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 November, 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        T            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        T    

 

 

 

 


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 September 30, 2010 and on September 30, 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 three-month periods

ended September 30, 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

  7

Balance Sheet

  86

Statement of Income

  87

Statement of Changes in Shareholders’ Equity

  88

Statement of Cash Flow

  89

Notes to the Financial Statements

  91

Schedules

  138

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

  149

Business Highlights

  155

Report of Independent Auditors

  175


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria,

Financiera y Agropecuaria

Free Translation of the Unaudited

Consolidated Financial Statements

corresponding to the three-month periods

ended September 30, 2010 and 2009


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Fiscal year No. 76 started on July 1, 2010

Unaudited Financial Statements for the period ended September 30, 2010

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

(in thousands of pesos)

 

Legal Address:    Moreno 877, 23 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 Financial Statements

CAPITAL STATUS (Note 3 of basic financial statements)

SHARES

 

Type of stock

   Authorized to be
offered publicly
     Subscribed      Paid-in  

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

     501,560,508         501,560,508         501,560,508   

 

1


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

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

(in thousands of pesos)

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

 

     September 30,
2010

(Notes  1 and 2)
    June 30,
2010
(Notes 1 and 2)
    September 30,
2009
(Notes 1 and 2)
 

ASSETS

      

Current Assets

      

Cash and banks (Note 4.a.)

     95,711        80,919        95,263   

Investments (Note 4.b.)

     539,908        278,968        325,687   

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

     265,177        441,065        269,445   

Other receivables (Note 4.d.)

     195,696        251,908        246,225   

Inventories (Note 4.e.)

     447,728        400,521        133,815   
                        

Total Current Assets

     1,544,220        1,453,381        1,070,435   
                        

Non-Current Assets

      

Trade accounts receivable (Note 4.c.)

     16,774        42,123        18,361   

Other receivables (Note 4.d.)

     319,674        248,315        212,508   

Inventories (Note 4.e.)

     202,490        204,218        268,952   

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

     2,044,240        1,881,135        1,563,716   

Other investments (Note 4.b.)

     1,257        18,935        8,974   

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

     3,315,952        3,290,221        3,287,352   

Intangible assets, net (Note 4.g.)

     75,342        88,585        53,505   
                        

Subtotal Non-Current Assets

     5,975,729        5,773,532        5,413,368   
                        

Goodwill, net (Note 4.h.)

     (384,157     (389,025     (414,513
                        

Total Non-Current Assets

     5,591,572        5,384,507        4,998,855   
                        

Total Assets

     7,135,792        6,837,888        6,069,290   
                        

LIABILITIES

      

Current Liabilities

      

Trade accounts payable (Note 4.i.)

     271,882        403,743        313,600   

Mortgages payable (Note 4.j.)

     —          —          —     

Short-term debt (Note 4.k.)

     681,973        1,059,736        583,167   

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

     43,142        61,484        37,521   

Taxes payable (Note 4.m.)

     78,791        108,558        145,834   

Advances from customers (Note 4.n.)

     226,586        216,464        116,507   

Other liabilities (Note 4.o.)

     58,674        73,253        54,517   

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

     1,347        5,479        2,434   
                        

Total Current Liabilities

     1,362,395        1,928,717        1,253,580   
                        

Non-Current Liabilities

      

Trade accounts payable (Note 4.i.)

     24,458        23,368        79,810   

Mortgages payable (Note 4.j.)

     —            985   

Advances from customers (Note 4.n.)

     89,112        90,393        162,095   

Long-term debt (Note 4.k.)

     1,594,135        853,166        878,519   

Taxes payable (Note 4.m.)

     292,019        273,963        211,702   

Other liabilities (Note 4.o.)

     75,661        65,372        82,231   

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

     9,620        9,708        8,455   
                        

Total Non-Current Liabilities

     2,085,005        1,315,970        1,423,797   
                        

Total Liabilities

     3,447,400        3,244,687        2,677,377   
                        

Minority interest

     1,644,254        1,625,008        1,491,629   
                        

SHAREHOLDERS’ EQUITY

     2,044,138        1,968,193        1,900,284   
                        

Total Liabilities and Shareholders’ Equity

     7,135,792        6,837,888        6,069,290   
                        

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

 

  

Alejandro G. Elsztain

Vicepresident II

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 three-month periods beginning on July 1, 2010 and 2009

and ended September 30, 2010 and 2009

(in thousands of pesos)

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

 

     September 30, 2010     September 30, 2009  

Agricultural production income (Note 5)

     35,143        13,206   

Cost of agricultural production (Note 5)

     (35,345     (22,388
                

Production loss - Agricultural

     (202     (9,182
                

Sales - crops, beef cattle, milk and others (Note 5)

     90,580        62,631   

Sales of farm (Note 5)

     71,096     

Cost of sales - crops, beef cattle, milk and others (Note 5)

     (80,770     (56,734

Cost of sales of farms (Note 5)

     (21,652  
                

Sales profit - Agricultural business

     59,254        5,897   
                

Sales and development of properties (Note 5)

     10,979        36,339   

Income from lease and service of offices, shopping centers, hotels, consumer financing and others (Note 5)

     296,298        230,711   

Cost of sales and development of properties (Note 5)

     (5,972     (14,887

Cost of lease and service offices, shopping centers, hotels, consumer financing and others (Note 5)

     (100,925     (97,211
                

Sales profit - Real estate business

     200,380        154,952   
                

Gross profit (loss) - Agricultural business

     59,052        (3,285
                

Gross profit - Real estate business

     200,380        154,952   
                

Gross profit

     259,432        151,667   
                

Selling expenses

     (46,178     (50,922

Administrative expenses

     (60,206     (47,212

Gain from recognition of inventories at net realizable value

     13,453        10,946   

Unrealized gain (Note 4.q.)

     11,935        2,287   

Net gain from retained interest in consumer finance trusts

     5,213        23,509   
                

Operating gain

     183,649        90,275   
                

Amortization of goodwill

     9,599        10,127   

Financial results

    

Generated by assets:

    

Exchange gains

     10,277        7,418   

Interest income (Note 4.r.)

     8,580        1,511   

Other unrealized (loss) gain (Note 4.r.)

     (18,055     7,995   
                

Subtotal

     802        16,924   
                

Generated by liabilities:

    

Exchange loss

     (12,710     (12,424

Loans and convertible notes

     (63,220     (44,440

Other unrealized gain (loss) (Note 4.r.)

     779        (2,508
                

Subtotal

     (75,151     (59,372
                

Financial results, net

     (74,349     (42,448
                

Gain on participation in equity investees

     15,233        93,576   

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

     (5,236     (6,098

Management fee

     (5,761     (6,803
                

Net income before income tax and minority interest

     123,135        138,629   
                

Income tax and minimum presumed income tax

     (23,946     (15,376

Minority interest

     (47,339     (61,426
                

Net income for the period

     51,850        61,827   
                

Earnings per share :

    

Basic net gain per share (Note 9 to the basic financial statements)

     0.10        0.13   

Diluted net gain per share (Note 9 to the basic financial statements)

     0.09        0.12   
                

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

 

  

Alejandro G. Elsztain

Vicepresident II

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 three-month periods beginning on July 1, 2010 and 2009

and ended September 30, 2010 and 2009

(in thousands of pesos)

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

 

     September 30, 2010     September 30, 2009  

Changes in cash and cash equivalents

    

Cash and cash equivalents at the beginning of the year

     175,653        211,676   

Cash and cash equivalents at the end of the period

     503,338        198,340   
                

Increase (decrease) net in cash and cash equivalents

     327,685        (13,336
                

Causes of changes in cash and cash equivalents

    

Operating activities

    

Income for the period

     51,850        61,827   

Income tax

     23,946        15,376   

Adjustments made to reach net cash flow from operating activities

    

Gain on equity investees

     (15,233     (93,576

Minority interest

     47,339        61,426   

Increase in allowances and provisions

     25,272        16,861   

Depreciation and amortization

     44,978        44,525   

Unrealized gain on Inventories

     (11,935     (2,287

Financial results

     45,879        (18,610

(Gain) loss from sales of fixed assets and undeveloped parcels of land

     (3,941     1,491   

Adjustment valuation to net realizable value in other assets

     (13,453     (10,946

Amortization of goodwill

     (9,599     (10,127

Changes in operating assets and liabilities

    

(Increase) decrease in current investments

     (47,529     18,014   

(Increase) decrease in trade accounts receivable, leases and services

     (62,672     22,156   

(Increase) decrease in other receivables

     (91,523     40,147   

(Increase) decrease in inventories

     (21,563     10,205   

Increase in intangible assets

     (1,117     (612

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

     (28,970     (5,439

Increase (decrease) in trade accounts payable

     39,578        (50,083

Dividends collected

     2,116        117   

Increase (decrease) in accrued interest

     39,183        (2,930

Increase (decrease) in other liabilities

     18,907        (59,689
                

Cash flows provided by operating activities

     31,513        37,846   
                

Investing activities

    

Decrease in non-current investments

     384        —     

Increase in interest on equity investees (except IRSA)

     (42,468     (56,189

Acquisition and upgrading of fixed assets

     (25,669     (31,678

Trade receivables of fixed assets collected

     2,652        2,429   

Gain on the sales of fixed assets

     17,918        —     

Income for the acquisition of equity investees, net of cash disposed

     67,477        —     

Payment for subsidiary acquired, net of cash acquired

     (9,969  

(Sale) purchase of undeveloped parcels of lands and other non-current investments

     (34,932     5,467   

Collection (increase) of loans granted

     41        (1,326

Collection of receivables of Subsidiaries, related companies Law No. 19,550 Section 33 and related parties

     15,362        —     

Advances for purchase of Arcos del Gourmet S.A. shares

     (29,438     —     

Payment of financed purchase

     (3,950     —     
                

Cash flows applied to investing activities

     (42,592     (81,297
                

 

  

Alejandro G. Elsztain

Vicepresident II

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 three-month periods beginning on July 1, 2010 and 2009

and ended September 30, 2010 and 2009

(in thousands of pesos)

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

 

     September 30, 2010     September 30, 2009  

Financing activities

    

Issuance of non-convertible notes

     712,373        49,469   

Increase in loans

     113,874        20,074   

Decrease in loans

     (430,850     (45,891

Decrease in mortgages payable

     (25,366     —     

Payment of financial interest

     (31,741     —     

Acquisition of minority interest

     —          6,463   

Contributions from minority shareholders

     474        —     
                

Cash flows provided by financing activities

     338,764        30,115   
                

Net increase (decrease) in cash and cash equivalents

     327,685        (13,336
                

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

 

     September 30, 2010      September 30, 2009  

Items not involving changes in cash and cash equivalents

     

Inventory transferred to property and equipment

     290         244   

Increase in non-current investments through an increase in long-term debts

     —           34,243   

Increase in fixed assets through an increase in trade accounts payable

     5,352         174   

Increase in non-current investments by transitory conversion differences

     24,817         26,447   

Financial costs capitalized in fixed assets

     —           1,963   

Undeveloped parcels of land transferred to inventory

     3,030         —     

Increase in fixed assets through an increase in long term debts

     53,896         —     

Increase in Inventories through a decrease in fixed assets

     —           8,644   

Issuance of certificates of participation

     18,786         4,580   

Decrease in inventories through a decrease in advances from customer

     1,920         —     

Increase in related parties interest through a decrease in other receivables

     36,036         8,838   

Increase in non-current investments through an increase in other liabilities

     6,053         —     

Complementary information

     

Interest paid

     44,005         41,341   

Income tax paid

     6,857         4,026   

 

  

Alejandro G. Elsztain

Vicepresident II

acting as President

 

5


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Consolidated Statements of Cash Flows (continued)

Corresponding to the three-month periods beginning on July 1, 2010 and 2009

and ended September 30, 2010 and 2009

(in thousands of pesos)

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

 

     September 30, 2010     September 30, 2009  

Acquisition of subsidiaries companies

    

Other receivables

     (36,036     —     

Investments

     17,952        —     
                

Acquired assets that do not affect cash, net value

     (18,084     —     
                

Minority interest

     31,369        —     

Goodwill generated by the purchase

     (3,316     —     
                

Purchase value of subsidiaries companies, net of cash acquired

     9,969        —     
                
     September 30, 2010     September 30, 2009  

Sale of Subsidiaries

    

Receivables, leases and services

     278,805        —     

Other receivables

     29,108        —     

Investment

     143,646        —     

Fixed assets

     2,829        —     

Financial loans

     (91,173     —     

Trade account payables

     (204,255     —     

Salaries and social security payable

     (11,221     —     

Tax payables

     (14,654     —     

Other debts

     (62     —     
                

Net value of sale assets not affecting cash

     133,023        —     
                

Advance funds

     (21,252     —     

Impairment and sale of investment

     (12,119     —     

Remaining investment

     (32,175     —     
                

Income from sale of companies, net of funds transferred

     67,477        —     
                

 

  

Alejandro G. Elsztain

Vicepresident II

acting as President

 

6


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Consolidated Financial Statements

For the fiscal years beginning on July 1, 2010 and 2009

and ended June 30, 2010 and 2009

(in thousands of pesos)

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

 

NOTE 1: BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

 

  a) Basis of consolidation

The company consolidated on a line by line basis the Balance Sheet as of September 30, 2010 and 2009 and the Statements of Income and the Statements of Cash Flows for the periods ended as of September 30, 2010 and 2009 with the financial statements of subsidiaries, following procedures established by Technical Resolution No. 21 of the Federación Argentina de Consejos Profesionales de Ciencias Económicas (FACPCE), aproved by Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires and Comisión Nacional de Valores.

Significant transactions and balances with subsidiaries have been eliminated from the consolidation.

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 September 30, 2010 and 2009 of the subsidiary companies Northagro S.A. (“Northagro”), Futuros y Opciones.Com S.A. (“FyO.Com”), Agrotech S.A. (“Agrotech”), Pluriagro S.A. (“Pluriagro”), FyO Trading S.A. (“FyO Trading”), Agrology S.A. and IRSA have been used in order to determine line by line consolidation.

These Financial Statements and the corresponding notes are presented in thousand of Argentine Pesos.

On September 13, 2010, APSA sold its 80% interest in Tarshop S.A. Consequently, the unaudited consolidated balance sheet as of this closing does not include Tarshop and the unaudited statements of income and the unaudited statement of cash flows include such company only for the two-month period when Alto Palermo S.A. (APSA) held control over it. Therefore, the compatibility of consolidated financial statements is affected.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Consolidated Financial Statements (continued)

(in thousands of pesos)

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

 

NOTE 1: (Continued)

 

Relevant totals from the Company’s consolidated financial statements assuming that the sale of share of Tarshop S.A. had taken place on June 30, 2010 and September 30, 2009 disclosed comparatively are shown in the following chart:

Balance Sheet as of June 30, 2010

 

Item

   Published Financial
Statement as of
June 30, 2010
(in pesos)
    Tarshop SA as  of
June 30, 2010
(in pesos)
    Financial Statements in
the event of sale as of
June 30, 2010
(in pesos)
 

Currents assets

     1,453,381        (268,982     1,184,400   

Non-current assets

     5,384,507        28,881        5,413,388   

Total assets

     6,837,888        (240,101     6,597,788   

Current liabilities

     (1,928,717     242,802        (1,685,915

Non-current liabilities

     (1,315,970     (2,701     (1,318,672

Total liabilities

     (3,244,687     240,101        (3,004,587

Minority Interest

     (1,625,008     —          (1,625,008

Shareholders’ Equity

     (1,968,193     —          (1,968,193

Balance Sheet as of September 30, 2009

 

Item

   Published Financial
Statement as of
September 30, 2009
(in pesos)
    Tarshop SA as  of
September 30, 2009
(in pesos)
    Financial Statements in
the event of sale as of
September 30, 2009
(in pesos)
 

Currents assets

     1,070,435        (208,522     861,913   

Non-current assets

     4,998,855        1,537        5,000,392   

Total assets

     6,069,290        (206,985     5,862,305   

Current liabilities

     (1,253,580     182,255        (1,071,325

Non-current liabilities

     (1,423,797     23,290        (1,400,507

Total liabilities

     (2,677,377     205,545        (2,471,832

Minority Interest

     (1,491,629     1,440        (1,490,189

Shareholders’ Equity

     (1,900,284     —          (1,900,284

 

8


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Consolidated Financial Statements (continued)

(in thousands of pesos)

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

 

NOTE 1: (Continued)

 

Statement of income as of September 30, 2009

 

Item

   Published Financial
Statement as of
September 30, 2009
(in pesos)
    Tarshop SA as  of
September 30, 2009
(in pesos)
    Financial Statements in
the event of sale as of
September 30, 2009
(in pesos)
 

Production loss – Agricultural

     (9,182     —          —     

Sale profit – Agricultural Business

     5,897        —          —     

Sale profit – Real State Business

     154,952        (14,617     140,335   

Gross profit

     151,667        (14,617     140,335   

Operating gain

     90,275        (4,550     85,725   

Net income for the period

     61,827        —          61,827   

Statement of cash flows as of September 30, 2009

 

Item

   Published Financial
Statement as of
September 30, 2009
(in pesos)
    Tarshop SA as  of
September 30, 2009
(in pesos)
    Financial Statements in
the event of sale as of
September 30, 2009
(in pesos)
 

Net cash provided by (used in) operating activities

     37,846        (20,123     17,723   

Net cash provided by (used in) investing activities

     (81,297     (22,765     (104,062

Net cash provided by (used in) financing activities

     30,115        42,187        72,302   

 

  b) Comparative information

Certain reclassifications have been made on the Financial Statements as of June 30, 2010 and September 30, 2009 and originally issued for the purpose of your presentation with comparative figures as of September 30, 2010.

 

9


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 2: CORPORATE CONTROL

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

 

Company

   Consolidated direct  and
indirect percentage of voting
shares owned
 

IRSA

     57.49 (1) 

FyO.Com

     65.85   

Agrology S.A.

     100.00   

FyO Trading

     67.09 (2) 

Agrotech S.A.

     100.00 (3) 

Pluriagro S.A.

     100.00 (3) 

Northagro S.A.

     100.00 (3) 

 

  (1) Includes interests of 6.89% of Agrology S.A.
  (2) Includes interests of 63.46% of FyO.Com
  (3) Includes interests of 3% of Agrology S.A.

 

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) 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”.

 

  b) Current investments

 

   

Real Estate Business

As of June 30, 2010, current investments included retained interests in securitized receivables pursuant to the securitization programs of Tarshop S.A. and Metroshop S.A. with a realization term not exceeding twelve months, which have been accounted for under the equity method, net of the corresponding allowances for impairment.

As of the date of issuance of these financial statements, this includes participation certificates in the framework of the program for the securitization of receivables arising from the credit card transactions conducted by Metroshop S.A. (a company proportionally controlled by APSA) maturing within a term of up to 12 months and measured by application of the equity method.

 

  c) Non-current investments

 

   

Real Estate Business

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.

 

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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)

 

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

As of June 30, 2010, included retained interests in securitized receivables of Tarshop S.A., which have been accounted for under the equity method, net of the corresponding allowances for impairment, if applicable. In addition, the interests held in entities over which the Company does not exert control, joint control or significant influence have been measured for accounting purposes at cost plus any declared dividends.

Given the sale of 80% of Tarshop S.A.’s shares described in Note 8 B.2.b, as of the date of issuance of these financial statements, APSA maintains a 20% investment in Tarshop S.A. which has been recognized by application of the equity method on account of the economic group being able to exercise significant influence on its decisions and of the economic group’s intention to maintain it as a long-term investment.

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 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.

Tyrus S.A. and Torodur S. A.:

Uruguay-based Tyrus S.A. and Torodur S.A. have 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 and Torodur’s assets and liabilities were converted into Pesos at the exchange rate in force at the close of the fiscal period/year. 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 “Translation Differences”.

 

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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)

 

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 the period/year.

 

  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.

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.

 

13


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

 

   

Real Estate Business

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

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.

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.

 

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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)

 

 

Assets

   Estimated useful life  (years)
on contract basis
 

Leasehold improvements

     According to the duration of the lease   

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.

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

 

   

Real Estate Business

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

 

   

Concession

Intangible assets include Arcos del Gourmet S.A.´s concession right, which is amortized over the concession life. (see Note 8.B.2.d.).

 

   

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

 

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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)

 

In the framework of the agreement executed with Banco Hipotecario S.A. for the sale of Tarshop S.A.’s shares, APSA has signed a non-compete agreement in favor of BHSA and has thus considered this intangible asset to be non-recoverable.

 

  g) Goodwill, net

 

   

Real Estate Business

Amortizations were calculated through the straight line method on the basis of an estimated useful life considering the weighted 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, net” 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.

 

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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)

 

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

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 or the cost of construction of the units to deliver plus necessary additional costs to transfer the assets to the creditor, the major. Liabilities in kind have been shown in the “Trade accounts payable”.

 

17


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)

 

 

  k) 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 gain or loss 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.

Net operating results from each business unit are disclosed in Note 5.

 

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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)

 

 

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

 

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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)

 

 

   

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.

 

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

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

 

a. Cash and banks

The breakdown for this item is as follow:

 

      September 30,
2010
     June 30,
2010
     September 30,
2009
 

Cash

     2,459         5,005         3,665   

Foreign currency

     80         77         1,261   

Banks in local currency

     69,505         64,435         19,912   

Banks in foreign currency

     20,335         5,458         66,487   

Checks to be deposited

     3,332         5,944         3,938   
                          
       95,711           80,919           95,263   
                          

 

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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)

 

 

b. Investments

The breakdown for this item is as follow:

 

     September 30,
2010
     June 30,
2010
    September 30,
2009
 

Current

       

Investments

       

Mutual Funds (2)

     523,331         153,699        142,525   

Time deposits

     —           —          —     

Government Bonds, Bonds and Notes (1)

       

- Pre 2009 bonds

     —           —          —     

- Pro 2012 bonds

     —           —          —     

- Participation trust certificates

     —           2,846        10,467   

- Certificates of participation - Tarshop Trust

     4,550         124,671        182,442   

- Allowance for impairment of investments

     —           (7,423     (11,444

- Global 2010 bonds

     162         132        133   

- Mortgage Bonds

     480         918        1,511   

Public shares (1)

     11,369         4,075        —     

Others investments (1)

     16         50        53   
                         
     539,908         278,968        325,687   
                         

 

(1) Not considered as cash equivalents in Cash Flow Statements.
(2) As of September 30, 2010 and June 30, 2010 includes Ps. 115,704 and Ps. 58,965 respectively, related to mutual funds not considered as cash equivalents in Cash Flow Statement.

Non-current

Investments on controlled and related companies

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

 

     September 30,
2010
    June 30,
2010
    September 30,
2009
 

Agro-Uranga S.A.

      

Shares

     10,706        10,191        8,682   

Higher property value

     11,179        11,179        11,179   
                        
     21,885        21,370        19,861   
                        

Cactus Argentina S.A. (“Cactus”)

      

Shares

     —          2,071        18,553   

Goodwill

     4,978        4,978        4,015   

Allowance for impairment of Cactus goodwill

     (4,978     (4,978     —     
                        
     —          2,071        22,568   
                        

Exportaciones Agroindustriales Argentinas S.A.

      

Shares

     —          5        99   
                        
     —          5        99   
                        

 

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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)

 

     September 30,
2010
    June 30,
2010
    September 30,
2009
 

BrasilAgro – Companhia Brasileira de Propriedades Agrícolas (BrasilAgro)

      

Shares

     313,616        290,832        245,759   

Higher values (1)

     6,887        6,887        6,887   

Goodwill

     6,965        6,965        3,841   

Negative Goodwill

     (13,240     (14,765     (18,035
                        
     314,228        289,919        238,452   
                        

Banco Hipotecario

      

Shares

     850,693        791,632        647,224   

Higher values (2)

     9,883        10,570        12,370   

Goodwill

     10,914        13,278        20,824   
                        
     871,490        815,480        680,418   
                        

Banco Crédito y Securitización S.A.

      

Shares

     6,094        5,996        5,611   
                        
     6,094        5,996        5,611   
                        

Manibil S.A.

      

Shares

     27,093        27,228        26,176   

Goodwill

     10        10        10   
                        
     27,103        27,238        26,186   
                        

Hersha Hospitality Trust

      

Shares

     211,557        204,553        60,003   
                        
     211,557        204,553        60,003   
                        

 

(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. 258 of higher value intangible assets, Ps. 20,367 of lower value trade account payables and (Ps.15,629) of higher value trade account receivable which belongs to the business combinations of Cresud and Agrology S.A., and Ps. 4,887 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)

 

 

     September 30,
2010
     June 30,
2010
    September 30,
2009
 

Tarshop S.A.

       

Shares

     33,492         —          —     

Higher values (6)

     355         —          —     
                         
     33,847         —          —     
                         

Advances for shares purchases

     53,361         23,735        6,277   
                         
     53,361         23,735        6,277   
                         

Undeveloped parcels of land:

       

- Santa Maria del Plata

     222,372         204,420        204,097   

- Puerto Retiro (1)

     66,486         66,551        66,409   

- Plot of Land Berutti (2)

     54,287         54,237        14,491   

- Plot of Land Caballito

     40,823         40,630        40,626   

- Patio Olmos (3)

     33,218         33,218        33,218   

- Pereiraola

     —           —          24,157   

- Torres de Rosario plot of land

     13,975         14,230        19,048   

- Coto Air Space (5)

     14,672         14,672        14,770   

- Zetol Plot of Land (4)

     14,469         14,348        1,774   

- Canteras Natal Crespo

     6,479         6,465        6,466   

- Pilar

     4,066         4,066        4,066   

- Torres Jardin IV

     —           3,038        3,038   

- Vista al Muelle Plot of Land (4)

     9,900         8,292        52,794   

- Other undeveloped parcels on land

     23,928         26,601        19,287   
                         
     504,675         490,768        504,241   
                         
     2,044,240         1,881,135        1,563,716   
                         
     September 30,
2010
     June 30,
2010
    September 30,
2009
 

Other Investments

       

The breakdown for this item is as follow:

       

Certificates of participation - Tarshop S.A. Trust

     —           18,458        9,413   

Allowance for impairment of investments

     —           (1,165     (645

MAT

     90         90        90   

Coprolán

     21         21        21   

Other investments

     1,146         1,531        95   
                         
          1,257         18,935        8,974   
                         

 

(1) Note 7 B.1.a. to the consolidated financial statements.
(2) Note 9.B.2.c. to the consolidated financial statements.
(3) Note 9.B.2.a. to the consolidated financial statements.
(4) Note 8.B.1.e. to the consolidated financial statements.
(5) Note 9.B.2.d. to the consolidated financial statements.
(6) Corresponds only to the higher value of intangible assets

 

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)

 

c. Trade accounts receivable

The breakdown for this item is as follow:

 

     September 30,
2010
    June 30,
2010
    September 30,
2009
 

Current

      

Debtors from consumer financing

     44,975        245,538        93,661   

Leases, services and real estate receivables

     74,995        76,565        82,820   

Checks to be deposited

     65,858        67,920        69,666   

Debtors from expenses and collective promotion fund

     21,231        19,917        31,376   

Leases, services and real estate receivables under legal proceedings

     43,432        42,117        38,150   

Trade accounts receivable – agricultural business

     61,837        73,399        46,951   

Trade accounts receivable – real estate agricultural business

     3,920        3,162        —     

Debtors from hotel activities

     13,469        11,186        10,172   

Documents receivable

     4,054        4,207        8,797   

Debtors from consumer financing – collection agents

     2,351        4,532        2,098   

Credit cards receivable

     402        877        1,375   

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

     8,083        6,500        4,811   

Less:

      

Allowance for doubtful accounts

     (79,430     (114,855     (120,432
                        
     265,177        441,065        269,445   
                        

Non-current

      

Debtors from consumer financing

     —          25,824        13,842   

Leases, services and real estate receivables

     16,774        15,553        6,454   

Documents receivable

     —          399        —     

Trade accounts receivable – real estate agricultural business

     —          1,597        —     

Less:

      

Allowance for doubtful accounts

     —          (1,250     (1,935
                        
     16,774        42,123        18,361   
                        

 

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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)

 

d. Other receivables

The breakdown for this item is as follow:

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Current

        

Call Option Metropolitan 885 Third Ave. LLC

     —           48,461         45,909   

Receivables from the sale of shares (1)

     —           35,772         34,971   

VAT receivables, net

     65,930         50,994         44,719   

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

     14,137         10,876         10,273   

Prepaid expenses

     42,510         41,003         26,979   

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

     8,538         9,992         17,940   

Guarantee deposits re. securitization programs

     692         5,427         6,565   

Loans granted

     1,158         859         7,693   

Guarantee of defaulted credits

     —           —           3,883   

Gross sales tax credit and others

     10,748         9,013         4,077   

Receivable for services of consumer financing

     —           4,880         2,847   

Guarantee deposits

     3,160         2,611         2,369   

Pre-paid insurance

     —           79         81   

Minimum presumed income tax

     473         1,056         7,438   

Premiums collected

     154         —           212   

Financial operations to liquidate

     770         512         —     

Other tax credits

     132         745         202   

Prepaid leases

     28,907         4,823         15,176   

Expenses to be recovered

     28         235         4,633   

Receivables from stock holders in related companies

     1,371         —           —     

Others

     16,988         24,570         10,258   
                          
     195,696         251,908         246,225   
                          

 

(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 December 2010 and it is supported by a pledge in favor 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)

 

 

     September 30,
2010
    June 30,
2010
    September 30,
2009
 

Non-current

      

Deferred tax

     38,203        66,245        60,959   

Minimum presumed income tax

     93,144        97,025        57,715   

VAT receivables, net

     59,237        65,088        63,051   

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

     14,102        15,010        23,189   

Prepaid expenses

     2,094        2,609        3,684   

Mortgages receivables under legal proceeding

     2,208        2,208        —     

Allowance for doubtful accounts

     (2,208     (2,208     —     

Gross sales tax credit and others

     1,506        935        2,067   

Guarantee deposits re. securitization programs

     —          —          78   

Loans granted

     96        195        —     

Tax on bank account operations

     139        92        —     

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

     1,643        —          —     

Escrow Fidelity National Title

     59,400        —          —     

Call Option – Metropolitan 885 Third Ave. LLC

     49,322        —          —     

Others

     788        1,116        1,765   
                        
     319,674        248,315        212,508   
                        

 

e. Inventories

The breakdown for this item is as follow:

 

     September 30,
2010
     June 30,
2009
     September 30,
2009
 

Current

        

Agricultural business

        

Crops

     35,024         51,660         21,513   

Materials and others

     68,115         37,619         47,078   

Beef cattle

     21,774         16,053         21,753   

Unharvested crops

     21,564         26,807         12,966   

Seeds and fodder

     2,356         3,664         2,111   

Real estate business

        

Credit from barter transaction of Terreno Caballito (Koad)

     28,031         27,115         19,758   

Abril

     1,675         1,839         2,112   

Inventories (hotel business)

     3,210         3,141         2,660   

El Encuentro

     5,487         5,777         2,141   

Horizons

     245,718         211,397         —     

Credit from barter transaction of Terreno Rosario

     9,828         3,379         —     

Other inventories

     1,448         2,841         1,222   

San Martin de Tours

     433         433         433   

Torres Jardin

     3,065         68         68   

Torres Rosario

     —           8,728         —     
                          
     447,728         400,521         133,815   
                          

 

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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)

 

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Non-Current

        

Agricultural Business

        

Beef cattle

     140,739         141,602         72,174   

Real estate business

        

Horizons

     —           —           131,315   

Credit from barter transaction of Terreno Caballito (Cyrsa) (Note 4.t)

     25,155         25,155         23,138   

Credit from barter of transaction of Terreno Caballito (Koad)

     7,227         6,991         15,080   

Credit from barter transaction of Terreno Rosario

     7,742         7,742         11,121   

Credit from barter transaction of Terreno Benavidez

     —              9,611   

El Encuentro

     5,045         6,222         —     

Caballito land

     6,830         6,794         4,429   

Pereiraola lots

     8,200         8,200         —     

Abril

     —           —           824   

Cruceros Buildings

     —           —           6   

San Martin de Tours

     —           —           4   

Other inventories

     1,552         1,512         1,250   
                          
     202,490         204,218         268,952   
                          

 

f. Property and equipment, net

The breakdown for this item is as follows:

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Agricultural business

     454,137         464,164         441,648   

Real estate business

        

Shopping Center

     1,547,557         1,505,363         1,603,485   

Office buildings

     974,618         979,778         988,109   

Hotels

     203,353         204,721         213,912   

Other fixed assets

     136,287         136,195         40,198   
                          
     3,315,952         3,290,221         3,287,352   
                          

 

g. Intangible assets, net

The breakdown for this item is as follow:

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Concession rights

     21,136         41,483         21,888   

Saving expenses of contracts in acquired leases

     9,984         10,625         13,108   

Pre-operating expenses

     23,924         24,040         15,400   

Tarshop’s customers

     —           2,610         2,829   

Non-compete agreement

     —           9,131         —     

Trademarks

     361         646         280   

Arcos del Gourmet S.A. grant

     19,891            —     

Others

     46         50         —     
                          
     75,342         88,585         53,505   
                          

 

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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)

 

h. Goodwill, net

The breakdown for this item is as follow:

 

     September 30,
2010
    June 30,
2010
    September 30,
2009
 

Goodwill

      

IRSA

     40,108        13,040        41,529   

APSA

     18,888        10,866        20,313   

Torre BankBoston

     5,638        5,033        5,846   

Della Paolera 265 and Museo Renault

     3,073        2,755        3,235   

Fibesa S.A.

     —          47        1,882   

Conil S.A.

     507        506        —     

Negative goodwill

      

IRSA

     (352,566     (360,477     (391,511

APSA

     (42,579     (25,635     (45,585

Palermo Invest S.A.

     (43,113     (24,503     (41,816

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

     (8,291     (4,757     (8,926

Mendoza Plaza Shopping S.A.

     (5,579     (5,002     (5,905

Emprendimiento Recoleta S.A.

     (243     (90     (318

Tarshop S.A.

     —          (808     6,743   
                        
     (384,157     (389,025     (414,513
                        

 

i. Trade accounts payable

The breakdown for this item is as follow:

 

    September 30,
2010
    June 30,
2010
    September 30,
2009
 

Current

     

Suppliers

    101,896        224,236        171,021   

Provisions for inputs and other expenses

    87,304        99,593        101,862   

Debt related to purchase of farms

    26,062        25,181        36,363   

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

    3,986        2,815        3,153   

Liabilities in kind “Horizons”

    49,438        46,451        —     

Provisions for harvest expenses

    725        3,284        164   

Others

    2,471        2,183        1,037   
                       
    271,882        403,743        313,600   
                       

Non-Current

     

Suppliers

    10,022        11,210        10,677   

Liabilities in kind “Horizons”

    —          —          46,451   

Debt related to purchase of farms

    —          —          22,682   

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

    14,436        12,158        —     
                       
    24,458        23,368        79,810   
                       

 

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)

 

j. Mortgage payable

The breakdown for this item is as follow:

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Non-Current

        

Mortgage payable Bariloche plots of land

     —           —           985   
                          
     —           —           985   
                          

 

k. Short-term and long-term debts

The breakdown for this item is as follow:

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Current

        

Bank loans

     244,410         253,990         293,619   

Bank Overdrafts

     295,915         609,075         135,671   

Short-term debt

     —           23,019         —     

Foreign financial entities

     5,578         4,921         1,297   

Seller financing

     8,262         15,920         59,546   

Non-convertible Notes – IRSA 2017 (1)

     5,680         15,393         5,486   

Non-convertible Notes Class I

     —              15,468   

Non-convertible Notes Class II

     —           35,324         34,245   

Non-convertible Notes Class III

     768            —     

Non-convertible Notes Class IV

     754            —     

Non-convertible Notes – IRSA 2020

     12,572            —     

Non-convertible Notes – APSA US$ 120 M.

     8,210         2,702         7,831   

Convertible Notes – APSA 2014 US$ 50 M. (Note 4.t.)

     1,227         2,719         1,174   

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

     44,358         44,165         —     

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

     26,068         25,813         —     

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

     28,171         26,695         28,830   
                          
     681,973         1,059,736         583,167   
                          

 

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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)

 

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Non-Current

        

Non-convertible Notes Class III

     35,532         

Non-convertible Notes Class IV

     70,422         

Non-Convertible Notes IRSA 2017 (1)

     444,791         440,670         428,045   

Convertible Notes – APSA US$ 120 M.

     264,254         261,663         254,333   

Bank loans

     53,157         52,767         77,488   

Non-Convertible Notes IRSA 2020

     574,925            —     

Convertible Notes – APSA 2014 US$ 50 M. (Note 4.t.)

     61,237         60,782         59,399   

Non-convertible Notes – APSA 2012 154 M.

     25,067         24,848         50,607   

Seller financing

     64,750         12,436         8,647   
                          
     1,594,135         853,166         878,519   
                          

 

l. Salaries and social security payable

The breakdown for this item is as follow:

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Provisions for vacation and annual bonus

     22,137         47,967         22,110   

Social security taxes payable

     18,212         11,994         12,857   

Salaries payable

     423         1,019         529   

Others

     2,370         504         2,025   
                          
     43,142         61,484         37,521   
                          

 

m. Taxes payable

The breakdown for this item is as follow:

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Current

        

VAT payable, net

     8,068         17,308         46,374   

Tax payment facilities plan for VAT

     —           13,235         37,428   

Minimum presumed income tax

     8,273         14,127         15,296   

Income tax provision, net

     36,354         38,213         6,070   

Tax on shareholders’ personal assets

     6,199         4,360         5,822   

Provisions – Gross sales tax payable

     6,359         4,729         4,350   

ABL moratorium

     142         815         —     

Minimum presumed income tax moratorium

     —           —           883   

Tax payment facilities plan for income tax

     1,609         1,559         13,083   

Tax payment facilities plan for minimum presumed income tax

     —           —           482   

Tax withholdings

     5,200         12,482         9,296   

Property tax payable

     1         82         212   

Gross revenue tax moratorium

     1,279         485         458   

Others

     5,307         1,163         6,080   
                          
     78,791         108,558         145,834   
                          

 

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)

 

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Non-current

        

Deferred income tax

     242,088         248,722         179,736   

Income tax

     20,858            1,492   

Income tax payable moratorium

     16,374         19,145         20,333   

Tax on shareholders’ personal assets moratorium

     2,315         2,392         2,620   

Gross sales tax payable

     —           —           1,138   

Gross revenue tax moratorium

     1,628         1,320         2,234   

Tax moratorium – ABL

     —           2,372         —     

Minimum presumed income tax

     8,756         12         4,149   
                          
     292,019         273,963         211,702   
                          

 

n. Advances from customers

The breakdown for this item is as follow:

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Current

        

Admission rights

     52,434         51,194         47,234   

Advanced payments from customers

     148,461         141,375         47,439   

Leases and service advances (1)

     25,691         23,895         21,834   
                          
     226,586         216,464         116,507   
                          

Non-current

        

Admission rights

     59,199         59,469         61,463   

Advanced payments from customers

     —           —           64,419   

Leases and service advances (1)

     29,913         30,924         36,213   
                          
     89,112         90,393         162,095   
                          

 

(1) See note 12.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 September 30, 2010 and June 30, 2010 includes advances of Ps.8,882 and Ps. 9,501 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.

 

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)

 

o. Other liabilities

The breakdown for this item is as follow:

 

    September 30,
2010
    June 30,
2010
    September 30,
2009
 

Current

     

Lower value of acquired contracts

    378        1,929        14,544   

Payables to Nationals Park Administration

    2,608        2,589        10,175   

Debt to purchase of investments

    —          —          4,658   

Guarantee deposits

    6,440        5,243        4,739   

Additional capital contribution payable

    —          —          2,298   

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

    26,987        26,117        5,826   

Loans with shareholders of related parties

    —          —          2,265   

Premiums collected

    4,001        595        362   

Debt to former minority shareholder of Tarshop S.A.

    3,556        3,529        —     

Management agreement provision (Note 4.t.)

    8,028        7,267        586   

Operations to liquidate

    319        178        —     

Contributed leasehold improvements to be accrued and unrealized gains

    451        516        524   

Advance from sale of Tarshop S.A.’s shares (Note 4.t)

    —          21,070        —     

Loan with FyO.Com’s minority shareholder

    47        134        134   

Others

    5,859        4,086        8,406   
                       
    58,674        73,253        54,517   
                       
    September 30,
2010
    June 30,
2010
    September 30,
2009
 

Non-current

     

Loans with shareholders of related parties

    20,564        19,989        63,315   

Contributed leasehold improvements to be accrued and unrealized gains

    9,396        9,687        10,073   

Guarantee deposits

    2,667        4,073        4,711   

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

    2,531        3,322        —     

Debts for the purchase of investments

      —          —     

Hersha’s Option payable

    18,814        16,693        —     

Additional capital contribution payable

    5,940        5,897        —     

Advance for concession of rights

    3,222        3,166        —     

Lowest value of acquired contracts

    —          —          378   

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

    4,125        20        20   

Interest in Subsidiaries, related companies Law No. 19,550 Section 33 and related parties

    624        —          —     

Others

    7,778        2,525        3,734   
                       
    75,661        65,372        82,231   
                       

 

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)

 

p. Provisions for lawsuits and contingencies

The breakdown for this item is as follow:

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Current

        

Lawsuits and contingencies

     1,347         5,479         2,434   
                          
     1,347         5,479         2,434   
                          

Non-current

        

Lawsuits and contingencies

     9,620         9,708         8,455   
                          
     9,620         9,708         8,455   
                          

 

q. Unrealized gain

The breakdown for this item is as follow:

 

     September 30,
2010
    September 30,
2009
 

Unrealized gain on inventories - Beef cattle

     16,127        28   

Unrealized (loss) gain on inventories - Crops, raw materials and MAT

     (4,192     2,259   
                

Total unrealized gain

     11,935        2,287   
                

 

r. Financial results, net

The breakdown for this item is as follow:

 

     September 30,
2010
    September 30,
2009
 

Generated by assets

    

Income interest

    

Income interest

     5,173        3,171   

Interest for asset discount

     3,407        (1,660
                

Sub-total

     8,580        1,511   
                

Other Unrealized gain (loss)

    

Conversion differences

     551        683   

Gain on hedging operations

     324        2.808   

Tax on bank account operations

     (2.059     (1.731

(Loss) gain on financial operations

     (320     6.230   

Others

     (16.551     5   
                

Sub-total

     (18.055     7.995   
                

Generated by Liabilities

    

Other Unrealized gain (loss)

    

Others

     779        (2.508
                

Sub-total

     779        (2.508
                

 

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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)

 

s. Other income and expenses, net

The breakdown for this item is as follow:

 

     September 30,
2010
    September 30,
2009
 

Other incomes:

    

Recovery of allowances

     9        73   

Lawsuits and contingencies

     97        28   

Management fee

     139        —     

Others

     453        569   
                

Sub-total Other Income

     698        670   
                

Other Expenses:

    

Tax on shareholders’ personal assets

     (3.436     (3.439

Lawsuits and contingencies

     (388     —     

Unrecoverable VAT receivable

     (445     (130

Donations

     (1.539     (1.532

Loss on the sale of other fixed assets

     (21     —     

Others

     (105     (1.667
                

Sub-total Other Expenses

     (5.934     (6.768
                

Total Other income and expenses, net

     (5.236     (6.098
                

 

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 4: (continued)

 

t. Subsidiaries related companies Law No. 19,550 Section 33 and others related parties:

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

As of September 30, 2010

 

    Current
Trade  accounts
receivable
    Current
Other
receivables
    Non
current
Other
receivables
    Inventories
Receivable
caballito  plot
of/and barter
    Current
Trade
accounts
payable
    Non-current
Trade
accounts
payable
    Short
term
debt
    Long
term
debt
    Current
Other
liabilities
    Non-current
Other
liabilities
 

Agro –Uranga S.A. (2)

    —          —          —          —          —          —          —          —          (101     —     

Banco Hipotecario
S.A. (2)

    217        —          —          —          (12     —          —          —          —          —     

Baicom Networks S.A. (2)

    —          7        387        —          —          —          —          —          —          —     

BrasilAgro (2)

    256        —          —          —          —          —          —          —          —          —     

Cactus (2)

    623        14        —          —          (226     —          —          —          —          —     

Canteras Natal Crespo
S.A. (4)

    332        35        —          —          —          —          —          —          —          —     

Consorcio Dock del Plata
S.A. (3)

    693        161        —          —          (113     —          —          —          (3     —     

Consorcio
Libertador
S.A. (3)

    —          69        —          —          (157     —          —          —          (4     —     

Consorcio Torre Boston
S.A. (3)

    1,533        710        —          —          (1,158     —          —          —          —          —     

Consultores Asset Management
S.A. (3)

    929        19        —          —          (7     —          —          —          (8,028     —     

Cresca S.A. (4)

    267        6,392        —          —          —          —          —          —          —          —     

Cyrsa S.A. (4)

    1,671        —          —          25,155        (1,006     —          —          —          —          —     

Directors (3)

    2        360        —          —          (36     —          —          —          (25,755     (4,125

Elsztain Managing Partners
Lim (3)

    —          —          —          —          —          —          —          —          (35     —     

Estudio Zang, Bergel &
Viñes (3)

    —          29        —          —          (1,110     —          —          —          —          —     

Fundación
IRSA (3)

    43        1        —          —          —          —          —          —          (1,073     —     

Inversiones Financieras del Sur S.A. (5)

    —          298        —          —          —          —          —          —          —          —     

IRSA Developments
LP (3)

    —          —          —          —          —          —          —          —          (8     —     

IRSA Real Estate Strategies
LP (3)

    —          —          —          —          —          —          —          —          (8     —     

Hersha Hospitality
Trust (2)

    —          2,102        —          —          —          —          —          —          —          —     

Metroshop
S.A. (1)

    —          350        —          —          —          (14,436     —          —          —          —     

Museo de los niños
S.A. (3)

    929        —          —          —          (5     —          —          —          —          —     

Military S.A.

    —          9        —          —          —          —          —          —          —          —     

Parque Arauco S.A. (3)

    —          —          —          —          —          —          (1,225     (31,271     —          —     

Credits to employees (3)

    111        2,875        —          —          (150     —          —          —          —          —     

Puerto Retiro
S.A. (2)

    60        31        —          —          (6     —          —          —          —          —     

Tarshop S.A. (3)

    417        675        13,715        —          —          —          —          —          —          —     
                                                                               

Total

    8,083        14,137        14,102        25,155        (3,986     (14,436     (1,225     (31,271     (35,015     (4,125
                                                                               

 

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

 

35


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, 2010

 

    Current
Trade
accounts
receivable
    Current
Other
receivables
    Non current
Other
receivables
    Inventories
Receivable
caballito plot
of/and barter
    Current
Trade
accounts
payable
    Non-current
Trade
accounts
payable
    Short
term
debt
    Long
term
debt
    Current
Other
liabilities
    Non-current
Other
liabilities
 

Agro –Uranga
S.A. (2)

    7        39        —          —          (36     —          —          —          —          —     

Banco Hipotecario S.A. (2)

    354        —          —          —          (168     —          —          —          (21,070     —     

Baicom Networks S.A. (2)

    —          1        323        —          —          —          —          —          —          —     

BrasilAgro (2)

    —          —          —          —          (8     —          —          —          —          —     

Cactus (2)

    304        —          —          —          (632     —          —          —          —          —     

Canteras Natal Crespo
S.A. (4)

    318        50        —          —          —          —          —          —          —          —     

Consorcio Dock del Plata
S.A. (3)

    883        2        —          —          (10     —          —          —          (3     —     

Consorcio Libertador
S.A. (3)

    —          20        —          —          (66     —          —          —          (4     —     

Consorcio Torre Boston S.A. (3)

    595        205        —          —          —          —          —          —          —          —     

Consultores Asset Management
S.A. (3)

    918        29        —          —          (7     —          —          —          (7,267     —     

Cresca S.A. (4)

    182        5,219        —          —          —          —          —          —          —          —     

Cyrsa S.A. (4)

    1,669        8        —          25,155        (1,006     —          —          —          —          —     

Directors (3)

    2        169        —          —          (36     —          —          —          (24,994     (20

Estudio Zang, Bergel &
Viñes (3)

    —          22        —          —          (708     —          —          —          —          —     

Fundación
IRSA (3)

    41        5        —          —          —          —          —          —          (1,073     —     

Inversiones Financieras del Sur S.A. (5)

    —          95        —          —          —          —          —          —          —          —     

Hersha Hospitality Trust (2)

    —          2,087        —          —          —          —          —          —          —          —     

Metroshop S.A. (1)

    —          —          14,687        —          —          (12,158     —          —          —          —     

Museo de los niños
S.A. (3)

    1,111        —          —          —          (5     —          —          —          —          —     

Parque Arauco
S.A. (3)

    —          —          —          —          —          —          (2,716     (60,822     —          —     

Credits to employees (3)

    57        2,894        —          —          (128     —          —          —          —          —     

Puerto Retiro
S.A. (2)

    59        31        —          —          (5     —          —          —          —          —     

IRSA Developments LP (3)

    —          —          —          —          —          —          —          —          (8     —     

IRSA Real Estate Strategies LP (3)

    —          —          —          —          —          —          —          —          (8     —     

Elsztain Managing Partners Lim (3)

    —          —          —          —          —          —          —          —          (27     —     
                                                                               

Total

    6,500        10,876        15,010        25,155        (2,815     (12,158     (2,716     (60,822     (54,454     (20
                                                                               

 

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

 

36


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 September 30, 2009

 

    Current
Trade
accounts
receivable
    Current
Other
receivables
    Non current
Other
receivables
    Inventories
Credit form  barter
transaction of
Terreno Caballito
    Current
Trade
accounts
payable
    Short
term
debt
    Long
term
debt
    Current
Other
liabilities
    Non-current
Other
liabilities
 

Agro –Uranga S.A. (2)

    —          —          —          —          (246     —          —          —          —     

Banco Hipotecario S.A. (2)

    131        —          —          —          —          —          —          —          —     

BrasilAgro (2)

    17        —          —          —          —          —          —          —          —     

Cactus (2)

    21        11        —          —          (722     —          —          —          —     

Canteras Natal Crespo
S.A. (4)

    208        939        —          —          —          —          —          —          —     

Consorcio Dock del Plata S.A. (3)

    514        50        —          —          —          —          —          —          —     

Consorcio
Libertador S.A. (3)

    452        17        —          —          (90     —          —          —          —     

Consultores Asset Management
S.A. (3)

    701        3        —          —          (10     —          —          —          —     

Cresca S.A. (4)

    —          2,013        —          —          —          —          —          —          —     

Cyrsa S.A. (4)

    1,615        19        —          23,138        (983     —          —          —          —     

Directors (3)

    —          4,747        —          —          —          —          —          (4,751     (20

Estudio Zang, Bergel &
Viñes (3)

    —          29        —          —          (1,058     —          —          (3     —     

Fundación IRSA (3)

    25        2        —          —          —          —          —          (1,072     —     

Metroshop S.A. (1)

    —          2,265        23,185        —          —          —          —          —          —     

Metroshop 885 Third Avenue LLC (3)

    67        —          —          —          —          —          —          —          —     

Museo de los niños S.A. (3)

    914        —          —          —          (5     —          —          —          —     

Parque Arauco S.A. (3)

    —          —          —          —          —          (2,716     (60,822     —          —     

Credits to employees (3)

    6        156        4        —          (26     —          —          —          —     

Puerto Retiro S.A. (2)

    39        13        —          —          —          —          —          —          —     

Rummaala (2)

    101        1        —          —          (13     —          —          —          —     

Vanker Hills S.A. (2)

    —          8        —          —          —          —          —          —          —     
                                                                       

Total

    4,811        10,273        23,189        23,138        (3,153     (2,716     (60,822     (5,826     (20
                                                                       

 

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

 

37


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 fiscal years ended September 30, 2010 and 2009, held with related companies, persons and shareholders are as follows:

As of September 30, 2010

 

     Gain
from
leases
     Beef
cattle
expenses
    Fees     Interest
Gain
(loss)
    Other
income
and expenses
and current
personal

asset’s tax
    Administration
services
     Sales and
fees for
shared
services
     Donations  

Shareholders In general (5)

     —           —          —          —          (83     —           —           —     

Agro –Uranga S.A. (2)

     —           —          —          —          14        —           —           —     

Cactus (2)

     —           (928     —          —          10        26         —           —     

Canteras Natal Crespo S.A. (4)

     —           —          —          —          —          —           12         —     

Consorcio Torre Boston (3)

     —           —          —          —          —          —           80         —     

Consorcio Libertador S.A. (3)

     3         —          —          —          —          —           31         —     

Consorcio Dock del Plata S.A. (3)

     —           —          —          —          —          —           39         —     

Consultores Asset Management
S.A. (3)

     —           —          (1,250     —          —          —           —           —     

Cresca S.A. (4)

     —           —          —          —          —          116         —           —     

Cyrsa S.A. (4)

     1         —          —          —          —          —           —           —     

Directors (3)

     —           —          (11,576     —          —          —           —           —     

Estudio Zang, Bergel & Viñes (3)

     —           —          (2,886     —          —          —           —           —     

Fundación IRSA (3)

        —          —          —          —          —           —           (496

Parque Arauco S.A. (3)

     —           —          —          (1,978     —          —           —           —     

Credits to employees (3)

     —           —          —          34        —          —           —           —     

Tarshop S.A

     686         —          —          80        —          —           121         —     
                                                                   

Total

     690         (928     (15,712     (1,864     (59     142         283         (496
                                                                   

 

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

 

38


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 September 30, 2009

 

     Gain
from
leases
     Beef
cattle
expenses
    Fees     Interest
Gain/
(loss)
    Other
income

and expenses
and current
tax on
shareholders’
personal
assets
    Administration
services
     Salaries
and
wages
    Sales and
fees for
shared
services
     Donations  

Shareholders in general (5)

     —           —          —          —          (116     —           —          —           —     

Agro –Uranga S.A. (2)

     —           —          —          —          7        —           —          —           —     

Cactus (2)

     —           (851     —          9        7        42         —          —           —     

Canteras Natal Crespo
S.A. (4)

     —           —          —          25        —          —           —          12         —     

Consorcio Libertador
S.A. (3)

     3         —          —          —          —          —           —          6         —     

Consultores Asset Management
S.A. (3)

     —           —          (6,803     —          —          —           —          —           —     

Cyrsa S.A. (4)

     39         —          —          —          —          —           —          —           —     

Directors (3)

     —           —          (3,041     (2     —          —           (132     —           —     

Estudio Zang, Bergel &
Viñes (3)

     —           —          (818     —          —          —           —          —           —     

Fundación IRSA (3)

     —           —          —          —          —          —           —          —           645   

Inversiones Financieras del Sur S.A. (5)

     —           —          —          151        —          —           —          —           —     

Credits to employees (3)

     —           —          —          35        —          —           —          —           —     
                                                                           

Total

     42         (851     (10,662     218        (102     42         (132     18         645   
                                                                           

 

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

 

39


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: SEGMENT REPORTING

As of September 30, 2010 :

 

    Agricultural     Real estate  
    Crops     Beef
cattle
    Milk     Feed
lot
    Sale of
farms
    Others     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

    20,295        2,789        2,758        9,301        —          —          —          —          35,143        —          —          —          —          —          —          —          35,143   

Cost of production

    (19,502     (3,369     (5,701     (6,773     —          —          —          —          (35,345     —          —          —          —          —          —          —          (35,345
                                                                                                                                       

Production profit (loss)

    793        (580     (2,943     2,528        —          —          —          —          (202     —          —          —          —          —          —          —          (202
                                                                                                                                       

Sales

    49,082        4,379        15,192        8,272        —          71,096        13,655        —          161,676        10,979        40,551        149,342        48,565        57,840        —          307,277        468,953   

Cost of sales

    (42,548     (4,225     (15,348     (8,272     —          (21,652     (10,377     —          (102,422     (5,972     (8,629     (42,616     (30,265     (19,415     —          (106,897     (209,319
                                                                                                                                       

Sales profit (loss)

    6,534        154        (156     —          —          49,444        3,278        —          59,254        5,007        31,922        106,726        18,300        38,425        —          200,380        259,634   
                                                                                                                                       

Gross (Loss) profit

    7,327        (426     (3,099     2,528        —          49,444        3,278        —          59,052        5,007        31,922        106,726        18,300        38,425        —          200,380        259,432   
                                                                                                                                       

Selling expenses

    (8,381     (411     (551     (222     —          —          (1,955     —          (11,520     (696     (971     (8,575     (5,128     (19,288     —          (34,658     (46,178

Administrative expenses

    (3,530     (1,200     (2,595     (350     —          (2,163     (778     —          (10,616     (9,672     (9,783     (15,183     (9,673     (5,279     —          (49,590     (60,206

Gain from recognition of inventories at net realizable value

    —          —          —          —          —          —          —          —          —          13,453        —          —          —          —          —          13,453        13,453   

Unrealized (loss) gain

    (4,063     20        16,127        —          —          —          (149     —          11,935        —          —          —          —          —          —          —          11,935   

Net gain from retained interest in consumer finance trusts

    —          —          —          —          —          —          —          —          —          —          —          —          —          5,213        —          5,213        5,213   
                                                                                                                                       

Operating result

    (8,647     (2,017     9,882        1,956        —          47,281        396        —          48,851        8,092        21,168        82,968        3,499        19,071        —          134,798        183,649   
                                                                                                                                       

Assets

    364,532        490,267        263,573        46,467        617        3,920        17,458        279,746        1,466,580        731,114        1,135,980        1,931,219        236,368        17,485        1,617,046        5,669,212        7,135,792   

Liabilities (2)

    42,773        26,526        356        1,072        223        —          5,824        757,031        833,805        363,954        586,705        1,183,994        232,830        28,523        217,589        2,613,595        3,447,400   

Non-current investments in other companies (1)

    18,320        314,228        178        3,386        —          —          —          —          336,112        27,103        —          —          —          33,847        1,089,142        1,150,092        1,486,204   

Increases and transfers of property and equipment and intangible assets

    1,858        2,433        4,506        201        —          —          138        680        9,816        14        356        14,760        2,040        90        —          17,260        27,076   

Amortization and depreciation

    1,225        117        429        174        —          —          58        191        2,194        97        7,485        30,878        3,764        560        —          42,784        44,978   

 

(1) The balance corresponds to equity interest in BrasilAgro, Agro – Uranga S.A., Banco Hipotecario S.A., Banco Crédito and Securitización S.A., Manibil S.A., Tarshop S.A. and Hersha Hospitality Trust.
(2) The balance corresponds to equity interest in Cactus; Exportaciones Agroindustriales S. A., included in other debts.

 

40


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: (continued)

 

As of September 30, 2009 :

 

    Agricultural     Real estate  
    Crops     Beef
cattle
    Milk     Feed
lot
    Others     Sale
of

Farms
    Non
Operating
(1)
    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

    5,223        1,134        1,555        5,294        —          —          —          —          13,206        —          —          —          —          —          —          —          13,206   

Cost of production

    (8,831     (1,567     (6,574     (5,416     —          —          —          —          (22,388     —          —          —          —          —          —          —          (22,388
                                                                                                                                       

Production loss

    (3,608     (433     (5,019     (122     —          —          —          —          (9,182     —          —          —          —          —          —          —          (9,182
                                                                                                                                       

Sales

    35,341        2,218        6,035        4,693        —          14,344        —          —          62,631        36,339        41,182        117,062        29,233        43,234        —          267,050        329,681   

Cost of sales

    (33,050     (1,711     (5,669     (4,693     —          (11,611     —          —          (56,734     (14,887     (8,700     (38,122     (22,649     (27,740     —          (112,098     (168,832
                                                                                                                                       

Sales profit (loss)

    2,291        507        366        —          —          2,733        —          —          5,897        21,452        32,482        78,940        6,584        15,494        —          154,952        160,849   
                                                                                                                                       

(Loss) gross profit

    (1,317     74        (4,653     (122     —          2,733        —          —          (3,285     21,452        32,482        78,940        6,584        15,494        —          154,952        151,667   
                                                                                                                                       

Selling expenses

    (5,701     (440     (366     (94     —          (457     —          —          (7,058     (1,938     (2,707     (7,586     (3,402     (28,231     —          (43,864     (50,922

Administrative expenses

    (6,054     (1,135     (3,390     (598     —          (465     —          —          (11,642     (6,148     (7,761     (9,753     (6,447     (5,165     (296     (35,570     (47,212

Gain from recognition of inventories at net realizable value

    —          —          —          —          —          —          —          —          —          10,946        —          —          —          —          —          10,946        10,946   

Unrealized gain

    2,367        (13     28        —          —          (95     —          —          2,287        —          —          —          —          —          —          —          2,287   

Net gain from retained interest in consumer finance trusts

    —          —          —          —          —          —          —          —          —          —          —          —          —          23,509        —          23,509        23,509   
                                                                                                                                       

Operating results

    (10,705     (1,514     (8,381     (814     —          1,716        —          —          (19,698     24,312        22,014        61,601        (3,265     5,607        (296     109,973        90,275   
                                                                                                                                       

Assets

    435,807        278,729        194,153        46,477        22,576        7,880        7,382        121,642        1,114,646        552,732        1,030,511        1,860,496        238,076        127,475        1,145,354        4,954,644        6,069,290   

Liabilities

    9,387        93,133        1,873        642        716        6,089        —          347,950        459,790        289,672        360,801        995,973        202,587        233,456        135,098        2,217,587        2,677,377   

Non current investments in other companies (1)

    17,164        238,452        —          2,697        22,568        0        —          99        280,980        26,186        —          —          —          —          746,032        772,218        1,053,198   

Increases and transfers of property and equipment

    5,553        3,778        3,777        187        —          201        —          1        13,497        —          —          258,999        —          3,635        —          262,634        276,131   

Amortization and depreciation

    861        72        470        170        —          140        —          381        2,094        174        6,182        29,939        4,368        1,768        —          42,431        44,525   

 

(1) The balance corresponds to equity interest in BrasilAgro, Cactus, Agro Uranga S.A., 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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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: 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.

Irrespective of the above, Cactus is carrying out a plan to improve its relationship with the community of Villa Mercedes, seeking to strengthen the company’s position as a valuable member in the social and economic activity in the region, whose purpose is that the scheduled moving be reconsidered by municipal authorities.

 

  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

 

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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 6: (continued)

 

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.

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. On April, 2010 LLR paid Ps. 13,122 in cash and bonds.

After LLR’s filing was duly notified to the plaintiff, the latter in turn stated that the amounts deposited were in line with the settlement that, having taken place on June 30, 2007, was eventually approved in the framework of these proceedings on December 5, 2007. As a result, the Argentine Agency of National Parks argued that the interest accrued until actual payment were to be adjusted by application of the Argentine Central Bank’s borrowing interest rate. As estimated by the Argentine Agency of National Parks, the outstanding balance, to be deposited by LLR would amount to US$ 659.

 

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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 6: (continued)

 

On June 10, 2010, LLR was notified of the newly-performed settlement: LLR filed an objection against it in due time and manner. On June 17, 2010, the court ordered that the plaintiff was to be served notice of the objection.

On August 6, 2010, the plaintiff filed a response to the most recent service of process. On September 10, 2010, the trial court judge resolved that the amount deposited by Llao Llao Resorts S.A. is not sufficient to cover the amount of the payment order. An appeal against this resolution was filed on behalf of Llao Llao Resorts S.A. alleging that there has been a material error incurred by the trial court.

In addition, on September 22nd, 2010, the judge calculated that the fees payable to the auctioneer who took part in the proceedings amount to Ps. 1.8 million. As soon as Llao Llao Resorts S.A. is officially notified of the fees as calculated by the court, it is going to lodge an appeal against them for considering them excessively high.

Based on the information provided by the legal advisors litigating these proceedings, LLR has booked Ps. 2,608 under “Other current liabilities – Payables to National Parks Administration”, that is, the amount in Pesos equivalent to the interest claimed by the plaintiff.

 

NOTE 7: RESTRICTED ASSETS

 

  A. Agricultural Business

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 9.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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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)

 

  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.

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.

 

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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 7: (continued)

 

  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 LIBO 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. As compensation, 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 September 30, 2010  

República Building

     218,602   

Terreno Caballito

     36,938   

Terreno Bariloche

     21,900   

Terreno Zetol

     14,469   

Suipacha 652

     10,823   

Terreno Vista al Muelle

     9,900   

Terreno Caballito

     6,830   

 

  d. IRSA maintains a pledge over CYRSA’s shares

 

  e.

To guarantee due compliance with all the covenants assumed by Liveck S.A., and the minority shareholder of Zetol S.A.’s and Vista al Muelle S.A.’s pursuant to the stock purchase agreement for Vista al Muelle S.A.’s shares executed on June 11, 2009 and the Addendums to the

 

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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 7: (continued)

 

 

Agreement, as well as payment of any possible 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.

 

  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.

 

  h. IRSA carries a mortgage on the property designated as “Edificio República” in connection with the loan granted by Banco Macro for the acquisition of said property.

 

  2. APSA

 

  a. The Property and equipment 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 guarantee deposits resecuritization programs included the contingency and expenses funds of financial trust as credit protection for investors that as of June 30, 2010 amounted to Ps. 4,749. They were restricted availability credits until settlement in accordance with the respective prospectus.

 

  c. As of September 30, 2010 under other current receivables, APSA has deposits that are restricted under due to different court attachments.

 

  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 September 30, 2010 amounts to Ps. 36,938 (disclosed in other “Non-current investments- Undeveloped parcels of land”).

 

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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 7: (continued)

 

  e. Other current investments account, as of June 30, 2010 included BONTE 2006 bonds for Ps. 34; which were deposited as rental guarantee.

 

  f. As of June 30, 2010, Tarshop S.A. had 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, XLIV, XLVII, LVII and LIX (loan of Ps. 15,371).

- To Banco Itaú Buen Ayre S.A., CP related to the Fideicomisos Financieros Tarjeta Shopping Series XXXIX and XL (loan of Ps. 3,724).

- To Banco Supervielle S.A., CP related to the Fideicomisos Financieros Tarjeta Shopping Series XXXII, XXXVIII y L, (loan of Ps. 7).

- To Banco Hipotecario S.A., CP related to Fideicomisos Financieros Tarjeta Shopping Series XLVII, XLIX y LVI, (loan of Ps. 20,149).

 

  g. 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.” (“APSA”), the building located at Av. Virrey Toledo 702, Salta, has been encumbered for an amount of Ps. 180 (disclosed in “Property and equipment”).

 

  h. 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.

On September 30, 2010, the last payment of the VDF’s issued by the Financial Trust was made. At present, such Financial Trust is in the process of liquidation.

 

  i. As regards the barter commitment described in Note 9.B.2.d.), the delivery and title deed of Air Space Coto is compromised.

 

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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 7: (continued)

 

  j. As of June 30, 2010, 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. 217.

 

NOTE 8: ACQUISITION, CONSTITUTION AND RESTRUCTURING OF COMPANIES

 

  A. Agricultural Business

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 and possibly of up to 100,000 hectares also located in Paraguay, which are derived from the purchase option granted by Carlos Casado to Cresca S.A. It should be mentioned that this option was exercised on September 3rd, 2008.

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.

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.

 

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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 8: (continued)

 

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. This area will be confirmed when measured before executing the title deed.

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 were paid on December 1, 2010 and US$ 0.5 million, on March 1, 2011.

Finally, on June 29, 2010, the title deed was executed for 3,646 hectares.

 

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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 8: (continued)

 

  B. Real Estate Business

 

  1. IRSA

 

  a. Constitution of CYRSA – Horizons Project

In January 2007, IRSA acquired two adjacent plots of land adjacent 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 million, from which US$ 30.3 million will be canceled by handing over certain units of the building to be constructed. As security for compliance, Rummaala S.A. shares were pledged and the Building located in Suipacha 652 (owned property) 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.

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 executing the agreements to purchase reaching to date 100% of units to be marketed and received advances, which are disclosed in “Customer advances”.

The purchase-sale price 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 plans:

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

 

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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 8: (continued)

 

- 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 September 30, 2010, the percentage of completion of the Horizons project was 86.98% 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, IRSA, through Real Estate Investment Group L.P. (REIG) acquired 5.7 million shares representing approximately 10.4% of Hersha’s common stock and a call option that matures on August 4, 2014 to purchase an additional 5.7 million shares at an exercise price of US$ 3.00 per share. Under the agreement, if starting on August 4, 2011 the quoted market price of Hersha´s share were to exceed US$ 5.00 per share during 20 consecutive trading sessions, Hersha may settle the call option by issuing and delivering a variable amount of shares to be determined in accordance with certain market values. The total purchase price paid was US$ 14.3 million. As part of the agreement, IRSA’s Chairman and CEO, Mr. Eduardo S. Elsztain, has been appointed to Hersha’s Board of Trustees.

In January 2010 and March 2010, REIG purchased 8,653,917 additional shares of Hersha’s common stock for an aggregate purchase price of US$ 30.8 million. (4,789,917 for US$ 3.00 per share and 3,864,000 for US$ 4.25 per share).

As of September 30, 2010 IRSA’s interest in Hersha represents 10.85%. On the other hand, upon exercise of the call option and assuming any Company’s interest is not diluted due to newly issued shares, IRSA’s interest in Hersha would be 14.34%. IRSA accounts for its investment in Hersha at cost while the call option has been accounted for at its fair value.

 

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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 8: (continued)

 

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 77 hotels throughout the United States of America totaling approximately 9,951 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, a Delaware-based limited liability company, which main asset is a rental office building in New York City known as the “Lipstick Building” and debt related to that asset. The transaction included the acquisition of (i) a put right exercisable until July 2011 to sell a 50% of the interest acquired at the same value paid plus interest at 4.5% per annum and (ii) a right of first offer to acquire a 60% portion of the 5% interest of the shareholding. The total price paid was US$ 22.6 million.

During 2009 and in the context of the financial crisis and shrinkage of the real estate market in New York, Metropolitan incurred significant losses, which resulted in negative equity mainly due to an impairment recognized in connection with the building. Since IRSA’s share in Metropolitan’s losses exceeded its equity interest; IRSA recognized a zero value on its investment although a liability of US$ 1.5 million was booked representing it’s maximum commitment to fund Metropolitan’s operations.

In addition, the put right has been adjusted to its value of US$ 12.5 million as of September 30, 2010 and is included in “Other receivables – Non-Current”.

To facilitate discussions in the framework of a debt renegotiation that Metropolitan 885 Third Ave. LLC aspires to obtain from Royal Bank of Canada, on August 4, 2010, IRSA entered into an Escrow Agreement with agent Fidelity National Title, Insurance Company, and transferred US$ 15 million as a non-mandatory, good-faith deposit for the sole purpose of allowing discussions between the parties to move forward. IRSA has reserved the right to extend the term of the agreement for an indefinite period at its sole criterion.

 

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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 8: (continued)

 

  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., the equivalent of 143,627,987 shares of 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 Unaudited Basic Financial Statements) generating a gain of Ps. 133.0 million, each year. As a result of these acquisitions, as of June 30, 2009 IRSA had a 21.34% interest in BHSA’s capital stock (excluding treasury shares).

During the year ended June 30, 2010, IRSA (through its subsidiaries) acquired the equivalent of 100,417,816 shares of BHSA for an amount of Ps. 118.7 million of which Ps. 112.6 million were paid as of June 30, 2010 and the balance was paid during this present period. The transaction was recorded by application of the “acquisition method” (See Note 2.j.2. to the Unaudited Basic Financial Statements), a gain in the year of Ps. 70.4 million. As result of this transaction, as of June 30, 2010, the Company’s ownership interest in BHSA was 28.03% (without considering treasury shares).

During the present period, IRSA exercised its preemptive rights and took part in the offer mentioned in Note 12.B.1 acquiring 26,197,564 Class D shares totaling Ps. 36.2 million.

After the above mentioned purchases, as of September 30, 2010, IRSA’s ownership interest in BHSA increased from the 28.03% to 29.78% of BHSA’S capital stock (without considering treasury shares).

On July 26, 2010, in the framework of an offer launched by BHSA’s Board of Directors for the sale to existing shareholders of 36.0 million of its treasury Class D shares in portfolio, Banco Hipotecario sold approximately 26.9 million of said shares.

Exercising its preemptive right, IRSA took part in the offer and acquired 4,352,243 Class D shares totaling Ps. 6.0 million. As a result of this transaction, as of the date of issuance of these Financial Statements, IRSA’s ownership interest in BHSA increased from the 5% as of the end of the fiscal year, to 5.29% (excluding the treasury shares in portfolio).

 

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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 8: (continued)

 

By virtue of the provisions arising from the Bank’s by-laws, the shares acquired do not entitle holders to vote or to collect dividends and/or any other distributions.

 

  e. Acquisition of companies in the Oriental Republic of Uruguay

During the fiscal year ended June 30, 2009, IRSA (through Tyrus) acquired by a minimum payment a 100% stake in Liveck S.A. (Liveck), a company organized under the laws of the Oriental Republic of Uruguay. Later, IRSA sold 50% of its stake in Liveck to Cyrela Brazil Realty S.A. for a price of US$ 1.3 million.

In June, 2009 Liveck acquired, a 90% interest over the shares of the companies Zetol S.A (Zetol) and Vista al Muelle S.A. (Vista al Muelle), both property owners in Uruguay’s Canelones Department. The remaining 10% ownership interest in the capital stock of both companies is held by Banzey S.A. (Banzey).

IRSA and its shareholders intend to develop an urban project that will consist in the construction of apartment buildings to be subsequently sold. The project has already been conferred the “Urban Feasibility” status by Canelones’ Mayor’s Office and its Legislative Council.

The total price for the purchase of Zetol was US$ 7.0 million, of which US$ 2.0 million were paid, the balance will be paid in 5 installments of US$ 1.0 million each with an annual 3.5% compensatory interest calculated on the total outstanding amount 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 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 to built.

The total price for the purchase and sale of all the shares in Vista al Muelle amounted to US$ 0.83 million, and accrued an annual 8% interest on the total outstanding amount. As of September 10, 2010 this operation was completely paid.

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.

 

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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 8: (continued)

 

In the framework of the agreement for the purchase and sale of Zetol and Vista al Muelle and their respective addenda, Liveck has agreed to buy the shares held by Banzey (or by Ernesto Kimelman or by 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 Banzey (or by Ernesto Kimelman or by 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 all the obligations mentioned above 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 December 13, 2010.

In December 2009, Vista al Muelle acquired other properties totaling US$ 1.9 million in exchange for a US$ 0.3 million down payment, with the balance to be cancelled through the delivery of home units and/or stores to be built and equivalent to 12% out of 65.54% of the sum of the prices of all of the units covered by the Launching Price List for Sector B (the parties have already signed a plat of subdivision to this end).

In February 2010, it acquired additional real estate for a total of US$ 1.0 million in exchange for a down payment of US$ 0.15 million with the balance to be paid in 3 consecutive and equal installments maturing on December 31, 2011, June 30, 2013 and December 31, 2014 and accruing an annual 3% interest rate on the outstanding balance, payable quarterly and on arrears as from December 31, 2009.

 

  f. Tender Offer for the acquisition of Telecom Argentina

In the course of the fiscal year, IRSA (through Torodur S.A.) took part, together with other bidders, in a tender offer procedure for the acquisition of the 50% stake held by Telecom Italia SpA. and Telecom Italia International N.V. (“Grupo Telecom Italia”) in Sofora Telecomunicaciones S.A. (“Sofora”) and of a purchase option for the remaining 50% stake held by Sofora, a company that indirectly holds the majority shareholding in Telecom Argentina. To that end, on June 4, 2010, the Company submitted a binding offer and a letter of credit for US$ 50,0 million for the benefit of Grupo Telecom Italia.

 

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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 8: (continued)

 

To guarantee performance of the reimbursement obligations under the above-mentioned letter of credit, a pledge was raised over the Company’s shares in Hersha and approximately US$ 43.5 million in negotiable obligations issued by Alto Palermo and acquired by the Company.

In late July 2010, Grupo Telecom Italia decided not to continue with the process to sell Telecom Argentina and concluded it. Therefore, the pledges raised to secure performance under the letter of credit as described above were lifted.

 

  g. 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.

 

  h. Option to acquire an interest in APSA

In January, 2010, Parque Arauco S.A. accepted the bid submitted by IRSA, and acquired, 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”.

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 million. IRSA transferred US$ 6 million to Parque Arauco S.A., non refundable, as payment in exchange for the option, to be computed towards cancellation of the final price.

On September 21, 2010 IRSA’s Board of Directors decided to exercise the option, which was materialized after the closing date of these Financial Statements.

 

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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 8: (continued)

 

  i. Sale of ownership interest in Pereiraola S.A.I.C.I.F. y A. (Pereiraola).

In June 2010, IRSA closed the sale and transfer of Pereiraola shares for US$ 11.8 million, for which it has collected US$ 1.94 million. The balance shall be paid through a transfer to the name of IRSA of the higher of 6% of the marketable lots, or 39,601 square meters in the gated neighborhood that the buyer has agreed to develop in the property owned by Pereiraola, equivalent to US$ 2.1 million and four consecutive, half-yearly installments of US$ 1.94 million each plus an annual 14% interest rate on the balances, which interest shall be paid in the same conditions as principal, with the first installment falling due in December 2010. As of September 30, 2010 the buyer had effected advanced payments on the first installment for US$ 1.05 million.

 

  j. Acquisition of Torodur S.A.

In May 2010 IRSA acquired a 100% stake in Torodur S.A.’s capital stock for US$ 0.01 million. Later on, IRSA transferred a 2% ownership interest to CAM Communications LP, at cost.

 

  k. Acquisition of Unicity S.A.

On September 1st, 2010, and through E-Commerce Latina S.A. (subsidiary of IRSA) acquired a 100% stake in Unicity for US$ 2.53 million. Unicity’s main asset consists in 31,491,932 shares representative of 10% of the capital stock of Solares de Santa María S.A. and for which it carries a liability to IRSA on the purchase price balance, which as of the date hereof is US$ 9.1 million. On September 28, the debt was capitalized and IRSA received 36,036,000 shares representing 88.61% of Unicity, being held by E-Commcerce the remaining 11.39%

 

  2. APSA

 

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

On October 30, 2009, Tarshop S. A., capitalized irrevocable contributions made by APSA, thus APSA’s participation amounted to 98.5878%.

During January 2010, APSA acquired the minority interest (1.4122%) property of the minority shareholder for US$ 0.54 million, reaching the 100% of share interest.

 

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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 8: (continued)

 

  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.

In this line of thought, on December 29, 2009, contractual documents related to the transaction were executed, which was subject to the approval by the Argentine Central Bank granted on August 30, 2010. Consequently, on September 13, 2010, the respective memorandum of closure was executed. The total price paid for the purchase of shares stood at US$ 26.8 million. Under this transaction, APSA granted Banco Hipotecario S.A. a two-year security agreement over APSA Class III Notes, issued on November 13, 2009, for a face value of Ps. 5 million, which will work as guarantee upon any price adjustment that may result in favor of Banco Hipotecario S.A. as provided by the purchase agreement.

In compliance with the conditions defined in the agreement in question, APSA committed itself to not competing for 5 years in the credit card and/or consumer loan business in which Tarshop S.A. has a presence.

Additionally, under this transaction, receivables and payables between APSA and Tarshop S.A. have been compensated.

 

  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 8: (continued)

 

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

On November 27, 2009, Alto Palermo S.A. (APSA) acquired 7,916,488 shares of common stock with a face value of Ps. 1 each, entitled to 1 vote per share, representing 80% of the capital stock establishing the price for the shares representing 40% of the company’s capital stock and votes at US$ 4.3 million and for the remaining 40% at a fixed price of US$ 0.84 million and a variable price equivalent to 20% of the investment required to develop the project until investing US$ 6.9 million.

The remaining unpaid balance as of the date of these unaudited financial statements is made up as follows: (i) one US$ 1 million installment, falling due on November 27, 2011 disclosed in “Long-term debt” and (ii) 20% of the investment required to carry out the project that will be paid off upon the possible increase of the capital required to develop the project, up to the amount of US$ 6.9 million disclosed in “Short-term debt”.

A Consultative Opinion request was filed with the Argentine Competition Defense Commission, still pending resolution, seeking to issue an opinion on the obligation or lack thereof to notify the sale.

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, 3,515,596 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. On July 14, 2010, shares pending subscription were subscribed for a total price of Ps. 0,256, an amount that has been fully paid in. Thus, to date, total capital increase resolved by the Shareholders’ Meeting of February 17, 2010, has been fully subscribed and paid in.

 

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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 8: (continued)

 

On June 25, 2010, Alto Palermo S.A. (purchaser) and Eduardo Giana, Pablo Bossi, Patricio Tobal and Abuam S.A. (sellers) subscribed an agreement for the option to purchase shares of Arcos del Gourmet S.A., for the total number of shares owned by them, which represent at least 17.54% of capital stock and votes of Arcos del Gourmet S.A. The term to exercise the option expires on April 30, 2011. The option was subject to the condition that the grantor of the Use Concession Agreement calls a bidding process whose purpose will be the sale of the real estate properties involved, assumption under which Arcos del Gourmet S.A. holds the preemptive right. The price of the shares owned by the sellers was established at US$ 1.4 million. The option price is US$ 0.4 million, out of which Ps. 0.3 million has been paid as of September 30, 2010. The balance, which matures on October 30, 2010 had already been canceled. In the event, APSA exercised the option, its price will be considered towards the share price.

 

  e. Merger between Comercializadora Los Altos S. A. and Fibesa S. A.

The Special and Unanimous Shareholders’ Meeting of Fibesa S.A. held on September 30, 2009, resolved the merger into Comercializadora Los Altos S.A. as from July 1, 2009. Thus, a capital increase of Ps. 1,686 in Fibesa’s capital stock was generated.

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. Finally, on August 23, 2010, IGJ (Argentine regulatory agency of business associations) approved the merger.

 

  f. Acquisition of a commercial center goodwill

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$ 7.1 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.

 

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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 8: (continued)

 

Once the definitive signature of the net assets transference has taken place, on July 1st, 2010, the remaining amount of US$ 13.6 million will accrue 5% annual interest plus VAT. The interest will be paid in seven annual and consecutive installments, the first due on July 1st, 2011. The capital will be canceled upon paying the last interest installment or upon granting the title deed, whichever later.

On July 1, 2010, Alto Palermo S. A. (APSA) and INCSA executed the definitive instrument for the partial transfer of the goodwill and memorandum of closure by which INCSA transferred the goodwill of the commercial center known as “Soleil Factory”; becoming operational on such date. The goodwill mainly includes a building, real properties, agreements, titles to the brand names and rights to build certain number of square meters. Possession thereof was handed over upon execution. Considering the goodwill value structure, the Company has booked in as fixed assets until the process to allocate the price paid for the assets and liabilities acquired is completed. Guidelines provide that INCSA does not transfer APSA its receivables or its payables originated before executing the agreement. Within 30 working days as from registering the co-ownership and administration regulations with the Argentine Real Property Registry, INCSA will grant APSA the title deed. It should be noted that the goodwill and the building related to the hypermarket transaction located on the same premises are excluded from the transaction.

The transaction was filed with the Argentine Competition Defense Commission that, thus far, has not ruled.

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 Suppliers advances.

 

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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 8: (continued)

 

This transaction was subject to certain conditions precedent, among which APSA should acquire from INCSA the goodwill constituted by the commercial center operating in Soleil Factory. Having complied with such condition, on July 1, 2010, APSA shall start the works i) 12 months after complying with such conditions, or ii) on May 2, 2011, whichever earlier. However, before starting with the works, INCSA should have: i) granted the title deeds to APSA’s future units to APSA, and ii) transferred to APSA the rights to the registered architectural project and the effective permits and authorizations to be carried out in APSA’s future units.

 

  g. 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.

 

  h. 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 owns 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.

 

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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 8: (continued)

 

  i. 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.

 

  j. 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 previous year end.

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%.

 

  k. Acquisition of Metroshop S.A.’s shares

On May 21, 2010, Alto Palermo S. A. (APSA) and Tarshop S.A. executed an agreement to formalize the transfer of shares by which Tarshop S.A. has sold APSA 18,400,000 registered nonendorsable shares of common stock with a face value of Ps. 1 each and entitled to 1 vote per Class “A” share representing 50% of Metroshop S.A.’s capital stock. The transaction price was set at Ps. 0.001 for the total shares.

 

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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: 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.

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 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 9: (continued)

 

 

  B. Real Estate Business

 

  1. IRSA

Acquisition of Catalinas Norte plots of land

On December 2009 IRSA acquired by public sale 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 total amount payed was Ps. 95.0 million, of which: Ps. 19.0 million was paid together with the sing to the preliminary agreement and the outstanding balance of Ps. 76.0 million was paid at the time of executing and delivering the corresponding title deed, which took place during May, 2010.

Acquisition of the building located at 183 Madison Avenue, New York, NY

On August 26, 2010, IRSA and some American partners entered into a conditional purchase and sale agreement to acquire the property located at 183 Madison Avenue, New York, NY. The investment vehicle is a US-based company, Rigby 183 LLC, which, as soon as the transaction is consummated, will be controlling a 19-story building at 183 Madison Avenue, New York, NY, that spans 22,893 square meters of net leasable area. The price offered was US$ 75.2 million.

The property is located in a Manhattan area known as “Midtown South” that also hosts other famous and prominent venues such as the Empire State Building, Macy’s Herald Square and the Madison Square Garden and boasts one the most significant office and retail markets in addition to excellent commuting alternatives, restaurants, shops and entertainment options.

On August 30, 2010, IRSA transferred US$ 7.3 million, in order to have that amount, together with the amount to be contributed by its partners at Rigby 183 LLC, held in a deposit in the name of the seller, for the agreement signed.

 

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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)

 

It must be clarified that the transaction has not yet been consummated and that it is subject to certain conditions. Given that the seller is going through bankruptcy proceedings, the requisite court approvals for considering the transaction to have been consummated are still pending. Additionally, Rigby 183 LLC has reserved the right to equal any competitive bid for acquiring the property that may be placed in the framework of the reorganization proceedings against the seller. If this were consummated, the Company would be holding a 49% stake in Rigby 183 LLC’s capital stock.

 

  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 223 month, with a current monthly fee of Ps. 12.6 while the next increase is scheduled for the 234 month.

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. 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.

 

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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)

 

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 parking spaces.

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 it.

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 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. 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.

 

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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 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.

On October 13, 2010, TGLT S.A. and APSA subscribed an agreement of purchase with a condition precedent by which APSA sells a plot of land located on Beruti 3351/59. The transaction was agreed upon at US$ 18.8 million. TGLT plans to construct a department building with residential and commercial parking. In consideration, TGLT S.A. commits to transferring APSA: (i) a number to be determined of departments representing altogether 17.33% of proprietary square meters that may be sellable in departments in the building to be constructed; (ii) a number to be determined of complementary/functional parking units representing altogether 15.82% of square meters in parking in the same building; (iii) all units earmarked for commercial parking and the amount of US$ 10.7 million payable upon granting the title deed.

On October 29, 2010, TGLT S.A. completed the initial public offering of its shares on the Buenos Aires Stock Exchange, thus complying with the condition to which the operation was subject.

On November 5, 2010 TGLT S.A. advanced payment of US$ 10.7 million by means of a transfer to an APSA account, while it remains to be executed the title deed to the plot of land mentioned above which should be carried out within 30 days as from complying with the condition mentioned in the preceding paragraph.

 

  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 parking spaces 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 parking spaces 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.

 

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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)

 

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 spaces that APSA would receive from COTO.

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.

Such investment is included in Non Current Investment – Land Reserves

 

  e. 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.

On August 12, 2010, the agreement of purchase was executed. The purchase price stood at US$ 0.5 million to be paid as follows:

 

  i) US$ 0.05 million was settled as prepayment on July 14, 2009,

 

  ii) US$ 0.1 million was settled upon executing such agreement, and

 

  iii) US$ 0.35 million will be paid upon executing the title deed.

Advances are included in Property and Equipment, net.

 

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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 title deed, at the same time of surrendering ownership, will be executed within 60 days running as from: i) the date on which APSA obtains the municipal clearance, or ii) the date on which the seller obtain the lot subdivision, whichever later.

APSA will be the only party in charge of carrying out administrative formalities before the Municipality and/or other agency to obtain the municipal clearance for using the shopping mall. It will bear all costs and expenses related to obtaining the municipal clearance.

 

  f. Plot of land Guaymallén

On March 26, 2010, APSA executed an agreement of purchase without possession by which the Company sells a building located in the district of Guaymallén, Province of Mendoza. The total agreed-upon price stood at US$ 0.3 million, out of which US$ 0.2 million was collected as prepayment while the remaining balance was settled together with the execution of the title deed on June 24, 2010.

 

  g. Plot of land Rosario

On April 14, 2010, APSA subscribed an irrevocable offer subject to compliance with a condition precedent (passing the amendment to Ordinance 8080), by which it sells the lot designated as 2 A of the building located in the District of Rosario, City of Rosario, Province of Santa Fe, facing the streets Thedy, Junín and Caseros avenue. The transaction price was fixed at US$ 4.2 million, out of which US$ 1.05 million was collected. The remaining balance of the price will be settled upon executing the title deed.

On May 3, 2010, Alto Palermo S. A. (APSA) subscribed an irrevocable offer to sell the lot designated as 2 E of the building located in the District of Rosario, City of Rosario, Province of Santa Fe, facing the street Rotonda Ingeniero G. Venesia and Caseros Avenue. On September 29, 2010, the title deed was executed.

The transaction price stood at US$ 1.4 million, payable as follows: US$ 0.35 million on May 3, 2010; US$ 0.35 million upon executing the title deed and US$ 0.73 million on May 30, 2011, plus interest at 14% to be accrued as from the date the title deed is executed.

The lots subject to these transactions have been recorded under inventories.

To secure the outstanding price amount, the building will be mortgaged.

 

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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: 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 September 30, 2010 and June 30, 2010, 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. 10,368 and Ps. 9,498 respectively.

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

 

NOTE 11: CONVERTIBLE AND NON CONVERTIBLE NOTES 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 (“the Program”) in a nominal value of up to US$ 200 million authorized by the National Securities Commission. Non convertible notes-2017 accrues 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 contains customary covenants including restrictions to pay dividends in accordance with certain limits.

On February 25, 2010, the IRSA’s 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, as approved by the Ordinary Meeting of Shareholders held on October 29, 2009.

 

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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 11: (continued)

 

Within this framework, on July 20, 2010, IRSA issued non-convertible notes for a nominal value of US$ 150 million (“Non-convertible Notes Class II”) maturing on July 20, 2020. The issuance price was 97.838% of par value and they accrue interest at a nominal interest rate of 11.5% per annum, to be paid semi-annually on January 20 and June 20 each year, starting on January 20, 2011. The expenses related to the issuance amounted to Ps. 7.1 million.

On November 2, 2010, the General Shareholders’ Meeting approved a new expansion of the Program in force for up to a further US$ 50 million bringing it to US$ 450 million.

 

  2. APSA

 

  b. Issuance of non-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.

- Due date: On July 19, 2014,

- 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.

 

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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 11: (continued)

 

- 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 September 30, 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 September 30, 2010 Convertible Notes amounted to US$ 47.2 million.

On July 19, 2010, Alto Palermo S.A. settled the interest installment related to the Notes convertible into shares of US$ 50 million, falling due in July 2014, for US$ 2.4 million.

On October 7, 2010, the holders of Notes convertible into APSA’s shares exercised the conversion right, issuing 477,544,197 shares of common stock, with a face value of Ps. 0.1 each and retiring Notes for a face value for US$ 15.5 million. As from the conversion, the number of Company’s shares goes from 782,064,214 to 1,259,608,411.

 

  b. Issuance of non-convertibles notes

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.

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 September 30, 2010 total Series I and Series II Notes repurchased by APSA amount to US$ 5.0 million and US$ 4.8 million, respectively. Such notes had been valued at face value and are disclosed netting the current and non-current capital and interest owed.

 

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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 11: (continued)

 

As of September 30, 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. On October 12, 2010 IRSA sold its Non-Covertible Notes Serie I. 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.

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.

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

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

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

As of September 30, 2010 Emprendimiento Recoleta S.A. holds Series III Notes for Fv. Ps. 12 million.

 

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

During the current fiscal year ended as of June 30, 2010, Tarshop S.A. 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 US$ 25 million, or equivalent amount in other currencies.

 

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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 11: (continued)

 

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

As of June 30, 2010, Class I was placed for a total nominal value of Ps. 22,720 and Class II for a total nominal value of Ps. 40,000. Class I and II VCPs accrue interest from the issuance date at a nominal annual rate equal to the BADLAR, plus cap-margin of 400 basic points.

Net funds resulting from placing Class I and II were earmarked for paying in working capital in Argentina in accordance with the corporate objective of Tarshop S.A.

 

NOTE 12: 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. (IFISA) by which 1,275,022 Global Depository Shares (GRDs) were granted, represented by GRDs representative of 10 shares of common shares with a face value of Ps. 1 per share of IRSA., Inversiones y Representaciones Sociedad Anónima (IRSA).

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 IFISA with the respective voting instructions. As regards dividends, IFISA commits itself to transferring forthwith to Agrology S.A. the funds related to this item.

This loan will accrue 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 10 shares of common stock of Ps. 1 per share.

 

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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 12: (continued)

 

On July 30, 2009, Agrology S.A. made an offer to IFISA 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.

On July 25, 2010, Agrology S.A. made an offer that was accepted by IFISA to extend for 360 days the term agreed upon in the previously-mentioned loan of IRSA’s 1,253,942 GDR’s on loan.

On September 8, 2010, Agrology S.A. executed a new agreement with IFISA by which IRSA’S 800,000 GDR’s are granted under the same conditions as above.

 

  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 and entitled the BCRA to determine the pertinent rules.

After a series of presentations Banco Hipotecario S.A. submitted the final presentation, 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.

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.

 

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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 12: (continued)

 

Exposure to the non-financial public sector

As of September 30, 2010, Banco Hipotecario S.A. has assets with the non-financial public sector for Ps. 1,561,157 booked in its financial statements.

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, through Communication “A” 4546 of July 9, 2006, regarding the assistance to the Public Sector, it was established that as from July 1, 2007, such limit was 35% (average measured) of total Assets of the last day of the previous month.

As of September 30, 2010 and 2009 the assistance to the Public Sector reaches 13.0% and 21.4% from total Assets, respectively.

Banco Hipotecario S.A.’s Treasury Shares

In the course of fiscal year 2009 and with the Total Return Swap dated January 29, 2004 having expired, Banco Hipotecario S.A. received treasury shares Class D totaling 71.1 million.

On April 30, 2010, the Extraordinary General Shareholders’ Meeting of the Banco Hipotecario S.A. resolved to delegate upon the Board of Directors of the bank the decision to pay with the treasury shares in portfolio the DAA or 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.

On June 16, 2010, the Board of Directors of Banco Hipotecario offered to sell 36 million of its treasury Class D shares to its existing shareholders. On July 26, 2010, in the framework of the offering, the Bank sold approximately 26.9 million of its treasury Class D shares. On August 3, 2010, the Bank applied the proceeds from the offering and the remaining Class D shares to the cancellation of the StAR coupons maturing on that date.

The Company’s Banco Hipotecario treasury shares still in its portfolio amount to 37.4 million and entail an increase in the Company’s ownership interest. As considered for valuation purposes, they have risen from 29.78% to 30.54%.

 

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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 12: (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 CNDC for a consultative opinion on whether IRSA had to notify that transaction or not. The CNDC found that there was an obligation to notify the same, but IRSA appealed that decision. As of the date of issuance of these financial statements, the CNDC had not yet handed down a resolution.

In addition, as regards the acquisition of Torre Bank Boston, on August 30, 2007 IRSA applied to the CNDC for a consultative opinion as to whether IRSA had to notify the transaction. On November 22, 2007 the CNDC stated that there was indeed a duty to notify the transaction. IRSA filed an appeal against this decision. The resolution from the matter in court was favorable to the CNDC. As of the date of issuance of these financial statements, IRSA is in process of notificating the operation.

In May 2008 IRSA applied to the CNDC for a consultative opinion concerning to the obligation of notifying the acquisition of Edificio República. The CNDC decided that such notification was required and therefore, in February 2010 IRSA has presented the required documentation notifying the operation. On November 3, 2010, the CNDC authorized the operation.

 

  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 Property and Equipment, net.

 

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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 12: (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 September 30, 2010 and interest accrued unpaid through that date, due to the original loan agreement and respective amendments are disclosed under Customers advances - Lease advances together with other advances not included in this agreement.

 

  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.

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.

 

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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 12: (continued)

 

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. Shopping Neuquén S.A. submitted the working plans related to the first stage of the work (contemplating the construction of the shopping mall and the hypermarket), it obtained the authorizations to start such works and on July 5, 2010 and within the previously mentioned 90 day term, construction began.

The first work stage mentioned should be completed at a maximum 22 month terms starting upon beginning construction. In the case of failing to comply the conditions established in the agreement, the Municipality of Neuquén is entitled to terminate the agreement and carry out the actions that may be considered necessary for such respect, among them, to request the return of the Company´s plots acquired to the Municipality of Neuquén.

On November 8, 2010, Shopping Neuquén S.A. was served notice of a resolution issued from the trial styled “Shopping Neuquén S.A. vs. Municipalidad de Neuquén in re: Administrative Procedural Action” lodged at the High Court of Justice of Neuquén, by which certain pending fees to be borne by Shopping Neuquén were established. Such resolution is not firm and Shopping Neuquén S.A. is currently evaluating the procedural recourse to be filed.

 

  c) 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. 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.

 

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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 12: (continued)

 

At the end of period/year the amount was pending of accrual and it was disclosed under Other liabilities – Contributed leasehold improvements

 

  d) 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 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.

 

NOTE 13: SALES OF BUILDINGS

Real Estate Business

During the three-month period ended September 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 2,751 for a total of Ps. 33.5 million. The gross income generated by these transactions amounted to Ps. 23.8 million.

During the three-month period ended September 30, 2010, there was no sale of office property.

 

NOTE 14: CAPITALIZATION PROGRAM FOR EXECUTIVE MANAGEMENT

As of September 30, 2010 Cresud and IRSA had made contributions to the capitalization program for executive management that amount Ps. 4,297.

 

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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 15: DERIVATIVE FINANCIAL INSTRUMENTS

Real Estate Business

Futures contracts – Ritelco S.A.

In the course of the period, Ritelco S. A. conducted certain shorting and covering transactions involving futures. According to the Company’s risk management policies, these deals are used for speculative purposes.

In connection with the futures transactions that took place during de fiscal year, the Company booked realized gains for US$ 26 (equivalent to Ps. 103) in the “Other holding results” line of its Income statement.

As of September 30, 2010, Ritelco S. A. carries neither derivatives contracts nor guarantees associated thereto.

 

NOTE 16: SUBSEQUENT EVENTS

Real Estate Business

 

  1. IRSA

 

  a. Option to acquire an ownership interest in Alto Palermo S.A. (APSA).

On October 15, 2010 the exercise of the option discussed in Note 8.1.h. was consummated through payment of the price balance. As a result, IRSA became the holder of 94.89% of APSA’s capital stock.

 

  b. Sale of Alto Palermo Notes

On October 12, 2010 IRSA sold Alto Palermo’s Series I Notes for a nominal value of US$ 39.6 million that it had acquired in fiscal year 2009 for US$ 38.1 million.

 

  c. Acquisition of shares of Hersha

On October 22, 2010 and through REIG, IRSA acquired 2,952,625 ordinary shares in Hersha Hospitality Trust (“Hersha”) at a price of US$ 5.80 per share, totaling US$ 17.1 million. Following this acquisition, IRSA’s ownership interest in Hersha amounts to 10.7% of Hersha’s outstanding capital. Besides, if the purchase option mentioned in Note 8.B.1.b. were exercised and Hersha failed to issue new shares in favor of third parties, IRSA’s ownership interest in Hersha would amount to 13.63%.

 

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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)

 

 

  2. APSA

 

  a. Acquisition of shares of TGLT S.A.

On November 4, 2010, APSA acquired 5,214,662 registered, nonendorsable shares of common stock, entitled to one vote per shares, issued by the company TGLT S.A. for a total amount equivalent to Ps. 47.1 million under the initial public offering of the latter.

 

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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 three-month periods

ended September 30, 2010 and 2009


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Unaudited Balance Sheet as of September 30, 2010 and 2009 and June 30, 2010

(in thousands of pesos)

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

 

     September 30,
2010

(Notes  1 and 2)
     June 30,
2010
(Notes 1 and 2)
     September 30,
2009
(Notes 1 and 2)
 

ASSETS

        

Current Assets

        

Cash and banks (Note 8 a.)

     21,102         3,810         5,192   

Investments (Note 8 b.)

     75,099         24,631         5,282   

Trade accounts receivable, net (Note 8 c.)

     83,717         85,492         39,246   

Other receivables (Note 8 d.)

     116,655         61,916         65,771   

Inventories (Note 8 e.)

     127,688         100,454         83,562   
                          

Total Current Assets

     424,261         276,303         199,053   
                          

Non-Current Assets

        

Other receivables (Note 8 d.)

     65,477         60,214         30,654   

Inventories (Note 8 e.)

     140,739         141,602         72,174   

Investments on equity investees (Note 8 b.)

     1,780,064         1,800,764         1,595,643   

Other investments (Note 8 b.)

     85,248         82,042         72,721   

Property and equipment, net (Schedule A)

     315,212         289,991         283,855   

Intangible assets, net (Schedule B)

     22,131         1,071         1,298   
                          

Total Non-Current Assets

     2,408,871         2,375,684         2,056,345   
                          

Total Assets

     2,833,132         2,651,987         2,255,398   
                          
     September 30,
2010

(Notes 1 and 2)
     June 30,
2010
(Notes 1 and 2)
     September 30,
2009

(Notes 1 and 2)
 

LIABILITIES

        

Current Liabilities

        

Trade accounts payable (Note 8 f.)

     76,156         83,126         54,277   

Short-term debt (Note 8 g.)

     406,275         449,311         226,271   

Salaries and social security payable (Note 8 h.)

     17,237         23,330         5,033   

Taxes payable (Note 8 i.)

     9,179         4,659         4,758   

Other liabilities (Note 8 j.)

     77,121         42,612         2,294   
                          

Total Current Liabilities

     585,968         603,038         292,633   
                          

Non-Current Liabilities

        

Long-term debt (Note 8.g.)

     105,954         —           —     

Taxes payable (Note 8 i.)

     91,383         75,822         60,710   

Other liabilities (Note 8 j.)

     4,018         3,166         —     

Provisions (Schedule E)

     1,671         1,768         1,771   
                          

Total Non-Current Liabilities

     203,026         80,756         62,481   
                          

Total Liabilities

     788,994         683,794         355,114   
                          

SHAREHOLDERS’ EQUITY

     2,044,138         1,968,193         1,900,284   
                          

Total Liabilities and Shareholders’ Equity

     2,833,132         2,651,987         2,255,398   
                          

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

 

  

Alejandro G. Elsztain

Vicepresident II

acting as President

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Unaudited Statement of Income

Corresponding to the three-month periods beginning as from July 1, 2010 and 2009

and ended September 30, 2010 and 2009

(in thousands of pesos)

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

 

     September 30, 2010     September 30, 2009  

Production income:

    

Crops

     20,295        4,236   

Beef cattle

     2,758        1,555   

Milk

     9,301        5,294   
                

Total production income

     32,354        11,085   
                

Cost of production (Schedule F.2)

    

Crops

     (19,575     (6,201

Beef cattle

     (5,701     (6,574

Milk

     (6,773     (5,416
                

Total cost of production

     (32,049     (18,191
                

Production gain (loss)

     305        (7,106
                

Sales

    

Crops

     49,082        33,547   

Beef cattle

     15,192        6,035   

Milk

     8,272        4,693   

Establishments

     71,096        —     

Other

     4,237        1,893   
                

Total sales

     147,879        46,168   
                

Cost of sales

    

Crops (Schedule F.1)

     (42,548     (31,352

Beef cattle (Schedule F.1)

     (15,348     (5,669

Milk (Schedule F.1)

     (8,272     (4,693

Establishments

     (21,652     —     

Other (Schedule F.1)

     (1,938     (403
                

Total cost of sales

     (89,758     (42,117
                

Sales profit

     58,121        4,051   
                

Gross (loss) profit

     58,426        (3,055
                

Selling expenses (Schedule H)

     (10,588     (5,408

Administrative expenses (Schedule H)

     (8,998     (9,834

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

     16,127        28   

Unrealized (loss) gain on inventories-crops, raw materials and MAT

     (4,153     2,020   
                

Operating gain (loss)

     50,814        (16,249
                

Financial results:

    

Generated by assets:

    

Exchange gains

     449        2,459   

Interest income (Note 8.k)

     4,255        4,426   

Other unrealized gain (Note 8.k)

     484        5,121   
                
     5,188        12,006   
                

Generated by liabilities:

    

Exchange gains

     279        (1,092

Interest income (Note 8.k)

     (11,594     (7,682

Other unrealized loss

     (1,250     (153
                
     (12,565     (8,927
                

Other income and expenses, net:

    

Shareholders’ Personal asset tax

     (2,200     (2,032

Others

     520        515   
                
     (1,680     (1,517
                

Gain on equity investees (Note 8 l.)

     30,595        75,613   

Management agreement fees (Note 5)

     (5,761     (6,803
                

Net income before income tax

     66,591        54,123   
                

Income tax (Note 6)

     (14,741     7,704   
                

Net income for the period

     51,850        61,827   
                

Earnings per share:

    

Basic (Note 9)

     0.10        0.13   

Diluted (Note 9)

     0.09        0.12   
                

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

 

 

Alejandro G. Elsztain

Vicepresident II

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 three-month periods beginning as from July 1, 2010 and 2009

and ended September 30, 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
September 30,
2010
 
     Capital (Note 3)      Inflation
adjustment
     Paid-in
capital (1)
     Subtotal      Legal
Reserve
     New Projects
Reserve
          

Items

   Common
stock
     Treasury
stock
     Common
stock
     Treasury
Stock
                      

Balances as of June 30, 2009

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

Transitory conversion differences for the period

     —           —           —           —           —           —           —           —           —           25,573         25,573   

Net income for the period

     —           —           —           —           —           —           —           —           61,827         —           61,827   
                                                                                                  

Balances as of September 30, 2009

     471,539         30,000         156,276         9,942         879,218         1,546,975         16,792         85,543         188,720         62,254         1,900,284   
                                                                                                  

Balances as of June 30, 2010

     496,560         5,001         164,561         1,657         879,331         1,547,110         23,023         143,928         187,683         66,449         1,968,193   
                                                                                                  

Transitory conversion differences for the period

     —           —           —           —           —           —           —           —           —           24,095         24,095   

Net income for the period

     —           —           —           —           —           —           —           —           51,850         —           51,850   
                                                                                                  

Balances as of September 30, 2010

     496,560         5,001         164,561         1,657         879,331         1,547,110         23,023         143,928         239,533         90,544         2,044,138   
                                                                                                  

 

(1) See notes 2.q. and 16.

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

 

 

Alejandro G. Elsztain

Vicepresident II

acting as President

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Unaudited Statement of Cash Flow

Corresponding to the three-month periods beginning as from July 1, 2010 and 2009

and ended September 30, 2010 and 2009

(in thousands of pesos)

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

 

     September 30, 2010     September 30, 2009  

Changes in cash and cash equivalents

    

Cash and cash equivalents at the beginning of the fiscal year

     18,364        15,991   

Cash and cash equivalents at the end of the period

     37,126        7,609   
                

Net Increase (decrease) in cash

     18,762        (8,382
                

Causes of changes in cash and cash equivalents

    

Operating activities

    

Net Income for the period

     51,850        61,827   

Income tax

     14,741        (7,704

Accrued interest during the period

     9,319        1,782   

Adjustments made to reach net cash flows from operating activities

    

Gain on equity investees

     (30,595     (75,613

Increase in allowances and provisions

     12,263        (251

Depreciations of Property and Equipment

     1,761        1,478   

Depreciations of Intangible Assets

     188        —     

Unrealized loss on Inventories

     (11,974     (2,048

Financial results, net

     (2,587     (5,401

Gain on the sale of fixed assets

     (3,920     —     

Changes in operating assets and liabilities

    

(increase) decrease in current investments

     (46,503     5,398   

Decrease in trade accounts receivable

     7,312        7,528   

(Increase) decrease in other receivables

     (51,193     6,368   

(Increase) decrease in inventories

     (281     11,003   

Decrease in social security payable and taxes payable

     (1,270     (1,297

Decrease in trade accounts payable

     (18,278     (6,367

Increase in other debts

     24,050        450   

Dividends collected

     141        117   
                

Cash flows applied to operating activities

     (44,976     (2,730
                

Investing activities

    

Increase in interest on equity method investees (except IRSA)

     (2,777     (35,412

Acquisition and upgrading of fixed assets

     (6,930     (4,325

Sale of fixed assets

     17,855        —     

Incorporated cash by merger

     579        1,161   
                

Cash flows provided by (applied to) investing activities

     8,727        (38,576
                

Financing activities

    

Increase in financial loans

     113,208        10,065   

Decrease in financial loans

     (163,121     (26,610

Issuance of Non-convertible Notes (Note 20)

     104,924        49,469   
                

Cash flows provided by financing activities

     55,011        32,924   
                

Net increase (decrease) in cash and cash equivalents

     18,762        (8,382
                

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

 

 

Alejandro G. Elsztain

Vicepresident II

acting as President

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Unaudited Statement of Cash Flow (Continued)

Corresponding to the three-month periods beginning as from July 1, 2010 and 2009

and ended September 30, 2010 and 2009

(in thousands of pesos)

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

 

 

     September 30, 2010     September 30, 2009  

Operations not involving changes in cash and cash equivalents

    

Inventories transferred to property and equipment

     290        244   

Increase in related companies interest by a decrease in trade account receivables

     (3,541     —     

Increase in related companies interest by an increase in other current liabilities

     926        —     

(Increase) Decrease in non-current investments by transitory conversion differences

     (24,095     25,573   

Increase in non-current investments through a decrease in other receivables

     —          6,593   
     September 30, 2010     September 30, 2009  

Complementary information

    

Interest paid

     4,858        5,604   

Income tax paid

     1,702        2,861   
     September 30, 2010     September 30, 2009  

Balances incorporated by merger (Note 14)

    

- Trade account receivables

     9,134        1,632   

- Other receivables

     9,431        1,360   

- Inventories

     14,408        3,214   

- Property and equipment

     37,622        5,835   

- Intangible assets

     1,511        —     

- Non-current Investments

     (63,631     (10,777

- Trade account payables

     (7,132     (408

- Salaries and social security payable

     (111     (37

- Tax payables

     (408     (523

- Provisions

     (258     (1,457

- Loans

     (1,145     —     
                

Incorporated cash

     (579     1,161   
                

 

 

Alejandro G. Elsztain

Vicepresident II

acting as President

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Unaudited Financial Statements

Corresponding to the three-month periods beginning as from July 1, 2010 and 2009

and ended September 30, 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).

 

  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 year 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.

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.

 

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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 1: (Continued)

 

 

  c. Comparative Information

Amounts as of June 30, 2010 and September 30, 2009, which are disclosed in these financial statements for comparative purposes have been taken from the financial statements as of such dates.

These financial statements have been prepared giving effect to the spin-off – merger mentioned in Note 14.2; consequently, the stand-alone financial statements as of September 30, 2010 are not comparable with those issued as of June 30, 2010 and September 30, 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 lawsuits and 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.

 

  e. 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.

 

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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 2: MORE RELEVANT ACCOUNTING POLICIES

 

  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/ fiscal year.

 

  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 end of the period. 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/fiscal 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 initial 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.

 

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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 2: (Continued)

 

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 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.

 

  g. Other receivables and liabilities

Other current receivables (except VAT receivables) have been valued at face value plus the financial results accrued at the end of the corresponding period/fiscal year. 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 receivables have 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/fiscal year-end.

Include:

 

   

Unharvested crops

 

   

Calves

 

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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 2: (Continued)

 

 

  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/fiscal year-end.

Include:

 

   

Dairy cattle

 

   

Breeding cows

 

  3) Biological Assets (finished): Cattle: have been measured at their net realization value (NRV) represented by the respective quotations as of each period/fiscal 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/fiscal 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/fiscal 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

 

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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 2: (Continued)

 

 

  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 as of each period/fiscal year-end.

 

  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/fiscal year.

Interests in subsidiaries and affiliates as of September 30, 2010 are as follows:

 

Subsidiaries and affiliates

   % Equity interest  

Agrology S.A. (Nota 13.1.b)

     100.00   

FyO.Com (1)

     65.85   

Cactus (Nota 13.2.a)

     48.00   

Agro – Uranga S.A.

     35.72   

IRSA (Nota 13.2.b)

     50.60   

BrasilAgro (Nota 13.1.a)

     23.24   

FyO Trading

     3.63   

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

     0.44   

Agrotech S.A. (Nota 13.2.e)

     97.00   

Pluriagro S.A. (Nota 13.2.e)

     97.00   

Northagro S.A. (Nota 13.2.e)

     97.00   

 

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

  

 

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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 2: (Continued)

 

 

  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. This implies identifying and determining the current values of assets and liabilities acquired, a process requiring complex judgments and significant estimations.

 

  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 controlled and related companies 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 values thus obtained, do not exceed their respective estimated recoverable values at the end of the period/fiscal year.

 

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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 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 financial statements and amortization has been calculated by the straight-line method based on estimated useful life, considering the weighted-average of the reaming useful life of identifiable assets acquired subject to depreciation.

The useful lives of negative goodwill 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 Investments on controlled and related companies 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 intends to hold them to maturity.

 

  l. Property and Equipment

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

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 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.

 

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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 2: (Continued)

 

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 incorporated by merge as mentioned in Note 14.2.

Depreciation for the fiscal year was calculated based on the remaining concession term.

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

 

  m. Intangible assets

Pre-operating expenses resulted 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 company, through the merger into ANTA mentioned in Note 14.2. among other goods and rights, 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.

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

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.

 

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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 2: (Continued)

 

On July 2, 2008, a memorandum of understanding was executed by which the concession agreement mentioned in Note 22 was renegotiated.

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

 

  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 lawsuits and contingencies: 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.

The evolution of provisions during the period/fiscal year is detailed in Schedule E.

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.

 

  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.

 

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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 2: (Continued)

 

 

  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 19).

 

  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 16, has been allocated to the account Paid-in Capital.

 

  r. Conversion of financial statements of companies located abroad

- 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/year-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.

 

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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 2: (Continued)

 

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.

- Integrated companies

Assets 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/year-end. Assets and liabilities denominated in foreign currency prior-year 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” from the Statements of Income.

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.

 

  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 year 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.

 

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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 2: (Continued)

 

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 results of closed positions are recognized as a difference between the exercise price and their close year; and the results of open positions are recognized at the period-end, as the difference between their exercise price and the market price for futures, and as a difference between the exercise premium and the market price for options in the same condition.

The charges for consumption of assets were determined based on the values of such assets. The rest of the results 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.

 

  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.

 

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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 2: (Continued)

 

  u. Minimum presumed income tax

The Company determines the minimum presumed income tax applying the prevailing rate of 1% on computable assets at period-end. This tax is supplementary to the income tax. The Company’s tax liability for each period/year will be the higher of these two taxes.

However, if the minimum presumed income tax 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 accrued in the period and paid in previous years as a credit, because it considers that it may be computed as payment on account of income tax in future periods.

 

  v. Issuance of debt expenses

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 amortization method.

Amortizations have been recorded under “Financial results, net” in the Statements of Income as a greater financing expense

 

NOTE 3: COMMON AND TREASURY STOCK

The activity in the Company’s shares during the last three financial years was as follows:

 

     Authorized
Face  value
     Subscribed
Face  value
     Paid-in
Face value
 

Common and treasury stock as of June 30, 2008

     501,531,865         501,531,865         501,531,865   

Exercise of Options (Note 16) - Fiscal Year 2009

     6,745         6,745         6,745   

Exercise of Options (Note 16) - Fiscal Year 2010

     21,898         21,898         21,898   
                          

Common and treasury stock as of September 30, 2010 (1)

     501,560,508         501,560,508         501,560,508   
                          

 

(1) As of September 30, 2010, there are 5,000,754 own treasury shares that were acquired during the previous fiscal year.

As of September 30, 2010, the capital authorized to be publicly offered is formed of 501,560,508 common, book-entry shares of Ps. 1 par value each and entitled to one vote per share.

 

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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 4: DERIVATIVE FINANCIAL INSTRUMENTS

As of September 30, 2010 the Company had arranged futures and options on the Futures Market 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

           

Soybean

     816         —          —          —          110   

US$

     —           —          —          —   (a)      (319

Sell

           

Corn

     11,600         318        —          —          (622

Soybean

     27,900         1,094        —          —          (3,939

Wheat

     1,000         27        —          —          (98

US$

     —           —          —          —   (b)      700   

Options

           

Purchase Call

           

Soybean

     28,900         1,662        (899     (3,578     (2,679

Corn

     6,200         198        (129     (364     (235

Wheat

     500         6        (13     (4     9   

Sell Put

           

Corn

     2,400         (49     45        52        7   

Soybean

     5,500         (93     175        89        (86

Wheat

     500         (3     13        13        —     
                                         

Total

     85,316         3,160        (808     (3,792     (7,152
                                         

 

(a) Corresponds to a future of purchase of US$ 7.1 million in Santander Rio bank with mature date on December 15, 2010. Loss generated as of September 30, 2010 is included in Financial Results of the Statement of Income.
(b) Corresponds to a future of sell of US$ 7.1 million in Santander Río bank with mature date on December 15, 2010. Gain generated as of September 30, 2010 is included in Financial Results of the Statement of Income.

 

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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 4: (Continued)

 

As of September 30, 2009 the Company had arranged futures and options on the Futures Market 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

            

Sell

            

Corn

     900         24         —          —          72   

Soybean

     36,200         1,377         —          —          3,246   

Wheat

     10,000         266         —          —          (524

US$

     —           —           —          —   (a)      4,490   

Options

            

Purchase Call

            

Soybean

     10,880         —           540        17        (523

Sell Call

            

Soybean

     20,920         505         (789     (265     524   

Corn

     9,500         141         (132     (49     83   

Purchase Put

            

Soybean

     10,880         —           408        195        (213

Sell Put

            

Soybean

     4,760         —           (76     (48     28   
                                          

Total

     104,040         2,313         (49     (150     7,183   
                                          

 

(a) Corresponds to: a future of Sell of US$ 19.5 million composed of: (i) US$ 5 million and US$ 3.5 million with Standard Bank due on March 31, 2010 and April 30, 2010 respectively; (ii) US$ 2 million with Itau Bank due on April 30, 2010; and (iii) two of US$ 4.5 million with APSA due on December 31, 2009. Gain generated as of September 30, 2009 is shown within Financial results of the Statement of Income.

Crops: As of September 30, 2010 and 2009 the Company recognized results of Ps. 12,250 (loss) and Ps. 1,850 (income), respectively, to reflect the closing of the transactions carried out during such periods. This results are disclosed as part of the line “Unrealized gain (loss) on inventories – Crops, raw materials and MAT” in the Statements of Income.

US Dollars: As of September 30, 2010 and 2009 the Company recognized results Ps. 324 (income) and Ps. 4,366 (income), respectively, for those transactions carried out during such periods. These results are disclosed as part of the line “Financial Results – Generated by assets – Other unrealized gain” in the Statements of Income.

 

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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 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.

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 agreement is held by Consultores Asset Management S.A.

The financial statements as of September 30, 2010 and 2009 include a charge in the Statements of Income by this concept for Ps. 5,761 and Ps. 6,803 respectively.

 

NOTE 6: INCOME TAX – DEFERRED TAX

The evolution and composition of deferred tax assets and liabilities, during the three-month period ended September 30, 2010 are detailed in the following table:

 

     Cumulative tax
loss
carryforwards
     Cash in
foreign
currency
    Investments      Fixed
Assets
    Inventories     Provisions      Total  

Balance as of June 30,2010

     13,365         (38     —           (49,091     (42,214     4,548         (73,430

Incorporated by merger

     638         496        —           161        —          —           1,295   

Gain (loss) recognized

     4,810         (475     —           (19,086     (2,962     2,972         (14,741
                                                           

Balance as of September,2010

     18,813         (17     —           (68,016     (45,176     7,520         (86,876
                                                           

As of September 30, 2010, net liabilities at period-end as per the information included in the preceding table amount to Ps. 86,876.

 

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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 6: (Continued)

 

The evolution and composition of deferred tax assets and liabilities, during the fiscal year ended June 30, 2010 are detailed in the following table:

 

     Cumulative  tax
loss
carryforwards
     Cash in
foreign
currency
    Investments     Fixed
Assets
    Inventories     Provisions      Total  

Initial Balance

     261         (437     —          (43,603     (21,795     302         (65,272

Incorporated by merger

     —           —          (8     (95     (929     510         (522

Gain (loss) recognized

     13,104         399        8        (5,393     (19,490     3,736         (7,636
                                                          

Closing balance

     13,365         (38     —          (49,091     (42,214     4,548         (73,430
                                                          

As of June 30, 2010, net liabilities at year-end as per the information included in the preceding tables amount to Ps. 73,430.

The Company in accordance with the accounting standards has decided not to recognize the deferred income tax liability generated by the effect of the adjustment for inflation on the fixed assets and other non-monetary assets, which as of the end of the period amounts to Ps. 80,040. The above-mentioned liability would probably be reverted according to the detail that follows:

 

Term

   Total  

1 year

     4,559   

2 years

     4,089   

3 years

     4,088   

Over 3 years

     56,437   

No term

     10,867   
        

Total

     80,040   
        

Cumulative tax loss carryforwards recorded by the Company which are pending of utilization at period-end amount to approximately Ps. 53,750 and may be offset by taxable income of future years, as follows:

 

Origination year

   Amount      Expiration year  

2009

     2,213         2014   

2010

     37,796         2015   

2011

     13,741         2016   

 

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Table of Contents

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 6: (Continued)

 

Minimum presumed income tax credits booked by the Company, which were pending to use as of the period-end, amount to Ps. 34,354 and under current regulations, they may be offset by taxable income for future years according to the following detail:

 

Origination year

   Amount      Expiration Year  

2005

     2         2015   

2006

     1,964         2016   

2007

     5,401         2017   

2008

     10,796         2018   

2009

     6,247         2019   

2010

     7,753         2020   

2011

     2,191         2021   

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

   September 30,
2010
    September 30,
2009
 

Net income before income tax

     66,591        54,123   

Tax rate

     35%        35%   
                

Net income at tax rate

     23,307        18,943   

Permanent differences at tax rate:

    

Restatement into constant currency

     1,962        31   

Donations

     16        1   

Results from equity investees companies

     (11,509     (27,115

Shareholders’ personal asset tax

     770        711   

Miscellaneous permanent differences

     195        (275
                

Income tax expense

     14,741        (7,704
                

During this period the income tax rate was 35%.

A reconciliation between the tax recognized and that which was determined tax for fiscal purposes is as follows:

 

Description

   September 30,
2010
    September 30,
2009
 

Total income tax expense

     14,741        (7,704
                

Transitory differences

    

-   Additions

    

    Cumulative tax loss carry-forwards

     4,810        6,823   

    Cash in foreign currency

     (475     492   

    Investments

     —          8   

    Fixed assets

     (19,086     78   

    Inventories

     (2,962     220   

    Provisions

     2,972        83   
                

Total income tax determined for fiscal purposes

     —          —     
                

 

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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 7: BALANCES AND RESULTS WITH SUBSIDIARIES, RELATED COMPANIES LAW No. 19,550 SECTION 33 AND RELATED PARTIES:

 

a. Balances as of September 30, 2010 and 2009 and June 30, 2010 with subsidiaries, related companies and related parties are as follows:

As of September 30, 2010:

 

     Current
Investments
     Non-current
Investments
     Current
Trade
accounts
receivable
     Current
Other
receivables
     Non-Current
Other
receivables
     Current Trade
accounts
payable
    Current Other
liabilities
 

Acres (1)

     —           —           262         6         264         —          —     

Agro –Uranga S.A. (2)

     —           —           —           —           —           —          (101

APSA (1)

     606         10,283         —           26,772         —           —          (18,520

Banco Hipotecario S.A. (2)

     —           —           —           —           —           (12     —     

Cactus (2)

     —           —           322         14         —           (223     —     

Consultores Asset Management S.A. (3)

     —           —           94         —           —           —          (8,028

Cresca S.A. (4)

     —           —           533         —           —           —          —     

Cyrsa S.A. (4)

     —           —           21         —           —           (46     —     

Directors (3)

     —           —           —           191         —           —          (606

Estudio Zang, Bergel & Viñes (3)

     —           —           —           —           —           (325     —     

Fundación IRSA (3)

     —           —           —           —           —           —          (1,073

FyO.Com (1)

     —           —           35,133         46         —           (9,799     (926

Inversiones Financieras del Sur S.A. (3)

     —           —           5         —           —           —          —     

IRSA (1)

     1,860         74,944         —           12,715         —           —          (43,548

Northagro S.A. (1)

     —           —           —           317         —           —          —     

Nuevas Fronteras S.A. (1)

     —           —           —           —           —           (3     —     

Ombú (1)

     —           —           —           —           7,650         —          —     

Panamerican Mall (1)

     —           —           —           —           —           (5     —     

Pluriagro S.A. (1)

     —           —           —           317         —           —          —     

Credits to employees (3)

     —           —           —           785         —           —          —     

Tarshop S. A. (1)

     —           —           167         —           —           —          —     

Yatay (1)

     —           —           —           —           3,935         —          —     

Yuchán (1)

     —           —           —           —           5,261         —          —     
                                                             

Total

     2,466         85,227         36,537         41,163         17,110         (10,413     (72,802
                                                             

 

(1) Direct or indirect subsidiary
(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 7: (Continued)

 

As of June 30, 2010:

 

     Current
Investments
     Non-current
Investments
     Current
Trade
accounts
receivable
     Current
Other
receivables
     Non-Current
Other
receivables
     Current Trade
accounts
payable
    Current Other
liabilities
 

Acres (1)

     —           —           61         —           —           —          —     

Agro –Uranga S.A. (2)

     —           —           —           39         —           (3     —     

Aguaribay (1)

     —           —           —           —           131         —          —     

ANTA (1)

     —           —           1,574         —           —           (1     —     

APSA (1)

     215         9,847         —           16,230         —           (6,019     —     

Banco Hipotecario S.A. (2)

     —           —           —           —           —           (9     —     

BrasilAgro (2)

     —           —           —           —           —           (8     —     

Cactus (2)

     —           —           286         —           —           (542     —     

Caldén (1)

     —           —           —           —           131         —          —     

Consultores Asset Management S.A. (3)

     —           —           101         —           —           —          (7,267

Cresca S.A. (4)

     —           —           364         —           —           —          —     

Cyrsa S.A. (4)

     —           —           21         —           —           (46     —     

Directors (3)

     —           —           —           —           —           —          (582

Estudio Zang, Bergel & Viñes (3)

     —           —           —           —           —           (132     —     

Fundación IRSA (3)

     —           —           —           —           —           —          (1,073

FyO.Com (1)

     —           —           28,645         24         —           (9,649     —     

IGSA (1)

     —           —           30         —           —           —          —     

IRSA (1)

     4,616         72,174         —           6,748         —           (3,604     (32,917

Itín (1)

     —           —           —           —           2,926         —          —     

Nuevas Fronteras S.A. (1)

     —           —           —           —           —           (3     —     

Ñandubay (1)

     —           —           —           —           2,396         —          —     

Ombú (1)

     —           —           —           —           2,177         —          —     

Credits to employees (3)

     —           —           —           551         —           —          —     

Tarshop S. A. (1)

     —           —           678         —           —           —          —     

Yatay (1)

     —           —           —           —           3,857         —          —     

Yuchán (1)

     —           —           —           —           5,157         —          —     
                                                             

Total

     4,831         82,021         31,760         23,592         16,775         (20,016     (41,839
                                                             

 

(1) Direct or indirect subsidiary
(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 7: (Continued)

 

As of September 30, 2009:

 

     Current
Investments
     Non-current
Investments
     Current
Trade
accounts
receivable
     Current
Other
receivables
     Current Trade
accounts
payable
    Current Other
liabilities
 

Agrology S.A. (1)

     —           —           189         —           —          —     

Acres (1)

     —           —           1,969         —           —          —     

ANTA (1)

     —           —           —           —           (1,782     —     

APSA (1)

     588         8,583         —           1,801         (604     —     

BrasilAgro (2)

     —           —           17         —           —          —     

Cactus (2)

     —           —           —           11         (716     —     

Consultores Asset Management S.A. (3)

     —           —           105         —           —          (586

Cresca S.A. (4)

     —           —           —           442         —          —     

Cyrsa S.A. (4)

     —           —           —           —           (30     —     

Directors (3)

     —           —           —           —           —          (273

Estudio Zang, Bergel & Viñes (3)

     —           —           —           —           (508     —     

Fundación IRSA (3)

     —           —           —           —           —          (1,073

FyO.Com (1)

     —           —           9,213         24         —          —     

Helmir S.A. (1)

     —           —           23         —           —          —     

IBOSA (1)

     —           —           —           —           (660     —     

IRSA (1)

     1,805         64,117         —           —           (471     —     

Credits to employees (3)

     —           —           —           135         —          —     

Shopping Alto Palermo

     —           —           —           —           (2     —     

Tarshop S. A. (1)

     —           —           204         —           —          —     
                                                    

Total

     2,393         72,700         11,720         2,413         (4,773     (1,932
                                                    

 

(1) Direct or indirect subsidiary
(2) Related companies
(3) Related parties
(4) Direct or indirect common control

 

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Table of Contents

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 7: (Continued)

 

 

b. Gain and losses provided by subsidiaries, related companies and related parties corresponding to the periods ended September 30, 2010 and 2009 are as follows:

As of September 30, 2010:

 

     Sales and fees
for shared
services
     Salaries and
wages
     Fees     Beef cattle
expenses
    Interest
Gain
(loss)
     Administration
services
     Others  

Acres (1)

     —           —           —          —          —           198         —     

APSA (1)

     9,295         —           —          —          389         —           —     

Cactus (2)

     —           —           —          (928     —           26         3   

Consultores Asset Management S.A. (3)

     —           —           (5,761     —          —           —           —     

Cresca S.A. (4)

     —           —           —          —          —           231         —     

Estudio Zang, Bergel & Viñes (3)

     —           —           (433     —          —           —           —     

FyO.Com (1)

     —           —           —          —          51         —           (163

IRSA (1)

     3,990         —           —          —          2,330         —           (169

Ombú (1)

     —           —           —          —          96         —           —     

Tarshop S.A. (1)

     142         —           —          —          —           —           —     

Yatay (1)

     —           —           —          —          50         —           —     

Yuchán (1)

     —           —           —          —          67         —           —     
                                                            

Total

     13,427         —           (6,194     (928     2,983         455         (329
                                                            

 

(1) Direct or indirect subsidiaries
(2) Related companies
(3) Related parties
(4) Direct or indirect common control

As of September 30, 2009:

 

     Sales and fees
for shared
services
    Salaries and
wages
    Fees     Beef cattle
expenses
    Interest
Gain
(loss)
     Administration
services
    Others  

ANTA (1)

     —          —          —          —          —           —          (3,527

APSA (1)

     (89     —          —          —          378         —          1,558   

Cactus (2)

     —          —          —          (851     9         42        1   

Consultores Asset Management S.A. (3)

     —          —          (6,803     —          —           —          —     

Directors (3)

     —          (132     —          —          —           —          —     

Estudio Zang, Bergel & Viñes (3)

     —          —          (129     —          —           —          —     

FyO.Com (1)

     —          —          —          —          123         —          (139

IBOSA (1)

     —          —          —          —          —           (9     (462

IRSA (1)

     (229     —          —          —          2,706         —          —     

Credits to employees (3)

     —          —          —          —          1         —          —     

Tarshop S.A. (1)

     33        —          —          —          —           —          —     
                                                         

Total

     (285     (132     (6,932     (851     3,217         33        (2,569
                                                         

 

(1) Direct or indirect subsidiaries
(2) Related companies
(3) Related parties

 

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Table of Contents

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

a. Cash and banks

 

The breakdown for this item is as follows:    September 30,
2010
     June 30,
2010
     September 30,
2009
 

Cash in local currency

     117         110         100   

Cash in foreign currency (Schedule G)

     44         55         67   

Local currency checking account

     2,444         2,884         2,951   

Foreign currency checking account (Schedule G)

     17,855         477         1,014   

Local currency saving account

     423         125         124   

Foreign currency saving account (Schedule G)

     219         159         204   

Checks to be deposited

     —           —           732   
                          
     21,102         3,810         5,192   
                          

b. Investments

 

The breakdown for this item is as follows:    September 30,
2010
     June 30,
2010
     September 30,
2009
 

Temporary investments

        

Temporary investments (Schedules C and G)

     75,099         24,631         5,282   
                          
     75,099         24,631         5,282   
                          

Long term investments in other companies

        

Investments on investees (Note 13 and Schedule C)

     1,780,064         1,800,764         1,595,643   
                          
     1,780,064         1,800,764         1,595,643   
                          

Other investments

        

Other investments (Schedules C and G)

     85,248         82,042         72,721   
                          
     85,248         82,042         72,721   
                          

c. Trade accounts receivable, net

 

The breakdown for this item is as follows:    September 30,
2010
    June 30,
2010
    September 30,
2009
 

Current

      

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (Note 7 and Schedule G)

     36,537        31,760        11,720   

Trade accounts receivable (Schedule G)

     43,180        44,010        20,304   

Trade accounts receivable – real estate (Schedule G)

     3,920        2,821        7,382   

Trade accounts receivable under legal proceedings

     322        341        341   

Checks to be deposited

     428        7,190        —     

Less:

      

Allowance for doubtful accounts (Schedule E)

     (670     (630     (501
                        
     83,717        85,492        39,246   
                        

 

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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:

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Current

        

VAT receivables, net

     24,031         15,506         32,732   

Income tax credit and advances

     —           6,444         5,093   

Minimum presumed income tax credit

     8,266         —           3,729   

Prepaid leases

     28,907         4,823         15,176   

Prepaid expenses

     5,941         3,816         355   

Guarantee deposits (Note 4 and Schedule G)

     3,160         2,611         2,369   

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (Note 7 and Schedule G)

     41,163         23,592         2,413   

Operations to liquidate

     770         512         —     

Gross sales tax credit

     1,263         469         431   

Premiums paid (Note 4 and Schedule G)

     154         —           212   

Others

     3,000         4,143         3,261   
                          
     116,655         61,916         65,771   
                          

Non-current

        

Minimum presumed income tax

     34,354         30,763         23,551   

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (Note 7)

     17,110         16,775         —     

VAT receivables, net

     14,013         12,676         7,103   
                          
     65,477         60,214         30,654   
                          

e. Inventories

The breakdown for this item is as follows:

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Current

        

Unharvested crops

     10,506         11,166         5,401   

Materials and others

     58,031         28,222         35,299   

Beef cattle

     21,774         16,053         21,753   

Crops

     35,021         41,566         19,041   

Seeds and fodder

     2,356         3,447         2,068   
                          
     127,688         100,454         83,562   
                          

Non-Current

        

Beef cattle

     140,739         141,602         72,174   
                          
     140,739         141,602         72,174   
                          

 

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Table of Contents

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:

 

      September 30,
2010
     June 30,
2010
     September 30,
2009
 

Current

        

Suppliers (Schedule G)

     45,594         40,280         23,763   

Provisions for inputs and other expenses (Schedule G)

     19,424         20,503         25,585   

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties (Note 7 and Schedule G)

     10,413         20,016         4,773   

Provision for harvest expenses

     725         2,327         156   
                          
     76,156         83,126         54,277   
                          

g. Short-term debts

The breakdown for this item is as follows:

 

      September 30,
2010
    June 30,
2010
    September 30,
2009
 

Current

      

Bank loans (Schedule G)

     154,185        118,123        121,860   

Interests payable - Bank loans (Schedule G)

     437        2,054        774   

Bank overdrafts

     243,547        292,781        49,585   

Interests payable - Bank overdrafts

     6,584        1,029        4,339   

Non-convertible Notes Class I (Note 20 and Schedule G)

     —          —          15,500   

Non-convertible Notes Class II (Note 20 and Schedule G)

     —          35,251        34,461   

Interest payable-Non-convertible Notes (Note 20 and Schedule G)

     1,991        153        252   

Expenses of Non-convertible Notes issuance (Note 20)

     (469     (80     (500
                        
     406,275        449,311        226,271   
                        

Non Current

      

Non-convertible Notes Class III (Note 20)

     35,650        —          —     

Non-convertible Notes Class IV (Note 20 and Schedule G)

     70,655        —          —     

Expenses of Non-convertible Notes issuance (Note 20)

     (351     —          —     
                        
     105,954        —          —     
                        

h. Salaries and social security payable

The breakdown for this item is as follows:

 

     September 30,
2010
     June 30,
2010
     September 30,
2009
 

Provision for vacations and annual bonus

     8,389         20,467         2,721   

Social security payable

     5,858         2,683         1,728   

Salaries payable

     72         —           —     

Health care payable

     2,918         180         584   
                          
     17,237         23,330         5,033   
                          

 

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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:

 

      September 30,
2010
     June 30,
2010
     September 30,
2009
 

Current

        

Minimum presumed income tax, net (Note 2.u.)

     1,489         2,530         —     

Moratorium - Minimum presumed income tax

     —           —           883   

Gross sale tax payable

     774         921         256   

Taxes withheld for income tax

     4,392         799         1,204   

Tax on shareholders’ personal assets

     2,505         305         2,337   

Others

     19         104         78   
                          
     9,179         4,659         4,758   
                          

Non-Current

        

Deferred income tax (Note 6)

     86,876         73,430         58,090   

Minimum presumed income tax (Note 2.u)

     2,192         —           —     

Moratorium- Tax on personal shareholder’s assets

     2,315         2,392         2,620   
                          
     91,383         75,822         60,710   
                          

j. Other liabilities

The breakdown for this item is as follows:

 

      September 30,
2010
     June 30,
2010
     September 30,
2009
 

Current

        

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties. (Note 7 and Schedule G)

     64,774         34,572         1,346   

Management fee provision (Notes 5 and 7)

     8,028         7,267         586   

Premiums collected (Note 4 and Schedule G)

     3,946         595         362   

Operations to liquidate

     319         178         —     

Others

     54         —           —     
                          
     77,121         42,612         2,294   
                          

Non-Current

        

Advances for concession rigths (Note 13.1.a. and Schedule G)

     3,222         3,166         —     

Interest in Subsidiaries, related companies Law No. 19,550 Section 33, and related parties (Schedule C)

     624         —           —     

Others

     172         —           —     
                          
     4,018         3,166         —     
                          

 

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Table of Contents

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)

 

k. Financial results

The breakdown for this item is as follows:

 

     September 30,
2010

Gain (loss)
    September 30,
2009

Gain (loss)
 

Generated by assets

    

Interest Income

    

Interest income

     3,501        3,312   

Interest for discount of assets

     754        1,114   
                
     4,255        4,426   
                

Other unrealized gain

    

Gain on hedging

     324        4,366   

Financial result of IRSA’s and APSA’s non-convertible notes

     2,156        2,059   

Tax on bank account operations

     (2,057     (1,417

Unrealized gain and results of securities operations

     61        113   
                
     484        5,121   
                

Generated by liabilities

    

Interest loss

    

Bank loans and other liabilities

     (9,082     (7,430

Interest of non-convertible notes

     (2,512     (252
                
     (11,594     (7,682
                

 

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Table of Contents

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:

 

      September  30,
2010
Gain/(loss)
    September  30,
2009
Gain/(loss)
 

IRSA

    

- Result equity method

     28,433        66,030   

- Amortization of negative goodwill

     7,519        9,053   

- Elimination of amortization of IRSA’s and APSA’s non- convertible notes issuance expenses (1)

     54        54   

- Accrued financial results of IRSA’s and APSA’s non-convertible notes (1)

     (2,156     (2,059

- Elimination of exchange difference of IRSA’s and APSA’s non-convertible notes (1)

     57        450   

- Amortization of higher values

     (4,455     (2,915

BrasilAgro

    

- Result equity method

     340        602   

- Amortization of negative goodwill

     1,525        1,128   

Cactus

    

- Result equity method

     (2,675     (343

Agro-Uranga S.A.

    

- Result equity method

     515        (342

IGSA

    

- Result equity method

     —          (13

ANTA

    

- Result equity method

     —          (853

- Amortization of concession right

     —          (175

- Amortization of three plantations (wood)

     —          (32

FyO.Com

    

- Result equity method

     (532     (94

Agrology S.A.

    

- Result equity method

     2,180        5,197   

- Amortization of pre-operative expenses

     (76     (75

EAASA

    

- Result equity method

     (25     —     

Acres

    

- Result equity method

     (57     —     

Ombú

    

- Result equity method

     (15     —     

Yatay

    

- Result equity method

     (9     —     

Yuchán

    

- Result equity method

     (12     —     

Northagro S.A.

    

- Result equity method

     (8     —     

Pluriagro S.A.

    

- Result equity method

     (8     —     
                
     30,595        75,613   
                

 

(1) Corresponds to the acquisition of IRSA’s and APSA’s non-convertible notes acquired during the fiscal year ended June 30, 2009.

 

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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: EARNINGS PER SHARE

Following is presented a reconciliation between the weighted average of outstanding shares of common stock and the diluted weighted average of shares of common stock. As of September 30, 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 (see Note 16).

 

     September 30,
2010
     September 30,
2009
 

Weight average of outstanding shares of common stock

     496,559,754         471,538,610   

Diluted weighted average of shares of common stock

     558,914,922         530,781,517   
     September 30,
2010
     September 30,
2009
 

Earnings for the calculation of basic earnings per share

     51,850         61,827   

Earnings for the calculation of diluted earnings per share

     51,850         61,827   

BASIC Earnings per share

   September 30,
2010
     September 30,
2009
 

Earnings

     51,850         61,827   

Number of shares

     496,559,754         471,538,610   

Earnings per share

     0.10         0.13   

DILUTED Earnings per share

   September 30,
2010
     September 30,
2009
 

Earnings

     51,850         61,827   

Number of shares

     558,914,922         530,781,517   

Earnings per share

     0.09         0.12   

 

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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:

Assets based on their estimated collection term

 

Estimated collection term

  Current and
Non-Current Investments
    Trade accounts receivable     Other receivables  
  September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
 

2nd quarter 2010/2009

    —          —          588        —          —          31,864        —          —          17,472   

3rd quarter 2010/2009

    —          —          1,805        —          —          —          —          —          15,753   

4th quarter 2010/2009

    —          —          —          —          —          4,719        —          —          13,253   

1st quarter 2011/2010

    —          24,148        —          —          85,151        2,663        —          36,081        3,505   

2nd quarter 2011/2010

    73,076        215        —          79,475        —          —          65,387        7,354        —     

3rd quarter 2011/2010

    1,860        —          —          3,920        —          —          1,338        3,381        —     

4th quarter 2011/2010

    —          —          —          —          —          —          7,167        10,214        —     

1st quarter 2012/2011

    —          —          —          —          —          —          13,156        —          —     

2nd quarter 2012/2011

    —          —          —          —          —          —          17,110        16,775        —     

3rd quarter 2017/2016

    74,944        72,174        64,117        —          —          —          —          —          —     

4th quarter 2017/2016

    10,283        9,847        8,583        —          —          —          —          —          —     

With no stated current term

    163        268        2,889        322        341        —          29,607        4,886        15,788   

With no stated non-current term

    21        21        21        —          —          —          48,367        43,439        30,654   
                                                                       

Total

    160,347        106,673        78,003        83,717        85,492        39,246        182,132        122,130        96,425   
                                                                       

Assets classified according to interest rate that they accrue

 

Interest rate that they accrue

  Current and
Non-Current Investments
    Trade accounts receivable     Other receivables  
  September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
 

At fixed interest rate

    85,227        82,021        72,700        —          2,696        7,359        785        551        135   

At variable interest rate

    72,633        19,800        2,889        —          —          —          16,960        16,509        56   

Non-interest bearing

    2,487        4,852        2,414        83,717        82,796        31,887        164,387        105,070        96,234   
                                                                       

Total

    160,347        106,673        78,003        83,717        85,492        39,246        182,132        122,130        96,425   
                                                                       

 

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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 (Continued):

 

Liabilities based on their estimated payment term

 

Estimated payment term

  Trade accounts payable     Short-term debts     Salaries and social security payable  
  September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
 

2nd quarter 2010/2009

    —          —          54,277        —          —          50,562        —          —          4,020   

3rd quarter 2010/2009

    —          —          —          —          —          33,589        —          —          —     

4th quarter 2010/2009

    —          —          —          —          —          68,733        —          —          —     

1st quarter 2011/2010

    —          83,126        —          —          139,956        19,463        —          21,337        1,013   

2nd quarter 2011/2010

    76,156        —          —          33,571        —          —          10,282        —          —     

3rd quarter 2011/2010

    —          —          —          11,175        —          —          3,390        1,993        —     

4th quarter 2011/2010

    —          —          —          111,398        15,545        —          —          —          —     

1st quarter 2012/2011

    —          —          —          —          —          —          3,565        —          —     

2nd quarter 2012/2011

    —          —          —          29,448        —          —          —          —          —     

3rd quarter 2012/2011

    —          —          —          29,449        —          —          —          —          —     

4th quarter 2012/2011

    —          —          —          29,450        —          —          —          —          —     

1st quarter 2013/2012

    —          —          —          17,607        —          —          —          —          —     

With no stated current term

    —          —          —          250,131        293,810        53,924        —          —          —     

With no stated non-current term

    —          —          —          —          —          —          —          —          —     
                                                                       

Total

    76,156        83,126        54,277        512,229        449,311        226,271        17,237        23,330        5,033   
                                                                       

Estimated payment term

  Taxes payable     Other liabilities     Provisions  
  September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
 

2nd quarter 2010/2009

    —          —          4,309        —          —          948        —          —          —     

3rd quarter 2010/2009

    —          —          297        —          —          1,346        —          —          —     

4th quarter 2010/2009

    —          —          76        —          —          —          —          —          —     

1st quarter 2011/2010

    —          1,901        76        —          8,622        —          —          —          —     

2nd quarter 2011/2010

    8,951        2,606        —          77,079        33,990        —          —          —          —     

3rd quarter 2011/2010

    76        76        —          14        —          —          —          —          —     

4th quarter 2011/2010

    76        76        —          14        —          —          —          —          —     

1st quarter 2012/2011

    76        —          —          14        —          —          —          —          —     

2nd quarter 2012/2011

    —          —          —          —          —          —          —          —          —     

3rd quarter 2012/2011

    —          —          —          —          —          —          —          —          —     

4th quarter 2012/2011

    —          —          —          —          —          —          —          —          —     

1st quarter 2013/2012

    —          —          —          —          —          —          —          —          —     

With no stated current term

    —          —          —          —          —          —          —          —          —     

With no stated non-current term

    91,383        75,822        60,710        4,018        3,166        —          1,671        1,768        1,771   
                                                                       

Total

    100,562        80,481        65,468        81,139        45,778        2,294        1,671        1,768        1,771   
                                                                       

Liabilities classified according to interest rate that they accrue

 

Interest rate that they accrue

  Trade accounts payable     Short-term debts     Salaries and social security payable  
  September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
 

At fixed interest rate

    —          —          —          441,431        415,413        145,931        —          —          —     

At variable interest rate

    —          —          —          61,786        30,662        74,975        —          —          —     

Non-interest bearing

    76,156        83,126        54,277        9,012        3,236        5,365        17,237        23,330        5,033   
                                                                       

Total

    76,156        83,126        54,277        512,229        449,311        226,271        17,237        23,330        5,033   
                                                                       

Interest rate that they accrue

  Taxes payable     Other liabilities     Provisions  
  September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
    September 30,
2010
    June 30,
2010
    September 30,
2009
 

At fixed interest rate

    —          —          —          31,680        31,448        —          —          —          —     

At variable interest rate

    —          —          —          —          —          —          —          —          —     

Non-interest bearing

    100,562        80,481        65,468        49,459        14,330        2,294        1,671        1,768        1,771   
                                                                       

Total

    100,562        80,481        65,468        81,139        45,778        2,294        1,671        1,768        1,771   
                                                                       

 

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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: 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 fiscal year plus (less) prior fiscal 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 12: PURCHASE AND SALE OF FARMS

 

  a) On May 30, 2008, IRSA signed, in commission, a purchase agreement 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 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.

 

  c) On June 15, 2010, the title deed for the sale of the establishment “TALI SUMAJ” (12,701 has.) located in the Province of Catamarca was executed. The transaction was agreed upon at US$ 4.8 million, which was fully collected.

As to the closing date of these financial statements, 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)”, had not been lifted (Note 17), the Company pledged to carry out all the formalities in its care to have the attachment lifted or replacement, assuming to carry out all obligations derived from the possible conviction, ensuing court expense and other procedural costs, once the ruling on the case is entered. For such purpose, the Company provided a performance bond to secure its obligations on behalf of the purchaser.

 

  d) On September 3, 2010, the title deed and conveyance of ownership related to selling the establishment “La Juanita” located in the district of Trenque Lauquen, Province of Buenos Aires, with a surface of 4,302 hectares, was executed. The transaction was agreed upon at US$ 18.0 million which: US$ 4.5 million was collected on August 6, 2010, upon executing the purchase agreement; US$ 12.5 million was collected upon executing the title deed and, the outstanding balance of US$ 1.0 million, secured by a first degree mortgage, will be paid on January 10, 2011.

 

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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 12: (Continued)

 

Under this transaction, a loan for use agreement was executed in favor of the Company through January 10, 2011, on certain portion of the building, seeking to continue until such date with the productive activities carried out at the establishment.

 

NOTE 13: 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 influence that derives from its capacity to affect the operative and financial decisions considering their participation in the Board of Directors.

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 S.A.C.I.F. y A., Cape Town LLC, Tarpon Investimentos S.A., Tarpon Agro LLC, Agro Managers S.A. and Agro Investment S.A.

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 expiring in 2021 and totaling 104,902, which can only be exercised at the option of Cresud whenever a transfer of control occurs or an offer to purchase the BrasilAgro shares is received. The exercise price of these options will be the same price as the purchase offer referred to in the previous paragraph. As of September 30, 2010, the Company has not registered any value for the holding of such options.

 

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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 13: (Continued)

 

Over fiscal year 2010, the Company acquired 2,395,400 additional shares from this company for the amount of US$ 15.2 million, thus the equity interest increased to 23.24% as of June 30, 2010. Such participation remains unchanged at the end of the period.

Tarpon Agro LLC and Tarpon Investimentos S.A. (“Tarpon”)’s share Purchase Agreement

On April 28, 2010 the Company entered into an agreement (“the agreement”) with Tarpon by which once certain conditions have been complied with, Tarpon will transfer for valuable consideration to Cresud S.A.C.I.F. y A the following:

 

  (a) 9,581,750 shares of common stock issued by BrasilAgro (either in shares or ADR’s, “Shares”), and

 

  (b) 64,000 first issue warrants from BrasilAgro and 64,000 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 Rs. 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.

To ensure the payment of the transaction, a first degree pledge commitment for Tarpon was made on 9,581,750 common shares and 64,000 warrants of Series 1 BrasilAgro held by the Company.

It should be noted that regardless of the departure of Tarpon from “BrasilAgro Project”, Mr Elie Horn and Cape Town LLC have expressed their intentions to remain as shareholder’s of BrasilAgro.

 

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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 13: (Continued)

 

After the closing date of these financial statements the acquisition of shares was made under the agreement and the payment process was started. See Note 24 to the financial statements.

Concession of rights and pledge to sell shares

During last quarter of year 2010, an agreement was executed by which the Company assigned all equity and political rights related to 2,276,534 shares of BrasilAgro for two years. The agreement also provides a promise to sell, under which the assignee may at any time request the sale of BM&FBOVESPA’s shares or the transfer of shares on its behalf.

In consideration for granting such rights, the Company was paid a fixed value of US$ 0.8 million and additionally, in the event the assignee requested the sale or transfer of share, it should paid US$ 7.15 per share sold or transferred.

 

  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, made over previous fiscal year, irrevocable capital contributions in proportion to their holdings for an amount of Ps. 37,208 in Agrology S.A. which were capitalized on January 19, 2010. In addition, as of June 30, 2010 irrevocable contributions and receivables were capitalized for Ps. 29,249 in Agrology S.A., 97% on its own account and 3% on account of IGSA.

 

  2. Cresud – Local

 

  a) Cactus

On May 19, 2010, the Company acquired from Helmir S.A. 3,294,667 registered, non-endorsable shares of common stock with a face value of Ps. 1 each one, entitled to one vote per share of Cactus Argentina S.A., for US$ 1.6 million.

On June 30, 2010, the Company had settled the payable to Helmir S.A. for such transaction. With this acquisition, our direct interest in Cactus as of that date increased from 36% to 48%. Such participation remains unchanged at the end of the period (Schedule C).

 

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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 13: (Continued)

 

  b) IRSA

During the fiscal year 2010, the Company acquired 2,114,360 shares amounting to US$ 2.3 million, increasing our direct interest to 50.60% as of June 30, 2010. Such participation remains unchanged at the end of the period (Schedule C).

 

  c) ANTA

During the fiscal year 2010, the Company made irrevocable contributions for Ps. 8,100, 90% on its own behalf and 10% on behalf of IGSA, which were capitalized on January 19, 2010. In addition, as of June 30, 2010, irrevocable contributions and receivables to ANTA for Ps. 10,228 were capitalized, 90% on its own behalf and 10% on behalf of IGSA. As from July 1st, 2010, the incorporation by merger into ANTA is effective as described in Note 14.2.

 

  d) IGSA

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. As from July 1st, 2010, the incorporation by merger into IGSA is effective as described in Note 14.2.

After Company’s the spin-off – merger into IGSA, mentioned in Note 14.1, 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 fiscal year 2010, Cresud made irrevocable contributions to IGSA for Ps. 1,926, which were capitalized on January 19, 2010. In addition, as of June 30, 2010, irrevocable contributions and receivables for Ps. 2,811 were capitalized in IGSA.

 

  e) Northagro S.A,, Agrotech S.A. and Pluriagro S.A.

On September 21, 2010, the articles of incorporations of the companies Northagro S.A., Agrotech S.A. and Pluriagro S.A. were signed, the contributions for each one of the companies were made by Cresud and Agrology by 97% and by 3%, respectively, totaling Ps. 50,000; equivalent to 50,000 registered non-endorsable shares of common stock with a face value of Ps. 1 each, entitled to one vote per share.

 

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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 13: (Continued)

 

  f) FyO.Com

On September 30, 2010, the Ordinary Shareholders Meeting of FyO.Com decided to approve a capital increase for up to Ps. 5,925, related to issuing 538,613 registered, non-endorsable shares of common stock with a face value of Ps. 1, plus an additional paid-in capital for Ps. 5,386. In such sense, the Company subscribed shares for Ps. 4,467, of which Ps. 3,541 was made by the conversion of debt into equity and the difference for Ps. 926 to be paid-in in cash. Due to such transaction, as of September 30, 2010, the Company’s interest amounted to 65.85%.

 

NOTE 14: SPIN-OFFS AND MERGERS

 

  1. Spin-off of Inversiones Ganaderas S.A. (IGSA) 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 all related documentation.

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
IGSA
 

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.

 

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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 14: (Continued)

 

 

  2. Cresud’s merger with IGSA and ANTA

On September 3, 2010, the Company’s Board of Directors resolved to merge with IGSA Residual and Anta, by which both companies merge into Cresud and are dissolved without liquidation. On September 25, a pre-merger agreement is executed, by which all assets, rights and obligations of Merged Companies (IGSA and ANTA) are transferred to the Merging Company (Cresud). Such assets and liabilities were transferred for the value at which they were registered in the Special Merger Financial Statements as of June 20, 2010, of IGSA and ANTA.

As from July 1, 2010, all transactions carried out by the merged companies will be understood as if they had been made by and for Cresud.

 

NOTE 15: NEGATIVE WORKING CAPITAL

At the end of the period, the Company carried a working capital deficit of Ps. 161,707 whose treatment is being considered by the Board of Directors and the respective Management.

 

NOTE 16: 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, locally and internationally.

After this capital increase, the Company’s outstanding shares amounted to 500,774,772.

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

 

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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 16: (Continued)

 

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.

As of June 30, 2009, 2,291,527 options were exercised; consequently, 763,838 shares of common stock were issued for Ps. 4,023.

During the fiscal year 2010, 21,898 shares entitled with the right to be converted into 62,559 options and such transaction yielded US$ 135.

During the three-month period ended September 30, 2010, no shares for exercising the right to convert warrants were issued. As of the closing date of this period, there are 177,645,914 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.

 

  - 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 17: EXAGRIND S.A. LAWSUIT – SAN RAFAEL AGAINST TALI SUMAJ AND OTHER DAMAGES AND LOSSES

Because of the merge with IGSA, Note 14.1, 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.

 

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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 17: (Continued)

 

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 Tali Sumaj farm on attachment has been accepted in replacement.

It should be noted that during the fiscal year 2010, it was executed the title deed for the sale of such establishment and because as of the closing date of these financial statement the attachment-in-aid-of-execution had not been lifted, the Company assumed certain obligations and provided a surety insurance to guarantee its obligation on behalf of the purchaser (Note 12).

 

NOTE 18: COUNTING AT ESTANCIA LOS POZOS

During the annual cattle count held at Estancia Los Pozos, it was detected that the number of head of cattle had decreased. As the Company had filed a report with Unidad Regional No. 5, in Joaquín V. González, Province of Salta, involving procedures by the Criminal Court No. 1, Metán, Province of Salta seeking to find out the reason for such decrease.

In this sense, the Company is currently providing the information and documentation requested by the judge hearing such case. Although such procedure is at the initial stage, the effects of the previously mentioned difference were recognized in the previous year.

 

NOTE 19: 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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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 19: (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.

Later, the terms and conditions for the acquisitions were amended on many occasions by the Board of Directors due to the plummeting market and worsened in turn by the general context in international. Some amendments were:

 

  - The maximum amount to be invested was increased to Ps. 82,000.

 

  - 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.

 

  - The price to be paid for the shares was established between a minimum Ps. 1 per share and up to Ps. 3.50 per share.

 

  - The deadline to make acquisition was successively extended.

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.

In accordance with the law of commercial companies, the board shall dispose of the shares acquired within a period of one year unless an extension is provided for a Shareholders meeting. On November 13, 2009, the Board of Directors seeking to comply with the mandate granted by the Shareholders meeting held 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.

 

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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 20: PRESENTATION OF THE GLOBAL PROGRAM FOR THE ISSUANCE OF NON-CONVERTIBLE NOTES FOR A FACE VALUE OF UP TO US$ 50,000,000

In the framework of the Global Program to Issue Corporate Bonds for a face value of up to US$ 50,000,000 (the “Program”), corporate bonds in one or more classes and/or series (the “ Corporate Bonds” or “CB”) may be issued. Corporate Bonds will be simple not convertible into share, with or without guarantee or guaranteed by third parties, whose face value may not exceed US$ 50,000,000 (or their equivalent in other currencies), with maturity dates not shorter than thirty days from the issuance date. The duration of the Program will be for five years as from its authorization by CNV (Argentines securities commission) on September 4, 2008, by means of resolution No. 15,972.

The issuance of Corporate Bonds was approved by the Shareholders Meeting on October 31, 2006 and by the Board of Directors’ Minutes on June 19, 2008, April 24, 2009, July 3, 2009, August 19, 2009 and July 1, 2010.

 

  1. Issuance of Non-Convertible Notes – Class I and II

On August 19, 2009, based on the powers granted by the shareholders to the Board of Directors, the Company approved the issuance of the Company’s First Series of Non-convertible notes up to a face value of Ps. 50 million under the Global Program.

During the following months, the First Series of non-convertible notes was subscribed and issued for Ps. 50 million in two classes. Class I for Ps. 15.5 million at variable rate (average Badlar + 300 basis points) falling due 270 days from issuance date and Class II for Ps. 34.5 million at a fixed rate of 7.2% falling due 365 after issuance date.

The terms and conditions of such non-convertible notes required that the Company complies with certain obligations that had been specified in the respective price supplement. In this sense, the Company made quarterly interest and amortization installment payment related to both classes,as broken down below:

 

  - On December 10, 2009, the first interest installments of Class I and Class II non-convertible notes were paid for Ps. 558 and US$ 159,201, respectively.

 

  - On March 10, 2010, the second interest installments of Class I and Class II non-convertible notes were paid for Ps. 487 and US$ 159,201 respectively.

 

  - On June 8, 2010, the third interest installments of Class I and Class II non-convertible notes were paid for Ps. 472 and US$ 159,201, respectively. Likewise, on such same date, Ps. 15.5 million related to the only amortization installment of Class I Corporate Bonds was paid.

 

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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 20: (continued)

 

  - On September 13, 2010, the last interest installment and the only amortization installment of Class II non-convertible notes were paid for US$ 171,583 and US$ 9.0 million, respectively.

 

  2. Issuance of Non-Convertible Notes – Class III and IV

On July 1, 2010, the Board of Directors approved the Price Supplement related to the issuance of Class III and Class IV Non-Convertible Notes, under the Program framework.

Later, between July 6 and 16, 2010, the Second Series of simple Corporate Bonds (not convertible into shares) was carried out for a total value of Ps. 105.9 million. The issue was finally carried out on July 21, 2010.

Class III Non-Convertible Notes, for a face value of Ps. 35.7 million and falling due 21 months after the issuance date will accrue interest at a variable date (Badlar privada plus 400 basis points). These will be paid on a quarterly basis in arrears while amortization will be made in three consecutive payments 15, 18 and 21 from the issuance date.

Class IV Non-Convertible Notes, for a face value of US$ 17.8 million and falling due 24 months after the issuance date will accrue interest at fixed annual rate of 7.75%. These will be paid on a quarterly basis in arrears while amortization will be made in four equal and consecutive payments 15, 18, 21 and 24 from the issuance date.

After the closing of these financial statements, the first interest installments from both CB classes were paid. See note 24 to the Financial Statements.

 

NOTE 21: 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 22: MINUTE OF RENEGOTIATION OF CONCESSION AGREEMENT

On July 2, 2008, ANTA (incorporated by merge according to Note 14.2.) 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.

 

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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 22: (continued)

 

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.

Additionally, ANTA committed to reduce the concession area through the return of 30,000 hectares and its location will come up from a sketch agreed by the parties involved.

 

NOTE 23: 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.

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

 

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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 23: (Continued)

 

In the future, the participants or their successors will have access to 100% of the Program Benefits (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 the Company only if he has participated in the plan during a minimum term of 5 (five) years, provided certain conditions were complied with.

During the current period the Company had made contributions to the Plan that amount Ps. 2,068.

 

NOTE 24: SUBSEQUENT EVENTS

 

  a) Non Convertible Notes – Class III and Class IV

On October 19, 2010, the first interest installments of Class III and Class IV CB for Ps. 1,272 and US$ 340,954, respectively, related to the period July 21 and October 19, 2010 were paid.

 

  b) Executing the Addendum to the Agreement to Purchase of Shares from Tarpon Agro LLC and Tarpon Investimentos S.A. (“Tarpon”).

On October 20, 2010, the Company ad Tarpon executed an addendum to the Share Purchase Agreement of April 28, 2010, under which the Company either directly or indirectly acquired 9,581,750 shares of common stock of BrasilAgro—Companhia Brasileira Propriedades Agrícolas (“BrasilAgro”), representing 16.40% of the outstanding stock. Consequently, Cresud paid Rs. 25,236,224.61 and the price remainder equivalent to Rs. 105,206,000.10 should be paid on April 27, 2011, which is guaranteed by a security interest over 8,298,150 shares and 37,325 warrants from the First Issue.

Consequently, Cresud is either directly or indirectly the owner of 20,883,916 shares or 35.75% of the Company’s outstanding stock. It should be noted that acquiring shares does not imply a change in the control over BrasilAgro; and that BrasilAgro’s Shareholders’ Agreement will remain effective with the amendments that may be required to sell all shares owned by Tarpon and its affiliates.

Likewise, due to the transaction, Cresud owns 168,902 BrasilAgro’s First Issuance Warrants and 168,902 BrasilAgro’s Second Issuance Warrants.

 

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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

 

 

  c) Meeting of Shareholders

The Ordinary and Extraordinary Shareholders Meeting held on October 29, 2010, approved, among others issues, the following:

 

  - Annual report and financial statements ended June 30, 2010;

 

  - Ratification of the spin-off-merger between the Company and IGSA;

 

  - Corporate reorganization by merger into IGSA residual and ANTA;

 

  - Defer treatment until the next Shareholders Meeting that may consider the fiscal year that will end on June 30, 2011, of the destination of proprietary portfolio stock;

 

  - Renewal for another period the delegations made in the Board by the Shareholders meeting from the previous period as regards paying a bonus to the Company’s Managements of up to 1% of the outstanding capital stock; and

 

  - Extending the amount of the Global Program to Issue Corporate Bonds in place for up to a further US$ 100 million (or its equivalent in other currencies).

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Property and equipment

Corresponding to the three-month periods ended September 30, 2010 and 2009

and fiscal year ended June 30, 2010

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
September 30,
2010
     Net carrying
Value as of
June 30,
2010
     Net carrying
Value as of
September 30,
2009
 

Principal
Account

   Value at the
the beginning
of the year
     Additions
and/or
Transfers (2)
     Deductions
and/or
Transfers
     Value at
the end of
the period /
year
     Rate %      Accumulated
at the
beginning
year
     Additions (3)      Decrease
of the
period /
year
     Current
period /
year (1)
     Accumulated
at the end of
the period /
year
          

Real estate

     201,831         3,964         9,029         196,766         —           —           —           —           —           —           196,766         201,831         201,837   

Wire fences

     9,815         47         518         9,344         3         1,385         —           78         76         1,383         7,961         8,430         8,467   

Watering troughs

     8,072         —           1,187         6,885         5         1,890         —           345         94         1,639         5,246         6,182         6,178   

Alfalfa fields and meadows

     9,255         25         3,069         6,211         12-25-50         4,068         —           1,217         356         3,207         3,004         5,187         4,463   

Buildings and constructions

     39,748         281         5,273         34,756         2         5,687         —           449         211         5,449         29,307         34,061         35,451   

Machinery

     12,692         559         91         13,160         10         9,458         68         91         150         9,585         3,575         3,234         3,395   

Vehicles

     3,725         81         —           3,806         20         1,937         60         —           134         2,131         1,675         1,788         1,615   

Tools

     269         11         —           280         10         177         2         —           4         183         97         92         99   

Furniture and equipment

     1,271         29         —           1,300         10         901         8         —           11         920         380         370         377   

Feeder and drinking troughs

     238         —           66         172         20         11         —           4         3         10         162         227         101   

Corral and leading lanes

     1,531         —           200         1,331         3         241         —           56         11         196         1,135         1,290         1,085   

Roads

     3,105         —           272         2,833         10         1,344         —           113         60         1,291         1,542         1,761         1,882   

Facilities

     18,224         240         761         17,703         10-20-33         9,882         33         294         281         9,902         7,801         8,342         7,886   

Computer equipment

     2,357         22         —           2,379         20         2,142         1         —           31         2,174         205         215         227   

Silo plants

     1,350         —           112         1,238         5         691         —           76         20         635         603         659         645   

Constructions in progress

     15,135         5,110         1,759         18,486         —           —           —           —           —           —           18,486         15,135         9,185   

Advances to suppliers

     1,187         659         —           1,846         —           —           —           —           —           —           1,846         1,187         962   

Improvement in third’s real estate

     —           34,124         —           34,124         3         —           2,330         —           283         2,613         31,511         

Tree plantations (wood)

     —           4,320         —           4,320         3         —           432         —           36         468         3,852         

Posts

     —           58         —           58         —           —           —           —           —           —           58         
                                                                                                                    

Total as of September 30, 2010

     329,805         49,530         22,337         356,998            39,814         2,934         2,723         1,761         41,786         315,212         —           —     
                                                                                                              

Total as of June 30, 2010

     309,468         30,548         10,211         329,805            34,540         2,234         2,702         5,742         39,814         —           289,991         —     
                                                                                                              

Total as of September 30, 2009

     309,468         13,446         807         322,107            34,540         2,234         —           1,478         38,252         —           —           283,855   
                                                                                                              

 

(1) Included in Schedule H.
(2) It includes additions for Ps.40,555 incorporated by merger with ANTA.
(3) Incorporated by merger.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Intangible Assets

Corresponding to the three-month periods ended September 30, 2010 and 2009

and fiscal year ended June 30, 2010

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
year
    Additions
of the
period /
year
     Value
at the
end of
the
period /
year
     Rate
%
     Accumulated
at the
beginning of
the year
     Additions (1)      Amount (2)      Accumulated
at the end of
the

period / year
     Net carrying
value as of
September 30,
2010
     Net
carrying
value as
of
June 30,
2010
     Net carrying
value as of
September 30,
2009
 

Pre-operative expenses (Bolivia)

     842        —           842         20         252         —           42         294         548         590         716   

Pre-operative expenses (Paraguay)

     671        —           671         20         190         —           34         224         447         481         582   

Concession Rights

     —   (1)      23,582         23,582         3         —           2,258         188         2,446         21,136         —           —     
                                                                                                 

Total as of September 30, 2010

     1,513        23,582         25,095            442         2,258         264         2,964         22,131         —           —     
                                                                                                 

Total as of June 30, 2010

     1,513        —           1,513            140         —           302         442         —           1,071         —     
                                                                                                 

Total as of September 30, 2009

     1,513        —           1,513            140         —           75         215         —           —           1,298   
                                                                                                 

 

(1) Incorporated by merger. See Note 14.2 to Financial Statements.
(2) Preoperative expenses are included in gain on equity investees in the Statements of Income in the Statement of Income. Concession Rights are included in Depreciation of Intangible Assets in Schedule H.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Investments

As of September 30, 2010 and 2009 and June 30, 2010

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
September 30,
2010
    Value as of
June 30,

2010
     Value as of
September 30,
2009
     Market
Value as of
September 30,
2010
     INFORMATION ON THE ISSUER  
                   Principal activity      Latest financial statements  
                      Capital      Income (loss)
for the year
    Shareholders’
Equity
 

CURRENT ASSET

                          

Current Investments

                          

Mutual Funds

                          

Bony Hamilton Fund (US$)

     4,087,747           16,024        14,554         2,331                 

Deutsche Managed Euro Fund (€) (1)

     —             —          53         61                 

Deutsche Managed Dollar Fund (US$) (1)

     14,399,487           56,446        4,925         25                 
                                            

Subtotal

          72,470        19,532         2,417                 
                                            

Bonds and Notes (1)

                          

Non-Convertible Notes IRSA 2017 (US$)-intrests

     469,653           1,860        4,616         1,805                 

Non- Convertible Notes APSA 2017 (US$)-Interests

     153,125           606        215         588                 

Global 2010 bonds

     110,000           162        132         133         1.4687              

Bocon Pro 1 bonds

     157,647           1        1         1         0.0040              

Mortgage bonds

     —             —          135         338                 
                                            

Subtotal

          2,629        5,099         2,865                 
                                            

Total current investments

          75,099        24,631         5,282                 
                                            

NON-CURRENT ASSET

                          

Investments on controlled and related companies

                          

Agro-Uranga S.A.

                  Unlisted         Agricultural livestock         2,500         1,443        29,970   

Shares

     893,069         35.72        10,706        10,191         8,682                 

Higher value of property

          11,179        11,179         11,179                 
                                            
          21,885        21,370         19,861                 
                                            

IGSA (2)

                  Unlisted         Raising and grazing cattle         —           —          —     

Shares

        —          —          14,860         11,177                 
                                            
          —          14,860         11,177                 
                                            

Cactus Shares

     22,158,362         48.00 (3)      (604 )(4)      2,071         13,915         Unlisted        
 
Exploitation and administration of
agriculture products and raising cattle
  
  
     (10) 46,163         (10) (5,573     (10) (1,259
                                            
          (604     2,071         13,915                 
                                            

FyO.Com

                          

Shares

     987,426         65.85        6,497        2,723         2,552         Unlisted        
 
 
Gives information about markets via
internet, brokerage and intermediation
on spot and future markets,
  
  
  
     1,500         (294     9,867   
                                            
          6,497        2,723         2,552                 
                                            

ANTA (2)

                          

Shares

     —           —          —          56,234         39,352         Unlisted         Agricultural and forestal         —           —          —     

Concession rights

            19,813         20,337                 
                                      
            76,047         59,689                 
                                      

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Investments (continued)

As of September 30, 2010 and 2009 and June 30, 2010

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

(in thousands of pesos- Notes 1 and 2)

Schedule C (continued)

 

    Amount     % of  the
participation
on the capital
    Value as
of  September 30,
2010
    Value as
of  June 30,
2010
    Value as
of September 30,
2009
    Market
Value as
of September 30,
2010
    INFORMATION ON THE ISSUER  
              Principal activity   Latest financial statements  

Securities

                Capital     Income (loss)
for the year
    Shareholders’
Equity
 

Agrology S.A.

              Unlisted      Investing     259,494        2,296        272,200   

Shares

    259,494,415        100.00        266,624        256,840        219,960             

Irrevocable contributions

        3,557        —          —               
                                     
        270,181        256,840        219,960             
                                     

FyO Trading

              Unlisted      Brokerage     20        —          20   

Shares

    726        3.63        1        1        1             
                                     
        1        1        1             
                                     

EAASA

              Unlisted      Meat packing industry     (10) 54,691        (10) (5,621)        (10) 4,505   

Shares

    240,000        0.44        (3) (20     (4) 5        99             
                                     
        (20     5        99             
                                     

IRSA

              5.80      Real Estate     578,676        56,193        2,460,746   

Shares

        1,309,632        1,282,481        1,191,748             

Higher values (5)

    292,811,013        50.60        173,693        178,148        190,018             
                                     
        1,483,325        1,460,629        1,381,766             
                                     

BrasilAgro

              (6) 9.85      Agricultural and Real Estate     875,381        1,462        1,349,318   

Shares

    13,578,700        23.24        313,616        290,832        245.759             

Higher values (7)

        6,887        6,887        6.887             
                                     
        320,503        297,719        252.646             
                                     

Agrotech S.A.

                   
              Unlisted      Investing     50        —          50   

Shares

    48,500        97.00        49        —          —               
                                     
        49        —          —               
                                     

Pluriagro S.A.

              Unlisted      Investing     50        (9     41   

Shares

    48,500        97.00        40        —          —               
                                     
        40        —          —               
                                     

Northagro S.A.

              Unlisted      Investing     50        (9     41   

Shares

    48,500        97.00        40        —          —               
                                     
        40        —          —               
                                     
        2,101,897        2,132,265        1,961,666             
                                     

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Investments (continued)

As of September 30, 2010 and 2009 and June 30, 2010

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

(in thousands of pesos- Notes 1 and 2)

Schedule C (continued)

 

 

Securities

  Amount     % of the
participation
on the capital
    Value as of
September 30,
2010
    Value as  of
June 30,
2010
    Value as of
September 30,
2009
    Market
Value as of
September 30,
2010
    INFORMATION ON THE ISSUER  
              Principal activity     Latest financial statements  
                Capital     Income (loss)
for the year
    Shareholders’
Equity
 

BrasilAgro negative goodwill (8)

        (13,240     (14,765     (18,035          

BrasilAgro goodwill

        6,965        6,965        3,841             

IRSA negative goodwill (9)

        (322,894     (330,413     (360,063          

IRSA goodwill

        6,712        6,712        6,268             

Cactus goodwill

        4,978        4,978        1,966             

Allowance for impairment of Cactus’s goodwill

        (4,978     (4,978     —               
                                     
        (322,457     (331,501     (366,023          
                                     

Subtotal

        1,779,440        1,800,764        1,595,643             
                                     

Other Investments

                   

Non-Convertible Notes IRSA 2017 (US$)

    33,152,000          74,944        72,174        64,117             

Non-Convertible Notes APSA 2017 (US$)

    5,000,000          10,283        9,847        8,583             

Coprolan

        21        21        21        Unlisted           
                                     

Subtotal

        85,248        82,042        72,721             
                                     
        1,864,688        1,882,806        1,668,364             
                                     

 

(1) Not considered as cash equivalents for Statement of Cash Flow purpose.
(2) Since July 1st, 2010, is effective the merger of Cresud with IGSA and Anta (See Note 14.2 to the financial statements)
(3) Included in Other liabilities.
(4) Recovery estimated value as of June 30, 2010.
(5) Consist of Ps. 11,732 higher value of inventory, Ps. 80,743 higher value of investments, Ps. 109,024 higher value of fixed assets, Ps. 28,186 higher value of intangible assets, Ps. 23,420 less value of loans, and Ps. (79,412) higher value of tax effect
(6) Total in reais.
(7) Consist of Ps. 10,596 higher value of fixed assets and Ps. (3,709) higher value of tax effect.
(8) The change as regards the previous year corresponds to amortization for Ps. 1,525.
(9) The change as regards the previous year corresponds to amortization for Ps. 7,519.
(10) Subject to board approval.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Allowances

Corresponding to the three-month periods

ended September 30, 2010 and 2009 and fiscal year ended June 30, 2010

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
September 30,
2010
     Value as of
June 30,
2010
     Value as of
September 30,
2009
 

Deducted from assets

              

For doubtful accounts

     630 (1)      59        (19     670         630         501   

Included in liabilities

              

For pending lawsuits

     1,768 (2)      —   (2)      (97     1,671         1,768         1,771   
                                                  

Total as of September 30, 2010

     2,398        59        (116     2,341         —           —     
                                                  

Total as of June 30, 2010

     787        1,770        (159     —           2,398         —     
                                                  

Total as of September 30, 2010

     787        1,485        —          —           —           2,272   
                                                  

 

(1) Included in the Schedule H.
(2) Included in other income and expenses in the Statements of Income – Others.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Cost of sales

Corresponding to the three-month periods

ended September 30, 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  
    September 30,
2010
    September 30,
2009
    September 30,
2010
    September 30,
2009
    September 30,
2010
    September 30,
2009
    September 30,
2010
    September 30,
2009
    September 30,
2010
    September 30,
2009
 

Inventories at the beginning of the fiscal year:

                   

Beef cattle

    —          —          138,807        78,710        —          —          —          —          138,807        78,710   

Crops

    41,566        42,250        —          —          —          —          —          —          41,566        42,250   

Seeds and fodder

    758        705        —          —          —          —          —          —          758        705   

Materials and others

    —          —          614        579        —          —          873        932        1,487        1,511   
                                                                               
    42,324        42,955        139,421        79,289        —          —          873        932        182,618        123,176   
                                                                               

Unrealized gain on inventories- Beef cattle

    —          —          14,011        648        —          —          —          —          14,011        648   

Unrealized gain (loss) on inventories – Crops and raw materials

    7,367        (899     —          —          —          —          —          6        7,367        (893

Production

    19,989        4,058        2,758        1,555        8,406        4,730        —          —          31,153        10,343   

Transfer of inventories to property and equipment

    —          —          —          —          —          —          (207     (194     (207     (194

Transfer of inventories to expenses

    (1,440     (1,570     (59     (29     (134     (37     (1,156     (542     (2,789     (2,178

Incorporated by merger with IGSA

    —          —          —          3,171        —          —          —          8        —          3,179   

Incorporated by merger with ANTA

    10,073        —          —          —          —          —          84        —          10,157        —     

Purchases

    21        6,547        1,161        958        —          —          1,776        696        2,958        8,201   

Operating expenses (Schedule H)

    —          —          —          —          —          —          1,970        427        1,970        427   

Inventories at the end of the period:

                   

Beef cattle

    —          —          (141,312     (79,914     —          —          —          —          (141,312     (79,914

Crops

    (35,021     (19,041     —          —          —          —          —          —          (35,021     (19,041

Seeds and fodder

    (765     (698     —          —          —          —          —          —          (765     (698

Materials and others

    —          —          (632     (9     —          —          (1,402     (930     (2,034     (939
                                                                               

Cost of Sales

    42,548        31,352        15,348        5,669        8,272        4,693        1,938        403        68,106        42,117   
                                                                               

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Cost of Production

Corresponding to the three-month periods

ended September 30, 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  
    September 30,
2010
    September 30,
2009
    September 30,
2010
    September 30,
2009
    September 30,
2010
    September 30,
2009
    September 30,
2010
    September 30,
2009
 

Inventories at the beginning of the fiscal year:

               

Beef cattle

    —          —          —          —          18,848        14,226        18,848        14,226   

Unharvested crops and other unharvested

    11,166        5,160        —          —          —          —          11,166        5,160   

Seeds and fodder

    —          —          2,190        1,694        499        426        2,689        2,120   

Materials and others

    25,477        15,925        876        686        382        426        26,735        17,037   
                                                               
    36,643        21,085        3,066        2,380        19,729        15,078        59,438        38,543   
                                                               

Unrealized gain (loss) on inventories – Beef cattle

    —          —          —          —          2,116        (620     2,116        (620

Unrealized gain on inventories – Crops and raw materials

    730        1,063        —          —          —          —          730        1,063   

Production

    —          —          306        178        895        564        1,201        742   

Transfer of property and equipment

    (84     (50     —          —          —          —          (84     (50

Transfer of inventories crops to expenses – Materials and others

    (5,177     (1,986     (1,585     (1,129     (2,074     (2,099     (8,836     (5,214

Incorporated by merger of IGSA

    —          —          —          35        —          —          —          35   

Incorporated by merger of ANTA

    4,252        —          —          —          —          —          4,252        —     

Purchases / increase in Unharvested crops by consume

    29,516        18,498        376        323        1,572        1,962        31,464        20,783   

Operating expenses (Schedule H)

    18,638        6,214        5,673        6,429        6,752        5,410        31,063        18,053   

Inventories at the end of the period:

               

Beef cattle

    —          —          —          —          (21,201     (14,013     (21,201     (14,013

Unharvested crops and other unharvested

    (10,506     (5,401     —          —          —          —          (10,506     (5,401

Seeds and fodder

    —          —          (977     (805     (614     (565     (1,591     (1,370

Materials and others

    (54,437     (33,222     (1,158     (837     (402     (301     (55,997     (34,360
                                                               

Cost of Production

    19,575        6,201        5,701        6,574        6,773        5,416        32,049        18,191   
                                                               

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Foreign currency assets and liabilities

As of September 30, 2010 and 2009 and June 30, 2010

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

(in thousands of pesos -Notes 1 and 2)

Schedule G

 

    September 30, 2010     June 30, 2010     September 30, 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 ASSETS

                   

CASH AND BANKS

                   

Cash and banks in Dollars

    US$        4,606        3.92        18,051        US$        167        649        US$        324        1,232   

Cash and banks in Brazilian Reais

    Rs        5        2.21        11        Rs        2        5        Rs        2        4   

Cash and banks in Euros

           10        5.34        52               8        37               9        49   

Cash and banks in Yenes

    JPY        85        0.05        4        JPY        —          —          JPY        —          —     

INVESTMENTS

                   

Mutual funds

    US$        18,487        3.92        72,470        US$        5,006        19,479        US$        620        2,356   

Mutual funds

           —            —                 11        53               11        61   

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

                   

Non-Convertible Notes IRSA 2017 (US$) – Interest

    US$        470        3.96        1,860        US$        1,174        4,616        US$        470        1,805   

Non-Convertible Notes APSA 2017 (US$) – Interest

    US$        153        3.96        606        US$        55        215        US$        153        588   

TRADE ACCOUNTS RECEIVABLE

                   

Receivables

    US$        10,427        3.92        40,872        US$        4,017        15,629        US$        459        1,747   

Receivables – Real estate

    US$        1,000        3.92        3,920        US$        725        2,821        US$        1,941        7,382   

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties

    US$        2,183        3.96        8,562        US$        349        1,370        —          —          —     

OTHER RECEIVABLES

                   

Guarantee deposits

    US$        806        3.92        3,160        US$        671        2,611        US$        623        2,369   

Premiums paid

    US$        39        3.92        154        US$        —          —          US$        55        212   

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties

    US$        —            —          US$        —          —          US$        115        442   

NON-CURRENT ASSETS

                   

OTHER RECEIVABLES

                   

Subsidiaries, related companies Law No. 19,550 Section 33 and related parties

    US$        4,322        3.96        17,110        US$        4,267        16,775        —          —          —     

INVESTMENTS

                   

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

                   

Non-Convertible Notes IRSA 2017

    US$        18,925        3.96        74,944        US$        18,360        72,174        US$        16,684        64,117   

Non- Convertible Notes APSA 2017

    US$        2,597        3.96        10,283        US$        2,505        9,847        US$        2,233        8,583   
                                                                   

Total US$

    US$        64,015          251,992        US$        37,296        146,186        US$        23,677        90,833   
                                                             

Total Rs

    Rs        5          11        Rs        2        5        Rs        2        4   
                                                             

Total €

           10          52               19        90               20        110   
                                                             

Total JPY

    JPY        85          4        JPY        —          —          JPY        —          —     
                                                       

Total Assets

          252,059            146,281            90,947   
                                     

US$: US Dollars

Rs: Brazilian Reais

€: Euros

JPY: Yenes

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Foreign currency assets and liabilities (continued)

As of September 30, 2010 and 2009 and June 30, 2010

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

(in thousands of pesos -Notes 1 and 2)

Schedule G (continued)

 

    September 30, 2010     June 30, 2010     September 30, 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 LIABILITIES

                   

TRADE ACCOUNT PAYABLE

                   

Suppliers

  US$          3,093        3.96        12,250      US$          4,576        17,987      US$          5,689        21,864   

Accrual for inputs and other expenses

  US$          1,374        3.96        5,440      US$          1,629        6,404      US$          75        288   

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

  US$          —            —        US$          28        109        —          —          —     

SHORT-TERM DEBTS

                   

Bank loans

  US$          38,936        3.96        154,185      US$          30,049        118,123      US$          20,000        76,860   

Interest payable – Bank loans

  US$          110        3.96        437      US$          523        2,054      US$          115        442   

Non-convertible notes class II

  US$          —            —        US$          8.967        35,251        —          8,967        34,461   

Interest payable – Non-convertible notes

  US$          269        3,96        1.065      US$          39        153        —          34        129   

OTHER LIABILITIES

                   

Premiums collected

  US$          996        3.96        3,946      US$          151        595      US$          94        362   

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

  US$          8,524        3.96        33,756      US$          8,374        32,917        —          —          —     

NON-CURRENT LIABILITIES

                   

LONG-TERM DEBTS

                   

Non-convertible notes class iV

  US$          17,842        3,96        70.655      US$          —          —          —          —          —     

OTHER LIABILITIES

                   

Advances for concession of rights

  US$          813        3.96        3,222      US$          813        3,166        —          —          —     
                                                       

TOTAL LIABILITIES

  US$          71,957          284,956      US$          55,149        216,759      US$          34,974        134,406   
                                                       

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 three-month periods

ended September 30, 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

 

Items

  Operating Expenses     Selling
Expenses
    Administrative
Expenses
    Total as of
September 30,
2010
    Total as of
September 30,
2009
 
  Crops     Beef cattle     Milk     Others     Total          

Directors’ fees

    —          —          —          —          —          —          391        391        199   

Fees and payments for services

    —          —          —          —          —          —          322        322        1,174   

Salaries, annual bonus and social security

    307        1,282        1,090        —          2,679        —          5,146        7,825        8,610   

Taxes, rates and contributions

    140        142        85        —          367        —          98        465        261   

Gross sales taxes

    —          —          —          —          —          3,006        —          3,006        907   

Doubtful accounts

    —          —          —          —          —          59        —          59        —     

Office and administrative expenses

    —          —          —          —          —          —          1,614        1,614        1,571   

Bank commissions and expenses

    —          —          —          —          —          —          339        339        1   

Depreciation of property and equipment

    864        419        379        2        1,664        —          97        1,761        1,478   

Depreciation of Intangible assets

    —          —          —          —          —          —          188        188        —     

Vehicle and traveling expenses

    60        148        41        —          249        —          380        629        437   

Spare parts and repairs

    110        666        281        —          1,057        —          33        1,090        951   

Insurance

    30        72        16        —          118        —          116        234        134   

Benefits to Employees

    36        111        98        —          245        —          264        509        745   

Livestock expenses (1)

    —          2,594        —          —          2,594        234        —          2,828        3,348   

Dairy farm expenses (2)

    —          —          4,477        —          4,477        62        —          4,539        3,636   

Agricultural expenses (3)

    16,962        —          —          1,968        18,930        7,227        —          26,157        9,317   

General expenses

    116        221        285        —          622        —          —          622        919   

Others

    13        18        —          —          31        —          10        41        34   
                                                                       

Total as of September 30, 2010

    18,638        5,673        6,752        1,970        33,033        10,588        8,998        52,619        —     
                                                                       

Total as of September 30, 2009

    6,214        6,429        5,410        427        18,480        5,408        9,834        —          33,722   
                                                                       

 

(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. Trade accounts receivable and Other receivables without a due date as of September 30, 2010:

 

     Trade
accounts
receivable
     Other
receivables
     Law No. 19,550 Section 33  
         Cactus      FyO.Com      Acres      Pluriagro S.A.      Northagro S.A.  
         Other
receivables
     Other
receivables
     Other
receivables
     Other
receivables
     Other
receivables
 

Current

     322         28,907         14         46         6         317         317   

Non-current

     —           48,367         —           —           —           —           —     

 

  b. Trade accounts receivable and Other receivables to fall due as of September 30, 2010:

 

            Law No. 19,550 Section 33  
            FyO.Com      CYRSA      Tarshop
S.A.
     Cactus      Acres      Cresca  

Maturity

   Trade
accounts

receivable
     Trade
accounts

receivable
     Trade
accounts

receivable
     Trade
accounts

receivable
     Trade
accounts

receivable
     Trade
accounts

receivable
     Trade
accounts

receivable
 

12/31/10

     43,037         35,133         21         167         322         262         533   

03/31/11

     3,920         —           —           —           —           —           —     

 

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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      Yuchan      Yatay      Acres      IRSA      APSA  
   Other
receivables
     Other
receivables
     Other
receivables
     Other
receivables
     Other
receivables
     Other
receivables
     Other
receivables
 

12-31-10

     25,900         —           —           —           —           12,715         26,772   

03-31-11

     1,338         —           —           —           —           —           —     

06-30-11

     7,167         —           —           —           —           —           —     

09-30-11

     13,156         —           —           —           —           —           —     

12-31-11

     —           7,650         5,261         3,935         264         —           —     

 

4. CLASSIFICATION OF DEBTS ACCORDING TO THEIR MATURITY

 

  a. There are no past due debts as of September 30, 2010.

 

  b. Debts without a due date as of September 30, 2010.

 

                                 Law No. 19,550
Section 33
     Allowances  
                               Cactus      EAASA     
   Trade accounts
payable
     Short-term debt      Taxes payable      Other
liabilities
     Other
liabilities
     Other
liabilities
    

Current

     —           250,131         —           —           —           —           —     

Non-current

     —           —           91,383         3,394         604         20         1,671   

 

  c. Debts to fall due as of September 30, 2010.

 

Maturity

   Trade
accounts
payable
     Law No. 19,550 Section 33  
      CYRSA      Banco
Hipotecario
S.A.
     Nuevas
Fronteras
S.A.
     Nuevas
Fronteras
S.A.
     FyO.Com      Cactus  
      Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
 

12.31.10

     66,068         46         12         3         5         9,799         223   

 

Maturity

   Short-term debt      Salaries and
social
security payable
     Taxes payables      Other liabilities      Law No. 19,550 Section 33  
               IRSA      APSA      Agro-Uranga      FyO.Com  
               Other
liabilities
     Other
liabilities
     Other
liabilities
     Other
liabilities
 

12.31.10

     33,571         10,282         8,951         13,984         43,548         18,520         101         926   

03.31.11

     11,175         3,390         76         14         —           —           —           —     

06.30.11

     111,398         —           76         14         —           —           —           —     

09.30.11

     —           3,565         76         14         —           —           —           —     

12.31.11

     29,448         —           —           —           —           —           —           —     

03.31.12

     29,449         —           —           —           —           —           —           —     

06.30.12

     29,450         —           —           —           —           —           —           —     

09.30.12

     17,607         —           —           —           —           —           —           —     

 

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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.             

 

            Law No. 19,550 Section 33  
          FyO.Com      CYRSA      Tarshop
S.A.
     Cactus      Acres      Cresca  
   Trade
accounts
receivable
     Trade
accounts
receivable
     Trade
accounts
receivable
     Trade
accounts
receivable
     Trade
accounts
receivable
     Trade
accounts
receivable
     Trade
accounts
receivable
 

In Pesos

     2,471         27,133         12         167         318         262         —     

In US Dollars

     44,808         8,000         9         —           4         —           533   

 

            Law No. 19,550 Section 33  
          FyO.Com      Cactus      Ombú      Acres      Norhagro
S.A.
     Pluriagro
S.A.
     Yuchan      Yatay      APSA      IRSA  
   Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
                          Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
     Othera
accounts
receivable
 

In Pesos

     121,521         46         14         —           6         317         317         —           —           26,772         12,715   

In US Dollars

     3,314         —           —           7,650         264         —           —           5,261         3,935         —           —     

 

  b. All Accounts receivable and Other receivables are not subject to adjustment clauses.

 

  c.             

 

            Law No. 19,550 Section 33  
          FyO.Com      CYRSA      Tarshop
S.A.
     Cactus      Acres      Cresca  
   Accounts
receivable
     Accounts
receivable
     Accounts
receivable
     Accounts
receivable
     Accounts
receivable
     Accounts
receivable
     Accounts
receivable
 

Outstanding balances accruing interests

     —           —           —           —           —           —           —     

Outstanding balances not accruing interests

     47,279         35,133         21         167         322         262         533   

 

            Law No. 19,550 Section 33  
          FyO.Com      Cactus      Ombú      Northagro
S.A.
     Pluriagro
S.A.
     Acres      Yuchan      Yatay      APSA      IRSA  
   Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
     Other
accounts
receivable
 

Outstanding balances accruing interests

     1,555         —           —           7,312         —           —           —           5,098         3,780         —           —     

Outstanding balances not accruing interests

     123,280         46         14         338         317         317         270         163         155         26,772         12,715   

 

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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)

 

6. CLASSIFICATION OF DEBTS ACCORDING TO THEIR FINANCIAL EFFECTS

 

  a.             

 

     Trade
accounts
payable
     Law No. 19,550 Section 33  
      CYRSA      Banco
Hipotecario
S.A.
     Nuevas
Fronteras
     FyO.Com      Panamerican
Mall S.A.
     Cactus  
      Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
 

In Pesos

     48,378         46         12         3         9,799         5         223   

In US Dollars

     17,690         —           —           —           —           —           —     

 

     Short-term
debt
     Salaries and
social security
payable
     Taxes
payable
     Other
liabilities
     Law No. 19,550 Section 33      Provisions  
               IRSA      APSA      Agro-
Uranga
S.A
     FyO.Com      CACTUS      EAASA     
               Other
liabilities
     Other
liabilities
     Other
liabilities
     Other
liabilities
     Other
liabilities
     Other
liabilities
    

In Pesos

     250,588         17,237         100,562         10,252         9,792         18,520         101         926         604         20         1,671   

In US Dollars

     155,687         —           —           7,168         33,756         —           —           —           —           —           —     

 

  b. All outstanding debts are not subject to adjustment clauses.

 

  c.             

 

     Trade
accounts
payable
     Law No. 19,550 Section 33  
      CYRSA      Banco
Hipotecario
S.A.
     Nuevas
Fronteras
S.A.
     Panamerican
Mall S.A.
     FyO.Com      Cactus  
      Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
     Trade
accounts
payable
 

Outstanding balances accruing interests

     —           —           —           —           —           —           —     

Outstanding balances not accruing interests

     66,068         46         12         3         5         9,799         223   

 

     Short-term
debt
     Salaries and
social security
payable
     Taxes
payable
     Other
liabilities
     Law No. 19,550 Section 33      Provisions  
               IRSA      APSA      Agro-
Uranga
S.A
     FyO.Com      Cactus      EAASA     
               Other
liabilities
     Other
liabilities
     Other
liabilities
     Other
liabilities
     Other
liabilities
     Other
liabilities
    

Outstanding balances accruing interests

     503,217         —           —           —           31,680         —           —           —           —           —           —     

Outstanding balances not accruing interests

     9,012         17,237         100,562         17,420         11,868         18,520         101         926         604         20         1,671   

 

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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 September 30, 2010 are described in captions 4 and 5 above.

 

8. RECEIVABLES FROM OR LOANS TO DIRECTORS AND STATUTORY AUDIT COMMITTEE MEMBERS

As of September 30, 2010 there were advance payments to directors for Ps. 763, 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.

 

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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)

 

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.

 

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 year 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         34,070   
Vehicles    Third parties, theft, fire and civil liability      4,499         1,675   

 

16. CONTINGENCIES

As of September 30, 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 11 to the Financial Statements.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Comparative Shareholders’ Equity Structure

 

     As of
September 30, 2010
     As of
September 30, 2009
     As of
September 30, 2008
     As of
September 30, 2007
     As of
September 30, 2006
 

Current Assets

     1,544,220         1,070,435         544,873         157,154         104,526   

Non-current Assets

     5,591,572         4,998,855         1,383,173         924,748         788,999   
                                            
     7,135,792         6,069,290         1,928,046         1,081,902         893,525   
                                            

Current Liabilities

     1,362,395         1,253,580         187,438         189,200         116,915   

Non-current Liabilities

     2,085,005         1,423,797         44,803         75,098         144,643   
                                            
     3,447,400         2,677,377         232,241         264,298         261,558   
                                            

Minority Interest

     1,644,254         1,491,629         1,211         900         471   
                                            

Shareholders’ Equity

     2,044,138         1,900,284         1,694,594         816,704         631,496   
                                            
     7,135,792         6,069,290         1,928,046         1,081,902         893,525   
                                            

Comparative Income Structure

 

     As of
September 30, 2010
    As of
September 30, 2009
    As of
September 30, 2008
    As of
September 30, 2007
    As of
September 30, 2006
 

Operating income (loss)

     183,649        90,275        (8,032     (7,168     (2,789

Financial and holding results

     (74,349     (42,448     6,175        (1,916     (3,100

Other income and expenses, net and gain equity investees

     19,596        97,605        (36,037     (6,820     6,004   

Management agreement fees

     (5,761     (6,803     —          —          (214
                                        

Operating net income

     123,135        138,629        (37,894     (15,904     (99

Income tax (expense) benefit

     (23,946     (15,376     546        3,365        1,937   

Minority Interest

     (47,339     (61,426     (51     (63     89   
                                        

Net income

     51,850        61,827        (37,399     (12,602     1,927   
                                        

Production volume

 

    Three-month
period
September 30,
2010
    Accumulated
July 1, 2010  to
September 30,
2010
    Three-month
period
September 30,
2009
    Accumulated
July 1, 2009  to
September 30,
2009
    Three-month
period
September 30,
2008
    Accumulated
July 1, 2008  to
September 30,
2008
    Three-month
period
September 30,
2007
    Accumulated
July 1, 2007  to
September 30,
2007
    Three-month
period
September 30,
2006
    Accumulated
July 1, 2007  to
September 30,
2007
 

Beef Cattle (in Kgs.)

    918,000        918,000        413,000        413,000        830,310        830,310        1,442,226        1,442,226        1,753,725        1,753,725   

Butyraceous (in Kgs.)

    230,845        230,845        208,165        208,165        201,890        201,890        182,040        182,040        142,933        142,933   

Crops (in quintals)

    509,636        509,636        151,415        151,415        157,000        157,000        91,847        91,847        26,185        26,185   

Sales volume

 

    Three-month
period
September 30,
2010
    Accumulated
July 1, 2010  to
September 30,
2010
    Three-month
period
September 30,
2009
    Accumulated
July 1, 2009  to
September 30,
2009
    Three-month
period
September 30,
2008
    Accumulated
July 1, 2008  to
September 30,
2008
    Three-month
period
September 30,
2007
    Accumulated
July 1, 2007  to
September 30,
2007
    Three-month
period
September 30,
2006
    Accumulated
July 1, 2007  to
September 30,
2007
 

Beef Cattle (in Kgs.)

    2,483,546        2,483,546        2,081,841        2,081,841        1,923,201        1,923,201        4,668,848        4,668,848        4,578,436        4,578,436   

Butyraceous (in Kgs.)

    230,845        230,845        208,165        208,165        201,890        201,890        182,040        182,040        182,040        182,040   

Crops (in quintals)

    830,920        830,920        616,503        616,503        763,517        763,517        375,683        375,683        202,289        202,289   

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Local Market

 

    Three-month
period
September 30,
2010
    Accumulated
July 1, 2010  to
September 30,
2010
    Three-month
period
September 30,
2009
    Accumulated
July 1, 2009  to
September 30,
2009
    Three-month
period
September 30,
2008
    Accumulated
July 1, 2008  to
September 30,
2008
    Three-month
period
September 30,
2007
    Accumulated
July 1, 2007  to
September 30,
2007
    Three-month
period
September 30,
2006
    Accumulated
July 1, 2007  to
September 30,
2007
 

Beef Cattle (in Kgs.)

    2,483,546        2,483,546        2,081,841        2,081,841        1,923,201        1,923,201        4,668,848        4,668,848        4,578,436        4,578,436   

Butyraceous (in Kgs.)

    230,845        230,845        208,165        208,165        201,890        201,890        182,040        182,040        182,040        182,040   

Crops (in quintals)

    830,920        830,920        616,503        616,503        763,517        763,517        375,683        375,683        202,289        202,289   

Export (not applicable)

Ratios

 

    As of September 30, 2010     As of September 30, 2009     As of September 30, 2008     As of September 30, 2007     As of September 30, 2006  

Liquidity

    1.13        0.85        2.907        0.831        0.894   

Solvency

    0.59        0.71        7.297        3.090        2.414   

Non-current assets to assets

    0.78        0.82        0.717        0.855        0.883   

Return on Equity (1)

    0.03        0.03        (0.022     (0.015     0.003   

 

(1) Result of the year divided average shareholder’s equity.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Buenos Aires, November 11, 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 quarter of fiscal year 2011 ended September 30, 2010.

Consolidated agribusiness sales for the period amounted to Ps. 161.7 million, 158.1% higher than those posted for the same quarter of the previous fiscal year. This increase was caused mainly by the Sale of Farms account generating Ps. 71.1 million from the sale of “La Juanita” farm, a 42.3% rise in the sales of crops and a 151.7% increase in the sales of beef cattle compared to the same period of the previous fiscal year.

Agribusiness production revenues amounted to Ps. 35.1 million in the period ended September 30, 2010, 166.1% higher than those recorded in the same period of the previous fiscal year. The increase is explained mainly by a 263.1% rise in crop production.

Consolidated sales in the real estate business were Ps. 307.3 million for the three-month period ended September 30, 2010. This represents an improvement from the Ps. 267.0 million in sales for the same quarter of the previous fiscal year.

Gross profit during the first three months of fiscal year 2011 amounted to Ps. 259.4 million compared to Ps. 151.7 million during the same period of the previous year. The increase in gross profit amounting to Ps. 107.8 between both periods resulted from an improvement of Ps. 62.3 million recorded in the agribusiness and increased results amounting to Ps. 45.4 million in the real estate business.

Operating results for the period ended September 30, 2010 showed a Ps. 183.6 million profit, composed of operating income of Ps. 134.8 million in IRSA’s segments for the first three months of fiscal year 2011 and a Ps. 48.9 million profit from Cresud’s agribusiness activities for the same period. This represents an improvement from the Ps. 90.3 million profit recorded in the same period of the previous fiscal year. The rise is explained mainly by an increase of Ps. 68.5 million from the agribusiness operating results, prompted by higher prices and margins in the agribusiness segment, and the gain resulting from the sale of “La Juanita” farm.

Net income for the first three months of fiscal year 2011 amounted to Ps. 51.9 million, compared to a Ps. 61.8 million income posted in the same period of the previous fiscal year. This slight decrease in net income resulted mainly from a higher loss in net financial results and lower results from interests in related companies. This reduction was partially offset by the increase in operating results, which rose from Ps. 90.3 million profits in the first quarter of fiscal year 2010 to Ps. 183.6 million profits in the same quarter of fiscal year 2011.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Main Indicators

 

For the three-month period ended September 30, 2010 and 2009:

 

Description

        3 months ended
09/30/2010
     3 months ended
09/30/2009
     %  

Sales

           

Wheat

        2,657         3,159         (15.9 %) 

Corn

        58,761         31,371         87.3

Sunflower

        1,563         5,609         (72.1 %) 

Soybean

        4,108         11,382         (63.9 %) 

Other

        16,002         10,130        
58.0

                             

Total Sales Crops (tons)

     83,091         61,650         34.8
                             

Sales - Cattle beef (tons)

     2,484         1,953         27.2
                             

Sales - Milk (thousands of liters)

     5,665         5,121         10.6
                             

Production

           

Wheat

        1,680         1,346         24.8

Corn

        42,291         13,725         208.1

Sunflower

        860         —           0.0

Soybean

        368         11         3,247.4

Other

        5,765         60         9,574.1
                             

Total Production - Crops (tons)

     50,964         15,142         236.6
                             

Production - Beef cattle (tons)

     918         413         122.3
                             

Production - Milk (thousands of liters)

     5,799         5,183         11.9
                             

Exploited Surface Area (in hectares) 1

        

Crops

  

Own farms 2

     57,853         59,614         (3.0 %) 
  

Leased farms

     51,695         40,973         26.2
  

Farms under

concession

     13,324         10,872         22.6

Cattle beef

  

Own farms

     90,074         102,696         (12.3 %) 
  

Leased farms

     12,635         26,925         (53.1 %) 

Milk farm

  

Own farms

     4,717         4,637         1.7

Sheep

  

Own farms

     100,911         100,911         0.0

Land reserves (in hectares)

        
  

Own farms

     225,314         223,785         0.7
  

Farms under concession

     111,540         115,992         (3.8 %) 

Surface under irrigation (in hectares)

        
  

Own farms

     3,762         3,762         0.0
  

Leased farms

     —           —           0.0

Storage capacity (tons)

        
  

Own plants

     10,000         10,000         0.0
  

Leased plants

     —           —           0.0

Stock of cattle heads

        

Breeding stock

     54,930         59,869         (8.2 %) 

Winter grazing stock

     12,281         25,045         (51.0 %) 

Milk farm stock

        8,776         8,386         4.7
                             

Total cattle (heads)

     75,987         93,300         (18.6 %) 
                             

Daily average milking cows (heads)

     3,331         3,138         6.2
                             

Notes:

1 - Does not include Agro-Uranga S.A. (35.72% of 8,299 hectares).

2 - Includes the “San Cayetano”, “San Rafael”, “La Fon Fon” and “Las Londras” farms, located in Santa Cruz, Bolivia, and the “Jerovia” farm, located in the District of Boquerón, Paraguay.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Summary of Operations

 

Crops

 

   

Gross profit in the crops segment amounted to Ps. Ps. 6.9 million for the first quarter of fiscal year 2011, compared to a Ps. 1.2 million loss recorded in the same period of the previous fiscal year.

 

   

Agribusiness production results rose from a Ps. 4.0 million loss in the first quarter of fiscal year 2010 to a Ps. 0.2 million profit in the same quarter of this fiscal year.

 

   

During this quarter, harvesting of the previous crop season was completed, resulting in a higher amount of tons produced than in the 08/09 season: crop production increased 236.6% compared to the same quarter of the previous fiscal year.

 

   

The production margin rose from (63,6%) in the first quarter of fiscal year 2010 to 0.9% in the same period of fiscal year 2011. Such improvement in the margin resulted mainly from the decrease in production costs per ton, which fell 34.6%.

 

   

Sales volume increased 34.8%.

 

   

Sales revenues from the crops segment increased from Ps. 2.8 million profits in the first quarter of fiscal year 2010 to Ps. 6.7 million in the same period of fiscal year 2011.

 

   

The operating area is 57,853 hectares in our own farms, 51,695 hectares in leased farms and 13,324 hectares in farms under concession, totaling approximately 123,000 hectares.

 

   

In Argentina, we have already planted approximately 8,800 hectares of wheat and we are in process of starting corn and sunflower planting activities.

 

   

If we consider the exploited hectares operated by BrasilAgro and AgroUranga S.A., the aggregate planted surface area would stand at approximately 189,000 hectares, an increase of more than 24% compared to the hectares in operation in the previous season.

 

   

In this way, we plan to accelerate our production rhythm by taking advantage of higher volumes and capturing the rises in crop prices recorded during this last period.

Beef Cattle

 

   

Operating results of the beef cattle segment showed an income of Ps. 9.9 million in the first quarter of fiscal year 2011, compared to a Ps. 8.4 million loss recorded in the same period of the previous fiscal year.

 

   

This improvement was caused mainly by holding gains for Ps. 16.1 million, resulting from the strong appreciation of the stock experienced recently as a consequence of the improvement in beef cattle prices.

 

   

We increased beef cattle sales by 27.2% in the first quarter of fiscal year 2011, so as to capitalize on the higher prices recorded in the beef cattle market.

 

   

As of September 30, 2010, the stock of breeding cattle amounted to 54,930 heads, compared to 59,869 heads in the same quarter of the previous fiscal year.

 

   

Winter grazing stock decreased to 12,281 heads in the first quarter of fiscal year 2011, compared to 25,045 heads in the same quarter of the previous fiscal year.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

 

   

As of September 30, 2010 we allocated an aggregate of 102,709 hectares to beef cattle production.

Milk

 

   

Operating results in the milk segment amounted to an income of Ps. 2.0 million in the first quarter of fiscal year 2011, compared to a Ps. 0.8 million loss in the first quarter of the previous fiscal year.

 

   

This improvement is explained by higher production revenues, which were spurred by an 11.9% increase in the liters of milk produced and an improvement of approximately 60.0% in milk prices in this period.

 

   

In the first quarter of fiscal year 2011, we had 8,776 milking cows, compared to 8,386 heads in the same quarter of the previous fiscal year, and we allocated 4,717 hectares to the dairy segment in this period, compared to 4,637 hectares in the same quarter of the previous fiscal year.

 

   

At present we have one dairy facility known as “El Tigre” farm, and we have a lease agreement to continue operating until the end of 2010 the two dairy facilities at the “La Juanita” farm, which we sold as described below.

Sale of La Juanita

On September 3, 2010, Cresud signed the title deed whereby it sold and delivered possession of “La Juanita” farm.

The aggregate price for the sale amounted to U$S 18.0 million, resulting in gains of approximately Ps. 49.4 million.

Within the framework of this transaction, a commodatum agreement has been executed in favor of Cresud to expire on January 10, 2011 in relation to certain fractions of real property for the purposes of continuing production operations in the farm until such date.

Development of marginal lands

 

   

During fiscal year 2010 the Company transformed 6,290 hectares in Los Pozos and 3,559 in Anta.

 

   

At present we have approximately 13,000 hectares ready for agriculture in Anta and 8,000 hectares in Los Pozos, which we expect to start planting in the 2010/2011 season.

 

   

On the other hand, we continued transforming non-productive hectares.

 

   

We are in process of transforming 3,000 hectares in Los Pozos for agriculture purposes, 800 hectares of which were converted in the first quarter of this fiscal year.

 

   

In Anta we expect to transform 4,800 hectares for agriculture purposes, 2,200 hectares of which have been converted, representing a degree of progress of 45.8% only in the first quarter of fiscal year 2011.

 

   

In our La Esmeralda farm we had 4,970 hectares allocated to agriculture in the 2009/201 season. This amount increased to 6,798 hectares in the current 2010/2011 season; therefore, at present La Esmeralda has 72% of its surface area allocated to agriculture compared to 57% recorded in the previous season.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

 

   

In the international segment, the farms which we control jointly with our partners, through Cresca, have 6,000 hectares allocated to agricultural production, and we expect to allocate 6,000 further hectares in the following 2011/2012 season, 1,200 hectares of which have been already transformed, representing a 20% degree of progress.

International Expansion

 

BrasilAgro

 

Property

  

Location

  

Total Surface
Area (ha)

    

Sowable
Area (ha)

    

Purchase

Price
(Millions of
R$)

    

Price per

hectare
(Thousands
of R$)

 

Sao Pedro

  

Chapadao do Ceu/GO

     2,443         1,700       R$ 9.9       R$ 4.1   

Cremaq

  

Baixa Grande Riberio/PI

     32,375         22,019       R$ 42.2       R$ 1.3   

Jatoba (1)

  

Jaborandi/BA

     31,602         24,600       R$ 35.4       R$ 1.1   

Alto Taquari

  

Alto Taquari/MT

     5,266         3,720       R$ 34.0       R$ 6.5   

Araucaria

  

Mineiros/GO

     9,682         7,007       R$ 70.5       R$ 7.3   

Chaparral

  

Correntina/BA

     37,129         28,000       R$ 45.9       R$ 1.2   

Nova Buriti

  

Januaria/MG

     24,185         19,935       R$ 21.9       R$ 0.9   

Preferencia

  

Barreiras/BA

     17,800         14,199       R$ 10.7       R$ 0.6   

Horizontina

  

Tasso Fragoso/MA

     14,358         8,600       R$ 37.0       R$ 2.6   
  

Total

     174,840         129,780       R$ 307.5      
  

Total Owned by BrasilAgro

     171,680         127,320       R$ 303.8      

 

(1)

Jatoba is owned by an affiliate company, Jaborandi S.A., in which Brasilagro holds a 90% equity interest.

BrasilAgro has started its 2010/2011 crop season. It expects to plant approximately 65,602 hectares, composed of soybean, corn, rice, sorghum, sugar cane, pastures and forestry. Adding the 794 hectares leased in Araucaria and Jatoba, the total planted area amounts to 66,396 hectares.

Continuing its development process, BrasilAgro plans to develop approximately 20,000 hectares, in line with the strong growth experienced in its planted area.

As concerns the 2010/2011 summer crops, BrasilAgro expects to plant 40,539 hectares of soybean, 5,343 of corn, 2,007 of rice and 4,745 of pastures in Araucaria, Chaparral, Cremaq, Horizontina, Jatoba, Preferencia and Sao Pedro. Moreover, BrasilAgro expects to plant 973 hectares of sugar cane in addition to the 8,676 already planted, thus expanding its sugar cane planted area.

On September 20, 2010 BrasilAgro’s Level I ADRs started to be traded under the BRCPY symbol.

At the shareholders’ meeting dated October 4, 2010, the shareholders approved the termination of the consulting agreement dated March 15, 2006 between BrasilAgro and Paraná Consultora de Investimentos S.A.

Following the transfer of shares and warrants implemented on October 25, 2010 as a result of the transaction described below, Cresud’s investment in BrasilAgro (excluding warrants) has reached 35.75%.

Execution of Addendum to Stock Purchase Agreement with Tarpon

On October 20, 2010, the Company and Tarpon executed an addendum to the Stock Purchase Agreement dated April 28, 2010, whereby the Company directly and indirectly purchased 9,581,750 common shares of BrasilAgro - Companhia Brasileira Propriedades Agrícolas (“BrasilAgro”), representing 16.40% of its outstanding capital stock. As consideration, Cresud paid R$ 25,236,224.61 and the price balance, of R$ 105,206,000.10, is payable on April 27, 2011. The price balance is secured by a pledge over 8,298,150 shares and 37,325 First Issue Warrants.

Therefore, Cresud is direct and indirect holder of 20,883,916 shares or 35,75% of the Company’s stock capital. It should be noted that the purchase of the shares does not imply a change of control in BrasilAgro, and that BrasilAgro’s Shareholders’ Agreement will remain in effect, as amended to reflect the sale of the entire equity interest held by Tarpon and its affiliates.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Therefore, as a result of the above mentioned transaction, Cresud is holder of 168,902 First Issue Warrants of BrasilAgro and 168,902 Second Issue Warrants of BrasilAgro.

IRSA Inversiones y Representaciones S.A.

 

In the first quarter of fiscal year 2011, Cresud did not acquire any shares in IRSA. Therefore, our equity interest as of September 30, 2010 was 57.5%.

Starting in the second quarter of fiscal year 2009, Cresud presents its financial statements consolidated with those of IRSA. The following information has been taken from the balance sheet of our controlled company IRSA as of September 30, 2010.

Offices and Other Rental Properties

During the last quarter, the market trend experienced in the last year has continued, resulting in stagnation in lease prices and a slight increase in office vacancy levels, mainly due to an increase in the surface are built in the northern area of Buenos Aires and Greater Buenos Aires, a market that is still settling down. On the other hand, IRSA has most of its portfolio in the Plaza Roma Zone, which shows a 7.6% vacancy level with an average lease price over US$ 31/sqm according to CBRE.

IRSA increased its portfolio by more than 11,200 sqm when it opened the DOT Building in the North Area. This building is located in a zone that is still stabilizing; therefore, it has a low occupancy level that affects the portfolio’s total occupancy level. However, the occupancy level of the rest of the portfolio has continued to improve and maintained high levels.

 

   

Offices and Other Rental Properties

 
    In Million of Ps.    IQ 11      IQ 10      var YoY
(%)
     FY 10      FY 09      var YoY
(%)
 
     

Financial

Results

 

Revenues

     40.6         40.7         0%         154.2         147.7         4%   
 

Operating Income

     22.5         22.3         1%         73.5         76.5         -4%   
 

Depreciation and Amortization

     5.8         6.2         -7%         24.2         24.0         2%   
 

EBITDA

     28.3         28.5         -1%         97.7         99.4         -2%   
         IQ 11      IVQ 10      IIIQ 10      IIQ 10      IQ 10      IVQ 09  
     

Office

Portfolio

 

Leaseable Area1 (sqm)

     151,480         140,238         141,724         142,964         152,270         156,000   
 

Occupancy2

     87.5%         93.1%         90.9%         89.6%         90.7%         91.2%   
 

Occupancy without “Dot Building”

     93.5%         93.1%         90.9%         89.6%         90.7%         91.2%   
 

Monthly Revenues3 (Ps./Leased square meters)

     98.0         97.1         93.3         91.4         95.0         93.0   

 

  u During this period, IRSA’s portfolio increased by 8.0% with the incorporation of Dot Building, an office building with more than 11,200 leaseable sqm developed by IRSA and located next to Dot Baires Shopping Center.

 

  u The incorporation of a new building into a still immature area has affected the portfolio’s total occupancy level, causing it to drop to less than 88%. However, excluding Dot Building from the analysis, the portfolio’s occupancy levels increased 93.5%.

 

  u The rent per leased surface area measured in Ps. / sqm increased by 1% accompanying the decrease in the exchange rate.

 

  u The growth in revenues and EBITDA lessened as a result of the smaller amount of leaseable properties resulting from sales of non-strategic assets made during fiscal year 2010.

 

 

1

At period end.

2

At period end. Percentage over the total leasable area.

3

Considering the 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 on our office segment as of September 30, 2010:

 

      Date of
Acquisition
     Leaseable
Area

sqm (1)
     Occupancy
Rate (2)

Sep—  09
    IRSA’s
Effective
Interest
    Monthly
Rental

Income
Ps./
000 (3)
     Annual accumulated rental income
over fiscal periods, Ps./000 (4)
     Book value
$/000 (5)
 
                2011      2010      2009     

Offices

                        

Edificio República

     04/28/08         19,884         80     100     2,062         6,341         5,234         995         218,602   

Torre Bankboston

     08/27/07         14,873         96     100     1,676         6,177         5,300         4,690         154,521   

Bouchard 551

     03/15/07         23,378         100     100     1,963         5,822         5,347         4,460         149,988   

Intercontinental Plaza

     11/18/97         22,535         100     100     1,934         5,397         5,817         3,730         81,404   

Dot Building (6)

     11/28/06         11,242         13     63     104         202         —           —           67,162   

Bouchard 710

     06/01/05         15,014         88     100     1,375         3,920         4,979         3,866         65,006   

Dique IV. Juana Manso 295 (7)

     12/02/97         11,298         92     100     1,222         3,630         3,468         —           64,056   

Maipú 1300

     09/28/95         10,280         99     100     1,002         2,975         2,874         1,918         37,941   

Costeros Dique IV

     08/29/01         5,437         84     100     477         1,332         1,167         1,221         18,964   

Libertador 498

     12/20/95         3,714         100     100     478         1,473         2,281         2,313         14,515   

Suipacha 652/64

     11/22/91         11,453         95     100     597         1,487         1,156         652         10,823   

Madero 1020

     12/21/95         101         100     100     3         8         8         10         213   

Other Offices (8)

     N/A         2,271         86     N/A        89         267         2,118         5,059         5,695   
   

Subtotal Offices

        151,480         87     N/A        12,982         39,031         39,749         28,914         888,890   

Other Properties

                        

Terreno Catalinas Norte (9)

     12/17/09         N/A         N/A        N/A        106         370         N/A         N/A         100,863   

Santa María del Plata S.A.

     07/10/97         60,100         100     100     87         258         252         266         12,496   

Museo Renault

     12/06/07         1,275         100     100     30         90         89         89         4,761   

Thames

     11/01/97         33,191         —          100     —           —           152         152         3,897   

Commercial Properties (10)

     N/A         312         —          N/A        —           —           —           52         3,563   

Other Properties (11)

     N/A         2,072         100     N/A        10         34         21         50         5,973   
   

Subtotal Other Properties

        96,950         65     N/A        233         752         514         609         131,552   

Management Fees (12)

        N/A         N/A        N/A           815         408         444         N/A   
   

TOTAL OFFICES AND OTHER (13)

        248,430         79     N/A        13,215         40,598         40,671         29,967         1,020,442   
   

Notes:

(1) Total leaseable area for each property as of 09/30/10. Excludes common areas and parking.
(2) Calculated dividing occupied square meters by leaseable area as of 09/30/10.
(3) Agreements in force as of 09/30/10 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) Through Alto Palermo S.A. – The building has revenues as from August 2010.
(7) The building was occupied in May 2009.
(8) Includes the following properties: Madero 942 (fully sold), Av. de Mayo 595, Av. Libertador 602 (fully sold), Rivadavia 2774, Sarmiento 517, Dock del Plata (fully sold), Edificio Costeros (fully sold), Laminar (fully sold) and Reconquista 823/41 (fully sold).
(9) Includes other income from lease of parking spaces.
(10) Includes the following properties: Constitución 1111, Crucero I (fully sold), Locales de Abril (fully assigned) and Casona de Abril.
(11) Includes the following properties: 1 unit in Alto Palermo Park, Constitución 1159 and Dique III (fully sold) and Canteras.
(12) Income from building management fees.
(13) Corresponds to the “Offices and Other Rental Properties” business unit mentioned in Note 3 to the Consolidated Financial Statements.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Alto Palermo S.A. (“APSA”): Shopping Centers and Consumer Finance

Since the first quarter of fiscal year 2010, ended in September 2009, and for the last 12 months, the shopping center segment has shown a substantial increase in all its levels. This was reflected on APSA’s tenants’ sales, the revenues generated by the segment and, mainly, its EBITDA generation, and it is the result of a significant improvement in economic activity and the increase in consumption levels.

Apart from leaving behind the shock of the 2009 global financial crisis, APSA’s shopping centers experienced a significant increase in tenant sales during the month of July.

The following information relates to data extracted from the balance sheet of IRSA’s subsidiary Alto Palermo S.A. (APSA), the company that operates our shopping center business, in which IRSA helds a 63.35% interest as of September 30, 2010. After this period end, IRSA’s interest increased to 94.89% after acquiring Parque Arauco S.A.’s shareholding.

Shopping Centers

 

   

Shopping Centers

 
    In Millions of Ps.    IQ 11      IQ 10      var YoY
(%)
     FY 10      FY 09      var YoY
(%)
 
     

Financial

Results

 

Revenues

     148.8         113.8         31%         518.4         396.7         31%   
 

Operating income

     84.7         60.0         41%         268.0         214.9         25%   
 

Depreciation and Amortization

     28.1         27.6         2%         112.7         86.6         30%   
 

EBITDA

     112.9         87.6         29%         380.6         301.5         26%   
         IQ 11      IVQ 10      IIIQ 10      IIQ 10      IQ 10      IVQ 09  
     

Shopping

Centers

 

Total Leaseable Area (sqm)4

     299,130         286,286         286,286         289,410         286,581         287,542   
 

Tenants’ Sales (Ps. Million, 12-month cumulative)

     6,277         5,776         5,229         4,807         4,400         4,194   
 

Tenants’ Sales in the same

Shopping Centers (Ps. Million,

12-month cumulative)5

     5,411         5,012         4,592         4,340         4,141         4,095   
 

Occupancy6

     97.6%         97.5%         98.0%         98.0%         97.9%         98.5%   

 

  u APSA has incorporated our 12th Shopping Center, Soleil, which has increased by 4.5% the size of our portfolio, bringing it to around 300,000 sqm of leaseable area.
  u 12-month cumulative tenant sales as of September 30, 2010 in the same shopping centers totaled Ps. 5,411 million, which accounts for a 30.7% increase compared to the same period of the previous year.
  u

During the three-month period ended September 2010, shopping centers’ tenants’ sales reached Ps. 1,733 million (a 40.7% increase compared to the same period of the previous year). Cumulative sales totaled Ps. 1,471 million in the same shopping centers7 compared to the same quarter of the previous year (a 37.2% increase).

  u During July, August and September 2010 sales increased by 59%, 33% and 30%, respectively, compared to the same months of 2009. In the same shopping centers, they increased by 54%, 30% and 28%, respectively.
  u EBITDA/Sales margin for the three-month period stood at 76%.

 

 

4

At period end.

5

Does not include Dot Baires Shopping and Soleil

6

At period end. Percentage over the total leaseable area.

7

Does not include Dot Baires Shopping and Soleil

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Below is information on our shopping center segment as of September 30, 2010.

 

      Date of
Acquisition
     Leaseable
Area
Sqm (1)
     APSA’s
Effective
Interest (3)
    Occupancy
Rate (2)
    Accumulated Annual Rental Income
as of September 30 for the fiscal
periods (In Ps./000)(4)
     Book Value
(Ps. 000) (5)
 
             2011      2010      2009     

Shopping Centers (6)

                     

Alto Palermo

     11/97         18,701         100.0     100.0     27,200         20,971         21,323         129.661   

Abasto Shopping (7)

     07/94         37,592         100.0     99.7     26,547         19,810         19,481         161.187   

Dot Baires Shopping (8)

     05/09         49,526         80.0     99.7     17,046         14,742         —           584.519   

Alto Avellaneda

     11/97         36,547         100.0     95.7     16,827         12,526         10,990         69.932   

Paseo Alcorta

     06/97         13,804         100.0     98.0     11,562         9,581         9,277         69.601   

Patio Bullrich

     10/98         11,741         100.0     99.7     10,870         8,669         7,708         87.661   

Alto Rosario Shopping (7)

     11/04         28,650         100.0     95.0     8,935         6,817         5,828         76.776   

Mendoza Plaza Shopping

     12/94         40,634         100.0     93.1     8,109         6,137         6,675         79.458   

Fibesa and Others (9)

     —           N/A         100.0     N/A        6,814         5,224         4,911         —     

Buenos Aires Design

     11/97         13,786         53.7     98.8     4,213         3,446         3,383         8.188   

Córdoba Shopping Villa Cabrera

     12/06         15,108         100.0     98.1     4,205         3,042         2,814         67.990   

Alto Noa Shopping

     03/95         19,001         100.0     99.6     3,887         2,785         2,738         21.084   

Soleil

     07/10         14,040         100.0     97.0     2,587         —           —           82.456   

Neuquén (10)

     07/99         N/A         98.1     N/A        —           —           —           13.560   
           

TOTAL SHOPPING CENTERS

        299,130         95.1     97.6     148,802         113,750         95,128         1,384,911   
           

 

Notes:

(1) Total leaseable area in each property. Excludes common areas and parking spaces.-
(2) Calculated dividing occupied square meters by leaseable 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. Excludes works in progress.
(6) Through Alto Palermo S.A.
(7) Excludes Museo de los Niños (3,732 in Abasto and 1,261 in Alto Rosario).-
(8) During May 2009, a shopping center, a hypermarket and a movie theater complex were opened.
(9) Includes revenues from Fibesa S.A., Comercializadora Los Altos S.A. (merged with Fibesa S.A.), and others.
(10) Land for the development of a shopping center.

New “Soleil” Shopping Center

On July 1, 2010, APSA and INCSA executed the transfer of “Soleil Factory” Shopping Center’s Going Concern. The total price for the transaction was US$ 20.7 million plus VAT. A partial amount was paid on July 7, 2010. The balance amounts to US$ 12.6 million and is payable on July 1, 2017 or upon the execution of the deed, whichever occurs last. As a result, APSA adds its 12th Shopping Center to its portfolio, which it plans to condition over the next months for it to reach the quality level of our portfolio. This addition implies a 4.5% increase in the size of the shopping center portfolio.

Acquisition of a Plot in Paraná, Entre Ríos for the future development of a Shopping Center

On August 12, 2010, APSA and Wal-Mart Argentina executed a preliminary purchase agreement for a plot of land of 10,022 sqm in the City of Paraná, Entre Ríos. The purchase price was US$ 0.5 million, US$ 0.15 million of which have already been paid. APSA will pay the US$ 0.35 million balance upon execution of the title deed and surrender of possession, which will take place 60 days after APSA receives the relevant approvals to construct and operate a shopping center in this plot.

Acquisition of Parque Arauco S.A.’s interest in Alto Palermo S.A.

After the end of this period, on October 15, 2010, IRSA announced the purchase of Parque Arauco S.A.’s direct and indirect equity interest in Alto Palermo S.A. (APSA), through the payment of US$ 126 million, US$ 6 million of which had already been paid at the time of purchase of the option announced in January 2010.

As a result, the fruitful relationship developed with an excellent strategic partner such as Parque Arauco S.A. has reached optimum results, that will probably allow us to delineate a future that joins us again in new challenges.

 

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Commercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Following such acquisition, IRSA holds 94.89% of Alto Palermo S.A.’s stock capital, thus increasing, for the benefit of its shareholders, its leading position in the Shopping Center segment and consolidating the equity expansion strategy rolled out by it at national and international levels.

Consumer Financing – Tarshop S.A.

 

 

     Consumer Finance  
     In Millions of Ps.   IQ 119      IQ 10      var YoY
(%)
     FY 10      FY 09      var YoY
(%)
 
      

Financial

Results

   Revenues     57.8         43.2         34%         265.3         236.8         12%   
   Operating Result     19.1         5.9         224%         53.3         -125.4      
   Depreciation and Amortization     1.4         1.8         -19%         8.0         5.6         43%   
   EBITDA     20.5         7.6         168%         61.3         -119.8      
         IQ 11      IVQ 10      IIIQ 10      IIQ 10      IQ 10      IVQ 09  
      

Consumer

Finance

   Loan Origination (in Millions of Ps.)     334.7         319.6         278.9         293.2         278.9         293.2   
   Loan Portfolio (in Millions of Ps.)     629.3         605.3         531.0         529.7         531.0         529.7   
   In Arrears for 3 to 6 months10     2.4%         3.1%         3.6%         3.9%         3.6%         3.9%   

 

  u Operating income and financial results of this segment reflect Tarshop’s full recovery and the momentum in this sector’s activity.

Sale of Tarshop to Banco Hipotecario

Upon fulfillment of the conditions precedent, including the relevant authorization of the Argentine Central Bank, on September 13, 2010 APSA transferred to Banco Hipotecario 80% of Tarshop’s stock capital, pursuant to the purchase and sale agreement executed on December 29, 2009. The purchase price was US$ 26.8 million and was fully paid.

As from September 1, 2010, Tarshop is no longer consolidated with IRSA. APSA’s interest (IRSA’s subsidiary) in Tarshop S.A. was 100% until August 31, 2010 and 20% as from September 1, 2010. APSA’s interest in Metroshop is 50%.

Sales and Developments

During this quarter no significant sales were made, which circumstance is reflected in the decrease in revenues and cash generation.

 

 

     Sales and Developments  
     In Millions of Ps.    IQ 11      IQ 10      var YoY
(%)
     FY 10      FY 09      var YoY
(%)
 
      

Financial

Results

   Revenues      11.0         36.3         -70%         225.6         280.4         -20%   
   Operating Result      8.1         27.4         -70%         139.5         121.2         15%   
   Depreciation and Amortization      0.1         0.2         -38%         -0.4         0.8         -157%   
   EBITDA      8.2         27.6         -70%         139.2         121.9         14%   

Horizons Project (CYRSA, partnered by IRSA and Cyrela)

It has been fully sold. Work progress is almost 86.98%. Completion and delivery of the units sold is expected to occur in the next months.

Nuevo Caballito Project (IRSA’s barter)

Sales percentage is 73% and its construction is completed. In October 2010, the units sold started to be delivered.

 

9

It only corresponds to July and August 2010.

10

Percentage over Total Loan Portfolio

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Torres Rosario Project (APSA’s barter)

A barter was executed over 2 parcels (2-G and 2-H) for the construction of two condominiums, whose degree of progress is 100% and 53%, respectively. Completion of works in the 2-H parcel is scheduled for December 2011. The process of sale of the condominiums in parcel 2-G has started.

In addition, Parcel 2-A of Terreno Rosario has been sold. The purchase price was US$ 4.2 million, US$ 1.1 million of which were collected. The price balance shall be paid upon the execution of the deed of conveyance of title.

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. As of the closing of this period 16.15% of the project had been sold.

Barter of Terreno Beruti

After the closing of this period, on October 13, 2010, TGLT S.A. and APSA executed a sale agreement whereby APSA sold “Terreno Beruti”. TGLT S.A. plans to construct in the Property an apartment building with both residential and commercial parking spaces. As consideration, TGLT S.A. will transfer to APSA:

 

u 17.33% of the saleable square meters of the properties to be built,

 

u 15.82% of the square meters of the parking spaces of the same building;

 

u all the commercial parking spaces; and

 

u US$ 10.7 million, payable simultaneously upon the execution of the title deed.

Below is information on our sales and development segment as of September 30, 2010

 

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Commercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Sales and Developments

 

DEVELOPMENT

   Date of
Acquisition
     Estimated /
Real Cost
(Ps. 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
September 30 of Fiscal Year
(Ps. 000) (6)
     Book Value
Ps./000 (7)
 
                        2011      2010      2009     

Residential Apartments

                                

Torres Renoir (15)

     09/09/99         22,861         5,383         28         100.00     100.00     100.00     53,940         —           142         —           —     

Swap receivable Terreno Rosario (8) (16)

     04/30/99         —           4,692         80         63.35     100.00     0.00     —           —           —           —           11,023   

Terrenos de Caballito (16)

     11/03/97         42,742         9,784         1         50.00     0.00     0.00     —           —           —           —           6,830   

Swap receivable Terreno Caballito (Cyrsa) (14)

     11/03/97         —           7,451         —           100.00     0.00     0.00     —           —           —           —           18,970   

Swap receivable Terreno Caballito (KOAD) (14)

     11/03/97         —           6,833         118         100.00     100.00     73.00     —           —           —           —           33,614   

Libertador 1703 y 1755 (Horizons) (15)

     01/16/07         482,886         59,000         467         50.00     86.98     100.00     —           —           —           —           242,965   

Other Residential Apartments (9)

     N/A         234,615         115,259         1,401               311,256         —           —           976         10,258   
                                                                                                        

Subtotal Residential Apartments

        783,104         208,402         2,095               365,196         —           142         976         323,660   

Residential Communities

                                

Abril/Baldovinos (10)

     01/03/95         130,955         1,408,905         1273         100.00     100.00     99.40     237,528         466         2,363         1,200         1,605   

El Encuentro

     11/18/97         —           125,889         110         100.00     100.00     16.15     6,494         3,012         —           —           8,805   

Villa Celina I, II y III

     05/26/92         4,742         75,970         219         100.00     100.00     100.00     14,028         —           —           76         —     
                                                                                                        

Subtotal Residential Communities

        135,697         1,610,764         1,602               258,050         3,478         2,363         1,276         10,410   

Land Reserves

                                

Puerto Retiro

     05/18/97            82,051         —           50.00     0.00     0.00     —           —           —           —           54,535   

Santa María del Plata

     07/10/97            715,951         —           100.00     0.00     0.00     31,000         —           —           —           158,536   

Pereiraola (11)

     12/16/96            1,299,630         —           100.00     0.00     100.00     46,311         —           —           —           —     

Terreno Rosario (8)

     04/30/99            31,000         —           63.35     0.00     44.95     16,741         5,669         —           —           17,615   

Caballito Mz 35

     11/03/97            9,784         —           100.00     0.00     100.00     19,152         —           —           —           —     

Terreno Baicom

     12/23/09            6,905         —           50.00     0.00     0.00     —           —           —           —           4,459   

Canteras Natal Crespo

     07/27/05            4,300,000         —           50.00     0.00     0.00     283         10         3         —           5,719   

Terreno Berutti (8)

     06/24/08            3,207         —           63.35     0.00     0.00     —           —           —           —           52,984   

Pilar

     05/29/97            740,237         —           100.00     0.00     0.00     —           —           —           —           3,408   

Espacio Aéreo Coto (8)

     09/24/97            24,000         —           63.35     0.00     0.00     —           —           —           —           13,188   

Torres Jardín IV

     07/18/96            3,176         —           100.00     0.00     0.00     —           —           —           —           3,030   

Terreno Caballito (8)

     10/22/98            23,389         —           63.35     0.00     0.00     —           —           —           —           36,938   

Patio Olmos (8)

     09/25/07            5,147         —           63.35     100.00     0.00     —           —           —           —           32,949   

Other Land Reserves (11)

     N/A            13,596,833         —                 2,862         1,821         —           —           35,735   
                                                                                                        

Subtotal Land Reserves

           20,841,310         —                 116,348         7,499         3         —           419,096   

Others

                                

Madero 1020

     12/21/95            5,069         N/A         100.00     100.00     100.00     18,848         —           71         —           —     

Della Paolera 265

     08/27/07            472         N/A         100.00     100.00     100.00     6,850         —           —           —           —     

Madero 942

     08/31/94            768         N/A         100.00     100.00     100.00     6,137         —           —           —           —     

Dock del Plata

     11/15/06            7,942         N/A         100.00     100.00     100.00     84,206         —           11,174         —           —     

Libertador 498

     12/20/95            6,819         N/A         100.00     100.00     100.00     82,958         —           22,292         —           —     

Edificios Costeros

     03/20/97            6,389         N/A         100.00     100.00     100.00     68,580         —           —           —           —     

Libertador 602

     01/05/96            677         N/A         100.00     100.00     100.00     10,948         —           —           —           —     

Laminar

     03/25/99            6,521         N/A         100.00     100.00     100.00     74,510         —           —           —           —     

Reconquista 823

     11/12/93            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         —           —           —           —     

Others (12)

     N/A            —           N/A         N/A        N/A        N/A        969         2         294         3         —     
                                                                                                        

Subtotal Others

           39,865                  387,547         2         33,831         3         —     
                                                                                                        

TOTAL (13)

        918,801         22,700,341         3,697               1,127,141         10,979         36,339         2,255         753,166   
                                                                                                        

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

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 Land Reserves the land area was considered.
(3) Represents the total units or plots upon completion of the development or acquisition (excluding parking and storage spaces).
(4) The percentage sold is calculated dividing the square meters sold by the total saleable square meters, 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 up to 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 September 30, 2010, adjusted for inflation as of 02/28/03.
(8) Through Alto Palermo S.A.
(9) Includes the following properties: Terreno Rosario, Torres de Abasto and Terreno Mendoza through APSA (fully sold), Proyecto Abasto through Cyrsa, Torres Jardín, Edificios Cruceros (fully sold), 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), Padilla 902 (fully sold) and Lotes Pereiraola through IRSA.
(10) Includes the sales of Abril’s shares.
(11) Includes the following land reserves: Terreno Pontevedra, Isla Sirgadero, Terreno San Luis, Mariano Acosta, Merlo and Intercontinental Plaza II through IRSA, Zetol and Vista al Muelle through Liveck, and C.Gardel 3134 (fully sold), C.Gardel 3128 (fully sold), 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 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 3 to the Consolidated Financial Statements.
(14) Corresponds to swap receivables disclosed as “Inventories” in the Consolidated Financial Statements.
(15) Owned by CYRSA S.A.
(16) 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 June 30, 2010 is 100% and with parcel “H” is 53%.

Hotels

There has been an improvement in tourism during the first half of calendar 2010. According to data released by the Tourism Secretariat in its International Tourism Survey (ETI) during the first half of 2010, the number of tourists arriving in Argentina was 4.1% higher than in the same period for the previous year.

 

          Hotels  
    In Millions of Ps.    IQ 11      IQ 10      var YoY
(%)
     FY 10      FY 09      var YoY
(%)
 

Financial

Results

  Revenues      48.6         29.2         66%         159.9         158.9         1%   
  Operating Income      3.6         -4.0            5.4         8.6         -37%   
  Depreciation and Amortization      3.6         4.4         -18%         16.1         18.0         -11%   
  EBITDA      7.1         0.4         1645%         21.6         26.6         -19%   
          IQ 11      IVQ 10      IIIQ 10      IIQ 10      IQ 10      IVQ 09  

Hotels

  Average Occupancy8      75.9%         66.2%         73.2%         73.6%         49.4%         57.5%   
 

Average Rate per Room

(Ps./night)9

     713         611         667         690         644         614   

 

  u The occupancy trend has shown a sustained increase in the demand for IRSA’s top-level hotels, which was 50% higher than during the same quarter of last year when this industry was affected by the international crisis and the H1N1 virus.

 

  u The improvement of the macroeconomic situation and the increase in demand of foreign and local tourists have led to an increase in the average fee per room to approximately US$ 180 compared to US$ 170 in the same quarter of the previous year.

 

  u A good level of cash generation has been observed which drove EBITDA margins over sales to 15%.

 

8

12-month Cumulative

9

12-month Cumulative

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

The following is information about our hotels as of September 30, 2010.

 

Hotels

   Date of
Acquisition
     IRSA’s
Effective
Interest
    Number
of
Rooms
     Average
Occupancy (1)
    Average Price
per room
Ps. 000 (2)
     Sales as of September 30 of
fiscal period Ps./000
     Book value
as of

09/30/10
(Ps.000)
 
                2011      2010      2009     

Intercontinental (3)

     11/01/97         76.34     309         77.9     600         18,493         11,333         13,832         54,291   

Sheraton Libertador (4)

     03/01/98         80.00     200         92.8     433         9,397         7,014         9,462         40,898   

Llao Llao (5)

     06/01/97         50.00     201         57.7     1,348         20,675         10,885         18,947         77,964   

Terrenos Bariloche (5)

     12/01/06         50.00     N/A         N/A        N/A         N/A         N/A         N/A         21,900   
                                                                              

Total

     —           —          710         75.9     713         48,565         29,233         42,241         195,053   
                                                                              

 

Notes:

1) Accumulated average in the three-month period.
2) Accumulated average in the three-month period.
3) Through Nuevas Fronteras S.A. (Subsidiary of IRSA)
4) Through Hoteles Argentinos S.A.
5) Through Llao Llao Resorts S.A.

Investments in Other Companies

Interest in Hersha Hospitality Trust (Hersha)

As of September 30, 2010, IRSA and its subsidiaries held 15,173,823 shares in Hersha Hospitality Trust amounting to an interest of 10.85%.

After the end of the period, in October 2010, Hersha Hospitality Trust opened a new process for the issuance of capital stock in which IRSA and its subsidiaries subscribed for 2,952,625 common shares for an approximate total amount of US$ 17.1 million, at US$ 5.8 per share. Accordingly, as of October 20, IRSA’s and its subsidiaries’ interest in Hersha amounted to 10.72%

Additionally, IRSA, through its subsidiaries, holds an option for an initial term of 5 years over 5,700,000 additional common shares, at US$ 3.00 each. Should it exercise such options, IRSA and its affiliates would have a 13.63% interest.

Hersha is a Real Estate Investment Trust (REIT) listed on the New York Stock Exchange (NYSE: HT), and is the holder of an indirect controlling interest in 77 hotels, mainly distributed in the northeastern coast of the United States, totaling approximately 9,951 rooms. IRSA’s Chairman and CEO, Mr. Eduardo S. Elsztain, is member of the Board of Trustees since 2009.

Interest in Banco Hipotecario S.A.

During this period, in exercise of its preemptive right, IRSA participated in the preemptive offer to sell 36.0 million treasury shares resolved upon by the Board of Directors of Banco Hipotecario and acquired 26,197,564 Class D shares for a total amount of Ps. 36.2 million. As a result of these transactions, as of the end of the period, IRSA’s interest in BHSA increased to 29.78% of BHSA’s stock capital (without considering treasury shares).

Interest in Metropolitan

In July 2008, IRSA (through its subsidiaries) acquired a 30% equity interest in “Metropolitan 885 Third Ave. LLC” (“Metropolitan”), whose main asset is an office building known as “Lipstick Building”, and the debt related to this asset. The transaction included the acquisition of (i) put rights effective July 2011 over 50% of the interest purchased for a price equal to the amount invested plus interest at rate of 4.5% per annum and (ii) a right of first offering over 60% of the 5% interest. The price paid for the transaction was US$ 22.6 million.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

During fiscal year 2009, Metropolitan recorded losses which turned negative its shareholders’ equity, mainly due to the recognition of an allowance for impairment of the referred building. Accordingly, the Company’s interest in Metropolitan’s losses exceeded its interest in its equity and therefore, the Company recognized the investment as zero and recorded liabilities for US$ 1.5 million, which represents the maximum amount it intents to contribute for the financing of Metropolitan’s transactions, if required.

In addition, the put option was revalued at its estimated value as of September 30, 2010, which amounts to US$ 12.5 million.

On August 4, 2010, and for purposes of facilitating the negotiations, within the framework of a debt renegotiation started by Metropolitan 885 Third Avenue LLC with the Royal Bank of Canada, IRSA, through a subsidiary, executed an Escrow Agreement with the broker Fidelity National Title, Insurance Company and transferred the amount of US$ 15.0 million as non-binding bona fide deposit, for the sole purpose of allowing further negotiations between the parties. The Escrow Agreement expired on September 27, 2010 and was extended to January 14, 2011.

Offer to Purchase a building located at 183 Madison Ave, New York, NY

On August 26, 2010, IRSA and other U.S. partners entered into a conditional agreement for the purchase of Rigby 183 LLC, a company that is owner of a 19-story building located at 183 Madison Avenue, New York, NY, which has around 22,893 sqm of leasable area. The price for the transaction amounted to US$ 75.2 million. IRSA transferred to the seller the amount of US$ 7.3 million as down payment under the executed agreement. As the seller is under reorganization proceedings, judicial authorizations are still pending to consummate the transaction. Should it be consummated, IRSA would become holder of 49% of Rigby 183 LLC’s stock capital.

Purchase of TLGT S.A.’s Interest:

After the end of the period, on November 4, 2010, APSA purchased 5,214,662 registered non-endorsable common shares, entitled to one vote each, issued by TLGT S.A., for an amount equivalent to Ps. 47.1 million.

Consolidated Financial Debt

 

Cresud

As of September 30, 2010 we had borrowed a total of U$S 145.64 million equivalent. The following table contains a breakdown of Cresud’s indebtedness.

 

CRESUD’s debt

   Currency
of
issuance
   Outstanding principal amount in U$S
MM equivalent
   Rate   Maturity date

Short-term debt

   Ps./U$S    U$S 73.06    Variable   Up to 270 days

Crop production financing

   U$S    U$S 39.05    Variable   Up to 273 days

Serie I, III Notes

   Ps.    U$S 9.17    Variable (Badlar+4.0%)   Apr-12

Serie I, IV Notes

   U$S    U$S 17.97    Fixed (7.75%)   Jul-12

Bolivia farms(1)

   U$S    U$S 6.39    -   Nov-10

Total debt

      U$S 145.64     

 

Note: The exchange rate considered for the loans was U$S 1= Ps.3.96.

 

(1)

Shown in the caption Other indebtedness in the Consolidated Balance sheet.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

As a consequence of the purchase of farms in the Republic of Bolivia, mortgages have been raised over them. As of September 30, 2010, the mortgage on the “Las Londras” farm amounts to U$S 2.5 million and it is set to expire on November 11, 2010; the mortgage over the farms “San Cayetano” and “San Rafael” amounts to U$S 2.0 million and it is set to expire on November 11, 2010 and the mortgage over the “La Fon Fon” farm amounts to U$S 1.9 million and it is set to expire on November 11, 2010.

On July 1, 2010 the Board of Directors approved the Pricing Supplement relating to the issue of Series III and Series IV Notes under the Global Note Program. The Notes were issued on July 21, 2010.

The following table describes the features of each issue of Notes:

 

    

Series III Notes

  

Series IV Notes

Issue Amount    Ps. 35,650,040    The U$S equivalent of Ps. 70,210,294
Initial Exchange Rate    -    Ps. 3.9351 per U$S
Interest Rate    Private Badlar plus 400 basis points    7.75%
Issue Price    100% of face value    100% of face value
Issue Date    July 21, 2010    July 21, 2010
Maturity Date    21 months after the issue date    24 months after the issue date
Interest Payment Dates    October 19, 2010, January 17, 2011, April 18, 2011, July 18, 2011, October 17, 2011, January 16, 2012, April 23, 2012    October 19, 2010, January 17, 2011, April 18, 2011, July 18, 2011, October 17, 2011, January 16, 2012, April 16, 2012 and July 23, 2012
Principal Payment Dates    October 17, 2011, January 16, 2012, April 23, 2012    October 17, 2011, January 16, 2012, April 16, 2012 and July 23, 2012

On September 13, the fourth interest installment under the Series II Notes was paid for the sum of U$S 171,583. Also on that date, the sum of U$S 8,967,328, corresponding to the balance of the Series II Notes, was repaid.

IRSA and APSA

The following table shows IRSA and APSA’s consolidated financial debt as of September 30, 2010. The aggregate amount of consolidated debt was of U$S 522.1 million as of such date.

 

IRSA

Description

  

Issue Currency

  

Outstanding Amount1

  

Rate

  

Maturity

Edificio República

   U$S    20.1    12.00%    Apr-13

IRSA Notes (International)

   U$S    150.0    8.5    Feb-17

IRSA Notes (International)

   U$S    150.0    11.50%    Jul-20

Short term debt

   Ps.    17.5    Float    <180 days

HASA2

   Ps.    4.9    16.30%    Mar-11

Total IRSA’s

      342.5      

 

APSA

Description

  

Issue Currency

  

Outstanding Amount1

  

Rate

  

Maturity

Series IV Notes (Local)

   U$S    6.6    6.75%    May-11

Arcos del Gourmet

   U$S    2.0       Nov-11

Series I Notes (International)3

   U$S    120.0    7.88%    May-17

Soleil / Tucumán Debt

   U$S    14.9    5.00%    Jul-17

Series III Notes (Local)4

   Ps.    14.0    Badlar + 3%    May-11

Series II Notes (International)5

   Ps.    22.1    11.00%    Jun-12

Total APSA’s Debt

      179.6      

 

1. Face value stated in U$S at the exchange rate of 3.96 Ps. = 1 U$S, without considering balances with equity investees (Section 33).
2. Hoteles Argentinos S.A.
3. As of September 30, 2010 IRSA held a face value of U$S 39.6 million and APSA had repurchased a face value of U$S 5.0 million.
4. As of September 30, 2010, our subsidiary Emprendimientos Recoleta S.A. held a face value of Ps. 12.0 million.
5. As of September 30, 2010, IRSA held a face value U$S 15.1 million and APSA had repurchased a face value of U$S 4.8 million.

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Issuance of Notes for U$S 150 MM

On July 20, 2010, IRSA issued non-convertibles Notes for a principal amount of U$S 150 million under its Global Note Program for up to U$S 400 million in principal amount, maturing on July 20, 2020. The issue price was 97.838% of the face value and the notes accrue interest at a nominal rate of 11.5% per annum, payable semi-annually on January and June 20, each year, commencing on January 20, 2011.

Extension of the Note Program

After the end of the period, on November 2, 2010, IRSA’s General Shareholders’ Meeting approved a further increase in the amount of the current Global Note Program for up to an additional amount of U$S 50 million, thus reaching a total amount of up to U$S 450 million.

APSA’s Dividend Payment for Ps. 113 MM

After the end of the period, on October 7, 2010, APSA made available to the shareholders an advance dividend in cash for the amount of Ps. 113 million equivalent to 89.71% of the Stock Capital, as from October 15, 2010. It was approved by the General Meeting of Shareholders on October 29, 2010.

Conversion of Notes

After the end of this period, on October 7, 2010, certain holders1 of convertible Notes of APSA exercised their conversion rights, resulting in the issuance of 477,544,197 common shares of Ps. 0.1 par value each, and the cancellation of Notes for a face value of U$S 15.5 million. Following such conversion, APSA’s shares increased from 782,064,214 to 1,259,608,411.

Sale of APSA’s Notes

After the end of the period, on October 12, 2010, IRSA sold in the over the counter market Alto Palermo SA’s Fixed Rate Series I Notes due 2017, for a Face Value of U$S 39.6 million. As a result of the referred sale, IRSA obtained a total income of U$S 38.1 million.

IRSA’s Dividend Payment for Ps. 120 M

After the end of this period, on October 29, 2010, IRSA’s General Shareholders’ Meeting made available to the shareholders a cash dividend for Ps. 120 million.

 

 

Prospects for next quarter

 

At global level, crop prices have increased sharply in the recent months. In Chicago, soybean rose 22.3% during the first quarter of this fiscal year, and it has gone up an additional 18.3% since September 30, 2010.

There is a correlation between these increases and the USDA’s downward revisions of U.S. crop forecasts. The lower than expected supply and the firm demand prompted by the growth experienced in the large emerging economies have had a strong impact on prices. Grain inventory stocks relative to consumption levels are at historically lows, another factor that squeezes future supply even further, fueling price increases.

On the other hand, the uncertainty related to the value of fiduciary currencies resulting from the various currency flexibilization programs implemented by central banks at world level boosts the potential for appreciation of the real assets in Cresud’s portfolio: commodities and real estate.

At production level, prospects are promising. On the one hand we have good conditions for starting planting activities and a much favorable input-product ratio. In addition, we continue to increase our planted hectares, which have risen by 24% to 189 thousand in the current fiscal year, including Brasilagro. In this sense, the consummation of our purchase of Brasilagro’s stake marks is a continuation in our strategy to penetrate in the region and increase production volumes, in line with our objective of forming a regional portfolio with significant development and appreciation potential.

 

 

1

See Note 16.4 to IRSA’s Basic Financial Statements.

 

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Comercial, Inmobiliaria, Financiera y Agropecuaria

Business Highlight

In Argentina, we are making progress in our strategy of supplementing agriculture in our own farms with agricultural activities in leased farms and farms under concession. As regards leases, we have focused on renting lands in nucleus areas, seeking to stabilize yields and supplement our development activities in our own farms.

As concerns transforming and adding value to our own hectares, we will continue developing our farms in Salta and Paraguay, where we expect to develop 14 thousand additional hectares to be placed into production in calendar year 2012.

Finally, as concerns our dairy business, following the sale of the “La Juanita” establishment we will focus on milk production in our state-of-the-art dairy facility in “El Tigre”, which we plan to operate at full capacity.

The actions described above related to the expansion of planted areas and the increase in Brasilagro’s stake are aimed at obtaining higher volumes in a scenario of rising market prices.

 

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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 September 30, 2010 and 2009, and the related statements of income, of changes in shareholders’ equity and of cash flows for the three-month periods ended September 30, 2010 and 2009 and the complementary notes 1 to 24 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 September 30, 2010 and 2009, and the related consolidated statements of income and of cash flows for the three-month periods ended September, 2010 and 2009 and notes 1 to 16, 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, 2010 and 2009, on which we issued our unqualified report dated September 8, 2010, we report that:

 

  a) The financial statements of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria at September 30, 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, 2010.

 

4. In accordance with current regulations, we report that:

 

  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;


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  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 September 30, 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. 4,714,802 none of which was claimable at that date.

Autonomous City of Buenos Aires, November 11, 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: November 29, 2010