$ 16.4 million.

As of March 31, 2010, IRSA’s ownership interest in Hersha amounts to 11.06%. Besides, if the purchase option previously mentioned were exercised without any new shares being issued in favor of third parties, IRSA’s stake in Hersha would amount to 14.60%. Hersha’s shares are valuated at cost and the purchase option as its current value.

Hersha is a Real Estate Investment Trust (REIT) listed in the New York Stock Exchange (NYSE) under the “HT” symbol that holds majority interests in 73 hotels throughout the United States of America totaling approximately 9,294 rooms. These hotels are rated as “select service” and “upscale hotels” and they are mainly located in the Northeast coast of the US, including New York, New Jersey, Boston, Washington D.C. and Philadelphia, whilst a few are located in northern California and some others in Arizona. These properties are operated under franchises that are leaders and enjoy widespread recognition in their markets, such as Marriot International, Intercontinental Hotel Group, Starwood Hotels, Hilton Hotels Corporation, Global Hyatt Corporation and Choice Hotels International.

 

  c. Acquisition of Metropolitan 885 Third Ave. LLC (“Metropolitan”)

In July 2008, IRSA (through its subsidiaries) acquired a 30% interest in “Metropolitan 885 Third Ave. LLC” (or “Metropolitan”) whose equity is composed of an office building known as “Lipstick Building” and debt related to that asset. The transaction included the acquisition of (i) a put right exercible until July 2011 to sell a 50% portion of the interest acquired at the same value paid plus interest at 4.5% per annum and (ii) a right of first offering to acquire a 60% portion of the 5% of its equity interest. The price paid in this transaction was US$ 22.6 million.

During year 2009, Metropolitan had incurred losses that became negative their equity mainly from the allowance for impairment booked in connection with the metioned building. Consequently, IRSA’s share in Metropolitan’s losses exceeds its equity interest. Therefore, the investment was valued at zero and a liability was recognized and recorded under “Other liabilities” for an amount of US$ 1.5 million (equivalent to the maximum amount that IRSA has agreed to contribute in the event of being required to fund Metropolitan’s operations).

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

Additionally, the put right was revalued accordingly and adjusted to its value at March 31, 2010, that amounts to US$ 12.2 million and is disclosed under Other receivables.

 

  d. Acquisition of shares in Banco Hipotecario S.A.

In fiscal year ended as of June 30, 2009, IRSA (through its subsidiaries) acquired, in arm’s length conditions, from Dolphin Fund PLC and from Inversiones Financieras del Sur S.A., 143,627,987 shares in Banco Hipotecario S.A. (BHSA) in exchange for Ps. 107.6 million of which 78.8 million were paid in July, 2009. The transaction was recognized by the “acquisition method” (see Note 2.j.2. to the basic financial statements). originating a gain of 133.0 million. As a result of these acquisitions, as of June 30, 2009 IRSA held a 21.34% interest in BHSA’s capital stock (without consideration treasury stock).

During the period, IRSA (through its subsidiaries) acquired the equivalent to 99,625,593 shares of BHSA for an amount of Ps. 117.4 million of which as of March 31, 2010, Ps. 105.2 million were paid. The transaction was recorded by application of the “acquisition method” (See Note 2.j.2. to the basic financial statements), the analysis of the current value of assets and liabilities acquired originating a gain of Ps. 62.9 million.

After the above mentioned purchases, as of March 31, 2010 IRSA has 27.98% of the shares of BHSA (without consideration treasury stock).

 

  e. Acquisition of companies in the Oriental Republic of Uruguay

During the fiscal year ended June 30, 2009, IRSA acquired a 100% stake in Liveck S.A. (“Liveck”) (a company organized in the Oriental Republic of Uruguay). On June 30, 2009, IRSA sold 50% of its stake in Liveck to Cyrela Brazil Realty S.A. for a price of US$ 1.3 million.

On June 11, 2009 Liveck acquired, a 90% interest over the shares of the companies Vista al Muelle S.A. (“Vista al Muelle”) and Zetol S.A (“Zetol”), both property owners in Uruguay’s Canelones Department.

The price of the purchase of all the shares in Zetol, of which 90% was acquired by Liveck and the remaining 10% of which was acquired by Banzey S.A. (Banzey), had been fixed at US$ 7.0 million, of which:

 

  I) US$ 2.0 million have already been paid.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

  II) The US$ 5.0 million balance is to be paid in 5 installments of US$ 1.0 million each and tied to the consummation of the release to the market of the real estate projects or within a maximum term of 93 months counted as from the date of acquisition of IRSA.

The balance outstanding on the price accrues an annual 3.5% compensatory interest rate calculated on the total outstanding amount and payable jointly and undividedly with each one of the price balance installments.

The sellers of the shares of Zetol may choose to receive, in lieu of the amounts outstanding in cash (capital plus interest) the ownership rights to the units to be built in the real estate owned by Zetol representative of 12% of the total marketable square meters built.

The price for the purchase and sale of all the shares in Vista al Muelle amounted to US$ 0.8 million, of which:

 

  I) US$ 0.5 million have already been paid.

 

  II) US$ 0.3 million to be paid within a maximum two-year term counted as from the date of the purchase and sale agreement.

An annual 8% compensatory interest rate has been agreed on the outstanding amounts, to be paid jointly and undividedly with each one of the price balance installments.

To guarantee compliance with the duties agreed by Liveck in the above transactions, Ritelco S.A. has tendered a surety bond guaranteeing payment of 45% of the outstanding balance, interest thereon and the option rights of the sellers. As a consequence of the above-mentioned sale of a 50% stake to Cyrela Brazil Realty S.A., there has been a 50% reduction in the original amount of the surety bond.

On December 22, 2009, Vista al Muelle acquired plot of land for a total of US$ 1.9 million and the terms of payment were:

 

  I) US$ 0.1 million have already been paid.

 

  II) US$ 0.2 million will be paid within the 10 days immediately following the earlier of the date on which the municipal office of the Mayor of Canelones serves conclusive notice of the approval and coming into force of the so-called “Detailed Urban Plan (PUD)” or within a maximum term of 8 months as from the date of execution of the agreement.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

  III) US$ 1.6 million to be paid by delivering Home Units and/or Retail Stores to be built and representative of a 12% portion of the 65.54% interest resulting from the sum of the prices of all the units appearing on the Price List for the launch to the market of the B Sector (with the parties having signed a boundary plan of said sector).

Pursuant to the stock purchase agreement for Vista al Muelle’s shares executed on June 11, 2009 and the Addendum to the Agreement dated January 4, 2010 and March 31, 2010, Liveck has agreed to buy the shares held by Ernesto Kimelman or Banzey or a company owned by Ernesto Kimelman (as applicable), of Vista al Muelle and Zetol and the latter have agreed to sell them, in exchange for the amount of US Dollars or Uruguayan Pesos, as the case may be, that Ernesto Kimelman or Banzey or a company owned by Ernesto Kimelman (as applicable), would have actually contributed to Zetol and Vista al Muelle until the execution of said purchase and sale.

Both parties have agreed that this purchase and sale is dependent upon, and shall be rendered ineffectual if the parties entered into a shareholder agreement no later than September 1st, 2010. If no such shareholder agreement is signed, this sale shall be executed and delivered on September 13, 2010.

 

  f. Merger and spin-off/merger between IRSA and Patagonian Investment S.A.; and spin-off/merger with Palermo Invest S.A. and Inversora Bolívar S.A. (IBOSA)

IRSA’s shareholders’ meeting held on November 27, 2009 approved, amongst other decisions, the corporate reorganization consisting in the merger by absorption of Patagonian Investment S.A. into the Company, and the spin-off of Palermo Invest S.A. to be subsequently merged with Inversora Bolívar S.A. as well as all the documentation concerning these transactions. Afterwards, on January 22, 2010, a public deed was drawn to formalize the Final Merger Agreement (“the Merger Agreement”) in due time filed with the oversight authorities.

 

  g. Option to acquire an interest in APSA

In January, 2010, Parque Arauco S.A. accepted the bid submitted by IRSA, for acquiring, through a purchase option, the 29.55% interest in APSA and the held of nominal value of US$ 15.5 million of “APSA’s Convertible Note 2014”.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

The acceptance of the bid grants IRSA the right to exercise the purchase option mentioned above until August 31, 2010, which term may be extended until November 30, 2010 subject to compliance with certain conditions.

The strike price has been fixed at the total and final amount of US$ 126.0 million. IRSA transferred US$ 6.0 million to Parque Arauco S.A., non refundables, as payment in exchange for the option, to be computed towards cancellation of the final price.

As of the date of issuance of these financial statements, the parties were carrying on the legal and commercial structure underlying the above transaction.

 

  2. APSA

 

  a. Capital increase and capital contributions to Tarshop S.A.

During the course of fiscal year 2009 and due to the international financial context, APSA reviewed the general and specific economic prospects for Tarshop S.A.’s business, taking various measures, all of which tend to strengthen the business upon the prevailing economic conditions.

To meet the growing volatility in the international financial context and provide Tarshop S.A. with a capital base according to the conditions commanding on the market, during first quarter of fiscal year 2009, APSA decided to participate in a capital increase of Tarshop S.A. for up to the amount of Ps. 60,000, increasing its equity interest in Tarshop S.A. from 80% to 93.439%.

During the second quarter of fiscal year 2009, APSA provided financial assistance to Tarshop S.A. for Ps. 105,000, amount then accepted as irrevocable capital contributions. The capitalization of such irrevocable contributions and the subsequent capital increase was decided by Tarshop S.A.´s Extraordinary Shareholders’ Meeting held on October 30, 2009. After this capitalization, the interest in the mentioned Company stands at 98.5878%.

Subsequently, during January 2010 and related to the restructure operation of its interest in Tarshop S.A., APSA acquired the minority interest (1.4122%) property of the minority shareholder for US$ 0.54 million, thus consolidating what its 20% interest will be in the future as regards

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

Tarshop S.A.’s capital stock in the event the previously mentioned Central Bank of Argentina approval is registered.

 

  b. Agreement to sell the equity interest in Tarshop S.A.

On December 22, 2009, APSA reported the approval by its Board of Directors of the sale assignment and transfer of the 80% of the equity interest in Tarshop S.A. to Banco Hipotecario S.A. Such interest represents 80% of the capital stock issued and outstanding, this is 107,037,152 registered, nonendorsable shares of common stock with a face value of Ps. 1 and entitled to 1 vote each.

The sale price was established at the total and definitive amount of US$ 26.8 million and APSA granted to Banco Hipotecario S.A. the indemnities that are usual in this type of transactions.

In this line of thought, on December 29, 2009, the contractual documents related to the sale of the 80% of Tarshop S.A.’s capital stock to Banco Hipotecario S.A. were subscribed.

It must be noted that the transaction is subject to the authorization and/or approval of the Central Bank of Argentina, under its function of enforcement agency in accordance with current regulations.

Upon executing the agreement, US$ 5.4 million was received as prepayment, disclosed in “Other Liabilities” and the remaining balance of US$ 21.4 million will be collected 5 working days after the Central Bank of Argentina notifies about the authorization, even with conditions to the transaction, whereupon price adjustments considered in the agreement and compliance with other predecent conditions set in the contract will be taken into account.

 

  c. Merger between Shopping Alto Palermo S.A. (“SAPSA”), Mendoza Plaza Shopping S.A. and Empalme S.A.I.C.F.A. y G.

SAPSA’s Extraordinary and Unanimous Shareholders’ Meeting held on February 16, 2009, resolved the merger of such company with Mendoza Plaza Shopping S.A. and Empalme S.A.I.C.F.A. y G.

As from July 1st, 2009 SAPSA merged into APSA.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

  d. Acquisition of shares of Arcos del Gourmet S.A.

During August 2007, APSA exercised an option for subscription of shares of Arcos del Gourmet S.A. (a company that holds a concession granted by ONABE).

The price of the option was fixed in US$ 0.6 million and it has been fully cancelled. As of June 30, 2009 the option has been accounted in Non-current investments – Advances for purchase of shares.

On November 27, 2009, Alto Palermo S.A. acquired 7,916,488 shares of common stock with a face value of Ps. 1, entitled to 1 vote each, representing 80% of the common stock.

The price agreed upon for 40% of acquired shares was fixed at US$ 4.3 million, out of which the amount of US$ 0.3 million has been settled as part of the option price; US$ 2.0 million was paid upon executing the share purchase agreement and the remainder shall be paid in two equal annual installments, falling due on November 27, 2010 and November 27, 2011.

For the remaining 40% of shares, the price was fixed at (i) US$ 0.8 million, plus (ii) 20% of the investment required to develop the project. Out of the price indicated in (i), US$ 0.3 million has been settled as part of the option price and US$ 0.5 million will be paid when the Shareholders’ Meeting approves the capital increase of Arcos del Gourmet S.A. for US$ 2.7 million. The portion of the price indicated in (ii) shall be paid upon the possible capital increase required to develop the project, which should be approved by the respective authorities and as agreed by the parties, up to US$ 6.9 million.

On February 17, 2010, Arcos del Gourmet S.A. held a shareholders’ meeting that approved a capital increase of US$ 2.7 million, equivalent to Ps. 10.4 million. Consequently, 3,515,545 registered nonendorsable shares of common stock will be issued, with a face value of Ps. 1 and entitled to one vote per share, with a subscription price of Ps. 2.9622 per share, of which Ps. 1 is the face value and Ps. 1.9622 is additional paid-in capital, of which APSA is entitled to 80% thereof.

On May 7, 2010, two share subscription agreements were executed establishing that such amount will be paid in as follows: (i) capitalizing of loans for Ps. 5.6 million, (ii) capitalizing receivables from APSA for Ps. 0.9 million, (iii) capitalizing irrevocable contributions for Ps. 2.5 million and (v) the amount of Ps. 1.4 million will be paid up in cash within three working days as from executing the agreements.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

  e. Acquisition of a commercial center’s going concern value

On December 28, 2007, APSA signed an agreement for Partial transfer of goodwill with INCSA for acquiring one of the parts of the net assets established by a Commercial Center where “Soleil Factory” currently develops activities. The transaction was being subject to certain conditions of precedent fulfillment. The total price of the operation is US$ 20.7 million of which US$ 8.1 million were paid at the time the preliminary purchase contract was entered into. Such disbursement was recorded as an Advance for the purchase of fixed assets.

Once the definitive signature of the net assets transference has taken place, the remaining amount of US$ 12.6 million will accrue 5% annual interest plus VAT, which will be repaid in 7 annual and consecutive installments. The first interest installment will be paid 365 days after the contract is signed and together with the payment of the last interest installment the total capital owned will be cancelled.

On March 15, 2010, APSA e INCSA agreed to waive the conditions precedents and, consequently, the partial transfer of the goodwill started, upon which completion, a portion of the goodwill related to the shopping mall will be transferred and ownership of the portion of the real property related to the shopping mall will be surrendered. APSA and INCSA agreed to file with the Argentine Anti-Trust Board (CNDC) within the legal terms after such partial transfer. Likewise, the title deed will be granted once the use of the property has been obtained.

On April 12, 2010, the publication of legal notices announcing the partial transfer of the goodwill ended and as instructed by the notary public involved, no creditors appeared within the legal term to do so.

Furthermore, APSA signed an offering letter for acquiring, building and running a commercial centre in a real estate owned by INCSA located in the City of San Miguel de Tucumán, Province of Tucumán. This transaction is subject to certain conditions, one of these being that APSA partially acquires from INCSA the net assets established by the commercial center that develops activities in “Soleil Factory”. The price of this transaction is US$ 1.3 million, of which US$ 0.05 million were paid on January 2, 2008. Such disbursement was recorded as an Advance for purchase of fixed assets.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

  f. Merger between APSA and Shopping Alto Palermo S.A.:

On November 27, 2009, it was held APSA’s shareholders’ meeting that approved, among others, the corporate reorganization consisting in APSA’s merger with Shopping Alto Palermo S.A. as from July 1, 2009, APSA being the absorbing or merging company and Shopping Alto Palermo S.A. the absorbed and merged company, with the ensuing dissolution without liquidation of Shopping Alto Palermo S.A.

Subsequently, on January 21, 2010, the Definitive Merger Agreement has been notarized into a public deed and filed with the enforcement agencies in due course.

 

  g. Purchase-Sale of Fibesa S.A. (Fibesa)’s shares:

On August 3, 2009, a share transfer agreement was executed by which APSA sold to Shopping Alto Palermo S.A. 49,999 Fibesa S.A.’s shares, with a face value of Ps. 0.00000001 each and entitled to 5 votes per share, representing 4.9999% of the Fibesa’s capital stock.

On August 3, 2009, a share transfer agreement was executed by which Ritelco S.A. sold to Shopping Alto Palermo S.A. one Fibesa S.A.’s share, with a face value of Ps. 0.00000001 each and entitled to 5 votes per share, representing 0.0001% of the Fibesa’s capital stock.

Due to the previously mentioned agreements, APSA owned 95% of that company’s capital stock and Shopping Alto Palermo S.A. owned the remaining 5%. Afterwards, due to the merger between APSA and Shopping Alto Palermo S.A., as mentioned in subsection f) of this note, APSA is the owner of 99.99996% of the Fibesa’s shares.

 

  h. Panamerican Mall S.A.

Panamerican Mall S.A., a company organized in November 2006 between APSA and Centro Comercial Panamericano S.A., with 80% and 20% interests, respectively, has developed a commercial venture in the Saavedra neighbourhood in Buenos Aires City.

During May 2009, the shopping mall Dot Baires and the hypermarket were opened while multiplex cinema opened in early July 2009. The office building is still at the construction stage. The project is being carried out by Constructora San José Argentina S.A., a company related to Centro Comercial Panamericano S.A. The progress percentage of the shopping mall stood at 99% by the period-end. Additionally, the progress percentage of the work of the office building is at 95%.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 9: (Continued)

 

Total contributions made by shareholders as regards this project amount to Ps. 556,989 as of the closing date of these unaudited financial statements.

 

  i. Purchase-Sale of Conil S.A.’s shares

On October 21, 2009, it was executed the share purchase agreement by which APSA and Fibesa S.A. acquired 95% and 5% of the 50% of Conil S.A.’s shares, respectively. The agreed price amounted to US$ 0.29 million which was completely cancelled at March 31, 2010.

As a result of the previously mentioned agreement, APSA becomes the owner of 97.5% of such company’s shares, while Fibesa S.A. owns the remaining 2.5%.

 

NOTE 10: PURCHASE, SALES AND BARTER OF PROPERTIES

 

  A. Agricultural Business

 

  1. Acquisitions of land in the Republic of Bolivia

a. On July 28, 2008, the Company acquired “Las Londras” farm, a 4,566 hectare property located in the Province of Guarayos, Bolivia for an aggregate purchase price of US$ 11.4 million, of which US$ 1.1 million was paid, US$ 3.8 million on January 22, 2009 date in which the contracts’ protocol was signed and US$ 4.0 million on November 9, 2009. The remainder balance will be paid without interests in November, 2010. For the outstanding balance of such real estate property, a mortgage was established in favor of the sellers effective through the last payment date.

b. On July 28, 2008, the Company acquired “San Cayetano” and “San Rafael” farms, a 883 hectare and a 2,969 hectare properties located in the Province of Guarayos, Bolivia for an aggregate purchase price of US$ 8.9 million out of which US$ 0.9 million was paid, US$ 2.9 million in November 19, 2008 date in which the contracts’ protocol was signed and US$ 3.1 million in November 9, 2009. The remainder balance will be paid without interests in November, 2010. For the outstanding balance of such real estate property, a mortgage was established in favor of the sellers effective through the last payment date.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 10: (Continued)

 

c. On July 28, 2008, the Company acquired “La Fon Fon” farm, a 3,748 hectare property located in the Province of Obispo Santiesteban, Bolivia for an aggregate purchase price of US$ 8.6 million out of which US$ 1.4 million was paid, US$ 2.3 million in November 19, 2008 date in which the contracts’ protocol was signed and US$ 3.0 million in November 9, 2009. The remainder balance will be paid without interests in 12 month from the referred date. For the outstanding balance of such real estate property, a mortgage was established in favor of the sellers effective through the last payment date.

 

  B. Real Estate Business

 

  1. IRSA

 

  a. Acquisition of plots of land located Catalinas Norte area

IRSA executed a preliminary sales agreement for the acquisition of a plot of land of 3,649 square meters and located in the area known as Catalinas Norte in the Autonomous City of Buenos Aires.

The price agreed was Ps. 95.0 million, of which: Ps. 19.0 million have already been paid and the outstanding balance shall be paid at the time of executing and delivering the corresponding title deed, scheduled during the present month of May.

 

  2. APSA

 

  a. Acquisition of the building known as Ex- Escuela Gobernador Vicente de Olmos (City of Córdoba)

In November 20, 2006, APSA acquired through a public bidding the building known as Ex Escuela Gobernador Vicente de Olmos, located in the city of Córdoba for the amount of Ps. 32,522.

The building is under a concession agreement, effective for 40 years, falling due in February 2032, which grants the concession holder the commercial exploitation of the property. Such agreement provides for paying a staggered fee in favor of the concession principal which shall be increased by Ps. 2.5 every 47 months. As of the issuance date of these financial statements, the concession is at the 217 month, with a current monthly fee of Ps. 12.6 while the next increase is scheduled for the 234 month.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 10: (Continued)

 

On September 25, 2007, the transfer deed of the property was signed with the Government of the Province of Córdoba and the transference of the respective concession contract. As of March 31, 2010 this transaction is recorded as Non-current investments.

 

  b. Barter with Condominios del Alto S.A.

On October 11, 2007, APSA subscribed with Condominios del Alto S.A. a barter contract in connection with an own plot of land (plot 2 G), located in the City of Rosario, Province of Santa Fe.

As partial consideration for such exchange contract, Condominios del Alto S.A. agreed to transfer the full property, possession and dominium in favor of APSA of the following future properties: (i) fifteen (15) Functional Housing Units (apartments), with an own constructed surface of 1,504.45 square meters, which represent and will further represent jointly 14.85% of the own covered square meters of housing (apartments) of the building that Condominios del Alto S.A. will build in Plot G, and (ii) fifteen (15) Garages, which represent and will further represent jointly 15% of the own covered square meters of garage in the same building.

On March 17, 2010, APSA and Condominios del Alto S.A. subscribed a supplementary deed specifically determining the units committed for bartering that will be transferred to APSA and the ownership title to 15 garage slots.

The parties have determined that the value of each undertaking is of US$ 1.1 million.

As a complementary consideration in favor of APSA, Condominios del Alto S.A. paid APSA US$ 0.015 million and constituted certain guarantees in favor of APSA.

APSA also granted Condominios del Alto S.A. an acquisition option through barter of plot 2 H. On November 27, 2008, the title deed for the plot of land 2 H was executed for US$ 2.3 million, a value that the parties have determined for each of their considerations.

As partial consideration for the above-mentioned barter, Condominios del Alto S.A. agreed to transfer the full property, possession and ownership in favor of APSA of the following future building: (i) forty two (42) Functional Housing Units (apartments), which represent and will further represent jointly 22% of the own covered square meters of housing (apartments) of

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 10: (Continued)

 

the building that Condominios del Alto S.A. will construct in Plot H; and (ii) forty seven (47) garages, which represent and will further represent jointly 22% of the own covered square meters of garage units in the same building.

 

  c. Acquisition of Beruti plot of land

On June 24, 2008, APSA acquired from Dowler Company S.A. a plot of land located at Beruti 3351/3359, between Bulnes street and Coronel Díaz avenue in Buenos Aires City, located in near “Shopping Alto Palermo S.A.”, a location considered to be strategic for APSA.

The transaction was executed for a total price of US$ 17.8 million, which were completely cancelled. Such plot of land is disclosed in “Non-current investments”- Undeveloped parcels of land.

 

  d. Barter with CYRSA S.A.

On September 24, 1997, APSA and COTO Centro Integral de Comercialización S.A. (COTO) granted a title deed by which APSA, which then operated under the name of “Sociedad Anónima Mercado de Abasto Proveedor” (SAMAP), acquired the rights to receive the garage parking slots and the rights to increase the height of the building located between the Agüero, Lavalle, Guardia Vieja and Gallo streets, in the Abasto neighborhood.

On July 31, 2008, a conditioned barter commitment was executed by which APSA would transfer CYRSA S.A. (CYRSA) 112 garage parking slots and the rights to increase the height of the property to build a two tower buildings on the previously mentioned property, upon compliance with certain conditions.

In consideration, CYRSA would give APSA an amount to be determined in the future of units in the building that would be built equivalent to 25% of square meters, which as a whole will be total not less than the amount of 4,053.50 proprietary square meters to be built. Likewise, if any, CYRSA would deliver APSA a number of storing units equivalent to 25% of storing units in the future building.

Additionally and in the case of the conditions which the transaction is subject to are considered to have been met, CYRSA would pay APSA the amount of US$ 0.1 million and would carry out the works at the parking slots that APSA would receive from COTO.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 10: (Continued)

 

In order for the barter to be effective, is condition the fulfillment of certain provisions essential by COTO.

Possession of the above mentioned assets will be simultaneously granted upon executing the title deed, which will be carried out within 30 running days as from the date on which APSA notifies CYRSA that conditions precedent.

The total amount of the transaction between CYRSA and APSA total US$ 5.9 million.

 

  e. “Letter of Intent” Plot of land Paraná:

On June 30, 2009, APSA subscribed a “Letter of Intent”. This “Letter of Intent” states its intention to acquire a plot of land of about 10,022 square meters located in Paraná, Province of Entre Ríos, to be used to build, develop and exploit a shopping center or mall. The price established for the purchase stands at US$ 0.5 million, out of which by early July, the amount of US$ 0.05 million was paid as down payment and as consideration of the commitment of not selling the property until November 27, 2009.

As of the date of issuance of these financial statements, the parties have postponed the deadlines of the letters of intent and agreed that, once authorized by Wal-Mart USA, the document will be signed by the parties.

Such documents refer to transferring the plot of land (the agreement of sale) to develop a shopping mall, regulation of the relationship between Wal-Mart USA supermarket and the future shopping mall (the “Coexistence Regulations) and the creation of easements to guarantee the use of parking slots by APSA, the supermarket communication with the future shopping mall and other committed agreed-upon by the parties in the agreement of sale and the Regulations.

 

  f. Agreement to sell the plot of land Guaymallén

On March 26, 2010, APSA executed an agreement of sale without ownership by which the Company sells the property located in the District of Guaymallén, Province of Mendoza. The total agreed-upon price stands at US$ 0.3 million, of which US$ 0.2 was collected in account of the total agreed upon price and disclosed in the Customer advances. The unpaid balance will be settled upon executing the title deed scheduled for June 24, 2010. Such transaction was valued at net realizable value, generating an income for Ps. 826 during the period ended March 31, 2010.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 11: GRANTED GUARANTEES OF FYO.COM

 

By means of brokerage of agreement with guarantee, FyO.Com assumes before the purchaser the obligation to comply with the agreement in the event the seller did not deliver the merchandise. This compliance is implemented by returning the amounts agreed upon by such transaction that may be pending delivery, as well as the price difference that may arise between the price at which the agreement was executed and the price of the merchandise on the date the agreement is cancelled.

As of March 31, 2010 and 2009 and June 30, 2009, the balance of brokerage transactions carried out by means of such agreement with guarantee, which was pending delivery, within the established contractual terms, amounted to Ps. 8,459, Ps 9,835 and Ps. 9,075 respectively.

As of March 31, 2010 and 2009 and June 30, 2009, there are no agreements that failed to be complied with for which FyO.Com may have been claimed in its capacity of guarantor.

 

NOTE 12: MEMORANDUM OF UNDERSTANDING TO RENEGOTIATE THE CONCESSION AGREEMENT

On July 2, 2008, ANTA executed a memorandum of understanding renegotiating the concession agreements for the northern and southern areas of the real estate property of Salta Forestal S.A. The agreements establish that the concessionaire should pay as a concession fee the amount in US Dollars equivalent to a quintal of soybean per harvested hectare of any crop in the northern and southern areas per year. The concession fee is required to be paid on July 1st of each year starting in 2009.

For the purposes of determining the concession fee, 2,000 hectares in the southern area rented out to Compañía Argentina de Granos are excluded.

On August 29, 2008, the Memorandum of Understanding was approved by Decree No. 3,766 of the Executive Power of the Province of Salta. Consequently, the disposals contained in the mentioned decree will have effect from the referred date.

On July 1st, 2009 the installment corresponding to 2008-2009 campaign was cancelled for Ps. 1,305.

Additionally, ANTA committed to return the 30,000 hectares originally considered as not usable for agricultural purposes under the concession.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 13: NEGOTIABLE OBLIGATIONS PROGRAM

 

  A. Real Estate Business

 

  1. IRSA

 

  a. Convertible Notes – Due date 2017

In February 2007, IRSA issued non-convertible Notes (Non convertible notes-2017”) for US$ 150 million to become due in February 2017 under the framework of the Global Program for Issuing Non convertible notes in a nominal value of up to US$ 200 million authorized by the National Securities Commission. Non convertible notes-2017 accrue an annual fixed interest rate of 8.5%, payable every six months, starting in August, 2007. The principal will be fully paid on maturity. Non convertible notes-2017 contain customary covenants including restrictions to pay dividends in accordance with certain limits. As of March 31, 2010 and June 30, 2009 the notes are net of issuance cost amounting to Ps. 874 current and Ps. 5,175 non-current and Ps. 875 current and Ps. 5,831 non-current, respectively.

On February 25, 2010, the Board of Directors approved the extension of the maximum nominal value of the program by an additional US$ 200 million, reaching a total amount of US$ 400 million.

 

  2. APSA

 

  a. Issuance of convertible notes

On July 19, 2002, APSA issued Series I of Convertible Notes (“ONC”) for up to US$ 50 million with a face value of Ps. 0.1 each. That series was 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. 14,196 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 Notes are as follows:

- Issue currency: US dollars.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 13: (Continued)

 

- Due date: On May 2, 2006, the Meeting of Obliges decided to postpone the original due date to July 19, 2014 and, for this reason, the Convertible Notes have been classified as non-current in these unaudited financial statements. Since the conditions of the CN have not substantially modified, the postponement of the maturity term have not had an impact on these financial statements.

- 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 convertible notes can be converted at any time at the option of each holder into ordinary shares at a conversion price equivalent to the higher of the result from dividing the nominal value of the Company’s shares (Ps. 0.1) by the exchange rate and US$ 0.0324, which means that each note is potentially exchangeable for 30,864 shares of Ps. 0.1 par value each.

Right to collect dividends: the shares underlying the conversion of the convertible notes 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.

As of March 31, 2010, the holders of Convertible Notes into APSA ordinary shares, have exercised their right to convert them for a total amount of US$ 2,8 million, leading to the issuing of ordinary shares of Ps. 0.1 face value each.

As of March 31, 2010 Convertible Notes amounted to US$ 47.2 million.

 

  b. Issuance of notes – non convertibles

On May 11, 2007, APSA issued two series of notes for a total amount of US$ 170 million.

Series I corresponds to the issuance of US$ 120 million becoming due on May 11, 2017, which accrue interest at a fixed rate of 7.875% paid semi-annually on May 11 and November 11 of each year as from November 11, 2007.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 13: (Continued)

 

Series II corresponds to the issuance of Ps. 154,020 (equivalent to US$ 50 million). Principal will be settled in seven, equal and consecutive semi- annual installments as from June 11, 2009, and accrues interest at 11% per annum, maturing on June 11, and December 11 of each year as from December 11, 2007.

As of March 31, 2010 total Series I and Series II Notes repurchased by APSA amount to US$ 5.0 million and US$ 3.7 million, respectively. Such notes had been valued at face value and are disclosed netting the current and non-current capital and interest owed.

As of March 31, 2010, IRSA holds Series I Notes for US$ 39.6 million in nominal value and Series II Notes for Ps. 33.2 million in nominal value. Additionally, Cresud holds Series I Notes for US$ 5.0 million in nominal value.

These issuances correspond to Classes 1 and 2 within the Global Program for Issuing Negotiable Obligations, having a face value of up to US$ 200 million authorized by the National Securities Commission Resolution No. 15,614 dated April 19, 2007.

Under the Global Program for Issuance of Notes, on November 10, 2009, the placement of the Second Series of Notes for a total value of Ps. 80.7 million, in two series was completed.

Series III relates to the issuance of Ps. 55.8 million maturing on May 12, 2011, which accrue interest at variable Badlar Privada rate plus a 3% margin payable on a quarterly basis.

As of March 31, 2010 Emprendimiento Recoleta S.A. is the holder of Serie III notes for a net value of Ps. 12 million.

Series IV relates to the issuance of Ps. 24.9 million (equivalent to US$ 6.6 million) maturing on May 12, 2011, which accrue interest at a fixed 6.75% rates applied to the principal in US dollars, payable on a quarterly basis.

The APSA´s Shareholders’ Meeting held on October 29, 2009 approved the increase in the amount of the Global Program for the Issuance of Notes in place up to US$ 200 million. It also approved the creation of the Global Program for the issuance of securities representing short-term debt (“VCP”) in the form of simple notes not convertible into shares, denominated in pesos, US dollars or any other currency with unsecured, special, floating and/or any other guarantee, including third party guarantee, either subordinated or not, for a maximum outstanding amount at any time that may not exceed the equivalent in Ps. of US$ 50 million.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 13: (Continued)

 

  c. Issuance of securities representing short-term debt of Tarshop S.A.

During the current fiscal year, Tarshop requested the National Securities Commission (CNV) to authorize the Global Program for the Issuance of Securities Representing Short-Term Debt (“Program”), for a maximum outstanding amount that may not exceed USD 25,000, or equivalent amount in other currencies.

On December 28, 2009, the Extraordinary General Shareholders’ Meeting of Tarshop approved the creation of the Program and its terms and conditions.

On February 15, 2010, the public offering for the Program was authorized by the CNV by registering it under No. 28. On that same day, the CNV’s Issuers’ Department resolved to authorize the issuance of Class I of Securities representing Short-Term Debt (VCPs) up to Ps. 15,000 that may be extended by up Ps. 25,000, under the special procedure to issue VCPs. On February 26, 2010, Class I was placed for a total nominal value of Ps. 22,720.

Class I VCPs will accrue interest from the issuance date at a nominal annual rate equal to the BADLAR Privada, plus cap-margin of 400 basic points. Interest payment dates will be: May 27, August 25 and November 23, 2010. Principal will be repaid in 270 days from issuance that is to say, on November 23, 2010.

 

NOTE 14: SIGNIFICANT EVENTS

 

  A. Agricultural Business

 

  1. Loan inventories

On August 6, 2008, Agrology S.A. executed a securities loan agreement with Inversiones Financieras del Sur S.A. by which 1,275,022 Global Depository Shares were granted, represented by GRDs representative of 10 shares of common shares with a face value of Ps. 1 per share of IRSA.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 14: (Continued)

 

This loan does not imply transferring any political or economic rights related to the GDR’s, which will be held by Agrology S.A. As regards exercising the political rights (vote), the Parties agreed that Agrology S.A. will grand a power of attorney to Inversiones Financieras del Sur S.A. with the respective voting instructions. As regards dividends, Inversiones Financieras del Sur S.A. commits itself to transferring forthwith to Agrology S.A. the funds related to this item.

This loan accrues interest at a monthly rate equivalent to 3-month LIBOR, plus 150 basis points. They will be effective for 30 days and may be renewed for periods, up to a maximum of 360 days.

As of the closing date of these financial statements, Inversiones Financieras del Sur S.A. returned 21,080 Global Depositary Shares (GDR’s) to Agrology S.A., represented by Global Depositary Receipts (GDR’s) representative of shares of common stock of Ps. 1 per share.

On July 30, 2009, Agrology S.A. made an offer to Inversiones Financieras del Sur S.A. to extend the agreed-upon due date of the loan inventories for 360 days, modifying the amount of GDRS of IRSA investments and Representaciones Sociedad Anónima granted in loan from 1,275,022 to 1,253,942 million which are free of encumbrances and are freely available to Agrology S.A.

 

  B. Real Estate Business

 

  1. IRSA

 

  a. Investment in Banco Hipotecario S.A.

Compensation of the National Government to financial entities as a result of the asymmetric “pesification”

The National Government, through Decree 905, provided for the issuance of “National Government Compensating Bonds”, to compensate financial entities for the adverse equity effects generated due to the conversion into pesos, under various exchange ratios, of the credits and obligations denominated in foreign currency as established by Law 25,561, Decree 214 and addenda, also provided for covering the negative difference in the net position of foreign currency denominated assets and liabilities resulting from its translation into pesos as established by the above-mentioned regulations, and entitled the BCRA to determine the pertinent rules.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 14: (Continued)

 

Banco Hipotecario S.A. submitted the presentation as regards sections 28 and 29 of Decree 905 Compensation to Financial Entities, as follows:

- National Government Compensation Bond - US$ 2012 (section 29, points b, c and d): compensating bond – difference between “pesified” assets and liabilities at Ps. 1.00 for the rate of exchange difference of Ps. 0.40 translated at Ps. 1.40 per US$ dollar: US$ 360,811.

- National Government Compensation Bond coverage - US$ 2012 (section 29 point e). Coverage bond – difference between assets and liabilities in US dollars net of the compensating bond: US$ 832,827.

In September 2002 and October 2005, the Central Bank of Argentina credited US$344,050 and US$16,761 in BODEN 2012, respectively, for compensation.

On August 1, 2005, a note was submitted to the Central Bank of Argentina stating the acceptance of the number of BODEN verified by the Superintendence of Financial and Exchange Entities.

In the period beginning in September 2005 and ended in January 2006, subscriptions were made for BODEN 2012 hedging bonds equivalent to US$ 773,533. A supplementary subscription of hedging bonds and detached coupons took place on June 26, 2009, subscribing an original par value of US$ 59,294 in exchange for a payment in cash of Ps. 211,947 as subscription price. In addition, US$ 40,207 were received as matured coupons.

Exposure to the non-financial public sector

Banco Hipotecario S.A. keeps recorded in its financial statements assets with the Non-Financial Public Sector amounting to Ps. 2,245,663 as of March 31, 2010.

As from January 1st, 2006, the dispositions of point 12 of Communication “A” 3911 (Communication “A” 4455) became effective, as regards that the assistance to the Public Sector (average measured) cannot exceed 40% of total Assets of the last day of the previous month. Through Communication “A” 4546 of July 9, 2006, it was established that as from July 1st, 2007, such limit was modified to 35%.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 14: (Continued)

 

The exposure of Banco Hipotecario S.A. to the Public Sector originated in compensations granted by the National Government as a result of year 2002 crisis, principally related to the asymmetric “pesification” of assets and liabilities. To such extent and considering that assets to the Public Sector exceeded the mentioned limit. On January 19, 2006, Banco Hipotecario S.A. reported to the Central Bank of Argentina that it will gradually decrease the proportion of assets subject to the exposure to the Public Sector, in line with the amortization and cancellation made by the Government of the bonds received for asymmetric compensation in the currency of issuance. To date, no objections to this issue have been received.

As of March 31, 2010 and 2009 the assistance to the Public Sector arises 19.4% and 24.8% from total Assets, respectively.

Banco Hipotecario’s Treasury Shares

In the course of the previous fiscal year and with the Total Return Swap dated January 29, 2004 having expired, Banco Hipotecario received treasury shares totaling 71.1 million. These are available in the terms and conditions laid down by the Argentine Companies Law in its Section 221.

Pursuant to the Minutes of the Board Meeting No. 268 dated January 12, 2010, Banco Hipotecario’s Board of Directors adopted the following resolutions: 1) to deliver the Class D shares currently in BHSA’s portfolio as payment to StARS holders up to the amount of their receivables and at the value quoted for the share at that time (or using any other method for improved accuracy), and 2) to analyze possible alternatives for the application of the remaining shares.

The Ordinary General Shareholders’ Meeting held on April 30, 2010 resolved to extend for a year, counted as from January 31, 2010, the term for realizing the treasury shares held by the Bank.

On April 30, 2010, the Extraordinary General Shareholders’ Meeting resolved to delegate upon the Board of Directors the decision to pay with the treasury shares in portfolio the Stock Appreciation Rights (StAR) coupons resulting from the debt restructuring as advisable based on the contractually agreed valuation methods and their actual market value after allowing the shareholders to exercise their preemptive rights on an equal footing.

 

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Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 14: (Continued)

 

  b. Transactions pending solution by the Argentine Antitrust Commission (CNDC)

On November 20, 2009, after the sale of the building Edificio Costeros (Dock II), IRSA applied to the Antitrust Commission for a consultative opinion on whether IRSA had to notify that transaction or not. As of the date of issuance of these financial statements, the Antitrust Commission had not yet handed down a resolution.

In addition, as regards the acquisition of Torre Bank Boston (Della Paolera), on August 30, 2007 IRSA applied to the Antitrust Commission for a consultative opinion as to whether IRSA had to notify the transaction. On November 22, 2007 the Antitrust Commission stated that there was indeed a duty to notify the transaction. IRSA filed an appeal against this decision. As of the date of issuance of these financial statements, this matter had not yet been finally settled.

In May 2008 IRSA applied to the Antitrust Commission for a consultative opinion concerning the acquisition of Edificio República. In December 2009 IRSA was notified that its timely filed had been dismissed and in February 2010 IRSA has presented the required documentation notifying the operation.

At the date of issuance of these financial statements, the operation is pending of approval.

 

  2. APSA

 

  a) Financing and occupation agreement with NAI INTERNATIONAL II, INC.

On August 12, 1996 Empalme S.A.I.C.F.A. y G. (merged into Shopping Alto Palermo S.A. as from January 1st, 2009) executed an agreement with NAI INTERNATIONAL II, INC. (subsequently transferred to NAI INTERNACIONAL II, INC. – Branch Argentina) by means of which the latter granted a loan for an original principal of up to US$ 8.2 million for the construction of a multiplex cinema and part of the parking lot located in the premises of Córdoba Shopping, which are disclosed in fixed assets, net.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 14: (Continued)

 

According to the agreement of occupation related to the loan contract, the amounts due are set off against payments generated by the occupation held by NAI INTERNATIONAL II, INC. of the building and the area known as cinema. The agreement provides that if after October 2027, there still is an unpaid balance of the loan plus respective interest thereon, the agreement will be extended for a final term established as the shorter of the term required to fully repay the unpaid loan amount, or ten years.

If once the last term has elapsed and there still is an unpaid balance, APSA will be released from any and all obligation to pay the outstanding debt.

On July 1st, 2002 a new amendment to the agreement was established, whose most important resolutions are as follows:

 

   

The outstanding debt was de-dollarized (Ps. 1 = US$ 1)

 

   

An antichresis right was created and it was established that all obligations assumed by Empalme S.A.I.C.F.A. y G. under the agreement by which the normal use and operation of the cinema center is warranted to NAI INTERNATIONAL II, INC., including those obligations involving restrictions on the use or title to property by Empalme S.A.I.C.F.A. y G. or third parties, shall be comprised in the previously mentioned real right.

Principal owed as of March 31, 2010 and interest accrued unpaid through that date, due to the original loan agreement and respective amendments are disclosed under Customers advances - Lease advances for Ps. 18,653.

 

  b) Neuquén Project

The main asset of Shopping Neuquén S.A., controlled by APSA, is a plot of land of 50,000 square meters approximately, in which a mixed use center would be built. The project includes the building of a shopping center, cinemas, a hypermarket, apartments, private hospital and other compatible purposes.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 14: (Continued)

 

On December 13, 2006, Shopping Neuquén S.A. entered into an agreement with the Municipality and with the Province of Neuquén by which, mainly, the terms to carry out the commercial and residential venture were rescheduled and authorized Shopping Neuquén S.A. to transfer to third parties the title to the plots of land into which the property is divided, provided that it is not that one on which the shopping center will be built. Such agreement was subject to two conditions, both already complied with, consisting in the ratification of the agreement by means of an ordinance of the legislative body of the Municipality of Neuquén, and that the new architectonic project and the extension of the environmental impact research submitted were approved by such Municipality.

Such agreement concluded the case styled “Shopping Neuquén S.A. vs. Municipality of Neuquén in re.: administrative procedural action” pending before the High Court of Neuquén where only involved lawyers’ fees are pending payment, which will be borne by Shopping Neuquén S.A. Such fees are booked in the Provisions account.

After having obtained the approval, the Company had a 150 days’ term to submit the drafts of the architectonic project, such term maturing on February 17, 2008. However, such drafts presentation took place prior to the referred date. As regards filing thereof, the Municipality of Neuquén made some comments as to feasible solution to the project. Considering this comment an additional term was formally requested to file the new project.

On June 12, 2009, Shoppping Neuquén S.A. and the Municipality of Neuquén executed a new agreement by which Shoppping Neuquén S.A. committed itself to presenting a new road project and to making those amendments that may be necessary to the general project. On October 19, 2009, the respective amendments to the previously mentioned projects were filed. Subsequently, the Municipality of Neuquén made some remarks to them, which were duly replied.

On January 18, 2010, the Municipality of Neuquén requested changes to the plans filed, granting a 30-day term to be filed. Finally Shopping Neuquén S.A. was notified about the registration of the project, so on April 8, 2010 the term of 90 running days to commence the shared works has started.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 14: (Continued)

 

The first work stage (that contemplates the construction of a shopping mall and a hypermarket) should be completed at a maximum 22 month terms starting upon beginning construction. In the case of mailing to comply the conditions established in the agreement, the Municipality of Neuquén is entitled to terminate the agreement and press those charges considered to be required in such sense, among them, to request the return of the premises where the shopping mall and/or hypermarket will be built, based on the condition of the real estate development in which the noncompliance has taken place.

On June 18, 2009, Shopping Neuquén S.A. received from the company G&D Developers US$ 119 for the sale price of a plot of land of about 4,332 square meters located in the whereabouts but is not a part of the plot of land where the shopping center will be built, under the negotiations held with the Municipality of Neuquén.

 

  c) Tarshop S.A. credit card receivables securitization program

Tarshop S.A. has ongoing securitization programs through which Tarshop S.A., transfers a portion of its customer credit card receivable balances to master trusts that issues certificates to public and private investors.

Under the securitization programs, Trusts may issue two types of certificates representing undivided interests in the Trusts - Títulos de Deuda Fiduciaria (“TDF”) and Certificates of Participation (“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, (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.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 14: (Continued)

 

In consideration of the credits transferred to the Trusts, which have been eliminated from Tarshop’s balance sheet, Tarshop S.A. receives cash (arising from the placement of the debt securities by the Trusts) and CPs issued by the Trusts. The latter are recorded at their values calculated by the equity method of accounting at the closing of the period/year, net of the corresponding allowances for impairment, if applicable, on the basis of the financial statements issued by the Trusts.

Under this Securitization Program Tarshop S.A. transferred to The Financial Trusts the total amount of Ps. 357,546 during the period ended March 31, 2010 of credits receivable originated in the use of its clients’ credits cards and personal loans carrying promissory notes. Consequently, TDF coupon zero for Ps. 13,500, TDF Series “A” for Ps. 283,686 and CP Series “C” for Ps. 60,360 were issued.

Tarshop S.A. acquired all the CP Series “C” in an amount equal to its nominal value, and all the remaining TDF and CP were placed to investors through a public offering in Argentina, with exception of TDF Series “B” corresponding to Financial Trust Series XXXIX, XL, XLVII, XLIX and L, and TDF Series C of the Series XLVII, part of which Tarshop S.A. maintained in its portfolio. Cash reserves for losses in the amount of Ps. 5,412 have been made as credit protection for investors.

 

  d) Contributed leasehold improvements- Other liabilities

In March 1996 Village Cinema S.A. inaugurated ten multiplex system cinema theatres, with an approximate surface of 4,100 square meters. This improvement of the building of Mendoza Plaza Shopping S.A. was capitalized with a balancing entry as a fixed asset, recognizing the depreciation charges and the profits over a 50-year period. At the end the amount of Ps. 9,769 was pending of accrual. The lease is for a time limit of 10 years to be renewed every four equivalent and consecutive periods, at the option of Village Cinema S.A..

 

  e) Agreement with the former minority shareholder of Tarshop S.A.

During January 2010, APSA executed an agreement with Mr. León Halac (LH), by which the latter assumed the obligation to abstain during 28 running months from performing any role or developing and participating in any manner whatsoever in any new credit card companies other than those existing on the market, or in the regions in which at present Tarjeta Shopping is developed. Such agreement also contemplates the impossibility by the same period of time that LH participates in developing, under any method, shopping malls of over

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 14: (Continued)

 

20,000 square meters within the territory of Buenos Aires City, Argentine Republic. APSA, shall pay in consideration of the obligations assumed by the other party a total and definitive price of US$ 2.2 million payable: (1) A down payment of US$ 0.8 million upon executing the agreement and (2) the balance of the price of US$ 1.4 million in 28 monthly consecutive installments, accruing no interest of US$ 0.05 million each, to which income tax withholdings will be added. In all cases, income tax withholdings should also be added. At March 31, 2010, the initial amount of US$ 1.20 million and the first installment falling due in march for US$ 0.077 million was paid.

 

NOTE 15: SALES OF BUILDINGS

During the period of nine-months ended March 31, 2010 and the year ended June 30, 2009, IRSA conducted several transactions for the sale of some office rental properties that made up its portfolio, representative of a gross leasable area of 13,330 and 20,315 square meters, respectively, in exchange for a total of Ps. 149.7 million and Ps. 201.3 million, respectively. The gross income generated by these transactions amounted to Ps. 105.8 million and Ps. 119.4 million, respectively.

 

NOTE 16: CAPITALIZATION PROGRAM FOR EXECUTIVE MANAGEMENT

The Company together with its related Company IRSA has developed a capitalization program for executive management staff through contributions made by employees and by the Company (the “Plan”).

The Plan is addressed to employees selected by those Companies with the purpose of keeping them in the company and increasing their total compensation through an extraordinary reward, provided that certain specific conditions are complied with.

Participation and contributions to the Plan are on a voluntary basis. Once the beneficiary (the “Participant”) has accepted, he will be able to make two types of contributions: a monthly one (based on the salary) and an extraordinary one (based on the annual bonus). The suggested contribution is up to 2.5% of the salary and up to 15% of the annual bonus. On the other hand, the Company contribution will be 200% of the monthly contributions and 300% of the employee’s extraordinary contributions.

Funds collected from participants’ contributions will initially be sent to an independent financial means especially created for such purpose and placed in Argentina as a Common Investment Fund, which will be approved by the C.N.V. Such funds will be freely redeemed under the requirement of the participants.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 16: (Continued)

 

The funds arising from the Company contributions will flow to other independent financial means separated from the previous one.

The participants or their successors will have access to 100% of the Program (that is, including Company contributions made in favor of the financial means especially created) under the circumstances that follow:

- ordinary retirement in line with the applicable working regulations

- total or permanent disability or inability

- death.

In case of resignation or discharge without legal justification, the participant will obtain the amounts contributed by Cresud and IRSA only if he has participated in the plan during a minimum term of 5 (five) years, provided certain conditions were complied with.

As of March 31, 2010 Cresud and IRSA had made contributions to the Plan that amount Ps. 3,256.

 

NOTE 17: NEGATIVE WORKING CAPITAL

At the end of the period, the Company carried a working capital deficit of Ps. 427,826, which treatment is being considered by the Board of Directors and the respective management.

 

NOTE 18: SUBSEQUENT EVENTS

Real Estate Business

 

  a) Sale of Pereiraola

In April 2010, IRSA undersigned a preliminary sales agreement for the shares in Pereiraola S.A.C.I.F. y A.. for US$ 11.8 million, on which US$ 1.94 million have already been collected. The balance will be amortized in four half-yearly consecutive and equal installments of US$ 1.94 million each, with the first installment maturing six months from the actual share transfer estimated for June 2010 and a non-monetary consideration equivalent to US$ 2.1 million through the transfer in favor of IRSA of 6% of marketable lots or 39,601 square meters in the gated neighborhood that the purchaser has agreed to develop in the real estate owned by Pereiraola, whichever higher.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements (continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for the publication in Argentina

 

NOTE 18: (Continued)

 

  b) Sale of plot

On April 14, 2010, APSA executed an agreement of sale upon occurrence of a condition precedent for the sale of plot 2 A, located in Rosario City, Province of Santa Fe. The transaction price was established at US$ 4.2 million, of which US$ 1.1 million was collected.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria,

Financiera y Agropecuaria

Free translation from the original prepared in Spanish for

publication in Argentina

Unaudited Basic Financial Statements

Corresponding to the nine-month periods

ended March 31, 2010 and 2009


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Unaudited Balance Sheet as of March 31, 2010 and 2009 and June 30, 2009

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

     March 31,
2010
(Notes 1 and 2)
   June 30,
2009
(Notes 1 and 2)
   March 31,
2009
(Notes 1 and 2)

ASSETS

        

Current Assets

        

Cash and banks (Note 8 a.)

   4,158    7,620    11,079

Investments (Note 8 b.)

   6,856    13,507    51,848

Trade accounts receivable, net (Note 8 c.)

   56,585    42,990    30,782

Other receivables (Note 8 d.)

   99,968    79,053    53,371

Inventories (Note 8 e.)

   146,566    86,962    152,756
              

Total Current Assets

   314,133    230,132    299,836
              

Non-Current Assets

        

Trade accounts receivable, net (Note 8 c.)

   —      2,153    6,581

Other receivables (Note 8 d.)

   30,911    30,725    84,500

Inventories (Note 8 e.)

   125,847    74,757    71,840

Investments on equity investees (Note 8 b.)

   1,762,590    1,463,153    1,206,608

Other investments (Note 8 b.)

   78,418    69,358    65,537

Property and equipment, net (Schedule A)

   290,165    274,928    272,578

Intangible assets, net (Schedule B)

   1,147    1,373    817
              

Total Non-Current Assets

   2,289,078    1,916,447    1,708,461
              

Total Assets

   2,603,211    2,146,579    2,008,297
              
     March 31,
2010
(Notes 1 and 2)
   June 30,
2009
(Notes 1 and 2)
   March 31,
2009
(Notes 1 and 2)

LIABILITIES

        

Current Liabilities

        

Trade accounts payable (Note 8 f.)

   56,059    61,099    39,597

Short-term debt (Note 8 g.)

   440,977    191,523    190,631

Salaries and social security payable (Note 8 h.)

   13,777    5,217    4,128

Taxes payable (Note 8 i.)

   7,757    5,682    14,576

Customer advances (Note 8 j.)

   1,939    —      —  

Other liabilities (Note 8 k.)

   46,427    1,843    2,944
              

Total Current Liabilities

   566,936    265,364    251,876
              

Non-Current Liabilities

        

Trade accounts payable (Note 8 f.)

   —      —      6,179

Taxes payable (Note 8 i.)

   69,676    68,045    81,633

Provisions (Schedule E)

   1,791    286    117
              

Total Non-Current Liabilities

   71,467    68,331    87,929
              

Total Liabilities

   638,403    333,695    339,805
              

SHAREHOLDERS’ EQUITY

   1,964,808    1,812,884    1,668,492
              

Total Liabilities and Shareholders’ Equity

   2,603,211    2,146,579    2,008,297
              

The accompanying notes and schedules are an integral part of the financial statements.

Saúl Zang

Vicepresident I

Acting as President

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Unaudited Statement of Income

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

      March 31, 2010     March 31, 2009  

Production income:

    

Crops

   28,106      36,306   

Beef cattle

   13,458      9,867   

Milk

   17,621      15,693   
            

Total production income

   59,185      61,866   
            

Cost of production (Schedule F.2)

    

Crops

   (27,258   (51,305

Beef cattle

   (15,261   (10,872

Milk

   (14,185   (13,962
            

Total cost of production

   (56,704   (76,139
            

Production gain (loss)

   2,481      (14,273
            

Sales

    

Crops

   57,471      77,518   

Beef cattle

   21,141      9,174   

Milk

   16,366      14,714   

Other

   10,973      9,601   
            

Total sales

   105,951      111,007   
            

Cost of sales (Schedule F.1)

    

Crops

   (54,231   (62,826

Beef cattle

   (20,060   (8,116

Milk

   (16,366   (14,733

Other

   (5,261   (3,788
            

Total cost of sales

   (95,918   (89,463
            

Sales profit

   10,033      21,544   
            

Gross profit

   12,514      7,271   
            

Selling expenses (Schedule H)

   (11,211   (11,931

Administrative expenses (Schedule H)

   (27,284   (18,981

Unrealized loss on inventories-crops, raw materials and MAT

   302      (3,876

Unrealized gain (loss) on inventories-beef cattle (Schedules F.1 and F.2)

   64,531      473   
            

Operating loss

   38,852      (27,044
            

Financial results:

    

Generated by assets:

    

Exchange gains and discounts

   3,647      64,927   

Interest income

   11,103      19,890   

Gain on hedging operations

   7,867      22,627   

Financial results accrued of IRSA and APSA notes

   6,421      3,263   

Doubtful accounts (Schedule E)

   (159   (120

Tax on bank accounts operations

   (3,826   (2,701

Holding gain and transactions on securities

   168      (2,469
            
   25,221      105,417   
            

Generated by liabilities:

    

Interest on short-term debts

   (24,667   (18,296

Interest on Non-Convertible Notes

   (2,522   -   

Exchange loss gain and discounts

   (5,437   (27,961

Others

   (1,825   (1,210
            
   (34,451   (47,467
            

Other income and expenses, net:

    

Gain on the sale of fixed assets

   (6,166   (10,489

Shareholders’ Personal asset tax

   35      115   

Others

   1,145      (51
            
   (4,986   (10,425
            

Gain on equity investees (Note 8 l.)

   181,881      22,567   

Management fee (Note 5)

   (20,446   (493
            

Net income before income tax

   186,071      42,555   
            

Income tax (Note 6)

   (1,414   (37,884
            

Net income for the period

   184,657      4,671   
            

The accompanying notes and schedules are an integral part of the financial statements.

Saúl Zang

Vicepresident I

Acting as President

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Unaudited Statement of Changes in Shareholders’ Equity

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009 (Notes 1 and 2)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

     Shareholders’ contributions    Retained earnings    Retained
earnings
    Translation
differences
   Total as of
March 31,
2010
    Total as of
March 31,
2009
 
     Capital (Note 3)     Inflation adjustment     Paid—  in
capital (1)
   Subtotal    Legal
Reserve
   Reserve for
new
developments
         

Items

   Common
stock
   Treasury
stock
    Common
stock
   Treasury
Stock
                      

Balances at the beginning of the fiscal year

   471,539    30,000      156,276    9,942      879,218    1,546,975    16,792    85,543    126,893      36,681    1,812,884      1,762,338   

Exercise of options (Note 15)

   21    —        —      —        107    128    —      —      —        —      128      37   

Purchase of treasury stock (Note 18)

   —      —        —      —        —      —      —      —      —        —      —        (62,237

Shareholders’ meeting held on 10.29.2009:

                               

-Legal Reserve

   —      —        —      —        —      —      6,231    —      (6,231   —      —        —     

-Cash Dividends

   —      —        —      —        —      —      —      —      (60,000   —      (60,000   (20,000

-Reserve for new developments

   —      —        —      —        —      —      —      58,385    (58,385   —      —        —     

-Atribution of treasury stock

   24,999    (24,999   8,285    (8,285   —      —      —      —      —        —      —        —     

Treasury stock dividends

   —      —        —      —        —      —      —      —      —        —      —        476   

Translation differences

   —      —        —      —        —      —      —      —      —        27,139    27,139      (16,793

Net income for the period

   —      —        —      —        —      —      —      —      184,657      —      184,657      4,671   
                                                                 

Balances as of March 31, 2010

   496,559    5,001      164,561    1,657      879,325    1,547,103    23,023    143,928    186,934      63,820    1,964,808      —     
                                                                 

Balances as of March 31, 2009

   474,811    26,728      157,360    8,858      879,218    1,546,975    16,792    158,744    (55,289   1,270    —        1,668,492   
                                                                 

 

(1) See notes 2.q. and 15.

The accompanying notes and schedules are an integral part of the financial statements.

Saúl Zang

Vicepresident I

Acting as President

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Unaudited Statements of Cash Flow

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

      March 31, 2010     March 31, 2009  

Changes in cash and cash equivalents

    

Cash and cash equivalents at the beginning of the fiscal year

   15,991      519,852   

Cash and cash equivalents at the end of the period

   8,196      41,143   
            

Net decrease in cash

   (7,795   (478,709
            

Causes of changes in cash and cash equivalents

    

Operating activities

    

Net income for the period

   184,657      4,671   

Accrued interest during the period

   5,354      (10,080

Income tax

   1,414      37,884   

Adjustments made to reach net cash flows from operating activities

    

Gain on equity investees

   (181,881   (22,567

Increase in allowances and provisions

   (4,544   (3,181

Depreciations

   4,334      3,978   

Unrealized (gain) loss on Inventories

   (64,833   3,403   

Financial results, net

   (13,232   (6,349

Gain on the sale of fixed assets

   (35   (115

Changes in operating assets and liabilities

    

Decrease (increase) in current investments

   4,874      (24,024

(Increase) decrease in trade accounts receivable

   (12,399   7,410   

Decresae (increase) in other receivables

   3,095      (20,170

Increase in inventories

   (44,305   (54,465

Increase in social security payable, taxes payable and advances from customers

   12,233      6,391   

Increase (decrease) in trade accounts payable

   10,724      (2,654

Dividends collected

   18,344      1,980   

Increase in other debts

   13,998      2,038   
            

Cash flows applied to operating activities

   (62,202   (75,850
            

Investing activities

    

Increase in interest in equity method investees (except IRSA)

   (107,158   (82,694

Increase in interest in IRSA

   (5,736   (148,884

Increase in related companies loans

   (38,723   (12,423

Acquisition and upgrading of fixed assets

   (12,104   (32,924

Acquisition of IRSA’s and APSA’s Convertible Notes

   —        (41,827

Collections of receivables from sale of fixed assets

   2,429      2,930   

Sale of fixed assets

   66      283   

Addition of intangible assets

   —        (860

Incorporated cash by merger

   1,161      —     
            

Cash flows applied to investing activities

   (160,065   (316,399
            

Financing activities

    

Exercise of warrants and options

   128      37   

Cash Dividends paid

   (60,000   (19,524

Proceeds from short-term debts

   228,048      82,959   

Payments of short-term debts

   (33,711   (87,823

Loans granted to controlled companies

   30,585      —     

Purchase of treasury stock

   —        (62,109

Issuance of Non-convertible Notes (Note 19)

   49,422      -   
            

Cash flows provided by (applied to) financing activities

   214,472      (86,460
            

Net decrease in cash and cash equivalents

   (7,795   (478,709
            

The accompanying notes and schedules are an integral part of the financial statements.

Saúl Zang

Vicepresident I

Acting as President

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Unaudited Statements of Cash Flow (Continued)

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

 

     March 31, 2010     March 31, 2009

Operations not involving changes in cash and cash equivalents

    

Inventories transferred to property and equipment

   1,661      1,044

Increase in property and equipment through and increase in other debts

   —        6,179

Purchase of treasury stock unpaid

   —        128

(Increase) decrease in investments on equity investees by translation differences

   (27,139   16,793

Increase in investements on equity investees through a decrease in other receivables

   6,593      97,471

Complementary information

    

Interest paid

   21,826      15,908

Income tax paid

   5,948      7,583
     March 31, 2010     March 31, 2009

Balances incorporated by merger (Note 13)

    

- Trade accounts receivable

   1,632      —  

- Other receivables

   1,360      —  

- Inventories

   3,214      —  

- Property and equipment

   5,835      —  

- Investments on equity investees

   (10,777   —  

- Trade accounts payable

   (408   —  

- Salaries and social security payable

   (37   —  

- Taxes payable

   (523   —  

- Provisions

   (1,457   —  
          

Cash incorporated

   1,161      —  
          

Saúl Zang

Vicepresident I

Acting as President

 

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Table of Contents

Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 1: ACCOUNTING STANDARDS

Below there is a description of the most relevant accounting standards used by the Company in the preparation of these Financial Statements, which have been applied on a consistent basis from the previous period.

 

  a. Presentation standards

These financial statements are stated in Argentine Pesos (Ps.) and have been prepared in accordance with the disclosure and valuation accounting standards contained in the Technical Resolutions issued by the Federación Argentina de Consejos Profesionales de Ciencias Económicas (FACPCE), as approved, with resolutions issued by the Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires (CPCECABA) and the Comisión Nacional de Valores (CNV).

The financial statements corresponding to the nine-month periods ended March 31, 2010 and 2009 have not been audited. The Company’s management estimates that they include all the adjustments necessary to present fairly the results for each period. The Company’s results for the nine-month periods ended March 31, 2010 and 2009 do not necessarily reflect the proportion of the Company’s full-year results.

 

  b. The effects of inflation

The financial statements have been prepared in constant currency units recognizing the effects of inflation up to August 31, 1995. As from this date and under professional accounting standards and as required by the enforcement agency, financial statements as of December 31, 2001 were no longer restated. As from January 1st, 2002 and under professional accounting standards, effects for inflation restarted to be recognized considering that accounting measurements restated for the change in the currency purchasing power until August 31, 1995, as those whose original date fell between such date and December 31, 2001, were stated in pesos as of such last date.

On March 25, 2003, the Federal Executive issued Decree No. 664, which established that the financial statements for periods ended after such date should be stated in nominal currency. Consequently, in conformity with Resolution No. 441/03 issued by the CNV, the Company discontinued the restatement of financial statements as from March 1, 2003. Such method does not agree with current professional accounting standards, which require that financial statements should be restated until September 30, 2003. However, given the little significance of inflation rates from March through September 2003, this departure has not generated a significant effect on the financial statements taken as a whole.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 1: (Continued)

 

The rate used for restatement of items until February 28, 2003 was the domestic whole revenue price index published by the National Institute of Statistics and Census.

 

  c. Comparative Information

Amounts as of June 30, 2009 and as of March 31, 2009, which are disclosed in these financial statements for comparative purposes have been taken from the financial statements as of such dates. Certain figures in the previously mentioned financial statements have been reclassified to be presented comparatively with those of the current period.

These financial statements have been prepared giving effect to the spin-off – merger mentioned in Note 13; consequently, the stand-alone financial statements as of March 31, 2010 are not comparable with those issued as of June 30, 2009 and with the nine-month period ended March 31, 2009.

 

  d. Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assessments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at that date and the reported amounts of revenues and expenses during the period.

Estimates are used when accounting for the allowance for doubtful accounts, depreciations and amortizations, income taxes, deferred liabilities, translation differences, provisions for contingencies, accrual for expenses and assets’ recoverable value and classification of the current and non-current assets and the current value of the assets and liabilities acquired in business combinations. Actual results could differ from these estimates.

 

NOTA 2: POLÍTICAS CONTABLES DE MAYOR RELEVANCIA

 

  a. Cash and banks

Cash on hand has been valued at face value.

 

  b. Foreign currency assets and liabilities

Assets and liabilities denominated in foreign currency have been valued at the exchange rates prevailing at the end of the period/year.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 2: (Continued)

 

  c. Temporary investments

The units of ownership of mutual funds, the mortgage certificates and bonds were valued at quotation value net of sales expenses as of the date of the financial statements. Therefore, interests to collect corresponding to non-convertible notes of IRSA and APSA which are measured according to the mentioned in Note 2.k. are included. Temporary investments do not exceed their recoverable value at the date of the financial statements.

 

  d. Trade accounts receivable and payable

Trade accounts receivable and payable have been valued at nominal value. Values obtained by this do not differ significantly from those that had been valued at their cash price estimated at the time of the transaction, plus interest and implied financial components accrued on the basis of the internal rate of return determined at such time.

 

  e. Credits and short-term debts

Credits and short-term debts have been valued at nominal value plus accrued interest at the end of the period/year. Values obtained by this do not differ significantly from those obtained from the sum of money delivered and/or received, respectively, net of transaction costs, plus financial results accrued at the internal rate of return determined at the moment of the inicial measurement.

 

  f. Derivates financial instruments

Forwards relate to cereal commitments deliverable and receivable at a previously agreed price and to purchase and sale of US dollars and receivable.

Premiums collected or paid correspond to options bought or written, respectively, and are included in Other debts and Other receivables, respectively, until its due date.

The assets and liabilities originated in derivatives instruments have been valued at their market value at the date of the financial statements.

Differences generated by the application of the above mentioned valuation criteria to assets and liabilities and derivative instruments corresponding to crops have been recognized under net income of the period under “Unrealized (loss) gain on inventories – Crops, raw materials and MAT”.

Results of purchases and sales of forward transactions with US dollars operations are included under the Financial Results.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 2: (Continued)

 

  g. Other receivables and liabilities

Other current receivables (except VAT credit) have been valued at face value plus the financial results accrued at the closing of the corresponding period. The figures thus obtained are not significantly different from those that would have been obtained if valued on the basis of the best possible estimate of the amounts receivable and payable, respectively, discounted by application of a rate that reflects the time value of money and the specific risks inherent in the transaction estimated at the time of recognizing the item in assets and liabilities, respectively.

The VAT credit has been valued based on the best possible estimate of the discounted amount using a rate that reflects the time value of money and the specific risks inherent in the transaction estimated as of the date of these financial statements.

 

  h. Balances corresponding to financial transactions and receivables and payables with related parties

Receivables and payables with related parties generated by financial transactions and other transactions were valued in accordance with the terms agreed by the parties.

 

  i. Inventories

 

  1) Biological Assets (under development): Unharvested crops and Cattle: have been measured at replacement cost of goods and services needed to obtain a similar asset, which does not exceed the net realization value as of each period-end or year-end.

Include:

 

   

Unharvested crops

 

   

Calves

 

  2) Biological Assets (in production): Cattle: Have been measured at the direct replacement cost of a similar asset, acquired to third parties in the markets in which the Company regularly operates, and do not exceed the net realization value as of each period-end or year end.

Include:

 

   

Dairy cattle

 

   

Breeding cows

 

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Table of Contents

Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 2: (Continued)

 

  3) Biological Assets (finished): Cattle: have been measured at their net realization value (NRV) represented by the respective quotations as of each period-end or year-end in the markets in which the Company regularly operates, net of additional costs generated by marketing.

Include:

 

   

Steers and heifers

 

   

Cattle round-up and mares

 

  4) Farming Products: Crops: have been measured at their net realization value, representing the different quotations as of each period-end or year-end in the markets in which the Company regularly operates, net of additional costs generated by marketing.

Include

 

   

Harvested crops

 

  5) Farming Products – Raw material: Seeds and various goods: have been measured at reproduction or replacement cost as of each period-end or year-end, which does not exceed the net realization value.

Include:

 

   

Seeds

 

   

Agrochemicals

 

   

Semen – Cattle raising and dairy

 

   

Food and by-products

 

   

Packs and bundles

 

   

Poles

 

   

Bags and blankets

   

Silos raw materials

 

  6) The remaining inventories were valued at their replacement cost.

The carrying values of inventories, which are determined as discussed above, do not exceed their estimated recoverable values at the end of each period/year.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 2: (Continued)

 

  j. Long term investments in other companies

 

  1. Investments in equity investees

The investments in subsidiaries and affiliates in which the Company has control or significant influence have been accounted under the equity method, as required by Technical Resolution No. 21 of the FACPCE approved by CNV.

The accounting standards used by the subsidiaries to prepare their financial statements are the same as those used by the Company.

The values thus obtained, do not exceed their respective estimated recoverable values at the end of the period/year.

Interests in subsidiaries and affiliates as of March 31, 2010 are as follows:

 

Subsidiaries and affiliates

   % Equity interest

IGSA (Note 12.2.d)

   99.99

Agrology S.A. (Note 12.1.b)

   97.00

ANTA (Note 12.2.c)

   90.00

FyO.Com (1)

   64.30

Cactus (Note 12.2.a)

   36.00

Agro - Uranga S.A.

   35.72

IRSA (Note 12.2.b)

   50.49

BrasilAgro (Note 12.1.a)

   23.23

FyO Trading

   3.63

Exportaciones Agroindustriales Argentinas S.A. (“EAASA”)

   0.44

 

(1)    It’s the owner of the 96.37% of the FyO Trading shares.

  

 

  2. Acquisitions of equity interests in companies

The significant acquisitions of companies are booked according to the “acquisition method” as established by Technical Resolution No. 18 and Technical Resolution No. 21.

Considering the participation in Cactus acquired during the previous fiscal year, according to mentioned in Note 2.j.3, the Company is now analyzing the fair values of acquired assets and liabilities identifiable according to the provisions of Technical Resolution No. 21 caption 1.3.1.

 

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Table of Contents

Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 2: (Continued)

 

  3. Goodwill

- Goodwill

The goodwill represents the excess acquisition cost above the market value of net assets from those subsidiaries acquired at the equity percentage.

The residual value of the goodwill generated by acquiring interests in the companies has been disclosed in the investments on equity investees account (Schedule C).

Upon defining the useful life, the following factors have been considered: (i) nature and expected life of acquired businesses; (ii) stability and expected life of the respective industry branch; (iii) effects that the obsolescence of products, changes in demand and other economic factors may have on the acquired business; (iv) feasibility of maintaining the required disbursement value to obtain future economic benefits from the acquired business and (v) the control period over the acquired business and legal or contractual provisions that may affect its useful life.

Based on these factors, the Company has estimated that it is not possible to estimate the specific useful life for the goodwill generated by applying the “acquisition method” provided by Technical Resolution No. 18, and it has therefore determined that they shall have an undefined useful life.

The goodwill related to acquiring an additional interest in Cactus, during the previous fiscal year, has been valued at cost, which was calculated as the difference between the value paid and the book value of the interest acquired. As to this goodwill, the Company is currently analyzing the fair value of assets and liabilities acquired identified as provided by Technical Resolution No. 21, caption 1.3.1.

The values thus obtained, do not exceed their respective estimated recoverable values at the end of the period/year.

 

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Table of Contents

Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 2: (Continued)

 

- Negative goodwill

The negative goodwill represents the excess market value of net assets from those subsidiaries acquired at the equity percentage above the acquisition cost. Negative goodwill has been restated following the guidelines mentioned in Note 1.b. to the basic financial statements and amortization has been calculated by the straight-line method based on estimated useful life, considering the weighted-average of the remaing useful life of identificable assets acquired subject to depreciation.

The useful lives of negative goodwils generated by IRSA acquisition was established between 20 to 30 years. The useful life for the negative goodwill generated by the acquisition of an interest in BrasilAgro was established at 5 years.

Amortizations have been classified in the account “Gain on equity investees” in the Statement of Income.

The residual value of the goodwill generated by acquiring interests in the companies has been disclosed in the investements on equity investees account (Schedule C)

 

  k. Other investments

- Investments in debt securities

IRSA and APSA’s non-convertible notes were valued based on the best estimate of the discounted amount receivable, applying the corresponding internal rate of return estimated at the time of incorporation to assets, as the Company will hold them to maturity.

 

  l. Property and Equipment

Property and equipment were valued at its acquistion cost, restated as mentioned in Note 1.b., less accumulated depreciation.

 

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Table of Contents

Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 2: (Continued)

 

Depreciations have been calculated by the straight-line method based on the estimated useful lives of each asset, applying annual rates sufficient to extinguish their values at the end of its useful life.

The value of these assets does not exceed its economic use value as of period/year-end.

 

  m. Intangible assets

Intangible assets are related to pre-operating expenses resulting from developing new activities in Bolivia and Paraguay. Such expenses were valued at acquisition cost less the respective accumulated amortization, as disclosed in Schedule B.

Amortizations were calculated through the straight-line method on the basis of an estimated useful life of five years.

Amortizations were classified in “Gain on equity investees” in the statement of income. The value of these assets does not exceed their estimated recoverable value at the end of the period.

 

  n. Provisions

- Allowance for doubtful accounts: this allowance was booked on the basis of a case-by-case analysis of the receivables portfolio recoverability.

- Provision for contingencies and miscellaneous risks: it was booked to cover possible labor and commercial contingencies and other risks that could generate obligations for the Company. The Company’s external legal counsel’s opinion was taken into account to estimate the amounts and possibility of occurrence. In addition, the insurance purchased by the Company has also been taken into account.

At the date of issuance of these financial statements, the Company’s Management understands that there are no elements to foresee other potential contingencies having a negative impact in these financial statements.

The evolution of provisions related to the period / year are detailed in Schedule E.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 2: (Continued)

 

  o. Shareholders’ equity

Amounts of shareholders’ equity accounts have been restated following the guidelines detailed in Note 1.b..

The “Capital Stock” account has been stated at historical nominal value. The difference between the value restated in constant pesos and the historical nominal value has been disclosed in the account “inflation adjustment to capital stock” in the shareholders’ equity.

 

  p. Treasury stock

The acquisition cost of treasury stock has been debited from the account “Reserve for new developments” as provided by sec. 220, subsec. 2, Law No. 19,550.

Likewise, the “Common stock account” was debited for the face value of purchased shares and the “Inflation adjustment of common stock account”, for the proportional portion of the adjustment for inflation related to the shares acquired. In turn, the accounts “Treasury stock” and “Inflation adjustment of treasury stock” were respectively credited (Note 18).

 

  q. Paid-in capital

- Subsidiaries, related companies Law No. 19,550 Section 33 and related parties: Increases or decreases of the equity value of investments in IRSA and Cactus generated on the basis of changes in their shareholders’ equity, arising from transactions of shareholders different from the Company and its subsidiaries, were included in this caption as established in caption 9 second part of Technical Resolution No. 17 of the FACPCE and Resolution CD No. 243/01 of the CPCECABA.

- Options issued: the value of options issued by the Company, which was determined as provided in Note 15, has been allocated to the account Paid-in Capital.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 2: (Continued)

 

  r. Conversion of financial statements of companies located abroad

 

  1. Not integrated companies

Assets and liabilities of the companies located abroad were converted to Argentine pesos using the exchange rate effective as of the period-end. Income statement accounts have been converted by using the average exchange rate for the period. Exchange differences have been appropriated to the shareholders’ equity in the “Translation differences” account.

BrasilAgro and the indirect interests in companies located in Bolivia and Paraguay are considered to be not integrated.

The foreign companies previously mentioned have been classified as not integrated to the Company’s operations because they are engaged in agricultural exploitation, developing its operations entirely carried out abroad, with a considerable degree of autonomy from the Company.

Likewise, the conversion difference resulting from our indirect interest in foreign companies through our subsidiary IRSA is included.

 

  2. Integrated companies

Assests and liabilities denominated in foreign-currency at the closing date of the company located abroad were converted into Argentine pesos using the exchange rate prevailing as of the period-end or year-end. Assets and liabilities denominated in foreign currency prior-period end of the company located abroad were converted into Argentine pesos using the respective historical exchange rates. Income statement accounts have been converted by using the average exchange rate for the period. Translation differences have been allocated to the “Gain on equity investees”.

The indirect interest in the company located in Uruguay is considered to be integrated.

The foreign company previously mentioned has been qualified as integrated with the Company transactions because it conducts its operations with a considerable degree of dependence and they are financed by funds from the Company.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 2: (Continued)

 

  s. Results for the period

Production income has been determined based on quantitative and qualitative changes of stocks subject to the biological transformation process measured from the beginning of the period to the closing date of these financial statements.

Grain, cattle and milk production cost is calculated to reflect production income is reflected in Schedule F.2.

The sales revenues are booked when the products are liquidated by the customers.

Cost of sales is determined considering the NRV of products in the month in which they are sold.

The adjustment for valuation to NRV of grain has been calculated as the difference between the production value at NRV upon harvesting and the value of the same production valued at NRV as of the closing date of these financial statements.

Unrealized gain (loss) on inventories – Beef Cattle is disclosed in a line of the Statements of Income and Schedules F.1 and F.2.

The results generated by futures and options on the Futures Market are recognized under “Unrealized gain (loss) on inventories – Crops, raw materials and MAT” on the Statements of Income. The closed positions are recognized as a difference between the exercise price and their close price; and the open positions at the period-end, as the difference between their exercise price and the market value price for futures, and as a difference between the premium and the market value premium for options.

The charges for consumption of assets were determined based on the values of such assets. The rest of income for the period is disclosed at incurred cost.

Financial results, segregated into that generated by assets and by liabilities, are disclosed in the Statements of Income.

 

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Table of Contents

Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 2: (Continued)

 

  t. Income tax

The Company has recognized the income tax on the basis of the deferred tax method, thus considering temporary differences between registration of assets and liabilities for accounting and tax purposes. The principal temporary differences originate in the valuation of beef cattle and the sale and replacement of fixed assets.

In order to determine deferred assets and liabilities the tax rate expected to be in effect at the temporary of reversal or use has been applied on the temporary differences identified and tax loss carryforwards, considering the laws enacted as of the date of issuance of these financial statements (35%) (Note 6).

Assets and liabilities generated by the application of the deferred tax method have been valued at face value.

 

  u. Tax on minimum presumed income

The Company determines the tax on minimum presumed income applying the prevailing rate of 1% on computable assets at fiscal period-end or year-end. This tax is supplementary to the income tax. The Company’s tax liability for each fiscal year will be the higher of these two taxes.

However, if the tax on minimum presumed income exceeds the income tax in any fiscal year, such excess may be computed as payment on account of the income tax that may be payable in any of the following 10 (ten) fiscal years.

The Company has recognized the minimum presumed income tax earned in the year and paid in previous years as a credit, because it considers that it may be computed as prepayment of income tax in future periods.

 

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Table of Contents

Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 3: COMMON AND TREASURY STOCK

 

The activity in the Company’s shares during the last three financial years was as follows:

 

     Authorized
Pesos
Face value
   Subscribed
Pesos
Face value
   Paid-in
Pesos
Face value

Common stock as of June 30, 2007

   309,576,220    309,576,220    309,576,220

Conversion of convertible notes in common stock - Fiscal Year 2008 (1)

   5,343,374    5,343,374    5,343,374

Exercise of Warrants - Fiscal Year 2008 (1)

   5,855,178    5,855,178    5,855,178

Capital Increase - Fiscal Year 2008 (Note 15)

   180,000,000    180,000,000    180,000,000

Exercise of Options (Note 15) - Fiscal Year 2008

   757,093    757,093    757,093

Exercise of Options (Note 15) - Fiscal Year 2009

   6,745    6,745    6,745

Exercise of Options (Note 15) - Fiscal Year 2010

   20,817    20,817    20,817
              

Common and treasury stock as of March 31, 2010 (2)

   501,559,427    501,559,427    501,559,427
              

 

(1) Correspond to the issue of Convertible Notes for US$ 50 million and Warrants for 50 million, which due date was on November 14, 2007.
(2) As of March 31, 2010, there were 5,000,754 proprietary treasury shares that were acquired during the previous fiscal year.

As of March 31, 2010, the capital authorized to be publicly offered is formed of 501,559,427 common, book-entry shares of Ps. 1 par value each and entitled to one vote per share.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 4: DERIVATIVE FINANCIAL INSTRUMENTS

 

As of March 31, 2010 the Company had arranged futures and options on the Futures Market and dollars as follows:

 

Cereal / currency

   Tons    Margins    Premium paid
or (collected)
    Premium
at fair value
    Gain (loss) for
valuation at
period—  end

at fair value
 

Futures

            

Purchase

            

Wheat

   5,000    134    —        —        (149

US$

   —      —      —        —    (a)    (1,724

Sell

            

Corn

   8,700    234    —        —        272   

Soybean

   28,200    1,082    —        —        1,212   

US$

   —      —      —        —    (b)    4,944   

Options

            

Purchase Call

            

Soybean

   5,440    —      443      1      (442

Corn

   2,540    —      85      —        (85

Sell Call

            

Soybean

   9,400    140    (278   (23   255   
                            

Total

   59,280    1,590    250      (22   4,283   
                            

 

(a) Corresponds to a future of purchase of US$ 25.9 million composed: (i) US$ 10.3 million and US$ 2.7 million in Standard Bank with mature date on 05/31/10 y 07/30/10 respectively; (ii) US$ 2 million and US$ 3 million in Banco Itaú with mature date on 04/30/10 y 05/31/10 respectively; (iii) US$ 3.5 million and US$ 4.4 million in Banco Santander Río with mature date on 04/30/10 y 06/30/10 respectively. Losses generated as of March 31, 2010 are included in Financial Results, net of the Statement of Income.
(b) Corresponds to a future sell of US$ 25.9 million composed: (i) US$ 3.5 million, two of US$ 2.7 million and US$ 2.7 million in Standard Bank with mature date on 04/30/10, 05/31//10 and 07/30/10 respectively; (ii) US$ 2 million and US$ 7 million in Banco Itaú with mature date el 04/30/10 and 05/31/10 respectivamente; and (iii) US$ 1 million and US$ 4.3 million in Banco Santander Río with mature date on 05/31/10 and 06/30/10 respectively. Gain generated as of March 31, 2010 is included in Financial Results, net of the Statement of Income.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 4: (Continued)

 

As of March 31, 2009 the Company had arranged futures and options on the Futures Market and dollars as follows:

 

Cereal

   Tons    Margins    Premium paid
or (collected)
    Premium
at fair value
    Gain (loss) for
valuation at
period-end

at fair value
 

Futures

            

Sell

            

Corn

   11,600    299    —        —        165   

Soybean

   22,100    813    —        —        (871

Wheat

   2,100    54    —        —        (11

Options

            

Purchase Call

            

Soybean

   16,728    —      848      357      (491

Wheat

   10,880    —      841      574      (267

Sell Call

            

Soybean

   48,420    —      (1,337   (1,099   238   

Wheat

   10,880    —      (453   (128   325   

Purchase Put

            

Corn

   21,590    —      813      28      (785

Soybean

   44,880    —      2,510      712      (1,798

Sell Put

            

Corn

   6,350    —      (83   (3   80   

Soybean

   37,420    —      (1,147   (266   881   
                            

Total

   232,948    1,166    1,992      175      (2,534
                            

Crops: As of March 31, 2010 and 2009 the Company recognized results of Ps. 858 (income) and Ps. 5,343 (income), respectively, to reflect the closing of the transactions carried out during such periods. This results are disclosed a part of the statement in the line “Unrealized gain (loss) on inventories – Crops, raw materials and MAT” in the Statements of Income.

US Dollars: As of March 31, 2010 and 2009 the Company charged to results Ps. 7,867 (income) and Ps. 22,617 (income), respectively, for those transactions carried out during such periods. These results are disclosed as part of the line “Gain on hedging operations” in the Statements of Income.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 5: MANAGEMENT AGREEMENT

 

The Company signed a management agreement with Dolphin Fund Management S.A. (now called Consultores Asset Management S.A.), for consulting in relation to livestock and farming activities, serving as an intermediary in transactions and investment consulting in relation to security investments.

In exchange for its services, such company will receive a payment equivalent to 10% of the net income resulting from the annual or the special financial statements, except the results from the investment in the subsidiary BrasilAgro.

Since certain directors of Cresud are also executive directors and shareholders of Dolphin Fund Management S.A., the above-mentioned agreement was approved by the Extraordinary Shareholders’ Meeting held on October 25, 1994, in compliance with Section No. 271 of Law No. 19,550.

In November 2003, Dolphin Fund Management S.A. was divided into two companies: Consultores Asset Management S.A. and Dolphin Fund Management S.A. As from that moment the management contract is held by Consultores Asset Management S.A.

The financial statements as of March 31, 2010 and 2009 include a charge in the Statements of Income by this concept for Ps. 20,466 and Ps. 493 respectively .

 

NOTE 6: INCOME TAX – DEFERRED TAX

The evolution and composition of deferred tax Assets and Liabilities, as of March 31, 2010 are detailed in the following table:

 

      Cumulative tax
loss
carryforwards
   Investments     Fixed
Assets
    Inventories     Cash in
foreign
currency
    Provisions    Total  

Initial balance

   261    —        (43,603   (21,795   (437   302    (65,272

Incorporated by merger

   —      (8   (95   (929   —        510    (522

Gain (loss) recognized

   13,313    8      207      (18,162   457      2,763    (1,414
                                        

Closing balance

   13,574    —        (43,491   (40,886   20      3,575    (67,208
                                        

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

NOTE 6: (Continued)

 

As of March 31, 2010, net liabilities at period-end as per the information included in the preceding table amount to Ps. 67,208.

The Company, in accordance with the provisions of the new accounting standards, has decided not to recognize the deferred liabilities generated by the inflation adjustment on fixed assets and other non-monetary assets, which as of the closing of the current period is Ps. 86,165. It is estimated that this liability will end up according to the detail that follows:

 

Term

   Total

1 year

   4,211

2 years

   4,130

3 years

   4,087

Over 3 years

   61,150

No term

   12,587
    

Total

   86,165
    

Below there is a reconciliation between the income tax recognized and that which would result from applying the prevailing tax rate on the Net Income for accounting purposes:

 

Description

   March 31,
2010
    March 31,
2009

Net income before income tax

   186,071      42,555

Tax rate

   35%      35%
          

Net income at tax rate

   65,125      14,894

Permanent differences at tax rate:

    

Restatement into constant currency

   91      138

Donations

   8      10

Results from equity investees

companies

   (66,011   18,661

Shareholders’ personal asset tax

   2,158      3,672

Miscellaneous permanent differences

   43      509
          

Income tax expense

   1,414      37,884
          

During this period the income tax rate was 35%.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 6: (Continued)

 

Cumulative tax loss carryforwards recorded by the Company wich are pending of utilization at period-end amount to approximately Ps. 38,783 and may be offset against taxable income of future years, as follows:

 

Origination year

   Amount    Expiration Year

2008

   746    2013

2010

   38,037    2015

Minimum presumed income tax credits booked by the Company, which were pending to use as of the period-end, amount to Ps. 29,013 and under current regulations, they may be compensated with taxable income for future years according to the following detail:

 

Origination year

   Amount    Expiration Year

2006

   1,943    2016

2007

   5,265    2017

2008

   10,535    2018

2009

   5,871    2019

2010

   5,399    2020

The following table shows the evolution and composition of deferred tax Assets and Liabilities, as of June 30, 2009:

 

     Cumulative tax
loss
carryforwards
    Cash in
foreign
currency
    Fixed
Assets
    Inventories     Accruals     Total  

Initial balance

   13,479      8,058      (43,747   (19,928   1,162      (40,976

(Loss) Gain recognized

   (13,218   (8,495   144      (1,867   (860   (24,296
                                    

Closing balance

   261      (437   (43,603   (21,795   302      (65,272
                                    

As of June 30, 2009, net liabilities at year-end as per the information included in the preceding table amount to Ps. 65,272.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 7: BALANCES AND RESULTS WITH SUBSIDIARIES, RELATED COMPANIES LAW No. 19,550 SECTION 33 AND RELATED PARTIES:

 

a. Balances as of March 31, 2010 and 2009 and June 30, 2009 with subsidiaries, related companies and related parties are as follows

As of March 31, 2010:

 

     Current
Investments
   Non—  current
Investments
   Current
Trade
accounts
receivable
   Current
Other
receivables
   Current Trade
accounts
payable
    Current Other
liabilities
    Total  

Agrology S.A. (1)

   —      —      142    —      —        —        142   

Acres (1)

   —      —      2,358    —      —        —        2,358   

Agro – Uranga S.A. (2)

   —      —      —      215    —        —        215   

Aguaribay (1)

   —      —      —      6,931    —        —        6,931   

ANTA (1)

   —      —      1,401    —      —        —        1,401   

APSA (1)

   594    9,363    3,360    1    —        —        13,318   

BrasilAgro (2)

   —      —      53    —      —        —        53   

Cactus (2)

   —      —      96    11    —        —        107   

Caldén (1)

   —      —      —      6,938    —        —        6,938   

Consultores Asset Management S.A. (3)

   —      —      —      —      —        (11,421   (11,421

Cresca S.A. (4)

   —      —      39    —      —        —        39   

Cyrsa S.A. (4)

   —      —      —      —      (26   —        (26

Directors (3)

   —      —      —      —      —        (158   (158

Estudio Zang, Bergel & Viñes (3)

   —      —      —      —      (693   —        (693

Fibesa S.A. (1)

   —      —      33    —      —        —        33   

Fundación IRSA (3)

   —      —      —      —      —        (1,073   (1,073

FyO.Com (1)

   —      —      10,476    24    —        —        10,500   

Helmir S.A. (1)

   —      —      23    —      —        —        23   

IRSA (1)

   1,821    69,034    3,468    —      —        (32,012   42,311   

Itín (1)

   —      —      —      4,794    —        —        4,794   

Ñandubay (1)

   —      —      —      4,268    —        —        4,268   

Ombu (1)

   —      —      —      5,212    —        —        5,212   

Credits to employees (3)

   —      —      —      301    —        —        301   

Tarshop S. A. (1)

   —      —      628    —      —        —        628   

Yatay (1)

   —      —      —      6,234    —        —        6,234   

Yuchán (1)

   —      —      —      5,732    —        —        5,732   
                                      

Total

   2,415    78,397    22,077    40,661    (719   (44,664   98,167   
                                      

 

(1) Subsidiary
(2) Related companies
(3) Related parties
(4) Direct or indirect common control

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 7: (Continued)

 

As of June 30, 2009:

 

     Current
Investments
   Non-current
Investments
   Current
Trade
accounts
receivable
   Current
Other
receivables
   Current Trade
accounts
payable
    Current Other
liabilities
    Total  

Agrology S.A. (1)

   —      —      46    142    —        —        188   

Acres (1)

   —      —      1,771    —      —        —        1,771   

Agro – Uranga S.A. (2)

   —      —      —      39    —        —        39   

ANTA (1)

   —      —      1,004    —      —        —        1,004   

APSA (1)

   208    8,133    —      243    (587   —        7,997   

BrasilAgro (2)

   —      —      13    —      —        —        13   

Cactus (2)

   —      —      17    8,935    —        —        8,952   

Consultores Asset Management S.A. (3)

   —      —      58    3,821    —        —        3,879   

Cyrsa S.A. (4)

   —      —      —      —      (40   —        (40

Directors (3)

   —      —      —      —      —        (227   (227

Dolphin Fund PLC (3)

   —      —      —      27,471    —        —        27,471   

Estudio Zang, Bergel & Viñes (3)

   —      —      —      —      (245   —        (245

Fibesa S.A. (1)

   —      —      1    —      —        —        1   

Fundación IRSA (3)

   —      —      —      —      —        (1,073   (1,073

FyO.Com (1)

   —      —      6,446    24    —        —        6,470   

Helmir S.A. (1)

   —      —      23    —      —        —        23   

IBOSA (1)

   —      —      —      —      (323   —        (323

IGSA (1)

   —      —      —      358    (494   —        (136

IRSA (1)

   4,458    61,204    —      —      (6,661   —        59,001   

Credits to employees (3)

   —      —      —      177    —        —        177   

Shopping Alto Palermo (5)

   —      —      —      —      (2   —        (2

Tarshop S. A. (1)

   —      —      163    —      —        —        163   
                                      

Total

   4,666    69,337    9,542    41,210    (8,352   (1,300   115,103   
                                      

 

(1) Subsidiary
(2) Related companies
(3) Related parties
(4) Direct or indirect common control
(5) See Note 9.B.2.c to the consolidated financial statements

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 7: (Continued)

 

As of March 31, 2009:

 

     Current
Investments
   Non-current
Investments
   Current
Trade
accounts
receivable
   Current
Other
receivables
   Non-current
Other
receivables
   Current Trade
accounts
payable
    Current Other
liabilities
    Total  

Agrology S.A. (1)

   —      —      45    —      —      —        —        45   

Acres (1)

   —      —      1,485    —      —      —        —        1,485   

Agro – Uranga S.A. (2)

   —      —      —      1,300    —      —        —        1,300   

ANTA (1)

   —      —      700    —      38,804    —        —        39,504   

APSA (1)

   570    7,631    —      —      —      (708   —        7,493   

Cactus (2)

   —      —      197    6,191    —      —        —        6,388   

Consultores Asset Management S.A. (3)

   —      —      —      9,062    —      —        —        9,062   

Cyrsa S.A. (4)

   —      —      —      —      —      (40   —        (40

Directors (3)

   —      —      —      —      —      —        (167   (167

Estudio Zang, Bergel & Viñes (3)

   —      —      —      —      —      (524   —        (524

Fibesa S.A. (1)

   —      —      1    —      —      —        —        1   

Fundación IRSA (3)

   —      —      —      —      —      —        (1,073   (1,073

FyO.Com (1)

   —      —      7,767    24    —      —        —        7,791   

IBOSA (1)

   —      —      —      —      —      (323   —        (323

IGSA (1)

   —      —      —      —      9,135    (104   —        9,031   

IRSA (1)

   1,747    57,885    —      —      —      (377   —        59,255   

Credits to employees (3)

   —      —      —      126    —      —        —        126   

Tarshop S. A. (1)

   —      —      123    —      —      —        —        123   
                                           

Total

   2,317    65,516    10,318    16,703    47,939    (2,076   (1,240   139,477   
                                           

 

(1) Subsidiary
(2) Related companies
(3) Related parties
(4) Direct or indirect common control

 

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Table of Contents

Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 7: (Continued)

 

b. Gain and losses provided by subsidiaries, related companies and related parties corresponding to the periods ended March 31, 2010 and 2009 are as follows:

As of March 31, 2010:

 

     Sales and fees
for shared
services
    Salaries and
wages
    Fees     Beef cattle
expenses
    Interest
Gain
(loss)
   Administration
services
    Other  

Aguaribay (1)

   —        —          —        97    —        —     

ANTA (1)

   —        —        —        —        —      —        (3,529

APSA (1)

   8,337      —        —        —        1,133    —        2,582   

Cactus (2)

   —        —        —        (1,199   9    111      7   

Caldén (1)

   —        —        —        —        97    —        —     

Consultores Asset Management S.A. (3)

   —        —        (20,446   —        —      —        —     

Cresca S.A. (4)

   —        —        —        —        —      1,082      —     

Directors (3)

   —        (428   —        —        —      —        —     

Estudio Zang, Bergel & Viñes (3)

   —        —        (425   —        —      —        —     

FyO.Com (1)

   —        —        —        —        249    —        (303

IRSA (1)

   6,813      —        —        —        7,130    —        (790

Itín (1)

   —        —        —        —        67    —        —     

Ñandubay (1)

   —        —        —        —        60    —        —     

Ombú (1)

   —        —        —        —        73    —        —     

Credits to employees (3)

   —        —        —        —        7    —        —     

Tarshop S.A. (1)

   350      —        —        —        —      —        —     

Yatay (1)

   —        —        —        —        87    —        —     

Yuchán (1)

   —        —        —        —        80    —        —     
                                         

Total

   15,500      (428   (20,871   (1,199   9,089    1,193      (2,033
                                         

As of March 31, 2009:

 

  

     Sales and fees
for shared
services
    Salaries and
wages
    Fees     Beef cattle
expenses
    Interest
Gain
(loss)
   Administration
services
    Other  

Agrology S.A. (1)

   —        —        —        —        10,127    —        —     

Agro – Uranga S.A. (2)

   —        —        —        —        —      —        271   

ANTA (1)

   —        —        —        —        3,007    —        117   

APSA (1)

   (462   —        —        —        555    —        —     

BrasilAgro (2)

   —        —        —        —        —      408      —     

Cactus (2)

   —        —        —        (91   620    127      287   

Consultores Asset Management S.A. (3)

   —        —        (493   —        —      —        —     

Directors (3)

   —        (446   —        —        —      —        —     

Estudio Zang, Bergel & Viñes (3)

   —        —        (653   —        —      —        —     

FyO.Com (1)

   —        —        —        —        —      —        (239

IBOSA (1)

   —        —        —        —        —      (39   (382

IGSA (1)

   —        —        —        —        573    —        (253

IRSA (1)

   327      —        —        —        3,959    —        —     

Credits to employees (3)

   —        —        —        —        —      —        —     

Tarshop S.A. (1)

   105      —        —        —        —      —        —     
                                         

Total

   (30   (446   (1,146   (91   18,841    496      (199
                                         

 

(1) Subsidiaries
(2) Related companies
(3) Related parties
(4) Direct or indirect common control

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 8: DETAILS OF BALANCE SHEET AND STATEMENT OF INCOME ACCOUNTS

 

As of March 31, 2010 and 2009 and as of June 30, 2009 the principal items of the financial statements are as follow:

a. Cash and banks

 

The breakdown for this item is as follows:    March 31,
2010
   June 30,
2009
   March 31,
2009

Cash

   113    154    117

Foreign currency (Schedule G)

   63    46    12

Local currency checking account

   2,113    1,760    7,655

Foreign currency checking account (Schedule G)

   785    4,466    2,434

Local currency saving account

   102    84    239

Foreign currency saving account (Schedule G)

   689    180    473

Checks to be deposited

   293    930    149
              
   4,158    7,620    11,079
              

b. Investments

 

The breakdown for this item is as follows:    March 31,
2010
   June 30,
2009
   March 31,
2009

Temporary investments

        

Temporary investments (Schedules C and G)

   6,856    13,507    51,848
              
   6,856    13,507    51,848
              

Long term investments in other companies

        

Investments on equity investees (Note 12 and Schedule C)

   1,762,590    1,463,153    1,206,608
              
   1,762,590    1,463,153    1,206,608
              

Other investments

        

Other investments (Schedules C and G)

   78,418    69,358    65,537
              
   78,418    69,358    65,537
              

c. Trade accounts receivable, net

 

The breakdown for this item is as follows:    March 31,
2010
    June 30,
2009
    March 31,
2009
 

Current

      

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (Note 7 and Schedule G)

   22,077      9,542      10,318   

Accounts receivable in local currency

   17,499      19,730      6,793   

Accounts receivable in foreign currency (Schedule G)

   10,027      7,251      6,883   

Trade accounts receivable – real estate (Schedule G)

   7,642      6,968      7,289   

Less:

      

Allowance for doubtful accounts (Schedule E)

   (660   (501   (501
                  
   56,585      42,990      30,782   
                  

Non-Current

      

Trade accounts receivable – real estate (Schedule G)

   —        2,153      6,581   
                  
   —        2,153      6,581   
                  

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 8: (Continued)

 

d. Other receivables

The breakdown for this item is as follows:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

VAT Credit

   44,605    25,632    19,565

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (Note 7 and Schedule G)

   40,661    41,210    16,703

Operations to liquidate

   4,945    -    -

Income tax credit and advances (net of provision)

   4,762    7,356    9,785

Guarantee deposits (Note 4 and Schedule G)

   1,590    1,489    1,166

Prepaid expenses

   1,041    451    215

Gross sales tax and other tax credits

   375    471    313

Prepaid leases

   124    75    258

Premiums paid (Note 4 and Schedule G)

   1    743    3,376

Tax on minimum presumed income advances and tax credit (net of provision)

   —      867    —  

Others

   1,864    759    1,990
              
   99,968    79,053    53,371
              

Non-current

        

Tax on minimum presumed income

   29,013    23,551    23,255

VAT credit and other tax credits

   1,898    7,141    13,306

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (Note 7)

   —      —      47,939

Prepaid leases

   —      33    —  
              
   30,911    30,725    84,500
              

e. Inventories

The breakdown for this item is as follows:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Unharvested crops

   71,447    5,160    84,219

Materials and others

   23,535    18,548    19,233

Beef cattle

   30,927    18,179    19,707

Crops

   18,474    42,250    27,309

Seeds and fodder

   2,183    2,825    2,288
              
   146,566    86,962    152,756
              

Non-Current

        

Beef cattle

   125,847    74,757    71,840
              
   125,847    74,757    71,840
              

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 8: (Continued)

 

f. Trade accounts payable

The breakdown for this item is as follows:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Suppliers in foreign currency (Schedule G)

   34,134    39,167    23,388

Provisions for inputs and other expenses (Schedule G)

   15,420    11,951    12,355

Suppliers in local currency

   4,331    377    889

Provision for harvest expenses

   1,455    1,252    889

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (Note 7)

   719    8,352    2,076
              
   56,059    61,099    39,597
              

Non-Current

        

Debt related to purchase of farms (Schedule G)

   —      —      6,179
              
   —      —      6,179
              

g. Short-term debts

The breakdown for this item is as follows:

 

     March 31,
2010
    June 30,
2009
   March 31,
2009

Bank Loans (Schedule G)

   385,972      187,741    187,669

Interests payable - Bank loans (Schedule G)

   4,718      3,782    2,962

Non-convertible Notes Class II (Note 19 and Schedule G)

   34,775      —      —  

Non-convertible Notes Class I (Note 19)

   15,500      —      —  

Interest payable Non-convertible Notes (Note 19 and
Schedule G)

   258      —      —  

Expenses of Non-convertible Notes issuance (Note 19)

   (246   —      —  
               
   440,977      191,523    190,631
               

h. Salaries and social security payable

The breakdown for this item is as follows:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Provisions for vacations and annual bonus

   11,712    4,244    3,522

Social security payable

   1,857    932    570

Health care payable

   208    41    36
              
   13,777    5,217    4,128
              

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 8: (Continued)

 

i. Taxes payable

The breakdown for this item is as follows:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Tax on shareholders’ personal assets

   6,471    2,938    8,466

Tax on minimum presumed income, net (Note 2.u.)

   780    2,207    5,230

Gross sale tax payable

   391    269    45

Property tax payable

   59    53    70

Taxes withheld for income tax

   31    212    761

Others

   25    3    4
              
   7,757    5,682    14,576
              

Non-Current

        

Deferred income tax (Note 6)

   67,208    65,272    78,860

Moratorium- Tax on personal assets

   2,468    2,773    2,773
              
   69,676    68,045    81,633
              

j. Customer advances

The breakdown for this item is as follows:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Customer advances (Schedule G)

   1,939    —      —  
              
   1,939    —      —  
              

k. Other liabilities

The breakdown for this item is as follows:

 

     March 31,
2010
   June 30,
2009
   March 31,
2009

Current

        

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties. (Note 7 and Schedule G)

   33,243    1,300    1,240

Management fee provision (Notes 5 and 7)

   11,421    —      —  

Premiums collected (Note 4 and Schedule G)

   23    543    1,576

Debt for purchase of shares (Schedule G)

   —      —      128

Others

   1,740    —      —  
              
   46,427    1,843    2,944
              

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 8: (Continued)

 

l. Gain on equity investees

The breakdown for this item is as follows:

 

     March 31,
2010
Gain/(loss)
    March 30,
2009
Gain/(loss)
 
    

IRSA

    

- Result equity method

   150,658      (48,938

- Amortization of negative goodwill

   35,274      14,745   

- Gains for purchase of IRSA’s and APSA’s non-convertible notes

   —        70,716   

- Elimination of amortization of IRSA’s and APSA’s non- convertible notes issuance expenses (1)

   179      (1,705

- Accrued financial results of IRSA’s and APSA’s non-convertible notes (1)

   (6,421   (3,263

- Elimination of exchange difference of IRSA’s and APSA’s non-convertible notes (1)

   450      8,957   

- Amortization of higher values

   (11,263   (4,472

BrasilAgro

    

- Result equity method

   645      233   

- Amortization of negative goodwill

   3,644      —     

Cactus

    

- Result equity method

   (2,483   (1,969

Agro-Uranga S.A.

    

- Result equity method

   3,092      2,267   

IGSA

    

- Result equity method

   (44   (1,087

ANTA

    

- Result equity method

   (1,436   (1,506

- Amortization of concession right

   (524   (524

- Amortization of three plantations (wood)

   (97   (97

FyO.Com

    

- Result equity method

   (509   (179

Agrology S.A.

    

- Result equity method

   10,967      (10,425

- Amortization of pre-operative expenses

   (227   —     

EAASA

    

- Result equity method

   (24   (186
            
   181,881      22,567   
            

 

(1) Corresponds to the acquisition of IRSA’s and APSA’s non- convertible notes acquired during the fiscal year ended June 30, 2009 (Note 20).

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 9:

 

Assets based on their estimated collection term

 

Based on their estimated collection term

   Current and
Non-Current Investments
   Trade accounts receivable    Other receivables
   March 31,
2010
   June 30,
2009
   March 31,
2009
   March 31,
2010
   June 30,
2009
   March 31,
2009
   March 31,
2010
   June 30,
2009
   March 31,
2009

4th quarter 2009/2008

   —      —      1,747    —      —      28,497    —      —      19,326

1st quarter 2010/2009

   —      4,458    570    —      38,398    2,285    —      41,891    2,926

2nd quarter 2010/2009

   —      208    —      —      —      —      —      8,727    2,515

3rd quarter 2010/2009

   —      —      —      —      —      —      —      11,819    11,643

4th quarter 2010/2009

   594    —      —      53,838    4,592    4,472    67,957    3,045    —  

1st quarter 2011/2010

   1,821    —      —      2,747    2,153    2,109    3,186    —      —  

2nd quarter 2011/2010

   —      —      —      —      —      —      15,788    —      —  

3rd quarter 2011/2010

   —      —      —      —      —      —      12,361    —      —  

3rd quarter 2017/2016

   69,034    61,204    57,885    —      —      —      —      —      —  

4th quarter 2017/2016

   9,363    8,133    7,631    —      —      —      —      —      —  

With no stated current term

   4,441    8,841    49,531    —      —      —      676    13,571    16,961

With no stated non-current term

   21    21    21    —      —      —      30,911    30,725    84,500
                                            

Total

   85,274    82,865    117,385    56,585    45,143    37,363    130,879    109,778    137,871
                                            

Assets classified according to their interest rate

 

Based on Interest rate that they accrue

   Current and
Non-Current Investments
   Trade accounts receivable    Other receivables
   March 31,
2010
   June 30,
2009
   March 31,
2009
   March 31,
2010
   June 30,
2009
   March 31,
2009
   March 31,
2010
   June 30,
2009
   March 31,
2009

At fixed interest rate

   78,397    69,337    65,516    7,324    8,872    13,870    301    177    126

At variable interest rate

   4,441    8,841    49,531    —      —      —      44,545    37,261    48,861

Non-interest bearing

   2,436    4,687    2,338    49,261    36,271    23,493    86,033    72,340    88,884
                                            

Total

   85,274    82,865    117,385    56,585    45,143    37,363    130,879    109,778    137,871
                                            

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

NOTE 9: (Continued)

 

Liabilities based on their estimated payment term

 

Based on their estimated payment term

  Trade accounts payable   Short-term debts   Salaries and social security payable   Taxes payable
  March 31,
2010
  June 30,
2009
  March 31,
2009
  March 31,
2010
  June 30,
2009
  March 31,
2009
  March 31,
2010
  June 30,
2009
  March 31,
2009
  March 31,
2010
  June 30,
2009
  March 31,
2009

4th quarter 2009/2008

  —     —     39.597   —     —     31.854   —     —     1.250   —     —     10.001

1st quarter 2010/2009

  —     61,099   —     —     46,201   45,170   —     4,428   2,278   —     4,902   959

2nd quarter 2010/2009

  —     —     —     —     69,211   —     —     789   600   —     628   959

2nd quarter 2010/2009

  —     —     —     —     —     —     —     —     —     —     76   2,657

4th quarter 2010/2009

  56,059   —     —     178,956   —     —     4,170   —     —     6,749   76   —  

1st quarter 2011/2010

  —     —     —     55,922   —     —     9,607   —     —     76   —     —  

2nd quarter 2011/2010

  —     —     —     —     —     —     —     —     —     856   —     —  

3rd quarter 2011/2010

  —     —     —     —     —     —     —     —     —     76   —     —  

With no stated current term

  —     —     —     206,099   76,111   113,607   —     —     —     —     —     —  

With no stated non-current term

  —     —     6,179   —     —     —     —     —     —     69,676   68,045   81,633
                                               

Total

  56,059   61,099   45,776   440,977   191,523   190,631   13,777   5,217   4,128   77,433   73,727   96,209
                                               

 

Based on their estimated payment term

  Customer Advances   Other liabilities   Provisions
  March 31,
2010
  June 30,
2009
  March 31,
2009
  March 31,
2010
  June 30,
2009
  March 31,
2009
  March 31,
2010
  June 30,
2009
  March 31,
2009

4th quarter 2009/2008

  —             —             —     —     —     2.944   —     —     —  

1st quarter 2010/2009

  —     —     —     —     543   —     —     —     —  

2nd quarter 2010/2009

  —     —     —     —     1,300   —     —     —     —  

2nd quarter 2010/2009

  —     —     —     —     —     —     —     —     —  

4th quarter 2010/2009

  1,939   —     —     45,196   —     —     —     —     —  

1st quarter 2011/2010

  —     —     —     158   —     —     —     —     —  

2nd quarter 2011/2010

  —     —     —     1,073   —     —     —     —     —  

3rd quarter 2011/2010

  —     —     —     —     —     —     —     —     —  

With no stated current term

  —     —     —     —     —     —     —     —     —  

With no stated non-current term

  —     —     —     —     —     —     1,791   286   117
                                   

Total

  1,939   —     —     46,427   1,843   2,944   1,791   286   117
                                   

Liabilities classified according to their interest rate

 

Based on Interest rate
that they accrue

   Trade accounts payable6    Short-term debts    Salaries and social security payable    Taxes payable
     March 31,
2010
   June 30,
2009
   March 31,
2009
   March 31,
2010
   June 30,
2009
   March 31,
2009
   March 31,
2010
   June 30,
2009
   March 31,
2009
   March 31,
2010
   June 30,
2009
   March 31,
2009

At fixed interest rate

   —      6,350    6,222    375,753    190,597    189,430    —      —      —      —      —      —  

At variable interest rate

   —      —      —      60,248    —      —      —      —      —      —      —      —  

Non-interest bearing

   56,059    54,749    39,554    4,976    926    1,201    13,777    5,217    4,128    77,433    73,727    96,209
                                                           

Total

   56,059    61,099    45,776    440,977    191,523    190,631    13,777    5,217    4,128    77,433    73,727    96,209
                                                           

 

Based on Interest rate that they accrue

   Customer Advances    Other liabilities    Provisions
     March 31,
2010
   June 30,
2009
   March 31,
2009
   March 31,
2010
   June 30,
2009
   March 31,
2009
   March 31,
2010
   June 30,
2009
   March 31,
2009

At fixed interest rate

   —              —              —      31,024    —      —      —      —      —  

At variable interest rate

   —      —      —      —      —      —      —      —      —  

Non-interest bearing

   1,939    —      —      15,403    1,843    2,944    1,791    286    117
                                            

Total

   1,939    —      —      46,427    1,843    2,944    1,791    286    117
                                            

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 10: RESTRICTIONS ON DISTRIBUTION OF PROFITS

 

In accordance with the Argentine Corporations Law, the Company’s by-laws and Resolution N° 368/2001 of the CNV, 5% of the net and realized profit for the year plus (less) prior year adjustments must be appropriated by resolution of shareholders to a legal reserve until such reserve equals 20% of the Company’s outstanding capital.

 

NOTE 11: PURCHASE AND SALE OF FARMS

 

  a) On May 30, 2008, IRSA signed, in commission, an agreement of purchase with transfer of possession for the purchase of 115 hectares from an establishment located in the District of Lujan, Province of Buenos Aires. The transaction was agreed at US$ 3.0 million, paying the amount of US$ 1.2 million on such date.

On December 13, 2008, the Company was formalized as principal to the transaction, the balance of US$ 1.8 million was paid by this one by granting the title deed for such property, on March 11, 2010.

 

  b) On July 24, 2008, IGSA and consequently the Company due to the merger process described in Note 13, executed a title deed conveying ownership for the sale of two plots of land belonging to the “El Recreo” farm (1,829 hectares), located in the Province of Catamarca. The transaction was agreed upon at US$ 0.4 million out of which US$ 0.3 million was collected. The balance of US$ 0.1 million will be collected in July 2010, plus interest equivalent to the LIBO rate plus 3%.

 

  c) On September 5, 2008, the Company signed the deed for the purchase of 10,910 hectares of the “Estancia Carmen” farm, located in the Province of Santa Cruz. The transaction was agreed for a price of US$ 0.7 million, which have been fully paid.

 

  d) On October 7, 2008, the Company executed a preliminary sale agreement without transfer of possession in connection with 1,658 hectares of the “Los Pozos” farm located in the Province of Salta. The agreed sales price was US$ 0.5 million.

On April 7, 2009, the title deed was signed and the balance of US$ 0.2 million was collected.

 

  e) On September 30, 2009, the entire mortgage related to the purchase of the “San Pedro” farm was settled by paying US$ 1.8 million including interest.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 11: (Continued)

 

  f) On December 17, 2009, the sale agreement for selling the “TALI SUMAJ” farm (12,701 hectares) located in the Province of Catamarca was signed. The transaction was agreed upon at US$ 4.8 million, out of which US$ 0.5 million was collected and the balance will be collected on April 15, 2010. The title deed shall be effective if prior to April 15, 2010, the attachment in aid of execution in the case “EXAGRIND S.A. –Estancia San Rafael c/Tali Sumaj y Otros s/Daños y Perjuicios” (EXAGRIND S.A. –Estancia San Rafael vs./Tali Sumaj et al in re: Damages) is lifted (Notes 16 and 17).

On April 14, 2010, the parties agreed until May 17, 2010 to postpone the transfer deed and the respective collection of the remaining balance, subject to the definitive aid of execution above- mentioned.

 

NOTE 12: INVESTMENTS IN COMPANIES

 

  1. Cresud – International

 

  a) BrasilAgro

The Company values the investment in BrasilAgro according to the equity method taking into account its significant impact that derives from: (i) its capacity to affect the operative and financial decisions considering that from the nine members of the Board of Directors, three of them -including the president- are appointed by the Company, other three are designated by the stockholders of BrasilAgro and the remaining three are independent directors appointed jointly by both parts, and (ii) the stockholders’ agreement existing among the founder shareholders, that is the Company, Tarpon Agro and Cape Town (shareholders founders). Under the terms of such agreement, the parties have agreed to vote jointly in Meeting of Shareholders in respect of matters related to proposals to change directors’ and administrators’ fees, increases of capital sock and appropriation of dividends, among other issues.

BrasilAgro was founded for the purpose of replicating Cresud’s Business in Brazil. The Company will be mainly involved in four business lines keeping its focus on agricultural real estate: (i) sugar cane, (ii) crops and cotton, (iii) forestry activities, and (iv) livestock.

The BrasilAgro founder partners are Cresud, Cape Town, Tarpon Investimentos, Tarpon Agro, Agro Managers and Agro Investment.

On March 24, 2006, Cresud entered into a shareholders agreement with Mr. Elie Horn and with Tarpon, which established among other matters that both parties should have a joint vote at the Shareholders’ Meetings and that both parties have a preemptive right to acquire shares held by the other party.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 12: (Continued)

 

The board of directors of BrasilAgro has nine members of which Cresud, in his capacity as founder of the company, has appointed three members, Tarpon and Cape Town other three and complementarily the Company has three independent directors. The BrasilAgro shares started to be listed in the Novo Market of the Brazilian Stock Exchange (BOVESPA) under the symbol AGRO3 on May 2, 2006 in compliance with Brazil highest standards in terms of corporate governance.

As compensation for having founded the Company Cresud received at no cost 104,902 purchase options to subscribe additional shares of BrasilAgro during 15 years at the same price as that offered at the initial public offering of shares, that is to say Rs. 1,000 as adjusted by the IPCA inflation rate.

In addition, Cresud received with no cost a second series of options totaling 104,902, which can only be exercised at the option of Cresud whenever a third party makes an offer to purchase the BrasilAgro shares. The exercise price of these options will be the same price as the purchase offer referred to in the previous paragraph. The second series of options matures in year 2021.

As of March 31, 2010, the Company has not registered any value for the holding of such options.

During the previous fiscal year, Cresud acquired 2,776,000 shares of BrasilAgro for Ps. 25,455. Such purchase generated a variation in the interest in BrasilAgro, from 14.39% to 19.14%.

Over the current period, the Company acquired 2,385,400 additional shares from this company for the amount of US$ 15.2 million, thus the equity interest increased to 23.23% as of March 31, 2010 (Note 25).

As of March 31, 2010, the equity method of accounting was applied to preliminary figures because, at the time of issuance of these financial statements, BrasilAgro had not completed the process of issuing and approval of its financial statements.

 

  b) Agrology S.A.

Under a series of transactions that constituted for Cresud a new expansion in the agricultural and livestock business in South America as designed in their business plan, the Company, jointly with IGSA, has made over the present period, irrevocable capital contributions in proportion to their holdings for an amount of Ps. 37,208 in Agrology S.A. which have been capitalized on January 19, 2010. After such date and until the closing of these financial statements, irrevocable contributions were made to Agrology S.A. for Ps. 2,314.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 12: (Continued)

 

  2. Cresud – Local

 

  a) Cactus

In association with Tyson Foods Inc. and Cactus Feeders Inc., Cactus has started an undertaking in Argentina that will be the country’s first fully integrated cattle project. Beef cuts for the Argentine consumer will be produced in said undertaking having access to the European and other international markets.

On June 30, 2009, Cresud executed a shareholders’ agreement with Cactus Feeders Inc. for the acquisition of its equity interest of 24% in Cactus and of 0.24% in EAASA. Based on such agreement, Cresud paid the amount of US$ 1.2 million for 12% in Cactus and 0.24% in EAASA. Consequently, Cresud’s equity interest in Cactus increased from 24% to 36% and from 0.24% to 0.48% in EAASA. Cactus’s remaining 12% was acquired by our subsidiary Helmir S.A., which will pay the amount of US$ 1.2 million on June 30, 2010 plus interest at 4% p.a.

On July 2, 2009, the Company assigned a receivable for Ps. 2,245 that it carried with Cactus to Helmir S.A., controlled by Agrology S.A.

Likewise, the Company has decided to capitalize the remaining receivable that it carried with Cactus.

As all Cactus’s shareholders have capitalized according to their equity interests, the Company’s interest in Cactus has remained unchanged.

 

  b) IRSA

During the previous fiscal year, we acquired 91,899,125 shares amounting to US$ 47.4 million, increasing our direct interest to 50.23% as of June 30, 2009 (Note 2.j.2).

During this period the Company acquired 1,471,180 shares amounting to US$ 1.5 million, increasing our direct interest to 50.49% (Schedule C).

 

  c) ANTA

On June 29, 2009, the Company’s Board of Directors ratified the conversion of debt into equity that ANTA carried with it as of May 15, 2009 for Ps. 41,823 contributing 90% on its own behalf and 10% on behalf of IGSA.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 12: (Continued)

 

On June 30, 2009, the Extraordinary and Unanimous Shareholders’ Meeting of ANTA, unanimously approved the conversion of debt into equity, hence the capital stock stands at Ps. 43,158.

During the current period, the Company made irrevocable contributions for Ps. 8,100, 90% on its own behalf and 10% on behalf of IGSA, which have been capitalized on January 19, 2010. After such date and until the closing of these financial statements, irrevocable contributions to ANTA were made for Ps. 4,200, 90% on its own account and 10% on account of IGSA.

 

  d) IGSA

On June 29, 2009, the Company’s Board of Directors ratified the conversion of debt into equity that IGSA carried with it as of May 15, 2009 for Ps. 13,612.

On June 30, 2009, the Ordinary and Unanimous Shareholders’ Meeting of the Company unanimously approved the conversion of debt into equity; hence the capital stock stands at Ps. 25,281.

On September 11, 2009, the Company and CAMSA executed an agreement for the purchase and transfer of shares for the only share that the latter carried in IGSA. Due to such transaction, as of September 30, 2009, the Company carried a 100% interest in IGSA’s capital stock.

After Company’s the spin-off – merger into IGSA, mentioned in Note 13, the capital stock decreased to Ps. 12,914. Afterwards, on December 31, 2009, a new share purchase and transfer agreement was executed between the Company and CAMSA for 1 share with a face value of Ps. 1. Consequently, from such date Cresud’s interest in IGSA stands at 99.99%.

During the current period, Cresud made irrevocable contributions to IGSA for Ps. 1,926, which have been capitalized on January 19, 2010. After such date and until the closing of these financial statements, irrevocable contributions were made to IGSA for Ps. 489.

 

NOTE 13: SPIN-OFF OF INVERSIONES GANADERAS S.A. AND MERGER INTO CRESUD

On November 27, 2009, it was held the Company’s shareholders’ meeting that approved, among others, the corporate reorganization consisting in the spin-off – merger with IGSA, and the totally of the related documentation.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 13: (Continued)

 

Subsequently, on January 21, 2010, the Definitive Merger Agreement (the “Agreement”) has been notarized into a public deed and filed with the enforcement agencies in due course. Under the Agreement, IGSA’s spin-off was resolved for 48.92% so that such spun-off percentage after having been merged into the Company, and IGSA Residual or Spun-off Company holds, but not limited to, the following assets:

 

Company

   Number of shares of
Inversiones  Ganaderas S.A.

ANTA

   4,315,811

Agrology S.A.

   5,684,398

Agropecuaria Acres del Sud S.A.

   2

Aguaribay Agropecuaria S.A.

   2

Calden Agropecuaria S.A.

   2

Itín Agropecuaria S.A.

   2

Ñandubay Agropecuaria S.A.

   2

Ombú Agropecuaria S.A.

   2

Yatay Agropecuaria S.A.

   2

Yuchán Agropecuaria S.A.

   2

All of IGSA’s remaining rights, duties, assets and liabilities are transferred under the merger by absorption to the Company’s shareholders’ equity.

 

NOTE 14: NEGATIVE WORKING CAPITAL

At the end of the period, the Company carried a working capital deficit of Ps. 252,803 whose treatment is being considered by the Board of Directors and the respective Management.

 

NOTE 15: CAPITAL INCREASE

During March 2008, the capital increase by 180 million shares with face value of Ps. 1 entitled to one vote per share was concluded. This capital increase was approved by the Shareholders’ Meeting of October 10, 2007. Thus, 180 million shares offered at the subscription price of US$ 1.60 or Ps. 5.0528 per share were fully subscribed, both locally and internationally.

After this capital increase, the Company’s outstanding shares amounted to 500,774,772.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 15: (Continued)

 

Additionally, for each subscribed share, each shareholder received at no additional cost 1 option entitling the holder to purchase 0.33333333 new shares at a price of US$ 1.68 per each share to be acquired. That is to say, 180 million options entitling holder to purchase a total of 60 million additional shares at the previously mentioned price were granted. Options fall due on May 22, 2015 and may be exercised between the 17th and the 22nd day of February, May, September and November. Options are listed on the Buenos Aires Stock Exchange under the symbol “CREW2” and on the Nasdaq under the symbol “CRESW”.

Funds obtained from increasing capital, net of issuance expenses, amounted to Ps. 881.1 million, while the tax effect of issuance expenses amounted to Ps. 9.9 million. As stated in the section “Allocation of funds” in the capital increase issuance prospectus, the funds brought into the Company were mainly used to organize companies and acquire plots of land for agricultural production in Bolivia and Paraguay, the purchase of shares of our subsidiaries IRSA and BrasilAgro, the acquisition of notes of our subsidiaries IRSA and APSA, the repurchase of proprietary shares, the settlement of payables and working capital. It should be considered that the allocation of net funds obtained from the offer has been and may continue occasionally to be influenced by current market conditions and, consequently, in the section “Allocation of funds” in the capital increase issuance prospectus, we have reserved the right to reallocate the whole or a portion of such anticipated uses to other uses that we consider consistent with our strategy.

Funds obtained were assigned to shares and options issued based on the current value estimated upon subscription.

During fiscal year 2008, 2,271,290 options were exercised; consequently, 757,093 shares of common stock were issued for Ps. 3,986.

During fiscal year 2009, 20,237 options were exercised; consequently, 6,745 shares of common stock were issued for Ps. 37.

During the current fiscal year, 20,817 shares entitled with the right to be converted into 59,479 warrants. Such transaction yielded US$ 33,308. As of March 31, 2010, there were 177,648,994 uncalled options. The terms and conditions of outstanding options (warrants) to subscribe the Company’s shares of common stock have been amended due to attributing proprietary shares on a prorate basis among its shareholders, made by the Company on November 23, 2009. Below are detailed the terms that have been modified:

The number of shares to be issued for warrants is, as a ratio previous to assignment 0.33333333 and as ratio resolved after assignment (current) 0.35100598.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 15: (Continued)

 

The prices to call shares to be issued are: price previous to assignment US$ 1.68, while the current price after assignment US$ 1.5954.

The rest of terms and conditions of warrants remain unchanged.

 

NOTE 16: “EXAGRIND S.A. LAWSUIT – ESTANCIA SAN RAFAEL AGAINST TALI SUMAJ AND OTHER DAMAGES AND LOSSES”

Because of the merge with IGSA, Note 13, the Company has been demanded by Exagrind S.A. on claims for damages and losses produced by a fire in “Estancia San Rafael”, which is close to Tali Sumaj farm, Province of Catamarca. The fire took place on September 6, 2000.

The estimated amount of the legal action is Ps. 2,915 at the date the claim was filed.

In turn, the Company has filed an extraordinary appeal to the High Court of the Province of Catamarca, requesting for a remainder term to answer the lawsuit as, at the time of revoking the first instance judge decision that postponed the terms to answer until a new notice was dispatched, such period had not yet expired. The management of the Company is awaiting the decision of the High Court of the Province of Catamarca.

Additionally, in March 2007 -under the request of Exagrind S.A.- the court in charge of the case seized an inhibition of assets. This decision was lifted in June 2007 and a real estate on attachment has been accepted in replacement.

 

NOTE 17: RESTRICTED ASSETS

In accordance with Note 16 to the financial statements, on June 4, 2007 a pre-judgment attachment was seized on the “Tali Sumaj” land owned by the Company in substitution for a more burdensome measure that had been previously ordered.

 

NOTE 18: REPURCHASE OF TREASURY STOCK

On August 26, 2008, the Company’s board of directors decided to acquire treasury stock under section 68, Law No. 17,811 and CNV regulations for a maximum amount of Ps. 30,000 and 10,000,000 shares of common book-entry shares of face value of Ps. 1 per share and entitled to 1 vote. Acquisitions were carried out in a term of 70 days running as from the date of publication of the information in the Boletín de la Bolsa de Comercio de Buenos Aires (Buenos Aires stock exchange bulletin) and a minimum of Ps. 3 and a maximum Ps. 3.5 per share were paid.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 18: (Continued)

 

This decision was taken to contribute to the decrease in the draw down and reduction of fluctuations in the listed price of the Company’s shares aiming at contributing to strengthening the shares on the market, minimizing possible temporary imbalances that there may be between the supply and demand on the market, considering the excessive cost of capital that the current listed prices showed.

Afterwards, on October 23, 2008 and due to a steep downtrend undergone by the market and worsened in turn by the general context of world markets, it was decided to set a Ps. 1 floor to a US$/Ps. exchange rate of Ps. 3.24 per share.

Finally, on October 24, 2008, the Board of Directors has decided in defense of economic interests of the shareholders and consequently, to preserve the company, to change the maximum amount of shares subject to acquisition to up to 30,000,000 shares of common stock, face value of Ps. 1 per share and entitled to 1 vote per share, in shares or American Depositary Shares (“ADR’s”) representing 10 shares each as provided by applicable regulations. As provided by Argentine Business Associations Law, the Board of Directors should divest the shares acquired within one year, unless extended by the shareholders’ meeting.

As of June 30, 2009, purchases of proprietary shares amounted to 2,935,641 ADRs and 643,590 shares of common stock paying an amount of US$ 21 million and Ps. 1,745, respectively (Note 21).

On November 13, 2009, the Board of Directors seeking to comply with the mandate granted by the Meeting of Shareholders on October 29, 2009, resolved to start attributing and assigning on a prorate basis 25,000,000 proprietary treasury shares with a face value of Ps. 1 entitled to 1 vote each.

Such assignment was made as from November 23, 2009, at 0.5301792784 shares per share with a face value of Ps. 1 each and 0.5301792784 shares per ADR. As upon making the attribution calculation, it yielded the need to distribute fractions of shares, they were settled in cash under the Buenos Aires Stock Exchange Regulations. Therefore, 754 shares have not been attributed and they remain in the Company’s treasury together with previously existing 5,000,000 shares.

 

NOTE 19: PRESENTATION OF THE GLOBAL PROGRAM FOR THE ISSUANCE OF NON-CONVERTIBLE NOTES FOR A FACE VALUE OF UP TO US$ 50,000,000

During August 2009, based on the powers granted by the shareholders to the Board of Directors, the Company has approved the issuance of the Company’s First Class I and Class II Series of Non-convertible notes up to a face value of

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 19: (Continued)

 

Ps. 50,000 under the Global Corporate Bond Issuance Program for a face value of up to US$ 50 million.

During the current period, the First Series of Corporate Bonds was subscribed and issued for Ps. 50,000 in two classes. Class I for Ps. 15,500 at variable rate (average Badlar + 300 basis points) falling due 270 days from issuance date and Class II for Ps. 34,500 at a fixed rate of 7.2% falling due 365 after issuance date.

The terms and conditions of such non-convertible notes require that the Company complies with certain obligations that have been specified in the respective price supplement.

On December 10, 2009, payments of the first interest installment of Class I Corporate Bonds, for an amount standing at US$ 558 and Class II Corporate Bonds for US$ 159,201 were started.

On March 10, 2010, payments of the second interest installment of Class I Corporate Bonds, for an amount standing at Ps. 487 million and Class II Corporate Bonds for US$ 159,201 were started.

 

NOTE 20: ACQUISITION OF IRSA’S AND APSA’S NEGOTIABLE OBLIGATIONS

During fiscal year ended June 30, 2009, the Company acquired US$ 33.1 million of face value of Notes related to the series issued by IRSA in February 2007 at an average listed price of US$ 0.47. The total amount paid stood at US$ 15.6 million.

Additionally, the Company acquired a face value of US$ 5 million in Note issued by APSA in May 2007 at a listed price of US$ 0.42. The total amount paid stood at US$ 2.1 million.

Both transactions yielded income for Ps. 73,875, recognized on fiscal year ended June 30, 2009.

 

NOTE 21: MEETING OF SHAREHOLDERS

General and Extraordinary Shareholders’ Meeting held on October 29, 2009 approved, among other matters, the following:

 

  - Paying a bonus for the Company’s management of up to 1% of the outstanding capital stated in cash or in kind. Delegating on to the Board of Directors the implementation, percentage allocation, time and form of execution.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 21: (Continued)

 

  - The issuance of securities representing short-term debt (“VCP”) in the form of simple non-convertible notes, denominated in pesos, US dollars or any other currency with common, special, floating and/or any other guarantee, including third party guarantee, either subordinated or not, for a maximum outstanding amount at any time that may not exceed the equivalent in Argentine Pesos of US$ 30 million;

On November 27, 2009, it was held the Company’s shareholders’ meeting that approved, among others, the corporate reorganization consisting in the spin-off – merger with IGSA, and the totally of the related documentation.

 

NOTE 22: COMPLIANCE WITH THE CURRENT ENVIRONMENTAL REGULATIONS

One of the Company’s ongoing objectives is the sustainable development of its business in compliance with current environmental regulations.

 

NOTE 23: ADOPTION OF THE INTERNATIONAL FINANCIAL REPORTING STANDARDS

The National Securities Commission, through the Resolution 562, has mandated that the Technical Resolution No. 26 of the FACPCE is to be applied by the companies admitted to the public offering system under Law No. 17,811 in connection with either their capital stock and/or negotiable obligations, and/or by the companies that have applied for admission to the public offering system. FACPCE’s Technical Resolution No. 26 adopts the International Financial Reporting Standards issued by the International Accounting Standards Board. The Company shall apply the IFRS as from the fiscal year beginning on July 1st, 2012. On April 29, 2010, the Company’s Board of Director has approved the specific implementation plan to the application of IFRS.

 

NOTE 24: FINANCIAL AND CAPITAL MARKET SITUATION

As from the last months of 2008, the world’s principal financial markets have suffered the impact of volatility conditions as well as lack of liquidity and credit. Consequently, stock-market rates showed a significant fall worldwide together with an evident economic deceleration.

As soon as the largest economies in the world were intervening by injecting liquidity into the markets, interest rates responded with a downward trend which favored, in 2009 and 2010, the recovery of stock and debt market indices. As regards the real economy at the global level, it remains to be seen whether the measures implemented by the different governments have had lasting positive effects.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 24: (Continued)

 

As regards Argentina in 2008, the quotation of Government and corporate securities in the stock markets sustained dramatic drops whereas interest rates, the country risk rate and the exchange rates went upwards. In 2009 and during 2010, securities started to recover, particularly the instruments issued by the Argentine Government, with the ensuing impact on the valuation at fair value of the financial assets holdings maintained by Banco Hipotecario in its portfolio.

As to the quotation of Banco Hipotecario’s shares, though it significantly appreciated in the past months, it does not reflect the entity’s equity and/or business conduct and neither is it representative of Banco Hipotecario’s current operational performance.

Amongst the factors considered by the Company to draw the conclusion outlined in the preceding paragraph are: (i) the factors that cause a decline in the quoted value and its historical performance (credit, interest rate, market, etc); (ii) the Company’s ability and intent to maintain the investment for a period long enough for the value to recover, (iii) how significant such decline in the quoted value may be to the Company and (iv) Banco Hipotecario’s business fundamentals. The assessment of a non-temporary decline is as both a qualitative and quantitative process, subject to several risks and uncertainties.

 

NOTE 25: SUBSEQUENT EVENTS

After the closing of these financial statements, the Company reached an agreement with TARPON AGRO LLC (“Tarpon”), a company organized under the laws of the State of Delaware, USA, by which once certain conditions have been complied with, Tarpon will transfer for valuable consideration to the Company the following:

 

  (a) 9,581,750 shares of common stock issued by BrasilAgro (either in shares or ADR’s, “Shares), and

 

  (b) 6,400,000 first issue warrants from BrasilAgro and 6,400,000 second issue warrants from BrasilAgro.

Once the conditions established in the agreement have been complied with, the actual transfer of Tarpon’s shares and warrants to the Company will take place within 10 days of implementing the ADR program that BrasilAgro is planning to launch.

The full price to be paid by the Company to Tarpon will be BRL 131.4 million, payable within 180 days from the actual transfer of the previously mentioned shares and warrants. Assuming that the price is paid off within the established term, it will not be subject to any monetary adjustment.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements (Continued)

(in thousands of pesos)

Free translation from the original prepared in Spanish for publication in Argentina

 

NOTE 25: (Continued)

 

It should be noted that, irrespective of Tarpon bowing out from the BrasilAgro Project, the shareholders, Mr. Elie Horn and the representatives of the company Cape Town LLC, have stated their intention to remain at BrasilAgro jointly with the Company.

 

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Cresud Sociedad Anónima, Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Property and equipment

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

Free translation from the original prepared in Spanish for publication in Argentina

(in thousands of pesos - Notes 1 and 2)

Schedule A

 

                    Depreciation   Net carrying
Value as of
March 31,
2010
  Net carrying
Value as of
June 30,
2009
  Net carrying
Value as of
March 31,
2009

Principal
Account

  Value at the
the beginning
of the fiscal year
  Additions
and/or
Transfers (2)
  Deductions
and/or
Transfers
  Value at
the end of
the period/
fiscal year
  Rate %   Accumulated
at the
beginning
of the
fiscal year
  Additions (3)   Decrease
of the
period/
fiscal year
  Current
period/
year (1)
  Accumulated
at the end of
the period/
fiscal year
     

Real estate

  199,253   2,763   —     202,016   —     —     —     —     28   28   201,988   199,253   178,211

Wire fences

  9,145   1,158   —     10,303   3   1,067   627   —     245   1,939   8,364   8,078   5,078

Watering troughs

  6,892   1,388   —     8,280   5   1,542   240   —     289   2,071   6,209   5,349   4,064

Alfalfa fields and meadows

  7,121   1,230   —     8,351   12-25-50   3,145   384   —     4   3,533   4,818   3,976   2,919

Buildings and constructions

  40,116   696   —     40,812   2   4,475   466   —     595   5,536   35,276   35,641   30,202

Machinery

  12,029   606   2   12,633   10   8,705   174   1   445   9,323   3,310   3,324   3,487

Vehicles

  3,471   407   217   3,661   20   1,726   40   192   384   1,958   1,703   1,745   828

Tools

  264   8   —     272   10   165   —     —     11   176   96   99   78

Furniture and equipment

  1,340   75   4   1,411   10   978   13   3   47   1,035   376   363   346

Feeder and drinking troughs

  55   183   —     238   20   2   —     —     6   8   230   53   52

Corral and leading lanes

  1,285   283   —     1,568   3   201   37   —     36   274   1,294   1,084   863

Roads

  3,004   148   —     3,152   10   1,100   108   —     185   1,393   1,759   1,904   1,375

Facilities

  16,994   213   5   17,202   10-20-33   8,868   145   2   1,845   10,856   6,346   8,126   6,977

Computer equipment

  2,266   2   2   2,266   20   1,953   —     1   156   2,108   158   313   419

Silo plants

  1,277   50   —     1,327   5   613   —     —     58   671   656   664   682

Constructions in progress

  3,453   13,472   302   16,623   —     —     —     —     —     —     16,623   3,453   34,287

Advances to suppliers

  1,503   —     544   959   —     —     —     —     —     —     959   1,503   2,710
                                                   

Total as of March 31, 2010

  309,468   22,682   1,076   331,074     34,540   2,234   199   4,334   40,909   290,165   —     —  
                                                 

Total as of June 30, 2009

  266,358   54,713   11,603   309,468     29,782   —     627   5,385   34,540   —     274,928   —  
                                                 

Total as of March 31, 2009

  266,358   40,748   1,102   306,004     29,782   —     334   3,978   33,426   —     —     272,578
                                                 

 

(1) Included in Schedule H.
(2) It includes additions for Ps. 8,069 incorporated by merger with IGSA.
(3) Incorporated by merger.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Intangible Assets

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

Free translation from the original prepared in Spanish for publication in Argentina

(in thousands of pesos - Notes 1 and 2)

Schedule B

 

                  Depreciation            

Principal
Account

  Values at the
beginning of the
fiscal year
   Additions and/or
transfers
   Value at the end of
the period/fiscal year
  Rate
%
  Accumulated
at the
beginning of
the fiscal year
  Amount (1)   Accumulated at the
end of the
period/fiscal year
  Net carrying value
as of March 31,
2010
  Net carrying value
as of June 30,
2009
  Net carrying value
as of March 31,
2009

Pre-operative Expenses (Bolivia)

  842    —      842   20   84   126   210   632   758   817

Pre-operative Expenses (Paraguay)

  671    —      671   20   56   100   156   515   615   —  
                                         

Total as of March 31, 2010

  1,513    —      1,513     140   226   366   1,147   —     —  
                                       

Total as of June 30, 2009

  —      1,513    1,513     —     140   140   —     1,373   —  
                                       

Total as of March 31, 2009

  —      860    860     —     43   43   —     —     817
                                       

 

(1) Included in gain on equity investees in the Statements of Income

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Investments

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

Free translation from the original prepared in Spanish for publication in Argentina

(in thousands of pesos - Notes 1 and 2)

Schedule C

 

Securities

   Amount    % of
participation
on the capital
   Value as of
March 31,
2010
   Value as of
June 30,
2009
   Value as of
March 31,
2009
   Market
Value
  

INFORMATION ON THE ISSUER

                    

Principal activity

   Latest financial statements
                        Capital    Income (loss)
for the  period
    Shareholders’
Equity
                            

CURRENT ASSET

                            

Current Investments

                            

Mutual Funds

                            

Bony Hamilton Fund (US$)

   177,305       680    972    2,281              

Deutsche Managed Euro Fund (€)

   11,067       57    7,375    27,759              

Deutsche Managed Dollar Fund (US$)

   860,186       3,301    24    24              

Dolphin Fund PLC (6)

   —         —      —      19,042              
                                  

Subtotal

         4,038    8,371    49,106              
                                  

Bonds and Notes (6)

                            

Non-Convertible Notes IRSA (US$)-interests

   469,653       1,821    4,458    1,747              

Non- Convertible Notes APSA (US$)-interests

   153,125       594    208    570              

Global 2010 bonds

   110,000       202    67    49    1.8326           

Pro 1 bonds

   157,647       1    1    1    0.0040           

Mortgage bonds

   200,785       200    402    375    0.9975           
                                  

Subtotal

         2,818    5,136    2,742              
                                  

Total current investments

         6,856    13,507    51,848              
                                  

NON-CURRENT ASSET

                            

Investments on controlled and related companies

                            

Agro-Uranga S.A.

                  Unlisted    Agricultural livestock    2,500    8,950      26,690

Shares

   893,069    35.72    9,534    9,024    8,420              

Higher value of property

         11.179    11,179    11,179              
                                  
         20,713    20,203    19,599              
                                  

IGSA

   12,913,660    99.99             Unlisted    Raising and grazing cattle    14,840    (44   13,616

Shares

         12.417    20,831    7,181              
                                  
         12,417    20,831    7,181              
                                  

Cactus Shares

   16,618,772    36.00    11.776    7,524    5,634    Unlisted    Exploitation and administration of agriculture products and raising cattle    46,163    (6,896   32,710
                                  
         11,776    7,524    5,634              
                                  

FyO.com

                            

Shares

   636,140    64.30    2,063    2,645    2,226    Unlisted    Gives information about markets via internet, brokerage and intermediation on spot and future markets.    961    (787   3.209
                                  
         2,063    2,645    2,226              
                                  

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Investments (continued)

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

Free translation from the original prepared in Spanish for publication in Argentina

(in thousands of pesos - Notes 1 and 2)

Schedule C (continued)

 

                                  

INFORMATION ON THE ISSUER

                                       Latest financial statements

Securities

  Amount   % of the
participation
on the capital
  Value as
of March 31,
2010
    Value as
of June 30,
2009
    Value as
of March 31,
2009
    Market
Value
  

Principal activity

  Capital   Income (loss)
for the period
    Shareholders’
Equity

ANTA

            Unlisted    Agricultural and forestall   51,258   (1,596   54,287

Shares

  38,842,298   90.00   48,858      39,343      1,957              

Concession rights

      19,988      20,512      20,687              
                                
      68,846      59,855      22,644              
                                

Agrology S.A.

            Unlisted    Investing   226,688   11,306      238,049

Shares

  219,886,953   97.00   230,907      181,043      161,549              
                                
      230,907      181,043      161,549              
                                

FyO Trading

            Unlisted    Brokerage   20   —        20

Shares

  726   3.63   1      1      1              
                                
      1      1      1              
                                

EAASA

                    

Shares

  240,000   0.44   76      99      56         Meat packing industry   54,691   (8,244   17,272
                                
      76      99      56              
                                

IRSA

            4.24         

Shares

  292,167,835   50.49   1,261,949      1,126,627      995,361         Real Estate   578,676   299,733      2,364,608

Higher values (2)

      181,670      192,933      101,253              
                                
      1,443,619      1,319,560      1,096,614              
                                

BrasilAgro

            (1) 8.80    Agricultural and Real Estate   875,381   2,358      1,292,763

Shares

  13,568,700   23.23   300,250      220,709      171,107              

Higher values (3)

      6,887      6,887      6,887              
                                
      307,137      227,596      177,994              
                                
      2,097,555      1,839,357      1,493,498              
                                

BrasilAgro goodwill

      6,965      3,841      3,841              

BrasilAgro negative goodwill (4)

      (16,140   (19,163   6,268              

IRSA negative goodwill (5)

      (334,024   (369,116   (17,183           

IRSA goodwill

      6,268      6,268      (279,816           

Cactus goodwill

      1,966      1,966      -              
                                
      (334,965   (376,204   (286,890           
                                

Subtotal

      1,762,590      1,463,153      1,206,608              
                                

Other Investments

                    

Non-Convertible Notes IRSA 2017 (US$)

  33,152,000     69,034      61,204      57,885              

Non-Convertible Notes APSA 2017 (US$)

  5,000,000     9,363      8,133      7,631              

Coprolan

      21      21      21      Unlisted         
                                

Subtotal

      78,418      69,358      65,537              
                                

Total non-current investments

      1,841,008      1,532,511      1,272,145              
                                

 

(1) In Brazilian Reais.
(2) Consist of Ps. 11,771 higher value of inventory, Ps. 85,838 higher value of investments, Ps. 114,084 higher value of fixed assets, Ps. 29,867 higher value of intangible assets, Ps. (2,247) higher value of liabilities, Ps. 25,422 less value of loans, Ps. (105) higher value of customer advances, and Ps. (82,960) higher value of tax effect.
(3) Consist of Ps. 10,596 higher value of fixed assets and Ps. (3,709) higher value of tax effect.
(4) The change as regards the previous year corresponds to additions for Ps. 621 and amortization for Ps. 3,644.
(5) The change as regards the previous year corresponds to addittions for Ps. 182 and amortization for Ps. 35,274.
(6) Does not qualify as cash equivalents in the Statements of Cash Flows.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Allowances and Provisions

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

Free translation from the original prepared in Spanish for publication in Argentina

(in thousands of pesos - Notes 1 and 2)

Schedule E

 

Item

   Balances at
beginning of
the fiscal
year
    Increases    Decreases     Value as of
March 31,
2010
   Value as of
June 30,
2009
   Value as of
March 31,
2009

Deducted from assets

               

Allowance for doubtful accounts

   501      159    —        660    501    501

Included in liabilities

               

For pending lawsuits

   286 (1)    1,505    —        1,791    286    117
                               

Total as of March 31, 2010

   787      1,664    —        2,451    —      —  
                               

Total as of June 30, 2009

   464      359    (36   —      787    —  
                               

Total as of March 31, 2009

   464      190    (36   —      —      618
                               

 

(1) Included in other income and expenses in the Statements of Income – Others. Also includes Ps. 1,457 incorporated by merger with IGSA.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Cost of sales

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

Free translation from the original prepared in Spanish for publication in Argentina

(in thousands of pesos - Notes 1 and 2)

Schedule F.1

 

     Crops     Beef cattle     Milk     Others     Total  
     March 31,
2010
    March 31,
2009
    March 31,
2010
    March 31,
2009
    March 31,
2010
    March 31,
2009
    March 31,
2010
    March 31,
2009
    March 31,
2010
    March 31,
2009
 

Inventories at the beginning of the fiscal year:

                    

Beef cattle

   —        —        78,710      68,695      —        —        —        —        78,710      68,695   

Crops

   42,250      62,988      —        —        —        —        —        —        42,250      62,988   

Seeds and fodder

   705      591      —        —        —        —        —        —        705      591   

Materials and others

   —        —        579      536      —        18      932      659      1,511      1,213   
                                                            
   42,955      63,579      79,289      69,231      —        18      932      659      123,176      133,487   
                                                            

Unrealized gain (loss) on inventories- Beef cattle

   —        —        63,408      611      —        —        —        —        63,408      611   

Unrealized (loss) gain on inventories – Crops and raw materials

   (1,394   (11,200   —        —        —        —        —        —        (1,394   (11,200

Production

   27,525      35,975      13,458      9,867      16,567      14,843      —        —        57,550      60,685   

Transfer of inventories to property and equipment

   —        —        —        —        —        —        (1,167   (704   (1,167   (704

Transfer of inventories to expenses

   (3,426   (2,536   (91   (79   (201   (128   (2,050   (1,403   (5,768   (4,146

Incorporated by merger with IGSA

   —        —        3,171      —        —        —        8      —        3,179      —     

Purchases

   8,091      5,339      2,331      5,518      —        —        3,282      2,407      13,704      13,264   

Operating expenses (Schedule H)

   —        —        —        —        —        —        5,294      3,792      5,294      3,792   

Inventories at the end of the period:

                    

Beef cattle

   —        —        (140,855   (76,372   —        —        —        —        (140,855   (76,372

Crops

   (18,474   (27,309   —        —        —        —        —        —        (18,474   (27,309

Seeds and fodder

   (1,046   (1,022   —        —        —        —        —        —        (1,046   (1,022

Materials and others

   —        —        (651   (660   —        —        (1,038   (963   (1,689   (1,623
                                                            

Cost of Sales

   54,231      62,826      20,060      8,116      16,366      14,733      5,261      3,788      95,918      89,463   
                                                            

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Cost of Production

Corresponding to the periods six-month beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

Free translation from the original prepared in Spanish for publication in Argentina

(in thousands of pesos - Notes 1 and 2)

Schedule F.2

 

      Crops     Beef cattle     Milk     Total  
      March 31,
2010
    March 31,
2009
    March 31,
2010
    March 31,
2009
    March 31,
2010
    March 31,
2009
    March 31,
2010
    March 31,
2009
 

Inventories at the beginning of the fiscal year:

                

Beef cattle

   —        —        —        —        14,226      15,194      14,226      15,194   

Unharvested crops and other unharvested

   5,160      6,052      —        —        —        —        5,160      6,052   

Seeds and fodder

   —        —        1,694      1,934      426      680      2,120      2,614   

Materials and others

   15,925      16,686      686      398      426      145      17,037      17,229   
                                                
   21,085      22,738      2,380      2,332      15,078      16,019      38,543      41,089   
                                                

Unrealized loss on inventories – Beef cattle

   —        —        —        —        1,123      (138   1,123      (138

Unrealized gain on inventories – Crops and raw materials

   838      1,981      —        —        —        —        838      1,981   

Production

   —        —        581      331      1,054      850      1,635      1,181   

Transfer of property and equipment

   (494   (340   —        —        —        —        (494   (340

Transfer of inventories crops to expenses – Materials and others

   (42,453   (55,901   (2,623   (2,978   (4,911   (4,723   (49,987   (63,602

Incorporated by merger of IGSA

   —        —        35      —        —        —        35      —     

Purchases / increase in Unharvested crops by consume

   113,175      131,814      994      2,048      4,617      4,128      118,786      137,990   

Operating expenses (Schedule H)

   27,080      51,879      15,281      10,882      14,213      13,487      56,574      76,248   

Inventories at the end of the period:

                

Beef cattle

   —        —        —        —        (15,919   (15,175   (15,919   (15,175

Unharvested crops and other unharvested

   (71,447   (84,219   —        —        —        —        (71,447   (84,219

Seeds and fodder

   —        —        (536   (1,091   (601   (175   (1,137   (1,266

Materials and others

   (20,526   (16,647   (851   (652   (469   (311   (21,846   (17,610
                                                

Cost of Production

   27,258      51,305      15,261      10,872      14,185      13,962      56,704      76,139   
                                                

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Foreign currency assets and liabilities

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

Free translation from the original prepared in Spanish for publication in Argentina

(in thousands of pesos - Notes 1 and 2)

Schedule G

 

      March 31, 2010    June 30, 2009    March 31, 2009

Item

   Type and amount
of foreign
   Current
exchange
Rate
   Amount in
local currency
   Type and amount
of foreign currency
   Amount in
local currency
   Type and amount
of foreign currency
   Amount in
local currency

CURRENT ASSET

                             

CASH AND BANKS:

                             

Cash and banks in Dollars

   US$    387    3.838    1,486    US$    1,236    4,642    US$    780    2,872

Cash and banks in Brazilian Reais

   Rs    3    2.107    6    Rs    2    4    Rs    2    4

Cash and banks in Euros

      9    5.193    45       9    46       9    43

INVESTMENTS:

                             

Mutual funds

   US$    1,037    3.838    3,981    US$    266    998    US$    5,801    21,347

Mutual funds

      11    5.193    57       1,400    7,375       5,695    27,759

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties:

                             

Non-Convertible Notes IRSA 2017 (US$) – Interest

   US$    470    3.878    1,821    US$    1,174    4,458    US$    470    1,747

Non-Convertible Notes APSA 2017 (US$) – Interest

   US$    153    3.878    594    US$    55    208    US$    153    570

TRADE ACCOUNTS RECEIVABLE:

                             

Receivables

   US$    2,613    3.838    10,027    US$    1,930    7,251    US$    1,870    6,883

Receivables – real state

   US$    1,991    3.838    7,642    US$    1,855    6,968    US$    1,981    7,289

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties

   US$    16    3.878    62    US$    —      —      —      —      —  

OTHER RECEIVABLES:

                             

Guarantee deposits

   US$    414    3.838    1,590    US$    396    1,489    US$    317    1,166

Premiums paid

   US$    0    3.838    1    US$    198    743    US$    917    3,376

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties

   US$    10,343    3.878    40,109    US$    7,312    27,471    —      —      —  

NON-CURRENT ASSETS

                             

TRADE ACCOUNT RECEIVABLE

                             

Secured by mortgages

   US$    —      —      —      US$    573    2,153    US$    1,788    6,581

INVESTMENTS

                             

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties:

                             

Non-Convertible Notes IRSA 2017

   US$    17,801    3.878    69,034    US$    16,119    61,204    US$    15,560    57,885

Non- Convertible Notes APSA 2017

   US$    2,414    3.878    9,363    US$    2,142    8,133    US$    2,051    7,631
                                           

Total US$

   US$    37,639       145,710    US$    33,256    125,718    US$    31,688    117,347
                                         

Total Rs

   Rs    3       6    Rs    2    4    Rs    2    4
                                         

Total €

      20       102       1,409    7,421       5,704    27,802
                                         

Total Assets

            145,818          133,143       —      145,153
                                     

US$: US Dollars

Rs: Brazilian Reais

€: Euros

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Foreign currency assets and liabilities (continued)

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

Free translation from the original prepared in Spanish for publication in Argentina

(in thousands of pesos - Notes 1 and 2)

Schedule G (continued)

 

     March 31, 2009    June 30, 2009    March 31, 2009

Item

   Type and amount of
foreign Currency
   Current
Exchange
rate
   Amount in
local currency
   Type and amount of
foreign Currency
   Amount in
local currency
   Type and amount of
foreign currency
   Amount in
local currency

CURRENT LIABILITY

                             

TRADE ACCOUNT PAYABLE:

                             

Suppliers

   US$      8,802    3.878    34,134    US$      10,315    39,167    US$      6,287    23,388

Accrual for inputs and other expenses

   US$      1,451    3.878    5,628    US$      33    127    US$      258    961

SHORT-TERM DEBTS:

                             

Bank loans

   US$      39,227    3.878    152,123    US$      18,300    69,485    US$      16,350    60,823

Accrued interest- Bank loans

   US$      585    3.878    2,267    US$      166    629    US$      295    1,097

Non-convertible notes class II

   US$      8,967    3,878    34.775      —      —      —        —      —      —  

Accrued interest – Non-convertible notes

   US$      37    3,878    144      —      —      —        —      —      —  

CUSTOMER ADVANCES

                             

Customer advances

   US$      500    3,878    1.939      —      —      —        —      —      —  

OTHER LIABILITIES :

                             

Premium collected

   US$      6    3.878    23    US$      143    543    US$      424    1,576

Debt for purchase of shares

   US$      —      —      —        —      —      —      US$      34    128

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties:

   US$      8,255    3.878    32,012      —      —      —        —      —      —  

NON-CURRENT LIABILITIES

                             

TRADE ACCOUNTS PAYABLE

                             

Debt related to purchase of establishment

     —      —      —      —        —      —      —      US$      1,661    6,179
                                         

TOTAL LIABILITIES

   US$      67,830       263,045    US$      28,957    109,951    US$      25,309    94,152
                                         

US$: US Dollars

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Information submitted in compliance with Section 64, subsection B of Law No. 19,550

Corresponding to the nine-month periods beginning as from July 1, 2009 and 2008

and ended March 31, 2010 and 2009

Free translation from the original prepared in Spanish for publication in Argentina

(in thousands of pesos - Notes 1 and 2)

Schedule H

 

     Operating Expenses                    

Items

   Crops    Beef cattle    Milk    Others    Total    Selling
Expenses
   Administrative
Expenses
   Total as of
March 31,
2010
   Total as of
March 31,
2009

Directors’ fees

   —         —      —      —         651    651    726

Fees and payments for services

   —      —      —      —      —      —      2,207    2,207    4,609

Salaries, annual bonus and social security

   1,622    3,676    2,796    —      8,094    —      15,470    23,564    16,880

Taxes, rates and contributions

   251    295    165    —      711    —      1,793    2,504    939

Gross sales taxes

   —      —      —      —      —      2,418    —      2,418    1,947

Office and administrative expenses

   —      —      —      —      —      —      4,266    4,266    2,480

Bank commissions and expenses

   —      —      —      —      —      —      986    986    —  

Depreciation of property and equipment

   1,598    1,508    1,002    —      4,108    —      226    4,334    3,978

Vehicle and traveling expenses

   243    443    99    —      785    —      803    1,588    893

Spare parts and repairs

   639    1,856    946    —      3,441    —      48    3,489    2,191

Insurance

   120    144    38    —      302    —      275    577    336

Benefits to Employees

   109    269    198    —      576    —      558    1,134    1,032

Livestock expenses (1)

   —      6,388    —      —      6,388    698    —      7,086    4,562

Dairy farm expenses (2)

   —      —      8,412    —      8,412    86    —      8,498    9,164

Agricultural expenses (3)

   21,509    —      —      5,294    26,803    8,009    —      34,812    59,400

Silo expenses

   —      —      —      —      —      —      —      —      10

General expenses

   987    702    557    —      2,246    —      —      2,246    1,691

Lease of machinery and equipment

   —      —      —      —      —      —      —      —      66

Safety and hygiene expenses

   2    —      —      —      2    —      1    3    —  

Others

   —      —      —      —      —      —      —      —      48
                                            

Total as of March 31, 2010

   27,080    15,281    14,213    5,294    61,868    11,211    27,284    100,363    —  
                                            

Total as of March 31, 2009

   51,879    10,882    13,487    3,792    80,040    11,931    18,981    —      110,952
                                            

 

(1) Includes cattle food and additives, lodging, animal health and others.
(2) Includes cattle food and additives, animal health and others.
(3) Includes seeds, agrochemical, irrigation, services hired, leases and others.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Additional Information to the Notes to the Financial Statements

(in thousands of pesos)

 

1. LEGAL FRAMEWORK

There are no specific significant legal regimes that would imply contingent suspension or application of the benefits included in these regulations.

 

2. RELEVANT MODIFICATONS IN THE COMPANY’S ACTIVITIES

They are detailed in the Business Highlight, which is attached to the present financial statements.

 

3. CLASSIFICATION OF ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES ACCORDING TO THEIR MATURITY

 

  a. Other Receivables without a due date as of March 31, 2010:

 

     Other
Receivables
   Law No. 19,550 Section 33
        FyO.Com    Cactus    Agro – Uranga    APSA
        Other
Receivables
   Other
Receivables
   Other
Receivables
   Other
Receivables

Current

   425    24    11    215    1

Non-current

   30,911    —      —      —      —  

 

  b. Trade Accounts Receivable and other receivables to fall due as of March 31, 2010:

 

Maturity

        Law No. 19,550 Section 33
        FyO.Com    Agrology
S.A.
   BrasilAgro
S.A.
   Fibesa
S.A.
   Tarshop
S.A.
   APSA    Cactus    IRSA    ANTA    Acres    Helmir    Cresca
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable
   Trade
Accounts

Receivable

06/30/10

   31,761    10,476    142    53    33    628    3,360    96    3,468    1,401    2,358    23    39

09/30/10

   2,747    —      —      —      —      —      —      —      —      —      —      —      —  

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Additional Information to the Notes to the Financial Statements

(in thousands of pesos)

 

3. (Continued)

 

Maturity

        Law No. 19,550 Section 33
        Ombú    Ñandubay    Itin    Aguaribay    Calden    Yuchan    Yatay
   Other
Receivables
   Other
Receivables
   Other
Receivables
   Other
Receivables
   Other
Receivables
   Other
Receivables
   Other
Receivables
   Other
Receivables

06-30-10

   27,848    5,212    4,268    4,794    6,931    6,938    5,732    6,234

09-30-10

   3,186    —      —      —      —      —      —      —  

12-31-10

   15,788    —      —      —      —      —      —      —  

03-31-11

   12,361    —      —      —      —      —      —      —  

 

4. CLASSIFICATION OF DEBTS ACCORDING TO THEIR MATURITY

 

  a. There are no past due debts as of March 31, 2010.

 

  b. Debts without a due date as of March 31, 2010.

 

     Trade Accounts
Payable
   Short-term debt    Taxes Payable    Other debts    Allowances

Current

   —      206,099    —      —      —  

Non-current

   —      —      69,676    —      1,791

 

  c. Debts to fall due as of March 31, 2010.

 

Maturity

   Trade
Accounts
Payable
   Law No. 19,550
Section 33
   Short-term debt    Salaries and Social
Security Payable
   Taxes Payable    Other
Debts
   Law No. 19,550
Section 33
      CYRSA                IRSA
      Trade Accounts
Payable
               Other
Debts

06-30-10

   56,033    26    178,956    4,170    6,749    13,184    32,012

09-30-10

   —      —      55,922    9,607    76    158    —  

12-31-10

   —      —      —      —      856    1,073    —  

03-31-11

      —      —      —      76    —      —  

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Additional Information to the Notes to the Financial Statements

(in thousands of pesos)

 

5. CLASSIFICATION OF ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES ACCORDING TO THEIR FINANCIAL EFFECTS

 

  a.             

 

        Sociedades Art. 33 Ley 19.550
        FyO.Com   Agrology
S.A.
  BrasilAgro
S.A.
  Fibesa
S.A.
  Tarshop
S.A.
  APSA   Cactus   IRSA   ANTA   Acres   Helmir   Cresca
    Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable

In Pesos

  16,839   10,476   142   53   33   628   3,360   96   3,468   1,401   2,358   —     —  

In Dollars

  17,669   —     —     —     —     —     —     —     —     —     —     23   39

 

          Sociedades Art. 33 Ley 19.550
          FyO.Com    Cactus    APSA    Agro—  Uranga    Ombú    Ñandubay    Itin    Aguaribay    Calden    Yuchan    Yatay
     Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable

In Pesos

   88,928    24    11    1    215    —      —      —      —      —      —      —  

In Dollars

   1,591    —      —      —      —      5,212    4,268    4,794    6,931    6,938    5,732    6,234

 

  b. All accounts receivable and other receivables are not subject to adjustment provisions.

 

  c.             

 

        Sociedades Art. 33 Ley 19.550
        FyO.Com   Agrology
S.A.
  BrasilAgro
S.A.
  Fibesa
S.A.
  Tarshop
S.A.
  APSA   ANTA   Cactus   IRSA   Acres   Helmir   Cresca
    Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable
  Trade
Accounts
Receivable

Outstanding balances accruing interests

  7,324   —     —     —     —     —     —     —     —     —     —     —     —  

Outstanding balances not accruing interests

  27,184   10,476   142   53   33   628   3,360   1,401   96   3,468   2,358   23   39

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Additional Information to the Notes to the Financial Statements

(in thousands of pesos)

 

5. (Continued)

 

          Law No. 19,550 Section 33
          FyO.Com    Cactus    APSA    Agro-
Uranga
   Ombú    Ñandubay    Itin    Aguaribay    Calden    Yuchan    Yatay
     Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable
   Others
Accounts
Receivable

Outstanding balances accruing interests

   5,246    —      —      —      —      5,146    4,214    4,733    6,843    6,850    5,659    6,155

Outstanding balances not accruing interests

   85,273    24    11    1    215    66    54    61    88    88    73    79

 

6. CLASSIFICATION OF DEBTS ACCORDING TO THEIR FINANCIAL EFFECTS

 

  a.             

 

          Law No. 19,550
Section 33
                       Law No. 19,550
Section 33
    
          CYRSA                        IRSA     
     Trade
Accounts
Payable
   Trade
Accounts
Payable
   Short-term
debt
   Salaries and
Social  Security
Payable
   Taxes
Payable
   Other
Debts
   Other
Debts
   Previsiones

In Pesos

   16,271    26    251,668    13,777    77,433    14,392    —      1,791

In Dollars

   39,762    —      189,309    —      —      23    32,012    —  

 

  b. All debts outstanding are not subject to adjustment provisions.

 

  c.             

 

          Law No. 19,550
Section 33
                       Law No. 19,550
Section 33
    
          CYRSA                        IRSA     
     Trade
Accounts
Payable
   Trade
Accounts
Payable
   Short-term
debt
   Salaries and
Social  Security
Payable
   Taxes
Payable
   Other
Debts
   Other
Debts
   Provisions

Outstanding balances accruing interests

   —      —      436,001    —      —      —      31,024    —  

Outstanding balances not accruing interests

   56,033    26    4,976    13,777    77,433    14,415    988    1,791

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Additional Information to the Notes to the Financial Statements

(in thousands of pesos)

 

7. INTEREST IN OTHER COMPANIES (Law No. 19,550 Section 33)

Interests in other companies’ capital and the number of votes held in those companies governed by Law No. 19,550 Section 33 are explained in Note 2 to the consolidated financial statements and intercompany balances as of March 31, 2010 are described in captions 4 and 5 above.

 

8. RECEIVABLES FROM OR LOANS TO DIRECTORS AND STATUTORY AUDIT COMMITTEE MEMBERS

As of March 31, 2010 there were advance payments to directors for Ps. 431, and there were no receivables due from or loans to Statutory Auditors and relatives up to and including second degree, of directors and Statutory Auditors.

 

9. PHYSICAL INVENTORIES

The company conducts physical inventories once a fiscal year in each property, covering all the assets under such account. There is no relevant immobilization of inventory.

 

10. VALUATION OF INVENTORIES

We further inform the sources for the information used to calculate the fair value:

 

  a. Cattle for fattening, valued at the market value net of estimated sale expenses: quotation in Mercado de Hacienda de Liniers and other representative of the market.

 

  b. Cattle for raising and daily production valued at its replacement cost: according to specific appraisals made by renowned experts.

 

  c. Crops: official quotation of the Cámara Arbitral de Cereales for the port closest to the warehouse, published by media of wide circulation (Diario La Nación) net of estimated sale expenses.

 

  d. The remaining inventory stated at its replacement cost:

- Seeds, forage and materials: replacement cost published by a well-known magazine (revista Márgenes Agropecuarios).

- Unharvested crops: replacement cost of goods and services needed to obtain similar assets, which does not exceed the net realization value as of each period-end.

 

11. TECHNICAL REVALUATION OF FIXED ASSETS

There are no fixed assets subject to technical revaluation.

 

12. OBSOLETE FIXED ASSETS

There are no obsolete fixed assets with accounting value.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Additional Information to the Notes to the Financial Statements

(in thousands of pesos)

 

13. EQUITY INTERESTS IN OTHER COMPANIES

There are no equity interests in other companies in excess of the provisions of Law No. 19,550 Section 31.

 

14. RECOVERABLE VALUES

The recoverable value of the inventory under consideration is the higher between the net realizable value (selling price at the end of the period less estimated selling expenses) and the economic use value determined.

 

15. INSURANCES

The types of insurance used by the company are the following:

 

Insured property

  

Risk covered

   Amount insured
Pesos
   Book value
Pesos
Buildings, machinery, silos, installation and furniture and equipment    Theft, fire and technical insurance    104,694    39,776

Vehicles

   Third parties, theft, fire and civil liability    4,499    1,702

 

16. CONTINGENCIES

As of March 31, 2010 there are no contingent situations that have not been accounted for or adequately exposed in notes according to accounting standards.

 

17. IRREVOCABLE CONTRIBUTIONS TO CAPITAL ON ACCOUNT OF FUTURE SUBSCRIPTIONS

None.

 

18. DIVIDENDS ON PREFERED STOCK

There are no cumulative dividends not paid on preferred stock.

 

19. LIMITATIONS OF PROFIT DISTRIBUTIONS

See Note 10 to the Financial Statements.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Comparative Shareholders’ Equity Structure

 

     As of
March 31, 2010
   As of
March 31, 2009
   As of
March 31, 2008
   As of
March 31, 2007
   As of
March 31, 2006

Current Assets

   1,323,626    1,003,003    918,634    193,610    95,247

Non-current Assets

   5,356,687    4,522,443    1,146,824    846,702    685,867
                        
   6,680,313    5,525,446    2,065,458    1,040,312    781,114
                        

Current Liabilities

   1,751,452    1,078,212    272,020    161,926    66,129

Non-current Liabilities

   1,386,374    1,488,160    45,536    68,831    161,297
                        
   3,137,826    2,566,372    317,556    230,757    227,426
                        

Minority Interest

   1,577,679    1,290,582    1,238    495    320
                        

Shareholders’ Equity

   1,964,808    1,668,492    1,746,664    809,060    553,368
                        
   6,680,313    5,525,446    2,065,458    1,040,312    781,114
                        

Comparative Income Structure

 

     As of
March 31, 2010
    As of
March 31, 2009
    As of
March 31, 2008
    As of
March 31, 2007
    As of
March 31, 2006
 

Operating income

   416,609      108,917      33,777      12,728      18,674   

Financial and holding result

   (91,645   (25,469   (27,328   (8,837   15,220   

Other income and expenses and income on equity

   161,165      (71,805   16,936      37,189      10,124   

Management agreement fees

   (20,446   (493   (2,976   (4,080   (2,601
                              

Operating net income

   465,683      11,150      20,409      37,000      41,417   

Income tax (expense) benefit

   (105,271   (32,466   7,561      (348   (18,176

Minority Interest

   (175,755   25,987      (344   64      136   
                              

Net income

   184,657      4,671      27,626      36,716      23,377   
                              

Production volume

 

    Three-month
period
March 31, 2010
  Accumulated
July 1, 2009  to
March 31, 2010
  Three-month
period
March 31, 2009
  Accumulated
July 1, 2008  to
March 31, 2009
  Three-month
period
March 31, 2008
  Accumulated
July 1, 2007  to
March 31, 2008
  Three-month
period
March 31, 2007
  Accumulated
July 1, 2006  to
March 31, 2007
  Three-month
period
March 31, 2006
  Accumulated
July 1, 2005  to
March 31, 2006

Beef Cattle (in Kgs.)

  2,060,565   4,303,565   2,548,680   5,467,570   2,347,510   7,036,158   2,912,046   8,112,493   3,226,444   7,758,548

Butyraceous (in Kgs.)

  170,054   609,302   154,936   578,272   175,087   564,708   137,260   455,048   110,820   397,149

Crops (in quintals) *

  375,014   807,150   432,628   815,371   303,840   605,600   498,654   696,735   351,413   522,413

 

* One quintals equals one hundred kilograms

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Sales volume

 

    Three-month
period
March 31, 2010
  Accumulated
July 1, 2009  to
March 31, 2010
  Three-month
period
March 31, 2009
  Accumulated
July 1, 2008  to
March 31, 2009
  Three-month
period
March 31, 2008
  Accumulated
July 1, 2007  to
March 31, 2008
  Three-month
period
March 31, 2007
  Accumulated
July 1, 2006  to
March 31, 2007
  Three-month
period
March 31, 2006
  Accumulated
July 1, 2005  to
March 31, 2006

Beef Cattle (in Kgs.)

  2,096,449   5,441,046   1,050,147   3,945,956   1,350,732   7,307,164   1,984,396   8,680,231   3,228,274   10,838,907

Butyraceous (in Kgs.)

  170,054   609,302   154,936   578,272   175,087   564,708   137,260   455,048   110,820   397,149

Crops (in quintals) *

  206,677   1,237,747   238,144   1,328,279   303,479   962,012   90,961   403,518   86,461   949,929

 

* One quintals equals one hundred kilograms

Local Market

 

    Three-month
period
March 31, 2010
  Accumulated
July 1, 2009  to
March 31, 2010
  Three-month
period
March 31, 2009
  Accumulated
July 1, 2008  to
March 31, 2009
  Three-month
period
March 31, 2008
  Accumulated
July 1, 2007  to
March 31, 2008
  Three-month
period
March 31, 2007
  Accumulated
July 1, 2006  to
March 31, 2007
  Three-month
period
March 31, 2006
  Accumulated
July 1, 2005  to
March 31, 2006

Beef Cattle (in Kgs.)

  2,096,449   5,441,046   1,050,147   3,945,956   1,350,732   7,307,164   1,984,396   8,680,231   3,228,274   10,838,907

Butyraceous (in Kgs.)

  170,054   609,302   154,936   578,272   175,087   564,708   137,260   455,048   110,820   397,149

Crops (in quintals)*

  206,677   1,237,747   238,144   1,328,279   303,479   962,012   90,961   403,518   86,461   949,929

 

* One quintals equals one hundred kilograms

Export (not applicable)

Ratios

 

     As of March 31, 2010    As of March 31, 2009    As of March 31, 2008    As of March 31, 2007    As of March 31, 2006

Liquidity

   0.76    0.93    3.377    1.196    1.440

Solvency

   0.63    0.65    5.500    3.506    2.433

Non-current assets to assets

   0.80    0.82    0.555    0.814    0.878

Return on Equity (1)

   0.10    0.00    0.021    0.051    0.043

 

(1) Result of the period divided average shareholder’s equity.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Buenos Aires, May 12, 2010 - Cresud S.A.C.I.F. y A. (Nasdaq: CRESY – BASE: CRES), one of the leading agricultural companies in Argentina, announces today its results for the first nine months of Fiscal Year 2010 ended March 31, 2010.

Effective as from the second quarter of fiscal year 2009, Cresud presents its financial statements in consolidated form with those of IRSA Inversiones y Representaciones Sociedad Anónima, in which we held an equity interest of 57.38% as of March 31, 2010.

Cresud’s consolidated income statement for the period beginning July 1, 2009 and ended March 31, 2010 includes the results of IRSA Inversiones y Representaciones Sociedad Anónima for that same period. Cresud’s consolidated financial statements as of March 31, 2009, disclosed in the comparative tables include IRSA’s consolidated data only for the period beginning October 1, 2008 and ended March 31, 2009, thus affecting the comparability of the income statement.

Results for the first nine months of fiscal year 2010 showed a net income of Ps. 184.7 million compared to a net income of 4.7 million posted in the same period of the previous fiscal year. The increase in net income is mainly due to the higher income from our subsidiary IRSA.

Consolidated agribusiness sales for the period amounted to Ps. 159.4 million, 19.6% higher than those posted for the same period of the previous fiscal year. This rise was caused mainly by the 85.5% increase in sales of beef cattle and the 37.7% increase in sales in the Others segment compared to the same period of the previous fiscal year.

Agribusiness production revenues amounted to Ps. 80.3 million in the period ended March 31, 2010, 27.5% higher than those recorded in the same period of the previous year. The rise is explained mainly by an increase of 34.1% in the crops segment and 27.5% in the beef cattle segment.

Consolidated sales in the real estate business were Ps. 964.1 million for the nine-month period ended March 31, 2010, whereas gross profit from the real estate segment stood at Ps. 605.2 million.

Gross profit during the first nine months of fiscal year 2010 amounted to Ps. 621.5 million compared to Ps. 366.0 million during the same period of the previous year. This increase was mainly due to the effect of considering the gross profit mentioned in the previous paragraph due to the consolidation of the results of the real estate business of our controlled company IRSA.

Operating results for the period ended March 31, 2010 showed a Ps. 416.6 million profit, composed of operating income of Ps. 384.0 million in IRSA’s segments for the first nine months of fiscal year 2010 and a Ps. 32.6 million income from Cresud’s agribusiness activities for the first nine months of fiscal year 2010, compared to the Ps. 28.3 million operating loss posted by Cresud in the same period of the previous fiscal year. This increase in results from the agribusiness activities is explained mainly by the higher results from agribusiness production, mainly due to the better weather conditions recorded in the 2009/10 season, to an improvement in the relationship between the prices of commodities and their related input costs and to better results in the beef cattle segment as a consequence of the increase in prices between both periods. As harvesting of our various crops concludes, we expect to recognize higher production revenues and results than those recorded in the previous season.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

I. Agribusiness Context

The 2008/2009 agricultural season in Argentina’s main production areas sustained one of the worst droughts in the past 70 years which adversely affected the agricultural and livestock industry and also had a negative bearing on the expectations for next season. Apart from this weather phenomenon, and mainly during the month of October, there were late frosts, strong winds and storms with hail, which worsened the referred scenario even more in certain areas. During the 2009/10 season there has been an improvement in rainfall which has favored the development of crops. According to the United States Department of Agriculture (USDA)’s May 2010 estimates, Argentina’s crops output (wheat, corn and soybean) for the 2009/2010 season is expected to be higher than in the previous cycle though lower than in the 2007/2008 season, as this was the last period to exhibit normal weather conditions. This decrease is partly due to the reduction in the area sown with wheat and corn. According to the Ministry of Agriculture, Cattle Raising, Fishing and Food, the area sown with soybean will rise by 0.6% compared to the previous cycle, whereas the area sown with corn and wheat will decrease by 5.1% and 32.7%, correspondingly, with respect to the previous cycle. The USDA has estimated that Argentina’s wheat output for the 2009/2010 season will be 12.0 million tons; while in the 2008/09 season this output had been 10.1 million tons approximately. As regards corn, output for the previous cycle has been 15.0 million tons, whereas the USDA report for May estimated that in the 2009/2010 cycle Argentina’s output will be 21.0 million tons. As regards the USDA projections concerning soybean, Argentina’s output will be 50.0 million tons, that is 56.3% and 8.2% higher than the production posted in the 2008/09 and 2007/08 seasons, respectively.

As regards beef cattle, in line with the March report published by the Argentine Beef Promotion Institute (IPCVA), beef-cattle slaughtering activities, accumulated for fiscal year 2010, would have been approximately 10.1 million heads, with production at 2.1 million tons of meat. In addition, since July 2009 there has been an increase in the price of beef cattle, due to the contracted supply resulting from the drop in production levels and lower birth rates. As regards external sales, during the first quarter of 2010 exports amounted to 61.6 thousand tons considering all meat cuts, which stood for a 28.6% year-on-year decrease. In monetary terms, revenues from exports were US$ 312.0 million, 10.8% lower than in the same quarter of the previous year.

II. Summary of Operations

Crops

Crop sales for the first nine months of fiscal year 2010 totaled Ps. 83.5 million, compared to sales for Ps. 79.3 million in the previous period. The volume of crops sold was 123,775 tons at an average price per ton of Ps. 675.1 compared to the 132.828 tons sold at an average price of Ps. 597.2 in the same period of the previous fiscal year. The decrease in the tons sold is mainly due to the decrease in the levels of stock of crops at the beginning of fiscal year 2010. Production revenues totaled Ps. 49.3 million, 34.1% higher than the revenues obtained from production in the same period of fiscal year 2009. In turn, the result from production for the period ended March 31, 2010 was a Ps. 0.1 million loss, compared to the Ps. 15.4 million loss recorded in the same period in the previous fiscal year. The improvement in the result from production derived mainly from better weather conditions and an improvement in the relationship between the prices of commodities and their related input costs. As we conclude the harvesting of coarse grains, to which we allocated most of the hectares during the past quarter, we expect to recognize higher production income and results than those recorded in the previous season.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

The stock of crops as of the end of the period totaled 32,585 tons; 13,095 of which were corn, 3,936 were soybean, 4,998 were sunflower and 7,867 were wheat. The rest of the tons correspond to sorghum and other minor crops.

Gross results for the period ended March 31, 2010 posted a Ps. 6.1 million profit compared to a Ps. 0.1 million profit recorded in the same period of the previous fiscal year.

For the current season we have allocated 101,458 hectares to agriculture, 42,996 of which are leased from third parties and 10,832 are operated under concession. Compared to the previous fiscal year, we have decreased the number of total hectares allocated to agriculture by 9,864, which stands for an 8.9% drop, mainly due to the 27.7% decrease in the hectares leased from third parties.

During the season we allocated 50,187 hectares to soybean production and 31,931 hectares to corn production. As of the date of this earnings release, approximately 50% and 19% of the harvest of these respective crops had been completed. This implies that a large portion of the harvest and its related income were still pending recognition as of March 31, 2010.

Beef Cattle

As of March 31, 2010, the Company’s beef cattle stock, including breeding and fattening holdings, was 86,476 heads, with a total of 130,758 hectares allocated to beef cattle activities.

Due to the increase in prices during the first nine months of fiscal year 2010, which rose by 68% for our beef cattle mix, we obtained holding results for Ps. 64.5 million.

Beef cattle sales rose compared to the previous fiscal year, from Ps. 11.4 million as of March 31, 2009 to Ps. 21.1 million as of March 31, 2010. During the first nine months of fiscal year 2010, sales totaled 5,526 tons, whereas the tons sold in the same period of fiscal year 2009 had been 3,950. The increase in sales was mainly explained by the sale of the beef cattle stock in the “Rucalen” farm due to the expiration of the lease agreement.

Beef-cattle production was 4,304 tons, meaning a 21.9% reduction compared to the previous fiscal year. The decrease in production volumes was mainly due to scarce rainfall during 2009, a circumstance that resulted in lower fattening and birth rates and higher death rates during this season.

All these circumstances led to a gross loss of Ps. 0.7 million in the beef cattle segment for the first nine months of fiscal year 2010, compared to a Ps. 0.5 million loss in the same period of the previous fiscal year.

Milk

Milk production increased by 2.6% in the period, from 15.7 million liters as of March 31, 2009 to 16.1 million as of March 31, 2010.

During the first nine months of fiscal year 2010, sales totaled Ps. 16.4 million, 11.2% higher than for the first nine months of fiscal year 2009. The increase in sales is attributable to the increase in the average price of the liter of milk and the increase in production. The efficiency in the daily output per cow was slightly higher than the figure posted in the same period of the previous fiscal year.

Gross income was Ps. 3.4 million, compared to the Ps. 1.7 million loss posted for the first nine months of fiscal year 2009.

In the first nine months of fiscal year 2010, the stock of dairy cattle amounted to 9,026 head over 4,637 hectares allocated to milk production, whereas for the same period of the previous fiscal year we had 8,351 cattle head over 4,106 hectares. On average, there were 3,213 cows in milking per day, 1.8% lower than in the same period of the previous fiscal year.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

At present, the Company has three dairy facilities, two in the “La Juanita” farm and one in “El Tigre”, equipped with state-of-the-art technology.

III. IRSA Inversiones y Representaciones S.A.

In the first nine months of fiscal year 2010, Cresud acquired 10,024,690 shares in IRSA. As a consequence of this acquisition, our equity interest as of March 31, 2010 was 57.38%.

Starting in the second quarter of fiscal 2009, Cresud presents its financial statements consolidated with those of IRSA Inversiones y Representaciones S.A. The following information has been taken from the financial statement of our controlled company IRSA Inversiones y Representaciones S.A. as of March 31, 2010:

III a. Offices and Other Rental Properties

During the last months of calendar year 2009, there was an upward trend in the office leasing market in the City of Buenos Aires. This market, in which IRSA holds a major position, has shown a slow decrease in lease prices along with an increase in vacancy levels since the end of 2008, mainly as a result of two factors: on one hand, supply rose in 2009, increasing the stock of leasable square meters in the downtown area of Buenos Aires and the northern region of Greater Buenos Aires, and on the other, demand was affected by the 2009 international economic crisis. By year end, the market started to show slight signs of recovery, resulting in vacancy levels of 5.8% and average prices of US$ 29.2 per square meter for the A+ building segment, according to Colliers International’s “Annual Real Estate Report. Buenos Aires, 2009/2010”.

 

   

Offices and Other Non-Shopping Center Rental Properties

         IIIQ 10    IIIQ 09    var%    9M 10    9M 09    var%
   

Results (in

Millions of Ps.)

 

Revenues

   37.9    37.6    0.8%    116.9    108.4    7.8%
 

Operating income

   19.7    18.9    4.4%    58.7    56.0    4.9%
 

Depreciation and Amortization

   6.1    3.7    63.8%    18.2    18.6    -2.6%
 

EBITDA

   25.8    22.6    14.2%    76.9    74.6    3.0%
         IIIQ 10    IIQ 10    IQ 10    IVQ 09    IIIQ 09    IIQ 09
   

Office

Portfolio

 

Leasable Area1 (sqm)

   141,724    142,964    152,270    156,000    156,938    161,502
 

Occupancy2 (GLA)

   90.9%    89.6%    90.7%    91.2%    94.1%    92.8%
 

Monthly  Revenues3 (Ps./sqm leased)

   93.3    91.4    95.0    93.0    87.3    78.4

 

  u The growth in revenues and EBITDA lessened as a result of the smaller amount of leasable properties resulting from sales of non-strategic assets made in fiscal year 2010.

 

  u During the third quarter of fiscal year 2010 IRSA continued to improve its portfolio mix by selling non-strategic office properties at attractive prices. 1,240 square meters of leasable office space have been disposed of in Edificio Av. Libertador 498 for US$ 4.3 million.

 

  u During the second quarter of fiscal year 2010, IRSA agreed to purchase a plot of land of 3,650 square meters in CATALINAS NORTE, a premium office district in the City of Buenos Aires, which may be used to develop an A+ office building.

 

 

1

At period end

2

At period end

3

Considering contracts in effect, occupancy and leasable meters at the closing of each period.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Below is information relating to our office properties as of March 31, 2010.

Offices and Other Rental Properties

 

      Date of
Acquisition
   Leasable
Area
sqm
   Occupancy
rate

Mar—  09
  IRSA’s
effective
interest
  Monthly
rental
income
Ps./000 (3)
   Annual accumulated rental  income
over fiscal periods Ps./000 (4)
   Book Value
Ps./000 (5)
                2010    2009    2008   

Offices

                        

Edificio República

   28/04/08    19,884    80%   100%   1,700    15,718    11,972    N/A    220,952

Torre Bankboston

   27/08/07    14,873    100%   100%   1,667    16,486    14,227    9,005    155,871

Bouchard 551

   15/03/07    23,378    100%   100%   1,950    16,788    14,742    11,496    151,152

Intercontinental Plaza

   18/11/97    22,535    100%   100%   1,914    16,210    12,003    8,808    83,411

Dique IV, Juana Manso 295 (10)

   02/12/97    11,298    92%   100%   1,196    10,404    —      —      65,194

Bouchard 710

   01/06/05    15,014    72%   100%   1,101    10,781    12,666    9,324    65,517

Maipú 1300

   28/09/95    10,280    95%   100%   959    8,510    7,025    6,023    38,633

Libertador 498

   20/12/95    3,714    100%   100%   464    5,567    7,234    6,173    14,799

Costeros Dique IV

   29/08/01    5,437    86%   100%   436    3,852    3,841    3,325    19,258

Edificios Costeros

   20/03/97    —      N/A   100%   —      1,384    3,218    2,888    —  

Suipacha 652/64

   22/11/91    11,453    95%   100%   535    3,579    2,713    1,805    11,049

Dock Del Plata

   15/11/06    809      100%   —      1,353    4,986    5,295    3,167

Madero 1020

   21/12/95    101    100%   100%   3    23    25    73    223

Laminar Plaza

   25/03/99    —      N/A   100%   —      198    4,882    4,034    —  

Reconquista 823/41

   12/11/93    —      N/A   100%   —      44    1,898    1,679    —  

Other Offices (6)

   N/A    2,948    66%   N/A   89    1,507    925    1,017    7,667
 

Subtotal Offices

      141,724    91%   N/A   12,014    112,404    102,357    70,945    836,893

Other Properties

                        

Commercial Properties (7)

   N/A    312    —     N/A   —      1    191    138    3,442

Museo Renault

   12/06/07    1,275    100%   100%   30    267    267    114    4,808

Santa María del Plata S.A.

   07/10/97    60,100    100%   90%   86    757    455    455    12,496

Thames

   11/01/97    33,191    —     100%   —      175    714    623    3,898

Other Properties (8)

   N/A    2,072    100%   N/A   6    70    2,225    213    5,719
 

Subtotal Other Properties

      96,950    65%   N/A   122    1,270    3,852    1,543    30,363

Management Fees (11)

      N/A    N/A   N/A      3,200    2,218    1,004    N/A
 

TOTAL OFFICES AND OTHER LEASE PROPERTIES (9)

      238,674    81%   N/A   12,136    116,874    108,427    73,492    867,256
 

 

Notes:

 

(1) Total leasable area for each property as of 03/31/10. Excludes common areas and parking.
(2) Calculated dividing occupied square meters by leasable area as of 03/31/10.
(3) Agreements in force as of 03/31/10 for each property were computed.
(4) Total consolidated leases, according to the RT21 method.
(5) Cost of acquisition, plus improvements, less accumulated depreciation, plus adjustment for inflation, less allowance for impairment in value.
(6) Includes the following properties: Madero 942 (fully sold), Av. de Mayo 595, Av. Libertador 602, Rivadavia 2774 and Sarmiento 517.
(7) Includes the following properties: Constitución 1111, Crucero I (fully sold), Abril Stores (fully assigned) and Casona de Abril.
(8) Includes the following properties: 1 unit in Alto Palermo Park, Constitución 1159 and Dique III (fully sold).
(9) Corresponds to the “Offices and Other Non-Shopping Center Rental Properties” business segment mentioned in Note 4 to the unaudited Consolidated Financial Statements.
(10) The building was occupied on 05/15/09.
(11) Income from building management fees.

III b. Alto Palermo S.A. (“APSA”): Shopping Centers and Consumer Finance

After an atypical start to 2009 characterized by a smaller inflow of foreign tourists due to the international crisis and the H1N1 virus outbreak (which had affected the pace in the growth of sales during the third and fourth quarters of fiscal year 2009) the shopping center industry experienced a significant rebound during the first nine months of fiscal year 2010. Sales in the summer months grew notably as a result of the recovery in domestic consumption and an inflow of tourists, mainly from Brazil and Chile.

Prospects in this segment for the rest of 2010 are promising, in line with an upsurge in consumption and economic activities.

The following information relates to data extracted from the financial statements of our subsidiary Alto Palermo S.A. (APSA), the company that operates our shopping center business, in which IRSA has a 63.35% interest as of March 31, 20104 .

 

 

4

IRSA holds an option to purchase the equity interest and Convertible notes held by Parque Arauco.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

 

          Shopping Centers
          IIIQ 10    IIIQ 09    var%    9M 10    9M 09    var%

Results (in

Millions of Ps.)

  Revenues    122.8    88.3    39.0%    375.0    283.6    32.2%
  Operating income    59.6    43.8    36.2%    198.9    146.4    35.9%
  Depreciation and Amortization    27.8    21.6    29.1%    84.5    62.4    35.4%
  EBITDA    87.5    65.3    33.9%    283.4    208.8    35.7%
          IIIQ 10    IIQ 10    IQ 10    IVQ 09    IIIQ 09    IIQ 09

Shopping

Centers

  Leasable area (sqm)    286,286    289,410    286,581    287,542    276,256    276,249
  Tenants’ sales (Ps. Million, 12-month cumulative)    5,229    4,807    4,400    4,194    4,055    4,039
  Tenants’ sales in the same Shopping Centers (Ps. Million, 12-month cumulative)    4,592    4,340    4,141    4,095    4,055    4,039
  Occupancy (GLA)    98.0%    98.0%    97.9%    98.5%    98.9%    98.4%

 

  u Cumulative tenants’ sales for the nine months of fiscal year 2010 totaled Ps. 4,068.3 million, a 34.4% increase compared to the same period of the previous year.

 

  u During the three months ended March 31, 2010, shopping center tenants’ sales reached Ps. 1,253.4 million (a 51% increase compared to the same period of the previous year). In the same shopping centers, such sales amounted to a cumulative figure of Ps. 1,083.6 million, compared to the same quarter of the previous year (an increase of 30%).

 

  u Sales for January, February and March 2010 increased 46%, 52% and 54%, respectively, as compared to the same months of 2009. In terms of shopping centers, such sales increased 25%, 32% and 33%, respectively, for each of such periods compared to the same shopping centers for the same periods of 2009.

 

  u The EBITDA/Sales margin for the nine-month period has remained at 75%.

Shopping Centers

 

      Date of
Acquisition
   Leasable
Area sqm
(1)
   APSA’s
Effective
Interest
(3)
    Occupancy
Rate
(2)
    Accumulated Rental Income
as of March 31
$/000 (4)
   Book
Value
($ 000)
(5)
             2010    2009    2008   

Shopping Centers (6)

                     

Alto Palermo

   11/97    18,629    100.0   100.0   70,881    61,681    50,233    140,366

Abasto Shopping (7)

   07/94    37,603    100.0   99.6   65,384    58,460    51,642    165,640

Alto Avellaneda

   11/97    36,579    100.0   95.7   42,552    34,582    28,625    75,855

Paseo Alcorta

   06/97    14,390    100.0   98.4   31,584    29,412    27,159    71,192

Patio Bullrich

   10/98    11,736    100.0   100.0   27,160    23,450    21,135    91,597

Alto Noa Shopping

   03/95    18,869    100.0   99.9   9,986    7,786    6,685    21,985

Buenos Aires Design

   11/97    13,786    53.7   99.6   10,951    9,803    8,921    9,434

Alto Rosario Shopping (7)

   11/04    28,650    100.0   97.1   22,055    17,170    14,470    77,744

Mendoza Plaza Shopping

   12/94    40,651    100.0   93.3   18,916    19,147    17,557    81,300

Fibesa and Others (8)

   —      N/A    100.0   N/A      18,102    13,769    17,799    —  

Neuquén (9)

   07/99    N/A    98.1   N/A      —      —      —      12,332

D (10)

   05/09    49,750    80.0   100.0   47,928       —      585,438

Córdoba Shopping Villa Cabrera

   12/06    15,643    100.0   98.0   9,473    8,331    7,817    66,636
    

TOTAL SHOPPING CENTERS

      286.286    N/A      98.0   374.972    283,591    252,043    1,399,519
    

 

Notes:

 

(1) Total leasable area in each property. Excludes common areas and parking spaces.-
(2) Calculated dividing occupied square meters by leasable area on the last day of the period.-
(3) APSA’s effective interest in each of its business units. IRSA has a 63.35% interest in APSA.-
(4) Corresponds to total leases, consolidated as per the RT21 method.-
(5) Cost of acquisition plus improvements, less accumulated depreciation, plus adjustment for inflation, less allowance for impairment in value, plus recovery of allowances if applicable.-
(6) Through Alto Palermo S.A.
(7) Excludes Museo de los Niños (3,732 in Abasto and 1,261 in Alto Rosario).-
(8) Includes revenues from Fibesa S.A., Comercializadora Los Altos S.A. (merged with Fibesa S.A.), and others.
(9) Land for the development of a shopping center.
(10) During May 2009, a shopping center, a hypermarket and a movie theater complex were opened. Still pending is the completion of an office building.
(11) Corresponds to the “shopping center” business unit mentioned in Note 4 to the Consolidated Financial Statements; includes revenues from “Credit Card” (Tarshop).-

 

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Business Highlight

Development of new commercial area in Palermo. This project, currently in development, is expected to begin in the next months. The project includes, in principle, the development of retail stores, including green areas and a restaurant hub, over a total buildable area of approximately 24,000 square meters.

“Soleil Factory” Shopping Center. The process for transferring this shopping center’s goodwill has already started. Upon its completion, possession of part of the building will be delivered. IRSA expects the transaction to be completed in the next months in order for APSA to be able to include this new shopping center into its portfolio.

Alto Palermo’s Purchase Option. On January 14, 2010 IRSA announced the acquisition of an option to purchase the entire direct and indirect equity interest held by Parque Arauco S.A. in Alto Palermo S.A., which totals 29.6% of the current shareholding interest and Parque Arauco’s holding of US$ 15,5 million face value of APSA 2014 Convertible Bonds. IRSA paid 6 million dollars for the option, which has been considered an advance payment of the final amount, fixed by both parties at US$ 126 million. The option may be exercised until August 31, 2010, extendable to November 30 of this year.

The company believes that once the transaction is consummated, not only it will be an excellent business opportunity, but it will also result in the consolidation of IRSA’s position in the Argentine shopping center market, placing IRSA at the forefront of this industry.

Consumer Finance Segment – Tarshop S.A. Subsidiary

 

    Consumer Finance
          IIIQ 10    IIIQ 09    var%    9M 10    9M 09    var%

Results (in

Millions of Ps.)

 

Revenues

   70.3    52.1    34.8%    182.0    175.7    3.6%
 

Operating result

   14.0    -9.4    —      32.3    -120.2    —  
 

Depreciation and Amortization

   2.1    1.5    38.5%    5.0    4.3    16.7%
 

EBITDA

   16.1    -7.9    —      37.3    -115.9    —  
          IIIQ 10    IIQ 10    IQ 10    IVQ 09    IIIQ 09    IIQ 09

Consumer

Finance

 

Loan Origination (Millions of Ps.)

   278.9    293.2    257.8    245.3    219.6    236.4
 

Credit Portfolio (Millions of Ps.)

   531.0    529.7    530.2    580.2    624.7    723.2
 

3 to 6 Months’ delinquency (portfolio %)

   3.6%    3.9%    4.2%    6.3%    7.8%    9.4%

 

  u Consolidation of the recovery of Tarshop S.A.’s operations as a result of the actions taken by management, improved capitalization and stabilization in the local financial markets.

 

  u On December 29, 2009, APSA executed a stock purchase agreement with Banco Hipotecario S.A. whereby Banco Hipotecario agreed to acquire 80% of Tarshop S.A.’s interest held by APSA for US$ 26.8 million. The transaction is subject to the occurrence of certain events, including the grant of the Argentine Central Bank’s consent, in compliance with the applicable laws.

III c. Sales and Developments

With respect to the demand of residential properties in the Argentinean real estate market throughout the calendar year 2009, there was a slowdown both in demand and supply. However, such deceleration did not significantly impact prices, as in other countries, since many individuals perceive real estate investments in Argentina as a high quality alternative to preserve their wealth. In addition, the low level of housing financing in Argentina, compared to other countries, has helped sustain the value of residential properties.

 

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Business Highlight

 

    Sales and Developments
          IIIQ 10    IIIQ 09    var%    9M 10    9M 09    var%

Results (in
Millions of Ps.)

 

Revenues

   17.7    73.4    -75.9%    155.1    137.1    13.2%
 

Operating income

   1.8    34.9    -94.7%    94.8    45.2    109.8%
 

Depreciaciones y Amortizaciones

   0.1    0.3    -65.8%    0.3    0.6    -46.8%
 

EBITDA

   1.9    35.2    -94.5%    95.1    45.7    107.9%

 

  u The lower level of revenues and results in the third quarter of fiscal year 2010, compared to the third quarter of fiscal year 2009, is attributable to lower sales of office buildings (recognized in this segment) made in the third quarter of fiscal year 2010.
  u Horizons Project (CYRSA, partnership between IRSA and Cyrela): percentage sold is more than 99% of available units and the degree of work progress exceeds 78% as of March 31. Completion and delivery of the sold units is expected to occur during fiscal 2011.
  u Torres Rosario Project (APSA’s barter). A barter between APSA and a third party was executed over 2 parcels (2-G and 2-H) for the construction of two condominiums, whose degree of progress is 99% and 25%, respectively. Completion of the project is scheduled for July 2010 and December 2011, respectively. The process of the sale of the condominiums in parcel 2-G has started.
  u El Encuentro Project: The process of sale of the 110 functional units located in this residential community has started. The project is located in the district of Tigre, Province of Buenos Aires.
  u

Sale of undeveloped parcels of land in Hudson, Province of Buenos Aires5. After the end of the March 31, 2010 period, IRSA agreed to sale a property known as “Pereiraola” for US$ 11.8 million (through the sale of the shares of Pereiraola S.A.I.C.I.F. y A.). The property is located in the district of Hudson, Province of Buenos Aires, and it extends over an area of approximately 130 hectares. IRSA expects to close the transaction in the next few months.

 

 

5

IRSA agreed the sale of the proprietary company of the land reserve known as “Pereiraola”

 

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Sales and Developments

DEVELOPMENT

   Date of
Acquisition
   Estimated
Real/Cost
($ 000) (1)
   Area intended
for Sale (sqm)
(2)
   Total
Units/Lots
(3)
   IRSA’s
Effective
Interest
    Percentage
Built
    Percentage
Sold (4)
    Accumulated
Sales
(Ps. 000) (5)
   Accumulated Sales as of March 31 of
fiscal years (Ps. 000) (6)
   Book
Value
$/000
(7)
                        2010    2009    2008   

Residential Apartments

                                

Torres Renoir (15)

   09/09/99    22,861    5,383    28    100.00   100.00   100.00   53,940    142    48,768    —      —  

Rosario plot barter receivable (8) (16)

   30/04/99    —      4,692    80    63.35   99.00   0.00   —      —      —      —      11,023

Caballito Plots (16)

   03/11/97    42,388    9,784    1    50.00   0.00   0.00   —      —      —      —      6,754

Caballito Plot barter receivable (Cyrsa) (14)

   03/11/97    —      7,451    —      100.00   0.00   0.00   —      —      —      —      18,970

Caballito Plot barter receivable (KOAD) (14)

   03/11/97    —      6,833    118    100.00   98.00   53.59   —      —      —      —      31,096

Libertador 1703 and 1755 (Horizons) (15)

   16/01/07    422,310    59,000    467    50.00   78.74   99.15   —      —      —      —      174,135
                                                              

Other residential apartments (9)

   N/A    231,677    116,513    1,437          366,558    —      3,326    61,057    2,009
                                                              

Subtotal Residential Apartments

      719,236    209,656    2,131          420,498    142    52,094    61,057    245,103

Residential Communities

                                

Abril/Baldovinos (10)

   03/01/95    130,955    1,408,905    1273    100.00   100.00   99.22   237,062    5,067    6,136    1,756    1,763

El Encuentro

   18/11/97    —      125,889    110    100.00   100.00   0.00   11,830    —      —      —      10,304

Villa Celina I, II y III

   26/05/92    4,742    75,970    219    100.00   100.00   100.00   14,028    —      76    —     
                                                              

Subtotal Residential Communities

      135,697    1,610,764    1,602          262,920    5,067    6,212    1,756    12,067

Land Reserves

                                

Puerto Retiro

   18/05/97    —      82,051    —      50.00   0.00   0.00   —      —      —      —      54,424

Santa María del Plata

   10/07/97    —      715,951    —      90.00   0.00   10.00   31,000    —      —      —      140,546

Pereiraola

   16/12/96    —      1,299,630    —      100.00   0.00   0.00   —      —      —      —      21,717

Alcorta plots (8)

   07/07/98    —      1,925    —      63.35   0.00   100.00   22,969    —      —      —      —  

Rosario plots (8)

   30/04/99    —      31,000    —      63.35   0.00   19.85   11,072    —      7,644    3,428    16,090

Caballito Mz 35

   03/11/97    —      9,784    —      100.00   0.00   100.00   19,152    —      —      —      —  

Catalinas Norte

   17/12/09    —      3,650    —      100.00   0.00   0.00   —      —      —      —      22,259

Baicom plot

   23/12/09    —      6,905    —      50.00   0.00   0.00   —      —      —      —      4,183

Canteras Natal Crespo

   27/07/05    —      4,300,000    —      50.00   0.00   0.00   252    —      —      51    5,707

Berutti plot (8)

   24/06/08    —      3,207    —      63.35   0.00   0.00   —      —      —      —      52,901

Pilar

   29/05/97    —      740,237    —      100.00   0.00   0.00   —      —      —      —      3,408

Coto air space (8)

   24/09/97    —      21,406    —      63.35   0.00   0.00   —      —      —      —      13,188

Torres Jardín IV

   18/07/96    —      3,176    —      100.00   0.00   0.00   —      —      —      —      3,030

Caballito Plot (8)

   01/10/98    —      23,791    —      63.35   0.00   0.00   —      —      —      —      36,741

Patio Olmos (8)

   30/06/08    —      5,147    —      63.35   100.00   0.00   —      —      —      —      32,949

Other Land Reserves (11)

   N/A    —      13,596,833    —            1,041    —      1,041    —      32,193
                                                              

Subtotal Land Reserves

         20,844,693    —            85,486    —      8,685    3,479    439,336

Others

                                

Dique III

   09/09/99    —      10,474    N/A    100.00   0.00   100.00   91,638    —      —      —      —  

Bouchard 551

   15/03/07    —      9,946    N/A    100.00   100.00   100.00   108,423    —      —      108,423    —  

Madero 1020

   21/12/95    —      5,069    N/A    100.00   100.00   100.00   18,848    71    271    476    —  

Della Paolera 265

   27/08/07    —      472    N/A    100.00   100.00   100.00   6,850    —      6,850    —      —  

Madero 942

   31/08/94    —      768    N/A    100.00   100.00   100.00   6,137    —      6,137    —      —  

Dock del Plata

   15/11/06    —      7,133    N/A    100.00   100.00   100.00   76,562    34,492    15,312    —      —  

Libertador 498

   20/12/95    —      6,819    N/A    100.00   100.00   100.00   82,958    46,608    36,350    —      —  

Edificios Costeros

   20/03/97    —      5,271    N/A    100.00   100.00   100.00   68,580    68,580         

Laminar

      —      6,521    N/A    100.00   100.00   100.00   74,510    —      —      —      —  

Reconquista 823

      —      5,016    N/A    100.00   100.00   100.00   31,535    —      —      —      —  

Locales Crucero I

      —      192    N/A    100.00   100.00   100.00   2,006    —      2,006    —      —  

Others (12)

   N/A    —      7,017    N/A    100.00   100.00   100.00   24,735    172    3,183    —      —  
                                                              

Subtotal Others

      —      64,698             592,782    149,923    70,109    108,899    —  
                                                              

TOTAL (13)

      854,933    22,729,811    3,733          1,361,686    155,132    137,100    175,191    696,506
                                                              

 

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Business Highlight

Notes:

 

(1) Cost of acquisition plus total investment made and/or planned for apartments and residential communities’ projects developed or being developed (adjusted for inflation as of 02/28/03, if applicable).
(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 though not including common areas). In the case of undeveloped parcels of 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, which includes sales as per the preliminary sales agreement for which no deed for the conveyance of title has yet been executed.
(5) Includes only the cumulative sales consolidated by the RT21 method adjusted for inflation as of 02/28/03.
(6) Corresponds to the company’s total sales consolidated by the RT4 method adjusted for inflation as of 02/28/03. Excludes turnover tax deduction.
(7) Cost of acquisition plus improvements, plus capitalized interest of consolidated properties in portfolio as of March 31, 2010, adjusted for inflation as of 02/28/03.
(8) Through Alto Palermo S.A.
(9) Includes the following properties: Torres de Abasto through APSA, Abasto Project, through Cyrsa, Torres Jardín, Edificios Cruceros, San Martin de Tours, Rivadavia 2768, Alto Palermo Park (fully sold), Torre Renoir II barter (fully sold), Minetti D (fully sold), Dorrego 1916 (fully sold) and Padilla 902 through IRSA.
(10) Includes sales of shares in Abril.
(11) Includes the following land reserves: Pontevedra plot, Isla Sirgadero, Terreno San Luis, Mariano Acosta, Merlo, Intercontinental Plaza II through IRSA, Zetol and Vista al Muelle through Liveck, and C.Gardel 3134, C.Gardel 3128, Agüero 596 (fully sold), Zelaya 3102, Conil and Others APSA (through APSA).-
(12) Includes the following properties: Puerto Madero Dock XIII (fully sold). It also includes income from termination (through IRSA and IBSA) and income due to the reimbursement of common maintenance expenses, stamp tax and associated fees.
(13) Corresponds to the “Sales and Developments” business unit mentioned in Note 4 to the Consolidated Financial Statements.
(14) Corresponds to swap receivables disclosed as “Inventories” in the Consolidated Financial Statements.
(15) Corresponds to swap receivables disclosed as “Inventories” in the Consolidated Financial Statements for parcels “G” and “H”. The degree of physical progress with parcel “G” at March 31, 2010 is 99% and with parcel “H” is 25%.

Hotels

There has been an improvement in tourism since the last quarter of 2009. According to data released by the Tourism Secretary in its International Tourism Survey (ETI) as of December 2009, the number of tourists arriving in Argentina (accumulated 12-month data) was 14.1% higher than in the same period for the previous year. The adverse effects of the world financial crisis and the H1N1 influenza outbreak have eased, and the hotel tourist industry has been recovering since the end of 2009.

 

     Hotels
         IIIQ 10    IIIQ 09    var%    9M 10    9M 09    var%
    

Results (in
Millions of Ps.)

   Revenues   46.8    39.2    19.6%    123.1    127.1    -3.2%
   Operating Result   6.3    2.2    194.2%    9.5    11.9    -20.1%
   Depreciation and Amortization   3.7    5.6    -34.1    12.6    13.5    -6.7%
   EBITDA   10.1    7.8    29.2%    22.1    25.3    -13.0%
         IIIQ 10    IIQ 10    IQ 10    IVQ 09    IIIQ 09    IIQ 09
    

Hotels

   Average  occupancy6   65.4%    61.5%    49.4%    69.8%    73.9%    75.1%
   Average rate per room

(Ps./night)7

  667    667    644    638    646    642

 

  u The occupancy trend shows a sustained increase in demand for IRSA’s premium hotels. After the 2009 economic crisis, hotel occupancy has started to return to customary figures for comparable assets.
  u An improvement in EBITDA margins has been observed in the quarter ended March 31, 2010 as compared to the same period in 2009.

 

 

6

12-month cumulative

7

12-month cumulative

 

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Business Highlight

The following is information about our subsidiary IRSA’s hotels for the nine-month period ended as of March 31, 2010.

 

Hotels

   Date of
Acquisition
   IRSA’s
Effective
Interest
   Number
of
Rooms
   Average
Occupancy (1)
   Avg. Price
per room
Ps. (2)
   Sales as of March 31 of fiscal
year Ps./000
   Book value
as of

03/31/2010
(Ps.000)
                  2010    2009    2008   

Intercontinental (3)

   11/01/97    76.34%    309    65.7%    617    46,483    45,442    41,165    55,306

Sheraton Libertador (4)

   03/01/98    80.00%    200    80.8%    456    26,563    28,777    25,181    41,624

Llao Llao (5)

   06/01/97    50.00%    201    49.9%    1,144    50,054    52,920    48,732    80,515

Terrenos Bariloche (5)

   12/01/06    50.00%    N/A    N/A    N/A    N/A    N/A    N/A    21,900
                                            

Total

   —      —      710    65.4%    667    123,100    127,139    115,078    199,345
                                            

 

 

Notes:

1) Accumulated average in the nine-month period.
2) Accumulated average in the nine-month period.
3) Through Nuevas Fronteras S.A. (subsidiary of IRSA).-
4) Through Hoteles Argentinos S.A.-
5) Through Llao Llao Resorts S.A.-

III e. Investments in Other Companies by our Controlled Company IRSA

Interest in Hersha Hospitality Trust

 

  u In January 2010, Hersha Hospitality Trust launched a stock capital offering in which IRSA and its subsidiaries subscribed for 4,789,917 common shares for a total amount of approximately US$ 14.4 million, at US$ 3.0 per share.
  u In March 2010, Hersha started a new stock capital issue process in which IRSA and its subsidiaries subscribed for 3,864,000 shares for a total amount of approximately US$ 16.4 million, equivalent to US$ 4.25 per share.
  u In this way, as of March 31, 2010, IRSA and its subsidiaries held 15,173,823 shares in Hersha Hospitality Trust and an option to purchase 5,700,000 common shares, reaching a stake of 11.06%. Together with its affiliates IRSA stakes reached 11.31%.

Interest in Banco Hipotecario S.A.

As of March 31, 2010, IRSA and its subsidiaries held an interest of 27.98%, excluding treasury shares, in the stock capital of Banco Hipotecario, which entitled them to 43.67% of the total voting capital at shareholders’ meetings.

 

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Business Highlight

IV. International Expansion

BrasilAgro

As of March 31, 2010, Brasilagro had 9 properties, with an aggregate surface area of 174,840 hectares, acquired at highly attractive prices as compared to the average in the respective regions, all of which offer high appreciation potential.

 

Farm

  

Province

   Acquisition Date   Surface Area
(in hectares)
  

Main Business (Project)

   Acquisition Cost
(R$ MM)

São Pedro Farm

   Chapadão do Céu/GO    Sep-06   2,443    Sugar cane    R$ 9.9

Cremaq Farm

   Baixa Grande Ribeiro/PI    Oct-06   32,375    Crops    R$ 42.2

Jatobá Farm (1)

   Jaborandi/BA    Mar-07   31,602    Crops and cotton    R$ 35.4

Alto Taquari Farm

   Alto Taquari/MT    Aug-07/Under analysis  (2)   5,266    Sugar cane    R$ 34.0

Araucária Farm

   Mineiros/GO    Apr-07   9,682    Sugar cane    R$ 70.5

Chaparral Farm

   Correntina/BA    Nov-07   37,129    Beef cattle/crops    R$ 45.9

Nova Buriti Farm

   Januária/MG    Dic-07   24,185    Forestry    R$ 21.9

Preferência Farm

   Barreiras/BA    Sep-08   17,800    Beef cattle/crops    R$ 10.7

Horizontina Farm

   Tasso Fragoso/MA    Mar-10   14,358    Crops    R$ 37.0
      Total   174,840       R$ 307.5
   Total owned by BrasilAgro (1)   171,680       R$ 304.8

 

(1)

The Jatobá farm is owned by Jaborandi S.A., in which company BrasilAgro has a 90% ownership interest.

BrasilAgro started the harvest of 28 thousand soybean hectares (summer harvest) and 3.7 thousand of corn, rice and sorghum hectares and has started arrangements for the harvest of 3 thousand hectares (winter harvest) and 2.2 thousand tons of its sugar cane plantation. This is in line with the company’s objective to reach 48,242 hectares in production during this season.

To date, Brasilagro has invested, including committed and disbursed amounts, 307.5 million Reais in land purchases, compared to an aggregate of 552.6 Reais raised in the initial public offering of shares. As of March 31, 2010, BrasilAgro’s cash flow position was 219 million Reais.

Brasilagro will remain focused on the agricultural real estate segment, looking for new business opportunities with the aim of consolidating an important portfolio of properties, and on the development of its four main business lines: sugar cane, grains and cotton, forestry and beef cattle.

On March 10, 2010, BrasilAgro agreed to purchase a rural property known as “Horizontina Farm” with an area of 14,358 hectares for 37.0 million Reais. The property will be used for crop production.

During the quarter ended March 31, 2010, we purchased in the market 192,900 shares of BrasilAgro. Therefore, as of such date our equity interest in BrasilAgro was 23.23%.

Paraguay

As regards our farmland in the Republic of Paraguay, we started sowing approximately 3,000 hectares developed in the first stage and we have begun to develop approximately 3,000 hectares in the second stage, which are expected to be concluded this calendar year and which are to start production during the next fiscal year, entailing a further addition to the land devoted to agricultural production. As of March 31, summer planting had been completed, with a share of 56% for sorghum, 20% for corn, 20% for soybean and 4% for beans.

On March 19, 2010 the option agreed under the agreement dated September 3, 2008 (Purchase Option Agreement) was exercised. Under this option, 3,614 hectares, valued at US$ 350 each, were transferred to CRESCA S.A.

 

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Business Highlight

Bolivia

During the first nine months of fiscal year 2010, we continued to carry out production activities over approximately 10,832 hectares. This farmland is fit for double-crop of different crops; therefore, it is possible to obtain better results per hectare in the same season. As of March 31, 100% of the winter crops had been harvested with good yields. Including double crops, the distribution of crops over the hectares sown will be 69% soybean, 18% corn, 5% wheat, 5% sunflower and 3% sorghum. As of March 31, summer planting had been completed with a share of 79% for soybean and 21% for corn.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Main indicators for the nine-month periodsended March 31, 2010 and 2009:

 

Description

   9 months ended
March 31, 2010
   9 months ended
March 31, 2009
   %  

Sales

           

Wheat

      7,624    23,693    (67.8 )% 

Corn

      55,932    49,761    12.4%   

Sunflower

      10,667    4,424    141.1%   

Soybean

      31,759    45,979    (30.9 )% 

Other

      17,793    8,972    98.3%   
                   

Total Crop sales (tons)

   123,775    132,828    (6.8 )% 
                   

Beef sales (tons)

   5,526    3,950    39.9%   
                   

Milk sales (thousand of liters)

   15,881    15,552    2.1%   
                   

Production

           

Wheat

      11,636    21,839    (46.7 )% 

Corn

      39,773    36,722    8.3%   

Sunflower

      7,188    13,074    (45.0 )% 

Soybean

      18,056    4,603    292.2%   

Other

      4,062    5,299    (23.4 )% 
                   

Total Crops Production (tons)

   80,715    81,537    (1.0 )% 
                   

Beef Production (tons)

   4,304    5,513    (21.9 )% 
                   

Milk Production (thousand of liters)

   16,134    15,731    2.6%   
                   

Operated surface area (in hectares)1

        

Crops

   Own lands2    47,630    43,754    8.9%   
  

Leased lands

   42,996    59,501    (27.7 )% 
  

Farms under concession3

   10,832    8,067    34.3%   

Beef

   Own lands    103,370    96,081    7.6%   
  

Leased lands

   27,388    32,795    (16.5 )% 

Milk

   Own lands    4,637    4,106    12.9%   

Sheep

   Own lands    100,911    100,911    0.0%   

Land reserves (in hectares)

        
  

Own lands

   229,843    218,174    5.3%   
  

Farms under concession3

   116,032    148,785    (22.0 )% 

Surface area under irrigation (in hectares)

        
  

Own lands

   3,762    3,762    0.0%   
  

Leased lands

   —      933    0.0%   

Storage capacity (tons)

        
  

Own plants

   10,000    10,000    0.0%   

Beef cattle stock

        

Breeding

   68,205    71,713    (4.9 )% 

Fattening

   18,271    20,179    (9.5 )% 

Milking cows

      9,026    8,351    8.1%   
                   

Total beef cattle stock (head)

   95,502    100,243    (4.7 )% 
                   

Daily average milking cows (head)

   3,213    3,273    (1.8 )% 
                   

 

Note:

1- This excludes Agro-Uranga S.A. (35.72% of 8,299 hectares)

2- This includes the “San Cayetano”, “San Rafael”, “La Fon Fon” and “Las Londras” farms, located in Santa Cruz, Bolivia, and “Jerovia” located in the department of Boquerón, Paraguay.

3- Lands under concession refer to our interest in Agropecuaria Anta S.A.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

V. Other Material Events

V.a. Events Occurred during the Quarter

Sale of Tali Sumaj. On April 14, 2010, an extension of the preliminary sales agreement for the Tali Sumaj farm was executed, whereby the date of the execution of the title deed was set for May 17, 2010. The preliminary sales agreement for the Tali Sumaj farm (12,701 hectares) located in the Province of Catamarca, for US$ 4.8 million, had been executed on December 17, 2009.

V.b. Post Closing Events

Progress in the accomplishment of the IFRS implementation plan. On April 29, 2010, the Company’s Board of Directors approved the specific implementation plan for the application of the IFRS.

Acquisition of Shares of BrasilAgro. We entered into an agreement with TARPON AGRO LLC (“Tarpon”), a company organized under the laws of the State of Delaware, United States of America, whereby Tarpon will transfer the following securities to Cresud for value upon satisfaction of certain conditions:

 

  (c) 9,581,750 common shares issued by BrasilAgro (whether in the form of shares of stock or ADRs (“Shares”), and

 

  (d) 6,400,000 First Issue Warrants of BrasilAgro and 6,400,000 Second Issue Warrants of BrasilAgro.

Upon satisfaction of the conditions set forth in the agreement, effective transfer of Tarpon’s shares and warrants to Cresud will occur within ten (10) days following the implementation of the ADR program that BrasilAgro plans to launch.

The total price payable by Cresud to Tarpon will be R$ 131,419,876 (one hundred thirty-one million four hundred nineteen thousand eight hundred and seventy-six Reais), payable within 180 days after the effective transfer of the above mentioned shares and warrants. If the price is paid within the agreed term, no monetary restatement will be applied to it.

It should be noted that despite Tarpon’s withdrawal from the “BrasilAgro Project”, shareholders Mr. Elie Horn and the representatives of the company Cape Town LLC have expressed their intention to remain in BrasilAgro jointly with Cresud.

VI. Consolidated Financial Debt

Cresud

As of March 31, 2010 we had borrowed a total of US$ 130.32 million equivalent. The following table contains a breakdown of Cresud’s indebtedness.

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

 

CRESUD’s debt

   Currency
of
issuance
   Outstanding principal amount in
US$ MM equivalent
   Rate   Maturity date

Short-term debt (2)

   AR$    U$S 70.63    Variable   Up to 381 days

Crop production financing

   US$    U$S39.23    Variable   Up to 365 days

Tranche I, Series I Notes (Argentine law)

   AR$    U$S 4.00    Variable (Badlar+3.0%)   Jun-10

Tranche I, Series II Notes (Argentine law)

   US$    U$S 8.97    Fixed (7.20%)   Sep-10

Bolivia farms(1)

   US$    U$S 6.29    -   Nov-10

Seller Note Cactus

   US$    US$ 1.20    -   Jun-10

Total debt

      U$S 130.32     

 

Note: The exchange rate considered for the loans was US$ 1= Ps.3.878, corresponding to the seller’s exchange rate quoted by Banco de la Nación Argentina as of March 31, 2010.

 

(1)

Shown in the caption “Trade Payables” in the Consolidated Balance sheet.

(2)

It includes US$ 8.0 million disclosed in the Balance Sheet under “Other Debts”.

IRSA and APSA

As of March 31, 2010, the composition of IRSA’s financial debt was as follows:

 

IRSA’s debt (without APSA)

  

Issue Currency

  

Outstanding
Amount1

  

Rate

  

Maturity

HASA2

   US$    US$ 4.9    6.38%    Apr-10

Seller Notes3 4

   US$    US$ 4.2       Aug-10

Edificio República

   US$    US$ 26.8    12.00%    Apr-13

IRSA Notes (Internactonal)

   US$    US$ 150.0    8.50%    Feb-17

Short Term Debt

   Ps.    US$ 59.3    Float    <180 days

Other Debt in Pesos

   Ps.    US$ 19.6       May-10

Total IRSA’s Debt

      US$ 264.7      

APSA’s debt (without APSA)

  

Issue Currency

  

Outstanding
Amount
1

  

Rate

  

Maturity

Series IV Notes (Local)

   US$    US$ 6.6    6.75%    May-11

Arcos del Gourmet

   US$    US$ 3.6       Until Nov-11

Convertible Notes5

   US$    US$ 47.2    10.00%    Jul-2014

Series I Notes  (International)6

   US$    US$ 120.0    7.88%    May-17

Short Term Debt7

   Ps.    US$ 25.6    Variable    <180 days

Series III Notes  (Local)8

   Ps.    US$ 14.4    Badlar + 300 bps    May-11

Series II Notes  (International)9

   Ps.    US$ 34.0    11.00%    Jun-12

Total APSA’s Debt

      US$ 251.4      

 

(1) Stated in millions of US$, at the exchange rate of 3.878 AR$ = 1 US$
(2) Hoteles Argentinos S.A.
(3) Acquisition of shares in Banco Hipotecario S.A.
(4) It corresponds to the subsidiary Tyrus S.A.
(5) As of March 31, 2010, IRSA held a face value of US$ 31.7 million.
(6) As of March 31, 2010 IRSA held a face value of US$ 39.6 million and APSA had repurchased a face value of US$ 5.0 million.
(7) Including Tarshop’s debt of AR$ 69.2 million
(8) As of March 31, 2010, our subsidiary Emprendimientos Recoleta S.A. held a face value of AR$ 12.0 million.
(9) As of March 31, 2010, IRSA held a face value US$ 15.1 million and APSA had repurchased a face value of US$ 4.8 million.

VII. Prospects for the coming quarter

Last year’s adverse weather conditions have ended, giving way to improved records; therefore, prospects for the development of our agricultural production in this season are favorable. Furthermore, we see an improvement in this fiscal year in the relationship between our input costs and our products’ prices, which

 

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Cresud Sociedad Anonima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

should favorably impact on results for the last quarter of this fiscal year, when the largest part of our production income generated by completion of coarse grain harvesting will be recognized.

As concerns beef cattle, the decrease in supply in the local industry caused by the drop in beef production figures and lower birth rates combined with a sustained demand has led to an upward trend in price levels. In this sense, we have been realizing part of the beef cattle stock in order to materialize holding gains.

In addition, we continue to analyze investment alternatives in the region, where the soil, weather and infrastructure conditions are optimum for agricultural development. We consider that there is an appealing opportunity to acquire and develop agricultural farmlands in South America, replicating our business model. This is one of the reasons that led us to increase our strategic equity interest in BrasilAgro through the recent agreement executed with Tarpon Agro LLC. Besides, we are planning to add more land for agricultural and beef-cattle activities in our farmlands in Paraguay, where we expect to have 9,000 productive hectares for the 2010/2011 season.

Our business segments have shown robust and sound performance. The quality of IRSA’s asset portfolio, as shown by its high occupancy levels, has allowed IRSA to capitalize on the effects of the economic recovery and resume a strong pattern of revenues and results.

Shopping centers maintain high occupancy levels and a strong commitment and adhesion by tenants. The pace of sales in the shopping centers has shown a sound recovery during the third quarter of fiscal year 2010, in line with the positive trend that has been observed during the last months. Tenants continue to be loyal and support our new proposals in this segment.

In addition, our subsidiary IRSA will continue working to improve the services they offer to our tenants and consumers, seeking to maintain our successful occupancy levels and traffic in our Shopping Centers. In this sense, our subsidiary IRSA expects to expand their portfolio in the next few months by adding Soleil to our portfolio and launching a new project in Palermo (through our subsidiary Arcos Gourmet S.A.).

With respect to the Consumer Finance business, the first nine months of the fiscal year saw a profit that is the result of the efforts made in the previous year to streamline and stabilize the business in light of the new economic scenario. By the end of the third quarter, operating data in this segment have shown signs of stabilization. However, IRSA will continue to work with the aim of optimizing operating and financial performance in this segment, and in pursuit of this goal IRSA aspires to complete the sales process of Tarshop S.A.’s majority interest to Banco Hipotecario S.A., that will benefit Tarshop with an operating and financial performance capacity commensurate with its future business needs.

As concerns the Office and Non-Shopping Center Rental Properties segment, lease revenues have remained firm, both in pesos and dollars. IRSA believes that there is some stagnation in the market in terms of occupancy rates and pricing levels caused by the market conditions and the addition of footage, mainly in the northern area of the City of Buenos Aires and Greater Buenos Aires. To face this, IRSA has a unique premium portfolio in downtown Buenos Aires that has sparked interest among top-quality lessees in the market. IRSA will continue working towards maintaining high occupancy levels and optimizing our portfolio mix.

Regarding the Sales and Development segment, IRSA will make progress in the development schedule of the Horizons project through IRSA’s subsidiary Cyrsa, where IRSA has already started to recognize revenues and the degree of work progress is above 78%. We believe that IRSA’s alliance with Cyrela in this company is an excellent opportunity to develop additional successful projects.

 

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Free translation from the original prepared in Spanish for publication in Argentina

Report of Independent Auditors

To the Shareholders, President and Board of Directors of

Cresud Sociedad Anónima Comercial,

Inmobiliaria, Financiera y Agropecuaria

Legal address: Moreno 877 - floor 23

Autonomous City of Buenos Aires

CUIT 30-50930070-0

 

1. We have reviewed the balance sheets of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria at March 31, 2010 and 2009, and the related statements of income, of changes in shareholders’ equity and of cash flows for the nine-month periods ended March 31, 2010 and 2009 and the complementary notes 1 to 25 and schedules A, B, C, E, F.1, F.2, G and H. Furthermore, we have reviewed the consolidated financial statements of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria, at March 31, 2010 and 2009, and the related consolidated statements of income and of cash flows for the nine-month periods ended March, 2010 and 2009 and notes 1 to 18, which are presented as complementary information. 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. Based on our work and our examinations of the financial statements of this Company and the consolidated financial statements for the years ended June 30, 2009 and 2008, on which we issued our unqualified report dated September 8, 2009, we report that:

 

  a) The financial statements of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria at March 31, 2010 and 2009 and its consolidated financial statements at those dates, set out in point 1, prepared in accordance with accounting standards prevailing in the Autonomous City of Buenos Aires, include all significant facts and circumstances of which we are aware, and we have no observations to make on them.

 

  b) The comparative information included in the basic and consolidated balance sheets and the supplementary notes and schedules to the attached financial statements arise from Company financial statements at June 30, 2009.

 

4. In accordance with current regulations, we report that:

 

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  a) the financial statements of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria and its consolidated financial statements were transcribed to the “Inventory and Balance Sheet Book” and comply, within the field of our competence, with the Corporations Law and pertinent resolutions of the National Securities Commission;

 

  b) the financial statements of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria arise from official accounting records carried in all formal respects in accordance with legal requirements, that maintain the security and integrity conditions based on which they were authorized by the National Securities Commission;

 

  c) we have read the business highlights, except for the chapter entitled “Progress in the accomplishment of the IFRS implementation plan”, 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 observations to make

 

  d) At March 31, 2010, the debt of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria accrued in favor of the Argentine Integrated Social Security System according to the accounting records amounted to Ps. 1,375,708 none of which was claimable at that date.

Autonomous City of Buenos Aires, May 12, 2010.

 

PRICE WATERHOUSE & CO. S.R.L.

(Partner)

C.P.C.E.C.A.B.A. T° 1 F° 17

Dr. Norberto Fabián Montero

Public Accountant (U.B.A.)

C.P.C.E.C.A.B.A. Tº 167 Fº 179

 

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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.

 

CRESUD SOCIEDAD ANONIMA COMERCIAL INMOBILIARIA

FINANCIERA Y AGROPECUARIA

BY:   /s/    Saúl Zang        

Name:

  Saúl Zang

Title:

  Vice Chairman of the Board of Directors

Dated: May 21, 2010