Form 6-K
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 6-K

 


REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13a-16 OR 15b-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of May, 2006

 


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 Unaudited Consolidated Financial Statements For the nine -month period ended March 31, 2006 and 2005.


Table of Contents

Cresud Sociedad Anónima

Comercial, Inmobiliaria, Financiera

y Agropecuaria

For the nine-month periods ended March 31, 2006 and 2005


Table of Contents

Cresud Sociedad Anónima

Comercial, Inmobiliaria, Financiera y Agropecuaria

Financial Statements

Index

 

Presentation  
Consolidated Balance Sheet   2
Consolidated Statement of Income   3
Consolidated Statement of Cash Flows   4
Notes to the Consolidated Financial Statements   5
Consolidated Schedules   15
Balance Sheet   22
Statement of Income   23
Statement of Changes in Shareholders’ Equity   24
Statement of Cash Flows  
Notes to the Financial Statements   26
Schedules   57
Additional Information to the Notes to the Financial Statements required by section 68 of the Buenos Aires Stock Exchange Regulations   64
Business Highlights   70
Report of Independent Auditors   82


Table of Contents
Name of the Company:    Cresud Sociedad Anónima
   Comercial, Inmobiliaria, Financiera y Agropecuaria
Legal Address:    Moreno 877, 23rd Floor
   Ciudad Autónoma de Buenos Aires
Principal Activity:    Agriculture, livestock and real-estate

Financial Statements for the nine-month period

ended March 31, 2006 presented in

comparative form with the previous year and

with the same period of the previous year.

Financial period No. 71 started on July 1, 2005

DATES OF REGISTRATION AT THE PUBLIC REGISTRY OF COMMERCE

 

Of the by-laws:    February 19, 1937
Of the latest amendment:    June 2, 1997
Duration of the Company:    June 6, 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
Pesos
   Subscribed
Pesos
  

Paid-in

Pesos

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

   176,199,596    176,199,596    176,199,596

 

1


Table of Contents

Cresud Sociedad Anónima

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Consolidated Balance Sheet as of March 31, 2006 and 2005 and June 30, 2005

 

    

March 31, 2006
(Notes 1, 2 and 3)

Pesos

    June 30, 2005
(Notes 1, 2 and 3)
Pesos
    March 31, 2005
(Notes 1, 2 and 3)
Pesos
 

ASSETS

      

Current Assets

      

Cash and banks (Note 4.a.)

   10,046,193     14,468,151     18,332,689  

Investments (Note 4.b.)

   7,896,475     59,978,002     100,660,590  

Trade accounts receivable (Note 4.c.)

   8,696,345     9,788,312     6,239,368  

Other receivables (Note 4.d.)

   17,892,670     22,214,019     15,917,702  

Inventories (Note 4.e.)

   50,714,748     46,293,640     47,076,758  
                  

Total current assets

   95,246,431     152,742,124     188,227,107  
                  

Non-current assets

      

Other receivables (Note 4.d.)

   15,093,109     6,480,334     5,277,421  

Inventories (Note 4.e.)

   60,787,150     53,223,179     55,078,987  

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

   320,377,323     289,391,269     303,368,115  

Other investments (Note 4.b.)

   86,946,920     105,508,513     106,604,680  

Fixed assets, net (Schedule A)

   219,686,357     166,497,596     158,061,206  
                  

Subtotal Non-Current Assets

   702,890,859     621,100,891     628,390,409  
                  

Goodwill (Note 4.b.)

   (17,023,514 )   (30,430,822 )   (43,320,138 )
                  

Total Non-Current Assets

   685,867,345     590,670,069     585,070,271  
                  

Total Assets

   781,113,776     743,412,193     773,297,378  
                  
LIABILITIES       
Current Liabilities       
Debts:       

Trade accounts payable (Note 4.f.)

   22,571,638     17,894,529     11,213,357  

Loans (Note 4.g.)

   37,336,082     11,499,782     26,199,626  

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

   1,294,282     1,748,138     1,066,091  

Taxes payable (Note 4.i.)

   2,052,600     20,203,393     23,578,691  

Other debts (Note 4.j.)

   2,874,729     14,634,298     15,560,123  
                  

Total Debts

   66,129,331     65,980,140     77,617,888  
                  

Total current liabilities

   66,129,331     65,980,140     77,617,888  
                  

Non-current liabilities

      

Trade accounts payable (Note 4.f.)

   981,422     —       —    

Taxes payable (Note 4.i.)

   50,572,947     39,285,385     35,485,840  

Loans (Note 4.g.)

   109,201,097     114,693,553     115,881,389  

Other debts (Note 4.j.)

   434,309     1,000     1,000  

Provisions (Schedule E)

   106,570     104,198     38,327  
                  

Total Non-current liabilities

   161,296,345     154,084,136     151,406,556  
                  

Total Liabilities

   227,425,676     220,064,276     229,024,444  
                  

Minority interest

   320,465     276,947     355,930  
                  

SHAREHOLDERS’ EQUITY

   553,367,635     523,070,970     543,917,004  
                  

Total Liabilities and Shareholders’ Equity

   781,113,776     743,412,193     773,297,378  
                  

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

 

Eduardo S. Elsztain
Chairman

 

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Table of Contents

Cresud Sociedad Anónima

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Consolidated Statement of Income

For the nine-month periods beginning on July 1, 2005 and 2004

and ended March 31, 2006 and 2005

 

     March 31, 2006
(Notes 1, 2 and 3)
Pesos
    March 31, 2005
(Notes 1, 2 and 3)
Pesos
 

Sales

    

Crops

   31,649,131     15,030,047  

Beef cattle

   25,011,983     27,112,319  

Milk

   5,862,005     2,217,786  

Feed Lot

   1,782,828     1,762,486  

Others

   4,450,432     3,749,554  
            

Total Sales

   68,756,379     49,872,192  
            

Cost of sales (Schedule F)

    

Crops

   (22,565,103 )   (11,777,221 )

Beef cattle

   (20,715,275 )   (22,159,509 )

Milk

   (3,323,002 )   (1,068,897 )

Feed Lot

   (1,498,624 )   (1,601,788 )

Others

   (1,850,086 )   (886,014 )
            

Total cost of sales

   (49,952,090 )   (37,493,429 )
            

Gross profit

   18,804,289     12,378,763  
            

Selling expenses (Schedule H)

   (5,974,705 )   (3,926,394 )

Administrative expenses (Schedule H)

   (6,348,710 )   (4,779,496 )

Net gain on sale of farms

   9,897,186     7,657,269  

Gain from inventory holding (Schedule F)

   2,296,228     9,321,932  
            

Operating income

   18,674,288     20,652,074  
            

Financial gain (loss)

    

Generated by assets:

    

Exchange differences and discounts

   10,668,341     (4,766,644 )

Interest income

   311,933     418,596  

Doubtful Accounts (Schedule E)

   (25,083 )   2,826  

Tax on banking debits and credits

   (1,283,625 )   (1,096,727 )

Gain on sale of Convertible Notes

   14,872,000     68,754,172  

Interest on Notes

   6,239,486     7,994,072  

Others

   1,922,446     229,913  
            
   32,705,498     71,536,208  
            

Generated by liabilities:

    

Reference stabilization index (CER)

   (17,996 )   (2,396 )

Interest paid

   41,386     (99,837 )

Financial expenses:

    

Interest on Convertible Notes (Note 7)

   (6,534,054 )   (7,419,382 )

Others

   (1,783,438 )   (1,737,116 )

Exchange differences and discounts

   (9,191,889 )   1,892,887  
            
   (17,485,991 )   (7,365,844 )
            

Other income and expenses, net

    

Gains from other fixed assets sales

   34,468     36,281  

Others

   (17,528 )   (3,352,530 )

Shareholders’ personal assets tax and miscellaneous

   (1,352,988 )   —    
            
   (1,336,048 )   (3,316,249 )
            

Income from related companies

   11,459,724     20,861,453  

Management fee

   (2,600,512 )   (6,905,699 )
            

Net Income before income tax and minority interest

   41,416,959     95,461,943  
            

Income tax expense

   (18,176,414 )   (33,420,169 )

Minority interest

   136,482     109,521  
            

Net income for the period

   23,377,027     62,151,295  
            

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

 

Eduardo S. Elsztain
Chairman

 

3


Table of Contents

Cresud Sociedad Anónima

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Consolidated Statement of Cash Flows

For the nine-month periods beginning on July 1, 2005 and 2004

and ended March 31, 2006 and 2005

 

     March 31, 2006
(Notes 1, 2 and 3)
Pesos
    March 31, 2005
(Notes 1, 2 and 3)
Pesos
 

Changes in cash and cash equivalents

    

Cash and cash equivalents at the beginning of the period

   67,462,547     13,138,533  

Cash and cash equivalents at the end of the period

   10,836,971     112,792,891  
            

Net (decrease) increase in cash and cash equivalents

   (56,625,576 )   99,654,358  

Causes of changes in cash and cash equivalents

    

Operating activities

    

Income for the period

   23,377,027     62,151,295  

Accrued interest

   7,092,959     7,319,715  

Income tax

   18,176,414     33,420,169  

Adjustments made to reach net cash flow from operating activities

    

Income from interest in related companies

   (11,459,724 )   (20,861,453 )

Minority interest

   (136,482 )   (109,521 )

Increase in allowances, provisions and accruals

   8,523,343     9,108,206  

Depreciation

   3,515,509     2,633,851  

Gain from inventory holdings

   (2,296,228 )   (9,321,932 )

Financial results

   (5,185,619 )   (7,078,085 )

Gain on sale of Convertible Notes

   (14,872,000 )   (68,754,172 )

Gain from sale of fixed assets

   (9,931,654 )   (7,693,550 )

Changes in operating assets and liabilities

    

Decrease in current investments

   5,800,768     2,693,282  

Decrease (Increase) in trade accounts receivable

   1,066,967     (881,684 )

(Increase) Decrease in other receivables

   (1,236,566 )   5,412,245  

Increase in inventories

   (10,187,085 )   (13,298,610 )

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

   (25,496,535 )   (3,184,669 )

Decrease in trade accounts payable

   (7,469,690 )   (1,832,153 )

Dividends collected

   988,307     1,011,469  

Increase in other debts

   47,934     1,964,862  
            

Cash flows applied to operating activities

   (19,682,355 )   (7,300,735 )
            

Investment activities

    

Decrease in non-current investments

   —       93,528,147  

Increase in interest in related companies

   (4,034,772 )   (6,349,709 )

Acquisition and upgrading of fixed assets

   (49,574,732 )   (8,978,683 )

Collection of receivables from sale of fixed assets

   5,736,964     1,127,138  

Sale of fixed assets

   9,870,951     8,572,815  
            

Cash flows (applied to) provided by investment activities

   (38,001,589 )   87,899,708  
            

Financing activities

    

Capital contributions from minority shareholders

   180,000     400,000  

Exercise of Warrants

   8,649,027     10,605,734  

Effective incentive plan

   —       240,000  

Dividends payment

   (10,000,000 )   (3,000,000 )

Increase in financial loans

   33,455,667     44,356,365  

Decrease in financial loans

   (14,712,326 )   (33,546,714 )

Decrease in other liabilities

   (16,514,000 )   —    
            

Cash flows provided by financing activities

   1,058,368     19,055,385  
            

Net (decrease) increase in cash and cash equivalents

   (56,625,576 )   99,654,358  
            

Items not involving changes in cash and cash equivalents

    

Transfer of inventory to fixed assets

   498,234     646,712  

Increase in other receivables by sale of fixed assets

   8,572,080     8,077,546  

Increase in fixed assets by increase in other liabilities

   7,160,617     —    

Decrease in other liabilities by decrease in fixed assets

   2,055,200     —    

Repayment of financial loans through issue of stock by exercise of conversion right

   13,427,766     8,751,779  

Complementary information

    

Interest paid

   6,534,054     5,119,411  

Income tax expense paid

   27,564,661     562,791  

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

 

Eduardo S. Elsztain
Chairman

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Notes to the Consolidated Financial Statements

For the nine-month periods ended March 31, 2006 and 2005

NOTE 1: BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS

As a consequence of the application of General Resolutions No. 368/01, 434/03, 441/03 and 459/04 of the Comisión Nacional de Valores (C.N.V.), which require that consolidated Financial Statements be presented as established by Technical Resolution No. 21 of the Federación Argentina de Consejos Profesionales de Ciencias Económicas (F.A.C.P.C.E.), the Balance Sheet as of March 31, 2006 and 2005 and the Statements of Income and the Statements of Cash Flows for the nine-month periods then ended were consolidated on a line by line basis with the financial statements of such companies in which it holds a majority of the voting shares for investments in which it has joint control. (see Note 1.b and 1.c to the basic financial statements).

The Company applies Technical Resolution No. 21 as concerns the proportional consolidation with Cactus Argentina S.A. on a 50% basis on account of the joint control held, and applied the same percentage for elimination of balances existing between them.

The financial statements as of March 31, 2006 and 2005 of the subsidiary companies Inversiones Ganaderas S.A., Futuros y Opciones.Com S.A. and Agropecuaria Cervera S.A. (at March 31, 2006) and Cactus Argentina S.A. as of March 31, 2006 and 2005 have been used in order to determine the investment at its equity value, line by line consolidation and proportional consolidation, respectively.

For purposes of comparability, reclassifications have been made on the information as of March 31, 2005.

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

NOTE 2: CORPORATE CONTROL

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

 

COMPANY

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

Inversiones Ganaderas S.A.

   99.99    99.99  

Futuros y Opciones.Com S.A.

   70.00    70.00  

Agropecuaria Cervera S.A.

   90.00    99.99 (*)

JOINT CONTROL

     

Cactus Argentina S.A.

   50.00    50.00  

(*) Includes Interests in Participations of Inversiones Ganaderas S.A.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES

The Financial Statements of the Subsidiary Companies mentioned in Note 2. have been prepared based on accounting principles consistent with those followed by Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria for the preparation of its Financial Statements, as detailed in Note 2. of the basic financial statements.

High relevant valuation and disclosed criteria applied in preparing the financial statements of Agropecuaria Cervera S.A. (ACER) and not explained in the valuation criteria note of the holding company are as follows:

Valuation criteria - fixed assets

The tree plantations included in the caption have been valued at replacement cost in accordance with the Tree Plantation Increase Report made in December 2003 by a forestry expert at the request of ACER previous shareholders.

Tree plantations have been transferred from inventories as ACER has no intention of sell it but to use it in the production process.

ACER former board of directors based on such report as well as on own estimates accepted the value of Ps. 4,320,000 and recorded an equal amount in other reserves in shareholders equity.

ACER’s current board of directors and shareholders will reestimate the above mentioned valuation considering the application of current accounting standards.

Other considerations – concessions granted

Among other goods and rights ACER has the concession planning an execution of an integral development project including biological, economy 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 ACER.

Among other obligations ACER has to invest Ps 16 million in agriculture, cattle farming, hydraulic resources, continuing education, forestry development, forest planting, fauna, natural reserve and eco-tourism, and has to pay an annual US$ 60,000 cannon to the province of Salta to be paid as from the 20th year as from the commencement of the concession.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

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

 

  a. Cash and banks

 

     March 31,    June 30,    March 31,
     2006    2005    2005
     Pesos    Pesos    Pesos

Cash

   65,976    31,983    42,174

Foreign currency (Schedule G)

   90,010    76,607    77,370

Local currency checking account

   1,227,017    2,022,467    343,824

Foreign currency checking account (Schedule G)

   8,218,713    3,897,430    6,331,295

Local currency saving account

   28,197    17,505    15,115

Foreign currency saving account (Schedule G)

   6,357    8,026,165    11,252,686

Checks to be deposited

   409,923    395,994    270,225
              
   10,046,193    14,468,151    18,332,689
              

 

  b. Investments and Goodwill

 

     March 31,     June 30,     March 31,  
     2006     2005     2005  
     Pesos     Pesos     Pesos  

Investment

      

Investment (Schedule C and G)

   7,896,475     59,978,002     100,660,590  
                  
   7,896,475     59,978,002     100,660,590  
                  

Investment

      

Investment from related companies (Schedule C)

   320,377,323     289,391,269     303,368,115  
                  
   320,377,323     289,391,269     303,368,115  
                  

Other investments

      

Other investments (Schedule C and G)

   86,946,920     105,508,513     106,604,680  
                  
   86,946,920     105,508,513     106,604,680  
                  

Goodwill

      

Goodwill (Schedule C)

   (17,023,514 )   (30,430,822 )   (43,320,138 )
                  
   (17,023,514 )   (30,430,822 )   (43,320,138 )
                  

 

  c. Trade accounts receivable

 

     March 31,     June 30,     March 31,  
     2006     2005     2005  
     Pesos     Pesos     Pesos  

Current

      

Accounts receivable in local currency

   8,825,022     8,771,084     5,483,423  

Less:

      

Allowance for doubtful accounts (Schedule E)

   (356,214 )   (386,344 )   (370,709 )

Accounts receivable in foreign currency (Schedule G)

   181,491     1,010,091     1,061,542  

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

      

Cactus Argentina S.A.

   46,046     393,087     65,112  

IRSA Inversiones y Representaciones S.A.

   —       394     —    
                  
   8,696,345     9,788,312     6,239,368  
                  

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

NOTE 4: (Continued)

 

  d. Other receivables

 

     March 31,    June 30,    March 31,
     2006    2005    2005
     Pesos    Pesos    Pesos

Current

        

Prepaid leases

   125,465    6,512,492    165,910

Tax on Minimum Presumed Income (Note 2.p.)

   7,425,960    54,872    38,006

Guarantee deposits and premiums (Schedule G)

   1,564,245    2,675,032    1,951,565

Secured by mortgage (Schedule G)

   3,141,226    8,217,166    8,164,858

Prepaid expenses

   692,671    2,125,903    989,895

Gross sales tax credit

   3,816    —      —  

Tax prepayments (net of accrual)

   3,890,413    1,945,005    2,946,290

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

        

Cactus Argentina S.A.

   185,390    166,104    681,982

IRSA Inversiones y Representaciones S.A.

   1,331    —      —  

Agro-Uranga S.A.

   160,609    39,993    694,981

Credits to employees

   75,818    36,582    41,801

Directors

   10,940    —      —  

Others

   614,786    440,870    242,414
              
   17,892,670    22,214,019    15,917,702
              

Non-current

        

Prepaid leases

   —      75,915    75,916

Tax prepayments

   5,672,316    6,328,177    5,080,327

Secured by mortgage (Schedule G)

   8,254,430    —      —  

Tax on Minimum Presumed Income

   82,006    60,818    72,849

Deferred tax

   74,374    14,874    44,044

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

        

Credits to employees

   —      —      3,385

Cactus Argentina S.A.

   9,814    —      —  

Alto Palermo S.A. (Schedule G)

   686,996    —      —  

IRSA Inversiones y Representaciones S.A.

   176,656    —      —  

Others

   136,517    550    900
              
   15,093,109    6,480,334    5,277,421
              

 

  e. Inventories

 

     March 31,    June 30,    March 31,
     2006    2005    2005
     Pesos    Pesos    Pesos

Current

        

Livestock

   13,609,916    15,152,813    13,364,281

Crops

   14,800,090    24,930,778    12,077,749

Unharvested crops

   18,025,519    826,336    17,777,895

Seeds and fodder

   294,515    319,169    500,487

Materials and others

   3,361,494    4,617,843    2,779,406

Advances to suppliers

   623,214    446,701    576,940
              
   50,714,748    46,293,640    47,076,758
              

Non-Current

        

Livestock

   60,787,150    53,223,179    55,078,987
              
   60,787,150    53,223,179    55,078,987
              

 

8


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

NOTE 4: (Continued)

 

  f. Trade accounts payable

 

    

March 31,

2006

Pesos

   

June 30,

2005

Pesos

  

March 31,

2005

Pesos

       
       

Current

       

Suppliers in local currency

   5,361,413     3,870,091    4,351,058

Suppliers in foreign currency (Schedule G) (1)

   9,806,871     6,611,576    2,315,281

Interest to be accrued (Schedule G) (2)

   (272,250 )   —      —  

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

       

Inversora Bolívar S.A.

   105,180     5,445    6,777

Alto City.Com. S.A.

   900     —      298

Alto Palermo S.A.

   60,409     193,053    74,664

IRSA Inversiones y Representaciones S.A.

   —       43,822    159,268

Cactus Argentina S.A.

   223,455     11,953    206,902

Estudio Zang, Bergel & Viñes

   191,597     34,297    76,847

Fundación IRSA

   1,900,000     1,900,000    1,177,988

Directors

   —       —      2,159

Accrual for other expenses (Schedule G)

   4,517,773     5,075,352    2,513,471

Short- term debts

   23,510     98,479    —  

Accrual for harvest expenses

   652,780     50,461    328,644
               
   22,571,638     17,894,529    11,213,357
               

Non-Current

       

Accrual for other expenses (Schedule G)

   981,422     —      —  
               
   981,422     —      —  
               

(1) Includes as of March 31, 2006 U$S 2,500,000 for the acquisition of farm “San Pedro” corresponding to suppliers in foreign currency secured by mortgage. See note 11
(2) Corresponds to the liability mentioned in (1).

 

  g. Loans

 

    

March 31,
2006

Pesos

   

June 30,

2005

Pesos

   

March 31,
2005

Pesos

 

Current

      

Local financial loans (Note 16)

   34,014,572     10,315,556     22,554,698  

Convertible Notes 2007 Interest payable (Schedule G)

   1,602,388     476,343     1,468,115  

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

      

Shareholders

   1,715,992     706,891     2,173,764  

Directors

   3,130     992     3,049  
                  
   37,336,082     11,499,782     26,199,626  
                  

Non-Current

      

Convertible Notes 2007 third parties (Schedule G)

   53,022,519     45,815,657     47,189,423  

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

      

Shareholders

   56,776,844     69,934,463     69,870,974  

Directors

   103,555     98,100     98,011  

Convertible Notes 2007 expenses

   (701,821 )   (1,154,667 )   (1,277,019 )
                  
   109,201,097     114,693,553     115,881,389  
                  

 

9


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

NOTE 4: (Continued)

 

  h. Salaries and social security payable

 

    

March 31,
2006

Pesos

  

June 30,
2005

Pesos

  

March 31,
2005

Pesos

Current

        

Accrual for vacation and statutory annual bonus

   1,091,873    1,423,925    874,254

Social security taxes payable

   147,545    224,914    114,964

Salaries payable

   32,622    81,488    53,422

Health care payable

   12,856    7,185    12,180

Others

   9,386    10,626    11,271
              
   1,294,282    1,748,138    1,066,091
              

 

  i. Taxes payable

 

    

March 31,
2006

Pesos

  

June 30,
2005

Pesos

   

March 31,
2005

Pesos

 

Current

       

Accrual for income tax

   153,632    24,772,007     24,289,677  

Advances to Income tax

   —      (5,148,500 )   (2,651,051 )

Tax on Minimum Presumed Income

   64,350    70,508     68,773  

Value added tax

   43,781    —       6,755  

Property tax payable

   216,721    86,960     80,182  

Taxes withheld for income tax

   105,850    165,166     68,995  

Gross sales tax payable

   86,864    215,145     80,846  

Taxes withheld-Gross sales tax payable

   4,397    —       —    

Taxes withheld-Value added tax payable

   30,757    41,215     10,036  

Others

   1,346,248    892     1,624,478  
                 
   2,052,600    20,203,393     23,578,691  
                 

Non-current

       

Deferred tax

   50,572,947    39,285,385     33,961,761  

Tax on Minimum Presumed Income

   —      —       1,524,079  
                 
   50,572,947    39,285,385     35,485,840  
                 

 

  j. Other debts

 

    

March 31,
2006

Pesos

  

June 30,
2005

Pesos

  

March 31,
2005

Pesos

Current

        

Security transactions payable (Schedule G)

   —      4,180,593    —  

Advances from customers (Schedule G)

   —      2,055,200    7,889,200

Management fees accrual

   2,600,512    8,239,263    6,905,699

Other income to be accruted

   40,623    —      —  

Loan to FYO minority shareholders

   134,196    134,196    134,196

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

        

Directors

   32,400    3,393    —  

Cactus Feeders Inc.

   46,502    1,268    513,253

Others

   20,496    20,385    117,775
              
   2,874,729    14,634,298    15,560,123
              

Non-current

        

Other income to be accruted

   433,309    —      —  

Guarantee deposit

   1,000    1,000    1,000
              
   434,309    1,000    1,000
              

 

10


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

NOTE 5:

a) Assets based on their estimated collection term (in pesos)

 

Based on their estimated
collection term

  

Current and non-current

Investment

   Trade accounts receivable    Other receivables
   March 31,
2006
  

June 30,

2005

   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

1st quarter 2005/2004 financial period

   —      —      —      —      —      —      —      —      —  

2nd quarter 2005/2004 financial period

   —      —      —      —      —      —      —      —      —  

3rd quarter 2005/2004 financial period

   —      —      —      —      —      —      —      —      —  

4th quarter 2005/2004 financial period

   —      —      3,338,226    —      —      6,214,368    —      —      3,748,270

1st quarter 2006/2005 financial period

   —      —      —      —      9,787,593    —      —      9,655,284    8,172,640

2nd quarter 2006/2005 financial period

   —      1,078,320    —      —      —      —      —      1,388,408    646,991

3rd quarter 2006/2005 financial period

   —      —      —      —      —      —      —      4,115,610    825

4th quarter 2006/2005 financial period

   2,604,146    —      —      8,548,703    —      —      5,400,453    5,324    3,385

1st quarter 2007/2006 financial period

   —      —      —      —      —      —      2,838,966    —      —  

2nd quarter 2007/2006 financial period

   —      —      —      —      —      —      8,007,137    —      25,582

3rd quarter 2007/2006 financial period

   —      —      —      —      —      —      547,723    —      —  

4th quarter 2007/2006 financial period

   —      —      —      —      —      —      10,128    —      —  

1st quarter 2008/2007 financial period

   —      105,487,796    —      —      —      —      2,180,582    —      —  

2nd quarter 2008/2007 financial period

   86,166,588    —      106,583,963    —      —      —      10,128    —      —  

3rd quarter 2008/2007 financial period

   —      —      —      —      —      —      437,517    —      —  

4th quarter 2008/2007 financial period

   —      —      —      —      —      —      10,128    —      —  

1st quarter 2009/2008 financial period

   —      —      —      —      —      —      2,174,871    —      —  

2nd quarter 2009/2008 financial period

   —      —      —      —      —      —      1,964    —      —  

1st quarter 2010/2009 financial period

   —      —      —      —      —      —      1,744,050    —      —  

1st quarter 2011/2010 financial period

   —      —      —      —      —      —      1,743,066    —      —  

Overdue

   —      —      —      —      —      25,000    —      —      —  

With no stated current term

   5,292,329    58,899,682    97,322,364    147,642    719    —      1,098,391    7,049,393    3,348,976

With no stated non-current term

   780,332    20,717    20,717    —      —      —      6,780,675    6,480,334    5,248,454
                                            

Total

   94,843,395    165,486,515    207,265,270    8,696,345    9,788,312    6,239,368    32,985,779    28,694,353    21,195,123
                                            

b) Assets classified according to their interest rate (in pesos)

 

Interest rate that
they accrue

  

Current and non-current

Investment

   Trade accounts receivable    Other receivables
   March 31,
2006
  

June 30,

2005

   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

At fixed interest rate

   86,166,588    105,487,796    106,583,964    —      —      —      11,111,155    8,095,402    8,143,356

At variable interest rate

   5,292,328    58,899,682    94,877,040    —      —      —      2,449,378    2,314,696    910,592

Non-interest bearing

   3,384,479    1,099,037    5,804,266    8,696,345    9,788,312    6,239,368    19,425,246    18,284,255    12,141,175
                                            

Total

   94,843,395    165,486,515    207,265,270    8,696,345    9,788,312    6,239,368    32,985,779    28,694,353    21,195,123
                                            

 

11


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

NOTE 5: (Continued)

Liabilities based on their estimated payment term:

 

Based on their
estimated payment term

   Trade accounts payable    Loans    Salaries and social security payable
   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
  

June 30,

2005

   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

1st quarter 2005/2004

   —      —      —      —      —      —      —      —      —  

2nd quarter 2005/2004

   —      —      —      —      —      —      —      —      —  

3rd quarter 2005/2004

   —      —      —      —      —      —      —      —      —  

4th quarter 2005/2004

   —      —      11,213,357    —      —      16,086,293    —      —      507,601

1st quarter 2006/2005

   —      12,623,191    —      —      10,315,556    10,113,333    —      1,721,673    558,490

2nd quarter 2006/2005

   —      4,308,000    —      —      1,184,226    —      —      6,583    —  

3rd quarter 2006/2005

   —      —      —      —      —      —      —      19,882    —  

4th quarter 2006/2005

   15,258,186    —      —      3,321,510    —      —      458,460    —      —  

1st quarter 2007/2006

   7,277,500    —      —      13,398,902    —      —      588,579    —      —  

2nd quarter 2007/2006

   —      —      —      —      —      —      72,719    —      —  

3rd quarter 2007/2006

   —      —      —      —      —      —      174,524    —      —  

4th quarter 2007/2006

   —      —      —      —      —      —      —      —      —  

1st quarter 2008/2007

   —      —      —      —      114,693,553    115,881,389    —      —      —  

2nd quarter 2008/2007

   —      —      —      109,201,097    —      —      —      —      —  

3rd quarter 2008/2007

   —      —      —      —      —      —      —      —      —  

4th quarter 2008/2007

   —      —      —      —      —      —      —      —      —  

1st quarter 2009/2008

   —      —      —      —      —      —      —      —      —  

2nd quarter 2009/2008

   —      —      —      —      —      —      —      —      —  

Overdue

   —      —      —      —      —      —      —      —      —  

With no stated current term

   35,952    963,338    —      20,615,670    —      —      —      —      —  

With no stated non-current term

   981,422    —      —      —      —      —      —      —      —  
                                            

Total

   23,553,060    17,894,529    11,213,357    146,537,179    126,193,335    142,081,015    1,294,282    1,748,138    1,066,091
                                            

 

Based on their
estimated payment term

   Taxes payable    Other debts    Provisions
   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

1st quarter 2005/2004

   —      —      —      —      —      —      —      —      —  

2nd quarter 2005/2004

   —      —      —      —      —      —      —      —      —  

3rd quarter 2005/2004

   —      —      —      —      —      —      —      —      —  

4th quarter 2005/2004

   —      —      1,863,094    —      —      7,023,474    —      —      —  

1st quarter 2006/2005

   —      509,378    —      —      14,500,103    7,889,200    —      —      —  

2nd quarter 2006/2005

   —      19,694,015    21,715,597    —      —      —      —      —      —  

3rd quarter 2006/2005

   —      —      —      —      —      —      —      —      —  

4th quarter 2006/2005

   1,834,618    —      —      2,528,060    —      —      —      —      —  

1st quarter 2007/2006

   —      —      —      13,541    —      —      —      —      —  

2nd quarter 2007/2006

   217,982    —      —      13,541    —      —      —      —      —  

3rd quarter 2007/2006

   —      —      —      —      —      —      —      —      —  

4th quarter 2007/2006

   —      —      —      1,472    —      —      —      —      —  

1st quarter 2008/2007

   —      —      —      1,472    —      —      —      —      —  

2nd quarter 2008/2007

   —      —      —      1,472    —      —      —      —      —  

3rd quarter 2008/2007

   —      —      —      1,472    —      —      —      —      —  

4th quarter 2008/2007

   —      —      —      1,472    —      —      —      —      —  

1st quarter 2009/2008

   —      —      —      1,472    —      —      —      —      —  

2nd quarter 2009/2008

   —      —      —      982    —      —      —      —      —  

Overdue

   —      —      —      —      —      —      —      —      —  

With no stated current term

   —      —      —      319,587    134,195    647,449    —      —      —  

With no stated non-current term

   50,572,947    39,285,385    35,485,840    424,495    1,000    1,000    106,570    104,198    38,327
                                            

Total

   52,625,547    59,488,778    59,064,531    3,309,038    14,635,298    15,561,123    106,570    104,198    38,327
                                            

Liabilities classified according to their interest rate:

 

Interest in rate that
they accrue

   Trade accounts payable    Loans    Salaries and social security payable
   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
  

June 30,

2005

   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

At fixed interest rate

   6,552,112    —      —      143,917,490    126,163,776    139,713,106    —      —      —  

At variable interest rate

   —      —      —      —      —      —      —      —      —  

Non-interest bearing

   17,000,948    17,894,529    11,213,357    2,619,689    29,559    2,367,909    1,294,282    1,748,138    1,066,091
                                            

Total

   23,553,060    17,894,529    11,213,357    146,537,179    126,193,335    142,081,015    1,294,282    1,748,138    1,066,091
                                            

 

Interest in rate that
they accrue

   Taxes payable    Other debts    Provisions
   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

At fixed interest rate

   —      —      —      —      —      —      —      —      —  

At variable interest rate

   —      —      —      1,662,660    —      —      —      —      —  

Non-interest bearing

   52,625,547    59,488,778    59,064,531    1,686,378    14,635,298    15,561,123    106,570    104,198    38,327
                                            

Total

   52,625,547    59,488,778    59,064,531    3,309,038    14,635,298    15,561,123    106,570    104,198    38,327
                                            

 

12


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

NOTE 6: EARNINGS PER SHARE

Following is conciliation between the average appraised ordinary stock in circulation and the average appraised diluted ordinary stock. The last one has been determined considering the possibility that the bearers of convertible bonds into company’s ordinary stock for up to an amount of U$S50,000,000 mentioned in Note 13 of the basic financial statements, exercise their right to convert into stock the titles they bear.

 

     March 31,
2006
    March 31,
2005
 

Average appraised stock in circulation

   166,847,072     152,945,734  

Average appraised diluted ordinary stock

   321,214,392     321,214,392  
     March 31,
2006
    March 31,
2005
 

Earnings for the calculation of basic earnings per share

   23,377,027     62,151,295  

Exchange differences

   7,482,465     7,419,382  

Financing expenses

   6,534,054     (1,677,679 )

Income tax

   (4,575,341 )   (1,874,235 )

Management fees

   (944,118 )   (386,747 )

Earnings for the calculation of diluted earnings per share

   31,874,087     65,632,016  
     March 31,
2006
    March 31,
2005
 

BASIC Earnings per share

    

Earnings

   23,377,027     62,151,295  

Number of shares

   166,847,072     152,945,734  

Earnings per share

   0.14     0.41  
     March 31,
2006
    March 31,
2005
 

DILUTED Earnings per share

    

Earnings

   31,874,087     65,632,016  

Number of shares

   321,214,392     321,214,392  

Earnings per share

   0.10     0.20  

 

13


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

NOTE 7: SEGMENT INFORMATION

As of March 31, 2006:

 

Description

  

Crops

(pesos)

   Beef Cattle
(pesos)
  

Milk

(pesos)

   Feed Lot
(pesos)
    Others
(pesos)
    Without
specific
allocation
(pesos)
  

Total

(pesos)

Sales

   31,649,131    25,011,983    5,862,005    1,782,828     4,450,432     —      68,756,379

Assets

   144,028,508    144,529,295    20,361,462    3,883,139     2,558,810     465,752,562    781,113,776

Liabilities

   7,035,020    1,018,682    26,575    827,696     966,896     217,550,807    227,425,676

Fixed asset additions

   10,394,410    9,145,356    1,182,903    (731,423 )   (79,770 )   42,750,737    62,662,213

Depreciation of fixed assets

   1,507,882    852,737    359,300    229,575     47,273     518,742    3,515,509

Income from related companies

   1,098,374    9,749    229,719    —       —       10,121,882    11,459,724

As of March 31, 2005:

 

Description

   Crops
(pesos)
   Beef Cattle
(pesos)
  

Milk

(pesos)

   Feed Lot
(pesos)
   Others
(pesos)
   Without
specific
allocation
(pesos)
  

Total

(pesos)

Sales

   15,030,047    27,112,319    2,217,786    1,762,486    3,749,554    —      49,872,192

Assets

   96,005,996    117,973,933    25,970,893    4,331,624    1,463,144    527,551,788    773,297,378

Liabilities

   5,414,854    580,566    201,135    1,311,996    517,011    220,998,882    229,024,444

Fixed asset additions

   1,932,891    1,302,443    2,688,570    119,954    63,029    2,871,796    8,978,683

Depreciation of fixed assets

   903,728    732,112    103,496    223,517    60,213    610,785    2,633,851

Income from related companies

   1,200,538    48,109    167,474    —      433,817    19,011,515    20,861,453

 

14


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Consolidated Fixed Assets

For the nine-month periods ended March 31, 2006 and 2005

and the year ended June 30, 2005

(Notes 1, 2, and 3)

Schedule A

 

                         Depreciation               

Principal Account

  

Value at

the beginning
of the period
Pesos

   Additions
And/or
transfers
Pesos
   Deductions
and/or
Transfers
Pesos
  

Value at

the end of

the period
Pesos

   Rate %    Accumulated
at the beginning
of the period
Pesos
  

Decrease

of the
period
Pesos

   Current
Period
Pesos
   Accumulated
at the end of
the period
Pesos
  

Net
carrying

value as of
March

31, 2006

Pesos

  

Net
carrying

value as of
June

30, 2005

Pesos

  

Net
carrying

value as of
March

31, 2005

Pesos

Real estate

   127,920,136    23,076,613    5,691,493    145,305,256    —      —      —      —      —      145,305,256    127,920,136    117,902,008

Wire fences

   4,815,906    23,884    181,072    4,658,718    3    1,126,302    54,868    120,977    1,192,411    3,466,307    3,689,604    3,812,878

Watering troughs

   3,549,725    105,800    254,865    3,400,660    5    1,090,500    100,736    127,478    1,117,242    2,283,418    2,459,225    2,529,287

Alfalfa fields and meadows

   3,265,110    890,877    1,282,571    2,873,416    12-25-50    2,020,885    1,199,476    433,545    1,254,954    1,618,462    1,244,225    704,226

Buildings and constructions

   5,982,037    23,750,313    58,895    29,673,455    2    1,901,144    10,112    444,475    2,335,777    27,337,678    4,080,893    3,739,454

Machinery

   9,610,388    933,896    15,045    10,529,239    10    6,152,583    12,036    724,279    6,864,826    3,664,413    3,457,805    2,167,008

Vehicles

   1,520,010    356,093    48,864    1,827,239    20    870,378    48,864    219,685    1,041,199    786,040    649,632    660,070

Tools

   193,155    4,565    —      197,720    10    139,216    —      10,239    149,455    48,265    53,939    52,472

Furniture and equipment

   1,149,488    54,571    —      1,204,059    10    716,045    —      86,662    802,707    401,352    433,443    376,657

Corral and leading lanes

   670,101    28,215    —      698,316    3    130,029    —      17,256    147,285    551,031    540,072    509,183

Roads

   1,057,888    89,688    25,160    1,122,416    10    689,480    12,580    81,939    758,839    363,577    368,408    370,124

Facilities

   11,596,648    189,413    26,008    11,760,053    10-20-33    4,647,034    24,295    859,191    5,481,930    6,278,123    6,949,614    3,311,563

Computer equipment

   1,188,319    176,073    14,256    1,350,136    20    844,095    14,256    123,142    952,981    397,155    344,224    370,715

Silo plants

   1,169,114    —      72,595    1,096,519    5    378,719    31,942    44,765    391,542    704,977    790,395    806,163

Feed Lot

   3,871,779    60,445    —      3,932,224    —      1,357,519    —      221,606    1,579,125    2,353,099    2,514,260    2,521,157

Constructions in progress

   10,918,842    7,213,077    252,150    17,879,769    —      —      —      —      —      17,879,769    10,918,842    17,943,757

Advances to suppliers

   82,879    —      42,368    40,511    —      —      —      —      —      40,511    82,879    284,484

Forest Products- Posts

   —      70,384    —      70,384    —      —      —      —      —      70,384    —      —  

Forest Products raw materials

   —      4,320,000    —      4,320,000    —      —      —      —      —      4,320,000    —      —  

Improvements in third parties buildings

   —      1,816,540    —      1,816,540    —      —      —      —      —      1,816,540    —      —  
                                                           

Total as of March 31, 2006

   188,561,525    63,160,447    7,965,342    243,756,630       22,063,929    1,509,165    3,515,509    24,070,273    219,686,357      
                                                           

Total as of June 30, 2005

   179,919,641    27,067,824    18,425,940    188,561,525       19,893,168    1,998,378    4,169,139    22,063,929       166,497,596   
                                                           

Total as of March 31, 2005

   179,919,641    9,625,395    9,334,882    180,210,154       19,893,168    378,071    2,633,851    22,148,948          158,061,206
                                                           

 

15


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Consolidated Investments

For the nine-month periods ended March 31, 2006 and 2005 and the year ended June 30, 2005

(Notes 1, 2, and 3)

Schedule C

 

                                 INFORMATION ON THE ISSUER
                                      Latest financial statements

Type and characteristics
Of the securities

   Amount   

Value at

March 31,
2006

Pesos

   

Value at

June 30,

2005

Pesos

   

Value at

March 31,
2005

Pesos

    Market
Value
Pesos
   Principal
activity
  

Capital

Pesos

  

Income

for the period
Pesos

  

Shareholders´
Equity

Pesos

Current Investments

                       

Mutual Funds

                       

Bony Hamilton Fund in dollars

   15,325    46,617     52,439,110     93,601,984     3,041978            

Banco Río Special Fund in pesos

   0    465,382     50,034     206,901                

Banco Río Plazo fijo Fund in dollars

   0    —       2,395     2,523                

Bank Boston 1784 Fund

      40,013     —       —                  
                                   
      552,012     52,491,539     93,811,408                
                                   

Notes and Convertible Bonds

                       

Interest on IRSA Convertible Notes 2007 (U$S)

                       

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

                       

IRSA Inversiones y Representaciones S.A.

      2,604,146     1,078,320     3,338,226                

Global 2010 Bonds

   110,000    103,732     100,997     95,732     0.943018            

Bocon Pro 1

   157,647    630     630     630     0.003996            

Arg Discount Bonds

   0    —       —       2,445,324                

Nobacs

   3,000,000    2,982,000     3,003,000     —       0.994000            

Arg Discount 2033 Bonds

      —       1,073,823     —       —              

Raymond James – Interest of Bonds

   0    —       20,235     —                  

Mortgage Bonds

   1,408,148    1,415,189     1,706,662     —       1.005000            

Letes

   0    —       —       320,571                
                                   
      7,105,697     6,983,667     6,200,483                
                                   

Deposits in foreign banks in dollars

      238,766     502,796     648,699                
                                   
      238,766     502,796     648,699                
                                   

Total current investments

      7,896,475     59,978,002     100,660,590                
                                   

Non-current investments

                       

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

                       

AGRO-URANGA S.A.

            Unlisted    Agriculture    2,500,000    1,038,398    12,889,465

Shares

   893,069    5,573,730     5,344,811     4,932,749                

Contribution on account of future subscriptions of shares

      7,865     7,865     7,865                

Higher property value

      11,179,150     11,179,150     11,179,150                
                                   
      16,760,745     16,531,826     16,119,764                
                                   

IRSA Inversiones y Representaciones S.A.

                       

Shares (Note 14)

   87,025,013    303,616,578     272,859,443     287,248,351     3.550000    Real Estate    368,447,884    28,987,509    1,301,356,122
                                   
      303,616,578     272,859,443     287,248,351                
                                   
      320,377,323     289,391,269     303,368,115                
                                   

Other Investments

                       

IRSA Convertible Notes 2007 (U$S)

                       

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

                       

IRSA Inversiones y Representaciones S.A.

   27,958,011    86,166,588     105,487,896     106,583,963                

BrasilAgro-Companhia Brasileira de Propiedades Agricolas (in formation)

      759,615     —       —                  

Coprolán

      20,717     20,717     20,717     Unlisted            
                                   
   Subtotal    86,946,920     105,508,513     106,604,680                
                                   

Goodwill

                       

Goodwill

      —       —       164,919                

IRSA negative goodwill

      (40,605,160 )   (30,430,822 )   (43,485,057 )              

Agropecuaria Cervera S.A. goodwill

      23,581,646     —       —                  
                                   
   Subtotal    (17,023,514 )   (30,430,822 )   (43,320,138 )              
                                   

Total non-current investments

      390,300,729     364,468,960     366,652,657                
                                   

 

16


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Consolidated Allowances and Provisions

For the nine-month periods ended March 31, 2006 and 2005

and the year ended June 30, 2005

(Notes 1, 2, and 3)

Schedule E

 

Item

   Balances at
the beginning
of the period
Pesos
  

Increases
(1)

Pesos

  

Decreases
(2)

Pesos

    Applications
Pesos
    Value at
March 31,
2006
Pesos
   Value at
June 30,
2005
Pesos
   Value at
March 31,
2005
Pesos

Deducted from assets

                  

Allowance for doubtful accounts

   381,214    50,000    (25,000 )   (50,000 )   356,214    386,344    370,709

Included in liabilities

                  

Non-current law contingencies for pending lawsuits

   104,198    2,372    —       —       106,570    104,198    38,327
                                    

Total at March 31, 2006

   485,412    52,372    (25,000 )   (50,000 )   462,784      
                                    

Total at June 30, 2005

   450,394    85,504    (5,824 )   (38,532 )      490,542   
                                    

Total at March 31, 2005

   450,394    —      (2,826 )   (38,532 )         409,036
                                    

(1) Included in Other Income and Other Expense.
(2) Included in Allowance for Doubtful Accounts.

 

17


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Consolidated Cost of Sales

For the nine-month periods ended March 31, 2006 and 2005

and year ended June 30, 2005

(Notes 1, 2, and 3)

Schedule F

 

     Crops     Beef cattle     Milk     Feed Lot     Others     Total  
    

March 31,
2006

Pesos

   

March 31,
2005

Pesos

   

March 31,
2006

Pesos

   

March 31,
2005

Pesos

   

March 31,
2006

Pesos

   

March 31,
2005

Pesos

   

March 31,
2006

Pesos

   

March 31,
2005

Pesos

   

March 31,
2006

Pesos

    March 31,
2005
Pesos
   

March 31,

2006

Pesos

   

March 31,

2005

Pesos

 

Inventories at the beginning of the period

                            

Beef cattle

   —       —       61,552,248     59,418,980     6,823,744     4,150,630     —       —       —       —       68,375,992       63,569,610    

Crops

   24,930,778     8,639,910     —       —       —       —       —       —       —       —       24,930,778       8,639,910    

Unharvested crops

   826,336     1,603,897     —       —       —       —       —       —       —       —       826,336       1,603,897    

Seeds and fodder

   128,575     —       172,941     134,870     17,653     103,508     —       —       —       3,138     319,169       241,516    

Materials and others

   3,768,385     3,842,219     —       —       65,430     44,982     155,791     601,626     628,237     197,822     4,617,843       4,686,649    
                                                                                    
   29,654,074     14,086,026     61,725,189     59,553,850     6,906,827     4,299,120     155,791     601,626     628,237     200,960       99,070,118       78,741,582  

Holding gains

   —       —       1,914,483     9,062,762     375,173     259,170     6,572     —       —       —         2,296,228       9,321,932  

(Gain) loss on commodities market

   (438,424 )   2,924,090     —       —       —       —       (9,499 )   4,528     —       —         (447,923 )     2,928,618  

Transfer of inventories to expenses

   (91,722 )   (149,403 )   (30,020 )   27,851     —       —       —       (65,938 )   (601,402 )   —         (723,144 )     (187,490 )

Transfers to fixed assets and inventories

   (346,306 )   (572,364 )   791,868     —       —       —       (791,868 )   —       (151,928 )   (74,348 )     (498,234 )     (646,712 )

Transfer of unharvested crops to expenses

   (14,052,802 )   (11,608,487 )   (382,865 )   (400,174 )   (1,018,566 )   (480,058 )   —       —       (360,753 )   (370,876 )     (15,814,986 )     (12,859,595 )

Recovery of inventories

   —       —       317,795     150,440     (317,795 )   (150,440 )   —       —       —       —            

Purchases

   28,609,741     27,919,030     8,998,390     4,599,061     3,138,055     929,239     1,698,059     660,306     1,103,310     565,247       43,547,555       34,672,883  

Operating expenses (Schedule H)

   14,946,376     11,322,950     12,824,503     12,912,144     3,571,080     1,459,122     624,004     571,786     1,435,197     835,014       33,401,160       27,101,016  

Less:

                            

Inventories at the end of the period

                            

Beef cattle (1)

   —       —       (65,269,557 )   (63,474,828 )   (9,127,509 )   (4,968,440 )   —       —       —       —       (74,397,066 )     (68,443,268 )  

Crops

   (14,800,090 )   (12,077,749 )   —       —       —       —       —       —       —       —       (14,800,090 )     (12,077,749 )  

Unharvested crops

   (18,025,519 )   (17,777,895 )   —       —       —       —       —       —       —       —       (18,025,519 )     (17,777,895 )  

Seeds and fodder

   (20,000 )   —       (174,511 )   (271,597 )   (100,004 )   (228,890 )   —       —       —       —       (294,515 )     (500,487 )  

Materials and others

   (2,870,225 )   (2,288,977 )   —       —       (104,259 )   (49,926 )   (184,435 )   (170,520 )   (202,575 )   (269.983 )   (3,361,494 )   (110,878,684 )   (2,779,406 )   (101,578,805 )
                                                                                    

Cost of Sales (2)

   22,565,103     11,777,221     20,715,275     22,159,509     3,323,002     1,068,897     1,498,624     1,601,788     1,850,086     886,014       49,952,090       37,493,429  
                                                                                    

(1) Includes cattle births of the fiscal period.
(2) Includes cattle production amounting Ps. 18,702,618 and Ps. 21,157,057 as of March 31, 2006 and 2005, respectively.
(2) Includes grains production amounting to Ps. 16,972,639 and Ps. 14,303,618 as of March 31, 2006 and 2005, respectively.

 

18


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Consolidated foreign currency assets and liabilities

For the nine-month periods ended March 31, 2006 and 2005

(Notes 1, 2, and 3)

Schedule G

 

     As of March 31, 2006     As of June 30,2005    As of March 31, 2005

Item

   Type and
amount of
foreign
Currency
   

Current

exchange
rate

Pesos

   Amount in
local
currency
Pesos
    Type and
amount of
foreign
Currency
   Amount in
local
currency
Pesos
   Type and
amount of
foreign
Currency
   Amount in
local
currency
Pesos

Current Assets

                  

Cash and banks

                  

Cash and banks

   U$S 2,733,315     3.042    8,314,743     U$S 4,215,034    12,000,202    U$S 6,138,808    17,661,351

Cash and banks

   Rs 250     1.348    337       —      —        —      —  

Investments:

                  

Mutual funds

   U$S 15,324     3.042    46,617     U$S 18,419,917    52,441,505    U$S 32,535,456    93,604,507

Interest of IRSA Convertible Notes 2007 Subsidiaries, related companies Law 19,550 Section 33 and related parties:

                  

IRSA Inversiones y Representaciones S.A.

   U$S 844,953     3.082    2,604,146     U$S 373,509    1,078,320    U$S 1,144,404    3,338,226

Deposits in foreign banks

   U$S 78,490     3.042    238,766     U$S 176,606    502,796    U$S 225,478    648,699

Trade accounts receivable:

                  

Trade accounts receivable

   U$S 59,662     3.042    181,491     U$S 354,791    1,010,091    U$S 368,975    1,061,542

Other receivables:

                  

Secured by mortgage

   U$S 1,032,619     3.042    3,141,226     U$S 2,886,254    8,217,166    U$S 2,837,976    8,164,858

Guarantee deposits

   U$S 514,216     3.042    1,564,245     U$S 939,597    2,675,032    U$S 678,333    1,951,565

Subsidiaries, related companies Law 19,550 Section 33 and related parties:

                  

Cactus Argentina S.A

   U$S 3,184     3.082    9,814       —      —        —      —  

Others

   U$S 15,922     3.082    49,071       —      —        —      —  

Non current assets

                  

Other receivables

                  

Secured by mortgage

   U$S 2,713,488     3.042    8,254,430       —      —        —      —  

Subsidiaries, related companies Law 19,550 Section 33 and related parties:

                  

Alto Palermo S.A

   U$S 222,906     3.082    686,996       —      —        —      —  

IRSA Inversiones y Representaciones S.A.

   U$S 57,319     3.082    176,656       —      —        —      —  

Others

   U$S 31,844     3.082    98,142       —      —        —      —  

Investments:

                  

IRSA Convertible Notes 2007

                  

Subsidiaries, related companies Law 19,550 Section 33 and related parties:

                  

IRSA Inversiones y Representaciones S.A.

   U$S 27,958,010     3.082    86,166,588     U$S 36,538,897    105,487,796    U$S 36,538,897    106,583,963
                                          

U$S

   U$S 36,281,252        111,532,931     U$S 63,904,605    183,412,908    U$S 80,468,327    233,014,711
                                          

Rs

   Rs 250        337       —      —        —      —  
                                          

Total Assets

        111,533,268        183,412,908       233,014,711
                          

Current liabilities

                  

Trade accounts payable:

                  

Suppliers

   U$S 3,181,983     3.082    9,806,871     U$S 2,290,120    6,611,576    U$S 793,720    2,315,281

Accrual for other expenses

   U$S 1,373,600     3.082    4,233,435     U$S 607,354    2,592,869    U$S 607,354    1,771,652

Interest to be accrued

   U$S (88,335 )   3.082    (272,250 )   U$S         U$S     

Loans:

                  

Local Banks

   U$S 4,347,470     3.082    13,398,902     U$S —      —      U$S —      —  

Interest of Convertible Notes 2007

   U$S 519,918     3.082    1,602,388     U$S 164,996    476,343    U$S 503,296    1,468,115

Subsidiaries, related companies Law 19,550 Section 33 and related parties:

                  

Shareholders

   U$S 556,779     3.082    1,715,992     U$S 244,853    706,891    U$S 745,205    2,173,764

Directors

   U$S 1,016     3.082    3,130     U$S 344    992    U$S 1,045    3,049

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Consolidated foreign currency assets and liabilities

For the nine-month periods ended March 31, 2006 and 2005

(Notes 1, 2, and 3)

Schedule G (Cont.)

 

     As of March 31, 2006    As of June 30,2005    As of March 31, 2005

Item

   Type and amount
of foreign
Currency
  

Current exchange
rate

Pesos

   Amount in
local currency
Pesos
   Type and amount
of foreign
Currency
   Amount in
local currency
Pesos
   Type and amount
of foreign
Currency
   Amount in
local currency
Pesos

Other debts:

                    

Security transactions payable

   U$S —      —      —      U$S 1,448,075    4,180,593    U$S —      —  

Advances from customers

   U$S —      —      —      U$S 711,881    2,055,200    U$S 2,704,559    7,889,200

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

                    

Cactus Feeders

     —      —      —        —      —      U$S 13,961    40,274

Non-current liabilities

                    

Accrual for other expenses

   U$S 318,437    3.082    981,422      —      —        —      —  

Loans:

                    

Convertible Notes 2007

   U$S 17,203,932    3.082    53,022,519    U$S 15,869,642    45,815,657    U$S 16,177,382    47,189,423

Subsidiaries, related companies Law 19,550 Article 33 and related parties:

                    

Shareholders

   U$S 18,422,078    3.082    56,776,844    U$S 24,223,922    69,934,463    U$S 23,953,025    69,870,974

Directors

   U$S 33,600    3.082    103,555    U$S 33,980    98,100    U$S 33,600    98,011
                                        

Total Liabilities

   U$S 45,870,478       141,372,808    U$S 45,595,167    132,472,684    U$S 45,533,147    132,820,193
                                        

U$S - US dollars

RS – Brazilian Reais

 

20


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria and Subsidiaries

Consolidated Information submitted in compliance with Section 64, subsection B of Law No.19,550

For the nine-month periods ended March 31, 2006 and 2005

(Notes 1, 2, and 3)

Schedule H

 

    Total as of   Operating Expenses   Expenses   Total as of

Items

  March 31, 2006
Pesos
 

Total

Pesos

 

Crops

Pesos

  Beef cattle
Pesos
 

Milk

Pesos

  Feed Lot
Pesos
  Others
Pesos
  Selling
Pesos
  Administrative
Pesos
  March 31, 2005
Pesos

Directors’ fees

  185,724   —     —     —     —     —     —     —     185,724   90,169

Fees and payments for services

  1,958,020   303,983   1,669   167,654   76,285   —     58,375   —     1,654,037   995,406

Salaries and wages

  5,862,710   3,244,681   591,875   1,326,763   612,899   —     713,144   78,567   2,539,462   4,735,448

Social security taxes

  1,044,586   547,111   227,132   152,988   31,154   —     135,837   14,965   482,510   830,802

Taxes, rates and contributions

  626,223   508,489   235,233   83,698   47,974   —     141,584   589   117,145   376,881

Gross sales taxes

  479,577   —     —     —     —     —     —     479,577   —     410,200

Office and administrative expenses

  803,128   179,291   —     7,255   —     —     172,036   1,773   622,064   598,415

Bank commissions and expenses

  26,579   26,579   6,599   3,029   504   —     16,447   —     —     22,051

Depreciation of fixed assets

  3,515,509   3,268,834   1,797,645   813,484   393,548   210,526   53,631   —     246,675   2,633,851

Vehicle and traveling expenses

  621,144   406,720   164,380   186,059   12,456   —     43,825   9,358   205,066   491,224

Spare parts and repairs

  1,315,555   1,308,064   720,895   481,871   105,298   —     —     —     7,491   1,022,348

Insurance

  207,347   44,591   19,622   15,961   1,305   —     7,703   —     162,756   193,552

Benefits to Employees

  296,991   194,208   54,895   112,979   8,529   —     17,805   —     102,783   276,421

Livestock expenses (1)

  9,925,274   9,284,095   —     9,284,095   —     —     —     641,179   —     10,338,566

Dairy farm expenses (2)

  2,264,870   2,264,870   —     —     2,264,870   —     —     —     —     896,496

Agricultural expenses (3)

  15,554,087   10,867,378   10,867,378   —     —     —     —     4,686,709   —     11,104,307

Feed lot expenses

  413,478   413,478   —     —     —     413,478   —     —     —     367,016

Silo expenses

  24,950   24,950   24,950   —     —     —     —     —     —     97,032

Coal expenses

  202   —     —     —     —     —     —     202   —     —  

ACER expenses

  21,649   21,649   —     —     —     —     21,649   —     —     —  

FyO expenses

  61,391   6,750   —     —     —     —     6,750   54,641   —     52,616

General expenses

  515,581   485,439   243,103   188,667   16,258   —     46,411   7,145   22,997   274,105
                                       

Total as of March 31, 2006

  45,724,575   33,401,160   14,946,376   12,824,503   3,571,080   624,004   1,435,197   5,974,705   6,348,710  
                                       

Total as of March 31, 2005

    27,101,016   11,322,950   12,912,144   1,459,122   571,786   835,014   3,926,394   4,779,496   35,806,906
                                       

(1) Includes cattle food and additives, lodging, animal health and others.
(2) Includes cattle food and additives, animal health and others.
(3) Includes seeds, agrochemicals, irrigation, services hired, leases and others.

 

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Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Balance Sheet as of March 31, 2006 and 2005 and June 30, 2005

 

     March 31, 2006
(Notes 1 and 2)
Pesos
    June 30, 2005
(Notes 1 and 2)
Pesos
    March 31, 2005
(Notes 1 and 2)
Pesos
 

ASSETS

      

Current Assets

      

Cash and banks (Note 8.a.)

   9,101,296     13,807,272     18,162,361  

Investments (Note 8.b.)

   7,152,314     59,425,172     99,805,081  

Trade accounts receivable (Note 8.c.)

   6,472,743     9,406,400     5,330,354  

Other receivables (Note 8.d.)

   16,802,356     21,353,798     16,070,289  

Inventories (Note 8.e.)

   49,263,569     43,647,216     46,258,634  
                  

Total Current Assets

   88,792,278     147,639,858     185,626,719  
                  

Non-Current Assets

      

Other receivables (Note 8.d.)

   16,530,828     6,404,092     5,156,243  

Inventories (Note 8.e.)

   57,206,925     48,743,639     49,804,357  

Investments on controlled and related companies (Note 8.b.)

   341,441,146     306,089,140     318,339,764  

Other investments (Note 8.b.)

   86,946,920     105,508,513     106,604,680  

Fixed assets, net (Schedule A)

   204,991,842     158,082,019     149,675,795  
                  

Subtotal Non-Current Assets

   707,117,661     624,827,403     629,580,839  
                  

Goodwill (Note 8.b.)

   (18,694,399 )   (30,430,822 )   (43,320,138 )
                  

Total Non-Current Assets

   688,423,262     594,396,581     586,260,701  
                  

Total Assets

   777,215,540     742,036,439     771,887,420  
                  

LIABILITIES

      

Current Liabilities

      

Debts:

      

Trade accounts payable (Note 8.f.)

   21,288,319     16,993,710     10,720,217  

Loans (Note 8.g.)

   37,336,082     11,499,782     26,199,626  

Salaries and social security payable (Note 8.h.)

   1,058,735     1,564,647     913,151  

Taxes payable (Note 8.i.)

   1,659,998     20,041,396     23,444,691  

Other debts (Note 8.j.)

   2,653,212     16,104,211     16,646,149  
                  

Total Debts

   63,996,346     66,203,746     77,923,834  
                  

Total Current Liabilities

   63,996,346     66,203,746     77,923,834  
                  

Non-Current Liabilities

      

Trade accounts payable (Note 8.f.)

   981,422     —       —    

Loans (Note 8.g.)

   109,201,097     114,693,553     115,881,389  

Taxes payable (Note 8.i.)

   49,600,797     37,987,388     33,961,761  

Other debts (Note 8.j.)

   —       14,911     203,432  

Provisions (Schedule E)

   68,243     65,871     —    
                  

Total Non-Current Liabilities

   159,851,559     152,761,723     150,046,582  
                  

Total liabilities

   223,847,905     218,965,469     227,970,416  
                  

SHAREHOLDERS’ EQUITY

   553,367,635     523,070,970     543,917,004  
                  

Total Liabilities and Shareholders’ Equity

   777,215,540     742,036,439     771,887,420  
                  

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

 

Eduardo S. Elsztain

Chairman

 

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Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Statement of Income

For the nine-month periods ended March 31, 2006 and 2005

 

     March 31, 2006     March 31, 2005  
     (Notes 1 and 2)     (Notes 1 and 2)  
     Pesos     Pesos  

Sales

    

Crops

   31,649,131     15,030,047  

Beef cattle

   19,725,313     26,261,038  

Milk

   5,862,005     2,217,786  

Other

   2,709,371     2,995,176  
            

Total Sales

   59,945,820     46,504,047  
            

Cost of sales (Schedule F)

    

Crops

   (22,565,103 )   (11,777,221 )

Beef cattle

   (14,473,492 )   (22,035,238 )

Milk

   (3,323,002 )   (1,068,897 )

Other

   (8,564 )   (1,161 )
            

Total cost of sale

   (40,370,161 )   (34,882,517 )
            

Gross profit

   19,575,659     11,621,530  
            

Selling expenses (Schedule H)

   (5,677,277 )   (3,760,424 )

Administrative expenses (Schedule H)

   (5,797,957 )   (4,347,610 )

Net gain on sale of farms

   9,872,997     7,657,269  

Gain from inventory holding (Schedule F)

   1,908,341     8,634,649  
            

Operating income

   19,881,763     19,805,414  
            

Financial gain (loss)

    

Generated by assets:

    

Exchange differences and discounts

   10,626,544     (4,720,303 )

Interest income

   399,182     420,120  

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

    

Interest on Notes (Note 7)

   6,239,486     7,994,072  

Doubtful accounts (Schedule E)

   —       2,826  

Tax on banking debits and credits

   (1,047,795 )   (962,665 )

Holding result and operations security stock:

    

Gain on sale of Negotiable Notes

   14,872,000     68,754,172  

Others

   1,808,564     126,915  
            
   32,897,981     71,615,137  
            

Generated by liabilities:

    

Financial expenses:

    

Interest on Convertible Notes (Note 7)

   (6,534,054 )   (7,419,382 )

Others

   (1,782,245 )   (1,726,096 )

Exchange differences and discounts

   (9,141,170 )   1,906,481  
            
   (17,457,469 )   (7,238,997 )
            

Other income and expenses, net:

    

Gains from other fixed assets sales

   29,157     40,175  

Shareholders’ Personal asset tax and miscellaneous

   (1,352,988 )   (3,320,033 )
            
   (1,323,831 )   (3,279,858 )
            

Income from controlled and related companies

   10,360,623     21,172,218  

Management fee (Note 5)

   (2,600,512 )   (6,905,699 )
            

Net Income before income tax

   41,758,555     95,168,215  
            

Income tax expense (Note 6)

   (18,381,528 )   (33,016,920 )
            

Net income for the period

   23,377,027     62,151,295  
            

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

 

Eduardo S. Elsztain

Chairman

 

23


Table of Contents

Cresud Sociedad Anónima,

Comercial, Inmobiliaria, Financiera y Agropecuaria

Statement of Changes in Shareholders’ Equity

For the nine-month periods ended March 31, 2006 and 2005

(Notes 1 and 2)

 

     Shareholders’ contributions     Retained
earnings
  

Retained

earnings

Pesos

   

Total as of

March 31,

2006

Pesos

   

Total as of

March 31,

2005

Pesos

 
     Capital (Note 3)   

Inflation
adjustment

of Common
stock

Pesos

  

Paid-in

capital (1)
Pesos

   

Subtotal

Pesos

   

Legal

reserve
Pesos

      

Items

  

Common
stock

Pesos

   Treasury
stock
Pesos
                

Balances at the beginning of the fiscal year

   162,784,579    —      166,218,124    78,175,196     407,177,899     7,692,591    108,200,480     523,070,970     465,168,196  

Subscription of incentive plan (Note 12)

   —      —      —      —       —       —      —       —       240,000  

Conversion of Notes in common stock (Note 13)

   8,798,601    —      —      4,629,165     13,427,766     —      —       13,427,766     8,751,779  

Exercise of Warrants (Note 13)

   4,616,416    —      —      4,032,611     8,649,027     —      —       8,649,027     10,605,734  

Shareholders meeting held on 11.29.05:

                      

Legal Reserve

   —      —      —      —         3,839,946    (3,839,946 )    

Cash dividends

   —      —      —      —       —       —      (10,000,000 )   (10,000,000 )   (3,000,000 )

Related companies Law 19,550 Section 33:

                      

IRSA (Note 14)

   —      —      —      (5,157,155 )   (5,157,155 )   —      —       (5,157,155 )   —    

Net income for the period

   —      —      —      —       —       —      23,377,027     23,377,027     62,151,295  
                                                  

Balances as of March 31, 2006

   176,199,596    —      166,218,124    81,679,817     424,097,537     11,532,537    117,737,561     553,367,635     —    
                                                  

Balances as of March 31, 2005

   162,534,470    —      166,218,124    113,918,962     442,671,556     7,692,591    93,552,857     —       543,917,004  
                                                  

(1) See notes 2 n and 14

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

 

Eduardo S. Elsztain

Chairman

 

24


Table of Contents

Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

For the nine-month periods ended March 31, 2006 and 2005

 

     March 31, 2006     March 31, 2005  
     (Notes 1 and 2)     (Notes 1 and 2)  
     Pesos     Pesos  

Changes in cash and cash equivalents

    

Cash and cash equivalents at the beginning of the fiscal year

   66,248,838     12,527,042  

Cash and cash equivalents at the end of the period

   9,147,913     111,767,020  
            

Net (decrease) increase in cash and cash equivalents

   (57,100,925 )   99,239,978  

Causes of changes in cash and cash equivalents

    

Operating activities

    

Income for the period

   23,377,027     62,151,295  

Accrued interest

   7,092,959     7,319,715  

Income tax

   18,381,528     33,016,920  

Adjustments made to reach net cash flow from operating activities

    

Income from interest in controlled and related companies

   (10,360,623 )   (21,172,218 )

Increase in allowances, provisions and accruals

   8,498,343     9,111,032  

Depreciation

   3,122,307     2,234,423  

Gain from inventory holdings

   (1,908,341 )   (8,634,649 )

Financial results

   (5,185,619 )   (6,981,621 )

Gain on sale of Negociable Notes

   (14,872,000 )   (68,754,172 )

Gain from sale of fixed assets

   (9,902,154 )   (7,697,444 )

Changes in operating assets and liabilities

    

Decrease in current investments

   5,800,768     2,596,816  

Decrease (Increase) in trade accounts receivable

   2,933,657     (1,752,734 )

(Increase) Decrease in other receivables

   (2,758,460 )   6,466,525  

Increase in inventories

   (12,669,532 )   (12,762,257 )

Decrease in social security payable & taxes payable and advances to customers

   (25,655,429 )   (2,911,877 )

Decrease in trade accounts payable

   (7,783,438 )   (2,536,152 )

Dividends collected

   988,307     1,011,469  

(Decrease) increase in other debts

   (1,604,227 )   1,670,362  
            

Cash flows applied to operating activities

   (22,504,927 )   (7,624,567 )
            

Investment activities

    

Decrease in non-current investments

   —       93,528,147  

Increase in interest in related companies

   (2,223,325 )   (6,349,709 )

Acquisition and upgrading of fixed assets

   (48,577,205 )   (8,650,536 )

Collections of receivables from sale of fixed assets

   5,736,964     1,127,138  

Sale of fixed assets

   9,589,200     8,554,120  
            

Cash flows (applied to) provided by investment activities

   (35,474,366 )   88,209,160  
            

Financing activities

    

Exercise of Warrants

   8,649,027     10,605,734  

Dividends paid

   (10,000,000 )   (3,000,000 )

Subscription of incentive plan

   —       240,000  

Increase in financial loans

   33,455,667     44,356,365  

Decrease in financial loans

   (14,712,326 )   (33,546,714 )

(Decrease) in others liabilities

   (16,514,000 )   —    
            

Cash flows provided by financing activities

   878,368     18,655,385  
            

Net (decrease) increase in cash and cash equivalents

   (57,100,925 )   99,239,978  
            

Items not involving changes in cash and cash equivalents

    

Transfer of inventory to fixed assets

   498,234     646,712  

Increase in interest in related companies trough a decrease of non-current investment

   15,608,956     —    

Increase in other receivables by sale of fixed assets

   8,572,080     8,077,546  

Repayment of financial loans through issue of stock by exercise of conversion right

   13,427,766     8,751,779  

Increase in fixed assets due to an increase in other debts

   7,160,617     —    

Decrease in other debts through a decrease in fixed assets

   2,055,200     —    
            

Complementary information

    

Interest paid

   6,534,054     5,107,038  

Income tax paid

   27,564,661     244,857  
            

 

Eduardo S. Elsztain

Chairman

 

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Table of Contents

Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

For the nine-month periods ended March 31, 2006 and 2005

Notes to the Financial Statements

NOTE 1: ACCOUNTING STANDARDS

Below 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, and have been prepared in accordance with the disclosure and valuation accounting standards contained in the Technical Resolutions issued by the F.A.C.P.C.E., as approved, with resolutions issued by the Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires (C.P.C.E.C.A.B.A.) and the C.N.V.

 

  b. New Accounting Standards

The C.P.C.E.C.A.B.A. enacted the following technical resolutions: No. 16: “Conceptual regime for professional accounting regulations”; No. 17: “Professional accounting regulations: development of matters of general application”, No. 18: “Professional accounting regulations: development of some matters of particular application” and No. 19 “ Modifications to technical resolutions No. 6, 8, 9, 11 and 14” and No. 20 “Derivative instruments and hedging transactions”, through Resolutions C 238/01, C 243/01, C 261/01, C 262/01 and C 187/02, respectively; establishing that such technical resolutions and the modifications incorporated, will be in force for periods initiated as from July 1, 2002 (other than Technical Resolution No. 20, which shall become effective for fiscal years beginning as from January 1, 2003).

The C.N.V., through Resolution No. 434/03 has adopted such technical resolutions with some exceptions and modifications, which have been in force for fiscal years initiated as from January 1, 2003.

The last changes basically result from the registration of income tax under the deferred tax method, as concerns agreements involving derivative instruments at their fair value and the valuation of receivables and payables with no stated rate at their discounted value.

As at February 19, 2003, the C.P.C.E.C.A.B.A., enacted Technical Resolution No. 21 “Proportional value- consolidation of financial statements- information to provide on related parties” through Resolution M.D. No. 5/2003.

The above mentioned Technical Resolution and the amendments introduced became effective for fiscal years ended as from April 1, 2003. Furthermore, The C.N.V. has adopted such Technical Resolution, through Resolution No. 459/04 introducing some modifications, which will be in force for fiscal years started as from April 1, 2004, consequently the Company has considered their application.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 1: (Continued)

On January 12, 2005, the C.P.C.E.C.A.B.A. approved Technical Resolution No. 22, “Professional accounting rules: agricultural business” under its Resolution M.D. No. 01/2005 effective for fiscal years starting as from July 1, 2005. The C.N.V. adopted such Technical Resolution through its Resolution No. 485 of December 29, 2005, effective for complete or interim periods of fiscal years commencing as from January 1, 2006. In accordance with the Company’s evaluation, the application of such resolution will not produce an impact on respect of the valuation of biological assets and it represents an improvement in the exposure. To such extent, production of meet is shown in these financial statements in Schedule F.

On August 10, 2005, the Professional Council in Economic Sciences of the City of Buenos Aires (C.P.C.E.C.A.B.A.) through its Resolution CD 93/2005 approved the consolidation of the professional accounting principles of its jurisdiction with those issued by the Argentine Federation of Professional Councils in Economic Sciences.

For the purpose of such Resolution, the issuance of reports from Certified Public Accountants on Financial Statements, Audit Standards, Statutory Audit Committee Standards and Professional Accounting Principles which are to be applied on a mandatory basis in the City of Buenos Aires, are contained in:

 

  a) Technical Resolutions 6, 7, 8, 9, 11, 14, 15, 16, 17, 18, 21 and 22 of the Argentine Federation of Professional Councils in Economic Sciences including the changes therein made by such entity up to April 1, 2005;

 

  b) Resolution No. 287/03 of the Governing Body of such Federation;

 

  c) Other interpretations of the accounting and audit standards 1, 2, 3 and 4 of such Federation with the changes therein made by such entity up to April 1, 2005

The above-mentioned standards will become effective for complete or interim periods of fiscal years commencing as from January 1, 2006 their anticipated application being admitted, and will substitute those standards contained in Resolutions CD No. 87/2003 and MD No. 1/2005 of the Professional Council of Economic Sciences of the City of Buenos Aires.

On December 29, 2005, through Resolutions 485 and 487, the National Securities Commission (CNV) adopted with certain changes the standards of the C.P.C.E.C.A.B.A. The standards adopted will become effective for the Company on July 1, 2006 (date of beginning of the next fiscal period). The principal change arising from the consolidation of the accounting standards is related to the treatment given to the adjustment for inflation in the calculation of the deferred tax, which can be taken as a temporary difference, according to the Company’s criteria. The adjustment for inflation is currently considered as a permanent difference in the calculation of the deferred tax. The Company has decided to maintain this accounting criteria.

Under the dispositions of Resolution 487 of the National Securities Commission (CNV) and according to the Company decision, informed to the CNV by note of March 31, 2006, of including the quantification in a note to the financial statements, we inform that the amount is $ 60,070,168 as of closing of these financial statements.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 1: (Continued)

The financial statements for the nine-month period ended as of March 31, 2006 and 2005 have not been audited. The Company management estimates that all necessary adjustments are included to reasonably present the income statements accounts of each year. The nine-month periods’ income statements accounts as of March 31, 2006 and 2005 do not necessarily reflect the proportion of the Company’s income statements accounts for the complete periods.

 

  c. Accounting for inflation

The Company’s financial statements have been prepared in accordance with Resolution M.D. 3/02 of the C.P.C.E.C.A.B.A., which has established the application of Technical Resolution No. 6, as amended by Technical Resolution No. 19 of the F.A.C.P.C.E., as from fiscal years or interim periods ended on or after March 31, 2002.

On March 25, 2003, the National Executive Power issued Decree No. 664 establishing that financial statements for fiscal years ended as from that date should be stated in nominal currency.

Therefore, in accordance with Resolution No. 441 issued by the C.N.V. on April 8, 2003, the Company discontinued restatement of its financial statements effective March 1, 2003. This criteria does not comply with Resolution M.D. 041/2003, enacted by the C.P.C.E.C.A.B.A., by means of which the restatement of financial statements as of October 1, 2003 is no longer compulsory. However, as of March 31, 2006, this deviation did not have a material effect on the Company’s financial statements.

As a consequence of the above mentioned, the initial balances at the Company’s financial statements are presented in constant currency as of February 28, 2003, having considered the accounting measurements restated by the changes in the purchasing power money until interruption of the adjustment and those arising in the period of stability, restated into currency of December 2001. Transactions subsequent to February 28, 2003 have been recorded at their historical values.

The coefficients prepared based on the domestic wholesale price index, published by the Instituto Nacional de Estadísticas y Censos, have been applied for purposes of the abovementioned restatement of comparative information.

 

  d. Comparative Information

For comparison purposes certain, reclassifications have been made as of March 31, 2005.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

 

  a. Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Estimates are used when accounting for the allowance for conversion of convertible bonds into shares of stock, doubtful accounts, depreciation, impairment of current and non-current assets, income taxes, deferred liabilities and provisions for contingencies, accrual for expenses, donations and assets’ recoverable value of the current and non-current assets. Actual results could differ from those estimates.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 2: (Continued)

 

  b. Local currency assets and liabilities

The local currency assets and liabilities are stated at period-end nominal currency.

 

  c. Foreign currency assets and liabilities

Assets and liabilities denominated in foreign currency have been valued at the amount of such currency as of the date of the financial statements, converted at the buying and selling exchange rate, respectively, prevailing at period-end.

 

  d. Temporary investments

The units of ownership of common investment funds, the mortgage certificates, nobacs and bonds were valued at quotation value at period-end net of sales expenses. Temporary investments do not exceed their recoverable value at the date of the financial statements.

 

  e. Trade accounts receivable and payable

Trade accounts receivable and payable have 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, provided they are significant.

 

  f. Credits and loans

Credits and loans have been valued in accordance with the sum of money delivered and received, respectively, net of transaction costs, plus financial results accrued on the basis of the rate estimated at such time as of period-end.

 

  g. Derivates financial instruments

Futures relate to cereal commitments deliverable at a previously agreed price (see note 4), to dollars commitments with Banco Río and to metals traded in Chicago market.

Premiums collected or paid correspond to options bought or written or bougt and are included in Other receivables.

The assets or liabilities originated in derivatives instruments have been valued at their market value at period-end (see Note 4).

Differences generated by the application of the above mentioned valuation criteria to assets and liabilities from derivative instruments corresponding to crops, dollars and metals have been recognized under net income of the period under Cost of sales and under Financial Results in the Income Statement, respectively.

 

  h. Other receivables and payables

Other receivables and payables have been valued on the basis of the agreed values plus interest accrued as of the date of these financial statements.

Other receivables and payables in foreign currency have been valued at their amount in such currency at the period-end closing date, converted to the buyer and seller exchange rate, respectively, prevailing at the period-end closing date.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 2: (Continued)

 

  i. Balances with related parties

Receivables and payables with related parties have been valued in accordance with the conditions agreed between the parties involved.

 

  j. Inventories

 

  1. Livestock for raising and grazing cattle have been stated at their market value at the end of the period, net of estimated selling expenses. The livestock for dairy production and other purposes not related to direct sale over the next 12 months were valued at replacement cost.

Holding gain on cattle was calculated as the price difference of the heifer kilogram between stocks at beginning and closing of period.

Production of cattle is shown in Schedule F, as mentioned in Note 1.b).

Considering the seasonal nature of agricultural activities, there are no results shown for production of grains to the date of these financial statements.

 

  2. Crops: at their quoted market value at the end of the period, less estimated sale expenses.

The cost of cereals includes the holding gain of grains.

Production of cereal is shown en Schedule F, as mentioned in Note 1.b.)

 

  3. Sown lands: Sown lands are valued at the replacement cost of the supplies used, plus expenses accrued as of the date of these financial statements.

 

  4. The remaining inventories were valued at replacement value.

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

 

  k. Long term investments in other companies

1. Investments in subsidiaries and affiliates

The investments in subsidiaries and affiliates in which the Company has significant influence have been accounted for under the equity method, as required by Technical Resolution No. 21 of the F.A.C.P.C.E. approved by C.N.V.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 2: (Continued)

Interests in subsidiaries and affiliates at March 31, 2006 are as follows:

 

Subsidiaries and affiliates

   % Equity interest

Inversiones Ganaderas S.A.

   99.99

Agropecuaria Cervera S.A.

   90.00

Futuros y Opciones.Com S.A.

   70.00

Cactus Argentina S.A.

   50.00

Agro Uranga S.A.

   35.72

IRSA Inversiones y Representaciones Sociedad Anónima

   22.65

Consolidated financial statements with Inversiones Ganaderas S.A., Futuros y Opciones.Com, Agropecuaria Cervera S.A. and Cactus Argentina S.A. in proportional consolidation of 50% at March 31, 2006 and 2005 are presented as complementary information.

2. Goodwill

The goodwill relating to the purchase of the subsidiary Futuros y Opciones.Com S.A. has been valued at its restated cost as of February 28, 2003, calculated as the difference between the price paid for such investment and its equity value calculated at the time of purchase, which was also restated as of that date (Note. 1.c.).

Depreciation was calculated in accordance with the estimated useful life, which was 5 years and has been classified under Gain from controlled and related companies in the statement of income. As of March 31, 2006 the above mentioned goodwill is fully amortized.

The negative goodwill corresponding to the investment in Inversiones y Representaciones S.A. had been valued at cost restated as of February 28, 2003, and calculated as a difference between the market value of such investment and its equity value at the time of changing the March 2002-valuation method, and in each one of the purchases restated, if any, at that same date (Note 1.c).

Depreciation is calculated in accordance with the estimated useful life, which is 20 years and has been classified under Gain from controlled companies and related companies in the statement of income.

Current valuations and economic conditions tend to make less risky any permanent investment opportunity and also help increasing the possibility to obtain significant long-term profits through IRSA shares.

The goodwill of the business (positive) for the purchase of the subsidiary Agropecuaria Cervera S.A. (ACER) has been valued at cost value, which was calculated as a difference between the value paid for such investment and the estimated current value of the assets added. The Company is currently analyzing the current value assigned to the assets acquired in line with the guidelines of Technical Resolution No. 21.

The amortization of the goodwill of ACER will be calculated in accordance with the duration of the project (Note 12), which was established in 35 year´s term with an option of 29 additional years. The goodwill of the project will be amortized as from the start.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 2: (Continued)

3. Other Investments

 

  - Investments in debt securities

IRSA’s Convertible Bonds were valued taking into account the face value at period-end in dollars, at the sellers’ exchange rate plus interest accrued as of the date of these financial statements.

BrasilAgro – Companhia Brasileira de Propiedades Agrícolas (undergoing incorporation process)

The investment in BrasilAgro has been valued at incurred cost as it is currently under capitalization stage.

 

  - Other investments

The remaining investments correspond to non-listed securities and were valued at their restated cost as of February 28, 2003 (Note 1.c.).

 

  l. Fixed assets

 

  - Purchase value

Valued at cost restated applying the coefficients mentioned in Note 1.c., based on the corresponding dates of origin.

 

  - Depreciation

Calculated by the straight-line method based on the estimated useful lives of the assets as from the period of addition.

 

  - The carrying value

The carrying value of fixed assets does not exceed their recoverable value at the end of the period.

 

  m. Shareholders’ equity

Initial balances have been restated in accordance with the criteria set forth in Note 1.c. Movements for the period are recorded at their historical values.

 

  n. Paid-in capital – Related Companies Law No. 19,550 Section 33

Increases or decreases of the equity value of investments in IRSA Inversiones y Representaciones S.A. and Futuros y Operaciones.Com S.A. 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 Technical Resolution 17 of the F.A.C.P.C.E. and Resolution CD 243/01 of the C.P.C.E.C.A.B.A.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 2: (Continued)

 

  o. Results for the period

Charges for assets consumed are calculated considering the values of the assets.

Holding gain and loans of livestock are disclosed in one line in the Income Statement and in Schedule F and is calculated as explained in note 2.j.1.

Cost of sale is calculated by inventory difference and cattle and corns production is disclosed in Schedule F (see notes 2.j.1 and 2.j.2)

The remaining results for the period are disclosed in the paid cost.

The income statement shows the financial gains and losses, discriminating those generated by assets and those generated by liabilities.

 

  p. Income Tax

The Company has recognized the income tax on the basis of the deferred tax liability 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 livestock 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%).

Assets and liabilities generated by the application of the deferred tax method have been valued at face value.

 

  q. Tax on minimum presumed income

The Company determines the tax on minimum presumed income 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 will be the higher of these two taxes. However, if the tax on minimum presumed income exceeds the income tax in any period, such excess may be computed as payment on account of the income tax that may be payable in any of the following ten fiscal years.

 

  r. Revenue recognition

Revenue is recognized on sales of products when the customer receives title to the goods, generally upon delivery.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 3: COMMON AND TREASURY STOCK

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

 

    

Authorized

Pesos

  

Subscribed

Pesos

  

Paid in

Pesos

Common and treasury stock at June 30, 2003

   124,098,095    124,098,095    124,098,095

Incentive Plan (Note 12) - Fiscal Year 2004

   332,437    332,437    332,437

Conversion of bonds in common stock (Note 13) - Fiscal Year 2004

   13,136,577    13,136,577    13,136,577

Exercise of Warrants (Note 13) - Fiscal Year 2004

   12,965,710    12,965,710    12,965,710

Incentive Plan (Note 12) - Fiscal Year 2005

   240,000    240,000    240,000

Conversion of bonds in common stock (Note 13) – Fiscal Year 2005

   5,918,871    5,918,871    5,918,871

Exercise of Warrants (Note13) - Fiscal Year 2005

   6,092,889    6,092,889    6,092,889

Conversion of bonds in common stock (Note 13) - Fiscal Year 2006-1st , 2nd and 3rd quarter

   8,798,601    8,798,601    8,798,601

Exercise of Warrants (Note13) -Fiscal Year 2005-2006 1st, 2nd and 3rd quarter

   4,616,416    4,616,416    4,616,416
              

Common and treasury stock at 2005

   176,199,596    176,199,596    176,199,596
              

As of March 31, 2006, the capital authorized to be publicly offered is formed of 176,199,596 common, book-entry shares of Ps.1 par value each and entitled to one vote per share, all of which were outstanding.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 4: DERIVATIVE FINANCIAL INSTRUMENTS

At March 31, 2006 the Company had arranged futures and options on the Futures Market as follows:

 

Cereal

   Tons    Margins
Ps.
    Premium
paid or
(collected)
Ps.
    Premium at
fair value
Ps.
   

Gain (loss) for
valuation at
fair value

Ps.

 

Futures

           

Purchase

           

Corn

   14,700    34,070     —       —         298,518  

Sell

           

Corn

   2,924    25,553     —       —         (24,776 )

Soybean

   6,600    200,772     —       —         12,016  

Wheat

   1,700    36,200     —       —         2,434  

U$S

            (a) 5,554  

Options

           

Purchase Call

           

Corn

   6,350    —       106,470     65,590       (40,880 )

Soybean

   2,040    —       9,240     6,271       (2,969 )

Wheat

   6,800    —       153,621     98,809       (54,812 )

Sell Call

           

Corn

   11,430    —       (97,724 )   (130,609 )     (32,885 )

Soybean

   16,120    26,316     (393,361 )   (188,243 )     205,118  

Wheat

   6,800    —       (86,697 )   (49,405 )     37,292  

Purchase Put

           

Corn

   17,780    —       102,287     51,711       (50,576 )

Soybean

   25,980    (2,807 )   818,024     635,145       (182,879 )

Sell Put

           

Corn

   6,350    —       (17,111 )   (3,802 )     13,309  

Wheat

   6,800    —       (94,302 )   (106,410 )     (12,108 )
                               

Total

   132,374    320,824     500,447     379,057       172,356  
                               

(a) Corresponds to 5,048,886 dollars. The gain generated as of March 31, 2006 is included in financial results of the income statement.

Crops:

As of March 31, 2006 and 2005 the Company charged to income Ps. 438,424 (gain) and Ps. 2,924,090 (loss), respectively, to reflect the closing of the transactions carried out during those periods. These results are disclosed under the cost of crops in a line of Schedule F.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 4: (Continued)

At March 31, 2005 the Company had arranged futures and options on the Forward Market as follows:

 

Cereal

   Tons    Margins
Ps.
    Premium paid
or (collected)
Ps.
   

Premium at fair
value

Ps.

   

Gain (loss) for
valuation at fair
value

Ps.

 

Futures

           

Sell

           

Corn

   31,750    —       —       —       19,778  

Soybean

   9,200    264,684     —       —       (47,263 )

Wheat

   3,800    76,528     —       —       (14,627 )

Purchase

           

Silver

   —      —       —       —       (291,781 )(a)

Options

           

Purchase Call

           

Corn

   31,750    —       270,424     151,035     (119,389 )

Soybean

   11,560    —       350,437     246,923     (103,514 )

Sell Call

           

Corn

   46,355    —       (327,385 )   (258,017 )   69,368  

Soybean

   28,380    15,205     (563,174 )   (470,887 )   92,287  

Wheat

   3,920    24,167     (73,339 )   (120,361 )   (47,022 )

Purchase Put

           

Corn

   14,605    —       273,301     300,810     27,509  

Soybean

   16,820    (115 )   783,399     811,001     27,602  
                             

Total

   198,140    380,469     713,663     660,504     (387,052 )
                             

(a) Corresponds to 705,000 troyan ounces. The loss generated as of March 31, 2005 is included in financial results of the Income statement.

NOTE 5: MANAGEMENT AGREEMENT

The Company signed a management agreement with Dolphin Fund Management S.A. (formerly 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 Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria 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.

On November 2003, Dolphin Fund Management S.A. was divided into two companies: Consultores Asset Management S.A. and Dolphin Fund Management S.A. As from that moment the management contract is held by Consultores Asset Management S.A.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 5: (Continued)

The financial statements as of March 31, 2006 and 2005 include a charge in the Statement of Income of Ps. 2,600,512 and Ps. 6,905,699 and a provision of the same amounts as the mentioned dates respectively.

NOTE 6: INCOME TAX – DEFERRED TAX

The following tables show the evolution and composition of deferred tax Assets and Liabilities.

 

  - Deferred assets as of March 31, 2006:

 

     Cumulative
tax loss
carryforwards
    Other     TOTAL  

Initial Balance

   2,367,216     494,355     2,861,571  

Income Tax expense

   (364,410 )   (454,795 )   (819,205 )
                  

Closing Balance

   2,002,806     39,560     2,042,366  
                  

 

  - Deferred liabilities as of March 31, 2006:

 

     Fixed Assets     Inventories     Investments     Accruals     Others    TOTAL  

Initial Balance

   (22,615,009 )   (14,240,940 )   (2,730,064 )   (1,271,064 )   9,282    (40,847,795 )

Income Tax expense

   (4,575,451 )   (517,132 )   (5,419,220 )   (283,566 )   —      (10,795,368 )
                                   

Closing Balance

   (27,190,460 )   (14,758,072 )   (8,149,284 )   (1,554,630 )   9,282    (51,643,163 )
                                   

As of March 31, 2006, net liabilities at period-end as per the information included in the preceding tables amount to Ps. 49,600,797.

Below is a conciliation between the Income Tax expensed and that which would result from applying the prevailing tax rate on the Net Income for accounting purposes:

 

Description

   March 31,
2006
    March 31,
2005
 

Net Income before income tax

   41,758,555     95,168,215  

Tax rate

   35 %   35 %
            

Net income at tax rates:

   14,615,494     33,308,875  

Permanent differences at tax rate:

    

Restatement into constant currency

   1,583,160     4,066,732  

Penalties

   1,050     159  

Donations

   7,827     3,050  

Amortization FYO Goodwill

   —       83,465  

Gain from purchase and sale of stock

   —       2,398,665  

Loss from controlled and related companies

   (3,626,218 )   (7,410,276 )

Personal asset tax

   467,200     1,157,197  

Conversion of notes in common stock

   5,419,175     1,509,585  

Miscellaneous permanent differences

   (86,160 )   (2,100,532 )
            

Income tax expense

   18,381,528     33,016,920  
            

During this period the Income Tax rate was 35%.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

Cumulative tax loss carryforwards recorded by the Company pending utilization at period-end amount to approximately Ps. 2,002,806 and may be offset against taxable income of future periods, as follows:

NOTA 6: (Continued)

 

Origination year

   Amount    Expiration Year

2003

   1,839,952    2008

2005

   162,854    2010

 

  - Deferred assets as of March 31, 2005:

 

     Cumulative
tax loss
carryforwards
    Provisions    Others    TOTAL

Initial Balance

   2,224,649     20    1,191    2,225,860

Income Tax expense

   (20,840 )   —      80,289    59,449
                    

Closing Balance

   2,203,809     20    81,480    2,285,309
                    

 

  - Deferred liabilities as of March 31, 2005:

 

     Fixed Assets     Inventories     Investments     Accruals     TOTAL  

Initial Balance

   (13,522,161 )   (11,545,458 )   (1,220,989 )   (1,069,822 )   (27,358,430 )

Income Tax expense

   (4,308,268 )   (2,535,921 )   (1,509,115 )   (535,336 )   (8,888,640 )
                              

Closing Balance

   (17,830,429 )   (14,081,379 )   (2,730,104 )   (1,605,158 )   (36,247,070 )
                              

As of March 31, 2005, the net liability related to the schedule detailed is an amount of Ps. 33,961,761.

 

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Table of Contents

Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

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

 

a. Balances at March 31, 2006 and 2005 and June 30, 2005 with Subsidiaries, related companies and related parties:

 

     March 31,
2006
  

June 30,

2005

   March 31,
2005

IRSA Inversiones y Representaciones S.A.(3)

        

Current Investments

        

-Interest of Convertible Bonds 2007-IRSA (U$S)

   2,604,146    1,078,320    3,338,226

Non-Current Investments

        

-Convertible Bonds 2007-IRSA (U$S)

   86,166,588    105,487,796    106,583,963

Current other receivables

   1,331    —      —  

Non-current other receivables

   176,656    —      —  

Current Trade accounts payable

   —      43,822    159,268

Inversiones Ganaderas S.A.(1)

        

Current Trade accounts receivable

   —      30,814    10,348

Non-current other receivables

   1,257,743    —      —  

Current trade accounts payable

   147,642    —      —  

Current Other debts

   —      1,605,463    1,630,854

Non-Current Other debts

   —      14,911    203,432

Futuros y opciones.Com S.A.(1)

        

Current Trade accounts receivable

   757,729    897,389    693,540

Current Other receivables

   23,603    23,603    23,603

Current Other debts

   —      —      102,896

Cactus Argentina S.A.(3)

        

Current Trade accounts receivable

   38,921    785,849    45,164

Current Other receivables

   370,781    332,209    1,363,965

Non-current other receivables

   19,628    —      —  

Current Trade accounts payable

   415,222    —      413,804

Agro-Uranga S.A.(3)

        

Current Other receivables

   160,609    39,993    694,981

Fundación IRSA (4)

        

Current Trade accounts payable

   1,900,000    1,900,000    1,177,988

Inversora Bolívar (4)

        

Current Trade accounts payable

   105,180    5,445    6,777

Alto Palermo S.A.(4)

        

Non-current other receivables

   686,996    —      —  

Current Trade accounts payable

   60,409    193,053    74,664

Alto City com (4)

        

Current Trade Payable

   900    —      298

Agropecuaria Cervera S.A (4)

        

Current other receivables

   14,398    —      —  

Non- current other receivables

   364,917    —      —  

Consultores Asset Management S.A.(4)

        

Management Fees

   2,600,513    8,239,263    6,905,699

Credits to employees (4)

        

Current credits to Senior management, directors and staff of the company

   71,942    29,397    35,114

Estudio Zang, Bergel & Viñes (4)

        

Current Trade accounts payable

   163,592    21,092    75,154

Directors (4)

        

Current other receivables

   10,940    —      —  

Current trade accounts payable

   —      —      2,159

Current Loans

        

Convertible Bonds 2007 Interest payable (Schedule G)

   —      —      —  

Directors

   3.130    992    3,049

Non Current Loans

        

Convertible Bonds 2007 (Schedule G)

        

Directors

   103,555    98,100    98,011

Other current debts

   32,400    3,393    —  

 

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Table of Contents

Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 7: (Continued)

 

     March 31,
2006
   June 30,
2005
   March 31,
2005

Shareholders (2)

        

Current Loans

        

Convertible Bonds 2007 Interest payable (Schedule G)

        

Shareholders

   1,715,922    706,891    2,173,764

Non-Current Loans

        

Convertible Bonds 2007 (Schedule G)

        

Shareholders

   56,776,844    69,934,463    69,870,974

(1) Controlled company
(2) Shareholder
(3) Related company
(4) Related party

 

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Table of Contents

Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 7: (Continued)

 

b. Gain and losses provided by Subsidiaries, related companies and related parties corresponding to the periods ended at March 31, 2006 and 2005.

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

 

     Year    Sales and Fees for
shared services
    Interest
paid
    Salaries     Fees     Livestock
expenses
    Interest income    Administrative
services
   Others  

Shareholders

   2006    —       (3,375,552 )   —       —       —       —      —      —    
   2005    —       (4,424,774 )   —       —       —       —      —      —    

Agro-Uranga S.A.

   2006    —       —       —       —       —       —      —      28,001  
   2005    —       —       —       —       —       —      —      106,780  

Alto Palermo S.A.

   2006    (464,856 )   —       —       —       —       —      —      —    
   2005    (89,961 )   —       —       —       —       —      —      —    

Consultores Asset Management S.A.

   2006    —       —       —       —       —       —      —      —    
   2005    —       —       —       —       —       —      —      —    

Cactus Argentina S.A.

   2006    —       —       —       —       (2,048,973 )   22,134    100,640    6,659  
   2005    —       —       —       —       (3,545,306 )   17,101    108,720    28,573  

Directors

   2006    —       (6,157 )   (2,458,174 )   (185,724 )   —       —      —      —    
   2005    —       (6,207 )   (193,269 )   (90,169 )   —       13,772    —      —    

Estudio Zang, Bergel & Viñes

   2006    —       —       —       (201,212 )   —       —      —      —    
   2005    —       —       —       (95,104 )   —       —      —      —    

Fundación IRSA

   2006    —       —       —       —       —       —      —      —    
   2005    —       —       —       —       —       —      —      —    

Futuros y opciones.Com S.A.

   2006    —       —       —       —       —       —      123,300    (75,048 )
   2005    —       —       —       —       —       —      28,800    (608 )

Inversiones Ganaderas S.A.

   2006    —       (121,134 )   —       —       —       28,549    52,497    (119,194 )
   2005    —       (92,935 )   —       —       —       —      60,136    132,569  

Inversora Bolívar S.A.

   2006    —       —       —       —       —       —      —      (79,569 )
   2005    —       —       —       —       —       —      —      (125,329 )

IRSA Inversiones y Representaciones S.A.

   2006    (18,640 )   —       —       —       —       6,239,486    —      —    
   2005    (104,113 )   —       —       —       —       7,994,072    —      —    

Credits to employees

   2006    —       —       —       —       —       3,038    —      —    
   2005    —       —       —       —       —       14,793    —      —    

Senior Management

   2006    —       —       (998,015 )   —       —       —      —      —    
   2005    —       —       (864,019 )   —       —       —      —      —    
                                                 

Total 2006

      (483,496 )   (3,502,843 )   (3,456,189 )   (386,936 )   (2,048,973 )   6,293,207    276,437    (239,151 )
                                                 

Total 2005

      (194,074 )   (4,523,916 )   (1,057,288 )   (185,273 )   (3,545,306 )   8,039,738    197,656    141,985  
                                                 

 

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Table of Contents

Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 8: Details of balance sheet and income statement accounts

 

  a. Cash and banks

 

     March 31,    June 30,    March 31,
     2006    2005    2005
     Pesos    Pesos    Pesos

Cash

   50,806    25,360    34,138

Foreign currency (Schedule G)

   88,912    74,354    75,139

Local currency checking account

   439,391    1,728,632    318,678

Foreign currency checking account (Schedule G)

   8,182,807    3,854,669    6,282,300

Local currency saving account

   28,197    17,505    15,115

Foreign currency saving account (Schedule G)

   6,357    8,026,165    11,252,686

Checks to be deposited

   304,826    80,587    184,305
              
   9,101,296    13,807,272    18,162,361
              

 

  b. Investments and Goodwill

 

     March 31,     June 30,     March 31,
     2006     2005     2005
     Pesos     Pesos     Pesos

Investment

      

Investment (Schedule C and G)

   7,152,314     59,425,172     99,805,081
                
   7,152,314     59,425,172     99,805,081
                

Investment

      

Investment on controlled and related companies (Schedule C)

   341,441,146     306,089,140     318,339,764
                
   341,441,146     306,089,140     318,339,764
                

Other investments

      

Other investments (Schedule C and G)

   86,946,920     105,508,513     106,604,680
                
   86,946,920     105,508,513     106,604,680
                

Goodwill

      

Goodwill (Schedule C)

   (18,694,399 )   (30,430,822 )   43,320,138
                
   (18,694,399 )   (30,430,822 )   43,320,138
                

 

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Table of Contents

Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 8: (Continued)

 

  c. Trade accounts receivable

 

     March 31,     June 30,     March 31,  
     2006     2005     2005  
     Pesos     Pesos     Pesos  

Current

      

Accounts receivable in local currency

   5,870,446     7,099,969     3,937,855  

Less:

      

Allowance for doubtful accounts (Schedule E)

   (356,214 )   (356,214 )   (345,709 )

Accounts receivable in foreign currency (Schedule G)

   161,861     948,593     989,156  

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

      

Inversiones Ganaderas S.A.

   —       30,814     10,348  

Futuros y Opciones.Com S.A.

   757,729     897,389     693,540  

Cactus Argentina S.A.

   38,921     785,849     45,164  
                  
   6,472,743     9,406,400     5,330,354  
                  

 

  d. Other receivables

 

     March 31,    June 30,    March 31,
     2006    2005    2005
     Pesos    Pesos    Pesos

Current

        

Prepaid leases

   125,465    6,512,492    165,910

Income tax credit and advances (net of accrual) (1)

   7,425,960    —      —  

Guarantee deposits and premiums (Schedule G)

   1,557,857    2,675,032    1,951,565

Secured by mortgage (Schedule G)

   3,141,226    8,217,166    8,164,858

Prepaid expenses

   649,087    2,045,319    973,269

Tax prepayments (net of accruals)

   2,951,166    1,063,379    2,481,699

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

        

Cactus Argentina S.A. (Schedule G)

   370,781    332,209    1,363,965

Futuros y Opciones.Com S.A.

   23,603    23,603    23,603

Agropecuaria Cervera S.A.

   14,398    —      —  

IRSA Inversiones y Representaciones S.A

   1,331    —      —  

Agro-Uranga S.A.

   160,609    39,993    694,981

Credits to employees

   71,942    29,397    35,114

Directors

   10,940    —      —  

Others (Schedule G)

   297,991    415,208    215,325
              
   16,802,356    21,353,798    16,070,289
              

Non-current

        

Secured by mortgage (Schedule G)

   8,254,430    —      —  

Tax prepayments

   5,672,316    6,328,177    5,080,327

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

        

Inversiones Ganaderas S.A.

   1,257,743    —      —  

Cactus Argentina S.A.

   19,628    —      —  

Agropecuaria Cervera S.A

   364,917    —      —  

Alto Palermo S.A. (Schedule G)

   686,996    —      —  

IRSA Inversiones y representaciones S.A

   176,656    —      —  

Prepaid leases

   —      75,915    75,916

Others

   98,142    —      —  
              
   16,530,828    6,404,092    5,156,243
              

(1) Accrual for income tax amounts to Ps 6,605,519 as of March 31, 2006. Comparative figures are presented in Taxes Payable.

 

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Table of Contents

Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 8: (Continued)

 

  e. Inventories

 

     March 31,    June 30,    March 31,
     2006    2005    2005
     Pesos    Pesos    Pesos

Current

        

Livestock

   12,445,288    13,099,574    12,745,725

Crops

   14,800,090    24,930,778    12,077,749

Unharvested crops

   18,025,519    826,336    17,777,895

Seeds and fodder

   294,515    319,169    500,487

Materials and others

   3,074,943    4,024,658    2,579,838

Advances to suppliers

   623,214    446,701    576,940
              
   49,263,569    43,647,216    46,258,634
              

Non-Current

        

Livestock

   57,206,925    48,743,639    49,804,357
              
   57,206,925    48,743,639    49,804,357
              

 

  f. Trade accounts payable

 

     March 31,     June 30,    March 31,
     2006     2005    2005
     Pesos     Pesos    Pesos

Current

       

Suppliers in local currency

   3,972,974     3,292,862    3,905,339

Suppliers in foreign currency (Schedule G and Note 11) (1)

   9,777,918     6,580,931    2,302,374

Interest to be accrued (Schedule G) (2)

   (272,250 )   —      —  

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

       

Inversora Bolívar S.A.

   105,180     5,445    6,777

Alto Palermo S.A.

   60,409     193,053    74,664

Inversiones Ganaderas S.A

   147,642     —      —  

Alto City.Com S.A

   900     —      298

IRSA Inversiones y Representaciones S.A.

   —       43,822    159,268

Cactus Argentina S.A.

   415,222     —      413,804

Estudio Zang, Bergel & Viñes

   163,592     21,092    75,154

Fundación IRSA

   1,900,000     1,900,000    1,177,988

Directors

   —       —      2,159

Accrual for other expenses (Schedule G)

   4,363,952     4,906,044    2,273,748

Accrual for cereal expenses

   652,780     50,461    328,644
               
   21,288,319     16,993,710    10,720,217
               

Non-Current

       

Accrual for other expenses (Schedule G)

   981,422     —      —  
               
   981,422     —      —  
               

(1) Includes as of March 31, 2006 U$S 2,500,000 for the acquisition of farm “San Pedro” corresponding to suppliers in foreign currency secured by mortgage. See Note 11.
(2) Corresponds to the liability mentioned in (1).

 

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Table of Contents

Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 8: (Continued)

 

  g. Loans

 

     March 31,     June 30,     March 31,  
     2006     2005     2005  
     Pesos     Pesos     Pesos  

Current

      

Local financial loans (Note 16)

   34,014,572     10,315,556     22,554.698  

Convertible Bonds 2007 Interest payable (Schedule G)

   1,602,388     476,343     1,468,115  

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

      

Shareholders

   1,715,992     706,891     2,173,764  

Directors

   3,130     992     3,049  
                  
   37,336,082     11,499,782     26,199,626  
                  

Non-Current

      

Convertible Bonds 2007 (Schedule G)

   53,022,519     45,815,657     47,189,423  

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

      

Shareholders

   56,776,844     69,934,463     69,870.974  

Directors

   103,555     98,100     98,011  

Convertible Bonds 2007 expenses

   (701,821 )   (1,154,667 )   (1,277,019 )
                  
   109,201,097     114,693,553     115,881,389  
                  

 

  h. Salaries and social security payable

 

          June 30,    March 31,
     March 31,    2005    2005
     2006    Pesos    Pesos

Current

        

Accrual for Vacation and statutory annual bonus

   912,933    1,288,720    760,536

Social security taxes payable

   115,335    185,771    111,169

Salaries payable

   13,205    79,095    27,545

Health care payable

   11,777    5,129    10,093

Others

   5,485    5,932    3,808
              
   1,058,735    1,564,647    913,151
              

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 8: (Continued)

 

  i. Taxes payable

 

     March 31,    June 30,     March 31,  
     2006    2005     2005  
     Pesos    Pesos     Pesos  

Current

       

Accrual for income tax

   —      24,772,007     24,289,677  

Advances to Income tax

   —      (5,148,500 )   (2,651,051 )

Property tax payable

   213,307    80,510     80,182  

Taxes withheld for income tax

   23,485    95,772     30,590  

Gross sale tax payable

   74,957    204,677     71,128  

Taxes withheld-Value Added Tax

   12,710    36,248     10,032  

Others (1)

   1,335,539    682     1,614,133  
                 
   1,659,998    20,041,396     23,444,691  
                 

Non-Current

       

Deferred tax

   49,600,797    37,987,388     33,961,761  
                 
   49,600,797    37,987,388     33,961,761  
                 

(1) Includes shareholders personal assets tax.

 

  j. Other debts

 

     March 31,    June 30,    March 31,
     2006    2005    2005
     Pesos    Pesos    Pesos

Current

        

Security transactions payable (Schedule G)

   —      4,180,593    —  

Advances from customers in foreign currency (Schedule G)

   —      2,055,200    7,889,200

Management fees accrual (Note 5)

   2,600,512    8,239,263    6,905,699

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

        

Inversiones Ganaderas S.A.

   —      1,605,463    1,630,854

Directors

   32,400    3,393    —  

Futuros y Opciones.Com S.A (Note 2.k)

   —      —      102,896

Others

   20,300    20,299    117,500
              
   2,653,212    16,104,211    16,646,149
              

Non-current

        

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

        

Inversiones Ganaderas S.A.

   —      14,911    203,432
              
   —      14,911    203,432
              

 

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Table of Contents

Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 9:

 

  a) Assets based on their estimated collection term

 

      Current and non-current Investment    Trade accounts receivable    Other receivables

Based on their estimated

collection term

   March 31,
2006
  

June 30,

2005

   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

4th quarter 2005/2004 financial period

   —      —      3,338,226    —      —      5,330,354    —      —      3,614,587

1st quarter 2006/2005 financial period

   —      —      —      —      9,406,400    —      —      9,516,252    8,164,858

2nd quarter 2006/2005 financial period

   —      1,078,320    —      —      —      —      —      781,889    442,270

3rd quarter 2006/2005 financial period

   —      —      —      —      —      —      —      4,108,583    —  

4th quarter 2006/2005 financial period

   2,604,146    —      —      6,472,743    —      —      5,482,770    —      —  

1st quarter 2007/2006 financial period

   —      —      —      —      —      —      2,713,837    —      —  

2nd quarter 2007/2006 financial period

   —      —      —      —      —      —      7,522,095    —      —  

3rd quarter 2007/2006 financial period

   —      —      —      —      —      —      427,389    —      —  

4th quarter 2007/2006 financial period

   —      —      —      —      —      —      2,944    —      —  

1st quarter 2008/2007 financial period

   —      —      —      —         —      2,173,398    —      —  

2nd quarter 2008/2007 financial period

   86,166,588    105,487,796    106,583,963    —      —      —      2,944    —      —  

3rd quarter 2008/2007 financial period

   —      —      —      —      —      —      430,333    —      —  

4th quarter 2008/2007 financial period

   —      —      —      —      —      —      2,944    —      —  

1st quarter 2009/2008 financial period

   —      —      —      —      —      —      2,173,399    —      —  

2nd quarter 2009/2008 financial period

   —      —      —      —      —      —      1,964    —      —  

1st quarter 2010/2009 financial period

   —      —      —      —      —      —      1,743,066    —      —  

1st quarter 2011/2010 financial period

   —      —      —      —      —      —      1,743,066    —      —  

Overdue

   —      —      —      —      —      —      —      —      —  

With no stated current term

   4,548,168    58,346,852    96,466,855    —      —      —      656,265    6,947,074    3,848,574

With no stated non-current term

   780,332    20,717    20,717    —      —      —      8,256,770    6,404,092    5,156,243
                                            

Total

   94,099,234    164,933,685    206,409,761    6,472,743    9,406,400    5,330,354    33,333,184    27,757,890    21,226,532
                                            

 

  b) Assets classified according to their interest rate

 

      Current and non-current Investment    Trade accounts receivable    Other receivables

Interest rate accrued

   March 31,
2006
  

June 30,

2005

   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

At fixed interest rate

   86,166,588    105,487,796    106,583,963    —      —      —      11,213,240    8,197,487    8,281,716

At variable interest rate

   4,548,168    58,346,852    94,021,531    —      —      —      2,449,378    2,314,696    910,592

Non-interest bearing

   3,384,478    1,099,037    5,804,267    6,472,743    9,406,400    5,330,354    19,670,566    17,245,707    12,034,224
                                            

Total

   94,099,234    164,933,685    206,409,761    6,472,743    9,406,400    5,330,354    33,333,184    27,757,890    21,226,532
                                            

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 9: (Continued)

Liabilities based on their estimated payment term :

 

      Trade accounts payable    Loans    Salaries and social security payable

Base don their estimated
payment term

   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
  

June 30,

2005

   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

4th quarter 2005/2004

   —      —      10,720,217    —      —      16,086,293    —      —      428,826

1st quarter 2006/2005

   —      12,685,710    —      —      10,315,556    10,113,333    —      1,564,647    484,325

2nd quarter 2006/2005

   —      4,308,000    —      —      1,184,226    —      —      —      —  

3rd quarter 2006/2005

   —      —      —      —      —      —      —      —      —  

4th quarter 2006/2005

   14,010,819    —      —      3,321,510    —      —      295,633    —      —  

1st quarter 2007/2006

   7,277,500    —      —      13,398,902    —      —      588,579    —      —  

2nd quarter 2007/2006

   —      —      —      —      —      —      —      —      —  

3rd quarter 2007/2006

   —      —      —      —      —      —      174,524    —      —  

4th quarter 2007/2006

   —      —      —      —      —      —      —      —      —  

2nd quarter 2008/2007

   —      —      —      109,201,097    114,693,553    115,881,389    —      —      —  

Overdue

   —      —      —      —      —      —      —      —      —  

With no stated current term

   —      —      —      20,615,670    —      —      —      —      —  

With no stated non-current term

   981,422    —      —      —      —      —      —      —      —  
                                            

Total

   22,269,741    16,993,710    10,720,217    146,537,179    126,193,335    142,081,015    1,058,735    1,564,647    913,151
                                            

 

      Taxes payable    Other debts    Provisions

Base don their estimated
payment term

   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
  

June 30,

2005

   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

4th quarter 2005/2004

   —      —      1,806,065    —      —      7,023,199    —      —      —  

1st quarter 2006/2005

   —      417,889    —      —      14,498,748    7,889,200    —      —      —  

2nd quarter 2006/2005

   —      19,623,507    21,638,626    —      1,605,463    1,630,854    —      —      —  

3rd quarter 2006/2005

   —      —      —      —      —      —      —      —      —  

4th quarter 2006/2005

   1,659,998    —      —      2,653,212    —      —      —      —      —  

1st quarter 2007/2006

   —      —      —      —      —      —      —      —      —  

2nd quarter 2007/2006

   —      —      —      —      14,911    203,432    —      —      —  

3rd quarter 2007/2006

   —      —      —      —      —      —      —      —      —  

4th quarter 2007/2006

   —      —      —      —      —      —      —      —      —  

2nd quarter 2008/2007

   —      —      —      —      —      —      —      —      —  

Overdue

   —      —      —      —      —      —      —      —      —  

With no stated current term

   —      —      —      —      —      102,896    —      —      —  

With no stated non-current term

   49,600,797    37,987,388    33,961,761    —      —      —      68,243    65,871    —  
                                            

Total

   51,260,795    58,028,784    57,406,452    2,653,212    16,119,122    16,849,581    68,243    65,871    —  
                                            

Liabilities classified according to their interest rate:

 

      Trade accounts payable    Loans    Salaries and social security payable

Interest rate
that they accrue

   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
  

June 30,

2005

   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

At fixed interest rate

   6,552,112    —      —      143,917,490    126,163,776    139,713,106    —      —      —  

At variable interest rate

      —      —      —      —      —      —      —      —  

Non-interest bearing

   15,717,629    16,993,710    10,720,217    2,619,689    29,559    2,367,909    1,058,735    1,564,647    913,151
                                            

Total

   22,269,741    16,993,710    10,720,217    146,537,179    126,193,335    142,081,015    1,058,735    1,564,647    913,151
                                            
      Taxes payable    Other debts    Provisions

Interest rate
that they accrue

   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005
   March 31,
2006
   June 30,
2005
   March 31,
2005

At fixed interest rate

   —      —      —      —      1,558,734    1,798,011    —      —      —  

At variable interest rate

   —      —      —      —      —      —      —      —      —  

Non-interest bearing

   51,260,795    58,028,784    57,406,452    2,653,212    14,560,388    15,051,570    68,243    65,871    —  
                                            

Total

   51,260,795    58,028,784    57,406,452    2,653,212    16,119,122    16,849,581    68,243    65,871    —  
                                            

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 10: RESTRICTIONS ON DISTRIBUTION OF PROFITS

In accordance with the Argentine Corporations Law, the Company’s by-laws and Resolution N° 368/2001 of the C.N.V., 5% of the net and realized profit for the period plus (less) prior year adjustments must be appropriated by resolution of shareholders to a legal reserve until such reserve equals 20% of the Company’s outstanding capital.

NOTE 11: PURCHASE AND SALE OF FARMS

 

  a) On July 25, 2005 the Company signed the deed of sale of the farm “El Gualicho” with a surface area of 5,727 hectares, located in the Department of General Roca and Presidente Roque Saenz Peña, Province of Córdoba. The agreed sale price was U$S 5,727,083. The sale generated a gain of Ps. 9,872,997.

 

  b) On September 1, 2005 the Company signed the deed for the purchase of the farm “San Pedro” of 6,022 hectares located in the Department of Uruguay, Province of Entre Ríos. The purchase price was U$S 16,000,000. This agreement generated a debt of U$S 6,500,000 of which U$S 4,000,000 was cancelled on December 14, 2005. The remaining balance will be paid on September 1, 2006.

NOTE 12: INVESTMENTS IN COMPANIES

a) On December 27, 2005, the Company and its subsidiary Inversiones Ganaderas S.A. have acquired the capacity of shareholders of Agropecuaria Cervera S.A. (ACER), by subscribing an agreement to exchange goods.

The shareholders transferred the ACER shares in the following proportions: a) in favor of Cresud thirty six thousand (36,000) common shares, registered, non-endorsable, class A, of pesos one (Ps. 1) par value with right to five (5) votes each; and b) in favor of IGSA four thousand (4,000) common shares, registered, non-endorsable, class A, of pesos one (Ps. 1) par value with right to five (5) votes each.

We would mention that ACER has, among other goods and rights, the concession of starting into production of an integral development project including biologic, economic and social issues on several buildings located in the Department of Anta, Province of Salta. The company has been duly authorized to carry out an outstanding crop farming, cattle and forestry project.

As consideration for the exchange referred to above, the actions that follow were effected:

 

    Cresud transferred 3,580,886 Negotiable Obligations convertible into common shares, with 8% annual interest, maturing in year 2007, having options in a face value of one US dollar each, issued by IRSA Inversiones y Representaciones S.A.

 

    The Company paid the amount of pesos Nine hundred and sixty two thousand five hundred and twenty three (Ps. 962,523) with consideration in the contribution made to the company in ACER. As part of the price, the Company paid US dollar Seven hundred thousand (U$S 700,000), staying such contribution in guarantee for future contingencies during a two-year term.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 12 (continued):

b) During the current period, the Company has transferred funds to pay the expenses included in the Board´s decision related to the possibility of making an agricultural investment in Brazil through a specific legal means. To such purpose, a company named BrasilAgro - Companhia Brasileira de Propiedades Agrícolas is currently undergoing the incorporation process stages. The funds provided by the Company grant the right to participate in the capital of the specific legal means referred to above. Such investment is of Ps. 759,615 and is disclosed in Other investments (see note 19).

NOTA 13: STOCK OPTION PLAN

As resolved upon at the General Extraordinary Shareholders’ Meeting at second call held on November 19, 2001 and in accordance with the resolutions adopted by the Board of Directors at its meeting dated December 7, 2001, the shareholders approved a Stock Option Plan (the “Plan”) relating to the shares that would remain after the shareholders exercised their pre-emptive rights to acquire treasury stock (the “Shares”) during a 30-day period covering 4,614,643 shares.

The stock balance remaining after expiration of the preemptive and accretion periods is intended to be offered under the Incentive Plan approved at the above mentioned Shareholders’ Meeting, at Ps.1 (one peso) par value, plus interest accrued as from actual exercise at a six-months LIBOR rate per annum. In accordance with the terms approved at the referred Shareholders’ Meeting, from a legal standpoint the implementation of the Plan is made by means of the transfer of the Shares in trust. From this balance, two thirds of the options relating to the Shares under the Plan were allocated for distribution by the Company’s Board of Directors among certain executive officers.

The remaining third was set aside for allotment by the Company’s Board of Directors among any employees or executives at the time of allotment and 6 (six) months after the initial allotment, and up to 3 (three) months before the expiration of the exercise period.

In January 2002 an aggregate of 2,353 shares of Ps.1 par value each were issued under the preferred offering of treasury stock.

In April and June 2002, an aggregate of 480,000 shares of Ps.1 par value each were issued to executive officers of the Company under the preferred offering of treasury stock.

During the fiscal year ended on June 30, 2003, an aggregate of 3,559,853 shares of Ps.1 per value each were issued to directors and executive officers of the Company under the preferred offering of treasury stock.

During the fiscal year ended on June 30, 2004, an aggregate of 332,437 shares of Ps.1 per value each were issued to directors and executive officers of the Company under the preferred offering of treasury stock.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 13: (Continued)

During the fiscal year ended on June 30, 2005, an aggregate of 240,000 shares of Ps.1 per value each were issued to directors and executive officers of the Company under the preferred offering of treasury stock. As of that date, there was no pending exercise balance.

NOTE 14: ISSUANCE OF CONVERTIBLE BONDS

The Shareholders meeting held on March 8, 2002 approved:

 

  a) The issue of simple convertible bonds, non-convertible into shares of the Company, for an amount of up to U$S 50,000,000 (or its equivalent in other currencies) for a maximum term of 5 years, accruing interest at a fixed rate not to exceed 12%; and/or,

 

  b) The issuance of convertible bonds into company’s common stock, for a total amount of U$S 50,000,000 (or its equivalent in other currency) with a maturity date in a term of 5 years or more according to the management’s decision and a fix rate not exceeding 12% or floating rate with a reference rate such as LIBOR plus a spread not exceeding 10%.

 

  c) The subscription option, for the holders of convertible bonds, with a premium determined by the management, between 20 and 30% over the conversion price of the convertible bond, with a value that will remain constant in terms of US currency. The exercise of the above mentioned would occur quarterly, only for the holders of the convertible bonds who have exercised their conversion rights.

Authorization for the public offer and quotation of convertible bonds has been approved by Resolution No. 14,320 of the Argentine Securities and Exchange Commission dated October 1, 2002 and by the Buenos Aires Stock Exchange, authorizing the issue up to U$S 50,000,000 in securities composed by convertible bonds into common stock with an 8% annual interest rate due in the year 2007, granting the right at the moment of conversion to achieve 50,000,000 common stock subscription options. Likewise, the conversion price and the Warrants price established are as follows:

 

  a) The conversion price is U$S 0.5078 stocks (U$S 5.0775 ADS), while the Warrant price is U$S 0.6093 stocks (U$S 6.0930 ADS).

 

  b) For each of Cresud’s convertible bond the holder has the right to convert it to U$S 1.96928 stocks (U$S 0.1969 ADS) and has an option to purchase the same amount of stock at the price of the Warrant.

Convertible bonds and options will be due on November 14, 2007.

Convertible bonds were paid in cash and the proceeds will be destined to the subscription of IRSA’s Convertible Bonds and for the generation of working capital.

During the fiscal year ended on June 30, 2003, 196,084 convertible bonds were converted into 386,140 ordinary shares, which resulted in a Ps. 593,038 increase in the Company’s net shareholders’ equity.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 14: (Continued)

During the fiscal year ended on June 30, 2004, 6,670,763 convertible bonds were converted into 13,136,577 ordinary shares, which resulted in a Ps. 19,364,974 increase in the Company’s net shareholders’ equity. During the same period, 6,583,995 Warrants were exercised, resulting in the issuance of 12,965,710 ordinary shares for Ps. 23,068,638.

During the fiscal year ended on June 30, 2005, 3,005,609 convertible bonds were converted into 5,918,871 ordinary shares, which resulted in an increase of the Company’s net shareholders’ equity of Ps. 8,857,011. In the same period, 3,093,975 warrants were exercised, resulting in the issuance of 6,092,889 common shares for Ps. 10,919,379.

During the current period, 4,467,934 Convertible Bonds were converted into 8,798,601 ordinary shares, which resulted in a Ps. 13,427,766 increase in the Company’s net shareholders’ equity. During the same period, 2,344,218 warrants were exercised, resulting in the issuance of 4,616,416 ordinary shares for Ps. 8,649,027

NOTE 15: PURCHASE AND SALE OF CONVERTIBLE BONDS

During November and December 2002, 49,692,668 convertible bonds issued by IRSA were purchased; these can be converted into common stock with an 8% annual interest rate and due in 2007, and grant the holder at the time of conversion to 49,692,688 options to subscribe common stock. The conversion price and the warrants price established are as follows:

 

  a) The conversion price is U$S 0.5571 per share (U$S 5.5713 GDS), while the warrant price is U$S0.6686 per share (U$S 6.6856 GDS)

 

  b) For each of IRSA’s convertible bond the holder has the right to convert it to 1.7949 shares (0.1795 GDS) and has an option to purchase the same amount of stock at the price of the warrant.

Due to the distribution of 4,587,285 shares of the company’s portfolio, IRSA has re stated the conversion price of its convertible bonds according to the subscription clauses.

The conversion price of the convertible bonds went from U$S 0.5571 to U$S 0.54505 and the warrants price went from U$S 0.6686 to U$S 0.6541. Such adjustment was effective as from December 20, 2002.

Convertible bonds and options are due on November 14, 2007.

During the months of July and November 2003 the Company purchased 250,500 Notes, and in May 2004 converted 5,000,000 Convertible Bonds into 9,174,312 common shares.

During the fiscal year ended on June 30, 2004, third parties bearers of convertible bonds into IRSA’s ordinary stock have exercised their conversion and warrant rights for a total amount of Ps.62.8 million originating the issuance of 27,616,878 ordinary shares with a face value of Ps.1 each. Consequently, the Company holding as of June 30, 2004 amounts to 44,943,168 Convertible Bonds.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 15: (Continued)

In July 2004 the Company purchased 350,000 Convertible Bonds issued by IRSA Inversiones y Representaciones Sociedad Anónima for U$S 511,115.

In March 2005 the Company sold 8,754,271 Convertible Bonds of IRSA Inversiones y Representaciones Sociedad Anónima for a total amount of Ps. 32,499,426. This sale resulted in a profit of Ps. 68,754,172.

During the fiscal year ended on June 30, 2005, third parties bearers of convertible bonds into IRSA’s ordinary stock have exercised their conversion and warrant rights for a total amount of Ps.171.5 million originating the issuance of 99,289,144 ordinary shares with a face value of Ps.1 each. On the other hand, the Company exercised warrants for a total of Ps.17.7 million, resulting in the issuance of 9,174,311 common shares of Ps.1 par value each.

During this period, third party holders of IRSA ´s Convertible Bonds exercised their conversion and warrants rights for a total of Ps. 41.5 million, resulting in the issuance of 17,861,019 common shares of Ps.1 par value each

As a consequence of such conversions and exercise of third parties warrants, the Company’s investment value has decreased in Ps. 5.16 million, such effect being recorded in Paid-In Capital (Related Companies Law No. 19.550 – Section 33) of Shareholders´ Equity (see Note 2.n.).

Likewise, during the current period the Company converted 5,000,000 Convertible Negotiable Obligations into 9,174,312 common shares.

NOTE 16: SALE OF THE INVESTMENT OF IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANÓNIMA IN BANCO HIPOTECARIO S.A. (BHSA) AND ITS FINANCIAL STATEMENTS AS OF MARCH 31, 2006

On August 9, 2005, IRSA sold 2,305,122 shares of Banco Hipotecario S.A. to Buenos Aires Trade and Finance Center S.A. (which was a subsidiary in which IRSA has an interest of 100%) in a total amount of U$S 10,540,000 (equivalent to Ps. 30,281,000). For this transaction IRSA recorded a gain of Ps. 1,845,000

As of December 31, 2005 the Company completed merger procedures to take-over its subsidiary company Buenos Aires Trade and Finance Center S.A. Consequently, as of period-end, the total shareholding in Banco Hipotecario is 10,141,015.

NOTE 17: FINANCIAL LOANS

During the present period, the Company has developed a strategy for externally financing the working capital of the production campaign, at adequate rates and conditions through pre-financing exports allowing to develop new business, and the necessary liquidity to take advantage of any potential investment opportunity.

Consequently, as of March 31, 2006, current loans with local financial entities amounted to 34.01 million. The Company was able, therefore, to promote new production projects and to generate a more efficient capital structure.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 18: IGSA’S TAX DEFERRAL

On December 19, 1996, under Decree 1968/96 the province of Catamarca approved the investment project submitted by Inversiones Ganaderas S.A., and conferred to it the benefits of Law 22,021 as amended by Law No. 22,702 subject to the conditions and scope detailed in the referred Decree.

The project is oriented towards the livestock business, and requires a total minimum investment of Ps. 1,600,002 to be made over a three year term. The investor is given the choice of deferring the payment of the amounts payable as income tax and value added tax. The amount of the deferred tax will be equal to 75% the direct capital contribution, i.e., Ps. 1,200,000. Deferred amounts do not accrue interest and are repayable in five consecutive annual payments as from the sixth fiscal year following the start-up date of the project that enjoys the benefit.

On October 15, 2002, Cresud S.A deferred the balance assessed in the value added tax return for fiscal period 9/2002 for the sum of Ps. 540,000.

On December 30, 2003, given the significant benefit granted under Decree 384/2003 to those taxpayers who early repay deferred tax liabilities, Cresud S.A repaid the deferred amount, for the sum of Ps. 249,317. To date it has still not made use of the remaining sums available under the project.

NOTE 19: SUBSEQUENT EVENTS

 

    Conversion of Convertible Negotiable Obligations

On April 13, 2006 the Company converted 15,958,011 of Convertible Negotiable Obligations of IRSA Inversiones y Representaciones S.A. and increased its share from 22.6% to 28.1%.

 

    Warrants

On April 28, 2006, the shareholder Inversiones Financieras del Sur S.A. (IFISA) notified the Company that it will deposit the amount of US$ 7,000,000 as advance payment for exercising 5,833,908 warrants the next date in which options will be exercised, that is June 30, 2006

Once such options are exercised, IFISA will receive 11,488,593 common shares to be converted into 1,148,859 ADRs.

 

    BrasilAgro – Companhia Brasileira de Propiedades Agrícolas (BrasilAgro)

Subsequent to the closing of the nine-month period ended March 31, 2006 the National Securities Exchange Commission of Brazil approved the placement under public subscription of Reais 432.0 million equivalent to 432,000 common registered shares with a price of Reais 1,000 per each BrasilAgro’ s share.

These shares were placed in conjunction with the Banco de Investimentos Credit Suisse (Brasil) S.A. in the Brazilian market by applying an investment mechanism ruled by the control authorities and with a sales effort abroad, all in compliance with the U.S. Securities Act of 1933 and other regulations established by the Securities and Exchange Commission.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 19: (Continued)

In accordance with the practice of the Brazilian market, BrasilAgro had an option to increase the size of the issue by 20% and Credit Suisse Investment Bank had another option for increasing the issue by 15% (Green shoe). As the placement had demand in excess, both BrasilAgro and Credit Suisse exercised such option up to 583,200 shares equivalent to Reais 583.2 million, which were fully placed.

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.

In addition to the funds originally contributed Cresud S.A.C.I.F. y A. made contributions during the offer for a total amount of Reais 42.4 million (approximately US$ 20.6 million). In line with such contribution Cresud S.A.C.I.F. y A. has a total of 42.705 shares equivalent to 7.3% of BrasilAgro capital.

As a contribution for having founded the company, Cresud S.A.C.I.F. y A. received 104,902 purchase options to subscribe additional BrasilAgro shares for 15 years at no cost and at the same price of the original offer of shares that is Reais 1,000 adjusted by the IPCA inflation index. Should such option be exercised, Cresud S.A.C.I.F. y A. will be able to acquire 59,726 additional shares and its holding would then be 14.1% of BrasilAgro diluted capital stock.

The BrasilAgro founder partners are Cresud S.A.C.I.F. y A., Cape Town, Tarpon Investimentos, Tarpon Agro, Agro Managers and Agro Investment.

Cape Town is a company whose sole shareholder, Mr. Elie Horn, is the chairman of Cyrela Brazil Realty, one of the largest Brazilian real estate companies. Tarpon has large experience as manager of financial resources and specializes in variable income. Agro Managers and Agro Investment are investment means that people related to Cresud S.A.C.I.F. y A. utilize.

On March 24, 2006, Cresud S.A.C.I.F. y A. entered into a shareholders agreement with Mr. Elie Horn and with Tarpon, which established among other matters that both parties should have a joint vote at the Shareholders´ Meetings and that both parties have a preentive right to acquire shares held by the other party.

The board of directors of BrasilAgro has nine members of which Cresud S.A.C.I.F. y A., in his capacity as founder of the company, has appointed three members, Tarpon and Cape Town other three and complementarily the Company has three independent directors.

BrasilAgro was created for the purpose of replicating Cresud´s Business in Brazil. The Company will be mainly involved in four business lines keeping itins focus on agricultural real estate: (i) sugar cane, (ii) grains and cotton, (iii) forestry activities, and (iv) livestock.

On March 15, 2006, BrasilAgro subscribed a consulting agreement with Parana Consultora de Investimentos. Parana will provide consulting services in matters related, among other, to the purchase and sale of land, transactions in capital markets, hedging policies and mergers and acquisitions.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Notes to the Financial Statements (Continued)

 

NOTE 19: (Continued)

As consideration for its services, Parana will receive from BrasilAgro a yearly remuneration equivalent to 1% of the capital subscribed of BrasilAgro.

Parana´s shareholders are Tarpon with a 50% interest, Consultores Asset Management with a 37.5% interest and Alejandro Elsztain with a 12.5% interest.

This transaction has a distinctive feature such being the most eloquent expression of our Group returning to the capitals market with the purpose of newly expanding our business and of diversifying our portfolio on an international basis.

In order to finance the investment in Brazil, on May 2, 2006, Cresud S.A.C.I.F. y A. obtained a U$S 8 million loan from Credit Suisse, for a 30 months term accruing interest at the three months LIBOR rate plus 375 basic points. This loan has been secured through a swap operation with Convertible Negotiable Obligations of IRSA in an amount of u$s 10 million. To complete the investment Cresud used short-term loans and its own funds.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Fixed Assets

For the nine-month periods ended March 31, 2006 and 2005 and year ended June 30, 2005

(Notes 1 and 2)

Schedule A

 

                         Depreciation               

Principal Account

  

Value at

the

beginning

of the

period/year

Pesos

  

Additions

and/or

transfers

Pesos

  

Deductions

and/or

transfers

Pesos

  

Value at

the end of

the

period/year

Pesos

   Rate %   

Accumulated

at the

beginning

of the

period/year

Pesos

  

Decrease

of the

Period

/year

Pesos

  

Current

period

Pesos

  

Accumulated

at the end of

the

period/year

Pesos

  

Net carrying

Value as of

March 31

2006

Pesos

  

Net carrying

Value as of
June 30,

2005

Pesos

  

Net carrying

Value as of

March 31

2005

Pesos

Real estate

   123,967,685    22,999,773    5,691,392    141,276,066    —      —      —      —      —      141,276,066    123,967,685    113,949,354

Wire fences

   3,738,415    —      181,072    3,557,343    3    685,961    54,868    85,292    716,385    2,840,958    3,052,454    3,164,070

Watering troughs

   2,972,393    105,800    254,865    2,823,328    5    932,450    100,736    111,922    943,636    1,879,692    2,039,943    2,104,819

Alfalfa fields and meadows

   2,782,001    890,877    1,282,571    2,390,307    12-25-50    1,628,273    1,199,476    401,952    830,749    1,559,558    1,153,728    600,109

Buildings and constructions

   5,737,215    23,592,231    58,895    29,270,551    2    1,974,112    10,112    434,580    2.398,580    26,871,971    3,763,103    3,419,066

Machinery

   9,463,175    913,350    15,045    10,361,480    10    6,049,081    12,036    711,228    6,748,273    3,613,207    3,414,094    2,120,910

Vehicles

   1,454,489    356,093    48,864    1,761,718    20    824,947    48,864    215,918    992,001    769,717    629,542    638,650

Tools

   191,545    4,565    —      196,110    10    137,606    —      10,239    147,845    48,265    53,939    52,472

Furniture and equipment

   1,067,663    51,448    —      1,119,111    10    682,763    —      80,267    763,030    356,081    384,900    325,516

Corral and leading lanes

   622,169    28,215    —      650,384    3    107,126    —      14,623    121,749    528,635    515,043    483,274

Roads

   960,053    60,288    25,160    995,181    10    614,320    12,580    72,396    674,136    321,045    345,733    345,003

Facilities

   11,455,517    189,413    26,008    11,618,922    10-20-33    4,587,196    24,295    831,530    5,394,431    6,224,491    6,868,321    3,262,867

Computer equipment

   969,371    139,310    —      1,108,681    20    668,954    —      107,595    776,549    332,132    300,417    332,691

Silo plants

   1,169,114    —      72,595    1,096,519    5    378,719    31,942    44,765    391,542    704,977    790,395    806,163

Constructions in progress

   10,719,843    6,904,693    —      17,624,536    —      —      —      —      —      17,624,536    10,719,843    17,786,346

Advances to suppliers

   82,879    —      42,368    40,511    —      —      —      —      —      40,511    82,879    284,485
                                                           

Total as of March 31, 2006

   177,353,527    56,236,056    7,698,835    225,890,748       19,271,508    1,494,909    3,122,307    20,898,906    204,991,842      
                                                           

Total as of June 30, 2005

   169,076,719    26,396,730    18,119,922    177,353,527       17,529,527    1,872,256    3,614,237    19,271,508       158,082,019   
                                                           

Total as of March 31, 2005

   169,076,719    9,297,248    9,255,517    169,118,450       17,529,527    321,295    2,234,423    19,442,655          149,675,795
                                                           

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Investments

For the nine month periods ended March 31, 2006 and 2005 and year ended June 30, 2005

(Notes 1 and 2)

Schedule C

 

                                 INFORMATION ON THE ISSUER
                                      Latest financial statements

Type and Characteristics
of the securities

   Amount   

Value at

March 31,

2006

Pesos

   

Value at

June 30,

2005

Pesos

   

Value at

March 31 30,

2005

Pesos

   

Market

value

Pesos

   Principal activity   

Capital

Pesos

  

Income

for the fiscal
period

Pesos

   

Shareholders’

Equity

Pesos

Current Investments

                      

Mutual Funds

                      

Bony Hamilton in dollars fund

   15,325    46,617     52,439,110     93,601,984     3.041978           

Banco Río special fund in pesos

      —       —       91               

Banco Río Plazo Fijo fund in dollars

      —       2,395     2,523               
                                  
      46,617     52,441,505     93,604,598               
                                  

Notes and Convertible Bonds

                      

Interest of Convertible Bonds 2007 -IRSA (U$S)

                      

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

                      

IRSA Inversiones y Representaciones S.A.

      2,604,146     1,078,320     3,338,226               

Bonos Global 2010

   110,000    103,732     100,997     95,732     0.943018           

Bocon Pro 1

   157,647    630     630     630     0.003996           

Bonos Arg Discount

      —       —       2,445,324               

Letes

      —       —       320,571               

Nobacs

   3,000,000    2,982,000     3,003,000     —       0.994000           

Bonos Arg Discount 2033

      —       1,073,823     —                 

Bonos Raymond James-interests

      —       20,235     —                 

Mortgage Bonds

   1,408,148    1,415,189     1,706,662     —       1.0050000           
                                  
      7,105,697     6,983,667     6,200,483               
                                  

Total current investments

      7,152,314     59,425,172     99,805,081               
                                  

Non-current investments

                      

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

                      

AGRO-URANGA S.A.

            Unlisted    Agricultural livestock        

Shares

   893,069    5,573,730     5,344,811     4,932,749           2,500,000    3,773,692     15,624,759

Contribution on account of future subscriptions of shares

      7,865     7,865     7,865               

Higher value of property

      11,179,150     11,179,150     11,179,150               
                                  
      16,760,745     16,531,826     16,119,764               
                                  

INVERSIONES GANADERAS S.A.

                      

Shares

   11,668,569    10,798,817     10,984,960     11,052,003     Unlisted    Rising and grazing cattle    11,668,570    (915,730 )   10,798,842

Contribution on account of future subscriptions of shares

        729,586     729,585               
                                  
      10,798,817     11,714,546     11,781,588               
                                  

CACTUS ARGENTINA S.A.

                      

Shares

   4,337,175    4,493,393     1,160,907     1,054,443     Unlisted    Exploitation and
Agriculture and beef cattle
products
   8,674,350    312,435     8,986,785

Contribution on account of future subscriptions of shares

        3,176,268     2,135,618               
                                  
      4,493,393     4,337,175     3,190,061               
                                  

FUTUROS Y OPCIONES.COM S.A.

                      

Shares

   252,656    327,697     646,150     —       Unlisted    Provide information about
consulting services trougth
Internet.
   360,937    (454,932 )   1,068,139

Contribution on account of future subscriptions of shares

      420,000     —       —                 
                                  
      747,697     646,150     —                 
                                  

AGROPECUARIA CERVERA S.A.

                      

Shares

   36,000    3,858,643     —       —       Unlisted    Agricultural and forestal    40,000    (23,487 )   5,582,129

Contribution on account of future subscriptions of shares

      1,165,273     —       —                 
                                  
      5,023,916     —       —                 
                                  

IRSA Inversiones y Representaciones S.A.

                      

Shares (Note 14)

   87,025,013    303,616,578     272,859,443     287,248,351     3.60    Real Estate    384,302,779    40,906,745     1,340,769,435
                                  
      303,616,578     272,859,443     287,248,351               
                                  
      341,441,146     306,089,140     318,339,764               
                                  

Other Investments

                      

Convertible Bonds 2007 - IRSA (U$S)

                      

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

                      

IRSA Inversiones y Representaciones S.A.

   27,958,011    86,166,588     105,487,796     106,583,963               

Brasil Agro- Companhia Brasileira de Propiedades Agricolas (in formation)

      759,615     —       —                 

Coprolán

      20,717     20,717     20,717     Unlisted           
                                  
      86,946,920     105,508,513     106,604,680               
                                  

Goodwill

                      

Goodwill

      —       —       164,919               

IRSA negative goodwill

      (40,605,160 )   (30,430,822 )   (43,485,057 )             

Agropecuaria Cervecera S.A. goodwill

      21,910,761     —       —                 
                                  
      (18,694,399 )   (30,430,822 )   (43,320,138 )             
                                  

Total non-current investments

      409,693,667     381,166,831     381,624,306               
                                  

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Allowances and Provisions

For the nine-month periods ended March 31, 2006 and 2005 and the year ended June 30, 2005

(Notes 1 and 2)

Schedule E

 

Item

  

Balances at
beginning of

the
period/year
Pesos

  

Increases
(1)

Pesos

   Decreases
Pesos
    Applications
Pesos
   

Value as of
March 31,
2006

Pesos

  

Value as of
June 30
2005

Pesos

  

Value as of
March 31,
2005

Pesos

Deducted from assets

                  

Allowance for doubtful accounts

   356,214    —      —       —       356,214    356,214    345,709

Included in liabilities

                  

For pending lawsuits

   65,871    2,372    —       —       68,243    65,871    —  
                                    

Total as of March 31, 2006

   422,085    2,372    —       —       424,457      
                                    

Total as of June 30, 2005

   387,067    79,374    (5,824 )   (38,532 )      422,085   
                                    

Total as of March 31, 2005

   387,067       (2,826 )   (38,532 )         345,709
                                    

(1) The accounting appropriation is included in Statement of Income, other income and expenses.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Cost of sales

For the nine-month periods ended March 31, 2006 and 2005

(Notes 1 and 2)

Schedule F

 

    Crops     Beef cattle     Milk     Others     Total  
    March 31     March 31     March 31     March 31     March 31     March 31     March 31     March 31     March 31     March 31  
    2006     2005     2006     2005     2006     2005     2006     2005     2006     2005  
    Pesos     Pesos     Pesos     Pesos     Pesos     Pesos     Pesos     Pesos     Pesos     Pesos  

Inventories at the beginning of the period

                       

Beef cattle

  —       —       55,019,469     55,198,055     6,823,744     4,150,630     —       —       61,843,213       59,348,685    

Crops

  24,930,778     8,639,910     —       —       —       —       —       —       24,930,778       8,639,910    

Unharvested crops

  826,336     1,603,897     —       —       —       —       —       —       826,336       1,603,897    

Seeds and fodder

  128,575     —       172,941     134,870     17,653     103,508     —       —       319,169       238,378    

Materials and others

  3,768,385     3,842,219     —         65,430     44,982     190,843     154,393     4,024,658       4,041,594    
                                                                       
  29,654,074     14,086,026     55,192,410     55,332,925     6,906,827     4,299,120     190,843     154,393       91,944,154       73,872,464  

Holding gain

  —       —       1,533,168     8,375,479     375,173     259,170     —       —         1,908,341       8,634,649  

(Gain) loss for operations in the commodity markets

  (438,424 )   2,924,090     —       —       —       —       —       —         (438,424 )     2,294,090  

Transfer of inventories to expenses

  (91,722 )   (149,403 )   —       —       —       —       —       —         (91,722 )     (149,403 )

Transfer of inventories to fixed assets

  (346,306 )   (572,364 )   —       —       —       —       (151,928 )   (74,348 )     (498,234 )     (646,712 )

Transfer of unharvested crops to expenses

  (14,052,802 )   (11,608,487 )   (382,865 )   (400,174 )   (1,018,566 )   (480,058 )   (360,753 )   (370,876 )     (15,814,986 )     (12,859,595 )

Recovery of inventories

  —       —       317,795     150,440     (317,795 )   (150,440 )   —       —         —         —    

Purchases

  28,609,741     27,919,030     7,038,254     3,868,098     3,138,055     929,239     413,022     506,664       39,199,072       33,223,031  

Operating expenses (Schedule H)

  14,946,376     11,322,950     11,473,945     12,561,709     3,571,080     1,459,122     17,839     26,263       30,009,240       25,370,044  

Less:

                       

Inventories at the end of the period

                       

Beef cattle (1)

  —       —       (60,524,704 )   (57,581,642 )   (9,127,509 )   (4,968,440 )   —       —       (69,652,213 )     (62,550,082 )  

Crops

  (14,800,090 )   (12,077,749 )   —       —       —       —       —       —       (14,800,090 )     (12,077,749 )  

Unharvested crops

  (18,025,519 )   (17,777,895 )   —       —       —       —       —       —       (18,025,519 )     (17,777,895 )  

Seeds and fodder

  (20,000 )   —       (174,511 )   (271,597 )   (100,004 )   (228,890 )   —       —       (294,515 )     (500,487 )  

Materials and others

  (2,870,225 )   (2,288,977 )   —       —       (104,259 )   (49,926 )   (100,459 )   (240,935 )   (3,074,943 )   (105,847,280 )   (2,579,838 )   (95,486,051 )
                                                                       

Cost of Sales (2)

  22,565,103     11,777,221     14,473,492     22,035,238     3,323,002     1,068,897     8,564     1,161       40,370,161       34,882,517  
                                                                       

(1) Includes cattle births of the period
(2) Includes cattle production amounting to Ps. 17,195,405 as of March 31, 2006 and Ps. 19,787,792 as of March 31, 2005
(2) Includes corn production amounting to Ps. 16,972,639 as of March 31, 2006 and Ps. 14,303,318 as of March 31, 2005

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Foreign currency assets and liabilities

For the nine-month periods ended March 31, 2006 and 2005 and the year ended June 30, 2005

(Notes 1 and 2)

Schedule G

 

     March 31, 2006     June 30, 2005    March 31, 2005

Item

   Type and amount
of foreign
currency
    Current
Exchange
rate
Pesos
   Amount in
local currency
Pesos
    Type and amount
of foreign
currency
   Amount in
local currency
Pesos
   Type and amount
of foreign
Currency
   Amount in
local currency
Pesos

Current Assets

                  

Cash and banks

                  

Cash and banks

   U$S 2,271,167     3.042    8,277,789     U$S 4,199,223    11,955,188    U$S 6,121,003    17,610,125

Cash and banks

   Rs 213     1,348    287     Rs —      —      Rs     

Investments:

                  

Mutual funds

   U$S 15,324     3.042    46,617     U$S 18,419,917    52,441,505    U$S 32,535,456    93,604,507

Interest from IRSA Convertible Notes 2007

   U$S            U$S —      —      U$S     

Subsidiaries, related companies Law 19,550 Article 33 and related parties:

                  

IRSA Inversiones y Representaciones S.A.

   U$S 844,953     3.082    2,604,146     U$S 373,509    1,078,320    U$S 1,144,404    3,338,226

Trade accounts receivable:

                  

Trade accounts receivable

   U$S 53,209     3.042    161,861     U$S 333,190    948,593    U$S 343,815    989,156

Other receivables:

                  

Secured by mortgages

   U$S 1,032,619     3.042    3,141,226     U$S 2,886,254    8,217,166    U$S 2,837,976    8,164,858

Guarantee deposits

   U$S 512,116     3.042    1,557,857     U$S 939,597    2,675,032    U$S 678,333    1,951,565

Subsidiaries, related companies Law 19,550 Article 33 and related parties:

                  

Cactus Argentina S.A

   U$S 3,184     3.082    9,814       —      —        —      —  

Others

   U$S 15,922     3.082    49,071       —      —        —      —  

Non-Current Assets

                  

Other receivables

                  

Secured by mortgages

   U$S 2,713,488     3.042    8,254,430       —      —        —      —  

Subsidiaries, related companies Law 19,550 Article 33 and related parties:

                  

Alto Palermo S.A

   U$S 222,906     3.082    686,996       —      —        —      —  

IRSA Inversiones y Representaciones S.A.

   U$S 57,319     3.082    176,656       —      —        —      —  

Others

   U$S 31,844     3.082    98,142       —      —        —      —  

Investments:

                  

IRSA Convertible Notes 2007

                  

Subsidiaries, related companies Law 19,550 Article 33 and related parties:

                  

IRSA Inversiones y Representaciones S.A.

   U$S 27,958,010     3.082    86,166,588     U$S 36,538,897    105,487,796    U$S 36,538,897    106,583,963
                                          

U$S

   U$S 36,182,061        111,231,193     U$S 63,690,587    182,803,600    U$S 80,199,884    232,242,400
                                          

Rs

   Rs 213        287       —      —        —      —  
                                          

Total Assets

        111,231,193        182,803,600       232,242,400
                                          

Current liabilities

                  

Trade accounts payable:

                  

Suppliers

   U$S 3,172,589     3.082    9,777,918     U$S 2.279.505    6,580,931    U$S 789,295    2,302,374

Interest to be accrued

   U$S (88,335 )   3.082    (272,250 )   U$S —      —      U$S     

Accrual for other expenses

   U$S 1,373,600     3.082    4,233,435     U$S 898.119    2,592,869    U$S 607,354    1,771,652

Loans:

                  

Local banks

   U$S 4,347,470     3.082    13,398,902     U$S —      —      U$S     

Accrued interest of Convertible Notes 2007

   U$S 519,918     3.082    1,602,388     U$S 164.996    476,343    U$S 503,296    1,468,115

Subsidiaries, related companies Law 19,550 Article 33 and related parties:

                  

Shareholders

   U$S 556,779     3.082    1,715,992     U$S 244.853    706,891    U$S 745,205    2,173,764

Directors

   U$S 1,016     3.082    3,130     U$S 344    992    U$S 1,045    3,049

Other debts:

                  

Security transactions payable

   U$S —          —       U$S 1.448.075    4,180,593    U$S —      —  

Advances from customers

   U$S —          —       U$S 711.881    2,055,200    U$S 2,704,559    7,889,200
                                          

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Foreign currency assets and liabilities

For the nine-month periods ended March 31, 2006 and 2005 and the year ended June 30, 2005

(Notes 1 and 2)

Schedule G

(continued)

 

     March, 31 2006    June 30, 2005    March 31, 2005

Item

  

Type and amount
of foreign

currency

   Current
Exchange rate
Pesos
  

Amount in local
currency

Pesos

   Type and amount
of foreign
currency
  

Amount in local

currency

Pesos

   Type and amount
of foreign
currency
  

Amount in local
currency

Pesos

Non-current liabilities

                    

Trade accounts payable

                    

Accrual for other expenses

   U$S 318,437    3.082    981,422      —      —        —      —  

Loans:

                    

Convertible Notes 2007

   U$S 17,203,932    3.082    53,022,519    U$S 15.869.642    45,815,657    U$S 16,177,382    47,189,423

Subsidiaries, related companies Law 19,550 Article 33 and related parties:

                    

Shareholders

   U$S 18,422,078    3.082    56,776,844    U$S 24.223.922    69,934,463    U$S 23,953,025    69,870,974

Directors

   U$S 33,600    3.082    103,555    U$S 33.980    98,100    U$S 33,600    98,011
                                        

Total Liabilities

   U$S 45,861,083       141,343,855    U$S 45,875,317    132,442,039      45,514,761    132,766,562
                                        

U$S: US dollars

Rs: Brazilian Reais

 

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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

For the nine-month periods ended March 31, 2006 and 2005

(Notes 1 and 2)

Schedule H

 

     

Total

March 31,

2006

   Operating Expenses    Expenses   

Total

March 31,

2005 Pesos

Items

     

Total

Pesos

  

Crops

Pesos

   Beef cattle
Pesos
  

Milk

Pesos

   Others
Pesos
   Selling
Pesos
   Administrative
Pesos
  

Directors’ fees

   185,724    —      —      —      —      —      —      185,724    90,169

Fees and payments for services

   1,697,965    244,258    1.669    166,304    76,285    —      —      1,453,707    821,909

Salaries and wages

   4,760,445    2,397,820    591,875    1,193,046    612,899    —      —      2,362,625    3,951,604

Social security taxes

   841,572    394,419    227,132    136,133    31,154    —      —      447,153    692,528

Taxes, rates and contributions

   449,550    356,365    235,233    73,092    47,974    66    —      93,185    359,689

Gross sales taxes

   393,564    —      —      —      —      —      393,564    —      371,920

Office and administrative expenses

   573,153    —      —      —      —      —      —      573,153    434,254

Bank commissions and expenses

   8,939    8,939    6,599    1,822    504    14    —      —      8,572

Depreciation of fixed assets

   3,122,307    2,886,713    1,797,646    687,365    393,548    8,154    —      235,594    2,234,423

Vehicle and traveling expenses

   534,510    347,816    164,379    168,261    12,456    2,720    —      186,694    437,062

Spare parts and repairs

   1,302,349    1,302,349    720,895    476,156    105,298    —      —         984,699

Insurance

   198,754    39,297    19,622    14,704    1,305    3,666    —      159,457    184,651

Benefits to employees

   277,068    176,403    54,895    112,979    8,529    —      —      100,665    256,889

Livestock expenses (1)

   8,856,972    8,259,968    —      8,259,968    —      —      597,004    —      10,298,720

Dairy farm expenses (2)

   2,264,870    2,264,870    —      —      2,264,870    —      —      —      896,496

Agricultural expenses (3)

   15,554,087    10,867,378    10,867,378    —      —      —      4,686,709    —      11,104,307

Silo expenses

   24,950    24,950    24,950    —      —      —      —      —      97,032

General expenses

   437,695    437,695    234,103    184,115    16,258    3,219    —      —      253,154
                                            

Total at March 31, 2006

   41,484,474    30,009,240    14,946,376    11,473,945    3,571,080    17,839    5,677,277    5,797,957    —  
                                            

Total at March 31, 2005

   —      25,370,044    11,322,950    12,561,709    1,459,122    26,263    3,760,424    4,347,610    33,478,078
                                            

(1) Includes cattle food and additives, lodging, animal health and others.
(2) Includes cattle food and additives, animal health and others.
(3) Includes seeds, agrochemicals, 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

 

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 MODIFICATIONS IN THE COMPANY’S ACTIVITIES

They are detailed in the Business Highlight, which is attached to the present financial statements.

 

3. CLASSIFICATION OF OUTSTANDING ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES ACCORDING TO THEIR MATURITY

 

  a. Other Receivables and prepaid expenses without a due date at March 31, 2006.

 

    

Other

Receivables

Pesos

   Law No. 19,550 Section 33
        AGRO
URANGA
   FYO    CACTUS    IGSA    IRSA    ACER
       

Others
Receivables

Pesos

  

Other

Receivables

Pesos

  

Other

Receivables

Pesos

  

Other

Receivables

Pesos

  

Other

Receivables

Pesos

  

Other

Receivables

Pesos

Current

   101,272    160,609    23,603    370,781    —      —      —  

Non- current

   6,457,454    —      —      —      1,257,743    176,656    364,917

 

  b. Trade Accounts Receivable and other receivables to fall due at March 31, 2006

 

    

Trade
Accounts
Receivables

$

   Law No. 19,550 Section 33   

Other

Receivables

$

   Law No. 19,550 Section 33
        FYO    Cactus       IRSA    CACTUS    ACER
        Trade
Accounts
Receivable
   Trade
Accounts
Receivable
      Other
Receivable
   Other
Receivable
   Other
Receivable
        $    $       $    $    $

06/30/06

   5,676,093    757,729    38,921    5,467,041    1,331    —      14,398

09/30/06

   —      —      —      2,713,837    —      —      —  

12/31/06

   —      —      —      7,522,095    —      —      —  

03/31/07

   —      —      —      427,389    —      —      —  

06/30/07

   —      —      —      —      —      2,944    —  

09/30/07

   —      —      —      2,170,454    —      2,944    —  

12/31/07

   —      —      —      —      —      2,944    —  

03/31/08

   —      —      —      427,389    —      2,944    —  

06/30/08

   —      —      —      —      —      2,944    —  

09/30/08

   —      —      —      2,170,455    —      2,944    —  

12/31/08

   —      —      —      —      —      1,964    —  

09/30/09

   —      —      —      1,743,066    —      —      —  

09/30/10

   —      —      —      1,743,066    —      —      —  

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Additional Information to the Notes to the Financial Statements

(Continued)

 

4. CLASSIFICATION OF OUTSTANDING DEBTS ACCORDING TO THEIR MATURITY

 

  a. There are no past due debts at March 31, 2006.

 

  b. Debts without a due date at March 31, 2006.

 

    

Trade

Payables

Pesos

  

Loans

Pesos

  

Taxes Payable

Pesos

  

Allowances

Pesos

Current

   —      20,615,670    —      —  

Non- current

   981,422    —      49,600,797    68,243

 

  c. Debts to fall due at March 31, 2006

 

    

Trade
Accounts
Payable

Pesos

   Law No. 19,550 Section 33   

Loans

Pesos

  

Salaries

and

Social

Security

Payable

Pesos

  

Taxes

Payable

Pesos

  

Other

Debts

Pesos

        IGSA    CACTUS            
        Trade
Accounts
Payable
   Trade
Accounts
Payable
           
        Pesos    Pesos            

06/30/06

   13,447,955    147,642    415,222    3,321,510    295,633    1,659,998    2,653,212

09/30/06

   7,277,500    —      —      13,398,902    588,579    —      —  

12/31/06

   —      —      —      —      —      —      —  

03/31/07

   —      —      —      —      174,524    —      —  

12/31/07

   —      —      —      109,201,097    —      —      —  

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Additional Information to the Notes to the Financial Statements

(Continued)

 

5. CLASSIFICATION OF OUTSTANDING ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES ACCORDING TO THEIR FINANCIAL EFFECTS

a.

 

    

Trade

Accounts

Receivable

Pesos

   Law No. 19,550
Section 33
  

Other

Receivables

Pesos

   Law No. 19,550 Section 33
        FYO    Cactus       IRSA    ACER    AGRO
URANGA
   IGSA    FYO    Cactus
        Trade
accounts
receivable
   Trade
accounts
receivable
      Other
receivables
   Other
receivables
   Other
receivables
   Other
receivables
   Other
receivables
   Other
receivables
        Pesos    Pesos       Pesos    Pesos    Pesos    Pesos    Pesos    Pesos

In Pesos

   5,514,232    757,729    38,921    17,155,796    1,331    379,315    160,609    1,257,743    23,603    380,595

In Dollars

   161,861    —      —      13,787,722    176,656    —      —      —      —      9,814

 

  b. All accounts receivable and other receivables are not subject to adjustment provisions.

c.

 

    

Trade

Accounts
Receivable

Pesos

   Law No. 19,550 Section 33   

Other

Receivables

   Law No. 19,550 Section 33
        IGSA    FYO    Cactus       IGSA    FYO    ACER    AGRO
URANGA
   IRSA    Cactus
        Trade Accounts Receivable         Other Receivables
        Pesos    Pesos    Pesos    Pesos    Pesos    Pesos    Pesos    Pesos    Pesos    Pesos

Outstanding balances accruing interests

   —      —      —      —      11,710,249    1,229,194    —      362,208    —      —      360,967

Outstanding balances not accruing interests

   5,676,093    —      757,729    38,921    19,233,269    28,549    23,603    17,107    160,609    177,987    29,442

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Additional Information to the Notes to the Financial Statements

(Continued)

 

6. CLASSIFICATION OF DEBTS ACCORDING TO THEIR FINANCIAL EFFECTS

a.

 

    

Trade
Accounts
Payable

Pesos

   Law No. 19,550
Section 33
  

Loans

Pesos

  

Salaries
and Social
security
Payables

Pesos

  

Taxes
Payables

Pesos

  

Other
debts

Pesos

  

Provisions

Pesos

        IGSA    Cactus               
        Trade
Accounts
Payables
   Trade
Accounts
Payables
              
        Pesos    Pesos               

In Pesos

   6,986,352    147,642    415,222    19,913,849    1,058,735    51,260,795    2,653,212    68,243

In Dollars

   14,720,525    —      —      126,623,330    —      —      —      —  

 

b. All debts outstanding are not subject to adjustments provisions

c.

 

     

Trade
Accounts
Payable

Pesos

   Law No. 19,550
Section 33
  

Loans

Pesos

  

Salaries

and

Social

Security

Payable

Pesos

  

Taxes

Payable

Pesos

  

Other

Debts

Pesos

  

Provisions

Pesos

        IGSA    Cactus               
       

Trade
Accounts

Payable

  

Trade

Accounts

Payable

              
        Pesos    Pesos               

Outstanding debts accruing Interests

   6,552,112    —      —      143,917,490    —      —      —      —  

Outstanding debts not accruing interests

   15,154,765    147,642    415,222    2,619,689    1,058,735    51,260,795    2,653,212    68,243

 

7. INTEREST IN OTHER COMPANIES (Law No. 19,550 Section 33)

Interests in other companies’ capital and the number of votes held in those companies governed by Law No. 19,550 Section 33 are explained in Note 2 to the consolidated financial statements and intercompany balances as of March 31, 2006 are described in captions 4 and 5 above.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Additional Information to the Notes to the Financial Statements

(Continued)

 

8. RECEIVABLES FROM OR LOANS TO DIRECTORS AND STATUTORY AUDIT COMMITTEE MEMBERS

At March 31, 2006 there were advance payments to directors for Ps.124,000, 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 period 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.

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).

 

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 net realizable value (selling price at the end of the period less estimated selling expenses). The recoverable value of fixed assets under consideration is the economic use value determined by the possibility of absorbing the depreciations with the income of the Company.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Additional Information to the Notes to the Financial Statements

(Continued)

 

15. INSURANCES

The types of insurance used by the company are the following:

 

Insured property

  

Risk covered

  

Amount insured

Pesos

  

Account
Value

Pesos

Buildings, machinery, silos and furniture    Theft, fire and technical insurance    61,132,601    31,878,368
Vehicles    Theft, fire and civil and third parties liability    1,613,100    769,717

 

16. CONTINGENCIES

At March 31, 2006 there are no contingent situations that have not been accounted for.

 

17. IRREVOCABLE CONTRIBUTIONS TO CAPITAL ON ACCOUNT OF FUTURE SUBSCRIPTIONS

None.

 

18. DIVIDENDS ON PREFERED STOCK

There are no cumulative dividends not paid on preferred stock.

 

19. LIMITATIONS OF PROFIT DISTRIBUTIONS

See Note 10 to the Financial Statements.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Business Highlight

Buenos Aires, May 11, 2006 - Cresud S.A.C.I.F. y A. (Nasdaq: CRESY – BCBA: CRES), one of the leading agricultural companies in Argentina, announced today its results for the nine-month period of fiscal year 2006, ended March 31, 2006.

The results for the nine-month period of 2006 showed a net profit of Ps. 23.4 million compared to the Ps. 62.2 million profit for the same period the previous fiscal year.

The decrease in the net result is mainly due to: (i) a decrease in results from our ownership interests in related companies, (ii) a reduction in results from the sale of previously acquired Convertible Bonds, and (iii) a reduction in results from livestock holdings compared to those for the same period the previous year.

Consolidated net sales for the period were Ps. 68.8 million, 38% higher than consolidated net sales for the same period the previous fiscal year, mainly due to increases in the sales of crops and milk for the nine-month period of fiscal year 2006.

Gross profit for the nine-month period of fiscal year 2006 was Ps. 18.8 million compared to Ps. 12.4 million gross profit for the same period the previous year.

This rise in gross profit is due to an increase in the sales of crops and milk, in addition to an increase in average prices per ton and per liter, compared to the same period the previous fiscal year.

There was also an increase in the production of milk as a result of the start-up of production activities in the new dairy facilities in our El Tigre farm. The production of milk rose by 122% compared to the same period the previous fiscal year, with a highly positive impact on the margin of the segment.

Operating results for the period ended March 31, 2006 were a Ps. 18.7 million profit, compared to the Ps. 20.7 million profit for the same period the previous fiscal year.

Results from related companies were a Ps. 11.5 million profit, mainly due to our ownership share in IRSA Inversiones y Representaciones S.A. as of March 31, 2006.

 

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Cresud Sociedad Anónima, Comercial,

Inmobiliaria, Financiera y Agropecuaria

Business Highlight (continued)

Summary of operations

Crops

Crop sales totaled Ps. 31.6 million for the period, compared to Ps. 15.0 million crop sales for the previous period. Crops sales amounted to 94,993 tons at an average price per ton of Ps. 333 compared to 45,531 tons sold at an average price of Ps. 330 during the same period the previous fiscal year.

At March 31, 2006, wheat harvests had finished with yields way above expectations. At that date, we harvested 92% of the area sown with sunflower, while corn amounted to 26% and soybean to 19%.

Our crop stock as of the end of the nine-month period totaled 41,729 tons, of which 17,859 correspond to wheat, 7,629 correspond to corn and 8,081 to soybean.

In the period ended March 31, 2006 gross profit in this segment was Ps. 9.1 million compared to a profit of Ps. 3.3 million for the same period the previous fiscal year. Gross profit in this segment rose as a result of the boost in crop sales and an overall increase in the price of crops. In turn, at the close of the period accumulated stocks were favored by an increase in real terms in the average prices of the different crops.

In the current season, our agricultural activities extend over a surface area of 37,022 hectares, 17,004 of which are leased from third parties. The total number of hectares devoted to agricultural activities has risen by 1,174 compared to the previous year, mainly as a result of the acquisition of the “El Invierno” farm, which added to the number of own hectares in operation, and of the increase in land leased from third parties.

Beef Cattle

At March 31, 2006, the Company had a 92,773-head cattle stock, slightly lower than for the same period the previous year, with a total surface area devoted to beef cattle activities of 129,946 hectares.

Beef cattle sales decreased by 7.7% compared to the previous fiscal year, from Ps. 27.1 million at March 31, 2005 to Ps. 25.0 million at March 31, 2006. During the nine-month period of the current fiscal year, sales totaled 10,839 tons, whereas for the same period of fiscal year 2005 the tons sold had amounted to 13,078, i.e., a 17.1% reduction.

Gross profit in the beef cattle segment was Ps. 4.3 million, compared to Ps. 5.0 million for the same period of the previous fiscal year. This drop in the business unit’s gross profit is mainly due to the drop in sales, as a result of a reduction in the production of beef cattle.

Beef cattle production was 7,759 tons, showing a 9% decrease compared to the previous fiscal year. This variation was due to a decrease in cattle stock derived from the sale of two farms and the effects of the drought that particularly impacted our farming establishment in the province of Catamarca.

 

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Business Highlight (continued)

During the first three months of 2006, upward trends in the international prices of beef cattle intensified as a result of sustained demand (caused by the increase in the purchasing power of developing economies and higher consumption of red meat to the detriment of white meat) and of limited supply (derived from the restrictions arising from the requirements imposed by the health authorities on the main suppliers). These pressures fed local inflationary expectations, as a result of which the Argentine Government had to take the measures necessary to increase production in the area, such as a ban on exports and restrictions upon the minimum weight of cattle to be slaughtered.

Milk

Milk production increased by 122% in the nine-month period, from 4.9 million liters at March 31, 2005, to 10.9 million liters at March 31, 2006.

Gross profit in this segment at March 31, 2006 was Ps. 2.5 million, 121% higher than the profit for the same period of the previous year, as a result of the increase in production due to the start-up in activities at the “El Tigre” farming establishment and an increase in the average price per liter of milk, which went up from Ps. 0.45 to Ps. 0.54.

The “El Tigre” dairy farm, equipped with state-of-the-art technology, started to operate on March 1, 2005. This dairy farm can process 2,000 heads and its production capabilities can deliver up to 32,000 liters of milk per day. Forecasts for this business segment estimate yields even higher than those projected for the agricultural segment. The investment required by this project was US$ 1.0 million.

At present, the Company has another dairy farm in La Juanita, whose feeding system is mainly pasture-based. This feeding system implies lower costs.

The milk business in Argentina has undergone major oscillations in recent decades: there was sustained growth until 1999 and afterwards, as a direct consequence of the economic crisis in 2001, there was a major drop in production. At present, thanks to increasingly attractive prices, the segment has become an interesting alternative again and the quantities of dairy products exported in 2005 have reached record high levels. This change in the trend seems to be strengthening in the first quarter of 2006, during which dairy exports increased by 26% in terms of tons and by 30% in US dollars compared to the same period in 2005.

Feed Lot

In the nine-month period ended March 31, 2006, the Company’s Feed Lot, a 170-hectare establishment located in the province of San Luis, in which the Company owns a 50% interest through Cactus Argentina S.A., continued to play a key role in our company’s cattle beef production which helped strengthen growth in the segment. The number of livestock head produced at Cresud’s farming establishment and finished at Cactus’ pens produced high volumes of beef demanded by export markets. Given the high level of efficiency delivered by the use of feed lots, animals are finished with higher weights at younger ages.

In the nine-month period ended March 31, 2006, Cactus Argentina S.A.’s gross profit was Ps. 1.0 million, i.e. 41% higher than the profit for the same period for the prior fiscal year. The net result for the period was a Ps. 0.3 million profit compared to a Ps. 0.2 million loss for the period ended March 31, 2005. This result was

 

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Business Highlight (continued)

mainly favored by the quantity of food sold to feed animals for exporting purposes (of higher weight) and to the increased profitability yielded by Cactus Argentina S.A.’s own animals. Additionally, the price of corn remained at reasonable values for use as the basic diet for animals.

Feed-lot animals yield consistently standard-end products, therefore buyers obtain high quality, which facilitates trading activities, increases prices and enhances access to the European market.

Prospects for the coming period anticipate an uncertain situation brought about by the measures applied by the Argentine Government as regards recovery in exports. Such scenario leaves beef cattle producers puzzled, and they are likely to adopt a passive attitude as regards beef production. The Argentine beef-cattle plan recently published has good action potential and should it be complied with, there would be a substantial improvement in the beef-cattle business in Argentina.

Development of marginal lands

We believe that the potential of the segment lies on the development of marginal land, as has been the case in various countries worldwide. With the help of state-of-the-art technology we can obtain yields similar to, and returns better than, those in the core areas.

During the nine-month period ended March 31, 2006, the development efforts at our “Los Pozos” farm in the province of Salta contemplated by the second module were completed. “Los Pozos” is a farming establishment, with a surface area of 20,000 hectares for livestock production purposes and it is currently operational. In addition, during the quarter, the Secretariat of the Environment and Sustainable Development of the Province of Salta approved the development project contemplated by the third module of the farming establishment and consisting in the development of a further 40,000 hectares for livestock purposes.

Additionally, development efforts for agricultural purposes started in the first 5,000 hectares destined to farming activities at Agropecuaria Cervera S.A., located in the Province of Salta. This project, consisting in a total surface area of 35,000 hectares, has been approved by the Secretariat of the Environment and Sustainable Development of the Province of Salta.

At March 31, 2006 Cresud’s own land reserves amounted to 258,477 hectares which had been acquired at very low prices. The development of these areas, accompanied by technological breakthroughs will contribute to an appreciation in the value of land which will in turn imply significant gains for the Company.

Investments in Other Companies

On December 27, 2005, Cresud and its subsidiary IGSA bought 100% of the shares in Agropecuaria Cervera S.A. (ACER) pursuant to a swap agreement. ACER has, among other assets and rights, the concession of the start-up of production activities in the framework of a comprehensive development project that comprises biological, economic and social aspects over various properties in the Anta department, province of Salta. ACER has been duly authorized to carry out a major agriculture, livestock and forestry project.

In consideration for this swap, Cresud transferred 3.6 million Convertible Bonds which may be converted into ordinary shares, issued by IRSA Inversiones y Representaciones S.A. and paid Ps. 0.96 million, while IGSA paid Ps. 0.1 million and US$ 0.7 million.

 

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Business Highlight (continued)

Expansion to Brazil: BrasilAgro – Companhia Brasileira de Propiedades Agrícolas

Subsequent to the close of the nine-month period ended March 31, 2006, the Brazilian Securities Exchange Commission approved a placement by public subscription of a total amount of Reais 432.0 million, equivalent to 432,000 common, book-entry shares at a price of Reais 1,000 per each BrasilAgro’s share. These shares were placed in conjunction with Banco de Investimentos Credit Suisse (Brasil) S.A. in the Brazilian market by applying investment mechanisms regulated by control authorities and with sales efforts abroad, all of it in compliance with the US Securities Act of 1933 and other regulations established by the Securities and Exchange Commission.

In addition, as is customary in the Brazilian market, BrasilAgro held an option to increase the amount of the issue by 20% and Credit Suisse, the investment bank, held another option to increase it by 15% (Green shoe). Given the excess demand resulting from the placement, both BrasilAgro and Credit Suisse exercised said options increasing the placement to 583,200 shares, equivalent to Reais 583.2 million, which were fully placed.

BrasilAgro’s shares started to be listed in Novo Mercado of the Brazilian Stock Exchange (BOVESPA) with the symbol AGRO3 on May 2, in compliance with Brazil’s highest standards in terms of corporate governance.

In addition to the funds originally contributed, Cresud made contributions during the offer for a total amount of Reais 42.4 million (approximately US$ 20.6 million). As from the time such contribution was made, Cresud now holds a total amount of 42,705 shares, equivalent to 7.3% of BrasilAgro’s stock capital.

As compensation for having founded the Company, Cresud received 104,902 purchase options to subscribe additional BrasilAgro shares for 15 years at no cost and at the same price as that bid in the initial public offering, i.e., Reais 1,000 adjusted by the IPCA inflation index. Should it decide to exercise such option, Cresud might acquire 59,726 additional shares, thereby becoming the holder of 14.1% of BrasilAgro’s diluted capital stock.

BrasilAgro’s founding shareholders include Cresud, Cape Town, Tarpon Investimentos, Tarpon Agro, Agro Managers and Agro Investment.

Cape Town is a company whose sole shareholder is Mr. Elie Horn, the Chairman of Cyrela Brazil Realty, one of the leading Real Estate companies in Brazil. Tarpon has vast experience in managing financial resources and it specializes in variable income. Agro Managers and Agro Investment are investment vehicles used by persons related to Cresud.

On March 24, 2006, Cresud entered into a shareholder agreement with Mr. Elie Horn and Tarpon whereby stipulations were agreed including that both parties should have a joint vote at Shareholders’ Meetings and that both parties have a preemptive right to acquire shares held by the other party.

BrasilAgro’s board of directors is made up by nine members. Cresud, in its position as founder of the company, appointed three members, Tarpon and Cape Town appointed three more and additionally, the company has three independent directors.

 

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Business Highlight (continued)

BrasilAgro was created for the purpose of replicating Cresud’s business in Brazil. The Company shall be involved mainly in four business lines while keeping its focus on Real Estate for farming purposes: (i) Sugar Cane, (ii) Grains and cotton, (iii) Forestry and (iv) Cattle-beef.

On March 15, 2006 BrasilAgro yearly entered into a consulting agreement with Parana Consultora de Investimentos. Parana shall supply consultancy services as to the purchase and sale of farming establishments, transactions in capital markets, hedging policies and mergers and acquisitions, among other issues.

In consideration for its services, Parana shall receive from BrasilAgro a yearly compensation equivalent to 1% of BrasilAgro’s subscribed capital.

Parana’s shareholders include Tarpon, with a 50% interest, Consultores Asset Management with a 37.5% interest and Alejandro Elsztain with a 12.5% interest.

Additionally, this transaction is our Group’s return into the capital markets for the purpose of expanding our businesses once again and diversifying our portfolio at the international level.

In order to finance the investment in Brazil, on May 2, 2006, Cresud obtained a US$ 8 million loan from Credit Suisse, for a term of 30 months, accruing interest at the 3-month LIBOR plus 375 basis points. The loan mentioned has been secured through a repo transaction with IRSA’s Convertible Notes for a total of US$ 10 million. Additionally, to complete its investment, Cresud used short-term loans and its own funds.

Internet

The Company holds a 70% equity interest in Fyo.com, an Internet site. Fyo.com’s position as leader in the farming sector continues to strengthen on the basis of the broad range of business services offered to the sector and Fyo.com’s role in direct sales of supplies and crop brokerage services.

At present, Futuros y Opciones.com S.A. has a database of over 40,000 users and more than 5,000 farmers authorized to carry out business. The strategy implemented consists in focusing on business services to farmers by leveraging on Cresud’s experience and operating capacity in the business, with Fyo.com being the link with customers.

During the period ended March 31, 2006, Futuros y Opciones.com S.A. posted sales for Ps. 1.8 million, 130% higher than the sales for the same period of the previous fiscal year. Net results for the period were a Ps. 0.45 million loss, 25% higher than the Ps. 0.37 million loss for the same period in fiscal 2005.

 

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Business Highlight (continued)

Principal indicators for the nine-month periods

ended March 31, 2006 and 2005:

 

     nine-month period ended
March 31, 2006
   nine-month period ended
March 31, 2005
   %  

Sales (volume)

        

Wheat (tons)

   9,685    6,307    54 %

Corn (tons)

   53,364    26,407    102 %

Sunflower (tons)

   1,810    1,133    60 %

Soybean (tons)

   26,674    10,682    150 %

Other (tons)

   3,460    1,002    245 %
                

Total Crops (tons)

   94,993    45,531    109 %
                

Beef (tons)

   10,839    13,078    -17 %

Milk (Thousands of liters)

   10,864    4,897    122 %

Production

        

Wheat (Tons)

   21,615    23,747    -9 %

Corn (Tons)

   11,299    17,018    -34 %

Sunflower (Tons)

   7,118    4,825    48 %

Soybean (Tons)

   9,017    4,931    83 %

Beef (Tons)

   7,759    8,480    -9 %

Milk (Thousands of liters)

   10,864    4,897    122 %

Operated surface area (in hectares)

        

Crops     Owned farms

   20,018    19,706    2 %

Leased farms

   17,004    16,142    5 %

Beef       Owned farms

   97,299    126,964    -23 %

Leased farms

   32,647    —     

Dairy     Owned farms

   1,505    1,583    -5 %

Land reserves (in hectares)

   258,477    263,177    -2 %

Surface area under irrigation

   3,750    3,929    -5 %

Storage capacity (tons)

   18,000    12,660    42 %

Total head of cattle

   92,773    93,880    -1 %

Dairy farm stock (heads)

   5,729    4,121    39 %

Milking cows (heads)

   3,307    1,875    76 %

Note: This table does not include Agro-Uranga (35.72% of 8,299 hectares) or Agropecuaria Cervera S.A. (99.99% of 160,000 hectares under a concession agreement).

 

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Business Highlight (continued)

Results from IRSA Inversiones y Representaciones S.A.

The result derived from our equity interest in IRSA Inversiones y Representaciones (NYSE: IRS – BCBA: IRSA) showed a Ps. 40.9 million profit in the nine-month period compared to a Ps. 78.2 million profit at March 31, 2005.

This decrease in IRSA’s net profit is mainly explained by: (i) the financial losses resulting from lower income from financial transactions and the depreciation of the peso against the dollar; and (ii) a decrease in the income generated by related companies.

IRSA is Argentina’s leading real estate company with a fully diversified portfolio of properties. IRSA participates in the following business segments:

 

    Office rental with more than 97,070 m2 for lease of premium offices.

 

    Operation of Shopping Centers through its 61.62% equity interest in Alto Palermo S.A. (APSA) (Nasdaq: APSA, BCBA: APSA). APSA is one of the leading operators of shopping centers in Argentina and owns or has majority interests in 9 shopping centers with 210,267 m2 of Gross Leaseable Area.

 

    Holding and operation of luxury hotels through its equity interest in 3 five-star hotels.

Besides, IRSA owns residential properties for sale and land reserves for current and future developments valued at Ps. 401.0 million.

Additionally, IRSA has an 11.76% ownership interest in Banco Hipotecario, the leading Argentine mortgage bank whose net worth amounts to Ps. 2,281 million. This amount has been calculated in accordance with the regulations of the Argentine Central Bank on the basis of temporary amounts as at the time of issuance of IRSA’s financial statements at March 31, 2006, Banco Hipotecario S.A. had not yet completed the issuance and approval of its financial statements.

IRSA’s total consolidated assets amount to Ps. 2,632.1 million and its net worth amounts to Ps. 1,340.8 million.

At March 31, 2006, the amount of outstanding Convertible Bonds and warrants was US$ 49.89 million and 56.20 million, respectively. Outstanding shares at that date were 384,301,777.

At March 31, 2006, our equity interest in IRSA amounted to 22.6% of its total outstanding shares. In addition, our holdings of Convertible Bonds issued by IRSA amount to US$ 28.0 million. These Convertible Bonds bear an option to purchase additional shares in IRSA. Should the option and conversion rights be exercised on an equal footing with all remaining bondholders, Cresud would become the owner of 34.3% of IRSA’s capital stock. Our ownership interest in IRSA is currently valued by application of the proportional equity method.

 

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Business Highlight (continued)

Other relevant highlights

Reduction of debt due to the conversion of notes and exercise of Warrants

As of the date of this report, Cresud’s indebtedness resulting from the issuance of Convertible Notes diminished by US$ 15,001,119, from the US$ 50,000,000 originally issued, as a result of the conversions received.

In addition, as of the date this report, a total amount of 12,022,188 Warrants have been exercised, which generated income for the company in the amount of US$ 14.4 million.

Therefore, after giving effect to all the conversions received and warrants exercised, the amount of Convertible Notes outstanding as of the date of this report is US$ 34,998,881 and the amount of outstanding warrants is 37,977,812. The amount of shares issued was 53,216,362, which raised the company’s total outstanding shares to 177,500,754.

At March 31, 2006, the Company’s holdings in IRSA’s Convertible Notes amounted to US$ 28.0 million. The interest rate accrued by these notes is the same as that accrued by the bonds issued by Cresud. During this period Cresud converted 5.0 million IRSA Convertible Notes and subsequent to March 31, 2006, it converted a further 16.0 million Convertible Notes thereby increasing its interest to 28.1%.

The following is a detail of the past, present and potential situation of the Convertible Notes issued on November 14, 2002 under the laws of the State of New York at an 8% interest rate (payable on a half-yearly basis) maturing on November 14, 2007 and convertible at a price of US$ 0.5078 per share of 1.00 par value (1.9693 shares for each Convertible Notes). The Convertible Notes also have a warrant attached that allows its holder to purchase 1.9693 shares of $1.00 par value at a price of US$ 0.6093 each per Convertible Notes.

LOGO

Note: Total conversion refers to a situation in which all the holders of Convertible Notes exercise their right to convert the bonds into shares and all the options granted by the warrants.

 

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Business Highlight (continued)

LOGO

On April 28, 2006, the Company received a notice from its shareholder Inversiones Financieras del Sur S.A. (“IFISA”) to the effect that IFISA will deposit in advance the sum of US$ 7,000,000 in connection with its future exercise of 5,833,908 warrants on the following warrant exercise date, i.e., on June 30, 2006. Upon exercise of the warrants IFISA will receive 11,488,593 common shares that will be converted into 1,148,859 ADRs.

Financial Indebtedness

On May 2, 2006, the Company entered into a loan agreement with Credit Suisse for US$ 8 million, for a term of 30 months, accruing interest at the 3-month LIBOR plus 375 basis points. The loan mentioned has been secured through a repo transaction with IRSA’s Convertible Notes for a total of US$ 10 million. The proceeds have been fully applied to the subscription of BrasilAgro’s shares.

Perspectives for the coming quarter

Prospects for the coming quarter are quite encouraging: the prices of commodities continue to be very firm and therefore we expect an increase in our profitability.

The last quarter of the year has the biggest impact on the agricultural industry as it is during this quarter that a major part of the soybean and corn crops are harvested. The conditions of both crops is as of the date of this release within budget, although we estimate a loss ranging from 5% to 10% of the corn crops as a result of the droughts sustained, but which will be offset by increased prices.

As regards the beef cattle market, we expect a stepwise re-opening of exports which will have a positive impact on the business.

 

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Inmobiliaria, Financiera y Agropecuaria

Comparative Shareholders’ Equity Structure

 

    

As of
March 31,
2006

Pesos

  

As of
March 31,
2005

Pesos

  

As of
March 31,
2004

Pesos

  

As of
March 31,
2003

Pesos

  

As of
March 31,
2002

Pesos

Current Assets

   95,246,431    188,277,107    71,848,921    85,739,891    75,335,253

Non-current Assets

   685,867,345    585,070,271    535,380,505    499,909,690    331,896,268
                        

Total Assets

   781,113,776    773,297,378    607,229,426    585,649,581    407,231,521
                        

Current Liabilities

   66,129,331    77,617,888    17,203,291    31,674,759    57,134,600

Non-current Liabilities

   161,296,345    151,406,556    148,454,671    171,168,755    12,860,198
                        

Total Liabilities

   227,425,676    229,024,444    165,657,962    202,843,514    69,994,798
                        

Minority Interest

   320,465    355,930    47,619    254,380    278,237
                        

Shareholders’ Equity

   553,367,635    543,917,004    441,523,845    382,551,687    336,958,486
                        
   781,113,776    773,297,378    607,229,426    585,649,581    407,231,521
                        

Comparative Income Structure

 

    

As of
March 31,
2006

Pesos

   

As of
March 31,
2005

Pesos

   

As of
March 31,
2004

Pesos

   

As of
March 31,
2003

Pesos

   

As of
March 31,
2002

Pesos

 

Operating income (loss)

   18,674,288     20,652,074     14,757,585     22,529,248     (1,057,380 )

Financial and holding gain (loss)

   15,219,507     64,170,364     107,388     (17,028,158 )   (46,798,459 )

Other income and expenses and income from related companies

   10,123,676     17,545,204     3,432,833     64,022,388     (200,982 )

Management fees

   (2,600,512 )   (6,905,699 )   (1,138,846 )   (4,887,308 )   —    
                              

Operating net income (loss)

   41,416,959     95,461,943     17,158,960     64,636,170     (48,056,821 )

Income Tax

   (18,176,414 )   (33,420,169 )   (7,068,447 )   (7,526,874 )   (1,386,034 )

Minority Interest

   136,482     109,521     159,091     176,376     255,490  
                              

Net Income (loss)

   23,377,027     62,151,295     10,249,604     57,285,672     (49,187,365 )
                              

Production volume

 

   

For the

Three-month
period ended

March 31,
2006

 

Accumulated
July 1, 2005

to

March 31,
2006

  For the
Three-month
period ended
March 31,
2005
 

Accumulated
July 1, 2004

to

March 31,
2005

  For the
Three-month
period ended
March 31,
2004
 

Accumulated
July 1, 2003

to

March 31,
2004

  For the
Three-month
period ended
March 31,
2003
 

Accumulated
July 1, 2002
to

March 31,
2003

  For the
Three-month
period ended
March 31,
2002
 

Accumulated
July 1, 2001
to

March 31,
2002

Beef Cattle

  (in Kgs.)

  4,441,986   8,974,090   2,492,476   8,480,476   3,364,013   8,475,050   2,480,263   7,986,199   4,282,224   9,531,779

Butyraceous

  (in Kgs.)

  110,820   397,149   49,490   175,086   49,984   185,179   44,113   157,801   36,763   189,825

Crops

  (in quintals) *

  351,735   522,413   308,221   532,601   185,386   325,436   274,577   349,321   321,151   532,285

* One quintal equals one hundred kilograms

 

Eduardo S. Elsztain

Chairman

 

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Sales volume

 

   

For the
Three-

month

period ended
March 31,
2006

 

Accumulated
July 1, 2005
to

March 31,
2006

 

For the
Three-

month

period ended
March 31,
2005

 

Accumulated
July 1, 2004
to

March 31,
2005

 

For the
Three-

month

period ended
March 31,
2004

 

Accumulated
July 1, 2003
to

March 31,
2004

 

For the
Three-

month

period ended
March 31,
2003

 

Accumulated
July 1, 2002
to

March 31,
2003

 

For the
Three-

month

period ended
March 31,
2002

 

Accumulated
July 1, 2001
to

March 31,
2002

Beef Cattle

  (in Kgs.)

  3,228,274   10,838,907   4,125,490   13,078,115   4,229,517   10,645,720   2,478,953   7,334,778   3,458,221   12,989,747

Butyraceous

  (in Kgs.)

  110,820   397,149   49,490   175,086   49,984   185,179   44,113   157,801   36,763   189,825

Crops

  (in quintals) *

  86,461   949,929   136,257   455,315   154,306   389,377   173,570   884,990   330,730   837,519

* One quintal equals one hundred kilograms

Local Market

 

   

For the

Three-

month

period ended
March 31,
2006

 

Accumulated
July 1, 2005
to

March 31,
2006

 

For the
Three-

month

period ended
March 31,
2005

 

Accumulated
July 1, 2004
to

March 31,
2005

 

For the

Three-

month

period ended
March 31,
2004

 

Accumulated
July 1, 2003
to

March 31,
2004

 

For the

Three-

month

period ended
March 31,
2003

 

Accumulated
July 1, 2002
to

March 31,
2003

 

For the

Three-

month

period ended
March 31,
2002

 

Accumulated
July 1, 2001
to

March 31,
2002

Beef Cattle

  (in Kgs.)

  3,228,274   10,838,907   4,125,490   13,078,115   4,229,517   10,645,720   2,478,953   7,334,778   3,458,221   12,989,747

Butyraceous

  (in Kgs.)

  110,820   397,149   49,490   175,086   49,984   185,179   44,113   157,801   36,763   189,825

Crops

  (in quintals) *

  86,461   949,929   136,257   455,315   154,306   389,377   173,570   884,990   330,730   837,519

* One quintal equals one hundred kilograms

Exports

There were no exports (foreign trade) in the last five fiscal years.

Ratios

 

    

As of

March 31,

2006

Pesos

  

As of

March 31,

2005

Pesos

  

As of

March 31,

2004

Pesos

  

As of

March 31,

2003

Pesos

  

As of

March 31,

2002

Pesos

 

Liquidity

   1.440    2.425    4.176    2.707    1.319  

Solvency

   2.433    2.375    2.665    1.886    4.814  

Non-current assets to assets

   0.878    0.757    0.882    0.854    0.815  

Return on Equity

   0.043    0.123    0.025    0.162    (0.139 )

 

Eduardo S. Elsztain

Chairman

 

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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

 

1. We have reviewed the balance sheets of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria at March 31, 2006 and 2005, and the related statements of income, of changes in shareholders’ equity and of cash flows for the nine-month periods ended March 31, 2006 and 2005 and the complementary notes 1 to 19 and schedules A, C, E, F, G and H. Furthermore, we have reviewed the consolidated financial statements of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria, 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 N° 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, 2005 and 2004, on which we issued our unqualified report dated September 8, 2005, we report that:

 

  a) The financial statements of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria at March 31, 2006 and 2005 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, 2005.

 

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 have been transcribed to the “Inventory and Balance Sheet Book” and comply, within the field of our competence, with the Corporations Law and pertinent resolutions of the National Securities Commission;

 

  b) the financial statements of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria arise from official accounting records carried in all formal respects in accordance with legal requirements; that maintain the security and integrity conditions based on which they were authorized by the National Securities Commission;

 

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  c) we have read the business highlights and the additional information to the notes to the financial statements required by section 68 of the Buenos Aires Stock Exchange Regulations, on which, as regards those matters that are within our competence, we have no observations to make;

 

  d) at March 31, 2006, the debt accrued of Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria accrued in favor of the Integrated Pension and Survivors’ Benefit System according to the accounting records amounted to $ 95.068,88 which is not yet due.

Autonomus City of Buenos Aires, May 11, 2006

 

PRICE WATERHOUSE & CO. S.R.L.

(Partner)

C.P.C.E.C.A.B.A. Tº 1 Fº 1

Dr. Andrés Suarez

Public Accountant (UBA)

C.P.C.E. Ciudad Autónoma de Buenos Aires

Tomo 245 - Folio 61

 

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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/ Eduardo S. Elsztain

Name:

  Eduardo S. Elsztain

Title:

  Chairman of the Board of Directors

Dated: May 29, 2006